The Wilson Center's Latin American Program is engaged in a multi-year project to explore the relationship between decentralization and democratic governance in Latin America. As part of this project, the Wilson Center has co-sponsored with institutions in six countries a series of conferences on decentralization and democratic governance.

On May 21, the Center co-sponsored one of these conferences in Mexico City along with the Centro de Investigación y Docencia Económicas (CIDE) to explore the challenges of federalism and regional development for Mexico's democracy. The conference brought together key policymakers from the federal, state, and local governments with leading scholars to address four major challenges: local governance, citizen participation, fiscal federalism, and regional development.

Panelists agreed that further legal changes are necessary to consolidate strong municipal and state governments in Mexico including laws that clarify responsibilities, taxes, and transfers for different levels of government. Sen. Cesar Camacho (PRI) and Rep. Alejandro Zapata (PAN) stressed their desire to forward legislation to strengthen and clarify municipal and state function. Carlos Gadsden explained the federal government's four-pronged strategy to strengthen the capacity and transparency of municipal governments. Enrique Cabrero observed that decentralizing government does not necessarily lead to greater democracy or more equitable development, but that we should learn from municipal innovations that are improving the quality of life. He emphasized the importance of linkages among the government, civil society, and the business sector to achieve progress. Octavio Acosta coincided with Cabrero in observing that decentralization does not necessarily lead to better democratic governance, but that good democratic governance requires decentralization. Mauricio Merino noted that municipal governments have often been quite innovative in new approaches to citizen participation at a local level, but there is no clear pattern of institutional structures that have worked to achieve this. Leticia Santín addressed some of these innovations, while Luis Linares described the emergence of participatory local governments in Guatemala and their challenges. Luis Carlos Ugalde offered a cautionary note, expressing concern about the potential for increased corruption as local governments manage more resources.

Panelists also agreed that the fiscal structure of Mexico's federalism needs adjustment, although they placed different emphasis on different aspects of this process. Fernando Elizondo Barragán noted the disparity in transfer payments in different funds that the federal government transfers to states. He argued that the formula used for many transfers unfairly penalizes wealthier states and those poorer states that make efforts to increase their local tax base. Fausto Hernández cautioned that rapid fiscal decentralization could jeopardize the solvency of the federal government and that the necessary transition to a more decentralized fiscal system should be made gradually and cautiously to avoid the kinds of fiscal crises that have taken place in Argentina and Brazil.
José Antonio Madrigal discussed the federal government's strategy to promote regional development among states that had common synergies and argued that this strategy was necessary to integrate all of Mexico into the global economy in an effective way. Hector Fereira addressed the government's strategy for Plan Puebla-Panamá, which would strengthen the development and integration of the Mexico's poorest regions in the south. Rafael Tamayo lauded the federal government's efforts to promote regional development but expressed concern that there are no long-term institutions that would encourage investors to think in terms of regional development.

by Andrew Selee