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IDB – Exchanging practices on managing public debt

Organization(s):

National Debt Management Offices of the Ministries of Finance and Economy of Argentina, the Bahamas, Barbados, Belize, Bolivia, Brazil, Colombia, Chile, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay and Venezuela. Strategic partners accompanying the initiative are the Inter-American Development Bank, the Monetary Council of Central America (CMCA), Caribbean Regional Technical Assistance Centre (CARTAC), the International Monetary Fund (IMF) and World Bank.

Country (ies):

Argentina, the Bahamas, Barbados, Belize, Bolivia, Brazil, Colombia, Chile, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay and Venezuela.

Overview:

This initiative focuses on creating and using knowledge transfer mechanisms and share debt management models and protocols by continuously exchanging experiences across countries in order to improve the efficiency and effectiveness of the National Debt Management Offices in Latin America and the Caribbean. It provides the necessary resources for: i) facilitating shared research in the subject area and knowledge transfer activities among participating countries, including south-south cooperation ii) designing a regional information system; and iii) developing environments for transfer of capabilities and skills.

Background:

This initiative was envisioned during a workshop on the development of bond markets that took place at the Inter-American Development Bank on August 2004. During that workshop the representatives of national debt management offices supported the idea of creating a general framework to structure and guide the actions of a group of Latin American and Caribbean debt specialists and their offices (Latin America and the Caribbean Debt Group –LAC Debt Group), thus promoting an approach to conduct uninterrupted sharing of experiences and information and innovation in policies and policy instruments for debt management. This framework will lead to greater transparency, coordination, and integration of Public Debt Agencies across participating countries. This initiative is also serving as a technical and policy debate forum for discussing state-of-the-art issues in an attempt to concoct common views; and encouraging studies and debates on current and potential debt and bond management analytical tools.

The LAC Debt Group was then formally created in March 2005 during its first Annual Meeting in Rio de Janeiro, Brazil, were 26 Latin American and Caribbean countries participated. By July 2005, the IDB began supporting the Group's enterprise under the Regional Public Goods Initiative, providing entrepreneurial resources and the RPG technology as well as organizational and technical support. The main objective of the initiative is to improve debt management by promoting the institutional strengthening of Public Debt Management Agencies in Latin America and the Caribbean. To this end the initiative has began the process of instituting mechanisms for sharing know-how, lessons learned and best practices among the participating countries.

These actions are expected to yield the following results: i) improvement of debt management conditions, ii) debt cost reductions thus freeing up country resources, iii) dialog facilitation and enhancement among participating countries, iv) support the creation of capital markets, and v) harmonization of norms and regulations related to the sector in Latin America.

Implementation:

As stated above, the enhancement of know-how and institutional capacity at Public Debt Management Agencies is based on the premises of knowledge exchange and knowledge generation and dissemination To this end the initiative is supporting a number of activities and setting the grounds for others that: i) promote capacity development through south-south cooperation among partner countries, ii) a well established horizontal partnership, iii) a cost effective model to participate in, and iv) a demand driven model, leaving the recipients to lead the decision making process based on their needs and priorities.

Consistent with the above, a few examples can be mention in which the SSC concept has been applied. As a mechanism for knowledge exchange and open communication among its partners, the project created an electronic list with access available to all participating countries. This electronic tool has become a platform for south-south cooperation, working as a clearing house of supply and demand of cooperation. As trivial as it may sound, the electronic list has been an instrumental vehicle to request technical assistance, disseminate key country debt information, share knowledge, and keep a channel of communication open among the partners, including the IDB. For example this communication channel assisted the Uruguayan Government in requesting advice and exchanging information during the process of acquiring a debt management accounting system. It is worth mentioning, that the IDB plays an important role in keeping this electronic list updated and running, by appointing a key person to administer the listing and facilitating the exchanges.

As part of the knowledge exchange and coordination mechanism, the LAC Debt Group holds meetings twice a year (one in Washington DC and one in any other participating country), the first meeting happens around April and is a more general meeting; its main objective is to exchange experiences and technical knowledge. The second meeting takes place around October and is a more in depth discussion of a subject area previously chosen by the partners. These meetings not only allow the participants to increase their knowledge in any one specific area, it also opens an informal communication channel to deal with specific needs.

In addition to the above the project promotes a demand driven system that places the partner countries in control of the budget, the issues to be studied and discussed, and the activities to be executed. Even though the IDB has contributed with non-refundable resources, its role has been intentionally limited to that of a project coordinator and technical advisor. Such relationship has been productive and effective in meeting the projected goals at the level of outputs and outcomes.

IDB and participating countries have had a good relationship since the design of the project. Furthermore, such relationship has improved throughout the execution period, as captured by surveys applied at certain meetings, comments received and higher rates of participation in events sponsored by the project or participating country.

Outcomes:

The initiative focused in achieving the following key results: i) a Standardized Public Debt Statistics Information System implemented since 2009; ii) a LAC Debt Group website available for the public, enclosing information regarding public debt statistics, publications –news and documents, and activities including past and future events; iii) annual meetings with high participation rates; and iv) an overall knowledge exchange mechanism for discussions on strengthening public debt markets and debt management offices and related issues. In addition to these achievements, the project inadvertently created an informal channel of communication among participating countries, it has also made evident the comparative advantages some countries and therefore enhanced the potential of capacity development among partners through the reduction of their asymmetries.

Several partner countries have also played a key role in enhancing the institutional capacity of Public Debt Management Agencies in LAC through south-south schemes, as was the case of Colombia in XXXX and Brazil in 2008. Such was the case of the Monetary Council of Central America (CMCA) that contacted Colombia's Public Debt Agency to request assistance for the Dominican Republic to develop a secondary bond market. Although different in size and culture both countries share comparable challenges, and so the experience and knowledge Colombia had to offer in the subject matter was valuable and potentially adaptable. As of now, the Dominican Republic is in the process of creating such market.

Brazil's experience in debt management has been recognized as valuable and worth exploring by countries in the region and so the government took the initiative and expressed interest in sharing such knowledge. By 2008 the Public Debt Agency of Brazil put together a training plan that covered investments, risk, accounting and statistics among other subject areas. The seminar took place in Brasilia and lasted five days. Among the participants were the representatives of Public Debt Agencies from 21 LAC countries. It's worth mentioning that not only did Brazil covered the costs of executing the seminar itself, but it also covered travel expenses of some participants together with the IDB and the Caribbean Regional Technical Assistance Centre (CARTAC), -who paid for some of the participants from the Caribbean. As a result of the seminar some countries expressed interest in studying more in-depth specific debt management issues, some of these were covered in later seminars.

In all these achievements is undeniable the level of involvement the IDB has had, although not as a decision making partner, but as a facilitator and triangulator of some of the cooperation from "south" partners, as well as financier of some of the actions executed by the project. Such contributions provide a strong argument against the sustainability of the benefits achieved so far, once the initiative under the IDB has finally concluded. According to the results of a midterm evaluation, countries expressed concerned with continuing the financial support of the initiative, despite the pledge some participants made to continue in the future with a regional public goods approach to debt management issues. On the other hand the role of an honest broker, triangulator of SSC and facilitator the IDB has played, might not be easily replaced. More has to be done to provide continuity for those benefits achieved so far, perhaps gradually transferring some of these responsibilities to a participating country and promoting an agreement to periodically contribute with financial resources to the initiative.

More has to be done to measure how cost effective the initiative has been, yet despite how limited the information is to make such assessment, one is able to say that the costs of the initiative are low when compared to an average investment operation and that the results such as the level of cooperation achieved, the successful execution of the Standardized Public Debt Statistics Information System with the participation of 21 countries in the region, and the knowledge exchange among other, undoubtedly exceed the resources so far invested in the project.

Aid Effectiveness:

In the case of a regional initiative such as the enhancement of know-how and Institutional Capacity at Public Debt Management Agencies, the application of the SSC concepts have been enhanced by the implementation of aid effectiveness principles. The possibility for participating countries to decide what actions to take and how within the context of the project, allowed them to pursue a more effective horizontal relationship. For example, the Public Debt initiative was conceived as a bottom-up operation. The involvement of participating countries from the initiative's formulation and design to the actual execution was clear, as clear was the role of the IDB during the execution, that of a triangulator of SSC and facilitator. This involvement supported the ownership of the initiative by the participating countries. Furthermore, the decision making process related to the identification and approval of the actions to be executed is exercised solely by the participating countries through the project's Steering Committee. The Steering Committee is integrated by five countries selected on a periodic basis by the LAC Debt Group. At the same time such actions have impacted the project's budget, which has been modified from its original version to accommodate the needs and priorities of the partner countries and what the challenges of a current time of the financial crisis imposed to them. For instance, a reflection of this was the decision taken by the partners not to finance more studies but to shift project resources to support more knowledge exchange meetings among participating countries, deemed more effective. In such example partners' leadership was also demonstrated.

Additionally, such involvement, as well as the leadership exercised by the participating countries in the decision making process of what and how to do things, supports the application of the alignment principle. Three out of five components included in the project support south-south cooperation activities, knowledge exchange and coordination activities, technical discussions, and decision making processes among other. These actions allow the initiative to respond and align itself to the needs and priorities laid out by the participating countries.

The Public Debt initiative is unique in that it was created and therefore owned by the participating countries from its beginning. As of now, no other program, project or initiative in the area of public finance and debt management exists similar to this; moreover, the International Monetary Fund (IMF) has held conversations with the IDB to replicate the concept in Asia. In spite of this, there has been an implicit coordination with other multilateral organizations, in the way of informing each other what events are scheduled throughout the execution process. These organizations (World Bank, IMF, CARTAC, CMCA etc.) are invited systematically to some of the recurrent events the initiative has.

Capacity Development:

As exemplified above, the initiative has promoted mechanisms to facilitate south-south cooperation, creation of capacities and knowledge transfer by continuously sharing experiences across countries and technical discussions involving a broad group of debt management analysts. In doing so it has created formal and informal channels of communication that have allowed countries to identify the comparative advantages some countries have to offer, and therefore it has facilitated knowledge exchange activities.

Duration:

Execution Period 36 months Disbursement Period 42 months

Budget (Optional):

IDB – US$ 500,000 Local Counterpart US$ 200,000 Total US$ 700,000

Name of Primary Contact Person:

Laura Bocalandro

Title of Primary Contact Person:

Coordinator, Regional Public Goods Program, Inter-American Development Bank

City:

Washington, DC