Reflections on two decades of social-spending decentralization

Abstract

The literature on federalism often evokes an association between redemocratization and decentralization, in which the consolidation of democracy is associated with a strengthening of federalism and a trend towards administrative, political and fiscal decentralization (Souza, 1999). The fact that this is driven by the need to provide resources and supply better-quality public services, makes analysis of the distribution of social spending highly relevant. Accordingly, the aim of this chapter is to analyze the trend of social spending in Latin America. Several Latin American countries have been pursuing an intensive process of fiscal decentralization over the last two decades; and, at the same time, almost the entire region has made changes to its social policies. These two processes reflect, first, the desire to generate allocation efficiency gains, which have an impact on expanding the decision-making, fiscal, and financial autonomy of local governments; and, second, the desire to strengthen democracy. The latter has had repercussions on social policy actions and services, generating broader coverage and higher monetary benefits, together with improved access, expansion of coverage, and the decentralization of jurisdictions and resources for service provision. In some countries, decentralization was seen as a way to resolve institutional problems caused by a loss of resources and the ability of federal governments to finance social policies and restructure service provision, while at the same time adapting to the growing importance of local areas in federative resource sharing and autonomous governance.