Implementation Strategy

Given the global scope of this program, its governance rests with the United Nations Statistical Commission, which serves as the IPC Steering Committee, ensuring adequate representation of countries and multilateral organizations.

The World Bank is the global implementing agency, known as the Global Office (GO), and is responsible for coordinating and executing the program globally, as well as producing and disseminating the results.

ECLAC serves as the regional coordinator for Latin America and the Caribbean. Its role is to implement the program guidelines at the level of participating countries, process the information compiled by the countries, develop regional PPAs, and transmit this information to the Global Office. It is also responsible for producing and disseminating the results among participating economies and at the regional level.

Working guidelines and information requirements flow from the GO to the regional implementation offices, which then transmit them to the countries through focal points or national officers designated by their respective institutions.

Diagram of the Governance of the International Comparison Programme (ICP)

ECLAC's Participation in the International Comparison Program

In Latin America and the Caribbean, Colombia was a pioneer in joining this international comparison effort in the 1970s, followed by Jamaica in 1980. Although regional participation was intermittent at first, a continuous collaborative process has been maintained since 2005. During that cycle, coordinated globally by the World Bank and with 2005 as the reference year, ECLAC—in conjunction with Statistics Canada—administered the program for South America, with the participation of Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, and Venezuela.

Subsequently, the 2011 Round marked a global milestone with the participation of more than 190 countries. In that edition, whose activities began in 2009, 22 Caribbean countries and 17 Latin American countries collaborated. Chile and Mexico joined this group, and while they were part of the regional program, they participated formally through the Eurostat-OECD group due to their membership in that organization. It was precisely in this 2011 round that ECLAC fully assumed the role of regional coordinator for Latin America and the Caribbean.

Since then, ECLAC has strengthened its commitment, leading the 2017 Round, the results of which were published by the Global Bureau (GB) in May 2020. Following the impact of the COVID-19 pandemic—which forced the postponement of the 2020 reference year to 2021 due to disruptions in consumption patterns and statistical work—the region has managed to stabilize data production.

Currently, the program operates under a rolling survey model, with measurements taken every two or three years. This scheme has made it possible to reduce the interval between rounds from five to three years, requiring a methodological redesign to comply with the new institutional timelines and ensure the continuity of Purchasing Power Parity (PPP) comparisons in the current global scenario.

PPP Calculation Methodology

The PPI is based on three main components:

1. Conceptual Framework: Determined by the set of measurements that comprise Gross Domestic Product (GDP).
2. Annual Average Prices: Quantitative and value-based information corresponding to a basket of goods and services comparable across countries and representative of local consumption patterns.
3. Compute Methodology: Procedures used to calculate PPPs at different levels: product, basic heading, GDP aggregates, and total GDP.

1. GDP and its Components

The main purpose of PPPs is to convert national accounts aggregates into a common monetary unit, eliminating differences in price levels between countries. This allows for comparison of GDP expenditure and its components across different economies. Under the expenditure (or demand) approach, the components considered are:

• Household final consumption expenditure.
• Government final consumption expenditure (individual and collective).
• Gross fixed capital formation.

2. Average Annual Prices

To estimate PPPs, it is essential to have prices and their respective weights; these weights are derived from the disaggregation of GDP using the expenditure approach. The basic inputs for calculating PPPs for a basic heading are the average prices of each product in each country.

The process begins with the collection of prices for a common basket of goods and services. Countries must compile detailed information on household consumption, government consumption, and gross fixed capital formation (which includes machinery, equipment, and construction). In addition, countries must provide updated data on their national accounts, exchange rates, and population figures.

3. Calculation Methodology at the Basic Heading Level

After data collection, a technical validation phase begins at the national and regional levels, encompassing prices, expenditure components, exchange rates, and population.

The basic heading (BS) is the most disaggregated level of the national accounts for which weights are available. The Basic Basket (BB) groups homogeneous products whose prices are collected according to technical specifications defined by the Global Office (GO). These headings are successively regrouped to form the major aggregates of the National Accounts.

Although the GO defines a global basket of goods and services, ECLAC and the regional offices adapt this list to local realities. Since many global products are not available in all markets, specific items are included to ensure regional representativeness.

The methodology follows a bottom-up approach: PPPs are first estimated at the product level and then aggregated into groups and divisions until total GDP is reached. The process is divided into three stages:

1. National-level estimates.
2. Regional-level estimates.
3. Global-level estimates.

Finally, the GO calculates global PPPs applying the principle of fixed prices. This method ensures that the relative price relationships established between countries in the same region remain unchanged when integrated into the global results, preventing price levels in other regions from distorting intra-territorial comparisons.

See also:  Conceptos de las paridades de poder adquisitivo (pdf, Spanish only)