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50 GOVERNMENT AT A GLANCE: LATIN AMERICA AND THE CARIBBEAN 2020 © OECD 2020
Government at a Glance: Latin America and the Caribbean 2020
© OECD 2020
Chapter 2
Public finance and economics
51
2.1. GENERAL GOVERNMENT FISCAL BALANCE
The fiscal balance is the difference between government highly indebted and experiencing low economic growth.
revenues and spending, indicating if governments raise In turn, net interest payments were the highest in Jamaica
enough resources to cover their expenditures. This balance (6.3%), Brazil (5.6%), Mexico (3.8%) and Barbados (3.8%).
could be negative, resulting in a deficit, or positive, resulting
in a surplus. Consecutive large fiscal deficits may lead to Methodology and definitions
debt accumulation. When the level of outstanding debt is
high, the cost of servicing that debt (interest payments) Data are drawn from the IMF World Economic
can push a country further into deficit, thereby hindering Outlook (WEO) database (October 2019), which is based
fiscal sustainability. Conversely, improvements in the on the Government Finance Statistics Manual (GFSM).
fiscal balance over time signal good fiscal health. Such The GFSM provides a comprehensive conceptual and
improvements may result from a combination of the accounting framework suitable for analysing and
following factors: political commitment to fiscal discipline, evaluating fiscal policy. It is harmonised with other
sound institutional arrangements for budgeting and/or a macroeconomic statistical frameworks, such as the
favourable performance of the economy. System of National Accounts (SNA). However, some
differences exist between the GFSM and the SNA
LAC countries reported an average deficit level of 4.3% frameworks in several instances, which led to the
of GDP in 2018, which was higher than in OECD countries establishment, to a large extent, of correspondence
where it reached on average 2.9% of GDP. Compared to 2007, criteria between the two statistical systems. The GFSM
when it was on average 0.9% of GDP the fiscal deficit in and SNA frameworks have been recently revised and
LAC countries increased by 3.4 p.p., portraying an overall several statistical standards were implemented by the
deterioration of the fiscal and economic outlook in the countries.
region when comparing these two points in time. Such
deterioration results from the combination, in recent Fiscal balance, also referred to as net lending
years, of fewer resources from commodities and sluggish (+) or net borrowing (-) of general government, is
economic growth coupled with political uncertainty in many calculated as total government revenues minus total
countries of the region. In 2018, Jamaica (1.2%) and Honduras government expenditures. The fiscal balance signals
(0.2%) were the only LAC countries that reported a fiscal whether a government is either putting financial
surplus. Over the past two of years, Honduras has made resources at the disposal of other sectors, or using the
important efforts to reduce macroeconomic imbalances financial resources generated by other sectors. The
and institutionalise macroeconomic prudence (IMF, 2019). primary balance is the fiscal balance excluding net
In contrast, the general government fiscal deficits were interest payments on general government liabilities
the highest in Bolivia (8.1%), Brazil (7.2%) and Suriname (i.e. interest payments minus interest receipts). For
(7.2%). Given the size of its economy, what happens in Brazil the OECD average, data are from the OECD National
in economic terms has consequences in many countries Accounts Statistics database, which is based on the
of the LAC region. The recession that started in 2015 has SNA framework.
demonstrated the existence of considerable imbalances in
the fiscal accounts, triggered by increased public spending Further reading
needed, among others, to cope with an ageing population
as well as subsidies to companies that have been losing Barreix, A. and L. Corrales (2019), Reglas fiscales resilientes
competitiveness (OECD, 2018). en América Latina, Inter-American Development Bank,
Washington, DC, http://dx.doi.org/10.18235/0002003.
The primary balance is the overall fiscal balance
excluding net interest payments on public debt. It illustrates IMF (2019), “Staff report for the 2019 Article IV Honduras”,
the extent to which governments can honour their debt IMF Country Report, No. 19/236, IMF Publishing,
obligations without the need for further indebtedness. All in Washington, DC.
all, the primary balance is an indicator of debt management
and sustainability of public finances in the short run. OECD (2018), OECD Economic Surveys: Brazil 2018, OECD
Publishing, Paris, http://dx.doi.org/10.1787/eco_surveys-
In 2018, of the 4.3% of GDP deficit on average in LAC bra-2018-e.
countries, almost 3.8% of GDP represented net interest
payments, which resulted in an average primary deficit Figure notes
of 0.5% of GDP. The largest primary deficit in 2018 was in
Bolivia (7.0%), followed by Suriname (3.6%), and Trinidad and Data for Bolivia and Suriname for 2018 refer to forecasts. LAC and OECD
Tobago (3.0%), while the largest primary surpluses were in averages are weighted. For more information on country specific
Caribbean countries such as Jamaica (7.5%), Barbados (3.5%) notes (e.g. coverage of general government) see: https://www.imf.
and Belize (2.1%). These three countries have implemented org/external/pubs/ft/weo/2019/02/weodata/index.aspx
fiscal consolidation reforms in the past years, as they were
52 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.1. General government fiscal balance
2.1. General government fiscal balance as a percentage of GDP, 2007 and 2018
2007 2018
10
5
0
-5
-10
BOL BOL
SUR BRA
TTO SUR
GUY CRI
CRI TTO
ARG ARG
NIC GUY
HTI NIC
BRA COL
CHL SLV
PER DOM
GTM MEX
PAN URY
PRY PAN
COL HTI
DOM PER
URY GTM
HND CHL
SLV PRY
ECU ECU
MEX BLZ
BLZ BRB
BRB HND
JAM JAM
LAC LAC
OECD OECD
Source: Data for the LAC countries, IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National
Accounts Statistics (database).
12 https://doi.org/10.1787/888934091144
2.2. General government primary balance and net interest spending as a percentage of GDP, 2007 and 2018
% Primary balance, 2018 Net interest, 2018 Primary balance, 2007 Net interest, 2007
14
12
10
8
6
4
2
0
-2
-4
-6
-8
Source: Data for the LAC countries, IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National
Accounts Statistics (database).
12 https://doi.org/10.1787/888934091163
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 53
2.2. GENERAL GOVERNMENT STRUCTURAL BALANCE
General government spending and revenues are of Barbados, it reflects the effects of a set of ambitious
highly sensitive to economic cycles and specific events reforms, including a fiscal consolidation program and debt
(e.g. privatisations). In turn, government revenues restructuring (Deyal, Alvarez, Waithe 2019)
(particularly tax revenues) tend to decline during economic
downturns, at the same time as public spending may Methodology and definitions
increase given that more people become unemployed and
qualify for social assistance or unemployment benefits. On Data are from the IMF World Economic Outlook
the other hand, during upturns, public accounts improve, as (WEO) database (October 2019), which is based on the
tax revenues rise and the number of those receiving social Government Finance Statistics Manual (GFSM). The GFSM
benefits usually declines. Analysing indicators that are not provides a comprehensive conceptual and accounting
influenced by temporary fluctuations helps policy makers framework suitable for analysing and evaluating fiscal
identify the underlying trend of fiscal policies associated policy. It is harmonised with other macroeconomic
with long-term public finance sustainability. The structural statistical frameworks, such as the System of National
fiscal balance aims to capture these trends in order to Accounts (SNA). However, some differences exist
assess fiscal performance. Estimating the structural balance between the GFSM and the SNA frameworks in several
requires calculating the structural and cyclical components instances, which led to the establishment, to a large
of both the fiscal balance and output or potential GDP extent, of correspondence criteria between the two
(i.e. the economy working at full capacity). statistical systems. The GFSM and SNA frameworks
have been recently revised and several statistical
The structural fiscal balance for LAC countries reached standards were implemented by the countries.
an average deficit of 3.8% as a share of potential GDP in
2018, increasing by 2.3 p.p. since 2007 when the deficit The structural fiscal balance represents the fiscal
was 1.5% of potential GDP. This differs from the trend in balance as reported in the SNA framework adjusted
OECD countries where the average deficit as a share of GDP for the state of the economic cycle (as measured by
was 3.1% in 2007 (pre-crisis) and diminished by 0.4 p.p. to the output gap) and non-structural elements beyond
reach 2.7% in 2018. LAC countries with the largest structural the economic cycle (e.g. one-off fiscal operations). The
deficits as a share of potential GDP in 2018 were Suriname output gap measures the difference between actual
(6.4%) and Brazil (6.1%) that are smaller than their overall and potential GDP, potential GDP being an estimate
deficits indicating on the one hand the need to increase of the level of GDP that would prevail if the economy
revenues but also that general recordings are capturing was working at full capacity (potential GDP is not
negative cyclical effects. . On the other hand, and while directly observable). For the OECD average, data are
in 2018 structural surpluses were not observed in any LAC from the OECD Economic Outlook No. 106 database,
country, Chile (1.5%), Paraguay (1.4%) and Barbados (0.3%) which is based on the SNA framework.
are the LAC countries with the smallest structural deficits.
Further reading
The projections of the structural balance as a share of
GDP in the LAC region indicate average deficits to decrease Ardanaz, M. et al. (2015), “Structural fiscal balances in
from a projected 3.7% in 2019 to 3.2% and 3.0% of potential Latin America and the Caribbean”, IDB Working Paper
GDP in 2020 and 2021 respectively. These projections are Series, No. IDB-WP-579, Inter-American Development
framed by the expectation of a recovery, albeit still at Bank, Washington, DC, https://publications.iadb.org/
modest rates, of economic growth in the region throughout en/structural-fiscal-balances-latin-america-and-carib-
the coming years. On the contrary, for OECD countries the bean-new-dataset-and-estimations.
projections of the structural deficit is expected to increase
from a projected 3.1% in 2019 to 3.2% of potential GDP in Deyal, Z., L. Álvarez and K Waithe (2019), “Economic growth,
2020 and 2021 reflecting the consequences of the trade war debt and fiscal adjustment: Barbados’s tripartite
between developed economies and the uncertainty brought challenge”, IDB Policy Brief, No. 310, IDB Publishing,
about, for example, by the economic effects of the Brexit. Washington, DC, http://dx.doi.org/10.18235/0001563
However, projected changes in LAC for 2019 vary, from Figure notes
a drop of 9.1 p.p. and a 6.1 p.p. of potential GDP in Suriname
and Brazil respectively, to a rise of 3.3 p.p. in Barbados. In Data for 2018 for Bolivia and Suriname refer to forecasts. LAC and OECD
the case of Suriname, it reflects government difficulties to averages are weighted. For more information on country specific
contain its spending including subsidies to state owned notes (e.g. coverage of general government) please see: https://www.
enterprises as well as troubles to improve tax collection. imf.org/external/pubs/ft/weo/2019/02/weodata/index.aspx
For Brazil, it evidences further increases in public spending
resulting from subsidies and social transfers. In the case
54 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.2. General government structural balance
2.3. General government structural balance as a percentage of potential GDP, 2007 and 2018
% 2007 2018
8
6
4
2
0
-2
-4
-6
-8
-10
-12
SUR SUR
GTM BRA
SLV CRI
DOM URY
BRA ARG
PAN DOM
MEX GUY
CHL SLV
URY MEX
PER ECU
CRI PAN
PRY PER
COL GTM
BRB COL
ARG CHL
GUY PRY
ECU BRB
LAC LAC
OECD OECD
Source: Data for LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD Economic Outlook
N.106 (database).
12 https://doi.org/10.1787/888934091182
2.4. General government projected structural balance as a percentage of potential GDP in 2019, 2020 and 2021
and change since 2018
% Change between 2018 and 2021 (p.p.) 2019 2020 2021
8
6
4
2
0
-2
-4
-6
-8
-10
Source: Data for LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD Economic Outlook
N.106 (database)
12 https://doi.org/10.1787/888934091201
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 55
2.3. GENERAL GOVERNMENT GROSS DEBT
General government gross debt represents Methodology and definitions
governments’ outstanding liabilities stemming from the
need to finance deficits through borrowing. Governments Data are from the IMF World Economic Outlook
accumulate debt to finance expenditures above their (WEO) database (October 2019), which is based on the
revenues. In the long run, debt can help for instance the Government Finance Statistics Manual (GFSM). The GFSM
development of infrastructure that could trigger economic provides a comprehensive conceptual and accounting
growth. In turn, fluctuations of the exchange and interest framework suitable for analysing and evaluating fiscal
rates can have a strong effect on government debt when it policy. It is harmonised with other macroeconomic
has a relevant foreign currency component (as it is the case statistical frameworks, such as the System of National
in several LAC countries), creating vulnerability to external Accounts (SNA). However, some differences exist
conditions. between the GFSM and the SNA frameworks in several
instances, which led to the establishment, to a large
In 2018, the average debt level in LAC countries reached extent, of correspondence criteria between the two
64.7% of GDP. Between 2007 and 2018, debt increased by statistical systems. The GFSM and SNA frameworks
17.2 p.p. across LAC countries. That is relatively low when have been recently revised and several statistical
compared to an increase of 35.5 p.p. in OECD countries standards were implemented by the countries.
during the same time period. Despite still recording the
third highest debt in the region (94.3% of GDP), Jamaica is Debt is generally defined as all liabilities requiring
the country were debt decreased the most (20.1 p.p.) over payment(s) of interest or principal by the debtor
the 11-year period; helped by an IMF programme for fiscal to the creditor at a date(s) in the future. Thus, all
recovery accompanying a set of fiscal reforms. The other debt instruments are liabilities, but some liabilities
LAC countries that managed to decrease their debt levels (e.g. shares, equity and financial derivatives) are
over the same period are Panama (9.7 p.p.), Guyana (8.0 p.p.) not debt. The treatment of government liabilities in
and Peru (5.7 p.p.). respect of their employee pension plans varies across
countries, making international comparability difficult.
Conversely, the highest increases during the 2007-2018 Under the GFSM framework, unfunded government
period occurred in Suriname (55.3 p.p.), Barbados (48.3 p.p.), sponsored retirement schemes are included in the
Trinidad and Tobago (28.8 p.p.) and Costa Rica (26.5 p.p.). debt components. In the 1993 SNA, only the funded
The steep increase in Suriname’ debt could be explained by component of the government employee pension
its dependency on the mining industry and its vulnerability plans is reflected in its liabilities. However, the 2008
to changes in mineral prices. The drop in international SNA recognises the importance of the liabilities of
commodity prices and the cessation of alumina mining in employers’ pension schemes, regardless of whether
Suriname significantly reduced government revenue and they are funded or unfunded. For pensions provided
reduced GDP growth over the past few years. In response, by the government to its employees, some flexibility is
the government only established a stabilization fund in allowed in the recording of unfunded liabilities in the
2017 and highly devalued the local currency and resorted core accounts. See more on calculating government
to debt for financing public expenditure (IMF, 2018). debt per capita in general government revenues in
the methodology and definitions of Section 2.4. For
Between 2007 and 2018, the annual average growth the OECD average, data are from the OECD National
rate of real government debt per capita in LAC countries Accounts Statistics database, which is based on the
was 3.9%, reaching an average of USD 10 656 PPP per SNA framework.
capita in 2018. In turn, the average growth rate of real
government debt per capita in OECD countries was higher Further reading
(4.6%), reaching an average of USD 55 219 PPP per capita in
2018. During the 11-year period, Chile strongly increased IMF (2018), “Suriname: 2018 Article IV Consultation – Staff
its debt per capita (21 p.p.) and Jamaica was the only LAC report”, IMF Country Report, No. 18/376, IMF Publishing,
country where it decreased it (-2.2 p.p.), see online graph. Washington, DC.
It is expected that debt in the LAC region will continue
to grow in the near future to partially compensate for, OECD et al. (2019), Latin American Economic Outlook 2019:
among others, the stabilization of commodity prices at Development in Transition, OECD Publishing, Paris,
comparatively low levels, slower economic growth and https://doi.org/10.1787/g2g9ff18-en.
increasing expectations and demands from the population
for governments to provide more public goods and services.
Figure notes
Data for Bolivia and Suriname for 2018 refer to forecasts. LAC and
OECD averages are weighted. For more information on country
specific notes (e.g. coverage of general government) please refers to:
https://www.imf.org/external/pubs/ft/weo/2019/02/weodata/index.aspx
2.7. (Annual average growth rate of real government gross debt per
capita, 2007-18) is available online in Annex F.
56 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.3. General government gross debt
2.5. General government gross debt as percentage of GDP, 2007 and 2018
2007 2018
140
120
100
80
60
40
20
0
BRB BRBARG BLZURY JAMTTO BRABRA ARGMEX SURSUR SLVPAN URYBOL JAM CRIBLZ GUYCOL SLV ECUECU TTOGUY HNDBOL PANPER NIC PRY HTI LAC
MEX DOM HND PER OECD
GTM CHL
Source: Data for LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National Accounts NIC GTM
Statistics (database). HTI PRY
12 https://doi.org/10.1787/888934091220
2.6. General government gross debt per capita, 2007 and 2018
2007 2018
60 000
55 000
50 000
45 000
40 000
35 000
30 000
25 000
20 000
15 000
10 000
5 000
0
CRI COL LAC
DOM CHL OECD
Source: Data for LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National Accounts
Statistics (database).
12 https://doi.org/10.1787/888934091239
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 57
2.4. GENERAL GOVERNMENT REVENUES
Governments raise revenues (through taxes, royalties, on hydrocarbons and the consequent recent negative
custom duties, etc.) to finance the provision of goods and fluctuations in prices and production (OECD 2019).
services and to redistribute income (e.g. social benefits and
subsidies). The amount of revenues collected depends on Methodology and definitions
multiple factors such as government fiscal policies and type
of development model, the endowment of natural resources, Data are from the IMF World Economic Outlook
political institutions, the stage of economic and social (WEO) database (October 2019), which is based on
development, and internal and external macroeconomic the Government Finance Statistics Manual (GFSM). The
conditions. GFSM provides a comprehensive conceptual and
accounting framework suitable for analysing and
In LAC countries, general government revenues on evaluating fiscal policy. It is harmonised with the
average accounted for 26.9% of GDP in 2018 below by other macroeconomic statistical frameworks, such
1.3 p.p. the 2007 value. The GDP has increased at a faster as the overarching System of National Accounts
pace than government revenues (which have increased in (SNA). However, some differences exist between the
absolute and per-capita terms) explaining why the overall GFSM and the SNA frameworks in several instances,
revenue to GDP ratio decreased for the period under study. which led to the establishment, to a large extent, of
This trend is in stark contrast to the OECD where general correspondence criteria between the two systems.
government revenues reached 37.5% of GDP in 2018 and The GFSM and SNA frameworks have been recently
increased by 0.2 p.p. since 2007. LAC countries with the revised and several statistical standards were
highest percent of revenues per GDP are Ecuador (35.8%), implemented by the countries.
Argentina (33.6%) and Brazil (31.2%). In the other end of
the spectrum, the Dominican Republic (14.1%), Costa Rica General government consists of central government,
(13.6%) and Guatemala (10.6 %) collect the least revenues. state government, local government and social
security funds. Revenues encompass taxes, net
Between 2007 and 2018 the largest increase, in general social contributions, and grants and other revenues.
government revenues as a percentage of GDP occurred in Government revenues per capita were calculated by
Ecuador (9.13 p.p.). The explanation for this increase is converting total revenues to USD using the implied
manifold, including the effect of a recent rebound in the IMF purchasing power parities (PPP) conversion rates
price of hydrocarbons but also structural factors such as and dividing it by population. PPP is the number of
reforms to the tax system, which included higher rates units of country B’s currency needed to purchase
on income and inheritances in 2008 and the introduction the same quantity of goods and services in country
of some new taxes (e.g. the exit currency tax). Efforts to A. Gross domestic product (GDP) is the standard
modernise the tax administration and reduce evasion have measure of the value of the goods and services
also led to significant increase in the number of taxpayers produced by a country during a period. For the OECD
in Ecuador. General government revenues decreased the average, data are derived from the OECD National
most in Panama (6.1 p.p.) which may be explained by the Accounts Statistics database, which is based on the
existence of numerous tax exemptions and incentives, SNA framework.
and underperformance in tax collection, which could
reflect structural weaknesses in customs and the tax Further Reading
administration (IMF, 2019).
IMF (2019), “Staff report for the 2019 Article IV consultation”,
An alternative way of looking at the importance IMF Country Report, No. 19/11, IMF Publishing,
of the government in the economy in terms of financial Washington, DC, https://www.imf.org/en/Publications/CR/
resources is to measure government revenues per capita. Issues/2019/01/17/Panama-2018-Article-IV-Consultation-
On average revenue per capita in LAC countries reached Press-Release-Staff-Report-and-Statement-by-the-46528.
USD 4 437 PPP in 2018 significantly below the OECD average
of USD 17 865 PPP. Among the countries with the highest OECD et al. (2019), Revenue Statistics in Latin America and
revenue per capita are English speaking Caribbean islands the Caribbean 2019, OECD Publishing, Paris, https://doi.
(Barbados and Trinidad and Tobago) alongside countries org/10.1787/25666b8d-en-es.
in the southern cone (Argentina, Chile and Uruguay). On
average, revenues per capita increased at an annual rate of Figure notes
0.6% in the LAC region compared to 0.8% in the OECD. Still,
the GDP has increased at a faster pace than government Data for 2018 for Bolivia and Suriname refer to forecasts. LAC and OECD
revenues explaining why the overall revenue to GDP ratio averages are weighted. For more information on country specific
decreased for the period under study. The highest negative notes (e.g. coverage of general government) see https://www.imf.org/
annual average growth rate in government revenues (-1.9%) external/pubs/ft/weo/2019/02/weodata/index.
occurred in Trinidad and Tobago explained by several
years of weak or negative growth and strong dependency
58 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.4. General government revenues
2.8. General government revenues as a percentage of GDP, 2007 and 2018
2007 2018
40
35
30
25
20
15
10
5
0
ECU LAC
ARG OECD
BRA
URY
GUY
JAM
BLZ
BRB
BOL
HND
TTO
COL
NIC
SUR
CHL
MEX
SLV
PAN
PER
PRY
HTI
DOM
CRI
GTM
Source: Sources: Data for the LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National
Accounts Statistics Database
12 https://doi.org/10.1787/888934091258
2.9. General government revenues per capita, 2007 and 2018
2007 2018
18 000
16 000
14 000
12 000
10 000
8 000
6 000
4 000
2 000
0
TTO PAN GUY LAC
URY BRA DOM OECD
ARG MEX BLZ
CHL ECU CRI
BRB COL PRY
SUR BOL
JAM SLV
PER HND
NIC
GTM
HTI
Source: Sources: Data for the LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National
Accounts Statistics Database
12 https://doi.org/10.1787/888934091277
2.10. Annual average growth rate of real government revenues per capita, 2007-18
5
4
3
2
1
0
-1
-2
-3
ECU NIC HTI LAC
GUY PER CRI OECD
PRY HND ARG
URY PAN CHL
DOM SLV JAM
COL BLZ
BOL BRB
MEX BRA
GTM
SUR
TTO
Source: Data for the LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National Accounts
Statistics (database).
12 https://doi.org/10.1787/888934091296
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 59
2.5. GENERAL GOVERNMENT TAX REVENUES
The capacity to tax citizens is one of the foundational of 18 p.p. in the relative importance of taxes on goods and
and fundamental attributes of governments. Revenues services) and Costa Rica (10.5 p.p.) have been successful in
collected from taxes represent the most important source achieving a more balanced distribution between indirect
of public funds in almost all countries and are crucial to (e.g.VAT) and direct taxes (e.g. income). However, on average,
provide public goods and services, guarantee government this reduction has been rather modest (1 p.p.) and the
operations, undertake public investment and embark on relative importance of indirect taxes has actually increased
a higher or lower degree of income redistribution. As a in nine LAC countries (Bahamas, Barbados, Belize, Chile,
general trend, in 2017 tax revenues as a share of GDP were Guyana, Jamaica, Mexico, Peru and Trinidad and Tobago).
on average 22% of GDP in LAC. This represents an increase
of 1.8 p.p. since 2007, yet is still significantly below the Methodology and definitions
OECD average of 34.1% in 2017. However, the increase in
OECD countries for the same period was smaller than in Data are drawn from the OECD Revenue Statistics
LAC (0.5 p.p. on average), indicating that the gap between in Latin America database, whose classification
both groups of countries is slowly decreasing. of tax revenue is almost identical to that of the
Government Finance Statistics Manual (GFSM). The
LAC countries where tax revenues as a share of GDP GFSM provides a comprehensive conceptual and
are highest are Brazil (32.3%), Barbados (31.8%) and Uruguay accounting framework suitable for analysing and
(30.8%) and Argentina (30.3%). At the other end of the evaluating fiscal policy. It is harmonised with the
spectrum, tax revenues as a share of GDP are the smallest other macroeconomic statistical frameworks, such
in the Dominican Republic (13.8%), Paraguay (13.8%) and as the overarching System of National Accounts
Guatemala (12.4%). The highest increases in tax revenues (SNA). The GFS and SNA frameworks have been
between 2007 and 2017 occurred in Ecuador (6.7 p.p.) and recently revised and several statistical standards
Uruguay (5.8 p.p.) permeated by the 2017 recovery in the were implemented by the countries. However, there
overall economic environment in the region after a two-year are some differences between the definitions of tax
recession. revenues used in the OECD Revenue Statistics in Latin
America database and the SNA. In the SNA, taxes
Still, in Ecuador, this is the result of several reforms are compulsory payments, in cash or in kind, made
over the past decade leading to higher rates in several taxes by institutional units to the general government.
(i.e. income, inheritances) as well as the modernization Social contributions are actual or imputed payments
of the tax administration. In the case of Uruguay, in 2007 to social insurance schemes to make provision for
the government introduced a tax reform under the motto social insurance benefits that may be compulsory
“those who have more shall pay more” that among others or voluntary. The OECD Revenue Statistics in Latin
simplified the tax system and shifted from a universal to a America database treats compulsory social security
progressive scheme for taxing wages while at the same time contributions as taxes, while the SNA considers them
establishing the requirement of filling out personal income social contributions because the receipt of social
tax declaration. The reform, associated with the economic security benefit depends, in most countries, upon
cycle, has resulted in an overall increase of tax revenues. On appropriate contributions having been made.
the other hand, tax revenues decreased the most in Peru (3
p.p.) between 2007 and 2017, largely explained by the sharp Further Reading
decrease in the price of minerals and corresponding fall in
tax revenues since 2014. ECLAC (2019), Fiscal Panorama of Latin America and the
Caribbean 2019, Economic Commission for Latin
The tax mix in LAC and OECD countries in 2017 was America and the Caribbean, Santiago, https://www.
structurally different. In LAC countries, taxes on good and cepal.org/en/publications/44517-fiscal-panorama-latin-
services (e.g. VAT), which tend to be regressive, represent america-and-caribbean-2019-tax-policies-resource.
about 50% of tax revenues compared to about one third
in OECD countries. For the same year, on average in LAC OECD et al. (2019), Revenue Statistics in Latin America and
countries, 44.3% of tax revenues came from taxes on income the Caribbean 2019, OECD Publishing, Paris, https://doi.
and profits and social security contributions, compared org/10.1787/25666b8d-en-es.
with 59.8% in OECD countries. In turn, within taxes on
income and profits, the revenue share of corporate income Figure Notes
tax was higher and taxes on persons were comparatively
lower in LAC compared to the OECD (OECD 2019) LAC and OECD averages are unweighted.
Between 2007 and 2017, on average, the most important 2.12 OECD average refer to 2016 rather than 2017.
change within the structure of tax revenues was the increase
in the relative importance of social contributions (from
14.4% to 17%). Some countries such as Uruguay (reduction
60 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.5. General government tax revenues
2.11. General government tax revenues as a share of GDP, 2007 and 2017
40
35
30
25
20
15
10
5
0
BRA BRB URY HND TTO SLV CHL ECU COL BHS MEX PER PAN DOM PRY GTM LAC
ARG OECD
BLZ
JAM
GUY
CRI
BOL
NIC
Source: OECD (2019) Revenue Statistics in Latin America and the Caribbean (database)
12 https://doi.org/10.1787/888934091315
2.12. Breakdown of tax revenues as a percentage of total taxation, 2007 and 2017
Goods & Services Income & Profits Social Security
Property Other
% Payroll
100
90
80
70
60
50
40
30
20
10
0
2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007
2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017
BHS BLZ DOM JAM BRB PRY CHL BOL ECU GTM HND GUY SLV ARG PER NIC COL BRA MEX URY CRI TTO PAN AC OECD
L
Source: OECD (2019) Revenue Statistics in Latin America and the Caribbean (database).
12 https://doi.org/10.1787/888934091334
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 61
2.6. GENERAL GOVERNMENT EXPENDITURES
Governments spend money in providing goods Methodology and definitions
and services to the population, some of which are its
exclusive competence (e.g. administering justice), and on Data are drawn from the IMF World Economic
redistributing income (e.g. via social benefits and subsidies). Outlook (WEO) database (October 2019), which is based
Government expenditures are usually less flexible than on the Government Finance Statistics Manual (GFSM).
revenues as they are less sensitive to the business cycle The GFSM provides a comprehensive conceptual
and reflect past and current policy decisions guaranteeing and accounting framework suitable for analysing
entitlements and rights. and valuating fiscal policy. It is harmonised with the
other macroeconomic statistical frameworks, such
In 2018, on average in LAC, governments spent 31.2% as the System of National Accounts (SNA). However,
of GDP, which represents an increase of 2 p.p. since 2007. some differences exist between the GFSM and the
Although LAC countries spent remarkably less than OECD SNA frameworks in several instances which led to the
countries -whose expenditures reached 40.3% of GDP, on establishment, to a large extent, of correspondence
average, in 2017-, they had a larger increase in the period criteria between the two statistical systems. The GFS
under analysis (OECD countries spent 1.3 p.p. more than and SNA frameworks have been recently revised and
they did in 2007). This is driven by increased expenditures several statistical standards were implemented by
in the majority of the countries, some of them whose the countries. General government consists of central
revenues decreased in the same period, such as Bolivia, government, state government, local government and
Chile, Costa Rica and Peru (see Section 2.4). Several LAC social security funds.
countries established new welfare policies (e.g. conditional
cash transfers, subsidies) in a period of comparatively high Expenditures encompass intermediate consumption,
rates of economic growth and high commodity prices, compensation of employees, subsidies, property
whose continuity might be challenged in the current income (including interest spending), social benefits,
prospect of low economic growth. grants and other expenses, and investments.Therefore,
total expenditures consist of total expenses and the
There are large variations among countries in LAC in net acquisition of non-financial assets. Gross domestic
terms of expenditures. For instance, Argentina (38.9% of product (GDP) is the standard measure of the value of
GDP), Brazil (38.5%), Bolivia and Ecuador (37.1% each) have the goods and services produced by a country during
the highest expenditures and are closer to the OECD average. a period.
On the contrary, Guatemala (12.3%) and Dominican Republic
(16.5%) spend around half of the LAC average. Purchasing power parity (PPP) is the number of
units of country B’s currency needed to purchase the
Compared with 2007, expenditures increased the most same quantity of goods and services in country A. For
in Ecuador (12.9 p.p.), Argentina (9.4 p.p.) and Suriname information on calculating government expenditures
(7.1 p.p.). In the case of Suriname, the increase is due to the per capita see the methodology and definitions’
size and growth of public employment, and the electricity and paragraph of Section 2.4. For the OECD average, data
fuel subsidies, among others (Stone et al, 2016). By contrast, are derived from the OECD National Accounts Statistics
Barbados (-2.7 p.p.), Guatemala (-2.0 p.p.) and Jamaica (-1.9 p.p.) database, which is based on the SNA framework.
are the ones that decreased their expenditures the most, due
to high levels of debt or slow economic growth. Further reading
Expenditures per capita provide an alternative way of Cavallo, E. and A. Powell (2019), Building Opportunities for Growth
interpreting government expenditures. In per capita terms, in a Challenging World, Inter-American Development
LAC countries spent, on average, USD 5 138 PPP in 2017. Bank, Washington, DC, https://publications.iadb.org/
When comparing with OECD countries, whose expenditures publications/english/document/Country-Program-Evalua-
amount to USD 19 227 PPP on average, LAC countries spend tion-Suriname-2011-2015.pdf.
around a quarter in per capita terms. Trinidad and Tobago
is the country that spends the most (USD 10 071 PPP), Stone, L.F. et al. (2016), Country Program Evaluation Suriname
followed by Argentina (USD 7 993 PPP), whereas Guatemala 2011-2015, Office of Evaluation and Oversight,
(USD 1 041 PPP) and Haiti (USD 359 PPP) spent the least in Inter-American Development Bank, Washington, DC.
the region.
Figure notes
Between 2007 and 2018, the annual average growth
rate of real government spending per capita was 1.7% per Data for 2018 for Bolivia and Suriname refer to forecasts. LAC and
year across LAC countries compared to an increase of 1.1% OECD averages are weighted. For more information on country
in OECD countries. Ecuador, Paraguay and Peru increased specific notes (e.g. coverage of general government) please refer to
their real government expenditures per capita the most https://www.imf.org/external/pubs/ft/weo/2019/02/weodata/index.aspx
since 2007 (5% or above), whereas decreases of at least 1%
per year where recorded for Jamaica and Barbados over the
same period.
62 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.6. General government expenditures
2.13. General government expenditures as a percentage of GDP, 2007 and 2018
2007 2018
45
40
35
30
25
20
15
10
5
0
ARG LAC
BRA OECD
BOL
ECU
GUY
URY
BLZ
TTO
SUR
BRB
JAM
COL
NIC
HND
MEX
CHL
SLV
PAN
PER
CRI
HTI
PRY
DOM
GTM
Source: Data for the LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National
Accounts Statistics (database)
12 https://doi.org/10.1787/888934091353
2.14. General government expenditures per capita, 2007 and 2018
2007 2018
20 000
18 000
16 000
14 000
12 000
10 000
8 000
6 000
4 000
2 000
0
TTO BLZ LAC
ARG PRY OECD
URY SLV
CHL NIC
BRA HND
PAN GTM
BRB HTI
MEX
SUR
ECU
COL
CRI
PER
DOM
GUY
BOL
JAM
Source: Sources: Data for the LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD
National Accounts Statistics (database).
12 https://doi.org/10.1787/888934091372
2.15. Annual average growth rate of real government expenditures per capita, 2007-18
7
6
5
4
3
2
1
0
-1
-2
PRY HTI LAC
ECU BRA OECD
PER TTO
CRI BLZ
URY GTM
CHL JAM
BOL BRB
NIC
PAN
DOM
GUY
SUR
ARG
COL
SLV
HND
MEX
Source: Data for the LAC countries: IMF, World Economic Outlook database (IMF WEO) (October 2019). Data for the OECD average: OECD National
Accounts Statistics (database)
12 https://doi.org/10.1787/888934091391
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 63
2.7. REVENUES AND EXPENDITURES STRUCTURE BY LEVEL OF GOVERNMENT
In general, sub-central governments are responsible Methodology and definitions
for delivering services to the population. Their ability to
collect revenues depends on the degree of fiscal federalism. Data are from the IMF Government Finance Statistics
In countries where sub-central levels have limited ability (IMF GFS) database, which applies the concepts set
to collect taxes, their main source of revenues are central out in the Government Finance Statistics Manual (GFSM).
government transfers, which are mostly earmarked in the The GFSM provides a comprehensive conceptual and
central budget. accounting framework suitable for analysing and
evaluating fiscal policy. It is harmonised with the
Recent research has found that decentralising other macroeconomic statistical frameworks, such
spending and revenue collection to the same extent as the System of National Accounts (SNA). Some
contributes to economic growth and spending efficiency, differences exist between the GFS and the SNA
especially in economies that are highly integrated to global frameworks in several instances, which led to the
markets (Kim and Dougherty, 2018). LAC countries, however, establishment, to a large extent, of correspondence
have traditionally suffered from an imbalance between criteria between the two statistical systems. The GFS
resource-generation and spending at sub-central levels of and SNA frameworks have been recently revised and
government, rendering local and state levels dependent several statistical standards were implemented by the
on transfers from the central government (Cibils and Ter- countries.
Minassian, 2015). As a result, these have limited autonomy
in their public finances. General government consists of central, state and
local governments and social security funds. State
Among LAC countries with available data in 2017, the government is applicable to the federal states of Brazil
central level generated 69.7% of the revenues, the state and Mexico and the highly decentralised countries of
level contributed 19.1% and the local government 10.4%. Colombia, Paraguay and Peru. For detailed information
This shows a higher decentralisation than in 2007, when on the components of revenues and expenditures,
the central level collected 70.7% of the revenues, the state see methodology and definitions’ paragraphs of
21.2% and the local level 7.5%. Similarly, in OECD countries, Sections 2.4 and 2.6 respectively. Data across levels
the state level collected 19.2% of the revenues and the local of government exclude transfers between levels of
level contributed 10.2% in 2017. government in order to see the contribution of each
sub-sector in general government total revenues/
There are differences in decentralisation of revenue expenditures, which are at this level consolidated. For
collection among LAC countries. In Chile, in 2017, the central the OECD average, data are derived from the OECD
government collected 91.9%, and the local government only National Accounts Statistics database, which is based
8.1%. Regional governments in Chile are “mixed entities” on the SNA framework.
(both decentralised and deconcentrated) and the only
self-governed entities are municipalities (which manage Further reading
the communes). However, these are highly dependent
on transfers. Hence, they serve mainly as public service Cibils, F. and Ter-Minassian, T. (eds.) (2015) Decentralizing
providers (OECD, 2017). On the contrary, in Brazil, a federal Revenue in Latin America: Why and How, Inter-American
country, the central government contributed 65.5%, the Development Bank, Washington, DC.
state level 24.0% and the local 10.4%.
Kim, J. and S. Dougherty (eds.) (2018), Fiscal Decentralisation
In LAC, spending is more decentralised than revenue and Inclusive Growth, OECD Fiscal Federalism Studies,
collection. In 2017, local levels spent, on average, 18% of OECD publishing, Paris/KIPF, Seoul. https://doi.org/
total expenditures. By contrast, the central level spent 62.7% 10.1787/9789264302488-en.
and the state level 18.5%. The imbalance is more apparent
in Mexico, where the central government spent 38.6% and OECD (2017), Making Decentralisation Work in Chile: Towards
the state level 35.0%, although the former collected 80.5% Stronger Municipalities, OECD Multi-level Governance
of the revenues and the latter only 7.2%. Studies, OECD Publishing, Paris. http://dx.doi.org/
10.1787/9789264279049-en
Similarly, in Peru, the central government collected
82.6% of the revenues, and spent 53.3% of the total Figure notes
expenditures. The state level collected 0.7% of the revenues
and spent 19.1%, and the local level raised 4.5% and spent Data for Mexico, Peru and Paraguay are recorded on a cash basis.
15.9%. Such an imbalance is due to the dependence on Transfers between levels of government are excluded. Data for
extractive industries (whose revenues are shared), the lack Mexico are not included in the LAC average. LAC and OECD averages
of sources of revenue at the regional level (e.g. specific are weighted.
taxes) and the lack of autonomy in defining municipal taxes
(Cibils and Ter-Minassian, 2015). Data for Honduras refer to 2015 rather than 2017 and data for Paraguay
refer to 2016 rather than 2017; and for Colombia refer to 2008 rather
than 2007.
Social security funds are included in central government for Brazil,
Chile and Colombia.
64 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.7. Revenues and expenditures structure by level of government
2.16. Distribution of general government revenues across levels of government, 2007 and 2017
Central government State government Local government Social security
100
90
80
70
60
50
40
30
20
10
0
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
CHL HND PER MEX COL PRY SLV BRA LAC OECD
Source: Data for the LAC countries: IMF Government Finance Statistics (IMF GFS) database. Data for the OECD average: OECD National Accounts
Statistics (database).
12 https://doi.org/10.1787/888934091410
2.17. Distribution of general government expenditures across levels of government, 2007 and 2017
Central government State government Local government Social security
100
90
80
70
60
50
40
30
20
10
0
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
HND CHL PRY SLV COL BRA PER MEX LAC OECD
Source: Data for the LAC countries: IMF Government Finance Statistics (IMF GFS) database. Data for the OECD average: OECD National Accounts
Statistics (database).
12 https://doi.org/10.1787/888934091429
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 65
2.8. GENERAL GOVERNMENT EXPENDITURE BY ECONOMIC TRANSACTION
In order to carry out their main functions (e.g. providing (3.4 p.p. and 3.2 p.p. respectively). Brazil allocated half of the
individual and collective goods and services to the population), regional share, and the greatest reduction was observed in
governments spend their resources in various ways: by making Colombia: -5.1 p.p. since 2007 (See Section 2.9).
transfers (e.g. subsidies and social benefits), by purchasing
goods and services (e.g. vaccines for hospitals), by paying When analysing government expenditures as a
their employees, and by making investments, among others. percentage of GDP, in 2017, LAC countries spent 10.2%
Disaggregating expenditures by economic transaction allows on social benefits, compared to 16.5% by OECD countries.
disentangling government priorities and commitments, as Brazil spent more than the OECD average (17.6% of GDP)
well as its margin of manoeuvre for modifying the allocation on this transaction. Honduras spent only 0.4% of GDP on
of public funds. social benefits, the smallest share among LAC countries.
Compensation of employees amounted, on average, to 8.9%
In 2017, LAC countries for which data are available of GDP in LAC, a similar proportion to the OECD (9.2%).
allocated 29.7% of their expenditures to social benefits Brazil (13.3%), Honduras (10.5%) and Paraguay (10.3%) spent
(e.g. pensions, conditional cash transfers). This represents the most in this category.
an increase of 9.2 p.p. since 2007. By comparison, OECD
countries spent 40.9% on this transaction, a comparatively Methodology and definitions
smaller increase (4.1 p.p.) from 2007. Compensation of
employees is the second largest transaction both in LAC Data are from the IMF Government Finance Statistics
and OECD countries, although it represents a larger share (IMF GFS) database, which applies the concepts set
in LAC (26%) than in the OECD (22.8%). However, the share out in the Government Finance Statistics Manual (GFSM).
of compensation has decreased 1.3 p.p. since 2007 in LAC. The GFSM provides a comprehensive conceptual and
In LAC, property income (mainly debt interest payments) accounting framework suitable for analysing and
represented 15.3% of expenditures in 2017. OECD countries evaluating fiscal policy. It is harmonised with the
spent around half that share: 6.5% on average. The trends other macroeconomic statistical frameworks, such
also diverge: in LAC they grew 0.8 p.p. from 2007 whereas as the System of National Accounts (SNA).
in the OECD they decreased by -1.4 p.p in the same period.
Hence, the share devoted to these expenditures continue Expenditures encompass intermediate
to be significantly higher than the share spent by OECD consumption, compensation of employees, subsidies,
countries, which have accumulated debt over the last decade. property income (including interest spending), social
benefits (consisting of social benefits other than
There are large variations among countries. Brazil – the social transfers in kind and of social transfers in
country with the largest expenditures among LAC countries kind provided to households via market producers),
with available data– spent 36.7% on social benefits and grants and other expenses (mainly current and
18.7% on property income, well above the average. Paraguay capital transfers but also other minor expenditures
(42.3%), El Salvador (40.4%) and Honduras (40.3%) spent more as other taxes on production, current taxes on income
than the LAC average on compensation of employees. By and wealth etc. and the adjustment for the change
contrast, social benefits in Honduras represented only 1.4% in pension entitlements) and investments. All these
of government expenditures, property income represented transactions at the level of general government are
3.1% in Chile, and Colombia spent 18.7% on compensation recorded on a consolidated basis (i.e. transactions
of employees. between levels of government are netted out). For
the OECD average, data are derived from the OECD
On average, in LAC, subsidies (e.g. on fuel, or electricity) National Accounts Statistics database, which is based
amounted to 1.6% of expenditures in 2017, down from 3.4% on the SNA framework.
in 2007. Therefore, it is now slightly lower than the share
spent by OECD countries on this transaction (2.0%). Chile Further reading
reduced the share spent on subsidies from 22.2% in 2007 to
4.9% in 2017 and increased the share on grants and other OECD (2018), OECD Economic Surveys: Chile 2018, OECD
expenses from 5.9% to 25.7%. This reflects a change in the Publishing, Paris. http://dx.doi.org/10.1787/eco_surveys-
system of transfers that among others captures that since chl-2018-en
2016 grants through the “free education” (gratuidad) make
access to education more equal, favouring the admission Figure notes
of vulnerable students (OECD 2018).
Data for Mexico, Peru and Paraguay are recorded on a cash basis. Data
In 2017, investment spending accounted for 4.6% of for Mexico and Colombia refer to 2008 rather than 2007. Data for
government expenditures in LAC, which entails a reduction Honduras refers to 2015 rather than 2017. LAC and OECD averages
of -2.7 p.p. since 2007. OECD countries spent 7.7% on are weighted.
this transaction. Peru spent four times the LAC average
(18.5%) and Paraguay spent (15.8%). They were the only
LAC countries to increase the share spent on investment
66 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.8. General government expenditure by economic transaction
2.18. Structure of general government expenditures by economic transaction, 2007 and 2017
Percentage of total expenditures
Compensation Intermediate Subsidies Property income Social benefits Grants + Other expenses Investments (gross)
of employees consumption (incl. interest) (current and capital) 2007 2017
2007 2017 2007 2017 2007 2017 2007 2017 2007 2017 2007 2017
Brazil 30.6 27.6 16.4 11.0 0.9 0.8 18.3 18.7 26.5 36.7 1.9 2.9 5.3 2.3
Chile
Colombia 24.0 26.8 12.9 11.9 22.2 4.9 3.0 3.1 20.5 18.8 5.9 25.7 11.6 8.9
El Salvador
Honduras 21.3 18.7 17.6 26.8 1.2 1.3 10.5 9.5 19.6 25.6 16.6 9.9 13.2 8.1
Mexico
Paraguay 38.2 40.4 15.8 16.3 2.8 1.5 11.1 10.9 10.5 10.6 10.3 11.6 11.2 8.6
Peru
44.2 40.3 15.4 15.9 5.2 0.2 2.5 7.0 1.1 1.4 17.2 23.2 14.4 12.0
LAC
OECD 21.6 22.2 7.7 9.9 7.4 3.6 10.2 12.9 9.7 18.7 35.3 26.6 8.1 6.1
47.6 42.3 11.1 10.5 0.0 0.0 4.3 3.2 16.3 19.5 8.1 8.7 12.6 15.8
29.4 29.9 24.5 27.9 0.0 0.0 9.8 5.2 14.4 9.3 6.8 9.2 15.1 18.5
27.2 26.0 14.2 12.7 3.4 1.6 14.5 15.3 20.5 29.7 12.8 10.0 7.3 4.6
24.1 22.8 14.6 14.1 1.9 2.0 7.8 6.5 36.7 40.9 5.6 6.0 9.3 7.7
Source: Data for the LAC countries: IMF Government Finance Statistics (IMF GFS) database. Data for the OECD average: OECD National Accounts
Statistics (database).
12 https://doi.org/10.1787/888934091448
2.19. Government expenditures by economic transaction as a percentage of GDP, 2017
Compensation of Employees Intermediate consumption Property income (incl. interest)
Subsidies Social Benefits Grants + Other expenses
Investments (gross) (current and capital)
60
50
40
30
20
10
0 LAC OECD
BRA COL HND CHL PRY SLV MEX PER
Source: Data for the LAC countries: Government Finance Statistics (IMF GFS) database. Data for the OECD average: OECD National Accounts Statistics
(database).
12 https://doi.org/10.1787/888934091467
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 67
2.9. GOVERNMENT INVESTMENT SPENDING
Government investment creates public infrastructure Methodology and definitions
essential for long-term economic growth and societal well-
being. For instance, public investment supports the provision Data are from the IMF Government Finance
of public services (e.g. schools). Further, governments invest Statistics database, which applies the concepts set
in transport infrastructure and other large-scale projects out in the Government Finance Statistics Manual (GFSM).
to improve productivity and competitiveness. Finally, The GFSM provides a comprehensive conceptual and
governments can also invest in research and development, accounting framework suitable for analysing and
which can contribute in spreading new tools and knowledge evaluating fiscal policy. It is harmonised with the
for increasing productivity and creating jobs in sectors other macroeconomic statistical frameworks, such
adding high value to the economy. as the System of National Accounts (SNA). However,
differences exist between the GFSM and the SNA
In 2017, government investment represented, on average, frameworks in several occurrences, which led to the
4.6% of total government expenditure in LAC countries with establishment, to a large extent, of correspondence
available data. This figure is smaller than in OECD countries criteria between the two statistical systems. The
where it was 7.7% in the same year. Government investment GFS and SNA frameworks have been revised and
in the LAC region is extremely heterogeneous. On the high several statistical standards were implemented by
end, investment as a percentage of government spending is the countries.
18.5% in Peru and 15.8% in Paraguay. Between 2007 and 2017,
these are the two countries where investment increased the General government investment includes gross
most, 3.4 and 3.2 p.p. respectively. As part of its national capital formation and acquisitions, less disposals of
development strategy (i.e. the “Bicentenary Plan: Peru 2021”) non-produced, non-financial assets. Gross fixed capital
issued in 2010 the Peruvian government set ambitious targets formation (also named fixed investment) is the main
in terms of public investment, particularly in the transport component of government investment, consisting
sector as means of closing gaps with other countries in mainly of transport infrastructure but also including
the region, improving people’s well-being and fostering infrastructure such as office buildings, housing,
economic growth. Similarly, Paraguay began an accelerated schools, hospitals, etc. Government investment
process of infrastructure improvement in 2013, to update is recorded on a gross basis (i.e. measured gross
and improve its road network and to complete hydraulic of consumption of fixed capital, unless otherwise
installations that will improve water quality and sanitation. stated). General government consists of central, state
and local governments and social security funds.
Investment as a share of GDP in LAC countries State government is applicable to the federal states
reached 1.6% in 2017 below the OECD average of 3.1%. of Brazil and Mexico and the highly decentralised
While investment decreased for both groups of countries, countries of Colombia, Paraguay and Peru. For the
it did on average at a faster pace in LAC countries (-0.7 p.p.) OECD average, data are derived from the OECD
compared to the OECD (-0.5 p.p.). Colombia (-1.8 p.p.) and National Accounts Statistics database, which is based
Brazil (-1 p.p.) are the LAC countries where government on the SNA framework. Data on these indicators are
investment spending decreased the most. In Colombia, this available for a limited set of LAC countries.
trend could be explained by the large oil price shock in
2015-16 that affected government revenues as well as by Further reading
adjustments to the budget for complying with fiscal targets
often taking place through reduced investment. In the case IDB (2019), Building Opportunities for Growth in a Challenging World,
of Brazil, the rising public deficit has led to reductions in Inter-American Development Bank, Washington, DC,
public investment. https://flagships.iadb.org/en/MacroReport2019/Building-
Opportunities-to-Grow-in-a-Challenging-World.
Investment can have higher economic returns in
regions with a relatively lower level of development. OECD (2019), OECD Economic Surveys: Colombia 2019, OECD
Investment spending across levels of government is crucial Publishing, Paris, https://doi.org/10.1787/e4c64889-en.
for securing long-term growth and reducing inequality.
For LAC countries with available information, 35.2% of OECD (2016), OECD Public Governance Reviews Peru: Integrated
government investment spending took place at the local Governance for Inclusive Growth, OECD Publishing, Paris,
level in 2017 compared to 29% in OECD countries. For LAC http://dx.doi.org/10.1787/9789264265172-en.
countries, this represents an increase of 5.4 p.p. since 2007,
notably in Colombia and Peru local governments carried out Figure notes
over 40% of total investment in 2017.
Data for Mexico, Peru and Paraguay are recorded on a cash basis. Data
for Honduras refer to 2015 rather than 2017. Data for Colombia and
Mexico refer to 2008 rather than 2007. LAC and OECD averages are
weighted.
2.22 Social security funds are included in central government for Brazil,
Chile and Colombia.
68 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.9. Government investment spending
2.20. Government investment as a percentage of total government expenditures, 2007 and 2017
% 2007 2017
20
18
16
14
12
10
8
6
4
2
0 LAC OECD
PER PRY HND CHL SLV COL MEX BRA
Source: Data for the LAC countries: IMF Government Finance Statistics (IMF GFS) database. Data for the OECD average: OECD National Accounts
Statistics (database).
12 https://doi.org/10.1787/888934091486
2.21. Government investment as a percentage of GDP, 2007 and 2017
% 2007 2017
5
4
4
3
3
2
2
1
1
0 LAC OECD
PER PRY HND COL CHL SLV MEX BRA
Source: Data for the LAC countries: IMF Government Finance Statistics (IMF GFS) database. Data for the OECD average: OECD National Accounts
Statistics (database).
12 https://doi.org/10.1787/888934091505
2.22. Distribution of investment spending across levels of government, 2007 and 2017
% Central Government State Government Local Government Social security funds
100
90
80
70
60
50
40
30
20
10
0
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
CHL PRY HND SLV COL PER MEX BRA LAC OECD
Source: Data for the LAC countries: IMF Government Finance Statistics (IMF GFS) database. Data for the OECD average: OECD National Accounts
Statistics (database).
12 https://doi.org/10.1787/888934091524
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 69
2.10. FISCAL REVENUES FROM NON-RENEWABLE NATURAL RESOURCES (NRNR)
Several countries in LAC are endowed with non- 2017 thus increasing pressure on LAC governments for
renewable natural resources (NRNR) mainly hydrocarbons finding alternative sources of funding or to implementing
and metals and minerals that constitute an important adjustments.
source of public revenues. These resources are, however,
finite and the stream of revenues they generate is subject Methodology and definitions
to high levels of volatility, as prices are set in international
markets. Furthermore, the management of NRNR should Dara are from the CEPALSTAT database. Fiscal
also consider intergenerational equity ensuring that revenues from non-renewable natural resources
depletion of these natural resources would not compromise refer to tax payments and property rents that the
or restrict opportunities of future generations as well as public sector receives for the exploitation of these
the sustainability of the environment. As a whole, the LAC resources. These payments are classified by each
region has experienced two recent periods of high NRNR NRNR considered and by the type of fiscal instrument,
prices, between 2006 and 2008 and again between 2010 Fiscal regimes for such revenues relate to royalties,
and 2014. However, only few countries (e.g. Colombia and income tax, other taxes on income and other levies.
Chile) have established reserve funds and put in place For example, royalty payments refer to the right to
stabilisation mechanisms aimed at counterbalancing extract oil and gas or exploit other mineral resources
possible price volatility. and are normally regarded as non-tax revenues as they
are property income from government owned land
On average in LAC countries with available or resources used. Non-renewable natural resources
information, fiscal revenues from NRNR reached 2.9% refer to metals and minerals and hydrocarbons.
of GDP in 2017 a sharp decline since 2007 when it was Fiscal revenues from hydrocarbons include revenues
6.9%. In 2017, as a percentage of GDP, Bolivia (5.9%) and from upstream (exploration and production) and
Ecuador (5.6%) reported the highest values while Colombia downstream (refining and commercialization)
(1.2%) and Chile (0.9%) the lowest. Between 2007 and 2017, activities. General government and public corporations
revenues from NRNR decreased in all LAC countries with constitute the public sector. Public corporations in
available information. This reflects the interplay of the the case of non-renewal natural resources refer to
evolution of prices and changes in the level of production non-financial enterprises. For further information see
as well as country specific one-off factors with effects on https://cepalstat-prod.cepal.org.
revenues. The largest reductions between 2007 and 2017
took place in Trinidad and Tobago (11.7 p.p.) and Chile Further reading
(7.1 p.p.) In the case of the former, it relies heavily in oil
and natural gas as the main activity of its economy, which ECLAC (2019), Fiscal Panorama of Latin America and the
on the one hand is shrinking, and, on the other hand, Caribbean 2019, Economic Commission for Latin
has been affected by diminishing prices. In the case of America and the Caribbean, Santiago, https://www.
Chile and despite increases in production, copper prices c e p a l . o r g / e n / p u b l i c a t i o n s / 4 4 5 1 7 - f i s c a l - p a n o r a m a -
are still below 2007 levels. Still, a solid macroeconomic latin-america-and-caribbean-2019-tax-policies-resource.
policy framework has smoothed adjustment to the end of
the commodity boom, contributing to low unemployment, OECD et al. (2019), Revenue Statistics in Latin America and
resilient household consumption and a stable financial the Caribbean 2019, OECD Publishing, Paris, https://doi.
sector (OECD 2018). org/10.1787/25666b8d-en-es.
Revenues from NRNR can be split into two categories: OECD (2018), OECD Economic Surveys: Chile 2018, OECD
hydrocarbons and metals and minerals. Chile has no oil Publishing, Paris, https://doi.org/10.1787/eco_surveys-
extraction and in Peru (e.g. copper, gold, lead and silver) chl-2018-en
mining is relatively more important than hydrocarbons as
a source of revenue. Revenues from NRNR remains a key Figure notes
source of funding in several LAC countries, for example,
it represents 32% and 28% of total revenues in Bolivia 2.25 Revenues from NRNR and total revenues are expressed in national
and Mexico respectively. In all countries with available currency at current prices.
information, however, the relative participation of NRNR
as a source of revenues diminished between 2007 and
70 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
2.10. Fiscal revenues from non-renewable natural resources (NRNR)
2.23. Fiscal revenues from non-renewable natural resources as a percentage of GDP, 2007 and 2017
2007 2017
16
14
12
10
8
6
4
2
0 LAC
BOL ECU MEX TTO PER ARG BRA COL CHL
Source: ECLAC, based on data from ECLAC’s Fiscal Revenues from Non-Renewable Natural Resources in Latin America and the Caribbean Database.
12 https://doi.org/10.1787/888934091543
2.24. Fiscal revenues from non-renewable resources by country and commodity as percentage of GDP,
2007 and 2017
Hydrocarbons Mining
16
14
12
10
8
6
4
2
0
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
2007
2017
TTO BOL CHL MEX ECU PER COL ARG BRA LAC
Source: ECLAC, based on data from ECLAC’s Fiscal Revenues from Non-Renewable Natural Resources in Latin America and the Caribbean Database.
12 https://doi.org/10.1787/888934091562
2.25. Relative participation of revenues from non-renewable natural resources as a share of total revenues,
2007 and 2017
2007 2017
60
50
40
30
20
10
0
ECU MEX BOL PER COL ARG BRA CHL
Source: ECLAC, based on data from ECLAC’s Fiscal Revenues from Non-Renewable Natural Resources in Latin America and the Caribbean Database.
12 https://doi.org/10.1787/888934091581
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 71
Government at a Glance: Latin America and the Caribbean 2020
© OECD 2020
Chapter 3
Public employment
73
3.1. EMPLOYMENT IN THE PUBLIC SECTOR
Employment in the public sector is one of the key meaning that total employment in LAC grew faster than
indicators of the size of the public sector. It reflects the public sector employment. High levels of public sector growth
societal agreement on the role of government in the rate from 2011 to 2018 were recorded in the Dominican
economy and society, as well as the decision on how Republic (5.1%); Guatemala (4.5%) and Chile (4.3%), while
public services are delivered – by public employees or in public sector employment declined in Trinidad and Tobago
partnership with the private or not-for-profit sectors. by 0.6% annually and in Costa Rica by 1.8% . In Costa Rica the
decline was caused by both an absolute decrease of public
Public sector employment as a percentage of total sector employment coupled with an annual increase of total
employment in the LAC region for countries with available employment over the period 2011-2018
data amounted to an average of 11.9% in 2018, slightly lower
than in 2011 when it was 12.3%. It is also much smaller Methodology and definitions
than in the OECD countries, where on average it reached
21.1 % in 2018. Data were sourced from the International Labour
Organization (ILO) ILOSTAT database. Data are based
There are also considerable differences in the share of on the Labour Force Survey unless otherwise indicated.
public employment to total employment across countries Public sector employment covers employment in
in LAC. Countries with high share of public employment the government sector plus employment in publicly
in 2018 include Caribbean countries such as Trinidad and owned resident enterprises and companies. Data
Tobago (25.9%) Barbados (23.6%) and Guyana (22.1%). The represent the total number of persons employed
share of public employment is low in 2018 in El Salvador directly by these institutions without regard for the
(7.7%), Guatemala (6.4%), Honduras (6.0%) and in Colombia particular type of employment contract.The employed
(3.7%). However, the number of public employees in comprises all persons of working age, who, during
Colombia are underestimated, as it is not possible to get a specified period, were in the following categories:
an accurate figure for the number of off-payroll staff. paid employment or self-employment.
Additionally, in Colombia public employment in the health
sector is very low compared to other countries, as most Further reading
healthcare workers are employed as private contractors,
although their tasks and responsibilities are very similar to OECD (2017), Skills for a High Performing Civil Service, OECD
people on employment contracts in other countries. Large Public Governance Reviews, OECD Publishing, Paris,
countries in the region that additionally have a federal https://doi.org/10.1787/9789264280724-en.
structure are operating their governments with various
sized of workforces; Argentina’s public sector employs Figure notes
17.2% of the total workforce, while Brazil’s employs 12.5%,
and Mexico’s 11.8%, in 2018. Data are based on the Labour Force Survey. Data for Brazil, El Salvador,
Honduras, Paraguay and Peru are based on household surveys.
Only in four countries in the region did public sector
employment as a share of total employment increase from 3.1: Data for Barbados, Belize, Bolivia, Guyana and Jamaica are not
2011 to 2018; in Argentina the one p.p. increase, from 16.2% included in the LAC average. Data for Belize, Guatemala, Guyana,
to 17.2%, can explained primarily by an overall reduction of Jamaica , Paraguay and Peru are for 2017 rather than 2018. Data for
total employment. Public sector employment also increased Barbados, the Dominican Republic and Trinidad and Tobago are for
in Uruguay from 14.4 % to 15%, the Dominican Republic 2016 rather than 2018.
from 13% to 14.8% and Chile from 10 % to 12%.
3.2: Data for Argentina refer to urban areas only. Data for Guatemala,
Regarding the annual growth rate of public sector Paraguay and Peru are for 2-11-2017. Data for the Dominican Republic
employment, the LAC average amounted to 1.4% from and Trinidad and Tobago are for 2011 to 2016. Data for Brazil are
2011 to 2018 compared to the OECD countries’ average of for 2012-2017.
0.6%. However, the comparison between the share of public
employment and total employment in the LAC region
between 2011 and 2018 shows on average a 0.4 p.p. decline
with the annual growth rate of public sector employment,
74 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
3.1. Employment in the public sector
3.1. Public sector employment as a percentage of total employment, 2011 and 2018
% 2011 2018
30
25
20
15
10
5
0
TTO
BRB
GUY
PAN
ARG
URY
DOM
CRI
BRA
JAM
CHL
MEX
BLZ
PRY
PER
BOL
ECU
SLV
GTM
HND
COL
LAC
OECD
Source: International Labour Organization (ILO) ILOSTAT (database), Employment by sex and institutional sector.
12 https://doi.org/10.1787/888934091600
3.2. Annual average growth rate of public sector employment, 2011-2018
%
6
5
4
3
2
1
0
-1
-2
-3 LAC OECD
DOM GTM CHL PAN ARG HND SLV COL ECU URY BRA PER MEX PRY TTO CRI
Source: International Labour Organization (ILO) ILOSTAT (database), Employment by sex and institutional sector.
12 https://doi.org/10.1787/888934091619
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 75
3.2. GENDER EQUALITY IN PUBLIC SECTOR EMPLOYMENT
Creating equal participation and opportunities for Brazil and Ecuador (18 p.p. each). In order to fully grasp
women contributes to a more representative and diverse women’s participation in all levels of public employment,
workforce. In many countries, the public sector is expected data on women representation in senior positions would
to be a model employer, leading the way and setting be required as evidence in OECD countries shows that they
standards for the implementation of gender equality, and tend to be under-represented in senior positions.
promoting diversity. A public sector workforce that reflects
the diversity of society would probably deliver better results, Methodology and definitions
for example, a diverse workforce is better positioned to
understand and serve the needs of the various segments Data on public sector employment were collected
of the population. by the International Labour Organization (ILO)
ILOSTAT database. Data are based on the Labour
The public sector generally employs more women, Force Survey unless otherwise indicated. Public sector
especially in care positions (e.g. nursing, teaching) which employment covers employment in the government
are traditionally regarded as “female occupations”, and sector plus employment in publicly owned resident
could offer better conditions for those who need to combine enterprises and companies. Data represent the
work and family obligations than the private sector does. total number of persons employed directly by these
In 2018, on average 51.0% of public sector employees were institutions without regard for the particular type
women in LAC, compared to 60.2% in OECD countries. The of employment contract. The employed comprises
share has remained stable over time: in 2011, the share of all persons of working age, who, during a specified
women in public employment was on average 50.7% in LAC brief period, were in the following categories: paid
and 59.2% in OECD countries. Jamaica, the country with employment or self-employment.
the largest share of women in the public sector (60.3%),
has a difference of 19 p.p. with Belize, the country with the Data for gender equality in ministerial positions
smallest share in LAC (41.2%). in national government were obtained from the
Interparliamentary Union’s “Women in Politics”
Recent evidence has shown that women in LAC work database. Data represent the percentage of appointed
more hours than men, but are less likely to get paid because ministers as of 1 January of each year of reference.
they spend more time producing goods and services for Data show women as a share of total ministers,
family consumption (e.g. food, care) (Bando, 2018). Hence, including deputy prime ministers and ministers.
in 2018, women represented on average 41.0% of the total Prime ministers/heads of Government were also
workforce in LAC, while the average across OECD countries included when they held ministerial portfolios. Vice
was 45.8%. Again, there is a 20 p.p. gap between Barbados, Presidents and heads of governmental or public
the country with the highest (53.4%) and Guatemala agencies have not been included in the total.
(33.6%), the country with the lowest share of women in
total employment. Further reading
While equal representation of women in public sector Bando, R. (2018). Evidence-Based Gender Equality Policy
employment has been achieved (and even surpassed) in and Pay in Latin America and the Caribbean: Progress
some LAC countries, this is not the case for leadership and Challenges. Inter-American Development Bank,
positions. Available data –referring to January 1, 2019 - show Washington DC. http://dx.doi.org/10.18235/0001614
that most LAC countries are far from achieving gender
equality in ministerial positions at the federal/central Figure notes
level of government. In 2019, on average in LAC, 27.4% of
ministerial positions were filled by women, which is around 3.3 and 3.4: Data are based on the Labour Force Survey (data for Brazil, El
4 p.p. lower than the OECD average (31.2%). However, Salvador, Honduras, Paraguay and Peru are based on other household
ministerial positions change frequently in LAC. surveys). Data for Barbados, Belize, Bolivia, Guyana and Jamaica are
not included in the LAC average. Data for Argentina refer to urban
By 2019, Nicaragua (55.6%), Colombia (52.9%) and Costa areas only. Data for Jamaica exclude own-use production workers.
Rica (51.9%) achieved gender parity in ministerial positions. Data for Belize, Guatemala, Guyana, Jamaica, Paraguay and Peru are
On the other end of the spectrum, there are no female for 2017 rather than 2018. Data for Barbados, Dominican Republic
ministers in Belize. Many LAC countries have substantially and Trinidad and Tobago are for 2016 rather than 2018. Data for
increased the share of women ministers between 2012 and Brazil are for 2012 rather than 2011.
2019, such as in Uruguay (35.8 p.p.), Costa Rica (23 p.p.), El
Salvador (22 p.p.), Mexico (21 p.p.) and Colombia (20 p.p.). In
other countries the representation of women in ministerial
positions declined substantially, namely Bolivia (31 p.p.),
76 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
3.2. Gender equality in public sector employment
3.3. Gender equality in public sector employment, 2011 and 2018
2011 2018
% of women
70
60
50
40
30
20
10
0
NIC BRB JAM PAN MEX URY CHL CHL JAM HND URY DMA TTO MEX SUR COL DOM PRY PAN SLV TTO ARG PAN BOL CRI GUY DOM PER PRY GUY COL GTM GTM BLZ ECU BHS GTM BLZ LAC
BRA ARG BRB GUY SLV BLZ OECD
Source: International Labour Organization (ILO) ILOSTAT (database), Employment by sex and institutional sector.
12 https://doi.org/10.1787/888934091638
3.4. Gender equality in total employment, 2011 and 2018
2011 2018
% of women
60
50
40
30
20
10
0
PER BRA ECU PRY MEX LAC
BOL ARG CHL HND CRI OECD
Source: International Labour Organization (ILO) ILOSTAT (database), Employment by sex and institutional sector.
12 https://doi.org/10.1787/888934091657
3.5. Gender equality in ministerial positions, 2012 and 2019
2012 2019
60
50
40
30
20
10
0
COL SLV VEN BRB DOM LAC
CRI TTO HTI JAM BOL OECD
URY HND PER ECU BRA
Source: Inter-Parliamentary Union (IPU) “Women in Politics”, 2012 and 2019. 12 https://doi.org/10.1787/888934091676
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
77
Government at a Glance: Latin America and the Caribbean 2020
© OECD 2020
Chapter 4
Institutions (CoG)
79
4.1. FUNCTIONS OF THE CENTRE OF GOVERNMENT
The Centre of government (CoG), also known as the the implementation of ICT. In 9 out of the 14 surveyed
Office of the President, Cabinet Office, General Secretariat of LAC countries, the CoG is responsible for advising the
the Government, among others, refers to the organisations development of the digital government strategies.
and units that serve the Chief Executive (President or Prime Additionally in 10 out of the 14 respondent LAC countries
Minister, and the Cabinet collectively). The CoG is expected the CoG also prioritises ICT projects and monitors the
to play a key role in ensuring evidence-based, strategic implementation of the digital government strategy. In
and consistent policy implementation by governments turn, it is less common for the CoG to develop technical
and are critical for organising and supporting the head of guidelines on ICT across government or coordinate with
government’s decision-making process for guaranteeing local levels, with 4 out of 14 countries in both cases (see
the delivery of government priorities online Table 4.3 in Annex F).
The CoG performs certain cross cutting functions Methodology and definitions
(strategic management, policy coordination, monitoring
and improving performance, manage the politics of Data were collected via the 2018 OECD-IDB Survey
policies, and communications and accountability). Other on Organisation and Functions of the Centre of
common tasks performed primarily by the CoG include Government, to which 11 LAC countries responded, in
policy coordination, taking care of the relations with addition Brazil, Costa Rica and Mexico and Costa Rica
parliament and communicating government messages answered to the OECD questionnaire. Respondents
within government and to the public were senior officials who provide direct support and
advice to heads of government and the council of
In 12 out of the 14 LAC countries surveyed including ministers or cabinet and provided information for the
Argentina, Brazil, Chile, Colombia and Mexico, the CoG is year 2018. Data for the OECD refer to 34 countries and
exclusively responsible for organising cabinet meetings, as are for 2016 as well as for Brazil and Costa Rica.
is the case in all OECD countries with available information.
In Guatemala, this responsibility is shared with the Planning An open government strategy is a document
Secretary (SEGEPLAN), while in Paraguay it is done jointly that defines the open government agenda of the
with the Social Cabinet (i.e. an extended set of institutions central government and/or of any sub-national
coordinating public policies in the social area). In turn, the level government, or of a single public institution or
formulation and monitoring of policies tend to be a shared thematic area. Such a document includes key open
responsibility between the CoG and other government bodies, government initiatives, together with short, medium
primarily line ministries (10 and 9 countries, respectively.). and long-term goals and indicators.
It is more common for the CoG in OECD countries than
in LAC countries to be primarily responsible of transition Central digital government policy/strategy refers
planning and management for the change of governments to the directives/principles that central governments
(21 out of 34 in OECD countries vs 5 out of 13 LAC countries define (e.g. through an Executive Directive or Decree,
with available information) and strategic planning (20 out of as result of other overarching central policies such
34 in OECD vs 5 out of 14 in LAC). as digital government, public sector modernisation
or open government) to incorporate information and
Open government is defined as a culture of governance communication technologies as a priority for the
that promotes the principles of transparency, integrity, public administration.
accountability and stakeholder participation in support of
democracy and inclusive growth (OECD, 2019). In 5 out of Further reading
the 14 surveyed countries in LAC, the CoG is responsible for
designing, communicating and monitoring open government Dassen, N. and A.V. Ramírez Alujas (2016), Winds of Change II:
policies. In Argentina, Costa Rica, Guatemala and Mexico, Progress and Challenges in Open Government Policies in Latin
the CoG is also responsible for coordinating them. On the America and the Caribbean, Inter-American Development
contrary, in Brazil, the CoG only designs open government Bank, https://publications.iadb.org/en/winds-change-ii-
strategies and initiatives. The only two countries that progress-and-challenges-open-government-policy-latin-
reported that the CoG plays a role in evaluating strategies america-and-caribbean.
and initiatives are Guatemala and Mexico. Overall, CoGs in
LAC are less involved in the implementation, coordination OECD (2019), Government at a Glance 2019, OECD Publishing,
and evaluation of open government strategies in LAC than Paris, https://doi.org/10.1787/8ccf5c38-en.
in OECD countries (OECD, 2019)
Governments often rely in the CoG’s coordination
to put at place their digital government strategies and
80 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
4.1. Functions of the Centre of Government
4.1. Responsibilities of the centre of government, 2018
Preparation Policy Relations Communication Government Monitoring Transition Policy Strategic Deigning and
of Cabinet co-ordination with parliament of government programme of government planning and formulation planning implementing
meetings management
messages policy º ● reform
.. ❍
Argentina ●● ● ● ●● .. ❍ ❍ ●
Bahamas ●º ❍ º º ❍
Barbados ●❍ ● ❍ ❍º ❍ º ● ❍
Brazil ●● ● º ❍ º
Chile ●● ● ❍ ❍º ● º ● ❍
Colombia ●º º º ● º
Costa Rica ●● ● ● ºº º ❍ ❍ º
Dominican Republic ●● ● º ❍ ●
Guatemala º❍ ❍ ● ●● ● º º ❍
Honduras ●º º º º ❍
Mexico ●º º ● ºº º ● º
Paraguay º● ❍ º º º
Peru ●● ● ● º● ● ●
Uruguay ●● ● 0 5 ❍
● ●º ● 10 4
2 5 3
❍ ºº º 5
3 20 6
º ❍º ❍ 23 13
1 1 7
● ºº º 17
10
º ●● ❍
● ●● ●
º ºº º
LAC total 12 8 8 8 55 5
● CoG responsibility 2 4 3 3 69 5
º Shared responsibility 0 2 3 3 30 3
❍ Responsibility of another body
OECD total 34 24 16 12 18 16 21
● CoG responsibility 0 10 18 21 12 15 11
º Shared responsibility 0 0 0 1 43 1
❍ Responsibility of another body
Source: OECD-IDB (2018) “Survey on Organisation and Functions of the Centre of Government”; OECD (2017) “Survey on Organisation and Functions of
the Centre of Government”.
12 https://doi.org/10.1787/888934091695
4.2. Role of the Centre of Government in open government strategies and initiatives, 2018
Countries
6
5
MEX MEX MEX
4
GTM GTM GTM MEX MEX
3
CRI DOM DOM GTM GTM
2
BRA CRI CRI DOM CRI MEX
1
ARG ARG ARG ARG ARG GTM
0 Communication Monitoring Implementation Co-ordination Evaluation
Design of the
strategies and
initiatives
Source: OECD-IDB (2018) “Survey on Organisation and Functions of the Centre of Government”; OECD (2017) “Survey on Organisation and Functions of
the Centre of Government”.
12 https://doi.org/10.1787/888934091714
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 81
4.2. DEGREE OF INFLUENCE AND ROLE IN POLICY COORDINATION OF CENTRE OF GOVERNMENT
Centres of Government (CoGs) are taking a more active The Bahamas is the only country that, at the time of
role in aligning multi-department workplans to government the survey, reported that the CoG has no influence over other
actions. This trend is driven by the rise of multidimensional government entities to coordinate policies meaning that it can
issues (e.g. environmental sustainability, competitiveness, only express its views. However, this is expected to change as
inequality, trust) which require whole of government a delivery unit was established in the Prime Ministers’ office to
responses, and by growing demands from people for better coordinate policies in eight key priority areas (e.g. education,
results in service delivery and better co-ordination in policy safety and security, infrastructure, modernisation, etc.).
formulation and implementation (i.e. minimise duplication
and contradiction). This more active role for the centre of Methodology and definitions
government throughout the policy cycle suggests the need
for adequate co-ordination and monitoring tools. The data were collected via the 2018 OECD-IDB
Survey on Organisation and Functions of the Centre
Ten out of 12 LAC countries with available information of Government, to which 11 LAC countries responded.
reported that the number of cross-ministerial initiatives Brazil, Costa Rica and Mexico answered to the OECD
has increased over the past years, in line with trends in questionnaire. Respondents were senior officials
OECD countries where the CoG is taking on more direct who provide direct support and advice to heads of
leadership over substantive policy and reform areas government and the council of ministers. Data are for
(OECD, 2018). Colombia is the only LAC country that reported the year 2018. Data for the OECD refer to 33 countries
that the number of such initiatives decreased while in Brazil (Italy did not complete the full questionnaire), are for
they have remained stable. In LAC countries, the CoG plays are for 2016, and include Brazil and Costa Rica.
primarily a role to facilitate and support coordination while
in OECD countries the CoG often plays a leadership role. The term Centre of Government refers to the
In turn, it is more common in OECD countries than in LAC organisations and units that serve the Chief
countries that the CoG to participate in discussions about Executive (President or Prime Minister, and the
the substance or content of the policy issues at stake. Cabinet collectively) and perform certain cross
cutting functions (strategic management, policy
The most common instruments used by the CoG in LAC coordination, monitoring and improving performance,
countries to promote coordination are the establishment of manage the politics of policies, and communications
task forces (12 out of 14 countries) and ad hoc meetings of and accountability). Typical units of the centre
senior officials (11 out of 14 countries). In Chile, coordination of government include the ministry or general
takes place exclusively at regular cabinet meetings and secretariat of the presidency, the Office of the Prime
ad hoc cabinet discussions. Regular Cabinet meetings are Minister, and the Cabinet Office, although other parts
the main coordination channel in OECD countries with of the government can perform these functions.
available information (29 out of 33), but less common in
LAC (8 out of 14 countries). A similar proportion of LAC Further reading
and OECD countries (about a quarter) indicated that the
CoG uses performance management systems to promote Alessandro, M., M. Lafuente and C. Santiso (2014), Governing
co-ordination across government (co-ordination is set as to Deliver: Reinventing the Center of Government in
an objective and staff are evaluated on it). Latin America and the Caribbean, Inter-American
Development Bank, https://publications.iadb.org/
The degree of influence of CoGs have over line en/governing-deliver-reinventing-center-government-
ministries to promote coordination is heterogeneous latin-america-and-caribbean.
across LAC countries. Nine out of the 14 surveyed
countries reported a high influence; which implies that OECD (2018), Centre Stage 2: The Organisation and Functions of the
the CoG can impose sanctions. Four countries reported Centre of Government in OECD Countries, OECD Publishing,
moderate levels of influence. In Peru while the CoG can Paris, https://www.oecd.org/gov/centre-stage-2.pdf
trigger cooperation, it is less successful in ensuring that
it is maintained over time in cross governmental projects. Figure notes
The trend is somewhat different in OECD countries where
about three quarters of countries consider they only have 4.4. Bahamas and Peru did not answer to this question.
“moderate” influence, indicating that while the “proximity
to power” authority of the centre, is important, it may not 4.7 (Role of CoG in implementing of cross-governmental policy initiatives,
be sufficient to exert influence over other parts of the 2018) is available online in Annex F.
administration (OECD, 2018)
82 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
4.2. Degree of influence and role in policy coordination of Centre of Government
4.4. Variation in the number of cross-ministerial 4.5. Level of influence of the CoG over line ministries
initiatives in recent years, 2018 to encourage coordination, 2018
CRI None
MEX 7%
CHL BHS ARG
URY BRB Decreased BRA CHL
COL 8%
Increased PRY Moderate BRB COL
83% 29% PER
HND DOM
BRA Remained
ARG stable 8% PRY GTM High
64%
GTM MEX HND
DOM CRI URY
Source: OECD-IDB (2018) “Survey on Organisation and Functions of Source: OECD-IDB (2018) “Survey on Organisation and Functions of
the Centre of Government”; OECD (2017) “Survey on Organisation and the Centre of Government”; OECD (2017) “Survey on Organisation and
Functions of the Centre of Government. Functions of the Centre of Government”.
12 https://doi.org/10.1787/888934091733 12 https://doi.org/10.1787/888934091752
4.6. Institutional instruments or initiatives used by the CoG to ensure policy co-ordination, 2018
Ad hoc meetings of senior officials Task forces Ad hoc Cabinet discussions Regular Cabinet meetings Written guidance Performance management
Argentina ● ● ● ● ❍ ●
Bahamas ❍ ❍ ❍ ❍ ● ❍
Barbados ● ● ❍ ● ❍ ❍
Brazil ● ● ● ❍ ● ❍
Chile ❍ ❍ ● ● ❍ ❍
Colombia ● ● ● ❍ ● ●
Costa Rica ● ● ● ● ● ❍
Dominican Republic ● ● ❍ ❍ ❍ ❍
Guatemala ● ● ● ● ❍ ●
Honduras ● ● ❍ ❍ ❍ ❍
Mexico ● ● ● ● ❍ ❍
Paraguay ❍ ● ● ❍ ❍ ❍
Peru ● ● ❍ ● ● ❍
Uruguay ● ● ● ● ❍ ❍
LAC total 11 12 9 85 3
● Yes 3 25 69 11
❍ No
27 26 23 29 18 9
OECD total 6 7 10 4 15 24
● Yes
❍ No
Source: OECD-IDB (2018) “Survey on Organisation and Functions of the Centre of Government”; OECD (2017) “Survey on Organisation and Functions of
the Centre of Government”.
12 https://doi.org/10.1787/888934091771
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 83
4.3. STRATEGIC MANAGEMENT AND MONITORING IN CENTRE OF GOVERNMENT
Centres of government (CoG) provide support to the in countries like the Bahamas, Chile, Colombia and Peru
head of Government (the president in most LAC countries) since 2013 with the functions of defining priorities, detailing
and the Cabinet of ministers. One of their main roles is implementation planning, generating continuous and reliable
to ensure that the policies proposed and implemented by data to measure performance and providing spaces and
line ministries are aligned with the government’s priorities, incentives to intervene when objectives are not being met.
which are usually laid out in the government programme. They contributed to reducing crime (homicides and theft),
To such end, at the time of designing strategies and policies, and time and costs of infrastructure projects, improving
the CoG works with line ministries to set targets and action learning outcomes, and improving health services, among
plans to achieve them, and aligns budget resources with others. Their value added was perceived to be higher for
such plans. At the time of implementation, the CoG monitors multidimensional priorities and in low institutional capacity
progress towards such targets and provides assistance to contexts (Lafuente and Gonzalez, 2018).
improve the performance of line ministries.
Methodology and definitions
At the time of designing national strategies, the CoG
identifies and defines whole-of-government strategic The data were collected via the 2019 OECD-IDB
priorities in 10 out of 14 LAC countries, compared to 18 out Survey on Organisation and Functions of the Centre
of 33 OECD countries. The CoG co-ordinates the design of Government, to which 11 LAC countries responded,
of long-term strategic planning with line ministries in in addition Brazil, Costa Rica and Mexico answered
another six LAC countries. By contrast, this was the most to the OECD questionnaire. Respondents were senior
predominant role of CoGs in OECD countries (24 of them). officials who provide direct support and advice to
A similar proportion of OECD and LAC countries reported heads of government and the council of ministers or
that the CoG mandates line ministries to develop long-term cabinet. Data are for the year 2018. Data for the OECD
strategic plans in cross-cutting areas (13 out of 33 and 5 out refer to 33 countries (since Italy did not complete the
of 14 respectively). full questionnaire) and are for 2016 and include Brazil
and Costa Rica.
When implementing whole-of-government strategic
priorities, the CoG monitors implementation in all LAC Delivery units have the purpose of mainstreaming
countries (compared to 28 OECD countries), and collects an evidence-based culture in government. They
reports and carries out evaluations, except in Barbados support line ministries to identify and plan the
(compared to 23 OECD countries). A similar proportion of implementation of priorities, and then gather and
CoGs from LAC and OECD countries ensure that proposals analyse data on public sector performance with
are linked to government priorities (11 out of 14 and 25 out the purpose of understanding whether government
of 33 respectively). Half of the CoGs in LAC co-ordinate the priorities are being implemented and can propose
implementation of strategic priorities, a smaller proportion corrective actions in order to ensure their achievement.
than among OECD countries (20 out of 33). Re-allocating
resources to meet strategic goals is less common (5 out of 14 For the definition of Centre of Government (CoG)
in LAC), although more prevalent than among OECD countries see Section 4.2.
(4 out of 33).
Further reading
In LAC, the most widely used mechanism to ensure that
government policies are implemented by line ministries is Lafuente, M. and S. Gonzalez (2018). Do delivery units deliver?
monitoring their implementation: all LAC countries did this Assessing government innovations. Washington, DC:
in 2017, compared to 29 out of 33 in the OECD. Inter-American Development Bank https://publications.
iadb.org/en/do-delivery-units-deliver-assessing-govern-
Chile, Costa Rica, Honduras and Uruguay reported ment-innovations
having performance targets in 2015 but not in 2018,
decreasing the proportion of countries using them from OECD (2018), Centre Stage II: The Organisation and Functions
9 out of 11 in 2015 to 8 out of 14 in 2018. Performance targets of the Centre of Government in OECD countries, https://
are less preeminent among OECD countries, only 13 out of www. oecd.org/gov/centre-stage-2.pdf
33 set them. On the contrary, more LAC countries are using
work-plans for the implementation of the government Figure notes
programme, for instance Guatemala, Paraguay and Peru.
In 2018, 9 out of 14 LAC countries had such work-plans in Data for Brazil, Costa Rica and Mexico were collected in 2017 at the
place, compared to 18 out of 33 OECD countries. same time of OECD member countries.
In order to carry out strategic management and 4.10. (Mechanisms the centre of government uses to ensure that
monitoring tasks, 12 out of 14 LAC countries in the survey government policies are implemented by line ministries, 2015 and
had a specific unit or team responsible for tracking progress 2018) is available online in Annex F.
(such as a delivery unit). These units have been established
84 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
4.3. Strategic management and monitoring in Centre of Government
4.8. Responsibilities of the centre of government in strategic planning, 2018
Defining and designing national strategies Implementation of whole-of-government strategic priorities
Identifies and Co-ordinates Mandates line Collects reports Ensures that
defines whole- on implementation proposals are linked
of-government the design of departments to develop Monitors Co-ordinates the Reallocates
strategic priorities implementation and carries out to government implementation resources to meet
Argentina long-term strategic long-term strategic evaluations priorities
Bahamas strategic goals
Barbados planning with line plans in different
Brazil
Chile departments cross-cutting areas
Colombia
Costa Rica ❍● ❍ ●● ● ●●
Dominican Republic
Guatemala ●❍ ❍ ●● ● ●❍
Honduras
Mexico ●❍ ● ●❍ ❍ ❍❍
Paraguay
Peru ●❍ ❍ ●● ● ❍❍
Uruguay
●● ❍ ●● ● ❍●
LAC total
● Yes ●● ❍ ●● ● ●❍
❍ No
●● ● ●● ● ●●
OECD total
● Yes ●● ● ●● ● ●●
❍ No
❍● ❍ ●● ● ❍❍
❍❍ ❍ ●● ● ❍❍
●❍ ● ●● ● ❍❍
●❍ ❍ ●● ❍ ●❍
●❍ ● ●● ● ●●
❍❍ ❍ ●● ❍ ❍❍
10 6
48 5 14 13 11 7 5
9 01 3 79
18 24 13 28 23 25 20 4
15 9 20 5 10 8 13 29
Source: OECD-IDB (2018) “Survey on Organisation and Functions of the Centre of Government”; OECD (2017) “Survey on Organisation and Functions of
the Centre of Government”.
12 https://doi.org/10.1787/888934091790
4.9. Existence of a unit or team in charge of tracking progress on the implementation of policy priorities, 2018
BRA
CRI
PER ARG
BHS MEX
Yes PRY
79% URY BRB No
HND 21%
GTM
DOM
COL
CHL
Source: OECD-IDB (2018) “Survey on Organisation and Functions of the Centre of Government”; OECD (2017) “Survey on Organisation and Functions of
the Centre of Government”; OECD (2017) “Survey on Organisation and Functions of the Centre of Government”.
12 https://doi.org/10.1787/888934091809
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 85
Government at a Glance: Latin America and the Caribbean 2020
© OECD 2020
Chapter 5
Budgeting practices and procedures
87
5.1. INSTITUTIONAL SETTING AND CHARACTERISTICS OF THE CENTRAL BUDGET AUTHORITY
By directing the budget process, the central budget where it is shared). By contrast, only around half of OECD
authority (CBA) can contribute to achieving a well- countries assign this responsibility to the CBA. Monitoring
structured budget that, in turn, can give strategic direction the performance of line ministries is the responsibility
and cohesion to the public sector by funding the country’s of CBA in 8 countries (out of 13), compared to a third of
competing needs, from improving education to developing OECD countries. On the contrary, a larger proportion of
new infrastructure. OECD countries than of LAC countries are responsible for
producing complementary budgets.
The location of the CBA affects the amount of
co-ordination required to consolidate the budget. The Methodology and definitions
majority of LAC (84%) countries have located the CBA within
the Ministry of Finance and/or Economics. It is commonly Data come from the 2018 OECD/IDB Survey of Budget
located in one specific office or department of the ministry, Practices and Procedures, to which 11 LAC countries
usually the budget department as, for example, in Argentina, responded. Respondents were predominantly senior
Bahamas, Costa Rica and Peru. In Uruguay, the CBA budget officials in LAC countries. Responses represent
functions are split between the Ministry of finance and the countries’ self-assessments of current practices
the national planning ministry/department. In both cases, and procedures. Data refer only to central/federal
the planning ministry/department is in charge of assessing governments and exclude the sub-national level.
and deciding on investment projects to be included in the
budget. In 2018, in the case of Brazil, the budget was entirely A CBA is a public entity, or several coordinated
managed by a CBA located in the Ministry of Planning, entities, located at the central/national/federal level
Budget and Management that coordinates for some aspects of government, which is responsible for budget
(e.g. directives) with the Ministry of Finance. formulation and oversight. In many countries,
the CBA is often part of a division or unit found
The head of the CBA is often the person responsible within the Ministry of Finance/Economy. Specific
for preparing the government’s budget and for interacting responsibilities vary by country, but generally, the
with other spending units. In most (62%) of LAC countries, CBA is responsible for formulating budget proposals,
the head of the CBA is a political appointee, understood conducting budget negotiations with line ministries
as a government official who generally does not remain and agencies, allocating or reallocating funds,
in the position when there is a change in government. ensuring compliance with the budget laws and, at
Nonetheless, in Argentina, the Bahamas, Costa Rica, El times, conducting performance evaluations and/or
Salvador and Paraguay, the head of the CBA is a civil servant efficiency reviews. While this authority may monitor
who could expect to remain in the position when there is budget execution, it may not necessarily undertake
a change in government. the treasury function of disbursing public funds.
Lastly, a very important role of the CBA is monitoring
The responsibilities and authority of the CBA should and maintaining aggregate/national fiscal discipline.
be defined in a way that prevents duplication of tasks or
disputes between the different units involved. The CBA A budget circular is a document/memorandum
has responsibilities at various stages of the budget cycle. issued by the CBA to guide line ministries/
In the majority of the countries, it is largely involved at the agencies in the preparations of their initial budget
time of formulating the budget. In all of the surveyed LAC proposals/budget estimates. A budget circular, for
countries in 2018, the CBA had the exclusive responsibility instance, may contain information or guidance on
of drafting budget circulars, including in Panama whose automatic productivity cuts, medium-term or annual
CBA was not responsible for this in 2013. Similarly, in all expenditure ceilings, etc.
surveyed OECD countries, drafting the budget circular was
the responsibility of the CBA. Developing the executive’s Figure notes
budget proposal is the responsibility of CBA in most OECD
and LAC countries. Determining budget ceilings for line 5.1 In Brazil, from 2019 the budget is entirely managed by a CBA
ministries is also the exclusive responsibility of the CBA located within the Ministry of Economy, which merges the previous
in the majority of both groups of countries. The CBA also Ministries of Finance and Planning Development and Management
conducts negotiations with line ministries in OECD and
in LAC countries, although in the Dominican Republic, El 5.3 Data for Bahamas and for Uruguay for 2013 are not available.
Salvador and Guatemala this responsibility is shared (in the More categories are available online. In Brazil, the ceilings are
last two, with the Presidency). discussed and approved by a collegial body: Junta de Execução
Orçamentária (Execution Budget Committee), regulated by a 2019
At the time of executing the budget, the CBA had decree, and primarily in charge of advising the president on fiscal
the exclusive competence over authorising outlays in policy matters.
ten LAC countries (including the Dominican Republic
88 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
5.1. Institutional setting and characteristics of the Central Budget Authority
5.1. Location of the central budget authority function, 5.2. Position of the head of the central budget
2018 authority, 2018
PRY Split between
PER two or more
PANDOM Ministries/ Career PRY PAN CHL
Ministry of MEX CRI URY Agencies (8%) civil servant CRI SLV DOM
Finance/ CHL SLV BRA Other (8%)
Economy GTM URYARG(38%)
(84%) PER
BHS GTM Political
BRABHSARG MEX appointee
(62%)
Source: OECD/IDB (2018) Survey of Budget Practices and Procedures. Source: OECD/IDB (2018) Survey of Budget Practices and Procedures.
12 https://doi.org/10.1787/888934091828 12 https://doi.org/10.1787/888934091847
5.3. Responsibilities of the central budget authority, 2013 and 2018
Drafting budget Developing executive Determining ceilings Negotiating with line Authorisation of line Monitoring Producing
circular performance of line supplementary
Country budget proposal for line ministries ministries ministries outlays
ministries budgets
Argentina
Bahamas 2018 2013 2018 2013 2018 2013 2018 2013 2018 2013 2018 2013 2018 2013
Brazil
Chile ●● ● º ● º ● º ● º ●● ºº
Costa Rica ●… ●… ●… ●… ●… ●… ●…
Dominican Republic ●● ●●●●●●● º º º ●●
El Salvador ●● ●●● º ●●●●● º ●●
Guatemala ●● ●●●●●●●● º ● ●●
Mexico ●● º ●❍● º ● º ● ●● º●
Panama ●● ●● ●● º º ●❍ º º ●●
Paraguay ●● ●●●● º ●❍º º º º●
Peru ●● ●●●●●●●●● º ●●
Uruguay ●❍ ●● ●● ●●● ●● ●●
●● ●●●●● º ●●● º º
LAC total ●● ●● ●● ●● ●❍●● ●●
● Sole responsibility of the CBA ●… ●… ●… ●…… º … …
º Shared responsibility between
the CBA and other institutions 12 10 12 9 10 8 9 6 8 5
❍ Not a responsibility of the CBA 13 10 89
Not applicable 11 02 33 13 56
00 32
OECD total 00 10 00 12 00
● Sole responsibility of the CBA 01 00 00 00 20 00 00
º Shared responsibility between 00 20
the CBA and other institutions
❍ Not a responsibility of the CBA 30 26 23 26 16 11 29
Not applicable
3 6 5 6 6 18 3
0 0 3 2 10 4 1
1230211
Source: OECD/IDB (2013, 2018) Survey of Budget Practices and Procedures, OECD (2018) Survey of Budget Practices and Procedures.
12 https://doi.org/10.1787/888934091866
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 89
5.2. FISCAL RULES
Fiscal rules set the passage for a country’s OECD countries is proposing corrective measures to the
responsible fiscal policy. Over the last years, LAC countries Legislature. In LAC, this is also the case in the Bahamas and
implemented fiscal responsibility laws in order to improve Panama. Brazil imposes automatic corrective measures
the sustainability and transparency of fiscal policy and once a fiscal rule has been violated. Currently, Argentina,
to increase economic growth. Fiscal rules are meant to Chile and Costa Rica reported not having enforcement
be observable and permanent, irrespective of changes in mechanisms in place.
government; hence they can help prioritise a predictable
track for government policy and keep public debt at healthy Methodology and definitions
levels.
Data come from the 2018 OECD/IDB Survey of Budget
Fiscal rules act as a commitment mechanism to Practices and Procedures to which 11 LAC countries
constrain excessive deficit accumulation arising from responded and 2018 OECD Survey of Budget Practices
distorted political incentives; nonetheless, strict rules might and Procedures, which collected data for Chile and
reduce the scope for adjusting policy to unexpected shocks. Mexico. Data for the OECD refer to 34 respondent
Recent research (Ardanaz et. al., 2019) found that flexible countries. Respondents were predominantly senior
fiscal rules can contribute to reduce procyclical biases budget officials in LAC countries and OECD member
against public investment, which is generally the most countries. Responses represent the countries’ self-
affected type of spending in periods of fiscal adjustment. assessments of current practices and procedures.
Data refer only to central/federal governments and
The vast majority of LAC countries have budget balance exclude the sub-national level.
rules, which can be in terms of nominal and primary budget
balance, structural balance and golden rule. More countries A fiscal rule is a permanent, long-term restriction
than in 2013 have such rules. Out of the surveyed countries, on fiscal policy aggregates. The majority of fiscal rules
only the Bahamas and Uruguay do not have any type of are based on international treaties, constitutional
fiscal rules for budget balance in place, and Argentina has decrees, or primary legislation. In exceptional cases,
a political commitment to have primary budget balance fiscal rules can be based on political commitments.
rules in place. While the headline/nominal balance rule is However, the commitment must be solid and involve
the most common in LAC, structural or cyclical balance is all relevant actors in the long run. In sum, the fiscal
the most common one among OECD countries. rule is meant to be applied on a permanent basis by
subsequent administrations. This is distinct from a
In LAC, debt rules are sanctioned in the majority of the “fiscal objective”, which is a target that is not legally
countries, although only in 4 out of 13 are they sanctioned binding but mandated through political decision or
by law. By contrast a majority of OECD countries sanction established custom and practice.
them by law (i.e. debt ceiling in a level or as a percentage
of GDP, debt target in level or as a percentage of GDP and A golden rule is a variation of a balance rule, in
debt reduction target). Debt rules have been sanctioned which the government is only allowed to borrow to
by law in El Salvador, Mexico, Panama and Peru. Paraguay, finance investments. The rationale underlying the
which did not have any debt rules in 2013, established golden rule is that investments represent future and
debt ceilings. not current consumption and have the potential to
generate future growth.
A large proportion of LAC countries have established
expenditure rules in order to limit the size of the government Further reading
since 2013. Expenditure ceilings are more common than
expenditure growth rates (the opposite of the OECD). Ardanaz, M., E. Cavallo, A. Izquierdo and J. Puig
Fiscal rules on revenue are less popular in LAC (as well as (2019), Growth-Friendly Fiscal Rules?: Safeguarding
among OECD countries). Costa Rica, Mexico and Paraguay Public Investment from Budget Cuts through Fiscal
have rules, grounded in laws, for upper limits on revenue, Rule Design, Inter-American Development Bank
and Brazil, Mexico and Paraguay also set constraints on http://dx.doi.org/10.18235/0001804
allocation of higher than expected revenues. Brazil and
Paraguay did not have such rules in place in 2013. Since Fall, F., et al. (2015), “Prudent debt targets and fiscal
2016, Peru has a rule stating that current expenditures frameworks”, OECD Economic Policy Papers, No. 15, OECD
cannot exceed current revenues. Publishing, Paris, https://doi.org/10.1787/5jrxtjmmt9f7-en.
For compliance to take place, some countries have Figure notes
enforcement mechanisms defining the procedures to
follow in the event of a deviation from the rule. El Salvador, Data for Bahamas and for Uruguay for 2013 are not available.
Panama, Paraguay and Peru enforce corrective measures to
be implemented by the entity responsible for the overrun. 5.6. (Types and legal foundation of fiscal rules, 2013 and 2018) is available
The Bahamas, Mexico and Panama set up a requirement to on line in Annex F.
explain the reasons for non-compliance to the Legislature.
The most common enforcement mechanism among
90 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
5.2. Fiscal rules
5.4. Types and legal foundation of fiscal rules by rule, 2018
Budget balance (deficit/surplus) Debt Expenditure Revenue
Country Headline/ Primary Structural/ “Golden Debt ceiling in Debt target in Debt Expenditure Expenditure Constraints on
nominal budget cyclical rule” a level or as a a level or as a reduction level/ceiling growth rate Upper limits allocation of higher
Argentina budget balance budget percentage of percentage of on revenue than expected
Bahamas balance balance target
Brazil GDP GDP revenues
Chile
Costa Rica x ❍xx x xx xx x x
Dominican Republic x x xx x xx xx x x
El Salvador ❍ ❍❍
Guatemala x xx ❍ x
Mexico x x x ❍ x
Panama x xx x xx x x x
Paraguay xx x
Peru x ❍
Uruguay xx x
x x x
LAC total x xx x
Legal Basis x
Internal rules/policy
❍ Political commitment x xx xx ❍❍ ❍ x
x Not applicable x x xx xx x
x xx
OECD total
Legal Basis x x
Internal rules/policy
❍ Political commitment x
Other basis
x Not applicable x x
xx x
9 5 42
0 1 10 4 33 73 3 3
0 1 00 3 20 12 0 0
4 6 8 11 1 12 11 2 1
5 78 47 8 9
20 14 14 11
20 6 22 1 0 30 16 18 6 0
2 2 20 0 63 1
6 0 31 0 11 23 1 0
0 1 10 14 11 16 22
7 25 6 32 32 2
00 0
13 11 25
Source: OECD/IDB (2018) Survey of Budget Practices and Procedures, OECD (2018) Survey of Budget Practices and Procedures.
12 https://doi.org/10.1787/888934091885
5.5. Enforcement mechanisms for fiscal rules, 2013 and 2018
Country Corrective measures Requirement to propose Requirement to explain the Automatic corrective measures No enforcement procedures
implemented by the entity corrective measures to the reasons for non-compliance to (e.g.sanctions) defined ex ante
Argentina responsible for the overrun
Bahamas Legislature the Legislature
Brazil
Chile X
Costa Rica X
El Salvador X
Mexico X
Panama
Paraguay
Peru X
X
LAC total
2018 X
X 2013 1 3
0 1
OECD total 2
2018 4 3
3
3
0
9 18 14 5 7
Source: OECD/IDB (2018) Survey of Budget Practices and Procedures, OECD (2018) Survey of Budget Practices and Procedures.
12 https://doi.org/10.1787/888934091904
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 91
5.3. MEDIUM TERM EXPENDITURE FRAMEWORKS
Maintaining economic and fiscal stability is a In 2017, Brazil, the country with the highest score in LAC
constant challenge for all countries in LAC, which requires (0.74), established a solid fiscal rule that limits the growth of
strengthening the fiscal framework and budget institutions. government expenditures to the rate of inflation in order to
Medium Term Expenditure Frameworks (MTEFs) are a tool restore fiscal balance after the recession. Since 2013, Panama
for linking the budgetary process to broad fiscal policy goals and Paraguay have established medium-term rules.
beyond the annual budgetary cycle. MTEFs allow authorities
to establish multi-year budget estimates or ceilings, and/ Methodology and definitions
or detailed expenditure plans, which could typically have
a span of three to five years. Such framework supports Data come from the 2018 OECD/IDB Survey of
governments in making good macroeconomic projections, Budget Practices and Procedures to which 11 LAC
setting spending limits -taking into account indebtedness countries responded and the 2018 OECD Survey of
and future income-, and in general, understanding the Budget Practices and Procedures, which collected
consequences of fiscal decisions. data for Chile and Mexico. Data for the OECD refer
to 34 respondent countries. Respondents were
A well designed MTEF would result in credible and predominantly senior budget officials in LAC countries
predictable annual budgets, provide relatively accurate and OECD member countries. Responses represent
medium-term macroeconomic projections and allow the countries’ self-assessments of current practices
understanding the source and size of fiscal challenges, the and procedures. Data refer only to central/federal
multi-year impact of new income and expenditure policy governments and exclude the sub-national level.
proposals before being adopted and provide early warnings
about the sustainability of ongoing policies. An MTEF is defined as a framework for integrating
fiscal policy and budgeting over the medium-term
A major challenge for the implementation of MTEFs (typically over a three to five-year period). In general
is ensuring that expenditure estimates and ceilings are terms, this involves systematic linkages between
based on high-quality projections. There must also be (a) aggregate fiscal forecasting, (b) maintaining
active coordination with line ministries and subnational detailed medium-term budget estimates reflecting
governments, both of which account for large levels of existing government policies, and (c) maintaining
government expenditure. compliance with a normative fiscal framework.
A key objective of an MTEF is to establish multi-year
Eight out of 13 surveyed LAC countries have some form expenditure ceilings which are effective for the
of multi-year budgetary framework. Only Paraguay and purposes of planning and prioritization.
Peru have a law which stipulates both the existence of an
MTEF and budget ceilings. Guatemala has a law stipulating The composite index contains ten variables that
that spending thresholds should not exceed medium term cover information on the existence of a medium-term
estimates; Brazil, Chile, Panama and Uruguay have a law perspective in the budget process, the number of
stipulating that spending thresholds should not exceed years the estimate covers, the types of expenditures
medium term estimates, and the Bahamas has a strategy/ included in the frameworks, the possibility of carrying
policy stipulating the MTEF and/or budget ceilings. From over unused funds from one year to the next year and
2013 to 2018, the Bahamas, Brazil, Panama and Peru have how those funds are monitored. Annex A describes the
established MTEFs. By contrast, the majority of OECD methodology used to construct this index, including
countries have an MTEF in place. the specific weights assigned to each variable.
The length of expenditure ceilings usually ranges Further reading
from three to five years, except for Brazil, which is the only
country in LAC that has a ceiling of six years or more; and IDB (2018), Better spending for better lives, Inter-American
the Bahamas, which has the shortest ceiling of only two Development Bank, Washington, DC http://dx.doi.
years, covering different expenditure levels. Out of these org/10.18235/0001217-en
countries, the Bahamas, Panama, Peru and Uruguay have
targets of expenditure ceilings. Brazil, Paraguay and Uruguay Figure notes
have specific programme expenditures; and Guatemala and
Uruguay have organizational expenditure purposes. Data for the Bahamas and for Uruguay for 2013 are not available.
In LAC countries, having medium-term perspective in 5.8 Bahamas approved a fiscal responsibility bill in 2018 by which it
the budget process is becoming more and more widespread. created a medium-term fiscal framework. In Panama the fiscal law
For this reason, the average score increased from 0.50 in 2013 was sanctioned in 2008, but the MTEF was put into practice in
to 0.63 in 2019 (on a scale from 0 to 1, where 1 is the highest 2014. A score of 0 means that the country does not have an MTEF.
score). This change is attributed to the recognition that
medium-term planning contributes to foresee the general
direction of policy and increase the predictability of financial
flows. Still, the mean is below the OECD average (0.75).
92 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
5.3. Medium Term Expenditure Frameworks
5.7. Medium Term perspective in the budget process at the central level of government, 2013 and 2018
Country Existence and legal Length of ceilings Targets of Programme Organizational
basis of MTEF (including upcoming expenditure or sector expenditures
Argentina
Bahamas fiscal year) ceilings expenditures
Brazil 2018 2013 2018 2013
Chile 2018 2013 2018 2013 2018 2013
Costa Rica x x x
Dominican Republic x x
El Salvador x
Guatemala ❍ 2 years x
Mexico x
Panama 6 years or more x x x x
Paraguay x x
Peru ❍ 4 years 3 years x
Uruguay x
x x x
LAC total x x
● Yes, in a law which stipulates both the existence of a MTEF and budget x x x x
ceilings x
Yes, in a law stipulating the creation of a MTEF which should be based on x x
budget ceilings
Yes, in a law stipulating that spending thresholds should not exceed medium 5 years 3 years
term estimates
❍ Yes, in a strategy/policy stipulating the MTEF and/or budget ceilings ● x 5 years
No
x Not applicable (e.g. No MTEF in place) 5 years x x
OECD total ●❍ 3 years 2 years xx
● Yes, in a law which stipulates both the existence of a MTEF and budget
ceilings ● 4 years x
Yes, in a law stipulating the creation of a MTEF which should be based on
budget ceilings 5 years
Yes, in a law stipulating that spending thresholds should not exceed medium
term estimates 21
❍ Yes, in a strategy/policy stipulating the MTEF and/or budget ceilings
No 21
x Not applicable (e.g. No MTEF in place)
30
12
57
2
12
10
3
4
3
Source: OECD/IDB (2013, 2018) Survey of Budget Practices and Procedures, OECD (2018) Survey of Budget Practices and Procedures.
12 https://doi.org/10.1787/888934091923
5.8. Use of a medium-term perspective in the budget process, 2013 and 2018
2013 2018 LAC (2018) OECD (2018)
1.0
0.9
0.8
0.7 0.74
0.71
0.6 0.69
0.67
0.5 0.43
0.60
0.4 0.59
0.58
0.3 0.57
0.41
0.43
0.56
0.2
0.1
00 0 0 00 0 0 0
BRA PAN URY CHL BHS PER GTM PRY CRI SLV ARG DOM MEX
Source: OECD/IDB (2013, 2018) Survey of Budget Practices and Procedures, OECD (2018) Survey of Budget Practices and Procedures.
12 https://doi.org/10.1787/888934091942
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 93
5.4. BUDGET FLEXIBILITY
The budget provides the financial framework that without a threshold but requiring approval. All of these
dictates the limits within the management of operations now allow cuts without a threshold and without approval.
of public institutions. Delegating authority to managers on Additionally, El Salvador did not allow for any cuts in
their fund allocations within their own budgets could lead 2013 and now allows them up to a certain threshold with
to more effective spending as local heads may be in the approval. Only Chile and Mexico became stricter, since they
best position to choose the most important mix of inputs allowed cuts without a threshold nor approval in 2013.
to carry out institutional objectives. Among OECD countries, 18 out of 34 allow for cuts without
a threshold and without requiring approval and only 6 do
On the other hand, excessive budget flexibility could not allow any cuts.
lead to a misuse of public resources and is against a budget
for results approach. Specially in low and middle-income For investment spending, a similar picture can be
countries, sub-limits on lump sum appropriations serve to observed for both OECD and LAC countries: only three LAC
align expenditures and revenues while making sure that countries (El Salvador, Mexico and Panama) do not allow
resources are not disproportionately allocated to one type of for cuts, while the rest allow the same flexibility as for
expenditure. In 2018, among countries with available data, operational spending. Only seven OECD countries do not
Brazil, the Dominican Republic, Panama and Peru imposed allow them, while the rest allow the same flexibility. In
sub-limits to lump sum appropriations. Such sub-limits can 2013, fewer LAC countries allowed for cuts on investment
be on wages or capital spending, among others. In Brazil, spending than cuts on operational spending, probably due
the number of limits decreased from three or more in 2013 to the bias against investment spending in times of fiscal
to one in 2018; similarly, in Panama they were reduced from adjustment.
two to one and in Paraguay they were eliminated. On the
contrary, Peru increased the sub-limits. Methodology and definitions
A budget carry-over is the ability of line ministries to Data come from the 2018 OECD/IDB Survey of Budget
transfer unused funds or appropriations from one fiscal year Practices and Procedures to which 11 LAC countries
to the next. This form of spending allows ministries to use responded and 2018 OECD Survey of Budget Practices
previous budget appropriations for their undertakings the and Procedures, which collected data for Chile and
following fiscal year. Carry-overs are not common in LAC. Mexico. Data for the OECD refer to 34 respondent
Only four out of thirteen countries (Bahamas, Brazil, Chile countries. Respondents were predominantly senior
and Peru) allowed them. Brazil allowed carry-overs without budget officials in LAC countries and OECD member
thresholds in 2013, but in 2018 it imposed thresholds. countries. Responses represent the countries’ self-
Additionally, in 2019, Mexico sanctioned an austerity law assessments of current practices and procedures.
by which all savings should be allocated to priority federal Data refer only to central/federal governments and
government programmes. By contrast, in 2018, around exclude the sub-national level.
half of OECD countries allowed for carry-overs without
a threshold for operating expenditure and/or investment Budget flexibility refers to the possibility to carry
expenditure, and around another third allowed them up to over funds to the use of an unspent appropriation
a certain threshold. beyond the time period of which it was originally
granted. This allows for spending agencies to transfer
Most LAC countries do not allow line ministries to unspent resources of the previous fiscal year to the
borrow against future appropriations in 2018; with the current year’s budget allocation.
exception of Peru for investment expenditures up to
a certain threshold. Similarly, very few OECD member Further reading
countries allow line ministries to do so. In 2018, this practice
took place in three countries for operational spending and Marcel M., M. Guzman and M. Sangines (2014), Presupuestos
four countries for investment spending both up to a certain para el desarrollo en América Latina, Interamerican
threshold. Development Bank, Washington, DC.
LAC countries are allowing more flexibility than Figure notes
before for the Executive to cut spending or redistribute
resources once the budget is approved by the Legislature. Data for Bahamas and for Uruguay for 2013 are not available.
For operational spending, in 2018, all LAC countries except
Mexico and Panama allowed the executive to perform such 5.9: Bahamas and Uruguay assign detailed operating expenditures to
cuts. Ten countries allowed the executive to redistribute line ministries.
spending without a threshold. The majority of these did
not allow such flexibility in 2013: Guatemala and Paraguay 5.10: Countries with an asterisk (*) responded to only one round of the
did not allow any cuts by the Executive, Argentina allowed survey. In Brazil, from 2019, parliamentary approval is required for
them only up to a certain threshold requiring approval, making transfers between categories of spending.
and Costa Rica and the Dominican Republic allowed them
94 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
5.4. Budget Flexibility
5.9. Ability of line ministries to carry over unused funds and borrow against future appropriations,
2013 and 2018
Country Number of sub-limits Ability of line ministries to carry over unused funds or Ability of line ministries to borrow against future
on line ministries’ lump appropriations from one year to the next appropriations
sum appropriations Operating expenditure Investment expenditure Operating expenditure Investment expenditure
2018 2013 2018 2013 2018 2013 2018 2013 2018 2013
Argentina 2
Bahamas
Brazil NA
Chile
Costa Rica 1 3 or more ● ●
Dominican Republic
El Salvador 3 or more ● ●
Guatemala
Mexico 02
Panama
Paraguay 20
Peru
Uruguay 00
00
3 or more
12
01
31
NA
LAC total 11 11 00 00
● Yes, without threshold 33 31 00 10
Yes, up to certain threshold 9 7 9 9 13 11 12 11
No, not permitted
OECD total
● Yes, without threshold 16 19 0 0
Yes, up to certain threshold 11 9 3 4
No, not permitted 7 6 31 30
Source: OECD/IDB (2013, 2018) Survey of Budget Practices and Procedures, OECD (2018) Survey of Budget Practices and Procedures.
12 https://doi.org/10.1787/888934091961
5.10. Authority of the Executive to cut/cancel/rescind spending once the budget has been approved
by the Legislature, 2013 and 2018
Not permitted (NP) Upto a threshold requiring approval (UTRA)
Up to a threshold without approval, but above approval is required (UTWA) Without a threshold but requiring approval (WTRA)
% Without a threshold and without requiring approval (WTWA)
100 SLV SLV SLV
PAN PRY PAN PRY
PER MEX PER
90 MEX PAN BRA PAN
80 SLV PER HTI*
CHL GTM
70 BRA HTI* URY* DOM
PER GTM PRY CRI
ARG GTM ARG
60 CHL ECU DOM BRA
CRI JAM*
50 URY* BRA BHS* HND*
HND* ARG ECU
40 PRY DOM CHL
GTM CRI 2018 BRB*
BRB* MEX
30 DOM COL*
2013
20 CRI MEX
JAM*
10 BHS* COL*
0 ARG CHL
2018 2013
Operational Spending Investment spending
Source: OECD/IDB (2013, 2018) Survey of Budget Practices and Procedures, OECD (2018) Survey of Budget Practices and Procedures.
12 https://doi.org/10.1787/888934091980
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 95
5.5. COMPLEMENTARY BUDGETS AND RESERVE FUNDS
Formulating the budget implies consultation and have contingency reserves for unforeseen expenditures
negotiation with line ministries and other spending units (such as natural disasters). Additionally, Argentina, Peru
as well as obtaining parliamentary approval. The central and Uruguay have contingency reserves for foreseen
budget authority consolidates a budget proposal that reflects expenditures (such as new policies) and Argentina, Brazil
policy priorities and existing financial commitments. Chile and Mexico have counter-cyclical stabilisation funds.
Unanticipated circumstances (e.g. natural disasters, Chile is the only country that has long-term reserve funds.
unexpected legal obligations) can alter the planned budget. The Bahamas does not have a reserve fund, but since 2018,
the government has at its disposal a contingent credit line
An instrument to react to unanticipated circumstances from multilateral banking in case of natural disasters.
are complementary budgets and reserve funds. The
frequent approval of complementary budgets may reflect Methodology and definitions
poor budget preparation procedures, inappropriate costing
of programmes, macroeconomics shocks, wrong forecast or Data come from the 2018 OECD/IDB Survey of
governmental failure to adhere to announced budgetary Budget Practices and Procedures to which 11 LAC
policies. Yet, the opposite case does not necessarily imply countries responded and the 2018 OECD Survey of
strict adherence to budgetary discipline as it could result Budget Practices and Procedures, which collected
from a process that is too flexible or from upwardly biased data for Chile and Mexico. Data for the OECD refer
budget allocations that allow circumventing the limits. to 34 respondent countries. Respondents were
predominantly senior budget officials in LAC countries
Between 2010 and 2017, Argentina, Brazil, Costa Rica, and OECD member countries. Responses represent
Dominican Republic, El Salvador, Paraguay and Peru approved the countries’ self-assessments of current practices
complementary budgets every fiscal year. Guatemala and procedures. Data refer only to central/federal
approved complementary budgets every year, except 2013; governments and exclude the sub-national level.
and in Panama, complementary budgets were approved in
2012, 2014, 2016 and 2017. The main reason for approving A complementary or supplementary budget
complementary budgets between 2014 and 2017 in Argentina contains proposed amendments to the main
and El Salvador were changing economic circumstances; in annual budget. This is the mechanism with which
Brazil, modifications were made to transfer funds between the government seeks legislative approval for
appropriations; in the Dominican Republic and Paraguay, spending that differs from the original budget and
emergency needs were the main drivers; while in Panama appropriations. Supplementary budgets are given
the increase in estimates of mandatory spending was the legal force through adjustment or supplementary
main reason. appropriations.
No complementary budgets were approved in the A reserve fund, also called contingency reserve
Bahamas, Chile, Mexico and Uruguay. In the Bahamas, fund, is a separate fund or a budget provision set aside
improper planning processes (such as budgeting for salaries to meet unforeseen and unavoidable requirements
of personnel that went into retirement due to having that may arise during the budget year, like natural
outdated registers) lead to over-budgeting and under- disasters or armed conflicts.
spending. In the case of Mexico, there could be overspending
(for instance, in 2013 there was an overspending of 6.3% Further reading
in comparison to the approved budget). However, it could
take place without resorting to complementary budgets, Vammalle, C. and A. Ruiz Rivadeneira (2019), “Budgeting
as current regulations only require the approval by the in Uruguay: Towards modern budgeting practices in
Ministry of Finance in specific cases, such as when they Uruguay”, OECD Journal on Budgeting, Vol. 19/1, OECD
affect the primary and financial balance of the spending Publishing, Paris, https://doi.org/10.1787/4ff4bfce-en
entity or when funds for investment are used for current
expenditures. Figure notes
Uruguay is a special case as it has a five-year budget. 5.11. Data were corrected since the Government at a Glance: Latin America
Every time a new government takes office after the and Caribbean 2017 for Panama for 2012, and for Paraguay for 2010,
elections, a budget has to be approved for the whole term. 2011 and 2012, new evidence showed that the countries had approved
Modifications can only occur once a year at the time of complementary budgets for such years. Bahamas and Uruguay
reporting (generally increasing the ceilings). responded only to one round of the survey.
Reserve funds grant budgetary flexibility to 5.12 Data for Chile, Guatemala and Mexico are not available.
governments to resolve contingency expenditures. Results
show that, according to the survey responses, 83% of LAC 5.13 Data for the Dominican Republic are not available. The Brazilian
countries have established such funds, slightly less than Sovereign Fund (Fundo Soberano) ceased existing in 2019.
in the OECD (91% of countries). Argentina, Brazil, Costa
Rica, El Salvador, Guatemala, Panama, Peru and Uruguay
96 Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020
5.5. Complementary budgets and reserve funds
5.11. Approval of complementary budgets, fiscal years 2010 through 2017
2010 2011 2012 2013 2014 2015 2016 2017
Number of years in which complementary budgets were approved
9
8
7
6
5
4
3
2
1
0
ARG BRA CRI DOM PER PRY SLV GTM PAN BHS CHL MEX URY
12 https://doi.org/10.1787/888934091999
Source: OECD/IDB (2018, 2013) Survey of Budget Practices and Procedures.
5.12. Main reason to approve complementary budget 5.13. Existence of reserve funds,
between 2014 and 2017, 2018 2018
Other Changing economic No
25% forecasts 17%
25% SLV PRY
PER ARG
PRY
DOM ARG
MEX
GTM
CRI BHS
CHL
URY
CRI
PER SLV
Increased
estimates of
Transfer of funds mandatory PAN BRA
from one BRA PAN expenditures Yes
83%
appropriation to 12.25%
another
12.5% Ad-hoc emergency needs
(e.g. natural disasters) 25%
Source: OECD/IDB (2018, 2013) Survey of Budget Practices and Procedures. Source: OECD/IDB (2018) Survey of Budget Practices and Procedures,
12 https://doi.org/10.1787/888934092018 OECD (2018) Survey of Budget Practices and Procedures.
12 https://doi.org/10.1787/888934092037
Government at a Glance: Latin America and the Caribbean 2020 © OECD 2020 97
5.6. EARMARKED FUNDS
Budget earmarks set aside a percentage of government Rica, the Dominican Republic, El Salvador and Peru. In Costa
funds for specific sectors, which can be estimated as a Rica, the law on transfer of competencies to the regions
share of GDP; and are established by the constitution, or has earmarked resources for the regions since 2016. For
by primary or secondary legislation. instance, subnational governments are entitled to at least
1.5% of government budget for building and maintaining
Earmarks cause budget rigidities because of the the road network that connects the cantons.
inability to fund programmes that are in line with new
policy priorities, as opposed to pre-existing ones. This, In 2018, seven countries (Brazil, Costa Rica, El Salvador,
in turn, can contribute to lack of accountability and Panama, Paraguay, Peru and Uruguay) reported having
inefficient use of resources by perpetuating programmes earmarked funds set in the constitution. For example, in
or initiatives that are no longer necessary or that do not Costa Rica, the constitution mandates that the budget for
perform as expected, which, in turn, may be captured by education must be at least 8% of GDP and that at least
interest groups and hamper the development of new and 10% of tax revenues must be transferred to subnational
strategic initiatives. In cases of sudden macroeconomic governments. Primary legislation was the legal basis in
shocks, excessive earmarks compromise macroeconomic seven countries, including Argentina, Brazil, Costa Rica,
stability by reducing the room for manoeuvre to adjust the Dominican Republic, El Salvador, Peru and Uruguay.
fiscal aggregates to changing macroeconomic perspectives, Secondary legislation provides the basis for earmarks in
leading to further indebtedness. Finally, when calculated as Dominican Republic and Panama.
a share of GDP, earmarks contribute to pro-cyclical spending
by increasing expenditures when the overall economy is Methodology and definitions
growing, and decreasing them in times of crisis.
Data come from the 2018 OECD/IDB Survey
From the point of view of line ministries, budget earmarks of Budget Practices and Procedures, to which
increase the predictability of resources in the medium- and 11 LAC countries responded. Respondents were
long-term, giving them greater flexibility to plan annual and predominantly senior budget officials in LAC
multi-annual operations. Earmarks also protect important countries. Responses represent the countries’ self-
social programmes from short-term fluctuations in funding assessments of current practices and procedures.
that may hinder long-term national objectives. Data refer only to central/federal governments and
exclude the sub-national level.
In 2018, all surveyed Latin American and Caribbean
countries had earmarked funds. In Brazil and the Dominican A budget earmark is defined as a pre-assigned
Republic they represent 61-80% of all expenditures; in fund. It is a line item established by law, decree or
Argentina, Costa Rica, Guatemala and Uruguay they constitutional mandate, and is independent of the
represent between 41-60%; in El Salvador and Paraguay 21- executive. It corresponds to revenues from a specific
40% are earmarked; and in the Bahamas only 0-20%. source or other transfers. Earmarks do not correspond
to those expenditures stemming from operational
In terms of sectors, in 2018, seven countries (Argentina, concepts such as payroll value or debt service.
Brazil, Costa Rica, Dominican Republic, Panama, Paraguay
and Peru) have earmarked budget for education. In the Further Reading
Dominican Republic several laws allocate resources to
specific sectors. For example, the Education Law indicates Pessino, C., Izquierdo, A. and Vuletin, G. (2018) Better Spending
that expenditure to education should be the highest for Better Lives: How Latin America and the Caribbean Can
between 16% of total expenditure or 4% of GDP. Another law Do More with Less. IDB Publications, Inter-American
allocates 5% of total expenditure to tertiary education. In Development Bank, Washington D.C.
Peru, the National Agreement establishes that investment
in education should reach 6% of GDP; however, in practice Figure notes
and despite recent increases, it is still below this level and
funding varies depending on macroeconomic conditions Data for Chile and Mexico for 2018 are not available.
and resources available. Five countries (Argentina, Brazil,
Costa Rica, El Salvador and Uruguay) had earmarks for 5.14. Data for Panama are not available. Peru has earmarked funds that
health. In El Salvador, the “Fondo Solidario para la Salud”, vary depending on the performance of macroeconomic variables,
established in 2004 and modified in 2019, earmarks all hence not included in the graph.
resources collected from taxes on harmful products
(e.g. tobacco) for funding the health system. 5.15 and 5.16. Data for Bahamas are not available. Data for Guatemala
for 2018 are not available. Data for Dominican Republic and Uruguay
Six countries also have earmarked transfers to for 2013 are not available.
subnational governments, including Argentina, Brazil, Costa
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