Public Finance in Latin America: Taxes and Expenditures as Development Tools

For the majority of the world, taxes are the main method by which countries raise revenue, and many argue that in Latin America and the Caribbean taxes are a missed opportunity to promote social change.  Two recent reports by the Inter-American Development Bank and CAF, the development bank of Latin America, argue that some of the region’s current tax systems could be useful tools to reduce income inequality, boost productivity, strengthen local governments and preserve the region’s natural resources.   When public funding comes primarily from a broad base of taxpayers, the system empowers citizens to demand more accountability from government and emphasizes the central role of public finance in promoting development with equity.

On June 24, the Brookings-CERES Economic and Social Policy in Latin America Initiative (ESPLA) hosted a discussion on the role of public financing and taxation in promoting development and social equality.  Presenters included Pablo Sanguinetti, director of socioeconomic research of CAF, José Juan Ruiz Gόmez, chief economist and manager of the research department at the Inter-American Development Bank and Vicente Fretes Cibils, chief of the fiscal and municipal management division of the Inter-American Development Bank. A moderated discussion followed, including: Augusto de la Torre, chief economist for Latin American and the Caribbean at the World Bank and Michael Keen, assistant director of the Fiscal Affairs Department at the International Monetary Fund. Senior Fellow and Director of ESPLA Ernesto Talvi moderated the discussion.