The fiscal politics of resource revenue: federalism, oil ownership and territorial conflict in Brazil and Canada

Abstract

ABSTRACT This paper explores the fiscal politics of oil revenue in Brazil and Canada, two oil-rich federal countries that have different constitutional arrangements for revenue allocation and where constituent unit governments have different powers in the energy sector. More specifically, it offers a comparative analysis of the intergovernmental relations around oil revenue distribution in both countries over the last 30 years. The argument is that constitutional provisions on natural resources in federations (federal ownership or constituent unit ownership) produce distinct federal dynamics as it pertains to intergovernmental relations. Federal government ownership of natural resources produces conflicts between constituent units as they vie for their share of the proceeds. In contrast, provincial ownership eliminates the direct competition between constituent units for natural resource revenues. Nevertheless, intergovernmental tensions over natural resources can still appear as constituent units pressure the federal government to adopt horizontal fiscal equalization formulas friendly to their oil-producing, or non-oil-producing economies.