Amid the unprecedented challenges unleashed by the COVID-19 pandemic worldwide, Latin America and the Caribbean (LAC) faced a pressing need: have intelligent tools to anticipate and manage risks threatening the economic and fiscal stability of the region.
In response to this need, FISLAC (Fiscal Sustainability for Latin American and Caribbean Countries) was born, an innovative technological platform to strengthen strategic fiscal policy decision making, launched in the last quarter of 2022.
Developed by the Fiscal Management Division of the Inter-American Development Bank (IDB), FISLAC has emerged as an essential ally for finance ministries, facilitating fiscal management in an environment characterized by uncertainty. This solution provides real-time analysis of macro-fiscal risks, promoting fiscal sustainability and contributing to economic growth to enhance the quality of life for the population.
Exploring FISLAC: Beyond a Technological Platform
FISLAC is not merely a platform; it is a complete ecosystem that encompasses forecasting models, fiscal rule calibration, and risk assessment. This toolkit allows policymakers to address crucial issues that can affect fiscal policy, from institutional strengthening to debt management, climate change, and energy transition. Easily accessible through its web platform, FISLAC offers a public data module with over 140 variables, allowing comparative analysis and providing a solid foundation for informed decision making.
Exclusively for governments, FISLAC-EWS (Early Warning System) detects vulnerabilities in fiscal and macroeconomic variables, supporting the formulation of policies to mitigate potential risks. Additionally, it allows comparisons of indicators and risks among countries and groups, enhancing resilience in fiscal stress situations.
Sustainability and Resilience: Confronting the Impact of Natural Disasters
Climate change and natural disasters have increased fiscal impact, underscoring the importance of the Public Climate Change Module. This module analyzes natural events, assesses their frequency and consequences, providing an updated view of regional vulnerability.
How do natural disasters affect fiscal sustainability? FISLAC models allow users to evaluate the impact on macro-fiscal variables of different large and persistent climate shocks. This contributes to the formulation of resilient strategies that consider stress scenarios related to natural disasters and the resilient investment response needed to mitigate potential negative effects stemming from these scenarios.
Institutional Strengthening: Closing Gaps and Promoting Transparency
FISLAC has contributed to close gaps in fiscal policy formulation. It offers specialized templates for Medium-Term Fiscal Frameworks, promoting realistic and consistent projections to assess sustainability. The FISLAC-EMA application exclusively available for governments provides access to an advanced macroeconomic model, simplifying the evaluation of fiscal policies and identifying measures to improve medium-term fiscal stability.
Moreover, FISLAC addresses compliance with fiscal rules. The Fiscal Rule Compliance Hub analyzes fiscal rules, allowing countries to assess compliance individually or compared with other nations, facilitating the identification of institutional gaps.
FISLAC includes a Public Investment module that provides a detailed understanding of investment spending dynamics in the region. It offers information on the amount invested, investment areas, and key actors. Additionally, it analyzes determinant factors, addressing efficiency and execution issues in spending across LAC. It also shows the importance of public investment performance in economic activity, including estimates of the public investment multiplier by country.
Regional Collaboration: A Year of Achievements and Significant Contributions
In its first year of operation, FISLAC has established successful collaborations with 11 economies in Latin America and the Caribbean, becoming an essential tool to analyze and mitigate macroeconomic and fiscal risks.
During this period, it has supported these economies through technical assistance, including the creation of models, the development of risk analyses, and the customization of technological solutions. Its contribution has significantly strengthened the technical capacity of macro-fiscal institutions, supporting financial sustainability in the region. FISLAC also provided in-depth analysis about LAC’s debt dynamics and fiscal risks that served as the base for the IDB’s flagship study Dealing with Debt launched last year.
FISLAC has worked closely with LAC countries, advising on the strengthening of Medium-Term Fiscal Frameworks (MFMP) in Brazil, Honduras, and Belize, and developing macro-fiscal forecasting models in Peru, Colombia, Paraguay, and the Dominican Republic.
Collaboration with Colombia and Paraguay has also propelled tools for sovereign credit risk analysis. In terms of institutional strengthening, it has actively supported the creation and improvement of fiscal councils in Peru, Colombia, and Paraguay, as well as the implementation of new fiscal rules in Brazil, Colombia, and Honduras.
It has also worked on estimating prudent debt levels and provided support in analyzing scenarios related to climate change in countries such as Brazil, Peru, Paraguay, and Argentina. Recently, we organized a Regional FISLAC Workshop with Central American and Dominican Republic countries, addressing strategic topics on macro-fiscal risk analysis.
We also held two Regional Policy Dialogues, discussing experiences in recalibrating fiscal institutions post-pandemic and strengthening public investment. During these events, we launched the Public Investment module and the Fiscal Rules Hub.
FISLAC in Action: Innovating for the Future
FISLAC does not stop in its first year. As part of its continuous improvement, new reports exclusively available for governments will be introduced to guide their decision making. The FISLAC+ report will offer a detailed view of the economic and fiscal context, while the FISLAC-CaRS report will provide personalized guidance to improve credit ratings.
The next steps of FISLAC demonstrate the commitment of the IDB and its Fiscal Management Division to fiscal sustainability in LAC. These new reports will provide valuable information and precise guidance to address economic, fiscal, and climate challenges, keeping FISLAC as a strategic partner in the IDB’s ongoing mission to improve lives.
All the progress and achievements made throughout the past year have been possible thanks to the FISLAC team: Matheo Arellano, Juan Camilo Díaz, Gustavo Sánchez, Andrea Correo, Carolina Dueñas, Carolina Ulloa, Alejandro Uribe, Alfredo Vilca, Daniel Rueda, Diana Velázquez, Federico Dueñas, Juliana Duque, Jorge Guerra, and Juan Esteban Ladino.
Would you like to learn more about FISLAC? Access the platform.
Read our flagship study Dealing with Debt.
Explore other related blogs:
How to Prevent Debt from Hurting Economic Growth
Complying with Fiscal Rules in Latin America and the Caribbean: From Promises to Action
How Do Inflation Shocks Affect Public Debt Dynamics?
What are the specific countries that FISLAC has collaborated with during its first year of operation?