Latin America’s biggest economies have made considerable progress in putting their public finances in order but much still needs to be done to increase the flexibility and improve the quality of government spending, according to a new OECD report.
Challenges to Fiscal Adjustment in Latin America says although levels of public debt and government spending, measured as percentages of GDP, vary widely between Argentina, Brazil, Chile and Mexico, all four countries face common pressures. Major challenges include the need to keep public indebtedness at sustainable levels and to improve the cost-effectiveness of government spending, including social safety nets for the poor and vulnerable. Another is to ensure that public investment in infrastructure building is both maintained at a high level and is responsive to changing needs.
Based on a recent OECD seminar on fiscal adjustment in Latin America, the report adds that widespread tax reform is needed in the region. Tax administration should be improved in many countries and the tax base broadened so that more sectors of the economy contribute to government revenue.
See full Press Release.
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