How Efficient Is the Management of Subnational Public Investment? The Situation in the Federal Countries of Latin America

This study discusses the important role of subnational governments in public investment and analyzes the way it is managed. Specifically, it addresses the following: How important is decentralized public investment?; What are the factors that affect the efficiency and quality of investment management?; and What actions can be taken to improve it? To answer these questions, the study applies an efficiency index of public investment management to the subnational governments of Argentina and Mexico. The findings are as follows: a) the subnational management of public investment is inefficient in all stages, but it is particularly deficient in strategic planning, ex ante evaluation, impact evaluation, auditing, and asset management; b) on average, subnational governments have less management capacity than federal governments, although, as there is great heterogeneity, some subnational governments show greater efficiency; and c) factors such as lack of intergovernmental coordination and difficulties in fulfilling the role as governing bodies strongly influence the inefficiency of subnational public investment management. The study concludes with a series of recommendations to improve project cycle management and investment programming in subnational governments.