Policy Work on Reforming State-Owned Enterprises and Development Banks

Off the Books : Understanding and Mitigating the Fiscal Risks of Infrastructure

Herrera Dappe, Matías

Foster, Vivien

Musacchio, Aldo

Ter-Minassian, Teresa

Turkgulu, Burak

Washington, DC : World Bank, 2023

Off the Books: Understanding and Mitigating the Fiscal Risks of Infrastructure shows that however governments deliver infrastructure—through direct public provision, state-owned enterprises (SOEs), or public-private partnerships (PPPs), the risk of fiscal surprises is high in both good times and bad. As a result, infrastructure service delivery often ends up costing significantly more than expected, eroding limited fiscal space for productive spending. This book makes a unique contribution by quantifying the magnitude and prevalence of fiscal risks from electricity and transport infrastructure and identifying their root causes across a range of low- and middle-income countries. It lays out a reform agenda for mitigating the fiscal risks associated with infrastructure based on building government capacity; adopting integrated public investment management and integrated fiscal risk management; improving fiscal and corporate governance of SOEs; and ensuring robust PPP preparation, procurement, and contract management. The book will be of enormous value to policy makers, practitioners, and academics who have an interest in infrastructure and fiscal policy.

Monitoring of and Fiscal Risk in Infrastructure State-Owned Enterprises

(Quasi-experiment to show the cost of SOEs during negative shocks) "State-Owned Enterprises as Countercyclical Instruments: Experimental Evidence from the Infrastructure Sector" conditional accept, World Development (with Matias Herrera Dappe, Carolina Pan, Yadviga V. Semikolenova, Burak Turkgulu, and Jonathan Barboza). Previously available as World Bank Policy Research Working Paper 9971 (2022)
(Discussing different ways of delivering infrastructure projects and their risks--government ministries, state-owned enterprises and PPPs) Off the Books : Understanding and Mitigating the Fiscal Risks of Infrastructure. Sustainable Infrastructure Series. Washington, DC : World Bank, 2023 (with Matías Herrera Dappe; Vivien Foster; Teresa Ter-Minassian; and, Burak Turkgulu).
(Sources of fiscal risk from SOEs and an indicator to predict fiscal risk) "Smoke and Mirrors: Infrastructure State-Owned Enterprises and Fiscal Risks." World Bank Policy Research Working Paper 9970 (2022). (with Matias Herrera Dappe, Carolina Pan, Yadviga V. Semikolenova, Burak Turkgulu, and Jonathan Barboza)
“Infrastructure State-Owned Enterprises: A Tale of Inefficiency and Fiscal Dependence” World Bank Policy Research Working Paper 9969 (2022). (with Matias Herrera Dappe, Carolina Pan, Yadviga V. Semikolenova, Burak Turkgulu, and Jonathan Barboza)
(On how governments implicitly guarantee the bonds issued by state-owned enterprises) "Leviathan as a Financial Godfather: Debt Advantages of Wholly State-Owned Enterprises." Global Strategy Journal. (forthcoming). (with Mauricio Jara-Bertin and Rodrigo Wagner). Previously available as Does the Bond Market Discipline State Owned Enterprises? , Inter-American Development Bank, 2017.
(On how state-owned enterprise creation and poor monitoring increases fiscal instability) Smoldering Embers: Do SOEs Threaten Fiscal Stability in the Caribbean? Inter-American Development Bank Publications Department (edited with Gerardo Reyes-Tagle, Carolina Pan, Yery Park), 2022.
(on the causes of fiscal risk and the best practices to monitor and minimize these risks) Fixing State-Owned Enterprises in Latin America: Old Problems, New Solutions (Inter-American Development Bank, 2019) (with Emilio I. Pineda, eds.)
State-Owned Enterprise Reform in Latin America: Issues and Possible Solutions, Inter-American Development Bank Discussion Paper IDB-DP-401 (With Emilio I. Pineda Ayerbe and Gustavo Garcia), 2015.
State-Owned Enterprises in Brazil: History and Lessons in State-Owned Enterprises in the Development Process, OECD, April, 2015, Chapter 3, pp. 69-104. (with Sergio G. Lazzarini)

Analyzing the Role of State-Owed Development Banks

The Role and Impact of Development Banks: A Review of their Founding, Focus and Influence, World Bank manuscript, November, 2016 (with Sergio Lazzarini, Pedro Makhoul, and Emily Simmons)
What Do State-Owned Development Banks Do? Evidence from BNDES, 2002-09. World Development 66 (February 2015) (with Sergio G. Lazzarini, Rodrigo Bandeira de Mello, and RosileneMarcon)
"Leviathan as a Minority Shareholder: Firm-level Implications of Equity Purchases by the State." Academy of Management Journal 56-6 (December 2013): 1775-1801. (With Carlos F. K. V. Inoue and Sergio G. Lazzarini.)

Smoldering Embers: Do State-Owned Enterprises Threaten Fiscal Stability in the Caribbean?

Inter-American Development Bank (2022)

(Reyes-Tagle, Gerardo; Musacchio, Aldo; Hosein, Roger; Wagner, Rodrigo; Pan, Carolina; Yu, Fernando; Park, Yery; Gookool, Rebeca; Escobar, Bernardita; La Cruz, Tamira; Araya, Sergio; Figueroa, Camila; Rosso, Lucas )

Fixing State-Owned Enterprises: New Policy Solutions to Old Problems

Inter-American Development Bank (2019)

(with Emilio I. Pineda, eds.)

Praise for Fixing State-Owned Enterprises:

At a time when fiscal pressures are mounting almost everywhere in Latin America and the Caribbean, tackling the fiscal burden generated by State-Owned Enterprises (SOE) takes on renewed importance. This splendid book will provide policymakers and analysts with the tools to understand the fiscal issues associated with SOEs, and the options available to improve their performance.

Santiago Levy, Senior Fellow, Brookings Institution.

Fixing State Owned Enterprises should be required reading for everyone preoccupied with SOE performance, and not only in Latin America. Realistic and blunt, it brings new data, new arguments, and new solutions to an issue that has plagued governments for years. For example, it presents strong evidence that SOEs in Latin American countries that are supervised by centralized monitoring agencies outperform SOEs under more decentralized control. It offers no panaceas and debunks some myths, such as the effectiveness of reforms relying on stronger boards of directors or minority ownership. Thanks to this evidence-based approach, Fixing State Owned Enterprises rises above much of the huge SOE literature, offering a fresh and insightful analysis of why SOEs underperform and what can be done about it.

Mary M. Shirley, President, The Ronald Coase Institute

Every once in a while, one needs to look at an old problem with a fresh set of eyes. This book does just that for State-Owned Enterprises (SOEs) in Latin America. In the 1980s, governments went through an aggressive wave of privatization. Yet, 40 years since then the region still faces huge fiscal issues associated with SOE performance. This book provides a complete up-to-date diagnosis of these issues and outlines a detailed set of policies attuned to the politically and socially charged environment in the region. It is a must read for any policy maker in a Ministry of Finance or any area of government related to the operation and monitoring of SOEs.

Jose Antonio Gonzalez Anaya, Former Minister of Finance, CEO of PEMEX, and CEO of IMSS.

This book sheds interesting Latin American light on a set of reform issues that have in the past been most extensively studied in ‘transition Europe’ and ‘emerging Asia’. It overall endorses OECD’s traditional focus on corporatisation and separation of decision making roles, but proposes broadening it to account for fiscal risks and SOE performance monitoring…at stake is a broader need for public administration and budgetary reform that can hardly be addressed selectively in the SOE sector.

Hans Christiansen, Senior Economist, OECD

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