Institutions for Growth and Social Welfare

The Region has progressed significantly in the sector priority of Institutions for Growth and Social Welfare with respect to improved tax collection, decentralized public expenditure, and credit access, and relatively less so in reducing the number of homicides and expanding the percentage of children registered at birth.

Led by a large increase in social security contributions, the ratio of total tax revenues to gross domestic product (GDP) has risen significantly. This is particularly important given that for many years, a number of countries relied heavily on an ongoing commodity price boom to finance relevant public spending. As the boom comes to an end, countries need to rely on internal sources of funding (mostly taxes) to maintain a funding stream for their development projects.

Though the percentage of children under five whose births were registered has changed little, innovative initiatives are underway to reach the marginalized communities in which these children tend to be located, for example in Guatemala and Ecuador. In Guatemala, a system of early warning of births was introduced and several municipalities have been declared free of under-registration. Policy innovations in crime and violence prevention have been insufficient to curb the Region’s homicide rate, which remains the highest in the world, according to the IDB’s latest study on the topic The Welfare Costs of Crime and Violence in Latin America and the Caribbean. However, investments made during this CRF in foundations like common definitions of crime statistics and the creation of crime “observatories” to collect these statistics have laid the groundwork for future improvement. The use of banks to finance investments was another goal in this area. To achieve this goal, the Bank has expanded programs that reduce the risks to banks of lending to small and medium sized firms, including partial credit guarantees and value chain finance, and promoted new technology and business models, such as alternative credit scoring models, to reach the unbanked population.

The CRF 2012-2015 established five output indicators for this sector priority and all targets were met. More than 130 projects in 21 countries contributed to achieving the targets in this sector priority. Stories 2.6 and 2.7 provide a glance into Indicator 3.3.1, highlighting two different initiatives that illustrate how the public and private sector windows of the Bank each supported SMEs in the Region. Story 2.6 features a US$100 million public sector initiative that promoted innovation in SMEs. Story 2.7 shows how a US$10 million private sector loan to a Brazilian wholesale distributor, Tenda Atacado, helped expand access to credit for microentrepreneurs. Finally Story 2.8 shows how unconventional forms of subnational governments can be a helpful ally in the implementation of IDB-financed projects (Indicator 3.3.4). This story illustrates how a Maroon village in Suriname decided to invest national government funding to benefit its community.

Figure A.3
Regional Development Goals:
Institutions for Growth and Social Welfare
Figure B.3
2012–2015 Output Contribution Indicators:
Institutions for Growth and Social Welfare

Development Stories

Story 2.6
Promoting Productivity

Story 2.7
Tackle the Funding Gap

Story 2.8
A Home for the Poorest and Most Vulnerable