Intergovernmental fiscal transfer system in Argentina: historical evolution, current performance and reform options to promote efficiency, equity and transparency

Abstract

Argentina is a very unequal federation, with areas as rich as developed nations, and provinces as poor as low middle-income countries. The 1853 Constitution grants a substantial degree of policymaking authority to the provinces, but responsibilities are not always clearly defined. Consequently, Argentina experienced complex and conflictive relationships across levels of government during most of its history. The evolution of its intergovernmental transfer system has not been driven by coherent policy decisions grounded in equity and efficiency considerations, rather it is the outcome of emergency measures taken to address macro-fiscal and financial crises originated at the federal level, and the by-product of the changing power relationships between the federal governments and provincial governors. The result of this historical process is a fiscal transfer system that falls short in effectively addressing both vertical and horizontal imbalances.