Apresentação - Antônio prado en final

ANTONIO PRADO DEPUTY EXECUTIVE SECRETARY

Seminario Internacional Papel do Estado

no Século XXI: Desafíos para a Gestão Pública

Brasilia, 4 September 2015

A new State-market-society

equation for development

in Latin America

and the Caribbean

A new State-market-society equation for development in Latin America and the Caribbean

Antonio Prado

“A new State architecture must be created that will allow the

State to play its rightful role as leader of our countries'

development strategies. By casting a critical eye on its

historical performance, we should be able to define that role,

give the State the proper tools and determine its precise place

in conjunction with the market and the citizens, achieving an

optimum balance of this trilogy in the development dynamic.”

ECLAC (2010) Time for Equality


Antonio Prado

Contents • A crossroads and the complex international

context

• The features of the current

State – market –society (citizenry) equation

• Compacts for equality as a tool for building a new equation

• The new State – market –society (citizenry) equation


Antonio Prado

The region is at a crossroads • The region is facing an economic slowdown after

several boom years

• Not enough was done to increase productivity and reduce equality

• Progress was achieved on the social front, but has come to a standstill and the region still has the world’s worst income distribution and other inequalities

• There are environmental sustainability challenges as regards moving towards low-carbon development paths

• Stable democracies, but new challenges

• Facing variable geometry routes towards integration


Antonio Prado

The region is facing critical restraints External

• Slowing international trade

• End of commodity price supercycle

• Financial volatility • Great vulnerability to

climatic phenomena • Middle-income trap

Endogenous

• Disjointed production structure • Informal, low-productivity employment • Little dynamic efficiency • Economic growth slowing and reliant

on consumption • Investment rates are too low • Stalled poverty reduction • Weak natural resources and

environmental governance • Shortage of good-quality public goods • Weak institutions


Antonio Prado

A more complex context

• The global economy has grown less than expected. Within a year, growth projections for 2015 have been lowered from 3.2% to 2.8%.

• Upturn in growth in the United States (above the initial estimate of 2.8% in 2015) with a positive impact in Mexico, Central America and the Caribbean through remittances, tourism and trade.

• Fiscal disequilibria and lack of competitiveness in the eurozone, with high levels of unemployment and growth of just 1.6% in 2015, are undermining global trade.

• Slowdown in China from 9.2% in 2011, to 7.0% in 2015 with an impact on natural-resources-exporting countries.

• Uncertainty over the timing of interest rate rise in the United States and QE in Europe, which could generate more volatile financial conditions.


Antonio Prado

Latin America and the Caribbean have seen growth slow since 2010

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Preliminary figures.

6,1

7,7

6,0

2,5

2,9

2,3

3,7

2,5

0,5

0,9

0,50

1

2

3

4

5

6

7

8

9

I II III IV I II III IV I II III IV I II III IV I II III IV I

2010 2011 2012 2013 2014 2015ᵃ

Latin America and the Caribbean: year-on-year GDP growth, 2010-2015a

(Percentages, on the basis of constant dollars at 2010 prices)


Antonio Prado

Poverty rates have fallen thanks to policies implemented over the past 10 years, but have stood still

since 2012 Latin America and other world regions:

Gini coefficient, around 2010

0,50

0,45 0,41

0,37 0,34 0,33 0,34

0,00

0,10

0,20

0,30

0,40

0,50

0,60

América Latina y el Caribe

(18)

Asia Oriental y el Pacífico

(10)

Asia Meridional (8)

OCDE (22)

Latin America a/: poverty and indigence, 1990 – 2014 b/

(Percentages of the population)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of data from household surveys conducted in the respective countries. a/ Estimate for 19 countries (including Haiti). b/ Figures for 2014 are projections.

48,4

43,8 43,9 41,9

33,5 29,6 28,1 28,1 28,0

22,6

18,6 19,3

15,3 12,9 11,6 11,3 11,7 12,0

0

10

20

30

40

50

1990 1999 2002 2005 2008 2011 2012 2013 2014

Pobres Indigentes


Antonio Prado

The crossroads calls for the redefinition of the State-market-society (citizens) equation

The past two decades have left lessons for the region in relation to the equation between State, market and society:

• The market is good at production, but bad at distribution. Unregulated, it reproduces structures revolving around activities that are knowledge-unintensive and environmentally inefficient.

• The State can do much, but not everything.

• Society (citizens) demands transparency, voice, participation and democracy.


Antonio Prado

The market in the current State-market-society (citizens) equation


Antonio Prado

The undeniable role of the private sector as the central agent in the market

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Economic Survey 2015. a Public investment includes State enterprises. For Colombia, State enterprises form part of the decentralized sector, which includes public establishments, industrial and commercial enterprises, mixed public-private firms, and autonomous universities.

Latin America (12 countries): proportion of gross fixed capital formation corresponding to public a and private investment, 2013

(Percentages, on the basis of local currency at constant prices)


Antonio Prado

Investment in R&D in the region is lower than in Europe

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Espacios de diálogo y cooperación productiva: el rol de las pymes, 2015.

Latin America European Union


Antonio Prado

0

12500

25000

37500

50000

62500

75000 1

99

1

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

0

5000

10000

15000

20000

25000

30000

The region’s productivity levels are very low

Latin America and the Caribbean and other regions: GDP per employed person, by region, 1991-2012 (Dollars at constant 2005 prices)

Developed economies and European Union

World

Latin America and the Caribbean

South-East Asia and the Pacific

East Asia

Source: ECLAC, on the basis of data from the International Labour Organization (ILO).


Antonio Prado

Latin America (18 countries): GDP per employed person, around 2009

(Thousands of dollars)

Source: ECLAC, Structural Change for Equality: An Integrated Approach to Development, 2012.

Latin America (18 countries): indicators of structural heterogeneity, around 2009 (Percentages)

Structural heterogeneity: the factory of inequality


Antonio Prado

Income distribution before taxes and transfers

Latin America and OECD countries: Gini index

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Panorama Fiscal de América Latina y el Caribe, 2015.

50,7

47,1

0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0

AL-16

Brasil Republica Dominicana

Honduras Chile

Panamá Argentina Colombia

Costa Rica Paraguay

México Perú

Ecuador Nicaragua

Uruguay El Salvador

Venezuela (Bol. Rep. de)

OCDE-25

Irlanda Portugal

Reino Unido Grecia

Estados Unidos Italia

Alemania Francia Austria España

Luxemburgo Bélgica Estonia

Finlandia Polonia

Australia Eslovenia

República Checa Canadá Suecia

República Eslovaca Países Bajos

Noruega Dinamarca

Islandia


Antonio Prado

The State in the current State-market-

society (citizens) equation


Antonio Prado

The State has a key role in correcting the market’s unequal outcomes ex post

Latin America and OECD countries: Gini index before and after taxes and transfers

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Fiscal Panorama of Latin America and the Caribbean 2015. Policy space and dilemmas.

50,7

47,1

-6,1

-37,6

-60,0 -40,0 -20,0 0,0 20,0 40,0 60,0 80,0

AL-16

Brasil Republica Dominicana

Honduras Chile

Panamá Argentina Colombia

Costa Rica Paraguay

México Perú

Ecuador Nicaragua

Uruguay El Salvador

Venezuela (Bol. Rep. de)

OCDE-25

Irlanda Portugal

Reino Unido Grecia

Estados Unidos Italia

Alemania Francia Austria España

Luxemburgo Bélgica Estonia

Finlandia Polonia

Australia Eslovenia

República Checa Canadá Suecia

República Eslovaca Países Bajos

Noruega Dinamarca

Islandia

Variación porcentual Después de impuestos y transferencias Antes de impuestos y transferencias


Antonio Prado

Tax collection is low and poorly implemented in the region

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Fiscal Panorama of Latin America and the Caribbean 2015. Policy space and dilemmas. a Organization for Economic Cooperation and Development.

Selected regions and countries: structure of the tax burden, 2012-2013

(Percentages of GDP)

Low tax burden in most countries

Regressive tax structure

High rates of evasion

Widespread exemptions

Special treatment for capital


Antonio Prado

Several countries have made changes to income tax, mainly to tax capital income

Argentina (2013)

Chile (2014)

Colombia (2012, 2014)

Ecuador (2007, 2014)

El Salvador (2009, 2011)

Guatemala (2012)

Honduras (2010, 2014)

Mexico (2013)

Nicaragua (2012)

Panama (2009-2012)

Paraguay (2012)

Peru (2007, 2012, 2014)

Dominican Republic (2012)

Uruguay (2007, 2012-2013)

Venezuela (Bolivarian Republic of) (2014)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Fiscal Panorama of Latin America and the Caribbean 2015. Policy space and dilemmas.


Antonio Prado

Tax revenues have risen from 16 to 21 GDP points, on average, since 2000, but they are still highly uneven

Tax revenues in Latin America, 2000 and 2013 (Percentages of GDP)

36

31

28 27

22 20 20 19 19 19 19 18 18

16 16 14 14 13

21

34

0

5

10

15

20

25

30

35

40

Bra

sil

Arg

enti

na

Bo

livia

Uru

guay

Co

sta

Ric

a

Ch

ile

Co

lom

bia

Ecu

ado

r

Nic

arag

ua

Méx

ico

Pan

amá

Perú

Ho

nd

ura

s

Para

guay

El S

alva

do

r

Ven

ezu

ela

Rep

. D

om

inic

ana

Gu

atem

ala

AL-

18

OC

DE-

34

2013 2000

Source: Economic Commission for Latin America and the Caribbean (ECLAC).


Antonio Prado

Prevent tax evasion and avoidance and control illicit flows

• Illicit financial flows represent a massive outflow of financial resources from developing economies

• On average, in 2002-2011 illicit financial flows represented twice as much as remittances and 14 times ODA in Latin America and the Caribbean

113,1

84,9

63,7

50,8

7,8

0

20

40

60

80

100

120

140

Flujos Ilícitos Inversión extranjera

directa

Flujos financieros

privados

Remesas ODA

Illicit flows from Latin America and the Caribbean, average for 2002-2011 period (Billions of dollars)


Antonio Prado

There are serious cracks and gaps in the region’s social

protection systems

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of household surveys conducted by the respective countries.

Latin America (14 countries): population living in households with no social security and receiving no pensions or welfare public transfers, by income quintile, 2009

(Percentages)


Antonio Prado

Investment is too weak to drive development

In infrastructure

In research, science and innovation

In development banking: inclusive financing

In environmentally cleaner production matrices

Gross fixed capital formation, 1950-2010 (Percentages of GDP on the basis of dollars at constant 2005 prices)

23,1

18,0 18,5 17,9

20,1

22.9

10

15

20

25

30

35

40

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

América Latina Asia Oriental y el Pacífico

Source: Economic Commision for Latin America and the Caribbean (ECLAC), on the basis of official figures, and World Development Indicators.


Antonio Prado

Persistent shortage of economic infrastructure Electric power generation capacity, 1980-2012

(Megawatts per 1,000 inhabitants)

Source: Economic Commision for Latin America and the Caribbean (ECLAC), Economic Survey 2015.

Density of total road network, 2007 and 2012

(Kilometres per 100 km2)


Antonio Prado

Source: World Bank, http://info.worldbank.org/governance/wgi/index.aspx#reports

The region has a moderate quality of regulation

World: regulatory quality index, 2013


Antonio Prado

Source: World Bank. http://info.worldbank.org/governance/wgi/index.aspx#reports

The region has little confidence in justice and compliance with laws and regulations

World: rule of law index, 2013


Antonio Prado


The region has little control of corruption

World: control of corruption index, 2013


Antonio Prado

Citizens in the current State-market-society (citizens) equation


Antonio Prado

Society (citizens) in the current equation • Demand for transparency, accountability and participation

• Democracy in its three dimensions: social, economic and political

• Society not only as an object of public policies, but demanding participation in policy definition and execution

• Citizens are engaged as bearers of rights of whose fulfilment the State is guarantor

• This is expressed in: open government initiatives, open data, Principle 10, participatory budgeting, the World Charter for the Right to the City, the Montréal Charter of Rights and Responsibilities, and the European Charter for the Safeguarding of Human Rights in the City, among many other participation instruments originating in civil society.


Antonio Prado


The region has lacklustre levels of participation and accountability

World: voice and accountability index, 2013


Antonio Prado

Society (citizens) feeling unrepresented

Source: Latinobarómetro 2015. Q. Do you feel that the government represents you politically? Or the parliament/congress?

Latin America: sense of being represented by the government or parliament/congress, 2015 (Percentages)


Antonio Prado

Compacts for equality as a tool for building a new equation


Antonio Prado

Politics and policymaking: the importance of compacts

• The development crossroads the region has reached calls for revisiting relations between institutions and structures, involving a wide range of agents in the process

• A compact is a political tool for putting into place, within a democratic framework, medium-term institutional policies and reforms with a strategic vision, with less risk that they will be reversed later

• A social compact is necessary at a time of changes in relations between the State, the market and society, with social effervescence and the emergence of new forms of participation

• The citizenry is a party to the compact, as a full bearer of rights, with the State acting as guarantor of those rights


Antonio Prado

Compacts for equality

• New fiscal compacts are badly needed • Trust and reciprocity between the State and citizens • Consolidate public spending with a redistributive impact • Agreements on origin and destination of resources for the State • Transparency and accountability

• Agreements for better governance of natural resources: taking advantage of windfall gains

• Investment in productivity: tradables (manufacturing with innovation) and non-tradables (infrastructure)

• Coordination of macro, industrial, social and environmental policies • Social consultation and consensus-building with accountability


Antonio Prado

Reciprocity as a basis for a fiscal compact: a rights-based approach to improving spending quality

Source: CAF, 2011.

35


Antonio Prado

Fiscal compact, stakeholders and reciprocity: tightening the link with the citizenry

• The CAF survey found that families in Latin America “would pay more tax” if the Government did its job better (www.caf.com/investigacion) – For eliminating corruption: 11.5% would pay more

– For better health and education: 11.5%

– For better public safety: 11.4%

– For more protection for the poor: 9.2%

• Citizens do not like to pay tax, but when they do pay they feel they have more right to demand responses from the authorities – This is the opinion of 72.6% of households in Latin America

• The evidence shows a vicious circle between tax (especially direct tax), accountability, reciprocity and the quality of public spending

http://www.caf.com/investigacion


Antonio Prado

Recasting the industrial architecture

Promote structural change mainstreaming environmental

sustainability

Build new institutions to boost productivity on the basis of explicit

industrial policy

Link low-productivity sectors with those already on the technology

frontier

A comprehensive SME support strategy with inclusive financing that links SMEs with more dynamic sectors

A more prominent role for science and technology

Mechanisms for mediation in socio-environmental conflicts

Land use management and urban planning


Antonio Prado

Good links between social spending and structure help to boost social spending, productivity and equality

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Standardized World Income Inequality Database, version 4.0, September 2013; Organization for Economic Cooperation and Development (OECD), STAN Structural Analysis Database; and World Bank, World Development Indicators.

United States, 38

Australia; 33,4

Canadá; 32

Denmark, 25.2

Finland, 26

Rep. of Ireland, 33.1

New Zealand, 31.7

Sweden, 26.9

Rep. of Korea, 31.1

Singapore, 44.8

Hong Kong (SAR of China), 43.1

Argentina; 44,5

Brazil, 54.7

Chile; 50,1

Colombia; 55,9 Costa Rica; 50,7 Ecuador; 49,3

Mexico, 47.2

Peru, 48.1

Uruguay; 45,3

Venezuela (Bol. Rep. of), 44.8

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0

Lab

ou

r p

rod

uct

ivit

y

Social spending as a percentage of GDP

Labour productivity and social spending as a percentage of GDP, around 1990 and 2010, and inequality around 2010 (Constant dollars at 2005 prices and percentages)


Antonio Prado

A new State-market-society (citizens) equation • The public arena as representing collective interests, not merely

public sector or national level concerns

• Political accords for a new social and intergenerational contract, defining responsibilities, ensuring protection of rights and providing accountability systems

• Establishing a culture of collective development based on tolerance for difference and diversity

• Strategic long-term vision built from within, promoting compacts between industrial stakeholders

– Forums for dialogue between the public and private sectors and public institutions to dovetail business strategies with development objectives

– Institutions and policies are needed to coordinate investment with the local production fabric in sectors that are priorities for industrial modernization plans


Antonio Prado

A new equation needs long-term compacts St

ron

g ro

le f

or

the

Sta

te • Development

strategy

• Fiscal capacity

• Professional management

• Transparency and social participation

Mar

ket

• Regulated

• With proper financing

• Coordination for development strategy

Soci

ety

(cit

ize

ns)

• Stimulus for stronger institutions

• Participation and access to public policies

• Democracy and social and economic policy


Antonio Prado

“The new development paradigm must be made to do

everything possible to build a model of globalization that

breeds greater collective awareness of global public goods,

awakens democracy across the planet by affording a voice to

the most diverse range of actors in the open concert of global

governance, and provides excluded sectors with the tools

needed to close gaps in capacity, citizens' rights and access to

well-being. The new model of globalization must develop

policies with a long-term vision --but start work on them as a

matter of urgency-- in order to remain one step ahead of the

climate, technological, demographic and cultural scenarios

that current trends are now projecting.”

ECLAC (2010) Time for Equality.

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Apresentação - Antônio prado en final

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