EL BLOG DE LA FIIAPP. Cooperación Española

COVID-19 has shown us that pandemics and their associated crises require rapid, coordinated and, above all, global responses to protect people and address the socioeconomic consequences being felt all over the world. Although the virus crosses borders, the unequal impact it has had on the population stands out.  

These disparities are evident in multiple dimensions and areas: the risk of infection, access to education due to the digital gap, inequality in access to health services and the ability to work at home. This inequality has been particularly notable in some of our partner countries, especially in Latin America where the United Nations estimates that real GDP has decreased by 8% in 2020 due to prolonged national closures, weak exports and the demise of tourism, which has undermined economic activities1 . 

In light of this, the European Union has reacted by redoubling its commitment to its partners. That’s why the Europe Team has been set up as a global response to the consequences of the pandemic in our partner countries, supporting and addressing key issues such as social cohesion, human rights, quality democracy, digitisation, gender equality and the environment. 

It aims to assist in the global management of the crisis, providing a joint, organised and coordinated European response; combining efforts by the European Union and its Member States – including cooperation agencies – and development finance institutions.   

In May 2020, following the “Working Better Together ” approach, the European Commission launched a pilot exercise called COVID19 Round Tables led by the Delegations of the European Union in Argentina, Costa Rica and Ecuador in collaboration with the governments of each of these three countries. This initiative works to identify the demands derived from the health emergency, in order to prioritise them in a joint exercise with the government of the partner country to channel the response of the European actors in a structured and coordinated manner according to the capacities and speciality of each actor.  

Thanks to the close work carried out together with the focal points of each country, it has been possible to pool the efforts of relevant actors in the different facets and levels at which the devastating consequences of the pandemic have been felt. 

The objective is to provide a joint EU response in the partner country, strengthening actions for socio-economic recovery, green recovery, digital and food security.  

The implementing agencies of the member states, such as the International and Ibero-American Foundation for Public Administration and Policies (FIIAPP) are part of Team Europe. Thus, the FIIAPP offers technical assistance to the EU Delegations of Costa Rica and Ecuador, coordinating the pilot round tables in these two countries.   

After several months of working together, the progress made is remarkable and the lessons learned are of great value. Throughout this process of dialogue, the focus has been on post-pandemic recovery and on rebuilding better, with an eye on the worst affected sectors and groups.  

Through specific dialogue in each country, with flexible methodology and based on the reorientation of activities already underway in the Member States, EU cooperation agencies and programmes such as EUROsociAL + , EUROCLIMA + , EL PAcCTO, Bridging the Gap are achieving: 

• Greater coordination and coherence in Team Europe’s response 
• Appropriation by both European actors and the institutions of the partner countries. A great commitment is observed on the part of all the actors involved, recognising the added value of a sectoral, multi-actor and peer-to-peer dialogue.  
• A deeper, mutual understanding of needs, demands, interests and of how we can respond. For example, it came to light that the Green Agenda, governance, digitalisation and inequality are important topics on the bilateral, regional and bi-regional agenda of Latin America and the Caribbean.
  

This joint response has led to the creation of Team Europe, making it possible to offer articulated, coordinated, coherent and flexible responses to urgent needs such as the one caused by the COVID-19 pandemic.  

Team Europe is determined that nobody will be left behind, and international cooperation is more important than ever to its success. We are in an excellent position to strengthen bonds and share know-how and experiences that will be useful to all of us.  

We have an opportunity to make progress, cooperating based on the values shared by both regions, transitioning towards real social cohesion, forming reliable democratic institutions to drive the digital revolution, gender equality and to give the Green Agenda the final push that it needs. 

Perhaps we can transition from this pilot exercise focused on COVID-19 towards a working methodology and relationship model for European cooperation and partner countries: progress from COVID19 Round Tables to Team Europe Round Tables, making the “policy first” principle part of a structured mechanism for joint dialogue, implementation and partnership. 

There’s no doubt that this is a difficult task, but it is one in which FIIAPP is determined to play a part. 

Let’s keep building our future together. 

Mariana Fernández, Management Support Unit at FIIAPP 

Fiscal policy is an invaluable tool for reducing inequalities, so it is vital to a programme like EUROsociAL+, which promotes social cohesion in Latin America. The public finance area of the European Union programme has participated in the Public Finance Laboratory organised by AECID.

What is the Public Finance Laboratory, organised by AECID, that EUROsociAL took part in, and why is it being implemented at this time?

The International Monetary Fund’s chief economist, Gita Gopinath, has pointed out that after the impact of COVID, the world faces a global liquidity trap, which requires a decisive and forceful use of fiscal policy, and public spending in particular, in order to avoid the dangerous effects that this situation could have in the long term.

One of the first to understand this situation was the European Commission, which months ago launched its massive public spending plan called Next Generation EU, designed to reactivate the European economic space.

Faced with this situation, the Spanish Cooperation Training Centre (CFCE) in Montevideo has, through the AECID INTERCOONECTA platform, organised the “Laboratory on Public Expenditure in the Context of COVID-19” with the participation of the European Union’s EUROsociAL+ programme together with other institutions such as the OECD, ECLAC, the IDB and the IEF, a Fiscal Studies Institute dependent on the Spanish Government’s Finance Ministry and an ally of the Programme.

This laboratory is part of Spanish cooperation’s joint response strategy against COVID and seeks, through the exchange of knowledge and experiences, to contribute to improving the efficiency and effectiveness of fiscal policies to achieve the harmonisation of domestic resources and meet the demands of citizens without leaving anyone behind. 

What recommendations and lessons learned in the field of public spending has the EUROsociAL programme collected that are of vital importance for Latin America?

First, at a global level, public spending must increase significantly. After a decade of monetary interventionism by the world’s main central banks, the impact of COVID has forced a greater amount of slack and monetary expansion (90% of developed countries have interest rates below 1%, 60% in the case of emerging countries).

This situation has left central banks with little room for manoeuvre and forces the use of fiscal policy to lever the reactivation of the global economy. In this context, the bulk of international financial organisations are recommending a significant increase in public spending financed by cheap debt, increasing public deficits and the application of selective taxes on sectors that have best weathered the crisis. An environment like the current one, with low interest rates and growing fiscal multipliers, favours a sustainable expansion of public spending in order to avoid “secular stagnation”, that is, persistently low economic growth, which could last for decades.

How can public spending be made more efficient? What sectors should it focus on?

The increase in public spending should, in effect, be directed towards those sectors with the greatest impact on economic reactivation and the promotion of social cohesion.

In the first instance, it seems essential that part of this increase in public spending be allocated to the health sector to strengthen the public capacity to face and limit the ravages generated by the coronavirus.

In addition, in this first phase, automatic stabilisers have exercised a countercyclical function, however, this is not proving sufficient. It is therefore necessary to increase public investment in those sectors with the highest fiscal multipliers. There is a certain consensus that these sectors are those related to productive infrastructures, the different spheres of human capital (education, R&D, social protection) and reforms that improve institutional quality.

Finally, this expansion must aim to correct the inequalities, already present in Latin America, that the COVID crisis has further exacerbated. In addition, these redistributive policies will make the increased economic growth more profound.

Why is it important to strengthen public capacities to improve the quality of spending? How is the EUROsociAL programme actually doing this in practice?

Because an increase in public spending cannot be carried out effectively if public capacities are not strengthened. When institutions are not strengthened and must increase their budgetary execution, phenomena such as inefficiency, misallocation and corruption can arise.

To avoid these situations, it is necessary to strengthen public capacities in various fields, such as regulations, human resources, financing, training and incentives, among others. In addition, it is necessary to establish a clear and transparent framework in managing and accounting for the results achieved, so that the trust of citizens is reinforced with regard to institutions and their legitimacy for managing these resources.

In this sense, at EUROsociAL+, particularly from the public finances aspect, we are trying to implement fiscal policies aimed at economic reactivation and the promotion of social cohesion.

To do this, we are supporting the state of Guanajuato in Mexico in designing a new social policy that enables social spending to be increased and levels of poverty and inequality in the region to be reduced.

In the area of spending effectiveness, we are supporting the “evaluation of public spending” and “mainstreaming the gender approach in results-based budgeting programmes” in countries such as Paraguay, Argentina, Brazil, and Central America.

Finally, regarding the strengthening of state capacities, the entire EUROsociAL+ governance area is working to strengthen institutional capacities in areas such as justice, territorial development and good governance.