State-Owned Enterprise Reform in Latin America: Issues and Possible Solutions [report]

Aldo Musacchio, Emilio Pineda, Gustavo A. García
2015 unpublished
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more » ... other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license. Abstract This paper examines the challenges governments in Latin America face to control their state-owned enterprises (SOEs). It argues that, absent privatization, governments can rely on a variety of reforms to address some of the main problems affecting SOEs. These problems are divided into corporate governance problems-which include agency and multiple-principals problems-and the fiscal governance problem, which has to do with the discretionary nature of the fiscal relationship between the government and its enterprises. Then the paper discusses a variety of solutions for each of these problems. Rather than providing a single recipe, it argues that governments can design governance mechanisms that rely on the market (e.g., by partially privatizing a firm and listing it on a stock exchange), on ex-ante administrative controls, or on hybrid solutions that combine both. Thus, the paper argues that the mechanisms to deal with the problems of SOEs have to be designed on a case-by-case basis, taking into account the specific problems of the public enterprise in question and the economic (and political) environment affecting it. JEL Codes: H11, H50, H77, G30
doi:10.18235/0000128 fatcat:5ya4cb4s4jatnhkxtsjhr3zjjq