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Transcript of Public Investment in Latin America: Challenges and Options for better Management Brasilia, 16 June...
Public Investment in Latin America:Challenges and Options for better Management
Brasilia, 16 June 2011
Jonas FrankSr. 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 ex-post 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
5
There is significant variation across countries in the level of investment spending…
Source: CEPAL (2011)
GDP
… and overall the quality of services is often still below the world average
Electric d
istrib
ution losse
s
Quality of p
ort infra
structu
re
Paved Roads
Cell-Phone Subscr
iptions
Landlin
e Suscriptions
Broadband In
ternet S
ubscriptions
Access
to Impro
ved Water
0%20%40%60%80%
100%120%140%160%180%200%
Average Provision of Services inLAC, 1989-2010 (World Average = 100)
World Aver-age
Source: World Development Indicators
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
Public investment management has evolvedover time…
… and led to different institutional arrangements
• Ministries of Finance (managing all cycle)• Peru, Argentina, El Salvador, Honduras, Panama, Mexico
• Planning entities• Colombia, Bolivia, Ecuador, Brazil, Costa Rica, Venezuela• Role of Presidencies: Nicaragua, Guatemala
• Variations: • Role of sector entities• Subnational governments
Planning Entity
Finance Ministry
Ex Ante Evaluation
Budget
Formulatio
n
Budget
Execution
Ex Post Evaluation
“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
Country Interface IFMIS vs SNIP Single project code in IFMIS Brazil yes yesColombia yes yesChile yes yesCosta Rica no noGuatemala no noHonduras yes yes (social investments)Paraguay no yes (in execution stage but not
at pre-investment level)Perú no yesBolivia no yesUruguay no yes
… and so is the integration with Financial Management Systems
Source: IDB Survey 2009-2010 and World Bank
Case of Bolivia: system overlaps and gaps
Nivel de Gobierno
Sistema de Info.CICLO DE LA INVERSIÓN PÚBLICA
Formulación Presupuestación Ejecución Seguimiento Evaluación
Central
SISIN web
SIGMA
SPI -MOP
Aplicativo MMyA
SAP - FPS/FNDR CMC
Aplicativo - VT
Departamental
SISIN web
SIGMA
SGP
SIGMA local
Municipal
SISIN web (GM)
SIGMA (GM)
SGP
SIGMA local
Source: World Bank
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…
2004 2005 2006 2007 2008 20091,183 2,142 1,885 2,319 2,321 2,4091,505
2,035 2,8163,190 2,837 3,072
1,022
1,332
7,186
13,299
19,798 18,891
Gobierno Nacional
Gobiernos Regionales
Gobiernos Locales
Fuente: SNIP
Example of Peru
Proceso de Elaboración del Plan Nacional de Inversiones Públicas
Dirección Nacional de Inversión Pública
Organismos Presupuestarios
Oficina Nacional de Presupuesto Provincias
Relevamiento de la Demanda de Inversiones
Priorización de los proyectos
Consultas a Provincias
Selección Definitiva de
Proyectos
Definición de Techos
Presupuestarios
Presupuesto de Inversiones
Plan Nacional de Inversiones Públicas
Dictamen
Remisión de documentación
Criterios de priorización
Mayo
Julio
Mayo
Septiembre
Agosto
Octubre
Abril
Mayo
Plan Nacional de Inversiones
Públicas
Relevamiento de la Demanda de Inversiones
Abril
Octubre
Argentina: bottom-up process and fiscal decisions on project selections
…and sometimes strong subnational autonomy can create additional pressures to spend... creating risk of
stop-and-go financing and incomplete projects
Source: Ministry of Economy, Argentina
Source: Dirección General de Inversión y Crédito Público, Ministerio de Hacienda, El Salvador
2.5
%
PIB
2.6
%
PIB
2.5
%
PIB
2.3
%
PIB2.9
%
PIB
El Salvador: Planned and executed public investment,
2006-2010 (in million US$)
Recent growth episode has led to resource abundance and challenged execution rates…
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2005 2006 2007 2008 2009
Millone
s
PIM Gobiernos Regionales Ejecutado
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2005 2006 2007 2008 2009
Millone
s
PIM Gobiernos Locales EjecutadoLocal Governments Regional Governments
Blue: planned budgetsRed: executed budgets
Peru case
Source: SNIP, Peru
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
-
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00 B
aja
Vera
paz
Reta
lhule
u
FO
NPETR
OL
Toto
nic
apán
Santa
Rosa
Jala
pa
Sacate
péquez
Zacapa
Suchitepéquez
Jutiapa
Izabal
Chiq
uim
ula
Chim
altenango
Quetz
altenango
Solo
lá
Huehuete
nango
Peté
n
Quic
hé
El Pro
gre
so
San M
arc
os
Guate
mala
Multir
egio
nal
PorcentajePobreza
Millo
ne
s d
e Q
ue
tza
les
Departamentos
Relación Inversión Pública 2011 vrs. Porcentaje de Pobreza
Nacional por Departamento
Total Inversión en el Departamento
… while expenditures are often still inequitable
Case of Guatemala
Electoral campaigns promise more infrastructure works
Incentive problems can be overcome if political pressures are channeled and used adequately…
19
… and attention is also paid to improving implementation and ex-post evaluation
Project evaluation Project
implementation
Ex-post evaluation
A balancing act
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.
Programming
BPIN
Budget
Execution
SIIF
Monitoring
SPI
EvaluationSIGOB
Formulation
…and in Colombia systems cover all steps of theinvestment cycle
Source: SUIFP - DNP
Other countries are trying other solutions:• Interfaces: Honduras (SIAFI/SIGADE/SISPU/DEI/BANCO CENTRAL)• System Integration: Costa Rica (ERP)• Reducing parallelism: Discussions in Bolivia (SISIN-SIGMA)
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
• Execution is monitored based on contract programming and milestones
Banco de Proyectos
Sistema de
Preinver-sión
Sistema de
Programación
Sistema de
Seguimient
o
Source: SNIP Nicaragua
GERENTE DE META
Registro semanal Restricciones,
Alertas y Oportunidades
Registro Mensual: Logros del último mes e Indicadores
COORDINADOR INSTITUCIONAL
Semanalmente atiendeAlertas - Restricciones
y valida oportunidades
Mensualmente validaReporte de Avance e
Indicadores
PRESIDENCIA
GRUPO DE ESTRATEGIA
Semanalmente atiende Alertas, Restricciones y Oportunidades
TransectorialesMensualmente
Toma conocimiento del Avance , Identifica sinergias y toma
decisiones
PRESIDENTERecibe propuestas de acción presidencial: normativas, técnico-
administrativas, político directas y de acción
comunicacional
MINISTRA/ O
Semanalmente atiende Alertas, Restricciones y
Oportunidades
MensualmenteToma conocimiento del Avance , Indicadores e
indica reprogramaciones
CIUDADANIA
El Salvador: improved monitoring with a results-focus
Source: SNIP El Salvador
Interactive system in Chile…
Source: MIDEPLAN, Chile
29Gobierno de Chile | Ministerio de
Planificación
… with geo-referencing
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
31
”Pareto-Strategy” in Mexico: focus on high expenditure areas
Fuente: Subsecretaría de Egresos de la SHCP/ Tomo VII PEF 2009 / Análisis Deloitte
Distribución de la cartera total por sector (monto y tipo de proyectos)
360
400Hidrocarburos
($228/537)
SCT($64/1,683)
Electricidad($40/450)
Medio Ambiente ($11/176)
Salud($10/175)
Impartición de Justicia($7/52)
Fomento($6/146)
Educación($5/190)
Seguridad Nacional($4/76)
Ejecutivo Federal($3/161)
320
280
240
200
160
120
80
40
4,0000 3,0002,0001,000
Mon
to A
sign
ado
en 2
009
(376
milm
illon
es d
e pe
sos)
Número de Proyectos(3,652 proyectos)
61%
15%
17%
46%
12%
11%
About 90% of investment is concentrated in three sectors: hidrocarbon, communications/transport and electricity
It is critical to being strategic about the way forward
32
A Network of LAC Directors of Public Investment was founded in October 2010 in Panama
• Annual meetings, exchange of information, consultations• Support from CEPAL, IADB, and World Bank