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Fiscal Indicators in Latin America and the Caribbean

Explore fiscal indicators, public debt, budgetary innovations, and social spending in Latin America, with insights on public investment, pro-poor budgeting, and recommendations for better financial management.

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Fiscal Indicators in Latin America and the Caribbean

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  1. Meeting of the Public Policy Management and Transparency Network: IDB, Washington, 23- 24 may 2005 Fiscal Indicators in Latin America and the Caribbean Ricardo Martner Area of Budgeting and Public Management, ILPES, CEPAL, United Nations

  2. PUBLIC POLICY OVERVIEW • Part A:PUBLIC FINANCES • group vision • public income • public spending • fiscal decentralization • public debt • public balance and macroeconomic cycle • Part B: BUDGETARY INNOVATIONS • macro-fiscal rules • counter-cyclic policies • transparency, systems and contingent liabilities • civic participation and budget • result-based public policy

  3. Index • Fiscal operations coverage: a recurrent debate • “Examples of creative indicators” • Chile: structural balance and new accounting framework • México: traditional balance and public private partnerships • Public debt in Brazil • Indicators of “quality” of public spending • The functional classification • Social Spending in Colombia • A “quality” synthetic indicator • Conclusions and Recommendations

  4. International Comparisons of public spending, 1970-2005, Fuente: OCDE, Economic Outlook N. 75 para países de la OCDE; FMI y CEPAL para América Latina.. 1/ For Latin american countries coverage is central government

  5. Latin America : Central Government • When the base year is 1990: • There is a generalized increase; • More intense when the starting point is low.

  6. Latin America : Central Government • When base year is 1980: • The rise only concerns countries with low starting point levels; • For the others, the nineties increase is just recovery

  7. Latin American Countries: spendings and incomes for central government Fuente: OXLAD para serie 1950-1989, CEPAL para serie 1990-2003

  8. Public debt according to coverage Source: ILPES-CEPAL. Simple average, without considering Nicaragua.

  9. The evolution of public expenditure, 1990-2003

  10. I. La cobertura de las operaciones fiscales FISCAL STATISTICS INSTITUTIONAL COVERAGE IN IMF STAFF REPORTS (as % in each group of countries) • There is a bias towards NFPS in Latin American countries • IMF proposal to exclude “commercially run enterprises” • Fiscal targets cover the General government in the EU, Chile and other countries. So does the IMF Manual 2001.

  11. II. Examples of “creative indicators” As opposed to creative accounting, these indicator of “good practices” aim at conducting fiscal policy. • Chile: structural balance and new accounting framework • México: traditional balance and public private partnerships • Public debt in Brazil

  12. II.Cyclical component of Budget in Chile

  13. Public debt in Brazil

  14. Financial requirements in México

  15. II.México: public-private partnerships PUBLIC INVESTMENT IN MEXICO • Pidiregas for PEMEX and CGE • More ample definition: hospitals, schools, roads. • There are future transfers (maintenance and amortization of investment). Examples: PFI in UK, PPS in México. • Big potential to reduce investment bias, but still do not represent more than 15% of total investment. (UK)

  16. III. Towards a better quality in public spending Functional Classification of Public expenditures (COFOG) • The aim is rather to avoid pro-cyclical public spending…

  17. Social spending in Latin American Countries Source: Cepal, Social Development Division. a/ simple average for 16 countries (excluding Bolivia and El Salvador).

  18. III.Priority to social spending? • Colombia: “social public spending will have priority over any other allocation” (artículo 350 de la Constitución) • The law of 1994 stresses that social spending are those that “increase general welfare and improve the quality of life of citizens” • The new budget law consider public spending the allocations that adress unsatisfied basic needs in health, education, sports, envirnmental protection, water and subsidies associated to the last two items.

  19. III.Pro-poor budgeting? 1: public debt interest payments 2:collective consumption, wages, pensions 3: housing, social exclusion, family and children, unemployment 4: education, active policies of employment, health, R&D, infrastructure

  20. Make progress in the General Government coverage, both in accounting and targeting. Apply GFSM 2001 Include officially measures of cyclically adjusted balances, to reflect the effects of macroeconomic environment in public finance. Report the magnitudes and types of PPPs. Improve information and budget projections concerning functional classification. The network could trigger these changes.... Conclusions and recommendations

  21. Reunión de la Red de Gestión y Transparencia de la Política Pública BID, Washington, 23 y 24 de mayo de 2005 Thank you...

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