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Support to the Program of Improvement of the Efficiency of the Expenditure in Public Investment
The objectives of this technical cooperation are to contribute to the improvement of the state's institutional capacity to manage public investment and to support the preparation and subsequent implementation of the Program for Improving the Efficiency of Public Investment Spending.

Project Detail

Country

Peru

Project Number

PE-T1364

Approval Date

July 20, 2017

Project Status

Closed

Project Type

Technical Cooperation

Sector

REFORM / MODERNIZATION OF THE STATE

Subsector

SUBNATIONAL AND LOCAL GOVERNMENTS

Lending Instrument

-

Lending Instrument Code

-

Modality

-

Facility Type

-

Environmental Classification

Likely to cause minimal or no negative environmental and associated social impacts

Total Cost

USD 300,000.00

Country Counterpart Financing

USD 0.00

Original Amount Approved

USD 300,000.00

Financial Information
Operation Number Lending Type Reporting Currency Reporting Date Signed Date Fund Financial Instrument
ATN/OC-16233-PE Sovereign Guaranteed USD - United States Dollar Ordinary Capital Nonreimbursable
Operation Number ATN/OC-16233-PE
  • Lending Type: Sovereign Guaranteed
  • Reporting Currency: USD - United States Dollar
  • Reporting Date:
  • Signed Date:
  • Fund: Ordinary Capital
  • Financial Instrument: Nonreimbursable

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Implementation Phase
https://www.iadb.org/document.cfm?id=EZSHARE-4830907-19
Anexo I - Solicitud del Cliente - PE-T1364.pdf
Published Feb. 07, 2018
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https://www.iadb.org/document.cfm?id=EZSHARE-4830907-20
Anexo II - Matriz de Resultados - PE-T1364.xlsx
Published Feb. 07, 2018
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https://www.iadb.org/document.cfm?id=EZSHARE-4830907-21
Anexo III - Plan de Adquisiciones - PE-T1364.xlsx
Published Feb. 07, 2018
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https://www.iadb.org/document.cfm?id=EZSHARE-4830907-22
Anexo IV - Términos de Referencia - PE-T1364.docx
Published Feb. 07, 2018
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https://www.iadb.org/document.cfm?id=EZSHARE-4830907-23
TC Document - Publication - PE-T1364.pdf
Published Feb. 07, 2018
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Publications
Published 2022
Research Insights: Do Changes in the Composition of Public Spending Affect the Macroeconomic Consequences of Fiscal Adjustments?
Si bien las consolidaciones fiscales tienden a ser contractivas, el tamaño de la caída del producto depende de la composición de los recortes del gasto público. Una consolidación fiscal del 1% del PIB implementada mediante la reducción de la inversión pública en lugar del consumo público reduce el producto en un 0,7% en un plazo de tres años. En cambio, proteger la inversión pública de los recortes presupuestarios en relación con el consumo público puede neutralizar los efectos contractivos de los ajustes fiscales en el corto plazo, e incluso puede estimular el crecimiento del producto a mediano plazo.
Publications
Published 2021
The Output Effects of Fiscal Consolidations: Does Spending Composition Matter?
This paper studies whether changes in the composition of public spending affect the macroeconomic consequences of fiscal consolidations. Based on a sample of 44 developing countries and 26 advanced economies during 1980-2019, results show that while fiscal consolidations tend to be on average, contractionary, the size of the output fall depends on the behavior of public investment vis-a-vis public consumption during the fiscal adjustment, with heterogeneous responses growing over time. When public investment is penalized relative to public consumption and thus, its share in public expenditures decreases, a 1 percent of GDP consolidation reduces output by 0.7 percent within three years of the fiscal shock. In contrast, safeguarding public investment from budget cuts vis-a-vis public consumption can neutralize the contractionary effects of fiscal adjustments on impact, and can even spur output growth over the medium term. The component of GDP that mostly drives the heterogeneity between both types of adjustments is private investment. The results hold up to a number of robustness tests, including alternative identification strategies of fiscal shocks. The findings have policy implications for the design of fiscal adjustment strategies to protect economic growth as countries recover from the coronavirus pandemic.
Blogs
Published 2022
Los beneficios de proteger la inversión pública durante la consolidación fiscal
A medida que las economías continúan recuperándose del shock del COVID-19, los gobiernos se están encontrando con la necesidad de realizar ajustes fiscales importantes para reestablecer la sostenibilidad de la deuda. En este contexto, el gran desafío consiste en diseñar planes fiscales que además de contribuir a sanear las finanzas públicas, puedan ser amigables al crecimiento económico inclusivo, y así promover el bienestar ciudadano.  Si bien muchas veces las discusiones de política suelen enfocarse en el tamaño de la consolidación fiscal, el diseño o composición del ajuste puede ser aún más relevante para entender su impacto macroeconómico.   
Publications
Published 2022
Allocative Efficiency of Government Spending for Growth in Latin American Countries
There is scant empirical economic research regarding the way that Latin American governments efficiently allocate their spending across different functions to achieve higher growth. While most papers restrict their analysis to the size of government, much less is known about the composition of spending and its implications for long-term growth. This paper sheds light on how allocating expenditures to investment in quality human and physical capital, and avoiding waste on inefficient expenditures, enhance growth in Latin America. This paper uses a novel dataset on physical and human capital and detailed public spending that includes -for the first time- Latin American countries, which is categorized by a cross-classification that provides the breakdown of government expenditure, both, by economic and by functional heads. The database covers 42 countries of the OECD and LAC between 1985 and 2017. There are five main results. First, the estimated growth equations show significant positive effects of the factors of production on growth and plausible convergence rates (about 2 percent). The estimated effect of the physical investment rate is positive and significant with a long-run elasticity of 1.2. Second, while the addition of years of education as a proxy for human capital tends to have no effect on growth, the addition of a new variable that measures quality-adjusted years of schooling as a proxy for human capital turns out to have a positive and significant effect across all specifications with a long-run elasticity of 1.1. However, if public spending on education (excluding infrastructure spending) is added to the factor specification, growth is not affected. This is mainly because, once quality is considered, spending more on teacher salaries has no effect on student outcomes. Therefore, the key is to increase quality, not just school performance or education spending. Third, both physical and human capital are equally important for growth: the effect of increasing one standard deviation of physical capital or human capital statistically has the same impact on economic growth. Fourth, increasing public investment spending (holding public spending constant) is positive and significant for growth (a 1% increase in public investment would increase the long-term GDP per capita by about 0.3 percent), in addition to the effect of the private investment rate. However, the effect of public spending on payroll, pensions and subsidies does not contribute to economic growth. Fifth, the overall effect of the size of public spending on economic growth is negative in most specifications. An increase in the size of government by about 1 percentage point would decrease 4.1 percent the long-run GDP per capita, but the more effective the government is, the less harmful the size of government is for long-term growth.
Publications
Published 2022
Options for a Reform of the Mexican Intergovernmental Transfer System in Light of International Experiences
This paper focuses on the design of intergovernmental transfers to reduce vertical and horizontal fiscal imbalances and improve the performance of subnational governments. It provides an overview of international experiences, especially of large federations, with a view to devising viable options for reform of the transfer system in Mexico. While there is no one-size-fits-all ideal model of design and implementation of intergovernmental transfer systems, this analysis points to some lessons that can inform reforms, including the need to view intergovernmental transfers as an integral part of the overall system of intergovernmental fiscal relations; the use of different types of intergovernmental transfers that are best suited to fulfill different objectives; and the incorporation of equalization schemes to address regional disparities. In the light of these experiences, we find that the current Mexican transfer system is too fragmented, is linked to volatile oil revenues, involves substantial discretion in the allocation of a significant portion of the transfers, and lacks sufficient equalizing power. This paper presents and discusses possible reform options and demonstrates that it is altogether possible to reduce transfer dependence to promote effort and fiscal responsibility; simplify the system to increase predictability and ease its administration; eliminate discretion to increase transparency and establish stronger subnational budget constraints; and improve fiscal equalization to promote equity in subnational service delivery. Careful consideration of political economy dynamics is given in the simulations of possible reforms, with a view to minimizing short-term gains and losses as well as political opposition.
Blogs
Published 2022
Why Don’t Voters Demand More Public Investment?
For decades economists have warned that low levels of public investment in education, health, infrastructure, and security would weaken a country’s economic growth and delay its social development. Unfortunately, that describes many Latin American and Caribbean countries. From 1980 to 2016, public investment in the region grew by almost 10 percentage points slower than in
Publications
Published 2021
Política fiscal y cambio climático: experiencias recientes de los ministerios de finanzas de América Latina y el Caribe
Esta publicación presenta un conjunto de experiencias recientes de ministerios de finanzas de la región de América Latina y el Caribe en tres áreas de intervención donde convergen los temas de cambio climático y las responsabilidades de estos ministerios. Así mismo, la publicación aporta elementos para que el diseño de las políticas fiscales coadyuve a un crecimiento sostenible. Las tres áreas donde las intervenciones de los ministerios de finanzas resultan cruciales son: 1) la gestión de los riesgos económicos, fiscales y financieros asociados a los eventos climáticos extremos y al cambio climático; 2) los desafíos de la transición hacia economías bajas en emisiones de carbono, y 3) la reorientación de las finanzas públicas para que contribuyan a los objetivos nacionales de resiliencia y descarbonización. La publicación también muestra que, aunque los riesgos y desafíos de la transición hacia economías verdes son reales, existe gran cantidad de evidencia que indica que, si dicha transición se planifica e implementa adecuadamente, es posible generar nuevas oportunidades económicas a la vez que se crean más y mejores empleos.
Publications
Published 2022
Digitalizar los servicios públicos: oportunidades para América Latina y el Caribe
La pandemia de la COVID-19 ha acelerado la transformación digital y ha puesto a nuestro alcance la posibilidad de mejorar drásticamente los servicios públicos para millones de personas en América Latina y el Caribe. ¿Cómo pueden los gobiernos aprovechar la tecnología digital para aumentar la eficiencia del Estado e impulsar el desarrollo inclusivo? Este informe revisa la evidencia sobre las opciones de políticas disponibles en educación, salud, trámites públicos y gestión fiscal, ofreciendo análisis de costo-beneficio que permitirán a los gobiernos establecer prioridades en sus esfuerzos de digitalización. Los responsables políticos tienen en sus manos una oportunidad única para desplegar herramientas digitales con el potencial de transformar los servicios públicos en la región. Las lecciones de este informe pueden servir de guía en este viaje.
Blogs
Published 2022
El impacto de la pandemia en las relaciones fiscales entre los niveles de gobierno en América Latina y el Caribe
La pandemia del COVID-19 tuvo durante 2020 un efecto negativo sobre las finanzas subnacionales en América Latina y el Caribe (ALC), que se revirtió parcialmente en 2021, de acuerdo con un análisis de las finanzas subnacionales de la región entre 2019 y 2021.
Publications
Published 2022
Municipal Fiscal Health in Latin America
Cities are important drivers of productivity, innovation, and economic growth. To achieve their full economic potential, cities must deliver high-quality public services to their residents and businesses. This is very important for Latin American cities given rapid urbanization and the deepening of decentralization reforms in many countries. The extent to which they can carry out all of these responsibilities depends at least partially on their fiscal health, ability to meet their service, infrastructure, and financial obligations with the revenue available to them. This study assesses the fiscal health of 80 main cities in Brazil, Colombia, Mexico, and Peru, from 2010 to 2017, and explores the factors that drive it. A primary purpose is to provide a methodology for cities to assess their own fiscal health, given available data. As such, it helps to determine whether fiscal distress is building up in selected large cities across the region and to understand whether and how financial solvency, public service delivery, and the maintenance and expansion of urban infrastructure may be compromised.
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