Abstract The year 2016 marked the 20th anniversary of the signing of the Framework Agreement for the Central American Electrical Market (1996) by the presidents of the six nations of Central America, and the 40th anniversary of the first electrical interconnection between two countries on the isthmus (Honduras and Nicaragua in 1976). This prompted the Inter-American Development Bank (IDB) to develop this publication, which aims to present the process of electrical integration in Central America comprehensively and coherently by tracing its origins, analyzing achievements and benefits to date, and contemplating the prospect of greater integration in the future. The publication provides evidence that regional electrical integration makes economic sense. It also shows that balance and symmetry prevail among the countries of Central America that are involved in the initiative and among the public and private stakeholders within them. It includes economic assessments of the different levels of electrical integration in Central America and complements this with an analysis of the political and institutional viability of implementing these, studying the costs, benefits, and different obstacles that may hamper the development and consolidation of this process.
Summary: This report by the World Bank’s Office of the Chief Economist for Latin America and the Caribbean (LAC) studies the region’s fiscal policies. After reviewing LAC’s growth performance, Chapter 1 provides an account of its financing needs in the 21st century to understand how such a diverse region ended up with fiscal deficits across the board in 2016. Chapter 2 goes back to the 1960s and assesses the cyclical properties of fiscal policies. Like most developing countries and in contrast with most developed economies, LAC has exhibited procyclical fiscal policies. The 2000s brought good news: one in three economies in the region became countercyclical, which helped improve credit ratings. However, fiscal policy is complicated by our inability to know if current economic conditions are temporary or permanent. The report argues for a prudent stance that would err on the side of saving too much during upswings and perhaps borrowing too little during downturns.
Summary: Latin America and the Caribbean does not have the infrastructure it needs, or deserves, given its income. Many argue that the solution is to spend more; in contrast, this report has one main message: Latin America can dramatically narrow its infrastructure service gap by spending efficiently on the right things.