Decentralisation and Budget Accountability in the Twilight of Mexican Presidentialism

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Decentralisation and Budget Accountability in the Twilight of Mexican Presidentialism THE LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE GOVERNMENT DEPARTMENT Decentralisation and Budget Accountability in the twilight of Mexican Presidentialism Juan E. Pardinas This dissertation is submitted for the degree of Doctor of Philosophy M ay 2009 1 Key Words: Decentralisation, Mexico, Budget Accountability, Presidentialism UMI Number: U615967 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U615967 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 TM£S£5 Till iJHW VO'lP Para Jimena Cerramos un capitulo y abrimos otros, de un libro muy feliz que vamos escribiendo juntos. Acknowledgments The guidance of Professor George Philip was a fundamental contribution to the design of the case study and the writing of the whole dissertation. The observations of professors Christopher Hood (Oxford University) and Gareth Jones (LSE) helped to strengthen the quality of the arguments. Juan Carlos Moreno-Brid assumed the anguishes and worries of my doctoral program as if they were his own. I read his concerns as a sincere proof of fraternal affection. Now, after seven years, he should share the joy of reaching the goal line, with the same intensity as he lived through the tribulations of this long distance run. Luis Rubio, President of CIDAC, believed in the need and pertinence of research on the accountability mechanisms of Mexico's young democracy. Edna Jaime, former director of CIDAC, has the virtue of always asking brilliant questions to her colleagues, in consequence, the people who work around her tend to provide intelligent answers. Some parts of this dissertation are the result of that fruitful dialogue. CIDAC's support was an enormous help through my years as a research student in London. Roberto Newell, Director-general of IMCO, gave me the professional opportunity to transform the premises of this research into a public policy agenda to improve the conditions of budget accountability in Mexico. Roberto has built an institution driven by intellectual freedom and evidence-based-research. It is a privilege to be part of IMCO's team. Rene Delgado, Editorial Director of the newspaper Reforma, provided help and active support for implementing the first national survey of Mexico's subnational Supreme Audit Institutions (SAI). Bob Rich and Sofia Falomir helped to polish the British English of a Spanish native speaker. Professor Ana de la 0 (Yale University) delivered constructive criticisms to improve the analysis of decentralization and clientelism in modern Mexico. David Lampon and Gabriela Otero helped me to sail through some uncharted waters of human knowledge. Edgar Franco's intelligence and initiative contributed in the improvement of the contents of the dissertation. Thanks to CR Hibbs and Guadalupe Mendoza, I have been able to further the scope of this research on the accountability of state and municipal governments in Mexico. Benjamin Fuentes, from the Auditori'a Superior de la Federation provided information and contacts that were crucial for the results of this research. One of the most treasured fortunes of my life is being the sibling of my brothers and sisters, with their love and good vibes I have never walked alone. Mark and Emma Quinn gave us a family, a home and a life enduring friendship. My dearest friend and teacher, Lourdes Quintanilla, gave me the wisdom and strength to keep the pace, when the PhD marathon was an uphill climb. When in London, I landed on my feet thanks to my LSE friends: Susana Berruecos, Miguel Angel Jimenez, Jesus Lopez, Jaime Ramirez and Jesus Ramirez. Jimena Otero read and reread this dissertation until she knew it by heart. In every reading she improved the form and substance of the following 300 pages. The everyday opportunity to honour this debt of gratitude towards her is a constant source of joy. This dissertation is also in debt with the knowledge and time of the 28 interviewees, whose name appear at the end of this volume. The British Council and the Consejo Nacional de Ciencia y Tecnologi'a, (CONACYT) provided the financial support that made it all possible. 3 DECLARATION I declare that this thesis is the result of my own work and includes nothing which is the outcome of work done in collaboration except where specifically indicated in the text. Juan E. Pardinas Date: 4 ABSTRACT This dissertation is an attempt to understand how Mexico's democratisation process transformed budget accountability and the relationship between the federal, state and municipal governments. With the decline of presidentialism, two major changes occurred: the federal Congress became a more powerful regulator of public expenditure; and a large share of the budget was decentralised to subnational governments. The research objective is to produce an empirical analysis of how it came about that the president lost control over a major share of discretionary budgetary spending while state and municipal authorities increased their financial capacities without strong local systems of checks and balances. The work then evaluates the unintended consequences of the process including uneven mechanisms of accountability among different levels of government. The dissertation uses original survey material in order to do this. This is a piece of empirical research that aims to fill a gap in the literature on the budgetary process in contemporary Mexico. This work contributes to the literature about decentralisation in both Mexico and the rest of Latin America. In particular, it is part of a new wave of studies that look at processes of institutional change related to democratisation and decentralisation within the region. The dissertation is based on the assumption that the congressional election of 1997 was the threshold of democratic change in Mexico. The results of that election changed the political conditions that permitted the existence of Mexico's presidentialism. The emergence of an opposition majority in the Chamber of Deputies triggered the transformation from a metaconstitutional to a constitutional presidency. In this transformation, an Executive with unwritten and overreaching powers evolved into a presidency bound by written laws and the institutions in charge of enforcing them. The active presence of opposition parties inside the Chamber of Deputies triggered several reforms that forced the President to the unprecedented practice of rendering accounts. As these changes were occurring at federal level, subnational politics were transformed through an unprecedented combination of political and financial autonomy for state governors and municipal presidents. On December 2002, a Mexican newspaper reported that the Municipal President of Tultitlan, a municipality with 432,000 inhabitants, had a higher salary than the then British Prime Minister, Tony Blair. According to the secret payroll of the municipal government, the Mayor received at least US$213,000 a year. That newspaper 5 report triggered the question that inspired this empirical research: which de jure and de facto institutional mechanisms allowed a mayor from a small Mexican town earn a higher wage than head of government from a G-8? The dissertation is focused on two reforms related to budgetary policy: 1) The creation of a new Supreme Audit Institution (SAI) at federal level; and 2) The decentralisation of federal spending to states and municipalities. The creation of a new SAI, the Auditoria Superior de la Federacion (ASF), improved the political autonomy and technical capability of the congressional bureau in charge of ex post budgetary oversight. Through the ASF, the Congress improved its capability to demand an accountable presidency. The second reform was the decentralisation of an important share of government expenditure to state and municipal authorities. This implied the creation of clear norms and transparent formulas for the distribution of public resources among the three levels of government. In the former political system, the President had the unwritten prerogative to decide the geographical allocation of public expenditure, according to unaccountable criteria. The federal Executive had deep pockets and full political power to determine the fiscal surplus or financial bankruptcy of a subnational government. The decentralisation process created rules that forced the President to render financial accounts to subnational governments. For the first time, the Federal Executive had to follow transparent and stable criteria for the transfer of resources to states and municipalities. The decentralisation process rested on the premise that local authorities would allocate public expenditure more efficiently and would maximise social welfare. The decentralisation of public expenditure increased the accountability of the federal government to states and municipalities. However, a central claim in my thesis is that an unforeseen consequence of this process was a lack of accountability of political leaders at subnational levels. With the dusk of presidentialism and the decentralisation
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