“Alice in Wonderland” and performance budgeting in Latin America and the Caribbean

One of the most interesting adventures of Alice in Wonderland is her encounter with the Cheshire Cat. Alice comes to a fork in the road and asks the cat which way she should go. The cat asks Alice where she wants to go. Alice persists with her question. The cat insists with hers. After a while the cat smiles and tells Alice, “If you don't know where you want to go, then it doesn't matter which way you go.”

Although it may seem obvious, the Cheshire cat's warning is not superfluous, not only for Alice, but also for those who make public spending decisions in Latin American and Caribbean (LAC) government administrations on a daily basis. More than once, these decisions follow an inertia and rigidity divorced from their intended purpose, compromising the effectiveness of public policies.

The “Budget for Results” (BfR) approach seeks to overcome these shortcomings by focusing spending decisions on the achievement of results. The expectation is that, when properly implemented, this tool can help use public resources more effectively and efficiently, as well as increase transparency and accountability.

Not surprisingly, many LAC countries have incorporated MfDR into their budgetary processes. According to the MfDR 2023 Survey, conducted by the Inter-American Development Bank (IDB) and the Latin American and Caribbean Results-Based Budgeting Network, 14 of the 17 countries that responded to the survey have been implementing MfDR, some of them for more than 20 years. However, as highlighted by the Management for Development Results (MfDR) Index, there is a wide dispersion in the level of progress in the implementation of this tool.

That is why CAF -development bank of Latin America and the Caribbean- encourages and collaborates with the implementation of the PfR approach in various programs in the region, among which the case of Ecuador stands out. Since 2019, CAF has been supporting Ecuador in the implementation of PfR to reduce Chronic Childhood Undernutrition (CID), a pressing problem among Ecuadorian children. In line with this approach, CAF supported the authorities to, within the framework of the PpR, set the reduction of CID as a goal and select a prioritized and evidence-based public policy package. The “prioritized package” included:

1. A timely and comprehensive immunization schedule
2. Prenatal and up to two-year check-ups
3. Exclusive breastfeeding counseling
4. Hand washing, complementary feeding and food preparation counseling
5. Access to safe water

According to the report “Early Childhood Care for Improved Well-Being,” the PfP has been instrumental in coordinating different institutions at various levels of government to ensure that the approach to the problem is comprehensive and multisectoral-something important for many public policy objectives, but critical in the fight against ICD. A systematic review of programs aimed at reducing IDD indicates that, although the ideal set of policies must be adapted to each implementation context, the combination of different policy alternatives can generate an average annual reduction in the rate of IDD of between 3 and 8%.

In Ecuador, although an impact evaluation has not been done, existing evidence suggests that the comprehensive approach adopted may have contributed to the reduction in ICD by almost 6 percentage points between 2018 and 2023, reaching 17.5% in 2023. In other words, it could have prevented or removed between 12,000 and 32,000 Ecuadorian children under 5 years of age from chronic malnutrition each year.

Encouraged by Ecuador's successful experience, CAF is supporting other countries in the region, such as Bolivia, Peru and Uruguay, through technical cooperation to improve the implementation of their early childhood programs with the PfR tool. These initiatives are part of CAF's “Early Childhood” strategic action area, which aims to promote the physical, cognitive and socioemotional development of Latin American and Caribbean children. Since 2019, CAF has contributed USD 1.17 billion to implement early childhood policies, benefiting 3.8 million children in 7 countries in the region. Thanks to CAF's contribution, these children will probably be able to have a more productive future for the region but, in addition, like Alicia, they will surely also be able to more fully enjoy all the magic and adventure of their childhood.

For more information on CAF's support to early childhood in Latin America and the Caribbean, visit: ImpactoCAF