Managing fiscal revenues from commodities:
Why do they matter and what can be done?
Ángel Melguizo
Head, Americas Desk
OECD Development Centre
LAC Tax Policy Forum
Macroeconomic implications of the tax treatment of extractive
industries and relationships between levels of government
Mexico City – July 3-4, 2014
Managing fiscal revenues from commodities: why do they
matter and what can be done?
• Some key recent fiscal developments in Latin America
are commodity-related
• Commodities have also been very relevant for the macro
of the region
• (We suspect) Latin America is not saving (enough)
• Saving revenue windfalls: how? how much? what for?
2
Tax revenues convergence to OECD levels
Tax revenue over GDP
Difference (A-B)
LAC (A)
OECD(34) (B)
40
35
30
25
20
15
10
5
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Source: OECD‐ECLAC‐CIAT (2014), Revenue Statistics in Latin America 1990‐2012
Tax revenues over GDP in LAC have been converging to OECD
3
levels
since 1990
… related to the commodity-prices boom
Fiscal revenues from non-renewable resources
(billion USD and %GDP)
%GDP
PEMEX
México
7.7
Brasil
2.2
Venezuela (R.B.)
9.8
Colombia
4.4
Argentina
2.8
Ecuador
14.7
Chile
3.1
Peru
3.3
Bolivia (E.P.)
12.2
0
20
40
60
Source: OECD‐ECLAC‐CIAT (2014), Revenue Statistics in Latin America 1990‐2012
4
80
100
Managing fiscal revenues from commodities: why do they
matter and what can be done?
• Some key recent fiscal developments in Latin America
are commodity-related
• Commodities have also been very relevant for the macro
of the region
• (We suspect) Latin America is not saving (enough)
• Saving revenue windfalls: how? how much? what for?
5
Resource windfalls related to commodities have historically
increased macro volatility
Resource windfalls in LAC (mid 60s – 2013)
LAC Promedios lamda = 400
Alimentos
Minerales
Combustibles
Remesas
Flujos de capital de corto plazo*
Inversión extranejra directa
Total recursos naturales
Total con flujos de capital
Suramérica Promedios lamda = 400
Alimentos
Minerales
Combustibles
Remesas
Flujos de capital de corto plazo
Inversión extranejra directa
Total recursos naturales
Total con flujos de capital
6
# bonanzas
Duración (años)
41
10
13
21
14
24
64
123
4,4
4,1
4,1
4,1
2,9
3,3
4,3
3,9
# bonanzas
Duración (años)
21
9
10
5
12
7
40
64
4,0
4,0
4,2
3,8
2,4
4,3
4,1
3,8
brecha Tamaño promedio promedio antes de la (% PIB)
bonanza
5,9
5,3
5,7
2,9
6,8
5,1
5,7
5,3
‐0,3
‐0,8
0,0
‐1,7
0,7
1,3
‐0,3
‐0,1
brecha Tamaño promedio promedio antes de la (% PIB)
bonanza
5,0
5,6
6,0
2,8
7,3
3,2
5,4
5,3
‐1,3
‐1,5
‐0,5
0,3
0,7
3,5
‐1,1
‐0,2
brecha promedio durante la bonanza
brecha promedio despues de la bonanza
Cambio en la brecha promedio durante la bonanza
Cambio en la brecha promedio despues de la bonanza
Cambio en la brechaentre antes y despues de la bonanza 2,6
1,1
0,9
‐0,4
4,4
4,0
2,0
2,3
‐0,7
‐2,0
‐1,6
‐1,3
‐0,5
‐0,5
‐1,1
‐0,9
3,4
1,9
0,9
1,6
3,7
3,5
2,6
2,7
‐3,8
‐3,4
‐2,9
‐0,9
‐4,9
‐3,2
‐3,5
‐3,2
‐0,4
‐1,4
‐1,9
0,2
‐1,2
0,6
‐0,9
‐0,5
brecha promedio durante la bonanza
brecha promedio despues de la bonanza
Cambio en la brecha promedio durante la bonanza
Cambio en la brecha promedio despues de la bonanza
Cambio en la brechaentre antes y despues de la bonanza 2,8
1,6
0,1
‐0,1
1,9
5,0
1,9
2,1
‐0,8
‐1,8
‐1,0
‐2,3
‐0,9
‐1,5
‐1,1
‐1,2
4,3
3,1
0,6
‐0,3
1,2
4,8
3,1
2,7
‐3,9
‐3,8
‐1,4
‐2,2
‐2,8
‐3,2
‐3,3
‐3,1
0,3
‐0,3
‐0,8
‐2,5
‐1,6
1,6
‐0,1
‐0,4
Source: OECD‐CAF‐ECLAC (2014), Latin American Economic Outlook 2015. In progress.
Managing fiscal revenues from commodities: why do they
matter and what can be done?
• Some key recent fiscal developments in Latin America
are commodity-related
• Commodities have also been very relevant for the macro
of the region
• (We suspect) Latin America is not saving (enough)
• Saving revenue windfalls: how? how much? what for?
7
Commodity-related public revenues explain a lot of recent
improvements in Argentina …
Adjusted primary budget balance
(%GDP)
Uruguay
Argentina
Cyclical
Observed
Cyclical
Adjusted
10.00
10.00
8.00
8.00
6.00
6.00
4.00
4.00
2.00
2.00
0.00
0.00
‐2.00
‐2.00
‐4.00
‐4.00
‐6.00
Commodity related
Observed
Adjusted
‐6.00
1992
1994
1996
1998
2000
2002
2004
2006
2008
1991
1993
1995
1997
1999
2001
2003
Source: Daude, C., A. Melguizo and A. Neut (2010), “Fiscal policy in Latin America: Countercyclical and sustainable at last?”, OECD Development Centre Working Paper 291
8
2005
2007
2009
… Chile, Peru…
Adjusted primary budget balance
(%GDP)
Chile
Peru
Cyclical
Commodity related
Observed
Cyclical
Adjusted
2.00
6.00
0.00
5.00
8.00
4.00
6.00
3.00
4.00
2.00
2.00
1.00
0.00
0.00
2.00
‐1.00
4.00
‐2.00
6.00
Commodity related
Observed
Adjusted
‐3.00
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
1990
1992
1994
1996
1998
2000
2002
2004
Source: Daude, C., A. Melguizo and A. Neut (2010), “Fiscal policy in Latin America: Countercyclical and sustainable at last?”, OECD Development Centre Working Paper 291
9
2006
2008
… and Mexico
Adjusted primary budget balance
(%GDP)
Mexico
Cyclical
Commodity related
Observed
Adjusted
12.00
10.00
8.00
6.00
4.00
2.00
0.00
‐2.00
‐4.00
‐6.00
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: Daude, C., A. Melguizo and A. Neut (2010), “Fiscal policy in Latin America: Countercyclical and sustainable at last?”, OECD Development Centre Working Paper 291
10
Managing fiscal revenues from commodities: why do they
matter and what can be done?
• Some key recent fiscal developments in Latin America
are commodity-related
• Commodities have also been very relevant for the macro
of the region
• (We suspect) Latin America is not saving (enough)
• Saving revenue windfalls: how? how much? what for?
11
Saving revenue windfalls: learning from peers from the
region and outside
• How?
- Fiscal framework (e.g. rule) with a stabilisation fund?
- Separated from the general budget?
• How much?
- Structural (long-term) prices and quantity
• What for?
- Fiscal sustainability and/or
- Stabilisation and/or
- Development (infrastructure, health, education) and/or
- Equity (inter-generational, territorial)
12
Gracias!
www.oecd.org/dev