Beyond the Center: Decentralizing the State

"Decentralization is transforming the structure of governance in Latin America. Since 1983, all but one of the largest countries in the region have seen a transfer of power, resources, and responsibilities to subnational units of government."

This dispersion of power is a global trend due to many different political, economic, and social factors. However, as this trend continues, the importance of accountability, deciding who is responsible for what, and giving those held accountable the authority to deliver results. In light of these important issues, this report examines the impact of decentralization and its effect on the efficiency of public services, on equity, and on macroeconomic stability. It also addresses the issue of politics and notes that successful decentralization requires more than good rules. Those rules must be compatible with incentives. Therefore, the report looks at the broader set of rules that affect political behavior, focusing particularly on electoral systems and political parties.

The study focuses on decentralization, referring to the process of returning the political, fiscal, and administrative powers, to sub-national units of government. It examines the decentralization transformation of government structures in Latin America, which, since 1983, has largely transferred power, resources, and, responsibilities, to the local level. Eight cases are reviewed, within a framework for sub-national government, revising the functions, structures, and revenues assigned, and, the strategies to synchronize the elements of reform. The macroeconomic threat is addressed through hard budget constraints, analyzing the outcomes of major decentralized states in Latin America, as well as the subtle risk, that empowered local governments may use their political power to undermine national interests, in benefit of individual constituencies. Furthermore, the accountability of authority is examined, revising what is at stake with the decentralization of education, health care, and, infrastructure, under new municipal powers. It is further suggested, that successful decentralization is dependent on consistent political culture, thus, broad sets of rules affecting political behavior are analyzed, particularly on electoral systems and political parties.