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Reinforcing Fiscal Discipline, Public Sector Management, and Service Delivery in the State of Rio de Janeiro

Rio de Janeiro Improves Service Delivery

July 10, 2013

The project will lead to improvement in the living conditions of the poorest communities, greater access to safety nets and social security, and reduced school dropout rates.

In the wake of the 2008 worldwide financial collapse, the state Government of Rio de Janeiro strengthened its policies to improve fiscal management, the business environment, and service delivery in education and health, and to guarantee the continuity of these policies despite a projected fiscal gap. Between the end of 2008 and the end of 2010, the state’s net financial position increased from R$1,1406 million to R$2,1765 million; the share of payments made by the state in less than 30 days increased from 82 percent to 94.2 percent; the average number of days to register a firm was reduced from 63 to 36; the number of students receiving smart cards increased from 0 to 771,291; and the number of services received at the Urgent and Emergency Care Units increased from 1.3 million to 6.25 million, to name a few.

Challenge

Brazil’s economy recovered relatively quickly from the global economic crisis, but damaging effects lingered. In the state of Rio de Janeiro, revenue collection deteriorated while expenditures on infrastructure increased, limiting the state’s ability to implement planned investments and other expenditures—and especially to improve the efficiency and effectiveness of public services.

Outcomes in education and health were well below the national average. In education, secondary school completion rates were 44.5 percent, compared to the national average of 50.9 percent. In health, only 27.7 percent of the state’s population was covered by basic health care programs, compared to the regional and national averages of 40.5 percent and 58.1 percent, respectively.

Solution


The Development Policy Loan (DPL) was designed to help with projected 2010 financing needs, giving special attention to such lagging sectors such as education and health. To strengthen and support the continuity of the state of Rio de Janeiro’s public service improvement plans, the loan focused on four priority policy areas:

  • Strengthening fiscal consolidation,
  • Improving the business environment,
  • Increasing the quality and efficiency of the basic education system, and
  • Increasing access to and the efficiency of health services, especially for urgent and emergency health care in disadvantaged areas and for low-income populations. 

Some specific supported programs included the state pension plan (RioPrevidência), a system to streamline the business registration process (Cadastro Fácil), an accelerated learning program for basic education, (Projeto Autonomia) and a system of performance-based state financial transfers to municipal hospitals (Programa de Apoio aos Hospitais do Interior – PAHI).

Results

This loan helped to improve the efficiency and effectiveness of state public services by strengthening policies in fiscal management, the business environment, basic education, and urgent and emergency health services:

  • Fiscal consolidation was strengthened through a reduction of long-term fiscal risk, improved efficiency of tax administration and collection, and strengthened budget procedures.  Between 2008 and December 2010, the state’s net financial position increased by 91 percent, and RioPrevidência’s net asset position increased by 235 percent.
  • The quality and efficiency of the business registration process was improved.  Between 2008 and April 2011, the average number of days to register a firm was reduced from 63 to 31, a reduction of 103 percent.
  • The quality and efficiency of the public secondary education system was increased.  Overall, all students enrolled in the state’s public secondary system (approximately 470,000 in 2001) are expected to benefit of the reforms. By April 2011, 2,030 teachers were trained for Projeto Autonomia;  42,743 students were estimated to be enrolled in the program.
  • Access to and efficiency of health services, especially for urgent and emergency health care in disadvantaged areas and for low-income populations, was increased.  Most of the population living in the metropolitan region of the municipality of Rio de Janeiro that do not have access to basic public health services and do not have private health insurance (approximately 5.5 million in 2011) will benefit from the health reforms supported by this operation. Most of this population belongs to the poorest two quintiles of the population. From 2008 to December 2010, 64 out of 69 municipalities had signed PAHI performance agreements, and the number of services at 24-Hour Rapid Service Units (Unidades de Pronto Atendimento) increased 381 percent.

The number of services at 24-Hour Rapid Service Units (Unidades de Pronto Atendimento) increased 381%.

Bank Group Contribution

The Bank loan totaled to US$485 million in 2010. The Bank analytical inputs used in the design of the operation included:

  • A Poverty and Social Impact Analysis report.
  • Doing Business 2010: Reforming Through Difficult Times (2010)
  • Hospital Performance in Brazil: The Search for Excellence (2008).
  • Various detailed background documents prepared by the task team on the state’s fiscal and debt sustainability, and education policy strengths and needs.

Partners

The State Secretariats of Finance, Education, and Health and Civil Defense were key partners in guaranteeing satisfactory implementation and efficient monitoring of operation outcomes. The strong partnership between the Bank and the Rio de Janeiro state Government was reflected in the successful cooperation between in the design and implementation of this project.

Moving Forward

This was the first of three DPLs designed to reinforce fiscal discipline, public sector management, and service delivery in Rio de Janeiro.  This collaboration is continuing through two further DPLs. The second DPL is the current Metropolitan Urban and Housing Development Loan, which aims to strengthen policies regarding planning and managing territorial growth through the provision of affordable housing and the creation of integrated social development programs targeted to the poor.  The third DPL is the upcoming State Fiscal Consolidation for Efficiency and Human Development Loan, which will continue to focus on and expand some of the policies covered by this first DPL and, additionally, focus on public sector management reforms.

Beneficiaries

The policy actions supported by this DPL are achieving significant positive impacts on the poverty and social conditions of the people of Rio de Janeiro, especially the poor.  These actions will help increase the state’s capacity to invest in infrastructure, improve access to the formal market economy, reduce age-grade distortion and rates of absenteeism among poor children, increase access to public health services in poor areas, and improve the allocation of public health funds. These efforts will lead to improvement in the living conditions of the poorest communities, greater access to safety nets and social security, reduced school dropout rates, and improved quality of health care.