Governments across the world often take long to pay their suppliers: procuring entities take on average 100 days to pay firms, with vast variation across countries (Bosio et al., 2022). This has several important implications. First, government purchases are a large share of the economy and a substantial revenue source for firms, affecting their future growth and employment trajectory (Ferraz et al., 2015). When governments take long to pay their suppliers, they impose an additional financial cost on firms deciding to supply, and potentially exclude small and medium-sized firms that are more likely to be liquidity constrained (Barrot and Nanda, 2020). Second, if firms understand these additional financial costs, firms may avoid competing for government contracts or, upon deciding to compete, only accept higher prices that make up for the additional liquidity necessary to finance themselves. In either case, that may reduce the cost-effectiveness of public purchases and/or lead to worsening of the quality of goods and services procured. Some government have explicitly introduced reforms to accelerate payment to suppliers: Barrot and Nanda (2020) discuss the impact of _QuickPay_ , which decreased the payment delay from 30 to 15 days for small business in the U.S. in 2011; and Chile introduced the Centralized Payment Platform (PPC, Spanish acronym for _Plataforma de Pagos Centralizados_ ) in 2020, which centralized payments from purchasing units to the Treasury and started to enforce a 30-day limit to payments.

In this Section we document payment timeliness across Brazilian municipalities using our new dataset. We highlight this exercise is only possible by using microdata on the entire budget executing process. In an ideal scenario, we would be able to connect each payment to a single verification, and then compute average payment delays at the verification level. In practice, the majority of payments are connected to one commitment, but not to a verification. We instead compute payment delays at the commitment level – in cases where one commitment is linked to more than one verification and more than one payment, we compute amount-weighted-dates for verifications and payments, and then determine payment delay as the difference between these two dates.<sup>26</sup> We restrict our sample to procurement-related commitment, to focus on delay to suppliers, and further restrict it to the purchase of goods and materials – since verifications of services are often more complex and numerous.

Procurement law in Brazil determines that payments should be made no later than 30 days after the verification, with a shorter limit of 5 days for bid waiver processes ( _dispensa de licitação_ ). In Figure 9 below, we present the distribution of the average payment delay at the municipality-by-year level, where average delays are calculated using the total amount of committed funds as weights (so it can be interpreted as the average delay to pay 1 BRL). In Figure 9a, we show the histogram of our delay measure – the distribution is centered around 15 days, showing that in the majority of municipality-year observations the average payment delay is well below the 30 day limit. We also document, nonetheless, a large right tail of observations with average delays well above 30 days: in Figure 9b, we show that approximately

> 26Details on the methodology to compute delays in complex situations, when one commitment is linked to several verifications and several payments, are discussed in Ricca (2019).

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