State-Owned Enterprise Reform in Latin America Issues and Possible Solutions

This paper examines the challenges governments in Latin America face to control their state - owned enterprises (SOEs). It argues that, absent privatization, governments can rely on a variety of reforms to address some of the main problems affecting SOEs. These problems are divided into corporate governance problems — which in clued agency and multiple - principals’ problems — and the fiscal governance problem, which has to do with the discretionary nature of the fiscal relationship between the government and its enterprises. Then the paper discusses a variety of solutions for each of these problems.  Rather  than providing  a  single  recipe, it  argues that  governments  can  design  governance mechanisms that rely on the market (e.g., by partially privatizing a firm and listing it on a stock exchange) , on ex - ante administrative controls , or on hybrid solutions that combine both . Thus, the paper argues that the mechanisms to deal with the problems  of  SOEs have to  be designed on  a  case-by-case  basis,  considering the specific problems  of  the  public  enterprise  in  question and the economic (and political) environment affecting it.