Integration & Trade Journal #36

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36Volume 17

January-June 2013

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Inter-American Development Bank

Integration and Trade Sector

Institute for the Integration of Latin America and the Caribbean

@journalE-Biannual Publication


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N36 // Volume 17 // January-June 2013

RNP: 5095068ISSN: 1995-9532

Publication property o the Institute or the Integration o Latin America and the Caribbean,Inter-American Development Bank (IDB-INTAL). All rights reserved.

Steering CommitteeRicardo Carcio*

Antoni Estevadeordal

Editorial CommitteeGala Gmez Minjn

Jan Martin

Christian Volpe

Coordination-EditingSsana M. FilippaJlieta S. Tarqini

Institute or the Integrationo Latin America and the Caribbean

Esmeralda 130, 16th FlooC1035ABD Benos Aires, Argentina

Tel: (54 11) 4323-2350Fax: (54 11) 4323-2365

e-mail:[email protected]://www.iadb.org/inta

The opinions expressed in this publication are those othe authors and do not necessarily reect the views o theInter-American Development Bank, its Board o Directors,or the countries they represent.

The unauthorized commercial use o Bank documents isprohibited and may be punishable under the Banks policiesand/or applicable laws.

Copyright [1996] Inter-American Development Bank.All rights reserved; may be reely reproduced or anynon-commercial purpose.

* Ricardo Carcio, IDB-INTAL Director p to May 31st, 2013.
mailto:intal%40iadb.org?subject=http://www.iadb.org/intal/index.asp?idioma=ENGhttp://www.iadb.org/intal/index.asp?idioma=ENGmailto:intal%40iadb.org?subject=


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Content

South-Southand triangular Cooperationin latin ameriCaandthe Caribbean: muCh adoabout nothing? 1

Matthew Shearer & Joaquim Tres

ArtiCleS 11

Public Goods and Regional Cooperation or Development:A New Look 13

Todd Sandler

The New Boom in South-South Cooperation:The Experience o Ibero-America 25

Cristina Xalma

The Rising Importance o South-South Cooperation inAsia-LAC Economic Relations 39

Jae Sung Kwak

Civil Society Organizations and Inclusive Partnerships orSouth-South Cooperation in Latin America 53

Jorge Balbis Prez

ArtiCleSfromthe Callfor paperS 67

South-South Development Cooperation in Latin America: WhatRole or the Private Sector? 69

Shannon Kindornay, Pablo Heidrich & Matthew Blundell


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Boosting Vocational Training and Skills Development: A Case oTriangular Cooperation among Brazil, Germany, and Peru 85

Susana Carrillo & Napoleo Dequech Neto

South-South Cooperation and Companies in Brazil and Chile 93

Rita Giacalone

South-South Cooperation in Suriname: New Prospects orInrastructure Integration? 95

Adriana Erthal Abdenur

Energy Security and Binational Cooperation: a Case Studyo the Itaipu Dam 105

Thauan Santos, Luan Santos & Cassia Oliveira

InterviewS 117

South-South CooperationSandra Bessudo Lion (APC-Colombia) 119

Jorge Daccarett (AGCI) 123

Martn Rivero Illa (AUCI) 127

Juan Manuel Valle Perea (AMEXCID) 131

Rebeca Grynspan (UNDP) 137

Brenda Killen (OECD) 143

Rafael Garranzo (AECID) 147

Masato Watanabe (JICA) 151

StatiStiCS 159


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@jo ur na lN36 // Volume 17 // January-June 2013

InstitutefortheIntegration

ofLatinAmericaandtheCaribbean(IDB

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1

billion.2 Despite its shortcomings, aid provided byDevelopment Assistance Committee (DAC) membersis rapidly changing to be more eective, inclsive, andrecipient-owned; principles that were refected in theParis Declaration o Aid Eectiveness (2005) and thatwere later reinorced in the Accra Action Plan and theBsan otcome docment (2011). Ths crrent aidprovided by traditional donors has improved its qality

dramatically and rather than talking abot donors andrecipients it is now more accrate to reer to crrentaid as taking place among partners or development.

Meanwhile, aid fows among developing contrieshave grown nearly ten-old in dollar terms in thelast decade, according to DAC data. However, thesestatistics do not inclde some o the new modalities orproviders o aid. More importantly many developingcontries, inclding some rom Latin America and theCaribbean (LAC), have initiated vibrant aid programsto exchange relevant knowledge and developmentpractice with other Sothern partners both within and

2 Developed contry aid reers to aid provided by theOECDs Development Assistance Committee (DAC) members.

MatthewShearer*Senior Specialist with the Integration and Trade Sector o the Inter-American Development Bank (IDB).

JoaquiMtreS*Lead Specialist with the Integration and Trade Sector o the IDB.

SOuTH-SOuTH AND TRIANGuLAR COOPERATION

IN LATIN AMERICA AND THE CARIBBEAN:Much Ado about Nothing?

IntroductIon

Is aid dead? Dead Aidwas the provocative title o abook that appeared on the 2009 New York Timesbestseller list in which Dambisa Moyo otlined

the shortcomings o traditional aid to Arica andproposed some even more contentios soltions orher continent.1 Bt has development assistance really

rn its corse? Does all aid ollow old colonial patternsand actors, as Moyo maintains?

We arge that aid is alive and kicking with someexciting trns that have been gathering momentmin recent years both among traditional donors andnew and still emerging Soth-Soth Cooperation(SSC) actors. Developed contry aid alone stillchanneled uS$134 billion in 2011, a 154% increaserom a decade earlier; preliminary gres or 2012show to little srprise a slight decline to uS$126

1 Moyo (2009). Dead Aidis a drill-down o long tradition oargments skeptical o the positive impact o aid and developmentcooperation, inclding seminal work by Baer (1971), and morerecent critiqes by Easterly (2006).

* The views expressed in this article are those o the athors alone and do not necessarily refect the views o the Inter-AmericanDevelopment Bank (IDB) or any o its member contries. The athors wold like to thank Christian Volpe or his comments.


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beyond their own region.3 As we will demonstratehere, SSC, rather than being mch ado abot nothing,is actally tangible and abot more than meets the eye,refecting new avenes o delivery, innovative ways othinking, and ongoing economic realignment.

This conclsion, however, raises still more qestions:What are the orces driving the rise o this increasinglyimportant cooperation modality? What are thecharacteristics o this emerging cooperation paradigm?How is the international cooperation rameworkchanging rom an architectre to an ecosystem as areslt? What are the implications o these changes orLatin America and the Caribbean and the IDB? Andwhat are the challenges presented by Soth-Soth andTrianglar Cooperation going orward?

theForces drIvIng south-southand

trIangular cooperatIon

Developing contries have registered stronggrowth over the past decade. Emerging marketand developing economies grew an annal

average o 6.6% between 2001 and 2011, and areprojected to grow 5.6% dring 2011-2016. At thesame time, LAC as a whole grew 3.8% annally, andis expected to contine growing at 3.6% (IMF, 2013).The IMF projects that developing economies will

accont or 55% o world economic otpt by 2018(Giles & Allen, 2013).

International trade has been the biggest driver odeepening Soth-Soth linkages. This is seen in thegrowth o trade between LAC and Asia, especiallywith China, and in the increasing nmber o ree tradeagreements (FTAs) in orce between the economies othe two regions, which have grown to 20 since the rstone became eective in 2004.4 While LACs exportsto the world have tripled since 2000, LAC exports to

3 Measring SSC only in dollar terms is bond to createmisperceptions. The diversity in SSC delivery models makes itdiclt to captre it properly and also the price o goods and servicesengaged in SSC are mch lower than in developed contries.

4 The international trade architectre o Latin Americaand the Caribbean refects an increasing integration with the worldeconomy more generally. Free trade agreements involving one ormore members o the region grew rom 12 in orce as o 2000 to 60by the close o 2012.

China grew by more than a actor o 25 (IMF, Directiono Trade Statistics).

Improving policy conditions and economic prospectshave served to attract oreign direct investment (FDI) to

the region, mch o it coming rom other contries othe Soth. Eight regional contries are presently grantedinvestment-grade debt stats by the rating agenciesand demand or bond isses rom other contries in theregion oten more than trebled. Worldwide, developingand transition economies have grown rom 10% o totalotward FDI in 2002 to 27% in 2011 (UNCTADstat),and mch o this investment is Soth-Soth in natre.Once again, China played an important role: Chinaslending to the region grew to uS$6 billion in 2008,to uS$18 billion in 2009, to uS$37 billion in 2010(Gallagheret al., 2012).

Expanding trade and investment ties are beingaccompanied by enhanced aid fows and cooperationmore broadly.5 In terms o development nance,assistance rom developing contry donors is growingin both absolte and relative terms. Flows o overseasdevelopment assistance (ODA) rom non-DACcontries grew rom uS$995 million in 2001 to uS$9.7billion in 2011, growing rom less than 2% o overallaid fows to more than 5% (OECD. Query Wizard orInternational Development Statistics - QWIDS).

Tracking actal Soth-Soth cooperation is mch

more complicated, however, as the ODA gres ollowa strict denition o cooperation that refects modalitiescharacteristic o North-Soth fows. Frthermore, manydeveloping contries, inclding some o the largestproviders o cooperation, do not report their aid fowsto the DAC becase they have dierent methodologies,their cooperation is not necessarily priced in uS dollars,and prices or their goods and services are mchlower than those oered by North-Soth cooperation.Becase o this diclty o measrement, levels ocooperation are not inclded in the Statistical Sectionin this isse o Integration & Trade, bt rather, Soth-Soth trade and investment fows are provided to give

an indication o the trend towards deepening economicrelations among developing contries.

5 There is a strong case that trade linkages promoteinternational cooperation more generally (Devlin & Estevadeordal,2002; Estevadeordal & Sominen, 2008).
http://unctadstat.unctad.org/http://stats.oecd.org/qwids/http://stats.oecd.org/qwids/http://stats.oecd.org/qwids/http://stats.oecd.org/qwids/http://unctadstat.unctad.org/


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South-South and Triangular Cooperation in LAC: Much Ado about Nothing?




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Rapid and sstained economic growth seen inmany developing contries in the last decade hasbeen accompanied by their emergence as increasinglyprominent players in international cooperation. Thesecontries have assmed a greater role not only in

terms o global governance, or example throgh theG-20, bt also in aid fows and throgh the sharingo sccessl experiences with other contries acingsimilar development challenges.

The shit in growth toward the emerging economies,especially Asia, has generated a mltipolar internationalsystem that maniests itsel in a rebalancing o theinternational cooperation system, o which SSC isa part and parcel. The new SSC refects majorchanges in the nderlying global economic strctre,as opposed to movements along the geopoliticalsrace. Althogh the economic emergence o the

Soth had been taking place or some time, the extentand implications o this did not become lly apparentntil the Great Recession. In contrast to the Erozoneand to a lesser extent the united States, the majorityo contries in LAC were able to recover qicklyrom the global nancial crisis o 2008 and retrn tothe path o growth in their economies as opposedto the stagnation that accompanied past crises.6 Thisrecovery has been made possible in part by prdentmacroeconomic management, sizeable internationalreserves rom the commodity boom, stronger nancialreglatory instittions, and scal space to carry ot

contercyclical programs in times o crisis, so there areelements o stronger ndamentals, improved policies,as well as economic tail winds.

theemergIng cooperatIon paradIgm

SSC is not presenting itsel as an alternative totraditional aid bt as a complement, jdging bythe Bsan Declaration. Both traditional and new

and emerging Sothern donors are partnering in thenew avene o Trianglar Cooperation by which

sccessl development experiences are transerredrom one contry (reerred to as a pivotal partner)to another (the beneciary) with the nancial and/or technical spport o a third contry (the acilitator,

6 In act, China provided a partial conterbalance to globaldeclines in the demand or goods as well as the spply o aordablegoods and o oreign direct investment dring the crisis period.

sally termed traditional donor) (OECD, 2012),improving the practice and redcing the cost. TrianglarCooperation becomes a clear example o this emergingpartnership among all kinds o development actors.Despite this new, more constrctive context, mch

remains to be done by all development partners inareas sch as tracking Trianglar Cooperation fows,monitoring and evalation, sharing inormation onmechanisms or promoting and providing nding toTrianglar Cooperation, and analyzing the role o theprivate sector, among others (OECD, 2013).

However, despite the proclamations at the highestpolitical levels, or perhaps becase o them, theqestion still lingers whether this is merely a well-intended rhetoric, or whether the new Soth-SothCooperation indeed refects a new developmentcooperation paradigm.

Cooperation between developing contries is notnecessarily new, and there have been a nmber o high-visibility Soth-Soth Cooperation initiatives in thepast. However, these initiatives were driven more bypost-colonial solidarity and the search or an alternativeto Cold War polarization and were regarded as gearedmore towards political isses rather than developmentcooperation. What is new is the development ocso the crrent Soth-Soth cooperation, given an earlyocial impets in the 1978 Benos Aires Plan o Actionbt more recently accelerating in practice.7

The rising economic prospects o developingcontries have been accompanied by an increasingprominence o the sbject o Soth-Soth Cooperationin international ora. The growing prole o the newSSC in the narrative o development cooperation isrefected in the inclsion o the topic in the 2008 AccraAgenda or Action endorsed at the Third High LevelForm on Aid Eectiveness.

The Forth High Level Form on Aid Eectiveness(HLF-4) held in Bsan, Korea represented a trningpoint in the concept o international cooperation. Here,

an nprecedented diversity o donors, approaches,

7 Buenos Aires Plan o Action (BAPA). In the otcomedocment o the Nairobi conerence, held to mark the 30th anniversaryo the Benos Aires conerence, the ollowing principles o SSC areset orth: respect or national sovereignty, national ownership andindependence, eqality, non-conditionality, non-intererence indomestic aairs and mtal benet. (uN General Assembly, 2010).
http://ssc.undp.org/content/dam/ssc/documents/Key%20Policy%20Documents/BAPA.pdfhttp://ssc.undp.org/content/dam/ssc/documents/Key%20Policy%20Documents/BAPA.pdf


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o which are not readily apparent, bt nonethelesscontribte to dening the whole.

Organisms mst continally adapt in sch anenvironment o ongoing change. One sch adaptation

is refected in a de-emphasis o the policy conditionalitythat was associated with the period o the WashingtonConsenss. Another innovation is the emergenceo Trianglar Cooperation, where the comparativeadvantages o traditional partners can be tilized toleverage the eectiveness o Soth-Soth cooperation.

Modalities o dialoge are also changing to becomebroader and more inclsive. Whereas the G-7, throghthe DAC, was the driving orce behind the 2005 ParisDeclaration on Aid Eectiveness, as a reslt o moreinclsive aid approaches, todays mltipolar world hadalready been refected in the 2011 Bsan otcome

docment. The role o developing contries, incldingthose o LAC, is apparent not only in the trearchitectre o cooperation set orth in the HLF-4otcome docment, bt indeed in the process leadingp to the preparation and active participation o theForm and the drating o the docment.

The ocial development nancing system has alsobecome more decentralized with regard to the nmbero players, the variety o instrments and the diversityo approaches. While this refects the recent rise o amore mltipolar world, it is also part o a longer-term

trend starting with the Bretton Woods system, throghthe creation o the mltilateral regional banks, ollowedby the rise o sbregional development banks, andmore national sorces o development nance bothrom North (sbnational aid programs) and rom theSoth, inclding the most recent Brazil, Rssia, India,China and Soth Arica (BRICS) project o creating theirown development bank.

The appearance o new actors also implies a widerassortment o instrments and approaches, which intrn creates limitations on the comparability amongvarios sorces o nding (Severino & Ray, 2009). For

example, the World Bank and regional developmentbanks can oer attractive concessional nancingterms given their AAA bond ratings, and accompanytheir lending with technical assistance and knowledgeprodcts, albeit oten with longer preparation timesthan with other sorces as a reslt, while other sorceso nancing may reqire higher rates with ewer or evenperhaps no complementary prodcts, and may have

less exacting technical standards and environmentaland social saegards.10 This variety nonetheless oersa wider men o sorces o nancing to developingcontries than beore, expanding contries easibleset o tools or complementing their national sorces

or nancing development, which represent the mainsorce o pblic investment throgh national bdgetsand annal investment plans.

ImplIcatIonsFor latIn amerIcaand

thecarIbbeanandthe Idb

LAC is a shrinking recipient o global aid fows, andthis trend is expected to contine de to progressin economic growth and poverty redction in LAC

and economic misortnes in most traditional donor

contries which are now prioritizing their aid ocs inother regions. The share o ODA destined to the regionhas allen rom 10% o total fows in 2000-2001 to 8%in 2010-2011 (OECD. Query Wizard or InternationalDevelopment Statistics - QWIDS). Gradation rom aidprovided by traditional donors also looms as a challengeor some LAC contries. Growth and the concomitantredction o poverty in many middle-income contries(MICs) is reslting, an increased concentration opoverty in, and ths development ocs towards, theimmediate needs o least developed contries (LDCs)consisting primarily o ragile states, especially in sb-

Saharan Arica, as noted by Kharas & Rogerson (2012).Their stdy posits that not only is the geographic ocso cooperation changing, bt development providerswill have to reassess their bsiness models as well,broadening the scope o cooperation beyond povertyby ptting orth three major axes o cooperation: (i)social welare; (ii) mtally benecial growth and trade,and (iii) the provision o global pblic goods. Thesethree cooperation challenges are in trn respectivelydriven by: (i) high impact philanthropy and civil society;(ii) SSC and the blending o private and pblic nance,and (iii) climate nance (Kharas & Rogerson, 2012).

10 Hmphrey & Michaelowa (2013) report loan approvaltimes o 12-16 months or the World Bank, 7-10 months or theIDB, and 3-6 months (1.5 i rgent) or the Andean DevelopmentCorporation (CAF), whereas the All-in Cost o interest rates olibor-based loans are less than 2% or the World Bank and IDB,and pwards o 4% or the CAF. The reader is cationed thatcomparability between loans is not exact.
http://stats.oecd.org/qwids/http://stats.oecd.org/qwids/http://stats.oecd.org/qwids/http://stats.oecd.org/qwids/


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Innovation is necessary to conteract a decliningsense o rgency on the part o some traditional donors.LAC has been a sorce o development soltions thatcan be tapped throgh Trianglar Cooperation andoset the declining interest in the region by traditional

donors. Also, i there is a tendency to ocs less onLatin America and the Caribbean de to greater needelsewhere, perhaps this can be oset by increasingthe ability to make a dierence in the region. Ensringthat development impacts can be evalated anddemonstrated will help redce the exods o traditionaldonors in a region dominated by middle incomecontries (MICs), and also helps attract emergingdonors who wold tend to have a strategic interest inseeing development impacts in their own region.

The IDB has also responded to these changes takingplace at the global and regional levels. The progress

seen in LAC economies has given them greater optionsin their sorces o nancing. The IDB is recalibratingits oer to its borrowing members, by maintainingproximity with the development priorities o clientsas well as a stronger presence in the contries o theregion, redcing preparation times or operations,dierentiating its loan prodcts by adding valethrogh complementary knowledge prodcts andby introdcing greater development eectiveness ininterventions. The IDB eected an increase in its capitalin 2012 to lend uS$12 billion annally on a sstainablebasis in the next decade, given that the economies o

the region had dobled in size since the last capitalincrease in 1994. The IDB has also increased its spportor development throgh private sector lending toarond uS$1.5 billion annally.

The IDB acilitates Soth-Soth cooperation withinLAC throgh varios instrments. Net income romloans to its borrowing member contries as well as theircontribtions to the Fnd or Special Operations (FSO)make possible concessional nancing to Bolivia, Gyana,Hondras and Nicaraga,11 and grants to Haiti, the lattero which presently total uS$200 million annally.

The IDBs Regional Pblic Goods (RPG) Initiative isbased on the rationale that LAC contries share bothchallenges and opportnities or development thatcan be addressed more eectively and eciently at a

11 under crrent eligibility criteria, Gatemala and Paragayalso receive a smaller share o FSO nancing, in addition to reglaraccess to the Ordinary Capital (IDB).

regional level throgh horizontal Soth-Soth collectiveaction among the IDBs borrowing member contries.At the heart o the IDBs denition o regional pblicgoods is collective action among a grop o contries,where the instittions in the region engaged in the

promotion o the RPGs decide collectively how toachieve a goal, inclding the agenda, governance,and partners o their regional cooperation, as wellas the regional commitments that they are willing tondertake. The Bank assmes the role o an honestbroker and acilitator o consenss and as a providero Trianglar Cooperation, providing nancing toovercome the typical obstacles to realizing initial stagecooperation; cooperation that can ltimately reslt inthe generation o benets that can be consmed bymore than one contry.12

The IDB has embarked on a joint Soth-Soth

cooperation and research program with the AsianDevelopment Bank (ADB), exchanging developmentexperiences and knowledge on isses o mtal interestsch as cstoms, broadband, sstainable integrationcorridors, inclsive bsiness, sstainable cities,conditional cash transer programs, and managingor development reslts. The Bank is also spportingthe strengthening o Latin American and Caribbeancooperation agencies, the strategic positioning o theregion in Soth-Soth cooperation more globally, andparticipation in proessional and academic exchangeswith China and Korea, and also with Japan. These

activities are made possible by nding provided by thesedonors intended to increase the development impact othe deepening Asia-LAC economic relationship.

IDB borrowing members are not only emerging asproviders o knowledge and development soltions,bt have become aid partners and are contribting togrant resorces as well to promote the regional andglobal integration o LAC contries. Chile, Colombia,and Mexico are all contribtors to integration ndsadministered by the Bank, or example.

12 As o April 2013, 92 RPG technical cooperation projectshad been approved or a total o uS$73 million. More detail on theIDB RPG program can be ond in IDB (2011). Another IDB programis CT/INTRA, established in 1976 that nances advisory servicesto contribte to the transer o knowledge and technology thatwold spport borrowing member contries economic and socialdevelopment eorts and promote cooperation among them.
http://www.iadb.org/en/about-us/idb-financing/fund-for-special-operations-fso,6063.htmlhttp://www.iadb.org/en/about-us/idb-financing/fund-for-special-operations-fso,6063.htmlhttp://www.iadb.org/en/about-us/idb-financing/fund-for-special-operations-fso,6063.htmlhttp://www.iadb.org/en/about-us/idb-financing/fund-for-special-operations-fso,6063.htmlhttp://www.iadb.org/en/about-us/idb-financing/fund-for-special-operations-fso,6063.htmlhttp://www.iadb.org/en/about-us/idb-financing/fund-for-special-operations-fso,6063.html


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challenges presentedbyssc

Measring SSC in money terms is verydiclt de to the increasing heterogeneityo cooperation. While traditional aid is

measred in nancial fows, which are by their natreqantiable, it is mch more challenging to assign anmber vale to the provision o shared knowledge ordevelopment soltions.13

Cooperation among developing contries is otendelivered in new orms that all otside the strictdenition o ODA, even when assistance does takethe orm o nancial spport. Lending by developingcontries may be throgh export/import banks,which can have less stringent lending conditions, btare oten linked to the procrement o goods andservices o the lending contry, with varying degrees

o concessionality. Indeed, even classiying contrieswithin the new diverse development ecosystembecomes diclt, as contries ndertake more nancedroles than the recipient verss donor dichotomy, orcontries classied as developing achieve higherGDPper capita levels than developed contries andsome traditional donors.

Measring impacts and reslts, and evalatingSSC interventions is also necessary in light o a moreinclsive denition o aid. Evalation is still an emergingdiscipline where there is mch room or improvement,

not jst with regard to SSC. Traditional aid gradallyinclded an emphasis on evalation and some donorsinclded participatory methodologies to inclde projectbeneciaries bt strggled with the attribtionactor, i.e., how mch o the improvement cold beattribted to the aid intervention and isolating otheractors. Determining case and eect is even moreproblematic in light o the variety o cooperation amongdeveloping contries. While SSC is not necessarily new,its prominence in the development mainstream is parto a new paradigm with considerably less literatrewith regard to monitoring and evalation, and calls orits evalability will certainly increase and new research

on SSC and Trianglar Cooperation will need to becarried ot to oer new light on their impact.

13 In act, the Nairobi otcome docment states that Soth-Soth cooperation shold not be seen as ocial developmentassistance. It is a partnership among eqals based on solidarity. (uNGeneral Assembly, 2010).

New actors with resh perspectives will give rise tocreative and innovative soltions. Bt there needs tobe coordination so that the broader goals o strctraltransormation are kept in sight given the plethorao individal interventions (Fengler & Kharas, 2010).

There will be a need to ensre convergence and synergyamong the Post-2015 Development Agenda (sccessorthe Millennim Development Goals), the SstainableDevelopment Goals, and the Global Partnership orEective Development Co-operation (Sinclair, 2012).14A related task will be to eectively operationalizecooperation eorts among LAC contries in order tomake a decisive contribtion to these initiatives.

In conclding, it is clear that aid is alive and kickingwith some recent exciting trns that are opening newavenes with more actors and modalities. SSC hasemerged with strength and gained prominence in aid

ora to complement North-Soth cooperation de tosstained economic growth in developing contries,especially the BRICS and MICs, and increased politicalclot that conrms the ongoing economic realignmentand a new more complex mltipolar world. The newcontext can no longer be characterized as the evoltiono the postwar North-Soth aid architectre; bt rathera more complex cooperation ecosystem that incldesSSC, Trianglar Cooperation and an increasinglydecentralized cooperation landscape.

This new cooperation ecosystem has proond

implications or LAC contries. As a reslt o strongeconomic perormance, several have become activeaid donors in and otside their obvios areas oinfence, while smaller and vlnerable contriesrisk being gradated rom traditional donors whoseabsence may not be oset by SSC in the short-term.The IDB increased its capital to become bigger and stepp its role as donor as demonstrated by the uS$200million annal grant transer or the 2010-2020 periodand other SSC programs on RPGs and with Asia inpartnership with the Asian Development Bank.

14 Emerging rom the Bsan HLF, the Global Partnershipor Eective Development Co-operation is working to strengthendevelopment cooperation, deepen SSC, and monitor andoperationalize the commitments made in Bsan. A recent Reporto the High-Level Panel o Eminent Persons on the Post-2015Development Agenda provides recommendations on the post-2015development agenda, in which sstainability is a clear priority (unitedNations, 2013; Haddad, 2013).
http://www.effectivecooperation.org/files/Mandate%20of%20the%20Global%20Partnership/formatted_proposal_for_mandate.pdfhttp://www.effectivecooperation.org/files/Mandate%20of%20the%20Global%20Partnership/formatted_proposal_for_mandate.pdfhttp://www.effectivecooperation.org/files/Mandate%20of%20the%20Global%20Partnership/formatted_proposal_for_mandate.pdfhttp://www.effectivecooperation.org/files/Mandate%20of%20the%20Global%20Partnership/formatted_proposal_for_mandate.pdf


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Despite the excitement generated by the emergenceo SSC and Trianglar Cooperation, importantchallenges have emerged related to an appropriatedenition o what can be dened as cooperationthat has implications or measring ODA fows and

determining what conts and what does not. However,the greatest challenge o all will be ensring that SSChas a real impact in economic, social and instittionaldevelopment to make extreme poverty history by 2030and contribting to improved well-being.

Featured contrIbutIons

In the rst work o the present isse o Integration& Trade, Todd Sandlero the university o Texasat Dallas analyses regional pblic goods and

their implications or sstainable development in theregion. Pblic Goods and Regional Cooperation orDevelopment: a New Look reviews the propertieso pblic goods, distingishes among their classesaccording to level, analyzes the role o instittionsin the provision o pblic goods, and draws policyrecommendations ten years ater he made a contribtionto the Regional Public Goods rom Theory to Practicethat led to the establishment o the IDBs RegionalPblic goods Program overviewed in this introdction.

In The New Boom in Soth-Soth Cooperation: The

Experience o Ibero-America,Cristina Xalma

o theIberoamerican General Secretariat (SEGIB) examinesthe evoltion and distingishing eatres o SSC,and the how this increasingly important cooperationis contribting to international dialoge. The paperprovides statistics and indicators on cooperation inLatin America.

Jae Sung Kwak o Kyng Hee university exploresdeepening Trans-Pacic trade, investment, andcooperation in The Rising Importance o Soth-SothCooperation in Asia-LAC Economic Relations. Thiscontribtion explores the rising prole and implications

o Soth-Soth and Trianglar Cooperation betweenLAC and China, Japan, and Korea, and sggests thata mltilateral ramework wold be a way to engagesmaller economies, and that SSC more broadly presentsan opportnity or more horizontal relations betweenAsia and LAC.

Jorge Balbis addresses a topic that has heretoorereceived only scant attention in the literatre: the

role o civil society organizations (CSOs) in dening,implementing, and evalating SSC interventions inthe region. Civil Society Organizations and InclsivePartnerships or Soth-Soth Cooperation in LatinAmerica examines how, throgh what means, nder

what conditions, and with which reslts CSOs areparticipating in pblic SSC initiatives throgh a logic opblic-private action.

Shannon Kindornay, Pablo Heidrich, and MatthewBlundell o the North-Soth Institte explore howproviders o SSC in the region engage the privatesector in Soth-Soth Development Cooperationin Latin America: What Role or the Private Sector?The athors provide key comparisons between SSCproviders and traditional donors in both motivationsand approaches, inclding a greater ocs on the privatesector by SSC providers versus traditional donors who

emphasize more market-based soltions.

Susana Carrillo and Napoleo Dequech Neto othe World Bank analyze a Trianglar Cooperationcase stdy in Boosting Vocational Training and SkillsDevelopment: A Case o Trianglar Cooperationamong Brazil, Germany, and Per. The athors sethis example to sggest that Trianglar Cooperationcan be sccessl when the participating instittionsshare mtal interests, ownership, and benets.

Rita Giacalone analyzes the interplay between private

economic interest and pblic policy objectives in Soth-Soth Cooperation and Companies in Brazil and Chile.In addition to addressing the private sectors importantrole in achieving oreign policy objectives, this article alsoexamines the role o the comparative economic systemso Brazil and Chile in acilitating private sector activity.

In Soth-Soth Cooperation in Sriname: NewProspects or Inrastrctre Integration? AdrianaErthal Abdenur addresses the new opportnities andchallenges presented by SSC, and its implications ortransportation inrastrctre and integration. Sheocses on three Soth-Soth partnerships pertinent to

Sriname and the role o the national government as acoordinating mechanism.

Thauan Santos, Luan Santos, and Cassia Oliveiradiscss the rationale or energy integration, andanalyze the incentives and prospects or cross-borderhydroelectric cooperation sing a game theoryapproach, nding that cooperation is in the interests


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o both contries in Energy Secrity and Bi-NationalCooperation: a Case Stdy o Itaip Dam.

The articles are complemented with interviews opractitioners in the eld o development cooperation.

One set o interviews provides insights on SSC romsome heads o regional cooperation agencies, inclding

Sandra Bessudo Lion, Director-General o the ColombianPresidential Agency o International Cooperation(APC-Colombia); Jorge Daccarett, Exective Directoro the Chilean International Cooperation Agency(AGCI); Martn Rivero Illa, Exective Director o theurgayan International Cooperation Agency (AuCI),andJuan Manuel Valle Perea, Exective Director othe Mexican Agency or International DevelopmentCooperation (AMEXCID).

reFerences

bauer, p. t. 1971. Dissent on Development: Studies and Debates in Development Economics. Harvard universityPress.

birdSall, nanCy. 2012. The Global Financial Crisis: The Beginning o the End o the Development Agenda?Center or Global Development Policy Paper 003. Washington.

devlin, robert & eStevadeordal, antoni. 2002. Trade and Cooperation: A Regional Pblic Goods Approach,paper presented at the PECC Trade Form on Developing Patterns o Regional Trading Arrangements in the Asia-Pacic Region: Isses and Implications. Preliminary Drat. Vancover. November 11-12.

eaSterly, william. 2006. The White Mans Burden: Why the Wests Eorts to Aid the Rest Have Done So MuchIll and So Little Good. Pengin Press.

eStevadeordal, antoni & Suominen, Kati. 2008. Seqencing Regional Trade Integration and CooperationAgreements, in: The World Economy 31(1).

fengler, wolfgang & KharaS, homi. 2010. Overview: Delivering Aid Dierently, in: Fengler, W. & Kharas, H.(Eds,) Delivering Aid Dierently: Lessons rom the Field. Brookings: Washington.

gallagher, Kevin p.; irwin, amoS & KoleSKi, Katherine. 2012. The New Banks in Town: Chinese Finance in LatinAmerica. Washington: Inter-American Dialoge.

gileS, ChriS & allen, Kate. 2013. Sotheastern Shit: The New Leaders o Global Economic Growth, in: FinancialTimes. Jne 4.

haddad, lawrenCe. 2013. The High Level Panels Ater 2015 Report: Solid--and that is OK, DevelopmentHorizons weblog. May 31.

humphrey, ChriS & miChaelowa, Katharina. 2013. Shopping or Development: Mltilateral Lending, ShareholderComposition and Borrower Preerences, in: World Development, Volme 44. April.

The second set o interviews complements this withperspectives rom international organizations anddeveloped contry cooperation agencies engaged inTrianglar Cooperation. These inclde contribtionsrom Rebeca Grynspan, Associate Administrator and

under-Secretary-General o uNDP, Brenda Killen,Head o the Global Partnership and Policies Division,Development Co-operation Directorate, OECD,Raael Garranzo, Director o Cooperation with LatinAmerica and the Caribbean, Spanish Agency orInternational Development Cooperation (AECID), and

Masato Watanabe, Vice-President, Japan InternationalCooperation Agency (JICA).u
http://www.cgdev.org/files/1426133_file_Birdsall_financial_crisis_FINAL.pdfhttp://www.pecc.org/resources/doc_view/168-trade-and-cooperation-a-regional-public-goods-approachhttp://www.thedialogue.org/PublicationFiles/TheNewBanksinTown-FullTextnewversion.pdfhttp://www.thedialogue.org/PublicationFiles/TheNewBanksinTown-FullTextnewversion.pdfhttp://www.developmenthorizons.com/2013/05/the-high-level-panels-after-2015-report.htmlhttp://www.developmenthorizons.com/2013/05/the-high-level-panels-after-2015-report.htmlhttp://www.developmenthorizons.com/2013/05/the-high-level-panels-after-2015-report.htmlhttp://www.developmenthorizons.com/2013/05/the-high-level-panels-after-2015-report.htmlhttp://www.thedialogue.org/PublicationFiles/TheNewBanksinTown-FullTextnewversion.pdfhttp://www.thedialogue.org/PublicationFiles/TheNewBanksinTown-FullTextnewversion.pdfhttp://www.pecc.org/resources/doc_view/168-trade-and-cooperation-a-regional-public-goods-approachhttp://www.cgdev.org/files/1426133_file_Birdsall_financial_crisis_FINAL.pdf


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inter-ameriCan development banK (idb). 2011. Regional Public Goods: An Innovative Approach to South-SouthCooperation. Washington.

international monetary fund. 2013. World Economic Otlook Database. April.

KharaS, homi & rogerSon, andrew. 2012. Horizon 2025: Creative Destruction in the Aid Industry . ODI Report.London: Overseas Development Institte. Jly.

moyo, dambiSa. 2009. Dead Aid: Why Is Aid Not Working and How There Is a Better Way or Arica . New York:Farrar, Stras and Girox.

organiSationfor eConomiC Co-operationand development (oeCd). 2012. Conclsions: Brainstorming Meeetingon Trianglar Co-operation. Lisbon. September 13-14.

-----. 2013. Emerging Messages and Follow-p Actions, Policy Dialoge on Trianglar Co-operation. Lisbon.May 16-17.

paeS-SouSa, romulo; regalia, ferdinando & Stampini, marCo. 2013. Conditions or success in implementing CCTprograms: Lessons or Asia rom Latin America and the Caribbean. IDB Policy Brie Nmber 192. Washington: IDB.Jne.

rodriK, dani. 2008.Second-Best Institutions. NBER Working Paper 14050. National Brea o Economic Research.

Severino, Jean-miChel & ray, olivier. 2009. The End o ODA: Death and Rebirth o a Global Public Policy. Centeror Global Development Working Paper Nmber 167. Washington.

SinClair, John. 2012. Beyond 2015: MDGs, SDGs and Global Partnership. The North-Soth Institte. November 13.

un general aSSembly. 2010. 64th Session. Plenary. Nairobi outcome document o the High-level United NationsConerence on South-South Cooperation. A/RES/64/222. Febrary 23.

united nationS. 2013. A New Global Partnership: Eradicate Poverty and Transorm Economies Through SustainableDevelopment. The Report o the High-Level Panel o Eminent Persons on the Post-2015 Development Agenda.
http://www.iadb.org/document.cfm?id=36610045http://www.iadb.org/document.cfm?id=36610045http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/7723.pdfhttp://www.oecd.org/dac/dac-global-relations/OECD_Conclusions%20Brainstorming%20Meeting%20on%20Triangular%20Co-operation.pdfhttp://www.oecd.org/dac/dac-global-relations/OECD_Conclusions%20Brainstorming%20Meeting%20on%20Triangular%20Co-operation.pdfhttp://search.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DCD/DAC/RD(2013)9/RD3&docLanguage=Enhttp://www.iadb.org/es/publicaciones/detalle,7101.html?id=69503&dcLanguage=en&dcType=Policy%20Briefs&doctype=&docTypeID=AllPublic&searchLang=&keyword=&selectList=All&topicDetail=0&tagDetail=0&jelcodeDetail=0&publicationCover=0&topic=MACRhttp://www.iadb.org/es/publicaciones/detalle,7101.html?id=69503&dcLanguage=en&dcType=Policy%20Briefs&doctype=&docTypeID=AllPublic&searchLang=&keyword=&selectList=All&topicDetail=0&tagDetail=0&jelcodeDetail=0&publicationCover=0&topic=MACRhttp://www.nber.org/papers/w14050.pdfhttp://www.nber.org/papers/w14050.pdfhttp://www.cgdev.org/sites/default/files/1421419_file_End_of_ODA_FINAL.pdfhttp://www.nsi-ins.ca/newsroom/beyond-2015-mdgs-sdgs-and-global-partnership/http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/64/222http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/64/222http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/64/222http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/64/222http://www.post2015hlp.org/wp-content/uploads/2013/05/UN-Report.pdfhttp://www.post2015hlp.org/wp-content/uploads/2013/05/UN-Report.pdfhttp://www.post2015hlp.org/wp-content/uploads/2013/05/UN-Report.pdfhttp://www.post2015hlp.org/wp-content/uploads/2013/05/UN-Report.pdfhttp://www.un.org/ga/search/view_doc.asp?symbol=A/RES/64/222http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/64/222http://www.nsi-ins.ca/newsroom/beyond-2015-mdgs-sdgs-and-global-partnership/http://www.cgdev.org/sites/default/files/1421419_file_End_of_ODA_FINAL.pdfhttp://www.nber.org/papers/w14050.pdfhttp://www.iadb.org/es/publicaciones/detalle,7101.html?id=69503&dcLanguage=en&dcType=Policy%20Briefs&doctype=&docTypeID=AllPublic&searchLang=&keyword=&selectList=All&topicDetail=0&tagDetail=0&jelcodeDetail=0&publicationCover=0&topic=MACRhttp://www.iadb.org/es/publicaciones/detalle,7101.html?id=69503&dcLanguage=en&dcType=Policy%20Briefs&doctype=&docTypeID=AllPublic&searchLang=&keyword=&selectList=All&topicDetail=0&tagDetail=0&jelcodeDetail=0&publicationCover=0&topic=MACRhttp://search.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DCD/DAC/RD(2013)9/RD3&docLanguage=Enhttp://www.oecd.org/dac/dac-global-relations/OECD_Conclusions%20Brainstorming%20Meeting%20on%20Triangular%20Co-operation.pdfhttp://www.oecd.org/dac/dac-global-relations/OECD_Conclusions%20Brainstorming%20Meeting%20on%20Triangular%20Co-operation.pdfhttp://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/7723.pdfhttp://www.iadb.org/document.cfm?id=36610045http://www.iadb.org/document.cfm?id=36610045


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conservation (Arce, 2004). The same actors indicatedabove or the growing importance o transnationalpblic goods also apply to RPGs, which, as a sbclasso the latter, generate benet spillovers that infenceewer or more contries.

RPGs serve a crcial nction in Soth SothCooperation (SSC), becase their provision can linkor integrate Latin American inrastrctre, therebyacilitating trade and development in the region.Sometimes, SSC is characterized as a RPG. While thischaracterization is ne, I preer to view SSC as a meanso acilitating the provision o a host o RPGs and GPGs.SSC is pivotal in the development o Latin America.

The prpose o the crrent article is to take a reshlook at RPGs rom a development and integrationviewpoint. In so doing, the article draws important

distinctions rom a collective action viewpoint amongor classes o pblic goods: NPGs, RPGs, TransregionalPblic Goods (TRPGs), and GPGs. TRPGs aretransnational pblic goods that benet contries in twodistinct regions -e.g., nding a cre or malaria. Thearticle identies actors that either inhibit or promotethe provision o these varios pblic goods. In practice,the article indicates what policies the Inter-AmericanDevelopment Bank (IDB) and other stakeholders canadopt to promote these or types o pblic goods.Along the way, the article lists some important RPGs inLatin America. To set the stage, the article begins with a

brie review o the properties and types o pblic goods,becase they come in myriad orms with dierentimplications or policies. The article also investigatesthe main stakeholders and participants, and how theyplay a role in the provision o RPGs. In recent times, thediversity o these stakeholders has grown and incldesmltilateral instittions, pblic-private partnerships,donor contries, Non-governmental Organizations(NGOs), development banks, charitable ondations,and others. Finally, the article reexamines the rationaleor sbsidiarity with respect to RPGs and the growingimportance o RPGs.

on publIc goods

The classic pre pblic good is characterizedby two properties: nonrivalry o benets andnonexcldability. Nonrivalry o benets indicates

that a nit o the good can be consmed by oneagent withot detracting, in the slightest, rom the

o terrorist networks to other states. Cross-borderexternalities may be positive or negative and aectthe ve sectors enmerated earlier -e.g., or the healthsector, the Internet can be sed to disseminate bestpractices in new operative procedres in medicine.

In addition to GPGs, globalization has increasedthe concern or transnational pblic goods (bads)that aect two or more nations throgh their rangeo benet (cost) spillovers. The increased presenceand awareness o these transnational pblic goodsstem rom nmeros cases (Sandler, 1997, 2004).First, agmented trade and nancial fows, associatedwith globalization, mean that social overhead capitalin one contry acilitates trade and nancial fows inother contries. Ths, this capital provides benetsnot only at home, bt also abroad, thereby rtheringsstainable development at the regional level.Second,

the increased pace o technological advancementcreates more transnational pblic goods as ideas andinnovations spread beyond national borders. Third, agrowing interest in market integration enhances theneed or transnational pblic goods, especially in termso inrastrctre that spports private enterprises andthe operation o markets. Fourth, the ragmentation onations, especially in Erope, Arica, and Asia, changessome National Pblic Goods (NPGs) into transnationalones. Fith, the worlds enhanced ability to monitor theplanet, either rom satellites or rom terrestrial vantagepoints, allows new transnational pblic goods to be

spotted -e.g., the spread o deserts or the bildp ogreenhose gases. Sch gases are monitored by satelliteor by an observatory on Mana Loa on the island oHawaii.Sixth, the anticipated initiative on SstainableDevelopment Goals will place increased emphasis onGPGs and RPGs in the environmental, health, andsecrity sectors as a pathway to development (unitedNations, 2012; uNCSD, 2012).

Globalization concerns have given rise to a newregionalism and the recognition that there are alsomore cross-border fows that reqire attention at theregional level (Arce & Sandler, 2002; Stlgren, 2000).

RPGs provide some o the necessary regional socialoverhead capital. In Latin America, RPGs inclde theCentral American Electricity Interconnection System(SIEPAC) linking Costa Rica, El Salvador, Gatemala,Hondras, Nicaraga, and Panama; the Regional Fndor Agricltral Technology (FONTAGRO) providingcommon-pool nancing or agricltral innovation;and the Regional Biodiversity Strategy or the AndeanTropics coordinating biodiversity strategies to promote


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consmption opportnities still available to othersrom the same nit o the good. Nonrivalry o benetsmeans that there is no marginal cost rom extendingconsmption o the pblic good to another ser;hence, there is no rationale to limit the size o the

grop sharing the pblic good. I new sers receivea positive marginal benet rom the pblic good,then consmption shold be aorded to these sers.Examples inclde a tsnami-early warning system,the tracking o hrricanes, remote-sensing monitoringo hrricane intensity, and the sharing o agricltralbest practices, all o which apply to Latin America.Nonexcldable benets arise when the pblic goodsprovision is available to payers and nonpayers alike.Crbing global warming or limiting ozone shielddepletion are nonexcldable pblic goods at the globallevel, while protecting a watershed or eradicating aregion-specic pest or disease are nonexcldable pblic

goods at the regional level. Annihilating a region-basedterrorist organization oers nonexcldable benetsto targeted contries. Nonexcldable benets implyree riding in which those who benet rom the goodreveal no preerence in terms o a payment, since theywill get the benets regardless. This then means thatgovernments or a collective o governments (in thecase o RPGs or GPGs) may have to provide the good.In some cases, pblic-private partnerships or charitableondations can oster provision o these pblic goods.

Althogh mch attention was initially paid to pre

pblic goods, most pblic goods are imprely pblicowing to partial rivalry and/or partial excldabilityo benets (Cornes & Sandler, 1996). Partial rivalrytypically arises rom crowding or congestion costswhere additional consmers detract rom the qalityor qantity o the goods benets that are availableto others rom a nit o the pblic good. A regionalinterstate highway or waterway is sbject to congestion,so that the marginal cost associated with additionalsers is not zero, thereby jstiying a limit to the sizeo the sharing grop. I, however, an impre pblicgood is partially rival bt nonexcldable, then the goodwill be oversed since sers will not accont or the

associated congestion cost that their se imposes onothers. That is, the congestion externality will not beinternalized throgh a ser charge. An example o apartially rival, nonexcldable RPG is a commons, schas sheries in Latin American waters.

A clb good is an impre pblic good that is partiallyrival and excldable at a nominal cost. As sch, a toll orser ee can internalize the marginal congestion cost,

thereby leading to optimal tilization. Moreover, thesetolls can be sed to nance an optimal provision level(Bchanan, 1965; Cornes & Sandler, 1996). A properlydesign clb can indce sers to reveal their trepreerences and to be charged accordingly. Consider

a bridge spanning a river orming the borders o twocontries. Individals, who have a greater willingnessto pay or the se o the bridge, will transverse it moreoten and pay more in total tolls. Each single transit willcost the same becase crowding cost is the same oreach transit, bt those sers with a greater need or thebridge will cross more reqently and pay the toll moreoten, thereby revealing their type and preerences.The bridge is a regional clb good that can be nancedby loans, which are later repaid with congestion-internalizing tolls. Any regional inrastrctre project inLatin America that displays crowding and excldablebenets can be provided throgh a clb arrangement

that can be nanced throgh IDB loans and repaidthrogh ser charges. These clb loans can also comerom other Latin American banks, sch as CorporacinAndina de Fomento (CAF), Banco Nacional deDesarrollo Econmico de Brasil (BNDES), and Fondo

para el Desarrollo de la Cuenca del Plata (FONPLATA).Clb goods can be provided privately (e.g., tollroads in Texas) or pblicly (e.g., pblic hospitals andniversities). Other clb good examples incldesatellite-lanch acilities (e.g., Alcntara in Maranaho,Brazil), air-trac control networks, power grids, crisis-management teams, and the Panama Canal. IDBs

greater se o loans to nance RPGs can with timebe tailored to the nancing o regional clb goods,especially i the loan can be repaid according to thecollection o ser ees.

Joint produCtS

Joint prodcts arise when an activity yields mltipleotpts. For private goods, the classic example is asheep, which yields a hide and mtton. For pblicgoods, a single activity can prodce mltiple otptswith varying degrees o pblicness: e.g., the Amazonrainorest not only seqesters carbon, which is a GPG,

bt it also provides eco-torism, which is a clb goodsbject to crowding and the se o tolls or ees. Inaddition, the Amazon rainorest oers biodiversity, localwatershed, local climates, and oods. Secrity pacts canprovide alliancewide RPGs in the orm o deterrence andproactive measres, while these pacts oer deensiveNPG benets to the allies (e.g., border protection anddisaster relie). A regional electric power grid, sch asSIEPAC in Central America, agments electric reliability


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(a prely pblic RPG), and spplies electric power (aprivate good) to its consmers. SIEPAC is an exampleo a joint prodct that stems rom a pblic-privatepartnership that transcends national borders. Cstomnions -Mercado Comn del Sur(MERCOSuR), Andean

Commnity o Nations (CAN), and Central AmericanIntegration System (SICA)- oer joint prodcts bypromoting regional inrastrctre, best practices, andniormity in transport reglations, which are RPGs.By increasing trade, member states gain an NPG. Theallocation prognosis or joint prodcts hinges on theratio o excldable to total benets. The larger is thisratio, the greater the anticipated allocative eciency asmarkets and clb arrangements can direct resorces totheir most-valed se throgh prices and tolls (Sandler,2004). Cstoms nions can nd regional clbs wheninrastrctre permits exclsion o nonpayers.

aggregation teChnologyof publiC Supply

An important property o pblic goods is theaggregation technology o pblic spply (henceorth,aggregation technology), which indicates the mannerin which individal provision levels are aggregatedto determine the amont o the pblic good thatis available or consmption by benet recipients(Hirshleier, 1983; Cornes & Sandler, 1984). Priorto 1983, the only aggregation technology in theliteratre was smmation where each contrys(or contribtors) pblic good provision are added

together to ascertain the level o the pblic good.For cleansing an ecosystem, the amont o polltantsremoved eqals the smmed eorts o the providingcontries. The capacity o a regional waterway alsodepends on the smmed provision levels. With asmmation aggregator, every contribtors provision isperectly sbstittable or those o others; one nationsprovided nits have the same marginal impact ontotal provision as nits spplied by other nations. Thisperect sbstittability provides strong motivation orree riding on the eorts o others, thereby resltingin sboptimal spply. In a regional context, a contrywold be less willing to assme a loan to spply

a RPG nless other benet recipients also assmeloans to nance the RPG. Ths, IDBs (2012) eortto promote collaborative eorts throgh its Initiativeor the Promotion o Regional Pblic Goods is wellonded rom a theoretical viewpoint. Other nancialinstittions -BNDES, CAF, and FONPLATA- can alsoapply their nancial resorces to nance sch collectiveeorts to provide essential RPGs.

Generally, other aggregation technologies have amore avorable prognosis or RPG provision (Sandler,1997). The weighted-sm aggregator pts nonnitaryweights on the provision levels o the individalcontribtors. As sch, the marginal impact that one

contrys provision exerts on the amont o the RPGis not necessarily the same as the marginal impact oother contries provision levels. Ths, providers eortsare not perectly interchangeable or sbstittable. Inregards to the redction o acid rain stemming rom theelimination o slr or nitrogen emissions, a weighted-sm aggregator applies. This ollows becase theinfence o emission ctbacks on acid depositiondepends on wind patterns, the emission sites, and thepolltants airborne time (Mrdoch et al., 1997). Aweighted-sm aggregation technology also applies tocrbing the spread o a pest, since the eectiveness ocontries actions depend pon the concentration o

the pest and natral barriers to inhibit its dispersion.With a weighted-sm aggregator, the potentialnderspply o RPGs may be attenated becase somenations receive greater payos rom their own eortsas the degree o sbstittability among provision levelsis redced.

Two other important aggregators are weakest linkand best shot. For a weakest-link RPG, the smallestcontribtion level xes the amont o the pblic goodor all benet recipients. As sch, contribtors aremotivated to match this smallest contribtion since to

give more wold be a waste o money. Some ormso inrastrctre abide by weakest link -e.g., the leastdeveloped or least reliable air-trac control systemin a mltinational network infences the trac fowor the entire network. Similarly, the contry with theleast eective monitoring system or disease otbreaksdetermines the protection o all at-risk contries in theregion. Weakest-link RPGs nderscore the need orthe IDB, other Latin American banks, and donors tobolster the eorts o the weakest-link sppliers in orderto raise the provision o the RPG. I these sppliersare assisted, then other contries will volntarilymatch their increased contribtions. At the other end

o the spectrm, the largest contribtion o a best-shot RPG determines the amont o the pblic goodor all benet recipients. Contribtion levels belowthe maximm provision o others do not increasethe RPG level. Geoclimatic-specic research ndingsin agricltre are best-shot RPGs. This is also tre odeveloping best practices or treating regional diseases.Discovering intelligence that can reslt in an eective


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raid on a region-based terrorist grop is also a best-shotRPG. For sch goods, eorts mst be concentrated andperormed by the best-eqipped contry to accomplishthe task; otherwise, wastel dplication occrs orprovision thresholds are not srpassed.

Many key sectors abide by mltiple aggregators opblic spply depending on the particlar activity beinginvestigated. In the governance sector, the contry withthe least sond nancial practice will disproportionatelyinfence the nancial stability in the entire region. Thecontry with the greatest secrity threat exerts thelargest eect on the peace and secrity or the region.As sch, peace may assme the characteristics o aweakest-link RPG, reqiring stabilizing assistance to themost threatened contry rom other allies or donors.The development o sond nancial practices is a best-shot RPG in the governance sector. For the health

sector, monitoring disease otbreaks is a weakest-linkRPG, while developing vaccines or diseases is a best-shot RPG (Sandler & Arce, 2002).

Sandler (1997) showed that aid fows shold bedirected toward weakest-link providers o RPGs,which are sally the poorer contries. This ollowsbecase the pblic good provision o these weakest-link contries mst be broght p to an acceptablestandard that satises all benet recipients. Tocircmvent moral hazard and other considerations,donors may give in-kind transers rather than nds

(Vicary & Sandler, 2002). In contrast, aid fows sholdbe directed toward best-shot providers o RPGs,which are oten the richer contries. At rst, this mightappear conterintitive; however, the rich contriesare typically best positioned to srpass thresholdsnecessary to achieve a best-shot pblic good, sch as acre or a disease. The contry with the best scientistsand laboratories are best sitated or making thediscovery. Resorces need to be concentrated wherethey do the most good or everyone. Ths, nancialcapacity is the key consideration or sbsidizingweakest-link RPGs, while provision capacity is thekey consideration or sbsidizing best-shot RPGs. A

contrys ability to provide varios RPGs, and notnecessarily its income level, determines whose RPGeorts shold be assisted by IDB, other nancialinstittions, and donors. For weighted-sm RPGs,aid shold fow to those contries with the greatestmarginal impact on the provision o RPGs. Hence,recent eorts by MERCOSuRs Strctral ConvergenceFnd (FOCEM) to bolster the inrastrctre o the two

poorer members (Berretoni & Lcngeli, 2012) makesgreat sense or weakest-link and smmation RPGs,bt not or best-shot RPGs, where richer contriesprovision benets all contries in a region. Theseconvergence eorts shold not be blindly applied to

all cases. We reer the reader to Arce & Sandler (2002)and Sandler (1997) or the desirable direction or aidfows in regards to other aggregation technologies-e.g., weaker link, better shot, and threshold.

dIFFerencesbetween npgs, rpgs,

trpgs, and gpgs

NPGs possess benets that are conned to thecontrys territory and do not transcend itsborders. A contrys central bank is an NPG. Other

NPGs inclde the contrys primary schools, its nationalgard, its jstice system, its police, and its internalhighways. Many NPGs are examples o social overheadcapital that are complementary to RPGs and GPGs,since the NPGs acilitate the tilization and provisiono pblic goods with wider ranges o spillovers. Forexample, a regional highway network needs a systemo national highways or greater derived benets, sothat goods rom other contries can reach their desireddestination in another contry. I regional health is tobe promoted, then each nations healthcare system inthe region becomes an important consideration. NPGs

can be provided at the national level with some help,at times, rom donors, development banks, and otherinterested parties. Nations have an incentive to takeot loans or their NPGs becase the lions share o thereslting benets stays within the nation. NPGs arenecessary or development.

RPGs are pblic goods whose benets extendbeyond a single nations territory to some well-denedregion. A region may correspond to myriad dierentconcepts. The regional basis may be geological -e.g.,nations along a river, or on a plain, or on a seacoast.In the seacoast case, the cleanp or prevention o an

oil spill in, say, a gl oers benets to all potentiallyaected coastal nations as crrents and random actors(e.g., wind or weather) infence which nations areltimately impacted. In other instances, the regionmay be geographically based, sch as contries in theSothern Cone o Soth America or in Central America.Propinqity may dene a region, sch as neighboringnations or contries within a dened distance rom


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a reerence contry. Distance becomes importantin the case o airborne polltants sch as slr andnitrogen emissions, which cases acid rain downwind.Geoclimatic actors may identiy a region as contriesthat share similar conditions or crops. The identication

o geoclimatic-based regions is particlarly importantor agricltral research -e.g., FONTAGRO. Regionsmay, at times, be politically dened as in the case ocstoms nion. Cltral similarities (e.g., langage orethnicity) may be the basis or a region. Finally, historicalconsiderations may determine a region, sch as pastties to the same colonizing contry. In its Initiative orthe Promotion o Regional Pblic Goods, IDB (2012)characterizes RPGs as goods, services, or resorcesthat are consmed and prodced collectively by thepblic sector and, i appropriate, the private sectorin a minimm o three Latin American contries.This denition allows or pblic-private provision

partnerships, and diers rom the standard denition,which concerns the range o consmption spilloversand not the natre o the prodcers. For example, abest-shot RPG can be provided by a single contry, btis consmed by contries in a region.

TRPGs have a benet range that incldes contriesrom two or more distinct regions. A transnationalpblic good provides benets to two or more contries,while a TRPG provides benets to two or more regions.A pblic good whose benets aect Central, North,and Soth America is a TRPG -e.g., hrricane-tracking

satellites that monitor more than one geographicalregion. As nations spply RPGs throgh regionalinstittions, a need may arise to network theseinstittions to spply TRPGs -e.g., the preservation orainorests on a continent or the linkage o cstomsnions. The Initiative or the Integration o RegionalInrastrctre in Soth America (IIRSA), begn in2000 by 12 Soth American contries, promotesTRPGs in the orm o integrated energy, transport, andtelecommnication networks as a means or acilitatinginterstate commerce. CAF, FONPLATA, and IDB havended inrastrctre projects o IIRSA, which, intrn, osters SSC. Finally, GPGs display benet ranges

that inclde a large swath o the planet or, in someinstances, the entire globe.

There are actors that both promote and inhibit theprovision o these or classes o pblic goods. NPGshave the best provision prognosis becase nations haveproper incentives to provide these goods. The mainconcern is nance, which is where oreign aid romdonor contries, regional development banks, NGOs,

and mltilateral instittions has a role to play. GPGs arepromoted throgh their ar-ranging benet spilloversbecase donor contries gain benets throgh theireorts to nderwrite recipient contries provision othe GPGs. For example, oreign assistance to preserve

a rainorest provides global pblic benets romthe seqestration o carbon and the preservation obiodiversity, which helps the donor contry and othercontries. Sch GPG eorts spport crrent thinkingabot sstainable development goals (uNCSD, 2012).Mltilateral instittions have an interest, the nds, anda mandate to spply GPGs. However, GPG provisioncan be inhibited by the large nmber o benet-recipient nations, since collective action is generallyharder to achieve among more participants. Moreover,some GPGs possess navorable pblicness propertieso nonexcldable and nonrival benets, which promoteree riding and inhibit provision.

Perhaps srprising, RPGs potentially pose moreinhibitors than NPGs and GPGs. RPGs may oer ewspillover benets to donor nations otside o the regionor to many spporters o mltilateral organizations.For example, redcing acid rain in many parts o LatinAmerica may have little benet spillovers to donorsin North America or Erope owing to prevailing windpatterns. Crbing region-specic diseases may alsohave ew global benet spillovers. Nations within aregion have little incentive to assme debt or an RPGthat benets the entire region nless other nations

in the region are also carrying their appropriate debtbrden or the RPG. Ths, IDBs initiative to promoteRPGs is an important step to srmont this hrdle. Thisis also tre or eorts by BNDES, CAF, and FONPLATA.Regional rivalries and past conficts may also inhibitthe provision o RPGs. The absence o a long-standingcltre to spport regional development banks isanother inhibitor o RPG provision. In contrast, thereis sch a cltre to spport the World Bank and theunited Nations, which bolsters the provision o GPGsand TRPGs. On the positive side, there are someconsiderations that acilitate RPG provision incldingthe new regionalism and cstoms nions. The ormer

makes nations recognize the benets rom regionalcollective action, while the latter promotes collectiveaction in terms o nding. Some RPGs, sch as regionalinrastrctre, possess avorable properties sch asexclsion and crowding that permit a clb arrangementto provide the RPG. IIRSA can promote inrastrctreprojects with agreeable pblic good properties. Cltraland spatial propinqity among benet recipients atthe regional level can bolster RPG provision. In some


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regions, the limited nmber o contries bodes well orcollective provision. Past and ongoing interactions canalso oster RPG provision at the regional level.

TRPGs represent an interesting class o pblic

goods whose benet spillover range lies betweenthat o RPGs and GPGs. Given TRPGs greater rangeo benet spillovers, there is a greater likelihood thatdonor nations may gain rom spporting TRPGscompared to RPGs. Also, mltilateral aid agencies havea greater interest to spport TRPGs than RPGs. Givenits mltiregional spillover range, a TRPG may changeits character between regions (e.g., prophylacticmeasres against malaria and river blindness dieramong inected regions.) This consideration may ormay not inhibit the provision o TRPGs. Two majorinhibitors o TRPGs are the associated transaction costsin establishing networks among impacted regions and

geographically dispersed spillover recipients. The latterconsideration is also associated with another potential

inhibitor -the large nmber o nations necessaryor eective collective action. Finally, the absenceo jrisdiction-specic instittions means that novelnetworks o regional instittions (e.g., cstoms nions)are needed and this need may orestall TRPG provision.

This concern will dissipate as more regional collectivescome into existence, which can then be linked amongregions. The creation o these networks can beachieved throgh collaborative eorts o the regionaldevelopment banks, the World Bank, or contries (e.g.,the case o IIRSA).

Table 1 lists the primary promoting and inhibitingactors or the provision o NPGs, RPGs, TRPGs, andGPGs. Crrently, NPGs and GPGs appear to have abetter prognosis than RPGs and TRPGs, becaseNPGs incentives are right and GPGs are championedby the mltilateral instittions. However, this can

change with eorts by the regional development

National Public Goods (NPGs)

Incentives exist or nations to provide these goods (promote)

Loans rom IDB, mltilateral instittions, and donors can be taken ot by the nation (promote)

NPGs are complementary to RPGs, TRPGs, and GPGs (promote)

Nations may lack nances (inhibit)

Regional Public Goods (RPGs)

New regionalism and cstoms nions can acilitate provision (promote)

Favorable characteristics o pblicness (e.g., joint prodcts, weighted-sm aggregator, and excldable benets) (promote)

Cltral and spatial propinqity among spillover recipients (promote)

Fewer nations involved than or TRPGs and GPGs (promote)

Past and ongoing interactions among regional contries (promote)

Less donor spillovers owing to some regional specicity o benets (inhibit)

Nations mst orm collectives to gain loans and provide collateral (inhibit)

Regional rivalry, eled by past and crrent disagreements (inhibit)

Absence o a cltre to spport regional development banks (inhibit)

T a b l e 1

factorS ProMotinGand inhibitinG nPGS, rPGS, trPGS, and GPGS


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RPGs and TRPGs. These instittions can bolster theprovision o weakest-link pblic goods by sbsidizingthe eorts o the poorer contries. The World HealthOrganization (WHO) plays an important role inassisting in the provision on health-related RPGs andTRPGs. Fourth, networks o participants and instittionscan provide TRPGs, sch as the Global EnvironmentalFacility (GEF) or environmental pblic goods andthe Consltative Grop or International AgricltralResearch (GCIAR) or knowledge pblic goods. Fith,pblic-private partnerships -e.g., the Global Fnd andthe Onchocerciasis Control Partnership- also promoteRPG and TRPG provision.Sixth, donor contries with

trade interests in Latin America (e.g., China, the unitedStates, and Canada) gain rom some RPGs, sch as roadslinking major seaports. These roads stimlate demandor their exports, thereby giving these contries avested interest in some RPGs.Seventh, other importantparticipants inclde charitable ondations (e.g., Gatesand Wellcome) and NGOs (e.g., the Red Cross andDoctors withot Borders).

factorS ProMotinGand inhibitinG nPGS, rPGS, trPGS, and GPGS

Transregional Public Goods (TRPGs)

Donor spillovers may arise, especially i joint prodcts are present (promote)

Mltilateral aid agencies have an interest (promote)

May be some dominant region-specic characteristics (infence ncertain)

Transaction costs associated with establishing transregional network (inhibit)

Large nmber o involved nations (inhibit)

Geographic dispersion o spillover recipients (inhibit)

Absence o a jrisdiction-specic instittion, which may reqire networking o existing instittions (inhibit)

Global Public Goods (GPGs)

Donor spillovers exist (promote)

Mltilateral instittions have an interest (promote)

Large nmber o nations involved (inhibit)

May possess navorable pblicness properties (inhibit)

Table 1

banks, pblic-private partnerships, donor nations, andcharitable ondations.

major partIcIpantsFor rpgsand trpgs

There are diverse stakeholders and participants inthe provision o RPGs and TRPGs. In act, thenatre and nmber o these participants grow

more varied over time and they provide an essentialmeans or overcoming these goods inhibitors. First,and oremost, there is IDB and other Latin American

development banks that can provide loans and grantsto member contries to nd RPGs. To date, IDBhas relied on loans, bt grants are more appropriateor RPGs and TRPGs with especially ar-reachingexcldable and nonrival benets. Second, cstomsnions can nderwrite RPG loans and promoteinrastrctre. Third, mltilateral instittions canpool nds or best-shot, threshold, and smmation


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costs to be spread over serving the needs o mltipleregions. Second, economies o scope rom sharingcommon inpts can redce nit costs rom spplyingtwo or more RPGs by a common jrisdiction, whichdoes not match the spillover ranges o the provided

RPGs. Third, by increasing the cmlative provisiono the RPG, cost savings rom economies o learningmay jstiy oversized decision-making jrisdictions.Fourth, the reqisite regional jrisdiction may not existor may possess inscient capacity. This is particlarlytre or RPGs whose range o benet recipients do notcorrespond to any established political jrisdiction. Fith,the aggregation technology may avor a jrisdictionlarger than that identied by regional sbsidiarity. Thisis likely the case or some best-shot RPGs, where thereqired provision eort is beyond the capabilities oany established region. Finally, the reqisite nancingor the RPG may reqire a providing jrisdiction that

exceeds the RPGs range o benets.

Table 2 smmarizes the spporting and detractinginfences on the application o regional sbsidiarity.

polIcyrecommendatIons

Many policy recommendations ollow rom theanalysis o this article. IDB has essential roles,throgh its RPG initiative and its leadership,

to promote myriad orms o RPGs. In so doing, IDBshold consider the se o grants or select RPGs,where a large nmber o Latin American contriesbenet and ree-rider motives are especially strong.IDB can also play a pivotal role in the provision oTRPGs by serving as a catalyst or linking instittionsin mltiple regions. Given the increasing importanceo RPGs in development, mltilateral instittions anddonor contries need to provide more nding or IDBand other regional development banks.

Cstoms nions in North, Central, and Soth Americahave a crcial role to play in the provision o RPGs

and TRPGs. A cstoms nion, which restricts tradeto contries otside the nion, can coordinate eortsamong its members to provide RPGs, and it can secreloans to spport RPGs. The linkage o cstoms nionsis a means or providing TRPGs. Cstoms nions canalso institte redistribtion schemes or the provisiono weakest-link RPGs (e.g., MERCOSuR StrctralConvergence Fnd). Another example is MERCOSuRs

on regIonal subsIdIarIty

Sbsidiarity derives rom the notion that thesmallest appropriate jrisdiction shold providethe pblic good. In its starkest orm, sbsidiarity

mandates that the decision-making jrisdiction sholdperectly match the range o pblic benet spillovers.Sbsidiarity is consistent with global instittionsspplying GPGs; the appropriate transregional

jrisdiction or network providing TRPGs; regionalinstittions nderwriting RPGs; and nations spportingNPGs. Sbsidiarity is closely associated with the notiono scal eqivalence (Olson, 1969). The analogy is,however, not perect becase, or developing regions,the nancing o RPGs is oten bolstered rom otsideo the decision-making district. Ths, a developingcontry may be making the provision decision or itsNPGs, bt the nding sorce may be rom a regional

development bank and other donors.

Adherence to regional sbsidiarity is intended toensre that decision-makers adjst their expenditredecisions on pblic goods to refect those who derivebenets. In an ideal sitation, sbsidiarity promotesthe eqality between the marginal benets (smmedover regional recipients) to the marginal costs. I thedecision-making jrisdiction lies within the RPGsspillover range, then nderspply is anticipatedas not all recipients derived marginal benets areinclded when provision is decided. I, in contrast,

the decision-making jrisdiction exceeds the RPGsspillover range, then overspply is anticipated as taxspillovers to nonrecipients occr when RPG provisionis decided. Regional sbsidiarity limits transaction costsby redcing the nmber o participants, agmentingrepeated interactions, and crtailing asymmetricinormation. Regional sbsidiarity also promotes theevoltion o regional instittions rom shared cltres,norms, and experiences. A reliance on region-basedinstittions or spplying RPGs also redces missioncreep o mltilateral instittions.

There are considerations that detract rom the blind

application o regional sbsidiarity where the RPGsspillover range is the sole driver o jrisdictional design.First, economies o scale may jstiy having the RPGprovided by an instittion whose political domainexceeds that o the reqisite region i the redcednit cost osets any lost eciency rom departingrom sbsidiarity. Global instittions may achievescale economies or some RPGs by permitting xed


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that Latin American RPGs can agment these partnersexports. As sch, IDB and other Latin Americannancial instittions need to make these RPG spilloverbenets transparent to these exporting contries inan eort to obtain RPG contribtions. There is alsoa need to promote pblic-private partnerships at theregional level as has been done at the global level.IDBs initiative on RPGs moves in this direction byentertaining proposals with pblic and private sectorparticipation. BNDES, CAF, and FONPLATA psh theirown RPG initiatives.

The natre o the RPGs, especially their aggregation

technologies, inorms policymakers on which contriesRPG provision shold be bolstered throgh aid.Redistribtion policies mst be tailored on a good-by-good basis.u

adoption o the Transport Agreement o the SothernCone to develop regional transport corridors bybringing its component parts p to an acceptablestandard (Costa, 2012). In the case o best-shot RPGs,cstoms nions can pool and coordinate eorts amongtheir member states to srmont provision thresholds.

Many RPGs, especially inrastrctre, possessexcldable and partly rival benets, which canbe spplied by clb arrangements. IDB, cstomsnions, and mltilateral instittions can provide theinitial easibility stdy to promote the reqisite clbarrangements or these clb RPGs. Clb arrangements

are particlarly appropriate or the provision andnancing o inrastrctre.

As trade increases with Latin America, tradingpartners otside o Latin America mst come to realize

Supporting actors or regional subsidiarity

Fosters eciency by eqating RPGs marginal benets (smmed over regional recipients) to its marginal costs.

Foster eciency by limiting tax spillovers to nonbeneciaries.

Limits transaction costs by redcing the nmber o participants, agmenting repeated interactions, and crtailing asymmetricinormation.

Spports the evoltion o instittions rom shared cltre, norms, concerns, experiences, propinqity, and vales.

Avoids mission creep o global instittions.

Detracting actors or regional subsidiarity

Economies o scale rom redced nit costs avor allocation by a larger jrisdiction than the spillover range o the pblic good.

Economies o scope rom redced nit costs encorage providing two or more RPGs in the same jrisdiction even when spillover rangesdo not match.

Economies o learning may reqire oversized jrisdictions where the cmlative level o the RPG is larger.

The reqisite regional instittion either does not exist or does not possess scient capacity.

Some aggregation technologies (e.g., best shot) avor jrisdictions beyond those identied by regional sbsidiarity.

The reqisite nancing may reqire a larger political jrisdiction than the range o benet spillovers.

T a b l e 2

SuPPortinGand detractinG influenceSon reGional SubSidiarity


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----- & Sandler, t. 2002. Regional Public Goods: Typologies, Provision, Financing, and Development Assistance.Stockholm: Almqvist.

berrettoni, d. & luCngeli, J. 2012. MERCOSuR: Asymmetries and the MERCOSuR Strctral ConvergenceFnd (FOCEM), in: Integration & Trade Journal 16(34): 33-43.

buChanan, J. m. 1965. An Economic Theory o Clbs, in: Economica 32(1): 1-14.

CorneS, r. & Sandler, t. 1984. Easy Riders, Joint Prodction, and Pblic Goods, in: Economic Journal 94(3):580-598.

-----. 1996. The Theory o Externalities, Public Goods and Club Goods, 2nd Ed. Cambridge: Cambridgeuniversity Press.

CoSta, S. p. m. 2012. Soth American Regional Integration by Land Transport: A Historical Perspective, in:Integration & Trade Journal 16(34): 7-15.

eStevadeordal, a.; frantz, b. & nguyen, t. r. (edS.) 2004. Regional Public Goods: From Theory to Practice.Washington DC: IDB & ADB.

hirShleifer, J. 1983. From Weakest-Link to Best-Shot: The Volntary Provision o Pblic Goods, in: PublicChoice 41(3): 371-386.

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