Designed to Succeed, Designed to Fail: Determinants and Reform Options for Local Public Investment Execution in Peru

Peruvian local governments manage close to 40% of national public investment, yet they execute on average only 60% of their budget. This study examines the causes of low execution at the project level, using a panel of 197,612 local public investment projects for the period 2012-2024. The results show that project cost, the number of years a project has been active, its funding source, whether it was inherited from a previous administration, and the mayors experience account for much of why some projects advance and others do not, even when comparing projects within the same municipality and year. Based on these findings, we propose and simulate five policy reforms that, taken together, could raise the execution ratio by 8.6 to 11.4 percentage points and generate fiscal gains equivalent to between 0.25% and 0.42% of annual GDP.