Public Investment in Latin America:
Challenges and Options for better
Management
Brasilia, 16 June 2011
Jonas Frank
Sr. Public Sector Specialist
The World Bank
Main messages
• Latin American countries have ample
opportunities to improve public investment
• It is critical to balance efforts: improved
appraisal, implementation monitoring and expost evaluation
• It is key to being up-front about political
economy factors
Latin American countries invest below
the world average…
… but much less compared to fast-growing
economies like China and India
There is significant variation across countries in the level
of investment spending…
GDP
Source: CEPAL (2011)
5
… and overall the quality of services is
often still below the world average
200%
150%
100%
50%
0%
Source: World Development Indicators
World
Average
Average Provision of
Services in
LAC, 1989-2010
(World Average =
100)
Public investment management has evolved
over time…
Phases
1960s
1970s
1980s-1990s
2000s
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
… 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
Ex Ante
Evaluation
Planning Entity
Ex Post
Evaluation
Budget
Formulation
Budget
Execution
Finance Ministry
“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
… 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
… and so is the integration with Financial Management
Systems
Country
Brazil
Colombia
Chile
Costa Rica
Guatemala
Honduras
Paraguay
Interface IFMIS vs SNIP
yes
yes
yes
no
no
yes
no
Perú
Bolivia
Uruguay
Source: IDB Survey 2009-2010 and World Bank
no
no
no
Single project code in IFMIS
yes
yes
yes
no
no
yes (social investments)
yes (in execution stage but not
at pre-investment level)
yes
yes
yes
Case of Bolivia: system overlaps and gaps
Nivel de
Gobierno
CICLO DE LA INVERSIÓN PÚBLICA
Sistema de Info.
Formulación
Presupuestación
Ejecución
Seguimiento
SISIN web
SIGMA
Central
SPI -MOP
Aplicativo MMyA
SAP - FPS/FNDR
Aplicativo - VT
SISIN web
Departamental
SIGMA
SGP
SIGMA local
SISIN web (GM)
Municipal
SIGMA (GM)
SGP
SIGMA local
Source: World Bank
CMC
Evaluación
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
Decentralization without planning and coordination can
lead to fragmentation of projects…
Gobierno Nacional
Example of Peru
Gobiernos Regionales
Gobiernos Locales
19,798
18,891
3,190
2,837
3,072
13,299
7,186
1,332
1,022
1,505
1,183
2,035
2,816
2,142
1,885
2,319
2,321
2,409
2004
2005
2006
2007
2008
2009
Fuente: SNIP
…and sometimes strong subnational autonomy can
create additional pressures to spend... creating risk of
stop-and-go financing and incomplete projects
Argentina: bottom-up process and fiscal decisions on project selections
Proceso de Elaboración del Plan Nacional de Inversiones Públicas
Dirección Nacional
de Inversión Pública
Organismos
Presupuestarios
Oficina Nacional
de Presupuesto
Relevamiento
de la Demanda
de Inversiones
Criterios de
priorización
Abril
Relevamiento
de la Demanda
de Inversiones
Abril
Mayo
Priorización de
los proyectos
Julio
Definición de
Techos
Mayo
Consultas a
Provincias
Mayo
Presupuestarios
Selección
Definitiva de
Proyectos
Plan Nacional de
Inversiones Públicas
Provincias
Remisión de
documentación
Octubre
Agosto
Presupuesto de
Inversiones
Plan Nacional de
Inversiones
Públicas
Septiembre
Octubre
Dictamen
Source: Ministry of Economy, Argentina
Recent growth episode has led to resource abundance
and challenged execution rates…
El Salvador: Planned and
executed public investment,
2006-2010 (in million US$)
2.5% PIB
2.6% PIB
2.5% PIB
2.3% PIB
2.9% PIB
16,000
Millones
Millones
Peru case
14,000
14,000
12,000
12,000
10,000
10,000
8,000
8,000
6,000
6,000
4,000
4,000
2,000
2,000
0
0
2005
Source: Dirección General de Inversión y Crédito Público,
Ministerio de Hacienda, El Salvador
16,000
2006
2007
2008
2009
Governments
PIMLocal
Gobiernos Locales
Ejecutado
Source: SNIP, Peru
Blue: planned budgets
Red: executed budgets
2005
2006
2007
2008
2009
Regional
Governments
PIM Gobiernos Regionales
Ejecutado
… while expenditures are often still inequitable
Case of Guatemala
800.00
Relación Inversión Pública 2011 vrs. Porcentaje de
Pobreza
Nacional por Departamento
90.00%
80.00%
700.00
70.00%
600.00
60.00%
500.00
50.00%
400.00
40.00%
300.00
30.00%
200.00
20.00%
100.00
10.00%
Departamentos
Multiregional
Guatemala
San Marcos
El Progreso
Quiché
Petén
Huehuetenango
Sololá
Quetzaltenango
Chimaltenango
Chiquimula
Izabal
Jutiapa
Suchitepéquez
Zacapa
Sacatepéquez
Jalapa
Santa Rosa
Totonicapán
FONPETROL
0.00%
Retalhuleu
-
Baja Verapaz
Millones de Quetzales
Porcentaje
Pobreza
Total Inversión en el
Departamento
Incentive problems can be overcome if political pressures
are channeled and used adequately…
Electoral campaigns promise more
infrastructure works
… and attention is also paid to improving
implementation and ex-post evaluation
A balancing act
19
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
Chile is putting SIGFE at the core…
Source: Proyecto SIGFE (Sistema de información para la gestión financiera del estado) Gobierno de Chile.
…and in Colombia systems cover all steps of the
investment cycle
Formulation
BPIN
SIGOB
Budget
Evaluation
Programming
Monitoring
SPI
Execution
SIIF
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)
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
Chile: risk approach (example airports), demand
analysis, and possibilities to delay financing
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
Sistema de
Preinversión
• Execution is monitored based on contract
programming and milestones
Banco de
Proyectos
Sistema de
Seguimiento
Source: SNIP Nicaragua
Sistema de
Programación
El Salvador: improved monitoring with a results-focus
PRESIDENCIA
MINISTRA/ O
CIUDADANIA
Semanalmente atiende
Alertas, Restricciones y
Oportunidades
Mensualmente
Toma conocimiento del
Avance , Indicadores e
indica reprogramaciones
GERENTE DE META
Registro semanal
Restricciones, Alertas y
Oportunidades
COORDINADOR
INSTITUCIONAL
Semanalmente atiende
Alertas - Restricciones y
valida oportunidades
Registro Mensual:
Logros del último mes e
Indicadores
Mensualmente valida
Reporte de Avance e
Indicadores
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
Source: SNIP El Salvador
Interactive system in Chile…
Source: MIDEPLAN, Chile
… with geo-referencing
Gobierno de Chile |
Ministerio de
Planificación
29
Source: MIDEPLAN, Chile
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
It is critical to being strategic about the way forward
”Pareto-Strategy” in Mexico: focus on high expenditure areas
400
Hidrocarburos
($228/537)
360
About 90% of
investment is
concentrated in three
sectors: hidrocarbon,
communications/trans
port and electricity
320
Monto Asignado en 2009
(376 mil millones de pesos)
280
61%
240
200
Medio Ambiente
($11/176)
160
15%
SCT
Salud
($64/1,683)
($10/175)
Impartición de Justicia
120
17%
($7/52)
Electricidad
Fomento
($40/450)
($6/146)
46%
80
Educación
11%
($5/190)
12%
40
Distribución de la cartera total por sector
(monto y tipo de proyectos)
Seguridad Nacional
($4/76)
Ejecutivo Federal
($3/161)
0
1,000
2,000
3,000
4,000
Número de Proyectos
(3,652 proyectos)
Fuente: Subsecretaría de Egresos de la SHCP/ Tomo VII PEF 2009 / Análisis Deloitte
31
A Network of LAC Directors of Public Investment
was founded in October 2010 in Panama
• Annual meetings, exchange of information, consultations
• Support from CEPAL, IADB, and World Bank
32