Overview of the Decentralisation Process in Latin America: Main Achievements, Trends and Future Challenges

Latin America is the most urbanized region in the developing world where around 80% of the citizens now live in cities. The region is marked by the most extreme inequality in the world, with some 40% of the population living below the poverty line. Key Messages Improved citizen voice and local accountability were the proximal causes of decentralization, research has indicated the need to also look at the “distal causes”, i.e. broader explanatory factors linked to patterns of urbanization, economic change and persistent path dependent institutional and social legacies. In Latin America, political decentralization is strongly linked to the democratization processes that begun in the 1980s. The newly established governments therefore regarded citizen participation as a means of containing social tensions and strengthening the long-term prospects of democracy through dialogue and consensus-building at the municipal level through a variety of consultative processes. Decentralization is not necessarily an irreversible process. In the mid 1990s, a reorientation took place as a result of the financial crisis in the region (e.g. Argentina), focused mainly on better controlling subnational borrowing and debt accumulation. Social cohesion is a key development challenge in Central and Latin America, linked to the history of structured inequalities and ethnic diversity affecting the region. Background This desk study has been elaborated in preparation of a series of seminars with key stakeholders from the European Commission and external experts on the challenges related to deepening decentralization and local governance reforms in Latin America. Conclusion The scope, rhythm, depth and impact of decentralization have logically varied throughout the region and even within countries. Some public policies have been decentralized while others remain firmly in the hands of central governments. Some countries remain highly centralized, while other have done real moves towards genuine decentralization. The systems of intergovernmental transfers and their impact in terms of efficiency and equity in providing decentralized goods and services (e.g. health, education, infrastructure) continue to be very heterogeneous. Important progress has been achieved in many countries yet major bottlenecks still make it difficult to realize the full potential of decentralization and local governance as tools to get better development outcomes and political dividends. In deciding what next, the focus should less be on “best models” of decentralization but on “best fits” with the prevailing political and institutional system and norms.