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

Posted: 25 Aug 2015

See all articles by Aldo Musacchio

Aldo Musacchio

Brandeis University- International Business School; National Bureau of Economic Research

Emilio Pineda

Inter-American Development Bank (IDB)

Gustavo Garcia

Inter-American Development Bank (IDB)

Date Written: July 7, 2015

Abstract

In this paper, we examine the challenges governments in Latin America face to control their state-owned enterprises (SOEs). We argue that, absent privatization, governments can rely on a variety of reforms to address some of the main problems affecting SOEs. We divide these problems 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. We then discuss a variety of solutions for each of these problems. Rather than providing a single recipe, we argue 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, we argue 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.

Keywords: State-owned enterprises, privatization, state reform, Latin America, corporate governance, fiscal decentralization

JEL Classification: H11, H50, H77, G30

Suggested Citation

Musacchio, Aldo and Pineda, Emilio and Garcia, Gustavo, State-Owned Enterprise Reform in Latin America: Issues and Possible Solutions (July 7, 2015). Available at SSRN: https://ssrn.com/abstract=2650519

Aldo Musacchio (Contact Author)

Brandeis University- International Business School ( email )

415 South Street MC 32
Waltham, MA 02454-9110
United States

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/aldo_musacchio

Emilio Pineda

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Gustavo Garcia

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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