FISLAC

Towards Development: Public
Investment in Latin America

From Insight to Impact: Exploring the Dynamics of Public Investment
in Latin America

How much, to whom, and in what do Latam countries invest?

Over the last decade, Public Investment Spending (% GDP) in Latin American and the Caribbean countries has decreased by 0.5pp, reaching a level of 4.45% of GDP in 2022.

How much does Latam spend on public investment?

Evolution of Total Spending in Public Investment

(% of GDP)

Select Groups:

Select Countries:

Source: IMF-WEO. Total public investment expenditure measured as net acquisition of non-financial assets (% GDP)

Total Spending in Public Investment by Country

({chart_2.selectedYear})

Select Indicator:

Select Year:

Visualization type:

By the year {chart_2.selectedYear}, the country with the highest total spending in public investment was {chart_2.data[0]?.country} with {chart_2.data[0]?.value.toFixed(1)} % of GDP% of execution USD, followed by {chart_2.data[1]?.country} ({chart_2.data[1]?.value.toFixed(1)} % of GDP% of execution USD) and {chart_2.data[2]?.country} ({chart_2.data[2]?.value.toFixed(1)} % of GDP% of execution USD).

México

Perú

República Dominicana

Panamá

{item.country}

$ {item.value.toFixed(1)} %

Source: Latin American Public Investment Expenditure Database (BDD-GIPAL)

What does Latam invest in?

Evolution of public investment by functions

(% of execution | 2000 - 2021)

Select group/country:

By the year {chart_3.text_year} in {chart_3.text_selectedGroupOrCountry}, the function of public investment spending with the highest share was {chart_3.text_firstCategory.name} ({chart_3.text_firstCategory.value}%) followed by {chart_3.text_secondCategory.name} ({chart_3.text_secondCategory.value}%) and {chart_3.text_thirdCategory.name} ({chart_3.text_thirdCategory.value}%).

Source: Latin American Public Investment Expenditure Database (BDD-GIPAL)

Who are the investors?

Evolution of public investment by government level

(% of total expenditure | Latam | 2000 - 2021)

Year:

By the year {chart_4.selectedTimeframe} in LAC , the Central Government has an important share of public investment as percentage of total expenditure in multiple countries.

Source: Latin American Public Investment Expenditure Database (BDD-GIPAL)

Evolution of public investment execution levels

Over the last decade, on average in LAC, only US$8 out of every US$10 allocated to public investment spending has been spent

Select function:

Year of reference:

{chart_10.text_lac_decrease_value} pp

{chart_10.text_lac_decrease_increase_text} in execution levels (%) on average in LAC during the last decade ({chart_10.text_selected_years_interval})

Highest increase
in the last decade ({chart_10.text_selected_years_interval})

Highest decrease
in the last decade ({chart_10.text_selected_years_interval})

{chart_10.text_highest_country}
{chart_10.text_highest_country_value} pp

{chart_10.text_lowest_country}
{chart_10.text_lowest_country_value} pp

Countries with highest
execution in {chart_10.selectedYear}

{item.label}

{item.value}%

Select a Peer:

Source: Latin American Public Investment Expenditure Database (BDD-GIPAL)

Why It Is Important To Protect Public Investment?

Public investment has an expansionary effect on economic activity in Latin American countries: For every dollar invested, the return on growth is $1.04 USD

Fiscal Multiplier of Public Investment

For every dollar invested in public investment in Latam,
1.1 USD are returned in output in the second year

Select Peer:

Perú

México

Panamá

{item.country}

{item.t2}

Note: i) 2-Year Cummulative Fiscal Multiplier. ii) Standard errors are: Chile 1.3, Peru 0.8, Colombia 0.3, Argentina 0.8, Nicaragua 0.8, Uruguay 0.7, Ecuador 0.3, Bolivia 0.2, Paraguay 0.4, Costa Rica 0.7, Rep. Dominicana 0.9 and México 0.5.

Note: 2-Year Cummulative Fiscal Multiplier.

Source: Work in progress of Ardanaz, Llempen, Puig and Valencia (Exected in 2023). The impact of public investment on growth in Latin America and the role of efficiency.

Note: The results are read as USD returned for one USD invested in public investment.

Source: Work in progress of Ardanaz, Llempen, Puig and Valencia (Exected in 2023). The impact of public investment on growth in Latin America and the role of efficiency.

Public investment promotes the closing of infrastructure gaps, greater access to public services, and the improvement of citizens' well-being.

Closing Gaps: Effort Needed to Close Infrastructure Investment Gap

According to sustainable development indicators, an average of 2.4% ⁽²⁾ of total investment in infrastructure ⁽³⁾ (% GDP) is needed in order to close the infrastructure gap in the region. To achieve this, an additional effort to 1pp average is needed.

Total Public Investment % GDP in LAC

Only Infrastructure Sectors ⁽¹⁾

Source: Own calculations with data from Latin American Public Investment Expenditure Database (BDD-GIPAL), and website of infrastructure gap in LAC of IDB.
Note 1: Total investment in infrastructure includes transport, energy and other economic activities.
Note 2: Average needed to close the gap includes new investment and asset replacement, excluding maintenance investment.
Note 3: Based on Brichetti et. al. (2021) The Infrastructure Gap in Latin America and the Caribbean: Investment Needed Through 2030 to Meet the Sustainable Development Goals. IDB.

We must all make effort

Select the country to see the additional effort (average needed to close the gap in 2030 minus the average of investment in the last 5 years) per country in infrastructure to reach the average investment needed to close the gap by 2030.

Select country:

Gap closure year
2030

Average Investement (% GDP)
needed to close the gap
{chart_new.average_gap}%

Additional effort per country in infrastructure to reach the average investment needed to close the gap by 2030.

The bars show the difference (pp) between the average investment of the last 5 years and the average investment needed to close the gap.

{item.country}

{item.value}

Note 1: Only countries without missing data for the last 5 years are shown.
Note 2: The total amount of the gap is calculated using the simple average of the last 5 years for new investment and asset replacement, excluding maintenance investment to be consistent with capital spending.

Total Public Investment % GDP in {chart_new.country}

Only Infrastructure Sectors ⁽¹⁾

Closing Gaps: Relationship Between Social Indicators and Public Investment

Function (x-axis):

Social indicator (y-axis):

Year:

Metric:

Overall, {chart_14.axis_y_text} has a {chart_14.text_relationship} with the level of {chart_14.axis_x_text}. {chart_14.text_first_country_good} and {chart_14.text_second_country_good} present a high value of {chart_14.axis_x_text} with high {chart_14.axis_y_text}.

{chart_14.title_chart_text}

{chart_14.text_median_x_axis}

Median of
{chart_14.axis_x_text}

{chart_14.text_median_y_axis}

Median of
{chart_14.axis_y_text}

{chart_14.text_correlation}

Correlation

Notes: This figure only shows the linear relationship between the two dimensions; it should not be taken as a causal effect. Source: Own calculations with data from IMF-WEO, World Bank and BDD-GIPAL

77%

From 2013 to 2021, total investment in LAC has decreased by 77% (0.9 pp of GDP)

Efforts to close the gap of 3.12% of GDP by 2030 according to sustainable development indicators would need to be extortionate and constant (on average 12% or 0.22pp of GDP yearly) in order to change the current trend in the region.

effor

Total public investment in infrastructure (% GDP) in LAC

Note: Infrastructure includes: Transportation, energy and other economic activities.
Source: IDB-Fislac calculations with data from IMF-WEO, and website of infrastructure gap in LAC of IDB.

We must all make effort

Enter the average growth rate and the calculator returns the time it will take to close the infrastructure gap and the average effort per year that must be made.

Growth rate type:

Percentage change (%): Percentage points (pp):

Scenarios of infrastructure

Adjusts the settings of the desired scenario to change the gap value.

Water

Access to water

Access to sanitation

Sewage treatment

Transport

Road

Aerial

Urban

Electromobility

Energy

Access to electricity

Generation and transmission

Connectivity

Access to telcos

Gap Closure Year
{chart_16.year_closing_gap}

Infrastructure gap
{chart_16.gap?.toFixed(2)} % of GDP

Total public investment (% GDP) in Latam

Reference: For more information visit La brecha de infraestructura en América Latina y el Caribe. Brichetti et al. (2021) and Dashboard "La Brecha de la infraestructura en Ameríca Latina y el Caribe"

Source: IDB-Fislac calculations with data from BDD-GIPAL, and website of infrastructure gap in LAC of IDB.

Public Debt vs Public Investment

Notes: Average of 2000-2021. Based on Kostarakos (2021), using the methodology proposed by Chudick and Pesarran (2015).
Source: IDB-Fislac calculations with data from IMF-WEO April 2023 and BDD-GIPAL

Good Management Of Public Investment

Efficiency of public investment: which countries get the best results per dollar invested?

Select function:

Select year:

Visualization type:

The Public Investment Efficiency Score is determined through the Data Envelopment Analysis (DEA) methodology. This score facilitates the ranking of countries based on their efficiency, ranging from the most efficient (which country employs the least resources to generate equivalent output) to the least efficient one.

Total Public Investment Efficiency

(Input vs Output | 2021)

Source: IDB-FISLAC calculations using Latin American Public Investment Expenditure Database (BDD-GIPAL)

Which factors have a greater impact on efficiency?

The areas that weigh most heavily in overall efficiency are: Defense (17%), Education (11.3%) and Health (11.3%). On the other hand, Transportation (5.7%) and Economic Affairs (4.2%) weigh the least.

Source: IDB-FISLAC calculations using Latin American Public Investment Expenditure Database (BDD-GIPAL)

What role does institutionality play in public investment?

Relationship between governance indicators and public investment

(% of execution | LAC | 2000 - 2021)

Good governance is correlated with higher public investment performance. Key factors such as voice and accountability, government effectiveness and control of corruption are highly correlated with better execution. The strengthening of SNIPs is key to improving the efficiency of public investment

24***

Voice and
Accountability

25***

Political
Stability

19**

Government
Effectiveness

Regulatory
Quality

16**

Rule of Law

21***

Control of
Corruption

23***

Average of
all WGI

Voice and Accountability

24***

Political Stability

25***

Government Effectiveness

19**

Regulatory Quality

Rule of Law

16**

Control of Corruption

21***

Average of all WGI

23***

Note: Pearson coefficient of correlation between -100 and 100. (*) means significance at 10%. (**) means significance at 5%. (***) means significance at 1%
Source: Latin American Public Investment Expenditure Database (BDD-GIPAL) and World Governance Indicators (WGI)

Created by: FISLAC by IDB

Data Source: World Economic Forum (WEO) - World Bank - BDD-GIPAL - IDB Infrastructure Gap dataset - Own calculations by FISLAC IDB

Important note: Estimations are only informative and must not be taken as final values for decision-making by the authorities

Towards Development: Public Investment in Latin America

Towards Development: Public
Investment in Latin America