Reflections on 20 Years of PEFA in Latin America

Over the past twenty years, Latin America^[1] has undertaken a total of 106 PEFA assessments: 44 at the national level, 47 at the subnational level and 15 using the supplementary frameworks on gender and climate change. Together, these exercises cover nearly every country in the region and represent a remarkable and sustained contribution to the global development of the PEFA framework. The growing application of the supplementary tools also reflects a marked regional interest in linking PFM practices to broader policy and development outcomes.

 

Engagement with PEFA at country level is, however, uneven. About half of the countries have applied the framework with some degree of regularity and used it to inform ongoing PFM reform efforts. The other half have engaged only sporadically, often treating PEFA as a standalone diagnostic rather than as part of a longer-term process of institutional strengthening, with four countries yet to undertake an assessment at the national level. This variation reflects differences in political priorities, familiarity with the PEFA methodology, institutional capacity and the level of support from the donor community.  

 

At the subnational level, about two-thirds of all PEFA assessments completed have been carried out in Peru and Ecuador, where they have been used to drive PFM reform at regional and local levels of government and to encourage dialogue on intergovernmental fiscal relations. In other countries where the PEFA methodology has been applied more selectively, results have provided valuable information on the performance of subnational PFM systems and their linkages with central government processes. This has been particularly relevant in federal contexts such as in Brazil, Mexico and Argentina.

 

Since the introduction of the 2016 framework, the pace of PEFA application in the region has slowed. The number of new national assessments has noticeably declined and, at the subnational level, initiatives have been fewer and less frequent. At the same time, a significant share of both national and subnational reports is unpublished, which affects transparency and weakens opportunities for peer learning and policy dialogue with stakeholders and development partners, two of the main strengths of the PEFA approach.

 

Results and patterns

PEFA findings show that Latin America’s PFM systems are broadly aligned with international good practices and that performance has steadily improved over time. The highest indicator scores are typically found in the upstream stages of the budget cycle, which include planning, macro and fiscal programming, and budget preparation, and where progress is often supported by clear institutional mandates and strong Ministry of Finance leadership. This outcome also reflects the long-standing orientation of reform efforts in the region toward strengthening fiscal discipline and expenditure control.

 

In contrast, the downstream stages of the budget cycle – execution, accounting, reporting, and audit – tend to show weaker results. Advancing reforms in these areas requires close coordination across multiple institutions and sustained political commitment, conditions that have often been harder to secure. The result is a persistent structural imbalance. While most countries have developed robust frameworks to maintain fiscal discipline, fewer have built the institutional capabilities needed to ensure that public resources are used strategically and with efficiency and effectiveness in the provision of public services. 

 

Utilization and ownership

While the region has contributed actively to the global spread of PEFA, the framework’s potential as a reform catalyst has not been fully realized. In many cases, assessments have been treated primarily as diagnostic exercises, valuable for identifying strengths and weaknesses, but not systematically linked to reform planning and implementation. Ministries of Finance, usually the institutional leads, have not always succeeded in converting PEFA findings into structured, government-led reform programmes, and coordination with line ministries and oversight institutions has been, on the whole, limited.

 

Development partners have played a constructive role in financing and supporting assessments, helping introduce the methodology and building national capacity. The next stage, however, requires stronger government leadership. For PEFA findings to translate into effective reform, responsibilities must be clearly assigned, adequate resources – both financial and technical - must be secured, and realistic timeframes established. Also, PEFA self-assessments must be encouraged as a way to lower costs and strengthen institutional learning and ownership. 

 

Looking Ahead

The next phase of PEFA in Latin America should aim to refresh the diagnostic base and use it to guide comprehensive reform programmes that strengthen the entire budget cycle. Reforms should not attempt to address all weaknesses simultaneously but should focus – prioritize even – on the downstream stage: execution, reporting, and audit, where persistent gaps remain. These functions are critical to closing the feedback loop of the budget process and ensuring that fiscal discipline translates into tangible improvements in service delivery.

 

At the same time, it will be important to deepen the analysis of intergovernmental fiscal relations by applying the PEFA SNG framework more broadly, helping countries understand how the division of responsibilities and resources affects overall PFM performance. Extending the use of the supplementary frameworks on gender and climate change, as well as conducting sector-level assessments in areas such as health or education, would further connect PFM performance to policy outcomes that matter to citizens.

 

Finally, PFM reform strategies will need to anticipate the transformative impact of technology. Data analytics, artificial intelligence and automation are reshaping how fiscal information is generated, verified and shared. To remain credible and effective, Latin America’s PFM systems will need to evolve in step, embracing new tools that can enhance the timeliness and quality of fiscal decision-making.