Decentralization and Reform in Latin America

Decentralization and Reform in Latin America

Improving Intergovernmental Relations

Edited by Giorgio Brosio and Juan P. Jiménez

Decentralisation and Reform in Latin America analyses the process of intergovernmental reform in Latin America in the last two decades and presents a number of emerging issues. These include the impacts of decentralization and the response of countries in the region to challenge such as social cohesion, interregional and interpersonal disparities, the assignment of social and infrastructure expenditure, macrofinancial shocks, fiscal rules and the sharing of natural resources revenue. The main aim of the book is to assess the effective working of decentralized arrangements and institutions, with a view of suggesting corrections and reforms where the system is not working according to expectations.

Chapter 6: The financing of subnational governments

Juan Carlos Gómez Sabaini and Juan Pablo Jiménez

Subjects: development studies, development economics, economics and finance, development economics, public finance


For most of the Latin American countries, the relationship between different levels of government and the reassignment of their respective responsibilities and financing have been of great significance to their economic, political and institutional development. Over the past decades, the region has undergone an intense and extensive process of decentralization, shifting the responsibility of various public functions to different levels of government. Although considerable time has elapsed since this process began, the impact of these various (and not always comparable) reforms has not been adequately evaluated, and the effectiveness of some has been doubtful. How public services and goods are provided, and the methods to allocate them among different levels of government, are central to achieving a sound, stable intergovernmental system and a sustainable decentralization. Systems of intergovernmental fiscal relationships, and the subnational governments involved, employ a variety of different financing instruments to fulfill the governments’ responsibilities. The amount of financing and the particular combination of instruments largely determine the success of the results.

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