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July 13, 2020

The Role of Latin American Legislatures in Budget Control During Covid-19

Covid
Posted by María Baron[1]

Governments in Latin America, as elsewhere, have assigned huge amounts of resources to tackling the health, economic and social impacts of the pandemic. While swift responses to mitigate the crisis are imperative, the transparency and oversight of these measures and governments’ accountability must not be neglected.

What role have Latin American parliaments been playing in allocating budgetary resources during the crisis, or managing specific COVID-related funds? Is this role different compared to before the pandemic?

A review conducted by Argentina’s Directorio Legislativo in collaboration with the International Budget Partnership of the practices and responses of parliaments in seven Latin American countries - Argentina, Brazil, Chile, Colombia, El Salvador, Mexico and Peru - between April and May 2020, sheds important light on these questions.

One clear trend is that decision-making power has shifted significantly to the executive branch. Coronavirus has disrupted parliamentary routines and forced legislatures to adapt their normal working modalities. Some legislatures have been managing these changes well but, overall, their capacity to debate and oversee lawmaking has been weakened. In the early days of the pandemic more time was spent on holding briefings than on actual decision-making.

Increase in government discretion over spending decisions

In Brazil, Chile and El Salvador, the legislative branches have been more active than in Argentina, Colombia, Mexico and Peru, where most of the budgetary decisions have been made through executive or presidential decrees. In Colombia, for example, the declaration of the Economic, Social and Ecological Emergency vested the President with powers to issue decrees with the force of law, including the creation of new taxes or modifications to existing ones. In Peru, for a period of 45 days, Congress delegated to the Executive the authority to legislate in fiscal and tax matters, investment promotion and protection of the productive, extractive and service sectors.

The relatively more active role of the legislative branches of Brazil, Chile and El Salvador is reflected in the following examples:

  • Brazil: Congress elaborated and approved emergency subsidies, established the National Program to Support Micro and Small Businesses and the Federal Program to Confront COVID-19.
  • Chile: Congress modified the Guarantee Fund for Small and Medium Entrepreneurs and approved the granting of an Emergency Family Income created to mitigate the economic effects of the emergency.
  • El Salvador: the Legislative Assembly modified the Budget Law to increase resources for the Fund for Disaster Prevention and Mitigation and Public Works, amended the Fund for the Economic and Social Development of Municipalities, and authorized the Executive to seek a loan from International Bank for Reconstruction and Development (IBRD).

Role of supervision of legislatures: creation of special control mechanisms.

Except for Argentina and El Salvador, each of the countries studied has created independent special committees within the legislature to monitor the government’s COVID-related emergency measures. These committees analyze, evaluate, investigate and discuss their findings and agree on recommendations - though they are not binding. Other mechanisms have also been established. In Chile, for example, the legislature oversees the Guarantee Fund for Small and Medium Entrepreneurs and the implementation of the Emergency Family Income scheme. In Brazil, the extraordinary fiscal, financial and contracting regime enacted during the state of emergency can be suspended by Congress in the event of irregularities or non-compliance with the scheme’s rules and procedures.

Haste should not come at the expense of transparency, control, and accountability

The pandemic has confirmed that, while it is imperative to enact rapid response measures to address the crisis, maintaining strong democratic processes that guarantee transparency and accountability is equally important. The Directorio Legislativo study highlights a worrying trend of insufficient parliamentary budget supervision and control in the region. The executive has been given broad powers to deal with the COVID-19 crisis and, while some parliaments have responded by implementing new controls, they have done so unevenly and in general far less than is needed.

It can be argued, indeed, that the pandemic presents an opportunity for legislatures to strengthen their oversight and supervisory role by:

  • actively participating in the formulation of laws and policies in response to the emergency;
  • independently monitoring, directly or through special control mechanisms, the implementation of the measures, in coordination with other oversight entities such as the supreme audit institution; and
  • strengthening or implementing new mechanisms for interaction and dialogue with civil society; and
  • extending some of the emergency schemes already implemented into permanent mechanisms after the pandemic is over that would strengthen the ability of legislatures to hold the executive to account for its fiscal performance.

Such efforts to empower legislatures to act as powerful watchdogs of governments would not just create short-term benefits but enhance these institutions for the future.

Link to full report

This article is part of a series related to the Coronavirus Crisis. All of our articles covering the topic can be found on our PFM Blog Coronavirus Articles page.

 

[1] Executive Director of Directorio Legislativo, Argentina. Ms. Baron is on the Steering Committee of the Open Government Partnership and is a member of the UNDP’s Civil Society Advisory Committee.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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