Executive Summary- The Process of Decentralization in Bolivia

Executive Summary

Background

Bolivia, a land-locked country located in the center of South America, has a highly diverse geography and ethnic composition. Some 50% of the population is indigenous, and 65% live in urban areas. GDP/per capita in 2007 was $1125, one of the lowest in Latin America. Bolivia’s economy mostly depends on hydrocarbons exports. Bolivia is also a highly unequal country; its Gini coefficient is 0.592 and it has illiteracy rates, which at 13% are higher than the regional average. With an increase in hydrocarbon exports, Bolivia has some new opportunities as annual economic growth, before the current worldwide recession, was averaging four percent (2005-2008).

Bolivia traditionally has had a unitary centralized for of government. The country is divided into nine departments and a number of municipal governments. Since 1989, with the election of mayors for municipal governments, Bolivia has started a de facto process of decentralization. In 1994, the government came up with a second generation of reforms that included the implementation of the Popular Participation Law. That law created more Municipal Governments in the country and distributed among them national tax revenue using population as the major criterion. In 2005, the first election of departmental Prefects was held. In the next year (2006), there was a national referendum, in which the population in each department decided whether or not to become Autonomous. These departments are: Pando, Beni, Santa Cruz and Tarija.

The problem and Policy Question

Bolivia’s national administrative structure (the Centralized Government Model) has hindered it from achieving higher levels of social development, mainly because of: (i) the extension and geographical variety of the country; (ii) the multiethnic composition of the inhabitants; (iii) the extreme centralization, with a huge, slow, not effective bureaucracy; and (iv) successive governments, supported by their political parties, have used the Central Government Model as a structure to award patronage.

The present project aims to respond to the question of what measures can best enhance social development in Bolivia?

The Policy options and Recommendation
The project analyses the advantages and disadvantages of the decentralization model and after derives the following policy options:
a) No further decentralization: This is assuming that the respective laws to put in motion this process are not delivered and the political situation in the country prevents the implementation of a more decentralized model.

b) Decentralized in the whole country: The Autonomous Departments will have a special and more advanced regime but the Central Government will delegate and/or deconcentrate some key functions to the Non Autonomous Departments in order to balance the power among departments.

c) Decentralized just in the Autonomous Departments: This policy may induce more inequalities and differences among regions.

The criteria used to analyze the options were: (i) ability to improve social sector service delivery; (ii) political feasibility; (iii) degree of complexity of the reforms; (iv) compatibility with the existing legal framework; and (v) promotion of equality.

The recommended policy is decentralization in the whole country. Bolivia now has momentum to introduce this kind of reform. One of the most important aspects is that giving some degree of decentralization to the non Autonomous Departments will help prevent generating further disparities within the country.

In order to implement this comprehensive reform, the Government should first set its goals, resources and desired time framework and involve all the major stakeholders in the process of designing the law, including holding workshops in different cities around the country.