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Linger at a downtown café in a Latin American city, and you are bound to hear about someone’s latest brush with bureaucracy.

The story will probably feature a trámite, an official transaction such as paying property taxes, obtaining a driver’s license, or registering a business. It is also likely to involve long lines, uncivil officials and bizarre complications. The story will prompt empathetic groans and laughter, but it may also lead to grim reflections and expressions of outrage.

Two decades ago, when the state provided the majority of services in most Latin American and Caribbean countries, people tended to accept dismal service as an inescapable fact of life. They had other reasons to withhold judgement: in many settings the government was the principal source of jobs and financial stability. But in recent years privatization, greater competition and new technology have revitalized services in areas such as telecommunications, electricity, water, transportation—even garbage collection. Although privatization has not always worked well, in most cases it has led to tangible improvements and a welcome focus on customer satisfaction and the quality of service.

But some services, such as health care, law enforcement and tax collection, will never be candidates for total privatization. And the contrast in quality between these services and those offered by the private sector is becoming increasingly stark. In an era of automated teller machines and instant Internet transactions, public services seem to be stuck in the age of the rubber stamp.

Slow and costly. The problem involves more than long lines, however. Slow-moving bureaucracies add billions of dollars to the cost of doing business and make local firms less competitive. And despite the move toward privatization, public spending remains the biggest means through which Latin American governments attempt to tackle the most urgent social problems. Yet in many countries it is impossible to find out exactly how public institutions are spending their budgets and whether they are, in fact, helping to reduce poverty or improve education. Lacking evidence to the contrary, many citizens assume that public services do little more than sustain bloated payrolls and divert public funds to corrupt officials. In the end, these suspicions undermine confidence in democratic institutions.

Politicians are increasingly aware of these costs, and candidates for office routinely make grand proposals to reorganize the public sector and improve the quality of services. Unfortunately, the subsequent failure of these proposals is also routine. Few things are more difficult, it seems, than transforming vast bureaucracies into agile, efficient and customer-centered enterprises. This special report explores the experience of two countries—Uruguay and Chile—that are making a deliberate effort to do just that.

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