PUBLIC SECTOR REFORM

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R d m
Red de Desarrollo Municipal RE2

• PUBLIC SECTOR REFORM
• Decentralization/Municipal Local Development
• DOING BUSINESS WITH MUNICIPALITIES
• IN
• CENTRAL AMERICA
• José V. Chibbaro
• Municipal Development Group
• Region 2
• Nov2003

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WHY DECENTRALIZATION?

• Decentralization began in the 1980s in many
  developing countries around the world.
• WHY among others reasons, to devolve Central
  Government functions to subnational
  jurisdictions.
• WHY partly in response to political pressures
  for subnational autonomy, but also to deliver
  public services more efficiently.
• Argument decentralization improves governance
  and public service delivery by increasing
• Allocative efficiency (better match of public
  service to local preferences)
• Productive efficiency (assumes increased
  accountability of LGs to citizens less
  bureaucracy and better knowledge of local costs)

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LEVEL OF DECENTRALIZATION IN LA( Ratio
subnational expenditures/public expenditures)

• Less than 10
• Ecuador (7.5)
• TT (7.2)
• El Salvador (6.2)
• Nicaragua (5.2)
• Panama (3.2)
• DR (2.9)
• Costa Rica (2.3)

• More than 20
• Argentina (49.3)
• Brazil (45.6)
• Colombia (39.0)
• Mexico (25.4)
• Bolivia (26.7)
• Venezuela (19.6)

• Between 10-20
• Uruguay (14.2)
• Chile (13.6)
• Honduras (12.3)
• Peru (10.5)
• Guatemala (10.3)

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IDB SUPPORT TO SUBNATIONAL DEVELOPMENT

• Approx. 13 (more than US17.5 billion) of the
  IDB loan portfolio supports subnational
  development.
• Loans to subnational Governments increased 3X in
  22 years.
• Active pipeline by year 2002 consisted of 79
  projects for a total of more than US8.3
  billion.
• Sectors at subnational levels municipal dev.
  25 state or province dev. 16 sewerage 33
  infrastructure 23, other 3.

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Decentralization in RE2

• A recent phenomena.
• Associated with the regions democratic form of
  government in the last two decades.
• Product of consolidation of democratic
  institutions at both levels national and local.
• Efforts of the Governments to implement a new
  development strategy based on
• the insertion of their economies into
  international markets.
• restructuring of their states to accommodate
  economic and political changes resulting from the
  globalization process.

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Decentralization in RE2

• 9 countries, 1336 municipalities, population of
  51 million
• Guatemala, Nicaragua and Honduras started efforts
  at an earlier stage (1985-90).
• HO and NI both actual governments with strong
  determination for undertaking decentralization
  process.
• Costa Rica, El Salvador Panama a more recent
  development (1995).
• ES process accelerated due to reconstruction
  after earthquakes 2001
• Dominican Republic initiating the process.

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MEXICO A DIFFERENT APPROACH

• Different opportunities and challenges. (32
  States and 2428 municipalities)
• Fiscal decentralization started in Mexico in
  1980.
• Decentralization has generated considerable
  expansion of available resources thus, public
  investment capacity is also expanding. (Approx.
  25 billion/yr of public investment executed by
  subnational level)
• 2000-03 more than 2 billion bonds issued by
  subnat. Govs.
• 29 of 32 States certified by international credit
  rating agencies

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STRENGTHENING SUBNATIONAL GOVS. CAPACITY

• Improvement of financial conditions and
  management.
• Client (citizens) oriented approach (internal
  structure, processing, systems, human resources,
  etc).
• Improvement of local development planning
  capacity (strategic and participative planning
  process, investments priority).
• Extension of environmental and natural resource
  management.
• Modernization of public service management.
• Strengthening authorities at subnational level to
  better respond to increasing challenges and
  opportunities related to LED, poverty reduction,
  regulatory role for local service supply, etc.

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FINANCIAL MECHANISMS

• Condition Good subnational Government
  performance requires access to sufficient
  resources, based on severe credit and financial
  discipline.
• IDBs assistance
• Technical Assistance to build foundations
  (systems) for a better credit discipline.
• Loans to Subnational Governments (with sovereign
  guarantee provided by Central Gov.)
• Facility for improving creditworthiness (improve
  financial autonomy with Banks loans and access
  to financial markets (graduated). Promote private
  sector participation in infrastructure and
  service provision. Other financial instruments
  based on local private financial market
  conditions.)

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IDB INSTRUMENTS

• Policy dialogue and programming process and
  documents.
• Sectoral studies (urban development strategy,
  local development strategy, etc).
• Loans for specific programs and projects
• Investment for services and infrastructure of
  subnational competence.
• Public Sector or State reform programs.
• Support for policy or structural reforms.
• Multiple works.
• Projects for innovation.
• Non reimbursable Technical Cooperations (more
  than 40 trust funds available).

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TYPES OF PROGRAMS

• Specific city project ( integral approach of city
  management).
• Secondary cities (group of cities assisted with a
  common financial instrument, loan).
• Support to decentralization process (design and
  implementation of national strategy for
  decentralization, national policy and related
  legal framework, etc).
• Historic patrimony (city historical centers)
  preservation, economic recovery.
• Urban poverty reduction programs.
• Local development programs.
• Local economic development and improvement of
  local competitiveness

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IDB OPERATIONS

TOTAL DEMAND
HOUSING
JUSTICE
ENVIRONMENT
DECENTRALIZATION
URBAN TRANSPORT
INTEGR. URBAN DEVELOP.
COMPETITIVENESS
WATER / SEWERAGE
PUBLIC/CITIZENS SECURITY
MUNICIPAL DEVELOPMENT
INSTITUTIONAL STTRENGTHENING
ADMINISTRATIVE REFORMS
URBAN POVERTY REDUCTION
CITIZENS/CIVIL SOCIETY PARTICIPATION
SHORT TERM MEDIUM / LONG TERM
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BUSINESS OPPORTUNITIES

• Under the scope of the different areas of
  activity
• Decentralization
• Local development
• Municipal Development
• Urban development
• Rural development

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BUSINESS OPPORTUNITIES

• Private sector and other organizations business
  opportunities cover a wide range of areas for
• Consulting firms
• Research institutes
• Municipal management Institutes and/or Centers
• Universities
• Contractors
• Financial sector (investment banking, risk
  rating, commercial banking)
• Public service operators
• Equipment suppliers
• Investors (development of different economic
  activities in competitive municipalities )
• Information technology and telecommunication
  firms (e-government at local level)
• Others (????) Imagination is the limit

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