Wednesday, February 17, 2010

More on the Constraints on Mexico's Municipal Governments

This from an interesting study from Mund Grouup:
The municipalities seem to be an afterthought in terms of funding by the federal and state authorities, but in the final analysis they are a litmus test of the historic limitations of federalism in Mexico.

With the exception of the local property tax (the “predial”) and some minor fees, the municipalities depend on federal government funding. While a “federalist” reform from the sexenio of Zedillo provided for many transfers from the federal government directly to the municipalities, the states retain a kind of “sticky” hand in the process.

The property tax is a weak reed to lean on. The OECD (Organization for Economic Cooperation and Development) has studied the question of the property tax as a funding source of local governments, providing a startling insight into the Mexican municipal problem. As a rule of thumb, the OECD notes that developed nations collect property taxes at a level from 3% to 4% of the GDP. This is the situation with the US and with the UK. Mexico is at the bottom of the OECD list of nations collecting less than 0.4% of GDP in its property taxes; many municipalities collect less than 0.2%. The municipal governments are perennially under-financed.

They are also woefully underrepresented in lobbying. The CONAMM (National Conference of Municipalities of Mexico) is an association of the various technical, regional-thematic and partybased municipal associations. But, the strongest political lobbying is done by the FENAMM (Federation of Municipalities of Mexico includes some 1,510 members) affiliated with the PRI.
Mexico's got more pressing reforms at the moment, but at some point legislation further federalizing the nation's governing structures is going to be needed.

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