Jean-Paul Faguet addresses the issue of decentralization and accountability in Bolivia in the article “Can Sub-National Autonomy Strengthen Democracy in Bolivia?” published in 2013 by the Journal of Federalism. He notes that Bolivia is one of the most radical decentralization reformers, and has recently implemented new reforms granting autonomy to local governments. Faguet seeks to analyze the effects these reforms may have on investment patterns, fiscal relations and political accountability. Faguet examines autonomies in light of both fiscal federalism theory and evidence on the effects of Bolivia’s 1994 decentralization. He concludes that the reform has the potential to improve citizen participation, make government more accountable, and strengthen Bolivian democracy.
In 1994 the Popular Participation reforms devolved powers and resources to hundreds of municipalities in Bolivia. In 2010 the government enacted the Framework Law of Autonomies and Decentralization, which granted more autonomy to local governments. Decentralization has been widely studied, but the long-term effects of decentralization are still hotly debated.
In this paper Faguet seeks to:
1) bring the new reforms to light for the wider audience of countries currently undertaking decentralization reforms.
2) enrich the current debate within Bolivia on how autonomies can be implemented to strengthen democracy and give voice to the poor.
The Empirical Literature
There are mixed reviews on the success of decentralization to improve government accountability, as Faguet notes: some studies have shown inconclusive results or even negative effects from decentralization. However the results are clearer in Bolivia, and provide a compelling argument for decentralization.
The Law of Autonomies and Decentralization
The 2010 Law regulates the territorial organization of the state as defined in the 2008 Bolivian Constitution and integrates the legal concept of autonomy into the current system. According to the law, autonomy is “exercised when citizens freely elect subnational political authorities who have the following powers: (i) create, administer and collect taxes; (ii) enact local resolutions and regulations; (iii) design and implement local policies, plans, and programs in the judicial, administrative, technical, economic, financial, cultural, and social fields; and (iv) use coercive powers to compel respect for the legal norms and decisions that they implement (Law 9).”
There are four levels of autonomy: departmental, regional, municipal, and indigenous and rural. The first three are hierarchical while the last is unique. The law defines the procedures required for different territorial units to attain autonomous status. Faguet focuses on the new autonomies and their likely effects on government efficiency and responsiveness, the sustainability of public finances, and political mobilization and stability.
The 1994 Decentralization Program
Before the reform, there was little local government in Bolivia. The 1994 law changed things drastically. The core points of the decentralization program were as follows:
1. Resource allocation: Funds devolved from the center to municipalities doubled to 20 percent of all national tax revenue. Allocation among municipalities switched to a strict per capita basis.
2. Responsibility for public services: Ownership of local infrastructure was given to municipalities, as well as a responsibility to manage these facilities and invest in new ones.
3. Oversight committees were established to provide representation in the policy-making process.
4. Municipalization: The borders of existing municipalities were expanded to include suburbs, and 198 new municipalities were created.
The Effects of Decentralization in Bolivia
Some studies found that the 1994 decentralization program brought negative effects, while others found it positive. Faguet argues that very few of these studies relied on objective, quantitative evidence, and uses datasets derived from investment records to prove his thesis. He argues that decentralization led to large changes in resource flows across the country, and more importantly, reoriented public investment away from economic infrastructure, toward primary services and human capital.
There is no data to answer the question of whether these changes led to changes in the quality of public investment. Faguet can investigate a related question: did decentralization make government more responsive to local needs? Improved responsiveness to local citizens is one of the central and most disputed arguments in favor of decentralization.
According to Faguet’s data, resources were redirected from cities to smaller, poorer, and rural districts. Decentralization made public investment more responsive to local needs, which contradicts common claims that local government is ignorant, corrupt, or prone to capture by local interests.
Analyzing the Effects of Subnational Autonomies
Faguet says that it is too early to analyze the effects of the 2010 law, but offers a framework of analysis for the future. This includes
-Public investment patterns and the responsiveness of government
-Taxes, transfers, and fiscal relations
The paper can be downloaded here.