0w2010 01 RESUM EJECUTIVO 03 DEFcarta ang
26/10/10
19:49
Pรกgina 50
EXECUTIVE SUMMARY 50
United Cities and Local Governments
decentralized expenditures in education, health, etc. Less progress can be detected in the devolution of autonomous revenue sources. Fiscal decentralization continues to be a dynamic process in Latin America. Recent times have seen a variety of innovations in the region that have attracted interest from all corners of the world, for example ranking local performance systems in Brazil and Colombia, per client based transfers for health and education in Chile, or fighting poverty with direct transfers to families administered by municipalities in Brazil. A good number of countries are embarked upon or considering significant reforms that will further deepen and strengthen municipal autonomy, such as Bolivia, Uruguay, and Costa Rica. But on the other hand, there are countries in the region where some trends have been toward some forms of re-centralization, such as Argentina, Colombia, Dominican Republic, Peru, and Venezuela.
Main issues and challenges for local government finance The local government shares in total public expenditures and in GDP in Latin America differ significantly by country but these shares are generally lower than those observed in other regions of the world. There are enormous variations in the assignment of responsibilities to municipalities representing a mosaic of approaches, but with a preponderance of concurrent responsibilities with the center. Municipal governments in many Latin American countries play a large role in public investment in infrastructure at the sub-national level often as equal partners with upper level governments. Practically all countries of Latin America assign certain taxes to local governments and the most commonly assigned tax is the property tax. The level of tax autonomy
granted to local governments also varies but, on average, municipalities raise a higher percentage of their budgets from own revenues than is the case in some other regions of the world. Nevertheless, in practically all countries in the region there are large vertical imbalances that need to be closed with transfers. The most common form of transfer is general revenue sharing, defined on the basis of central government general revenues or specific tax sources and distributed according to a formula index containing population and other variables, or, less often, on a derivation (i.e. origin) basis. Some countries allow unconditional use of shared revenues but more often the use of funds is conditional. Beyond the use of conditionality for revenue sharing funds, traditional conditional or specific transfers are less extensively used in Latin America than in other regions of the world. The practice of explicitly addressing horizontal fiscal disparities among local governments through explicit equalization transfers is still not common either. Most countries in the region allow local governments to borrow subject to prudent rules and limitations. The discussion about the special issues, constraints and opportunities for the development of local finance in Latin America is focused around several major themes: (a) Organizational Structure; (b) Intergovernmental Fiscal System Design; and (c) Short Term and Long Term Structural Challenges.
Issues in organizational structure Fragmentation and sub-optimal scale Many countries in the region have numerous local governments that are too small to take advantage of economies of scales in the delivery of public services. Often this problem is aggravated by the incentives provided for further fragmentation by transfer formulas