Mr. Jose Chibbaro

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Mr. Jose Chibbaro

  1. 1. <ul><li>PUBLIC SECTOR REFORM </li></ul><ul><li>Decentralization/Municipal & Local Development </li></ul><ul><li>DOING BUSINESS WITH MUNICIPALITIES </li></ul><ul><li>IN </li></ul><ul><li>CENTRAL AMERICA </li></ul><ul><li>José V. Chibbaro </li></ul><ul><li>Municipal Development Group </li></ul><ul><li>Region 2 </li></ul><ul><li>Nov2003 </li></ul>Red de Desarrollo Municipal RE2 R d m
  2. 2. WHY DECENTRALIZATION ? <ul><ul><ul><li>Decentralization began in the 1980’s in many developing countries around the world. </li></ul></ul></ul><ul><ul><ul><li>WHY: among others reasons, to devolve Central Government functions to subnational jurisdictions. </li></ul></ul></ul><ul><ul><ul><li>WHY: partly in response to political pressures for subnational autonomy, but also to deliver public services more efficiently. </li></ul></ul></ul><ul><ul><ul><li>Argument: decentralization improves governance and public service delivery by increasing: </li></ul></ul></ul><ul><ul><ul><ul><li>Allocative efficiency (better match of public service to local preferences) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Productive efficiency (assumes increased accountability of LGs to citizens; less bureaucracy and better knowledge of local costs) </li></ul></ul></ul></ul>
  3. 3. LEVEL OF DECENTRALIZATION IN LA ( Ratio: subnational expenditures/public expenditures) <ul><li>More than 20% </li></ul><ul><li>Argentina (49.3) </li></ul><ul><li>Brazil (45.6) </li></ul><ul><li>Colombia (39.0) </li></ul><ul><li>Mexico (25.4) </li></ul><ul><li>Bolivia (26.7) </li></ul><ul><li>Venezuela (19.6) </li></ul><ul><li>Between 10-20% </li></ul><ul><li>Uruguay (14.2) </li></ul><ul><li>Chile (13.6) </li></ul><ul><li>Honduras (12.3) </li></ul><ul><li>Peru (10.5) </li></ul><ul><li>Guatemala (10.3) </li></ul><ul><li>Less than 10% </li></ul><ul><li>Ecuador (7.5) </li></ul><ul><li>TT (7.2) </li></ul><ul><li>El Salvador (6.2) </li></ul><ul><li>Nicaragua (5.2) </li></ul><ul><li>Panama (3.2) </li></ul><ul><li>DR (2.9) </li></ul><ul><li>Costa Rica (2.3) </li></ul>
  4. 4. IDB SUPPORT TO SUBNATIONAL DEVELOPMENT <ul><ul><ul><li>Approx. 13% (more than US$17.5 billion) of the IDB loan portfolio supports subnational development. </li></ul></ul></ul><ul><ul><ul><li>Loans to subnational Governments increased 3X in 22 years. </li></ul></ul></ul><ul><ul><ul><li>Active pipeline by year 2002 consisted of 79 projects for a total of more than US$8.3 billion. </li></ul></ul></ul><ul><ul><ul><li>Sectors at subnational levels: municipal dev. 25%; state or province dev. 16%; sewerage 33%; infrastructure 23%, other 3%. </li></ul></ul></ul>
  5. 5. Decentralization in RE2 <ul><ul><ul><li>A recent phenomena. </li></ul></ul></ul><ul><ul><ul><li>Associated with the region’s democratic form of government in the last two decades. </li></ul></ul></ul><ul><ul><ul><li>Product of consolidation of democratic institutions at both levels: national and local. </li></ul></ul></ul><ul><ul><ul><li>Efforts of the Governments to implement a new development strategy based on: </li></ul></ul></ul><ul><ul><ul><ul><li>the insertion of their economies into international markets. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>restructuring of their states to accommodate economic and political changes resulting from the globalization process. </li></ul></ul></ul></ul>
  6. 6. Decentralization in RE2 <ul><ul><ul><li>9 countries, 1336 municipalities, population of 51+ million </li></ul></ul></ul><ul><ul><ul><li>Guatemala, Nicaragua and Honduras started efforts at an earlier stage (1985-90). </li></ul></ul></ul><ul><ul><ul><ul><li>HO and NI: both actual governments with strong determination for undertaking decentralization process. </li></ul></ul></ul></ul><ul><ul><ul><li>Costa Rica, El Salvador & Panama a more recent development (1995). </li></ul></ul></ul><ul><ul><ul><ul><li>ES: process accelerated due to reconstruction after earthquakes 2001 </li></ul></ul></ul></ul><ul><ul><ul><li>Dominican Republic initiating the process. </li></ul></ul></ul>
  7. 7. MEXICO: A DIFFERENT APPROACH <ul><ul><ul><li>Different opportunities and challenges. (32 States and 2428 municipalities) </li></ul></ul></ul><ul><ul><ul><li>Fiscal decentralization started in Mexico in 1980. </li></ul></ul></ul><ul><ul><ul><li>Decentralization has generated considerable expansion of available resources thus, public investment capacity is also expanding. (Approx. $25 billion/yr of public investment executed by subnational level) </li></ul></ul></ul><ul><ul><ul><li>2000-03 more than $2 billion bonds issued by subnat. Govs. </li></ul></ul></ul><ul><ul><ul><li>29 of 32 States certified by international credit rating agencies </li></ul></ul></ul>
  8. 8. STRENGTHENING SUBNATIONAL GOVS. CAPACITY <ul><ul><ul><li>Improvement of financial conditions and management. </li></ul></ul></ul><ul><ul><ul><li>Client (citizens) oriented approach (internal structure, processing, systems, human resources, etc). </li></ul></ul></ul><ul><ul><ul><li>Improvement of local development planning capacity (strategic and participative planning process, investments priority). </li></ul></ul></ul><ul><ul><ul><li>Extension of environmental and natural resource management. </li></ul></ul></ul><ul><ul><ul><li>Modernization of public service management. </li></ul></ul></ul><ul><ul><ul><li>Strengthening authorities at subnational level to better respond to increasing challenges and opportunities related to LED, poverty reduction, regulatory role for local service supply, etc. </li></ul></ul></ul>
  9. 9. FINANCIAL MECHANISMS <ul><ul><ul><li>Condition: Good subnational Government performance requires access to sufficient resources, based on severe credit and financial discipline. </li></ul></ul></ul><ul><ul><ul><li>IDBs assistance: </li></ul></ul></ul><ul><ul><ul><ul><li>Technical Assistance to build foundations (systems) for a better credit discipline. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Loans to Subnational Governments (with sovereign guarantee provided by Central Gov.) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Facility for improving creditworthiness (improve financial autonomy with Bank’s loans and access to financial markets (graduated). Promote private sector participation in infrastructure and service provision. Other financial instruments based on local private financial market conditions.) </li></ul></ul></ul></ul>
  10. 10. IDB INSTRUMENTS <ul><ul><ul><li>Policy dialogue and programming process and documents. </li></ul></ul></ul><ul><ul><ul><li>Sectoral studies (urban development strategy, local development strategy, etc). </li></ul></ul></ul><ul><ul><ul><li>Loans for specific programs and projects: </li></ul></ul></ul><ul><ul><ul><ul><li>Investment for services and infrastructure of subnational competence. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Public Sector or State reform programs. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Support for policy or structural reforms. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Multiple works. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Projects for innovation. </li></ul></ul></ul></ul><ul><ul><ul><li>Non reimbursable Technical Cooperations (more than 40 trust funds available). </li></ul></ul></ul>
  11. 11. TYPES OF PROGRAMS <ul><ul><ul><li>Specific city project ( integral approach of city management). </li></ul></ul></ul><ul><ul><ul><li>Secondary cities (group of cities assisted with a common financial instrument, loan). </li></ul></ul></ul><ul><ul><ul><li>Support to decentralization process (design and implementation of national strategy for decentralization, national policy and related legal framework, etc). </li></ul></ul></ul><ul><ul><ul><li>Historic patrimony (city historical centers) preservation, economic recovery. </li></ul></ul></ul><ul><ul><ul><li>Urban poverty reduction programs. </li></ul></ul></ul><ul><ul><ul><li>Local development programs. </li></ul></ul></ul><ul><ul><ul><li>Local economic development and improvement of local competitiveness </li></ul></ul></ul>
  12. 12. IDB OPERATIONS TOTAL DEMAND SHORT TERM MEDIUM / LONG TERM URBAN TRANSPORT INTEGR. URBAN DEVELOP. = WATER / SEWERAGE DECENTRALIZATION JUSTICE COMPETITIVENESS ENVIRONMENT PUBLIC/CITIZENS SECURITY URBAN POVERTY REDUCTION HOUSING CITIZENS/CIVIL SOCIETY PARTICIPATION INSTITUTIONAL STTRENGTHENING MUNICIPAL DEVELOPMENT ADMINISTRATIVE REFORMS
  13. 13. BUSINESS OPPORTUNITIES <ul><li>Under the scope of the different areas of activity: </li></ul><ul><ul><ul><li>Decentralization </li></ul></ul></ul><ul><ul><ul><li>Local development </li></ul></ul></ul><ul><ul><ul><li>Municipal Development </li></ul></ul></ul><ul><ul><ul><li>Urban development </li></ul></ul></ul><ul><ul><ul><li>Rural development </li></ul></ul></ul>
  14. 14. BUSINESS OPPORTUNITIES <ul><li>Private sector and other organizations business opportunities cover a wide range of areas for: </li></ul><ul><ul><ul><li>Consulting firms </li></ul></ul></ul><ul><ul><ul><li>Research institutes </li></ul></ul></ul><ul><ul><ul><li>Municipal management Institutes and/or Centers </li></ul></ul></ul><ul><ul><ul><li>Universities </li></ul></ul></ul><ul><ul><ul><li>Contractors </li></ul></ul></ul><ul><ul><ul><li>Financial sector (investment banking, risk rating, commercial banking) </li></ul></ul></ul><ul><ul><ul><li>Public service operators </li></ul></ul></ul><ul><ul><ul><li>Equipment suppliers </li></ul></ul></ul><ul><ul><ul><li>Investors (development of different economic activities in “competitive municipalities” ) </li></ul></ul></ul><ul><ul><ul><li>Information technology and telecommunication firms (e-government at local level) </li></ul></ul></ul><ul><ul><ul><li>Others (????) Imagination is the limit </li></ul></ul></ul>
  15. 15. <ul><li>TO LEARN MORE ABOUT MUNICIPAL DEVELOPMENT IN CA, PLEASE FEEL FREE TO GO TO OUR WEB SITE AT: </li></ul><ul><li>WWW.IADB.ORG/RDM </li></ul><ul><li>THANK YOU </li></ul>

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