Policy Capacities Under Weak Institutions: The Design of Paying for Ecosystem Services in Latin America

ABSTRACT How do policy capacities interplay to achieve policy effectiveness in settings of political instability and low compliance? To address this question, this paper maps and analyzes the capacities displayed during the policy design process of the Payment for Ecosystem Services (PES) program, adopted in many Latin American countries during the 1990s and 2000s to protect forested areas valuable for conserving ecosystem services. By tracing the design process of a policy tool that relies on scientific data, targeted interventions, and stakeholder negotiations, the analysis shows that while analytical capacities are indispensable for identifying appropriate locations and incentives, it is the continual exercise of political skills and resources that sustains the policy's original theory of change. This paper argues that achieving policy effectiveness—particularly in contexts under weak political institutions—relies on a strategic integration of analytical and political capacities at the policy‐design coalition level.