Context 

• To drive economic growth and inclusive and sustainable development in Latin America and the Caribbean, it is crucial to strengthen state capacities, citizen security and the rule of law. 
• According to the World Bank's Worldwide Governance Indicators, in 2021 the region scored in the 50th percentile for government effectiveness (an indicator related to state capacity), in the 49th percentile for rule of law, and in the 50th percentile for control of corruption. These scores are worse than those of the previous decade, meaning that the region’s performance has deteriorated.
• High levels of crime, violence and insecurity—which are exacerbated by organized crime—have significant social and economic implications: they discourage foreign investment, hinder business, reduce labor productivity, negatively impact the environment, affect citizens’ quality of life and cost the region 3.5% of GDP annually, taking resources away from urgent needs like education and health (IDB, 2023). 
• A preliminary IMF analysis suggests that closing the gap in security between the region and the world average could significantly boost economic growth.

Why is it important to strengthen institutional capacity, citizen security and the rule of law?

• Evidence shows that strong institutional capacity, rule of law and citizen security are key to reducing poverty and inequality, addressing climate change and fostering sustainable regional growth, since they are preconditions for effective policy design and implementation, service delivery and reforms in all areas.
• In addition, states need sufficient institutional capacity to effectively implement policies, programs and projects with sustainable results.
• For this reason, the IDB group is working to:
  • Strengthen the public sector’s institutional and technical capacities to effectively implement policies, improving the sector’s strategic functions and management systems to deliver services. This area of work also aims to enable policy implementation, service delivery and private-sector development by adjusting the sector’s organizational structures and regulatory frameworks.
  • Create an enabling environment and governance mechanisms for effectively implementing public policies, providing better insight into the country context and key policy actors and establishing partnerships to foster cooperation and coordination.
  • Strengthen rule of law and accountability, promoting impartial and predictable state performance, lack of corruption and open government. Under this area, the bank also works to foster consistent, impartial and transparent enforcement of regulations and contracts to provide a stable and predictable legal framework for society and business.
  • The IDB Group believes it is important to improve citizen security and justice by strengthening the institutional capacity of the security and justice sector and enhancing protection for vulnerable populations.

What is the IDB Group doing?

1.     Strengthening public sector management. In this area, the IDB supports countries to:

• Enhance strategic management of public administration. 
• Improve financial management, procurement and public investment processes and practices.
• Strengthen legal and policy frameworks, as well as state structures and organizational arrangements for effective intergovernmental coordination and policy implementation 
•  Promote a merit-based and capable civil service in which more women and diverse population groups participate.

Results

• The IDB has successfully instituted Centers of Government in the region. These management units help structure the complexity of public administrations, set priorities and achieve results. Over the last 10 years, the IDB has supported these efforts through technical assistance in more than 15 countries in the region.
• The IDB has also strengthened civil services, building state capacities to better manage senior officials in public administrations. Examples include senior officials in Chile over the last 20 years, and the civil service career in Brazil. 

2.     Strengthening fiscal management and policy: In this area, the IDB supports countries on: 

• Macro-fiscal and debt policy and management, 
• Fiscal policy and management, including tax policy and administration, public budget and expenditure management (annual and medium-term budgeting, routine expenditure reviews, public procurement and investment management capacity), and green fiscal management; 
• Decentralizing and strengthening subnational governments, including intergovernmental arrangements for revenue and expenditure management, transfer systems and fiscal responsibility frameworks at the subnational level. 
• Promoting equity and transparency in the use of public resources.

Results: 

• The Bank has supported policy reforms in Costa Rica, Chile, Ecuador, Jamaica, Peru and Uruguay to implement counter-cyclical fiscal policies, strengthen macro-fiscal management, bolster the quality of public spending, and increase the efficiency of budgeting processes. 
• Jamaica's fiscal, tax, customs and spending reforms reduced public debt by 50 percentage points of GDP and increased the growth rate by one percentage point. 
• As a result of digitalizing tax administration and financial management at the subnational level in Brazil—a process that included implementing electronic invoicing—tax revenues increased by 10% and formal employment by 3%. Additionally, Brazil saved R$ 1 billion in public procurement. 

3.     Driving the digital transformation of the public sector: In this area, the IDB supports: 

• Digital transformations of public administrations to improve state capacity and service delivery and empower citizens. The bank bolsters digital governance and institutions, the regulatory framework, digital talent and digital infrastructure and tools, as well as digital transformation in specific sectors to improve efficiency and services to citizens. 

Results: 

• A landmark intervention in this area is the IDB's support on Argentina's public procurement system, which included implementing the COMPR.AR platform. This assistance led to lower final prices paid, saving the country over $ 35 million per year (approximately 4.4% of total public procurement). It also shortened public procurement processes and increased competition (measured by number of bidders). 

4.     Strengthening transparency and integrity: In this area, the IDB supports countries to: 

•  Promote public sector integrity and ethics and prevent conflicts of interest, as well as foster open government, access to information, anti-corruption policies, fiscal transparency and accountability. It also assists countries in reinforcing control and auditing entities, financial transparency, initiatives to combat money laundering and terrorist financing, and sectoral transparency in areas such as extractive industries, infrastructure and natural resource governance.

Results: 

• The IDB has used digital technologies to enhance fiscal transparency and accountability through the InvestmentMap initiative, which is present in 14 countries in Latin America and the Caribbean. It has already launched platforms for nine countries and is developing five more to be launched soon. 

5.     Improving citizen security and justice: In this area, the IDB supports countries to:

• Implement proactive policies to prevent and reduce crime and violence among vulnerable populations. 
• Professionalize police institutions so they respond more effectively to crime and boost public confidence. 
• Strengthen justice system institutions to ensure accessible, impartial, equal and transparent case resolution and justice services. 
• Reinforce the penitentiary system, improving the policy and infrastructure for rehabilitation.
• Foster coordination at the national and local levels to improve the design, management and evaluation of policies and programs that will have a decisive impact on citizen security outcomes.

Results: 

• A positive parenting intervention as part of a program in Jamaica led to a 22% drop in child abuse and a 33% decrease in truancy.
• In Honduras, a police reform program contributed to a 50% decrease in the homicide rate and a 50% increase in public confidence in the police. 
• In Chile, a partnership between the prison system and the banking sector to provide microloans, seed capital and job training achieved economic inclusion and a 50% reduction in recidivism among women in conflict with the law. 

6.     Improving the enabling environment for private-sector development: In this area, the IDB supports countries to:

• Strengthen policymaking and government capacity to foster a favorable business climate. This area of work encompasses business creation, investment, trade and the productive sector, as well as entrepreneurship, innovation, SMEs and value chains. 
• Improve regulatory quality and capacity in critical areas such as competition, property rights, consumer rights and protection, and quality standards, among others. 
• Promote the financial sector and financial inclusion, with an emphasis on productive, digital and green finance. 
• Strengthen corporate governance and a culture of integrity in the private sector. 

Results: 

• IDB-supported innovation programs to foster private sector development in Peru and Uruguay show that the state recovers 7 and 6.5 dollars in tax revenues, respectively, for every $1 spent on supporting innovation and business development.