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Public Investment in Latin America: Challenges and Options for better Management Brasilia, 16 June 2011 Jonas Frank Sr. Public Sector Specialist The World.

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Presentación del tema: "Public Investment in Latin America: Challenges and Options for better Management Brasilia, 16 June 2011 Jonas Frank Sr. Public Sector Specialist The World."— Transcripción de la presentación:

1 Public Investment in Latin America: Challenges and Options for better Management Brasilia, 16 June 2011 Jonas Frank Sr. Public Sector Specialist The World Bank

2 Main messages Latin American countries have ample opportunities to improve public investment It is critical to balance efforts: improved appraisal, implementation monitoring and ex- post evaluation It is key to being up-front about political economy factors

3 Latin American countries invest below the world average…

4 … but much less compared to fast-growing economies like China and India

5 5 There is significant variation across countries in the level of investment spending… Source: CEPAL (2011) GDP

6 … and overall the quality of services is often still below the world average Source: World Development Indicators

7 Phases 1960s1970s1980s-1990s2000s Economic and Fiscal Context Vicious circle Structures Oil crisis Debt push Adjustment External shocks Washington consensus Growth Public Management Models and Public Investment Public Investment Plan (4-6 years, donor driven) Planning Projects Exante control Project Bank Situational planning Exante control SNIP: Public Investment Systems Strategic planning Integrated financial management Single Treasury Account Multi-year planning Results-based management Monitoring and Evaluation Web-based modules E-Government Public investment management has evolved over time…

8 … and led to different institutional arrangements Ministries of Finance (managing all cycle) Peru, Argentina, El Salvador, Honduras, Panama, Mexico Planning entities Colombia, Bolivia, Ecuador, Brazil, Costa Rica, Venezuela Role of Presidencies: Nicaragua, Guatemala Variations: Role of sector entities Subnational governments Planning Entity Finance Ministry

9 SNIPs (Public Investment Systems) have been created but often stand in isolation… Capture information for the whole project cycle Information for investment budget Supports monitoring Project culture But often SNIP remained an isolated system: Financial management Procurement

10 … and the coverage of SNIPs is still uneven… Colombia 100% of central government investment Less for subnationals (no full data) Dominican Republic: 90% of central government investment; Subnationals part of the system only as of 2009 Peru: Central level: 80% (2009) Regions: 97% Municipalities: 76% Mexico: 76% of federal investments (2009) Guatemala: 48% of central government

11 CountryInterface IFMIS vs SNIPSingle project code in IFMIS Brazilyes Colombiayes Chileyes Costa Ricano Guatemalano Hondurasyesyes (social investments) Paraguayno yes (in execution stage but not at pre-investment level) Perúnoyes Bolivianoyes Uruguaynoyes … and so is the integration with Financial Management Systems Source: IDB Survey 2009-2010 and World Bank

12 Case of Bolivia: system overlaps and gaps Nivel de Gobierno Sistema de Info. CICLO DE LA INVERSIÓN PÚBLICA FormulaciónPresupuestaciónEjecuciónSeguimientoEvaluación Central SISIN web SIGMA SPI -MOP Aplicativo MMyA SAP - FPS/FNDR CMC Aplicativo - VT Departamental SISIN web SIGMA SGP SIGMA local Municipal SISIN web (GM) SIGMA (GM) SGP SIGMA local Source: World Bank

13 Incentive problems Under-estimation of costs, overestimation of benefits Cumbersome processes – Because of administrative bottle-necks in SNIPs – Because of improved evaluation Peru: refinement of appraisal methodologies Nicaragua: 26 appraisal methodologies Consequences: – Weak gate-keeping – Unproductive investments

14 Decentralization without planning and coordination can lead to fragmentation of projects… Fuente: SNIP Example of Peru

15 Argentina: bottom-up process and fiscal decisions on project selections …and sometimes strong subnational autonomy can create additional pressures to spend... creating risk of stop-and-go financing and incomplete projects Source: Ministry of Economy, Argentina

16 Source: Dirección General de Inversión y Crédito Público, Ministerio de Hacienda, El Salvador 2.5% PIB 2.6% PIB2.5% PIB 2.3% PIB 2.9% PIB El Salvador: Planned and executed public investment, 2006-2010 (in million US$) Recent growth episode has led to resource abundance and challenged execution rates… Local Governments Regional Governments Blue: planned budgets Red: executed budgets Peru case Source: SNIP, Peru

17 … while expenditures are often still inequitable Case of Guatemala

18 Electoral campaigns promise more infrastructure works Incentive problems can be overcome if political pressures are channeled and used adequately…

19 … and attention is also paid to improving implementation and ex-post evaluation Project evaluation Project implementation 19 Ex-post evaluation A balancing act

20 It is critical to create incentives for cooperation and information exchange System integration – Procurement module critical Platforms for coordinated subnational planning and budgeting – Chile: Convenios de Programación (but deconcentrated regional level) – OECD countries France: Contrats de Plan Etat-Région Germany: joint tasks Spain: agreements (convenios) Coordination within central government: – Mexico: Infrastructure Cabinet led by Presidency Emerging discussion: defining and benchmarking standards of capacity

21 Chile is putting SIGFE at the core… Source: Proyecto SIGFE (Sistema de información para la gestión financiera del estado) Gobierno de Chile.

22 Programming BPIN Budget Execution SIIF Monitoring SPI Evaluation SIGOB Formulation …and in Colombia systems cover all steps of the investment cycle Source: SUIFP - DNP Other countries are trying other solutions: Interfaces: Honduras (SIAFI/SIGADE/SISPU/DEI/BANCO CENTRAL) System Integration: Costa Rica (ERP) Reducing parallelism: Discussions in Bolivia (SISIN-SIGMA)

23 Current efforts at improving ex-ante controls Independent evaluations in only a few countries – Argentina (starting) – Mexico: energy, water, and transport Chile: simplifying evaluation methodologies – Focus on value added and time reduction – Policy: social and economic evaluation should not hold up efficient projects Maximize Net Present Value – Multi-sector benefits – Risk analysis, interdependence, externalities – Base line for ex post evaluation – Expert group for technical advice

24 Chile: risk approach (example airports), demand analysis, and possibilities to delay financing

25 Differentiation of appraisals: can lead to undesirable consequences if not applied on whole spectrum of projects Peru Evaluation according to project size some evidence on fragmentation to take advantage of lighter evaluations in small scale projects Chile No monetary threshold Specialized methodologies in some projects – Airports; Urban road maintenance: for municipalities with less capacities; Telecenters: calculation of benefits are simplified Mexico Evaluation according to project size Methodologies for small and medium-sized projects: – Urban solid waste, Water, Rural roads, Health centers, school building

26 Nicaragua: Procurement Module is critical for monitoring physical and financial execution Monitors execution in two moments: at the award stage and during execution of contracts Execution is monitored based on contract programming and milestones Source: SNIP Nicaragua

27 GERENTE DE META Registro semanal Restricciones, Alertas y Oportunidades Registro Mensual: Logros del último mes e Indicadores COORDINADOR INSTITUCIONAL Semanalmente atiende Alertas - Restricciones y valida oportunidades Mensualmente valida Reporte de Avance e Indicadores PRESIDENCIA GRUPO DE ESTRATEGIA Semanalmente atiende Alertas, Restricciones y Oportunidades Transectoriales Mensualmente Toma conocimiento del Avance, Identifica sinergias y toma decisiones PRESIDENTE Recibe propuestas de acción presidencial: normativas, técnico-administrativas, político directas y de acción comunicacional MINISTRA/ O Semanalmente atiende Alertas, Restricciones y Oportunidades Mensualmente Toma conocimiento del Avance, Indicadores e indica reprogramaciones CIUDADANIA El Salvador: improved monitoring with a results-focus Source: SNIP El Salvador

28 Interactive system in Chile… Source: MIDEPLAN, Chile

29 29 Gobierno de Chile | Ministerio de Planificación … with geo-referencing Source: MIDEPLAN, Chile

30 Efforts at ex-post monitoring are limited Chile: Reporting on programs to Congress; baselines Peru: creating and refining methodologies (four levels of results and impacts) Creating more demand is critical – Users of services – Within the administration

31 31 Pareto-Strategy in Mexico: focus on high expenditure areas Fuente: Subsecretaría de Egresos de la SHCP/ Tomo VII PEF 2009 / Análisis Deloitte Distribución de la cartera total por sector (monto y tipo de proyectos) About 90% of investment is concentrated in three sectors: hidrocarbon, communications/trans port and electricity It is critical to being strategic about the way forward

32 A Network of LAC Directors of Public Investment was founded in October 2010 in Panama 32 Annual meetings, exchange of information, consultations Support from CEPAL, IADB, and World Bank

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