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 10: The intergovernmental allocation of revenue from natural resources: finding a balance between centripetal and centrifugal pressure

Giorgio Brosio and Juan Pablo Jiménez

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


This chapter analyses the allocation of rents from non-renewable natural resources, hydrocarbons and minerals, among levels of government in Latin America. This is a crucial issue not only from the point of view of ensuring good governance at the subnational level, but also from the necessity of avoiding political conflict and strains on national unity. Latin American countries have accommodated fairly well regional claims on natural resources. However, things could change for the worse as a few countries, notably Bolivia (Plurinational State of) and possibly Brazil in the future, experience acute conflicts over assignment of natural resources. Rents from natural resources reach substantial levels in many Latin American countries (Table 10.1, below). Some of these countries are among the world’s most important producers of hydrocarbons and minerals. More precisely, non-renewable natural resources in Latin America contribute to more than 20 per cent of total exports in a large set of countries including Bolivia (Plurinational State of), Chile, Colombia, and Mexico. In Venezuela (Bolivarian Republic of) oil accounts for almost 80 per cent of total exports. Trinidad and Tobago follows closely, with almost two-thirds of exports coming from oil. As a consequence of this economic role, rents appropriated by government represent an important share of public revenue.

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