How to Spend $10 billion in Latin America and the Caribbean

If Latin American and Caribbean governments had $10 billion to solve their most urgent problems, how should they spend it? Last week, the Inter-American Development Bank (IDB), in a joint venture with the Copenhagen Consensus Center (CCC) and the INCAE business school, organized the Consulta de San José, in the capital city of Costa Rica.

Based on a methodology originally applied at the Copenhagen Consensus of 2004, the Consulta de San José consisted of three days of structured presentations and debates regarding 44 possible solutions to problems in 10 specific areas.

The original 10 challenges were selected through a survey conducted by the IDB of Latin American and Caribbean professionals, including policymakers, academics, business representatives, journalists, and researchers, among others. The 10 problem areas highlighted in this survey were education, violence and crime, poverty and inequality, fiscal policy, democracy, infrastructure, forests and biodiversity, employment and social security, public administration and health. For each challenge, a top academic in the field wrote a “Solution Paper” offering a number of potential solutions, with relevant costs and benefits to each. In addition, an “Alternative View” author presented his or her opinion on the Solution Paper, in some cases offering additional solutions to the challenge.

A team of nine economic experts drawn from Latin America and elsewhere weighed these proposed solutions, carefully considering the costs, disadvantages and advantages of each one. The experts present at the Consulta de San José included Nobel Laureate in Economics Finn Kydland, Chilean Finance Minister Andrés Velasco, former United Nations Under Secretary General José Antonio Ocampo, Harvard University professor Ricardo Hausmann, former Director of the United Nations Development Program’s Poverty Group Nora Lustig, and Nancy Birdsall, president of Center for Global Development in Washington, D.C.

In parallel, 35 graduate students from 20 countries across Latin America and the Caribbean participated in the Consulta de San José Youth Forum. The Youth Forum operated in parallel to the Experts Panel, and was assigned the same task – prioritize a range of solutions to pressing regional problems based on benefit-cost analyses presented by the authors.

At the end of the three days, the nine renowned economists, along with graduate students, released prioritized lists of the 44 programs. The economists listed early childhood development programs, fiscal rules and increased investment in physical infrastructure as the three policies that would offer the greatest development impact per dollar spent. By contrast, the graduate students gave top billing to nutrition programs for preschool children, conditional cash transfers for education, and increased access to healthcare.

All the participants recognized that this exercise has its limitations, chief among them being that the proposed solutions had to be accompanied by cost-benefit analyses, thus they were limited to interventions that have already been tested somewhere and for which there is some quantitative program evaluation. Despite its limitations, the exercise proved to be useful because prioritization, while certainly unpleasant, is unavoidable with scarce resources. While the prioritized lists are in no way a blueprint for reform, they are informative about the kind of programs that, in the judgment of a group of talented economists, have a greater bang for the buck in the region. For more information on the Consulta, the process, the papers and the results, please visit here.