Surely yes, the spending needs in the country are enormous. What cannot be repeated is the transfer scheme, carried out until 2018 through labels that were managed in the Chamber of Deputies in the context of budget approval. Surely, in not a few cases these resources actually served to pay for important services in the communities, but many others were wasted, due to the haste and difficulty of spending, because they were not planned or simply because they were used to carry out acts of corruption. The difficulty to control was also enormous, infrastructure projects were labeled as well as health, culture, sports, technology, etc., in amounts that varied from 250,000 to hundreds of millions of pesos. In reality, the distribution mechanism did not correspond to any criteria, it depended on the bargaining power of each parliamentary fraction, the municipalities obtained, or not, resources in proportion to the fact that their leaders belonged to the governing coalition. That, in the political science literature, is called “pork barrel politics”, and it is a bad practice of public spending, since spending decisions in the territories depend exclusively on political exchange.

If we want more federal resources for local governments we first need the design of funds and policies that generate the right incentives. There are three ways to transfer budget to Sub-national governments. Participations, which is the part that corresponds to them for having renounced tax powers in favor of the federation; contributions, which pay for specific services, most of which result from decentralization processes, but also from security and social development services; and agreements, where all types of financing can be agreed. An alternative to improve the quality of spending can be to establish competitive funds to support the best local projects, which prove their results, or projects that guarantee high public profitability.

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One of the problems of Mexican federalism is that the Subnationals receive resources, but they collect very little. This does not necessarily mean that they are swimming in money, and even in some cases cannot pay for services, such as education, that were once transferred. But, in any case, they do not bear the cost of collecting taxes. All local revenues in Mexico add up to only one point of the product. An alternative is to fund the municipalities so that they invest in cadastral registers and in collection mechanisms that allow increasing the income from taxing the property, as well as to improve the collection of water.

Another is to establish certification mechanisms so that states and municipalities assume greater functions of collaboration in matters of inspection with the SAT, so that they can have income through this means. In the case of the states, coordination mechanisms could be financed with the IMSS to improve the administration of the payroll tax and reward the entities that make use of powers such as the collection of car ownership. That is, supporting the locals to collect money should be a policy promoted by the federation. There is, of course, the problem of hundreds of municipalities that do not really have the possibility of collecting property. They should be able to request additional support to that which they receive for participations and contributions, probably in the form of an increase in the Contribution Fund for Social Infrastructure and in return establish additional control and evaluation mechanisms, determined by the federal government, because In these entities, the control mechanisms are more likely to be diluted. That is, the demand for greater resources for local government must be met, but not as before, in exchange for political support and without rhyme or reason, yes to strengthen public finances and for municipalities in extreme poverty, but with better spending mechanisms .

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Twitter: @vidallerenas


Guest column

A graduate in Economics from the Instituto Tecnológico Autónomo de México (ITAM), he has a Master’s Degree in Public Policy and Management from the University of Essex, United Kingdom and a Doctorate in Public Administration and Management from the University of York.

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