LATIN AMERICA URUGUAY UNITARY COUNTRY
BASIC SOCIO-ECONOMIC INDICATORS INCOME GROUP: HIGH INCOME LOCAL CURRENCY: URUGUAYAN PESO (UYU)
POPULATION AND GEOGRAPHY ECONOMIC DATA
Area: 176 220 km 2 GDP: 78.2 billion (current PPP international dollars), i.e. 22 562 dollars per inhabitant Population: 3 456 million inhabitants (2017), an increase of 0.34% (2017) per year (2010-2015) Real GDP growth: 2.7% (2017 vs 2016) Density: 20 inhabitants / km 2 Unemployment rate: 8.3% (2018) Urban population: 95.2% of national population Foreign direct investment, net inflows (FDI): -878.31 (BoP, current USD millions, 2017) Urban population growth: 0.5% (2017 vs 2016) Gross Fixed Capital Formation (GFCF): 16.66 (2017) Capital city: Montevideo (50.2% of national population) HDI: 0.804 (high), rank 55 (2017) Poverty rate: 0.1% (2017) MAIN FEATURES OF THE MULTI-LEVEL GOVERNANCE FRAMEWORK
Uruguay is a unitary republic organized as a presidential representative democracy with division of powers and three levels of elective government: national, departmental and municipal. The President is vested with the Executive power and is both the head of government and the head of the State. Legislative power is vested in a bicameral General Assembly, comprised of the Chamber of Representatives and the Chamber of Senators. The President is elected every five years by popular vote, while members of the General Assembly are elected every five years by proportional representation to ensure the presence of at least two members by department. Judicial power is vested in the courts, of which the Supreme Court is the highest one.
The beginning of the decentralization process can be traced back to 1935, with the enactment of the Organic Municipal Act No. 9 515 ( Ley Orgánica Municipal ). Decentralization is embedded in the 1967 Constitution (Section XVI), which acknowledges the existence of local authorities, although they are not explicitly deemed as municipalities. The Constitution has been amended in several occasions: 1989, 1994, 1996 and 2004. In particular, the 1996 Constitutional Reform defined a series of political reforms towards decentralization, amongst which the creation of the Sectoral Commission on Decentra - lization and the Congress of Mayors, as well as the definition of departmental and municipal matters may be highlighted. A second set of interventions was carried out since 1990 with the decentralizing initiative and new mechanisms of citizen participation of the department of Montevideo.
Important steps towards decentralization were taken in 2009 with the approval of the Law No. 18 567 on Political Decentralization and Citizen Participation, which established municipalities as local governments yet subject to the hierarchy of the head of department ( Intendente ). In July 2010, the first local governments were elected at the same time that the Law No. 18 719 gave rise to the Incentive Fund for Municipal Management ( Fondo de Incentivo a la Gestión de los Municipios ). In 2014, Law No. 19 272 was introduced, replacing Law No. 18 567 and establishing municipal councils as fully decentralized government bodies. However, the approval in 2015 of National Budget Law No. 19 355 entailed the return to the hierarchical system initially contemplated in Law No. 18 567.
TERRITORIAL ORGANISATION
2016 Municipal level Intermediate level regional or State level Total number of SNGs 112 Municipalities 19 Department (Municipio) (Departamento) Average municipal size: 21 391 inhabitants 112 19 131
OVERALL DESCRIPTION. Following the enactment of Law No. 18 567 and the subsequent creation of municipalities, Uruguay is divided into 19 departments and 112 municipalities. Slightly over 20% of the country’s territory is municipalized, including 72% of total population. Three departments have their territory completely municipalized: Canelones, Maldonado and Montevideo. The three departments include 41% of all municipalities. Territories which are not municipalized remain under the management of the departmental government they fall within.
MUNICIPALITIES AND INTER-MUNICIPAL COOPERATION. 89 municipalities were initially created after the implementation of Law No. 18 567, a number that has expanded to become the 112 municipalities that exist to date in the country. The initial 2009 Law established that municipalities may be created in territories of 2000 inhabitants or more, although departmental governments were granted by the 2009 Law the capacity to create municipalities in territories of even less than 2000 inhabitants – a capacity that they kept until 2013. In 2010, the initial 89 municipalities were created in all territories with over 5000 inhabitants. In 2013, departmental governments created 12 new municipalities and in 2015, following that years’ municipal elections, 11 new municipalities were created in those territories whose populations exceeded 2000 inhabitants.
In 2013, the Departmental Congress approved the creation of a National Municipal Plenary ( Plenario Nacional de Municipios ) for promoting cooperation between municipalities in advancing the decentralization process.
DEPARTMENTS. The 19 departments constitute the second level of government in Uruguay. All departments are constituted by the Departmental Board ( Junta Departametal ), with judicial and legislative functions, and the Mayor ( Intendente ), which holds executive and administrative functions. The Constitution sets the basic responsibilities attributed to departments and leaves the determination of the rest of legislative and control responsibilities to ordinary law. Moreover, the Constitution also provides for the creation of the Departmental Congress, with the aim of coordinating the actions of the different departments in the country. SUBNATIONAL GOVERNMENT RESPONSIBILITIES
The responsibilities of departmental governments are mostly defined by the Municipal Organic Law, adopted in 1935 and, more recently, by Art. 13 of abo - vementioned Law No. 19 272 on Political Decentralization and Citizen Participation. The law excludes from the local government’s sphere public security service and all the constitutional provisions that directly define powers of both national bodies and deconcentrated entities or services. Recent reforms have created new competencies that devolve responsibilities in the areas of land management, social policies, health, education and agriculture.
Municipalities are responsible for annual accountability to their department; collaboration in the collection of departmental income; assisting public agencies in territorial management and collaborating in national public policies in agreement with the departmental government and the executive branch. There are several fields in which local government’s competences are not clearly defined, but local authorities can manifest institutional interest and contribute to programming and policy-making (Art. 13 of Law No. 19 272).
Main responsibility sectors and sub-sectors
Departmental level municipal level 1. General public services Internal administration Internal administration
2. Public order and safety
3. Economic affairs Transit and roads; Road management; Departmental and urban transport; Road network; Traffic signs and traffic control; Conforming measures /transports Promote the development of agriculture, livestock, industry and trade for the development of livestock, industry or tourism in coordination with the Departments; Opinion, proposal and assistance in the management of local development projects; Collaborate in guidelines on fairs and markets 4. Environmental Protection of the environment and sustainable development Environmental protection; Environmental education programs; protection of natural resources; Waste collection Maintenance of green areas; Rainwater management; Urgent measures in collaboration with the National Government on accidents, fires, floods and other natural disasters; Collection and final disposal of waste that is assigned by the department 5. Housing and Construction and housing (part of its execution and regulation); Territorial and Maintenance of public works; Improvement of goods and buildings; community amenities urban planning; Street cleaning; Public lighting; Sanitation; Cemeteries Public lighting; Street cleaning; Public spaces; Cemeteries 6. Health Public hygiene and health Zonal programs in health and hygiene
7. Recreation, Libraries; Museums; Exhibitions; Nurseries; Theater; Music; Social and cultural programs, attending to the proposals culture & religion Sports; Gardens; Zoos; Planetariums of other social bodies 8. Education
9. Social Activities and policies for specific population groups (women, children, protection young people, the elderly and people with disabilities)
SUBNATIONAL GOVERNMENT FINANCE
Availability of fiscal data: Quality/reliability of fiscal data : Scope of fiscal data: departmental and municipal governments. SNA 1993 and other Medium Medium
GENERAL INTRODUCTION. Finance provisions regarding departments can be found in the Constitution, in particular in articles 214, 273, 275 and 298. Departments are financed through own revenue or transfers from the National Government or other agencies. Most of departmental own resources come from taxes and fees. The Constitution gives the departmental legislative body the possibility of creating specific taxes and fees. Law No. 19 272 directly regulates municipal finance, establishing that municipalities may only manage financial resources, not create them. Furthermore, the Law also sets out that departments must plan in their budget an allocation for municipalities.
SUBNATIONAL GOVERNMENT EXPENDITURE BY ECONOMIC CLASSIFICATION
2016 Dollars PPP / inh. % GDP % sNG expenditure % general government expenditure (Same expenditure category)
Total expenditure 673 3.1% 100% Inc. current expenditure 568 2.6% 84.4% Total expenditure 9.0% Staff expenditure 328 1.5% 48.7% Intermediate consumption 175 0.8% 26.0% Social expenditure 0 0.0% 0.0% Staff expenditure 15.2% Subsidies and current transfers 27 0.1% 3.9% Financial charges 18 0.1% 2.7% Social benefits 0.0% Others 20 0.1% 3.0% Incl. capital expenditure 105 0.5% 15.6% Capital transfers 0 0.0% 0.0% Direct investment 21.4% Direct investment (or GFCF) 105 0.5% 15.6% 0% 5% 10% 15% 20% 25% LATIN AMERICA URUGUAY UNITARY COUNTRY
EXPENDITURE. For the last ten years, the Departments’ expenditure rate (data for municipal governments have been available only since 2016) has increased by more than 10% per year on average. In 2016, current expenditures made up 84% of subnational total expenditure, while capital expenditures approximately 16%. Half of the expenses correspond to staff expenditure (salary and social security). Staff expenditure corresponds to group 0 of expenditure classification at departmental level, it includes social benefits and social security. In this category, municipal governments spend a higher share of their income than departmental governments do (65% and 46% respectively). Another considerable expense is that of intermediate consumption, which reaches 26% of total expenditure (even though, in this case, expense is relatively higher at the departmental level). In the national classification, the intermediate consumption is divided into group 1, consumption goods, and group 2, consumption services. Subsidies and transfer, corresponding to group 5 of the national classification, accounts for 4% of subnational spending. The amount of transfers cannot be disaggregated into capital and current transfers. The total amount is therefore included in “subsidies and current transfers”. Other unclassified expenses and figurative expenses corresponds to groups 7 and 9 of the national classification, account for 3% of total subnational spending. Financial charges account for 2.7% of subnational spending. As per the national classification,it includes include expenses of group 4 (Financial assets), group 6 (interest charges) and group 8 (the repayment of internal and external debts).
DIRECT INVESTMENT. Direct investment corresponds to the group 3 of the national classification. In total, it corresponds to 21.4% of total public capital spending and 105 dollar PPP per capita. Departments allocate 16% of their total spending to investment. Subnational government direct investments have mostly experienced a sustained increase over the last ten years, with the exception of fiscal years 2010 and 2015. The percentage of investment over expenditure for municipal governments is 15%.
SUBNATIONAL GOVERNMENT EXPENDITURE BY FUNCTIONAL CLASSIFICATION – COFOG
Departmental expenditure is mostly allocated to the provision of general % GDP % SNG expenditure public services, which accounts for 36.5% of expenditure, followed by 3,0% 1.1% housing and community affairs and economic affairs, which respectively Social protection 0.1% 6.8% represent 22.1 and 21.2%. Within economic affairs, transport is the main 0.8% 2,5% Education line of expenditure. Environmental protection accounts for 11.4 % of Recreation, culture subnational expenditure, while 6.8% is spent on recreation, culture and and religion 2,0% 36.5% religion. Defence and security, education and social security are the main Health 22.1% expenditures at the national level. Housing and 1,5% community amenities Environmental protection 1,0% Economic affairs/ transports
0,5% Public order and safety 11.4% Defence 21.2% 0,0% General public services
SUBNATIONAL GOVERNMENT REVENUE BY CATEGORY
2016 dollars % GDP % general goverment revenue % sng revenue ppp / inh. (same revenue category)
60% Total revenue 703 3.2% 10.0% 48.2% Tax revenue 339 1.6% 6.2% 40% Grants and subsidies 204 0.9% 29.1% Tariffs and fees 55 0.3% 20% Property income 72 0.3% 7.9% 10.3% 4.5% Other revenues 32 0.1% 0% Tax Grants and Tariffs Property Other revenue subsidies and fees income Revenues
OVERALL DESCRIPTION. Subnational revenue accounts for 3.2% of the GDP and 10% of total public revenue. In recent years, departmental revenues have grown at a rate exceeding 10% per year, except for 2015 when they increased by 5%. By 2016, 70% of departmental income came from own-revenue, mostly tax revenue, while the rest proceeded from the national level. In total, taxes revenue accounts for 48% of subnational government re. Contributions from the national level are based on the abovementioned constitutional provisions and laws, while transfers to specific destinations have mainly originated from the Office of Planning and Budget (OPP) and sectorial Ministries. In total, transfer and subsidies account for 29% of subnational public revenue.
TAX REVENUE. PIT, CIT and Property taxes are only collected at the central level and are different from the ones collected by the Departments. The national government establishes the tax rate. The Constitution provides for three main taxes to be collected at the departmental level: the Real Estate Fee (rural, urban and suburban), which taxes building property according to cadastral value; a ‘wheeled-vehicle’ license for all owners of a motor vehicle; and a tax on the sale and killings of cattle ( Impuestos a Remates y ventas de semovientes ). In 2016, the wheeled-vehicle fee was the main source of departmental income. The Real Estate Fee, on the other hand, was a top-three source of income for 16 departmental governments. Since 2011, a unified Single System for Collection of Vehicle Revenues (SUCIVE) has been established, standardizing tax amounts across all departments. The national government is in charge of managing and running the system. Other taxes collected at the local level include public lighting and commercial and industrial activities. GRANTS AND SUBSIDIES. The total transfers made by the national government to sub-national governments amounted to 1% of GDP in 2016. Law No. 18 355 establishes that 3.33% of the National Budget will be directed to Departmental Governments. The Interior Development Fund (FDI) is an alternative, project- based financing source created in 2015 by Law No. 19 337. Remaining transfers come from subsidies for public lighting, roads and the Sub-National Development and Management Programme (PDGS). Funds are also granted for patent unification and the Law on Auctions and Livestock, which are paid by the central go - vernment on behalf of the department. (Law No.19 272). Lastly, the national government allocates specific funds, such as the Municipal Management Incentive Fund (FIGM) created by Law 19 272.The FIGM, which increased substantially from 2015 to 2016, allocates 10% of the annual amount divided in equal parts for all municipal units. 75% of the FIGM is divided according to Article 230 of the Constitution (weighted by territorial criteria): The remaining 15% is allocated to programmes and projects.
OTHER REVENUES. Tariffs and fees. Over the last 5 years, the total amount of tariffs and fees has grown (except in 2015). In 2016, it corresponds to 8% of subnational public revenue, of which, 48% corresponds to fees. By order of amount collected, the fees include: transit services, sanitation, administration, urban planning, safety, cemeteries and related services, and other sources.
Property income. Capital income collected by Departments includes allowances, prices, fines and surcharges and the output of commercial and industrial activities. Property income amounts to 10.3% of total subnational income.
SUBNATIONAL GOVERNMENT FISCAL RULES AND DEBT
2016 dollars ppp/inh. % gdp % general government debt % sng debt
Total outstanding debt 134 0.6% 1.0% 100% Financial debt* 39 0.2% 0.3% 29% * Currency and deposits, loans and bonds
FISCAL RULES. According to article 301 of the Constitution, departmental governments may borrow funds subject to the approval of the departmental board. Moreover, the Constitution also establishes that and loan accumulation requires Parliamentary approval and backup guarantees from the national government. In 2016, the approval of Law No. 17 947 established the legal framework for setting an annual national ceiling for debt contraction.
DEBT. The table shows the departmental governments’ borrowing, that reflects the debt contracted with banks and providers. Subnational governments total outstanding debt accounts for 0.6% of GDP. Financial debt corresponds to 29% of the total outstanding debt, while 71% corresponds to other accounts payable.
Socio-economic indicators: World Bank // UNDP // UN Desa // ILO. Fiscal data: Central Bank of Uruguay // World Bank // General Accounting of the Nation (CGN) // Nation Institute of Statistics (NIE) // Observatorio Territorio Uruguay, Planning and Budget Office (OPP) // budgetary transparency portal. Other sources of information: Arocena, J. (2013) “Descentralización: desafíos, contexto y el caso uruguayo” en Jornadas de trabajo “Diálogos sobre descen - tralización, gobernanza local-regional y desarrollo urbano sostenible”. Organizadas por Mercociudades, IMM, PNUAH, Comisión Europea y AECID // BID (2009) Fi - nanzas y gestión de los gobiernos subnacionales en Uruguay // Farinha, F et al. (2018) “Análisis legislativo sobre la descentralización en materia departamental y municipal” en Serie Descentralización y desarrollo territorial. Montevideo: Dirección de descentralización e inversión pública, OPP // Ferla, P. et al (2016) Panorama Lead responsible: UCLG Last update: 02/ 2019 del nivel municipal en Uruguay. Montevideo: Fundación Konrad Adenauer: Universidad Católica del Uruguay // Lalanne, A. y Brun, M. (2014) Los ingresos y egresos de los gobiernos departamentales entre 1990 t 2013. Montevideo: Oficina CEPAL // OPP, Uruguay Integra (2017) Fondo de Incentivo para la Gestión de Municipios, www.sng-wofi.org Informe Desarrollo Municipal. Octubre 2017, Montevideo: Dirección de descentralización e inversión pública, OPP.