infrastructure and other pers in mexico s. webb, ieg and j. halpern, ewd public finance analysis and...
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Infrastructure and other PERs in Mexico
S. Webb, IEG and J. Halpern, EWDPublic Finance Analysis and Management
Core Course,
PREM Learning Week, May 1-5, 2006
Overview• Programmatic approach
– public finance concerns including infrastructure– 2 state PERs (Guanajuato and Veracruz)– PER – distribution– Infrastructure PER– Water PER– Mexico Poverty III – decentralized services for poor, including municipal
infrastructure• Permitted building knowledge,
– trust of clients gradually– continuity of policy dialogue
• Shifted principal client and champion from line ministries to Finance• Heavy use of local consultants
– econ/fin/tech experts, not research assistants) – enhanced credibility and continuity of effort
Mexico PER
• client demand for PER focused on distribution • Difficulties in addressing infrastructure sectors
– WSS, electricity– Not: urban roads, highways,, telecoms)
• BIA in electricity– Methods—HH survey and electric co billing
• , results and recommendations• Benefit of looking across sectors at distributional
concerns• energy subsidy is pro-rich
– contrast with health, education, and social protection programs
Most programs are regressive in absolute terms…
Pensionados ISSSTE
Pensiones Activos ISSSTE
Edu Superior
Salud ISSSTE
IVA GASTO FISCAL
Pensiones Activos IMSS
Pensionados IMSS
Salud PEMEX
Salud Hospital
Subsidio Eléctrico
Salud IMSS
Media Superior
Salud Embarazo/Parto
Salud Primaria
TOTAL
Edu Secundaria
Procampo
Edu Primaria
Edu Preescolar
Salud SSA
Oportunidades
-0.800 -0.600 -0.400 -0.200 0.000 0.200 0.400 0.600 0.800
REGRESIVO (PRO RICO)PROGRESIVO (PRO POBRE)
Calculation methods
• Household surveys give data on how many households at each income level access most public services
• Correlation of rate of access with level of income gives correlation coefficient– Positive coefficient means more goes to the rich (regressive in
absolute terms)– Negative coefficient means a greater share to the poor
• Household Electricity subsidy– Assumes the standard rates for all (the HH survey only has
amount spent, not volume)
– Data from the electricity company billing show a similar pattern of regressivity
…but the progressive programs get about half of the resources whose distribution
could be measured.
Prog. más progresivos
Prog. más regresivos
Oportunidades
SSA
Educacion Basica
PROCAMPOEduc. Media Superior
IMSS Salud
Subsidios para Elect. Residencial
PEMEX Salud
IMSS Pensiones
ISSSTE Salud
Educ. Terciaria
ISSSTE Pensiones
Nature of progressive programs
• Targeted to the poor: – Oportunidades– ProCampo
• Open to all, but more used by the poor– Basic education– Basic Health
• Regressive – requires money to access more– Electricity subsidy
Public spending is very redistributive, if tax payments are about proportional to income:
households in the poorest access public services costing 150% of their own income
0% 20% 40% 60% 80% 100% 120% 140% 160%
Gasto público como proporción del gasto privado de los hogares
10% más pobre
2
3
4
5
6
7
8
9
10% más rico
Dec
iles
Primaria
SSA
Oportunidades
Secundaria
Preescolar
IMSS Salud
Procampo
Media-Superior
Subsidio Eléctrico
IMSS Pensiones Jubilados
PEMEX Salud
IMSS Pensiones Activos
ISSSTE Salud
Superior
ISSSTE Pensiones Jubilados
Critical assumptions
• Assumes that value equals cost• Assumes that value (quality) are the same
to rich and poor further sector studies needed
Municipal Social Infrastructure (FAIS) transfer and Social protection
transfer go mostly to poor states
Fig. 3.4. Geographic distribution of targeted anti-poverty spending, 2002
0
200
400
600
800
1,000
1,200
Chi
apas
Gue
rrero
Oax
aca
Vera
cruz
Hid
algo
San
Lui
s P
otos
í
Pue
bla
Cam
pech
e
Taba
sco
Mic
hoac
án
Yuca
tán
Zaca
teca
s
Gua
naju
ato
Nay
arit
Sin
aloa
Que
réta
ro
Dur
ango
Tlax
cala
Mor
elos
Qui
ntan
a R
oo
Méx
ico
Col
ima
Tam
aulip
as
Son
ora
Jalis
co
Chi
huah
ua
Baj
a C
alifo
rnia
Sur
Agu
asca
lient
es
Coa
huila
Baj
a C
alifo
rnia
Nue
vo L
eón
Dis
trito
Fed
eral
Nat
iona
l Avg
.
2002
MxP
per
cap
ita
FAIS OPORTUNIDADES
Electricity subsidies for agriculture go mainly to the richest (and driest) states
Fig. 3.7: Geographic distribution of agriculture electric subsidies, 2002
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
20
02
Mx
P p
er
rura
l p
op
ula
tio
n
Infrastructure PER • Client demand
– built on questions raised by clients in review of distributional PER – concern with program efficacy, not just distributional outcome– What is point of progressively distributing a poorly run program?
• Scope- multiple sectors, – sequence of analysis (sector performance, fund flows
(magnitude/purpose) – planning and budgeting, cost projections, government credit
guarantees/enhancement, prioritization and sequencing of recommendations)
• Full sectoral diagnostic as well as cross sectoral analysis and recommendations (not just editorial exercise).
• Tradeoffs in relative emphasis – comprehensive sectoral vs cross-sectoral topics – benefit to focusing on cross-sectoral issues.
Three Methods –
• 1-benefit incidence analysis (from PER)• 2-investment cost projections under alternative
policy scenarios Estimation of spending needs in each sector -- converging to conclusion
• 3-differential impact of build-up of government credit enhancement programs-leading to distorted (and in some cases dysfunctional) development of the sectors
INTERNATIONAL COMPARISONS TO PLACE COUNTRY PERFORMANCE IN
PERSPECTIVE• Multi-sector• Roads• ELECTRICITY Distribution• BENCHMARKING-WSS
– – international and in country
International comparisons of the quality of infrastructure for business
PaísCalidad Global Puertos Ferrocarriles Electricidad
Argentina 3.6 3.6 2.7 4.2
Brasil 3.5 3.1 2.1 4.9
Chile 4.9 4.8 2.7 5.7
Colombia 2.9 3.0 1.4 4.7
México 3.4 3.3 2.5 3.9
China 3.4 3.6 3.9 4.2
Thailand 4.6 4.2 3.4 5.5
Malaysia 5.7 5.6 5.0 5.7
Philippines 2.5 2.6 1.4 3.5
Indonesia 4.2 4.4 4.1 4.1
Promedio muestra
3.9 3.8 2.9 4.6
E.U.A. 6.4 6.0 4.8 6.2Source: WEF (2004)
Road quality improving in Mexico, but still way behind OECD,
and behind projected needs for traffic
99% 99%
92% 91%
86% 76%
59% 35%
33% 29%
20% 6%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Spain Thailand
Greece
China Portugal Malaysia
United States Canada
Mexico Argentina
Chile Brazil
El servicio de transporte carretero tuvo grandes mejoras tras la desregulación iniciada en 1989 … pero
La porción de la red en mal estado es aún significativa (40%); se concentra en caminos secundarios y rurales
No está consolidada la información de estado de las redes subnacionales
Parte de la red aún presenta estándares inadecuados (ancho de carril, pendiente, etc.), incluido un 30% de los corredores clave.
La pavimentación es relativamente baja (un tercio; es dos tercios en países desarrollados)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
MALO
REGULAR
BUENO
Red Pavimentada - %b
Estado de la red
Electricity efficiency – distribution losses
0
2
4
6
8
10
12
14
16
18
1995 1996 1997 1998 1999 2000 2001 2002
CFE Totales
Peru Edelnor
Peru Luz del Sur
Chile Chilectra
Argentina Edenor
Argentina Edesur
Pérdidas en Distribución (%)
Collection efficiency of WSS
City / country Collection/billing
Monterrey. Mx 98
OECD average 95
Asian cities (18) aver. 88
Brazil major cities, aver. 87
Hermosillo, Mx 85
Mexico average city 72
Matamoros, Mx 45
Mexico small cities 20
COST/INVESTMENT PROJECION MODELS, feedback with growth
• México invests 1%-1.2% of GDP in infrastructure
• This would suffice to maintain current path of improvement if and only if it were spent more efficiently, because depreciation grows
• To reach the level of S Korea or compete with China, Mexico would need to invest 2.5 - 3% of GDP
Billion 2003 MXP
% GDP
1998 64 1.06
1999 64 1.02
2000 69 1.04
2001 68 1.02
2002 84 1.26
2003 83 1.23
Electricity Investment
0
10,000
20,000
30,000
40,000
50,000
60,000
1998 1999 2000 2001 2002 2003
Inversión directa CFE Pidiregas Luz y Fuerza del Centro
Inversión total en electricidad (%PIB)
0.71% 0.77%
2.51%2.79%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
México (2003) Argentina (2002) Chile (2001) Colombia (2001)
Millones de Pesos 2004
MEXICO POLICY & CREDIT SUPPORT FOR PSP/PRIVATE
OPERATORS/INVESTORS
• INTERNATIONAL COMPARISON-– Shows that Mexico is not that especially successful in attracting
infrastructure – Government credit enhancement has biased investment toward
greenfield projects• Un balanced sectoral development—to little at the distribution end,
where the private sector has the greatest advantages
• RESULT = COSTLY AND POORER QUALITY SERVICE
México has made limited use of Public-Private Investment
partnerships
• Bajo PPI comparado con sus pares– A pesar de la elevada
calificación de crédito soberano
– Y un amplio (y creciente) mercado doméstico de capitales
• Limitada a greenfield/off-take– Bajo impacto en eficicencia
$-
$100
$200
$300
$400
$500
$600
$700
1993-1997 1998-2002
Dolla
rs pe
r Inha
bitan
t
Argentina Brazil
Chile Colombia
Mexico
Water PER
• Mexico’s Water resources as well as fiscal resources– Emphasized conservation as well as traditional PER issues
• Key issue is how to bring the right mix of incentives to the decisions on both the water conservation and the fiscal issues.– River basins seem to be the right scale for decision power– How to make the requisite institutional reforms within the present
legal and political contexts
• Recommendations for implementation of new water law – calling for decentralization
Mexico- CONAGUA revenue and spending by cuenca
-100.0
100.0
300.0
500.0
700.0
900.0
1,100.0
1,300.0
1,500.0
0.0 500.0 1,000.0 1,500.0 2,000.0 2,500.0 3,000.0
Expenditures
Rev
en
ue
s
Lerma Santiago- Pacifico
Bravo
Golfo-Centro
Cuencas Centrales Norte
Balsas
Aguas del Valle de Mexico
Frontera Sur
Golfo Norte
Pacifico Norte
Peninsula Baja California
Pac. SurNoroeste
Pen. Yucatan
Dissemination
• shift emphasis away from producing long gray cover “reports”
• vehicle for interacting with federal and subnational policy makers and practitioners