Authorities and Experts Advocate for Improved Public Spending Quality and Transparency in Latin America

Santiago, January 21- Latin American and Caribbean countries registered an average global deficit of 2.4% of GDP in 2013, but their fiscal revenues rose and kept their public debt situation stable, giving them more room to increase investment and social spending, according to a new study by ECLAC released yesterday.

In its Fiscal Panorama of Latin America and the Caribbean 2014 (Spanish only), the organization contends that while public spending increased significantly in the last two decades region-wide-especially on education and health-institutional reforms must be expanded upon to improve the quality and transparency of spending since both are key to achieving a fiscal pact that promotes greater economic growth with equality.

The document was presented today during the first session of the XXVI Regional Seminar on Fiscal Policy, which was inaugurated yesterday by the Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena.

"Forging fiscal pacts that promote equality is essential for a sustainable future," said the United Nations official.

"These pacts must be firmly rooted in broad social agreements and their goals must be clear: to increase tax flows and make them progressive, reduce evasion, and capture more income from natural resources," Bárcena said.

According to the Fiscal Panorama 2014, Latin America's public debt was close to an average 31% of Gross Domestic Product (GDP) in 2013, with nearly equal parts external and domestic debt. A significant decline in interest payments was also registered in the last few years.

The situation is different in Caribbean countries, where public debt is much higher, with an average that surpassed 76% of GDP in 2013.

Meanwhile, the region's fiscal income as a whole increased 0.7% of GDP in 2013.

According to ECLAC, the region's fiscal position is mixed and efforts to consolidate it must be intensified in those countries with financing difficulties. The organization added that in addition to ensuring economic solvency, fiscal policies must also contemplate available income distribution, medium-term growth and sustainable development.

The study shows that although environmental criteria have been incorporated into recent tax reforms, challenges persist, such as devising clear and transparent policies to subsidize fuels and including redistributive considerations in the design of "green" taxes.

In redistributive matters, the Fiscal Panorama shows the limited impact of fiscal policy on taxation systems, since the progressive effect of income taxes tends to be small and is offset by the regressive impact of the value-added tax (VAT).

Regarding transfers, ECLAC's report says that they have a strong effect in countries where pension system coverage is significant, especially in Argentina and Uruguay, and a moderate impact in the rest of the region. Finally, the document shows that increased social spending has been important in the recent improvements of the Gini coefficient-which measures income distribution-at a regional level.

Participants in the inauguration of the XXVI Regional Seminar on Fiscal Policy included Sanjeev Gupta, Deputy Director at the Fiscal Affairs Department of the International Monetary Fund (IMF), and Teresa Ter Minassian, International Consultant and a former Director of the IMF's Fiscal Affairs Department, among others.

The meeting is organized by ECLAC and co-sponsored by the IMF, The World Bank (WB), the Organization for Economic Cooperation and Development (OECD) and the Inter-American Development Bank (IDB), with the support of Germany's Federal Ministry for Economic Cooperation and Development.

The seminar will last until Tuesday, January 21, and will be complemented by the Public Finances Workshop 2014, which will be held on Wednesday, January 22, and will examine the effects of fiscal action on income distribution and the policies needed to improve them, both in terms of taxes and public spending.