LAC Countries Waste $220 billion Per Year in Public Funds, IDB Finds

Many governments pay excessive salaries to civil servants and spend four times more on the elderly than on young people.

IDB

Countries in Latin America and the Caribbean (LAC) are wasting around US$220 billion annually through corruption, fraud procurement, and cost overruns in infrastructure projects, according to a new study by the Inter American Development Bank (IDB).

Many governments pay excessive salaries to civil servants and spend four times more on the elderly than on young people. Generous social welfare programs have long remained a drag on the region’s economic growth, with pension and healthcare programs accounting for 35% of general budget.

If current pension and health expenditure regimes are kept in place, IDB warns, their share in the budget could jump to as much as 78% by 2065, starving other priorities such as infrastructure development and job skill training.

Argentina wastes the most public resources, while Chile is the most efficient when it comes to public spending, losing just 1.8% of its GDP.

“While public investment per capita has increased on average more than 50% in every other region in the world, in Latin America it has only crept up 5%, remaining roughly at the same levels as in the 1980s,” says the report.

More than anything else, the bank says, the gap between rich and poor will never be closed unless governments demonstrate efficiency and root out corruption.

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“More government spending is unlikely to help close the region’s inequality gap if inefficiencies in redistribution are not corrected,” the report noted.

Reducing cost overruns and delays in government-financed infrastructure projects alone could help save around US$50 billion a year, says the bank.

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