How comprehensive should institutional reforms be in Latin America and the Caribbean (LAC)? Is too much being asked of reforms? In this era of globalisation, the call for institutional reform is being heard globally, more so in the LAC region. Governments in the LAC region have realised that their competitiveness and economic growth are directly correlated to having good institutions.
This World Bank paper looks at the precise nature of institutional reforms and provides a framework for their design and implementation in the LAC region. As the region’s political and economic environment becomes more conducive to institutional reform, there are many key obstacles to overcome: Widespread corruption, a lacklustre education system, problems of information and a very weak legal institution.
Past reforms in the LAC region have not been as effective as many policy makers would have liked. As a result, there is a need for a more realistic definition of objectives. Most LAC institutional reformers do not have access to comparative studies on the subject and, as a result, they continue to repeat the same mistakes or follow the same procedures in their national programmes. Thus, donors are critical in providing information in this regard, even though they do not always use their access to comparative experience in their own projects. These and other prevailing issues have led the authors to conclude that the very institutional constraints targeted for elimination are likely to impede progress. Other findings include:
- The Washington Consensus ignored the potential role that institutional reform could play in accelerating the economic and social development of the region
- Persistent inequality and low quality characterise basic education systems in the LAC region – few reforms have affected change at the local level
- Judicial systems in LAC have suffered from a common set of failings: Lack of resources, slow dispute resolution procedures and political interventions
- The misallocation of resources, inefficiencies and the lack of accountability are still predominant features of many institutions in the LAC region
- The LAC region has barely made any improvements in reducing corruption and bureaucratic inefficiencies
- Education is critical for promoting an adaptive institutional environment.
The trend towards more efficient and effective institutions is not limited to the LAC region. In this regard, there has been a coalescence of ideas in support of a new model for institutional reform called New Public Management. It involves the devolution of decision-making, performance orientation, client focus and market orientation. However, for this and any other model of reform to be effective in LAC, there needs to be:
- A compensation scheme for the losers of institutional reform
- Public information campaigns about the reforms
- A systemic strategy that acknowledges that multidimensional problems require multidimensional solutions
- Tools for evaluating and monitoring the progress of reforms
- Greater independence of the judiciary
- Safety nets to guard against total economic collapse.
