0w2010 01 RESUM EJECUTIVO 03 DEFcarta ang
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EXECUTIVE SUMMARY 52
United Cities and Local Governments
conditional grants, these lack clear objectives and predictability, especially in the area of capital grants. When conditional grants are used, complexity of the system is often a problem.
Increasing fiscally responsible local borrowing One consequence of Brazil and Argentina’s experiences with uncontrolled sub-national borrowing and hyperinflation during the 1980s and 1990s is that the policy of some countries in the region towards local government borrowing has become excessively conservative and restrictive. Thus a pending challenge for several countries is how to set up institutions that effectively regulate and monitor local borrowing without becoming overly restrictive. A second challenge for practically all countries is how to make more credit available to local governments for responsible borrowing. In practice, with the exception of a couple of countries, the level of borrowing by local governments in Latin America is far too low to meet the present large need for public infrastructure across the sub-continent.
Long term: Structural challenges Beyond the short-term issue of regaining fiscal balance, many local governments face similar long-term structural challenges. The chapter highlights three of these challenges: (i) strengthening tax capacity and its effective use by local governments. (ii) increasing the efficiency of public expenditures and the quality of public services; and (iii) finding avenues to finance the large capital infrastructure deficit for municipal services in the region, requiring a combination of capital transfers from central governments and better access to local credit.
Conclusions On organizational structure •
Countries with problems and small municipalities legislation and practical creation of associations into mancomunidades.
•
Most central governments in the region, and provincial or state governments in the case of federal systems, should devote more resources to developing administrative capacity, especially in the case of small and rural local governments.
Short term: Addressing the impact of the global crisis In 2009, local governments in the Latin American region have seen a deterioration of their fiscal position as a consequence of the ongoing global financial crisis. Like in many other regions of the world, local governments in Latin America have been further constrained by their dependence on central government transfers and their lack of access to credit markets. However, beyond the impact of the crisis, some have taken advantage of this crisis to take a harder look at their systems of intergovernmental fiscal relations and how municipal finances can be strengthened in the long run.
of fragmentation should introduce support for the of municipalities
On intergovernmental fiscal system design •
Most systems of intergovernmental fiscal relations in the region would benefit from an explicit clarification of the competencies assigned to local governments, identifying exclusive responsibilities of local governments where possible, and in the case of concurrent responsibilities, identifying the attributes of the particular competence (regulation, financing, and implementation) assigned to local governments.