Universidad Nacional Autnoma de Mxico University of California Institute for Mexico and the United States

Democratization and Dispersion of Power: New Scenarios In Mexican Federalism Author(s): Alain De Remes Reviewed work(s): Source: Mexican Studies/Estudios Mexicanos, Vol. 22, No. 1 (Winter 2006), pp. 175-204 Published by: University of California Press on behalf of the University of California Institute for Mexico and the United States and the Universidad Nacional Autnoma de Mxico Stable URL: http://www.jstor.org/stable/10.1525/msem.2006.22.1.175 . Accessed: 04/05/2012 12:38
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Democratization and Dispersion of Power: New Scenarios In Mexican Federalism

Alain De Remes*
Ocina de la Presidencia para las Polticas Pblicas

Focusing on political bargaining between the national and subnational realms, this article considers how the dispersion of power in different regions of a country may become a crucial factor shaping the rules of democratic governance. First, it analyzes changes in power dispersion of the last two decades in Mexico, highlighting how alternation in power at the national level in 2000 implemented horizontal checks and balances and revived a federal pact. Second, it shows that changes in the rules of the Mexican political system fostered a window of opportunity for new subnational actors to shape the national political agenda on re-engineering of the institutions of Mexican federalism. Enfocndose en la negociacin poltica entre el nivel nacional y el subnacional, este artculo reexiona sobre cmo la dispersin de poder de diferentes regiones de un pas puede convertirse en un factor crucial al modelar las reglas del gobierno democrtico. Primero, analiza los cambios en la dispersin del poder en las ltimas dos dcadas de Mxico, haciendo notar que la alternancia del poder a nivel nacional del 2000 implement balances y contrapesos, y revivi el federalismo. Segundo, muestra que los cambios en las reglas del sistema poltico mexicano fomentaron el surgimiento de opciones para que nuevos actores subnacionales moldearan la agenda poltica nacional rediseando las instituciones del federalismo mexicano.

*The author thanks Todd Eisenstadt, Rafael Aguirre, Armando Palacios, Francisco Sarmiento, Melissa Ovalle, Diego de la Mora, Helios Becerril and Isaac Arteaga for their help and useful comments and Mony de Swaan and Juan Molinar for allowing the use of their Indice de Concentracin de Poder. While the author is a Mexican public ofcial, the views expressed here are strictly his own, and do not reect the positions of any public agency.

Mexican Studies/Estudios Mexicanos Vol. 22, Issue 1, Winter 2006, pages 175204. ISSN 0742-9797 electronic ISSN 1533-8320. 2006 by The Regents of the University of California. All rights reserved. Please direct all requests for permission to photocopy or reproduce article content through the University of California Presss Rights and Permissions website, at www.ucpress.edu/journals/rights.htm.

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A signicant portion of the literature on transitions to democracy overlooks the fact that the advent and consolidation of democracy in a country with a protracted and incremental transition may be the end result of political bargaining between national and subnational levels of government. By focusing on the subnational realm, it is possible to unravel how the dispersion of power in different regions of a country can be a crucial factor in shaping the rules of governance and the practice of democratization. This article is divided into two sections. In the rst, I briey analyze how power has been dispersed in Mexico over the last two decades. I highlight how alternation in power at the national level in 2000 not only helped to foster a horizontal system of checks and balances between purportedly co-equal branches of government (executive, legislative and judicial branches), but also reinforced vertical accountability, among the national government, state governments, and municipalities, reviving a federal pact which had been dormant for more than seven decades. I also illustrate how this new dispersion of power is causing important changes in the behavior of the Mexican political system. Among the most important transformations are new patterns of recruitment and mobility for political elitesopen primaries, responsiveness to the local electorate, and a longer time span for local politicians to advance their careers. The second part of this article argues that dispersion of power and changes in the rules of the Mexican political system fostered a window of opportunity for new subnational actors seeking to shape the national political agenda on a range of issues which have brought a new impetus to a long-needed re-engineering of the institutions of Mexican federalism. The advent of the Conferencia Nacional de Gobernadores (CONAGO) signaled a dramatic change in the political and economic relations between the federation and the states. This later section of the article concludes by analyzing the main themes of the federalism agenda that emerged from the creation of this and related organizations and evaluates some of the opportunities and challenges emerging from the 2004 Convencin Nacional Hacendaria. Measuring Alternation and Dispersion of Power in Mexicos Democratic Transition The main characteristic of the Mexican democratic transition is that national-level democracy arrived only after a protracted and incremental process of electoral reforms that began in 1977 and ended in 1996. This democratic transition was mostly conducted election by election, rather than through any overarching pacts. The dominant Partido Revolucionario Institucional (PRI) did not vanish from the political scene, despite

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Figure 1. Indice de Concentracin de Poder

Source: Mony de Swaan and Juan Molinar Horcasitas, Movimientos Graduales Pendulares: Transicin democrtica y dispersin del poder. Paper prepared at the Conference of Ibergop El Gobierno Dividido en Mxico: Riesgos y Oportunidades Mexico May 7, 2002 CIDE. The calculus for the year 2002 and 2003 was made by the author using the methodology established by De Swaan and Molinar. 2000 a) Before 2000 federal election. 2000 b) After 2000 federal election.

losing the 2000 Presidential election, but rather won back some of its lost congressional seats in the mid-term elections of 2003. To assess how this incremental transition took place, I use Molinar and De Swaans Indice de Concentracin de Poder (ICP), measuring the degree of decentralization of political and economic resources from the executive branch. This index is particularly helpful in showing different steps in the process of national democratization closely related to two variables: electoral reforms and economic crisis. The ICP can vary from 0 to 100, in which zero means that political and economic resources are completely decentralized among different branches and of government at the national and subnational levels. In contrast if the ICP reaches 100, this means that the party of the presidency has overarching control of all political and economic resources vis--vis other branches that compose the national and subnational political system. A complete description of all variables included in this index can be found in Annex 1. As shown in Figure 1, dispersion of power at the national level began in 1986. This can be partially attributed to the fact that in 1983, reform of Article 115 of the Constitution gave more autonomy to municipalities. As a result, the local political arena experienced some degree

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of electoral competitiveness amid an economic crisis.1 This increase in competitiveness led, for the rst time ever, to alternation of power in the state of Baja California in 1989, when the panista candidate Ernesto Ruffo became Mexicos rst opposition governor since before World War II. The second important event affecting the ICP in 1995 and 1996 was the Zedillo administrations so-called Error of December 1994. Financial mismanagement triggered an unprecedented national economic crisis that left at least one million people without work, brought the industrial and banking systems to the verge of collapse, and impoverished the lower and middle classes when interest rates, wage freezes, and ination radically diminished their purchasing power while scal austerity measures diminished social spending.2 The Partido de la Revolucin Democrtica (PRD) and, especially the Partido Accin Nacional (PAN) capitalized on the discontent fostered by this era of economic hardship. However, despite the PRIs electoral losses at the subnational level, the Indice de Concentracin de Poder did not shift dramatically, although it did continue on a downward trajectory. The third crucial event came in 1997, when for the rst time in recent history the PRI was not able to obtain a plurality of seats in the Chamber of Deputies, the lower chamber of Congress, after the mid-term election. The party also lost its qualied or two-thirds majority in the Senate. Hence, the PRI could no longer enact constitutional amendments on its own. In fact it was during Zedillos term that for the rst time in recent history, the president sent to Congress several bills related to important structural reforms, and the national legislature either amended signicantly (as in the case of the pension funds or the nancial rescue of the banking system, Fondo Bancario de Proteccin al Ahorro (FOBAPROA) or rejected the presidential proposals (as in the case of the electrical reform). Furthermore, in 1997 the PRI not only lost its representative hegemony in Congress, but it also lost that hegemony in Mexico City, where the PRD won Mexicos most coveted mayoral election.3 These two ele1. This crucial reform entitled municipal governments to expand their sphere of activities to include administration of water and sewage systems, public lighting, garbage collection, markets and slaughterhouses, and public recreation facilities. Most important, this reform enabled municipalities to collect some local taxes, such as the property tax, that made it more attractive for opposition parties to seek municipal posts. Moreover, after the 1982 economic crisis, local politics became increasingly competitive, while the PRI began to lose important municipal strongholds in the northern part of the country. (Mizrahi 1994:13758; Molinar 1991). 2. The number of insured workers in the Instituto Mexicano del Seguro Social is used as a proxy to calculate the number of layoffs. Between 1994 and 1995, the workforce went from 10.07 million to 9.45 million (Secretara del Trabajo y Revisin Social 2005). 3. The constitutional status of the Distrito Federal (Mexico City) is not exactly that of the states: in contrast, the power of the chief of government of the Distrito Federal is

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ments triggered a signicant shift in the ICP, which reached a threshold slightly below 80 points. This meant that the traditional meta-constitutional powers of the president began to fade at a slow pace, once electoral competitiveness became the norm.4 Even after these previous changes, the 2000 federal election emerged as the most important catalyst in the deconcentration of power. Alternation of power at the presidential level did not bring President Foxs party a majority of seats in the lower chamber. The Senate remained under PRI control, two thirds of the state governments continued to be controlled by parties other than Foxs PAN, and more than 65 percent of Mexicos 2,400 municipalities remained outside of PAN control. Alternation and democratization in Mexico resulted in divided government among the legislative and executive branches of government. Most importantly, alternation in power at the presidential level also produced a dispersion of power at the subnational level, since a stacked electoral calendar favored those parties other than the presidents to retain power in most state and municipal governments. In short, political alternation at the national level simultaneously produced a divided government and a pattern of scattered power at the subnational level, and this brought new life to the federal pact. For decades, Mexico had observed the countrys federal arrangement only in parchment. Decentralized power and local autonomy had not existed due to the lack of electoral competitiveness and an overwhelming prista hegemony in which all governors behaved as presidential agents (Eisenstadt 2004). Most municipalities were also held within the tight grip of governors and had almost no latitude within which to decide how to spend their budgets. In short, competitiveness and alternation of power at the subnational level also contributed to changing most of the unwritten rules of the Mexican political system which had worked for decades, especially those mandating strict party discipline and unconditional gubernatorial allegiance to the national executive. During the rst three years of the Fox administration the ICP continued to decline marginally, reaching the threshold of 51.7 in 2003. This can be mostly attributed to the excessive concentration of the PAN vote in some regions during the 2003 mid-term election and the loss of the
limited by other federal powers on issues like procurement of justice, public security, and debt. Nonetheless, the resources of the local government and the public exposure of the mayor make this a highly attractive position for politicians. 4. The traditional meta-constitutional powers of the Mexican president until the Salinas administration were: the possibility of controlling the PRI through the appointment of its leader; the power to nominate and remove state governors; complete control over the national bureaucracy; and control of members of his party in Congress. Indeed, the most important meta-constitutional power of the Mexican president was to appoint his successor. For further information on this subject see Weldon (1997: 22558).

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Table 1. Concentration-Dispersion of Power, 1994 and 2000

Ernesto Zedillo (PRI) 1994 Absolute data % Federal Representatives Senators Governors Population governed at the state level Municipalities Population governed at the municipal level 300 95 29 78,823,573 2,187 60 74.22 90.62 89.87 91.6 Vicente Fox (PAN) 2000 Absolute data % 206 46 8 20,836,527 308 41.2 35.9 25 22.12 12.7

65,767,271

86.43

32,578,653

36.68

Source: IFE, INAFED, INEGI, and Alain de Remes.

Nuevo Len governorship to the PRI. However, it is important to point out that the ICP seems to have stabilized at a level characteristic of democratic federal systems where checks and balances operate horizontally (checks among co-equal branches of government) and vertically (national governments, states and municipalities). In addition to the Concentration of Power Index, another way to assess the dispersion of power is to look simultaneously at the national and subnational electoral outcomes and analyze how these results have affected the countrys governance in recent years. Table 1 shows that the last two Mexican presidents faced very different power congurations at the commencements of their terms. The party of President Zedillo in 1994 may have been losing ground slowly, but it was still rmly in control of subnational electoral politics. Contrarily, Fox had to face what in practical terms resembled a minority government, with checks and balances operating at the horizontal (co-equal executive and legislative branches) and vertical (states and municipalities) levels of government. Although important scholarly evidence exists that divided or even minority governments are not necessarily prone to deadlock, dynamics of political confrontation have spread in Mexico along with alternation. In the double process of dispersion of power (vertical and horizontal), regions effectively grew more assertive and less responsive to the will of the central government. Simultaneously, the legislative arena also experienced dramatic changes as Congress grew more prolic than the national executive in the introduction of bills. Along with this intensied activity, Congress began to activate capabilities to obstruct the execu-

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Table 2. Concentration-Dispersion of Power, 1997 and 2003

Population governed by: Ernesto Zedillo (PRI) 1997 Absolute data Federal Representatives Senators Governors Population governed at the state level Municipalities Population governed at the municipal level 238 77 25 64,456,018 1,433 40,530,166 % 47.6 60.16 78.12 68.44 59.5 48.74 Vicente Fox (PAN) 2003 Absolute data 151 46 9 23,311,864 430 32,129,810 % 30.44 35.9 28.12 22.84 17.7 34.51

Source: IFE, INAFED, IFE and Alain de Remes.

tive agenda, something extremely unusual throughout the golden years of the hegemonic party system.5 Table 2 illustrates the political situation that Ernesto Zedillo and Vicente Fox faced after the mid-term elections, halfway through their sixyear terms.6 Zedillo had to cope with a decidedly more adverse panorama in 1997, as the PRI secured only 48 percent of the seats in the Chamber of Deputies, 12 percent fewer than in 1994. The PRI was reduced from majority party to merely the largest minority in the lower chamber, a position the party had not faced since the early post-revolutionary period (19201928) (Nava and Yanez 2003). The PRI also lost 15 percent of its seats in the Senate.7 As evidenced in Table 2, the 2003 mid-term election also triggered
5. This is not to say, however, that Congress had been unconditionally deferent to the president during the last decades. Even in the golden years of the Ancien Regime, and notwithstanding the presidential control of the legislature through the PRI, there was a certain (yet negligible) degree of opposition between the two powers. This is shown by the number of presidential vetoes to bills passed in the Congress ( Weldon 1997: 236). 6. Mid-term contests tend to be overlooked by some scholars. However, one of the interesting characteristics of this type of election is that they can effectively contribute to a noticeable shift in the balance of power, and also, these elections tend to produce divided government (Shugart 1995). 7. The loss of seats for the PRI in the Senate can be attributed to two factors: First, the COFIPE reform of 1996 introduced a proportional representation formula in one of the tiers, and thirty-two seats were distributed according to this principle. Therefore, plurality increased. Second, the country was recovering from one of its worst economic crises, and support for the ofcial party decreased.

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a further dispersion of power away from the Fox administration. The presidents party lost more than 11 percent of its seats in the lower chamber, as compared with PANs gains in the 2000 election. This result effectively diminished its capacity to block constitutional amendments. In the upper chamber, the numbers remained unchanged because senators are elected for six-year terms. However, PAN is the second force in the Senate, controlling 36 percent of the seats. In conclusion, it is important to stress that the last two Mexican administrations faced a greater dispersion of power, signaling the end of an era of strong governance where presidents always secured majorities in the legislative branch. However the paradox of the Mexican process of transition is that old political rules have not been replaced by new ones, since there has not been an overarching pact between the elites that settles how the system can effectively work under a framework of political plurality. Subnational Democratization and New Political Trends Little scholarship on Mexico has used the conditions and prerequisites established by the literature on democratization at the national level to explain the outcome of democratization at subnational levels. There is also a dearth of explanation of how politics at the local level impinge on the pace and form of overall democratization of a country. The lack of attention to local processes as a catalyst for democratization is pervasive. Nonetheless, analyzing local politics is useful, as the result may illustrate how an increase in electoral competition at the national and local levels may be changing parties strategies and the pattern of recruitment and elite settlement, and may establish a system of checks and balances between the center and the periphery. The trends at the subnational level clearly show that competitiveness has increased, steadily bolstering plurality and as Figure 3 and Table 3 demonstrate, the power sharing phenomenon is not limited to the national arena. In 2003, the PRI still controlled 53 percent of the state governorships. However, its overwhelming supremacy at the regional level has been challenged by the PAN and the PRD, with the former controlling 28 percent, and the latter 15 percent of the states. Situations of complete hegemony in state legislatures are also quickly fading, giving way to a norm of majoritarian or rst minority governments.8 In addition, the sub-national realm is also experiencing divided
8. The typology for local legislatures is the following one: 1) Hegemonic congress: if a party has at least 60 percent of the seats; 2) Majoritarian congress: if a party has at least

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Figure 2a. Governors by Political Party 19891996

Figure 2b. Governors by Political Party 19972003

government (where the governors party is different from the one holding a majority of the unicameral legislatures seats), as was the case in 22 percent of the states by 2003. Thus, power sharing also is becoming the norm in local legislatures, and in the near future governors will face more checks from their legistlatures. This also means that governors will have to nd ways to create viable legislative coalitions if they are to pass their agendas through more plural legislatures. The dispersion of power between co-equal branches of government at the subnational level has brought interesting phenomena not seen in the national realm. At least three states (Chihuahua in 1996, Nayarit in 2002, and Tlaxcala in 2003) have experienced budgetary deadlock under divided government. Although it was possible to solve these crises, the states constitute a political laboratory for unprecedented political circumstances. Furthermore, once the hegemonic grip of single-party rule eroded, state constitutions were no longer mere mirrors of the national chart. Today they include many institutional innovations that are not yet present at the federal level, such as mechanisms for direct democracy, protection of indigenous rights, and more advanced electoral laws (Lujambio 2000).
50 percent plus one of the seats but less than 60 percent; 3) First Minority congress: if a party has the greatest number of seats but does not have 50 percent plus one of the total seats; and 4) Divided government: when a party other than the governors controls the legislature.

Table 3. Structure of Local Legislatures 2003

Estado Aguascalientes Baja California Baja California Sur Campeche Coahuila de Zaragoza Colima Chiapas Chihuahua Distrito Federal Durango Guanajuato Guerrero Hidalgo Jalisco Mxico Michoacan de Ocampo Morelos Nayarit Nuevo Leon Oaxaca Puebla Queretaro de Arteaga Quintana Roo San Luis Potos Sinaloa Sonora Tabasco Tamaulipas Tlaxcala Veracruz-Llave Yucatn Zacatecas PAN PRI PRD 10 12 2 13 8 9 5 11 16 8 18 4 4 17 16 5 9 7 11 7 10 12 3 11 12 10 2 7 3 11 12 4 289 12 10 6 18 20 13 24 18 7 13 10 20 18 19 25 17 8 18 26 25 25 10 1 2 11 1 3 2 7 2 37 2 4 17 7 2 16 18 8 2 1 8 2 2 Others 4 1 2 3 4 1 4 2 6 2 4 5 0 2 18 0 5 3 4 2 4 1 4 2 4 0 1 3 4 3 0 3 101 Total 27 25 21 35 35 25 40 33 66 25 36 46 29 40 75 40 30 30 42 42 41 25 25 27 40 33 31 32 32 45 25 30 1128 % 44.4% 48.0% 52.4% 51.4% 57.1% 52.0% 60.0% 54.5% 56.1% 52.0% 50.0% 43.5% 62.1% 47.5% 33.3% 45.0% 30.0% 60.0% 61.9% 59.5% 61.0% 48.0% 60.0% 44.4% 52.5% 63.6% 51.6% 59.4% 43.8% 60.0% 48.0% 43.3% 46.9% PRD PRI PRI PRI PRI PRI PRD PRI PAN PRI PRI PRI PRI PRD PAN PRI PRI PRI PRI PAN PRI PRI PRI PRI PRI PRI PRI PRI PAN-PRI PRD Hegemony Absolute Majority First Minority Divided PRI PAN Yes No No No No No Yes No No No No No No Yes Yes No No Yes No No No No No Yes No No No No Yes No No No

15 3 12 2 21 3 21 2 16 12 19 3 14 11 27 4 12 1 10 13 529 209

Hegemony: If the dominant political party at least have 60% seats in local congress. Absolute Majority: If the dominant political party has 50%+1 seats in state congress. First Minority: If the dominant political party has less than 50% seats in local congress. Divided Government: If the most important political party in the local congress is different from the governors party. Source: Local Electoral Institutes, and Alain De Remes July 2003.

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However, we should keep in mind that federalism is a two-way street in which the subnational realm is inuenced by the national, and vice versa. Indeed, another interesting novelty is that some governors are intensely lobbying, pressuring, and at times controlling the members of their party in the national Congress. For example, the nal vote tally of the 2003 (rejected) scal reform clearly shows that PRI legislators from the states of Hidalgo and Veracruz followed the will of their governors. They were overtly in favor of this bill. Although at the time there was an intra-party dispute over leadership of the PRI, congressional members from these states were not truly responding to one of the factions, but rather to directives from their respective governors. Therefore, we can expect that in the near future the inuence of regional issues on the federal Congress will certainly increase. The risks posed by this reality are not negligible, as Mexico still needs important structural reforms to enhance its economic performance. Hence, extreme caution must be taken not to let regional agendas overpower national needs. Electoral competitiveness and alternation in power at the local level also have prompted important changes in the recruitment and mobility of politicians. Under the hegemonic party system, most governors had ties with the national government. Nomination to become a states chief executive depended entirely on what the center wanted. However, during the late 1980s and throughout the 1990s, most opposition political groups (meaning political groups not associated with the PRI) inaugurated new patterns of elite mobility and recruitment. Most opposition governors made their political names locally before becoming governors. This pattern also has been followed more recently by the PRI. The partys governors tend now to have attained a higher local prole than in the past. In short, the pattern of political mobility from the center to the periphery is rapidly vanishing, and today politicians who want to occupy political posts in the regions need strong local ties to improve their prospects. Another interesting characteristic, also triggered by more competitive local processes, is that some parties (especially the PRI since 1998 and the PAN in 2004) are beginning to rely on open primaries to choose their candidates for municipal and gubernatorial races. The implementation of open primaries by parties has important consequences for the Mexican political system. Primaries are generally not regulated by national or subnational electoral laws. This loophole can be used by parties to exceed the campaign-nance ceiling established by the regulatory framework. This process also has the effect of giving more exposure to the winning candidate of the primary, a factor that may turn into a denitive advantage in a close general election race. In addition, primaries diminish the nomination power of party leaders and

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give more voice to the electorate to choose their preferred candidates. However, primaries also have been criticized, since they open the window for outsiders to win party nominations, and they also tend to increase the cost and duration of campaigns. Another noteworthy pattern is that losing gubernatorial candidates in close races are no longer considered lame ducks, as they may even have chances to compete as frontrunner candidates in the next election. This was the case of Natividad Gonzlez Paras, the PRI candidate who lost the governorship of Nuevo Len in 1997, but who was again nominated in 2002. On that occasion he won the governorship. This strategy was previously used by the PAN in Chihuahua (19861992) with Francisco Barrio, and in Guanajuato (19911997) with Vicente Fox. In short, as the subnational electoral level becomes more competitive, the time span for local politicians to advance their careers also increases, and losing an election is no longer the end of a political career. One trend has become increasingly important for gubernatorial contests. Once alternation of power occurs, the framing of the following local electoral campaign tends to concentrate on local, rather than national issues. Thus, performance of the state incumbent governor may become the most critical factor in retrospective evaluations by voters. As demonstrated by Mizrahi (1999), Chihuahua helps illustrate when and why good administrative performance is important. Furthermore, as politics becomes more locally focused, voter turnout also increases. The 2003 midterm elections offer an example. While in 2003 participation at the national level was the lowest of the last four elections (42 percent), states with concurrent federal elections reached a 54 percent turnout, 12 points above the national average. Thus, we may conclude that people are beginning to show more interest in elections that are not based on national issues. Local politics are increasingly important to voters. People have more incentives to vote when local issues directly affecting their lives are at stake. Once electoral competitiveness at the subnational level has been established as the norm, state and municipal governments respond better to the needs of their constituencies, and are less concerned about fostering political ties with the center. However, the importance of stressing local independence vis--vis the center has political and economic consequences, as manifested in new research on state budget decits in Mexico. According to Velzquez, the states where governors have a striking local prole (in other words, governors whose political careers are based entirely in the periphery) possessed substantially higher imbalances, since they have to respond more actively to the needs of their electorates (Velzquez 2000). This could produce future national macroeconomic management problems.

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To conclude, federalism is being re-ignited through electoral competition and a consequent new political dynamic in the local realm. Among the important changes have been those in patterns of recruitment and mobility which were unthinkable under a single party regime. Open primaries, responsiveness towards the local electorate, longer time horizons for local politicians to advance their careers, and a more prominent place for regional issues on the national political agenda are all positive balances on the ledger of the new subnational democratization process. However, on the negative side, party discipline has weakened, support and cooperation with the president to implement his national mandate have diminished, and potential risks exist that extreme local political competition could trigger national macroeconomic imbalances. The increasingly pluralistic makeup of subnational electoral politics has prompted a clamor for greater resource shares and greater roles in decision-making. Important new actors in Mexicos centrifugal opening are seeking to consolidate electoral gains and ensure that these gains also translate into pluralistic governance. Unlike the era of PRI domination, when Mexico looked like a centralized system rather than a federation, the new actorsorganizations of elected ofcialsare trying to counter the traditionally executive-heavy and centralized authority. This, in turn, has encouraged them to seek increasing ows of revenue to the states, home rule, and taxation authority, as I shall describe in the next section. New Subnational Actors Seek to Consolidate Electoral Gains Dispersion of power at the national and subnational levels has been capitalized upon by new actors seeking to mold the national political agenda. The second part of this paper describes the origins and development of CONAGO and the Conferencia Nacional de Municipios de Mxico (CONAMM), two organizations created since 2000, that have been extremely active in promoting federalism, and particularly in seeking increased revenue ows from the federal government to the states.9 The following analysis considers an ongoing process where the agenda, the strategies, and results are contingent, and hence the conclusions offered are tentative. The origins of CONAGO must be traced to a previous organization, ANAGO (Asociacin Nacional de Gobernadores), formed less than a year
9. Revenue ows are understood as the amount of resources that the federal government transfers to the states, either after they were originally collected in the state or as new allocations.

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before the 2000 election by the PRD governors of Nayarit, Mexico City (the Federal District), Zacatecas, and Tlaxcala. The ANAGOs motivation was to create a forum to consider decentralizing resources and functions of the national government and to improve delivery of state-based services such as health care and education. In fact, in 2002 ANAGO became more dynamic and confrontational, as the governor of Tlaxcala threatened to devolve the failing state educational system under his control back to the federal government if the Fox administration did not offer more resources. This action prompted other governors from the PRI, such as Jos Murat from Oaxaca and Melquiades Morales from Puebla, to petition for a similar deal. As the dispute escalated, the PRD-governed ANAGO member states also threatened to devolve health care back to the federal government, and to release all prisoners convicted of federal crimes, pardoning their sentences in state prisons.10 Eventually, the Fox administration and the local ANAGO governors were able to solve their differences through an additional transfer of resources from the federal governments to these states. The two skirmishes sent clear signals that the governors were building a space to unite and voice their concerns, and thus, relations between President and governors were not going to be easy to manage. Once the PRD and PRI governors decided to combine their efforts on the education issueand form the Conferencia Nacional de Gobernadores, most of the agenda and activities of ANAGO were taken over by CONAGO. However, the former organization is still in place and serves as a coordinating mechanism for PRD state executives. In July 2002, twenty-three governors (seventeen from the PRI, ve from the PRD, and one independent)11 met in Cancn, Quintana Roo, to form CONAGO. Initially, the PAN governors decided not to participate in the new forum. However, they have attended most meetings as observers. CONAGO was designed as a permanent institutional space for dia10. The governors threatened to devolve all the prisoners purging their sentence for federal crimes in state prisons to the Federal Government. However, it was out of the question to release the prisoners since they had already been convicted. Furthermore, Governors do not have the power to release prisoners convicted for federal crimes, but they have the power to transfer these prisoners to Federal precincts or jails. 11. Pablo Salazar took ofce as governor of Chiapas in December 2000, after leading an unprecedented coalition among the PAN, the PRD, and ve other parties. This alliance was instrumental in defeating the PRI in one of its traditional strongholds. Nonetheless, shortly after taking ofce, and because he wanted to build an encompassing base of citizen support which cut across different partisan lines, Pablo Salazar declared his independence from the organizations that supported him in the election. This is a rather unusual strategy, since most governors elected through a coalition of several parties sooner or later pick one of the parties and adhere to it.

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logue, debate, and negotiation aimed at equilibrating the power between the national and state governments. The organization has emphasized several times that its main objective is to strengthen the states so they might contribute more effectively to national development. The group also seeks to increase state government resources and to enhance their capacity to respond to community demands. Finally, CONAGO also has given assurances to the central government that it does not wish to withdraw from the federal pact, but rather seeks to promote a new decentralization process that strengthens all levels of governments. For several reasons, an organization such as CONAGO was unthinkable under a one-party regime. First, during the golden years of the prista hegemony all governors were members of the PRI, and although episodes of intra-party competition among different factions of the PRI did occur (Hernndez 2000; Langston 2002), party discipline was extremely strong and almost impossible to break, since the president had complete control of his party and his congressional delegation. Second, the president had metaconstitutional powers allowing him to nominate and remove governors at will, and these were exercised frequently during the Salinas administration. As long as the president could pull the strings of the PRI, most governors acted as agents of the president and offered little resistance to orders from the national government.12 This centralization of the political system created incentives for each governor to bargain with the president over transfers of additional resources for his/her state on an individual basis rather than through a collective interest group. In short, the creation of a national association of governors cannot be dissociated from an increase in electoral competition and plurality and with alternation in power at the national and subnational levels. Once the governors began to build their careers locally, their complete allegiance to the president was simply not necessary, especially if the president came from a different party. For the aforementioned reasons, it is notable that, aside from its declared ofcial goals, CONAGO served another implicit purpose in the new context of Mexican politics: helping to bridge the suddenly increased distance between the president, on the one hand, and the majority of governors, on the other. This issue must not be disregarded. With the alternation of the national executive, the old rules of commu12. The deference of the governors, and of the PRI itself, started to wane as the electoral conditions turned more competitive all over the country. Although Carlos Salinas managed to concentrate control over the political leaders of his party (mainly through his persona), the relations of Ernesto Zedillo with the PRI (governors included), were not easy at all. The electoral defeats of the PRI strained its relations with the president throughout that sexenio (19942000). For further information, see Hernndez (2000).

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nication and bargaining between the governors and the president were rendered obsolete, and they have not been replaced by other institutional channels. Over the last year, CONAGO has sought to promote two issues. The rst, the groups short-term objective, was to increase state shares of federally generated revenues from higher petroleum prices. More specically, CONAGO pushed for a new mechanism for transferring resources to a new agricultural program established in 2003 to improve living standards of peasants and small producers.13 This short-term agenda also has included issues such as coordinating public security between the states and the central government, and addressing problems of migration, health care, education, and natural disaster response. Despite its very recent founding, the CONAGO has already logged four important results. For the rst time since opposition governors began to win ofce in 1989, the CONAGO was able to bring together governors from different political groups and regions. The importance of this accomplishment should not be underrated, since the challenges faced by each governor in his/her state are quite diverse and so are the governorspreferences as to how decentralization should be carried out or how the scal system should be reformed.14 Despite these obstacles, in a relatively short period of time, CONAGO constructed an agenda identifying the most common difculties governors faced in their daily relations with the central government. In only two years, the group has become an institutional space for framing the pressing issues of federalism, and has become the agenda setter on this subject. This is an especially remarkable achievement in that members have overcome collective action problems unheard of under the prista presidencies, when each governor relied on personal connections with ofcials from the center and on individual bargaining skills to obtain a greater share of national transfers and national public infrastructure projects.
13. Mexico is still extremely centralized in revenue generation. In 1996, 94.7 percent of the total revenue was concentrated in the federal government. This proportion puts Mexico among the most centralized systems in this respect. Most of the developed nations show much lower levels of centralizationfor instance, Norway: 79.9 percent, Germany: 72.8 percent, the United States: 66.3 percent, Canada: 50 percent. (CADE, 1999). 14. Different needs and a sense of fairness in sharing revenues for each state are elements to illustrate this situation. For instance, the poorer and highly populated southern states such as Oaxaca and Chiapas have great and permanent need to receive an inow of federal transfers, since they have weak scal bases on which to collect revenues. Also, other southern states such as Tabasco and Campeche have expressed a strong preference for retaining a greater amount of locally-generated oil revenues. In contrast, the more afuent northern states have been pushing for a new taxation system that would allow them to retain a greater portion of the taxes they collect in their polities and which are automatically transferred to the central government.

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Second, CONAGO successfully pressured the national government to allocate more resources to a new fund called the PAFEF (Programa de Apoyos para el Fortalecimento de las Entidades Federativas), established in 2000 to strengthen state nances. These new resources came from surplus revenue generated by oil price increases. In order to more efciently use these resources, the federal government created spending limitations, forcing states to allocate at least 50 percent of this additional income to infrastructure projects. However, PAFEF seems to allow a great degree of latitude for governors, since in 2003, thirteen states did not report in their annual budget accounts how this fund was used. The third important achievement was the involvement of CONAGO in the Agricultural Pact (or Acuerdo Nacional para el CampoANC) signed between the national government and the most important peasant organizations. In fact, the governors will receive oil revenue surplus resources to support agricultural programs in their states. The fourth and most important result was the capacity that CONAGO showed to call for the Convencin Nacional Hacendaria, which was launched in February 2004. At this convention, the national, state, and municipal governments tried to redene crucial aspects of the scal and federal pacts. The main objective of the convention was to set a comprehensive agenda of reforms, which were presented to Congress in September 2004. The 2004 Convencin Nacional Hacendaria On October 28, 2003, the national, state and municipal governments as well as the national Congress, decided to sign a protocol launching the Convencin Nacional Hacendaria. Fifty-seven years had elapsed since such a comprehensive exercise had last been undertaken in Mexico, and few similarities exist between the motivations for the three previous conventions and the most recent one. The misfortunes of some of the early conventions warrant consideration here, as they are illustrative of the political underpinnings of Mexicos scal structure during the twentieth century. In the rst and second scal conventions (1925 and 1933), the most pressing necessity was to build a unied, coherent. and reasonably strong scal authority for a national economy that was still very fragmented. Notwithstanding the urgency of this purposeaddressed in the proposals for each conventionthe accomplishment was postponed for decades, because, even as they followed a centralizing rationale, some delegates sought to defy regional interests which were well-represented in Congress at that time. In the aftermath of the Mexican Revolution, legislators were highly responsive to regional bosses and revolutionary warlords in their territories and in the districts that they formally rep-

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resented. Therefore, the federal legislature either diluted or rejected moves towards centralization of resources and responsibilities. A unied scal system was attained only with the political centralization completed with the rise of the nascent hegemonic party. The third convention in 1947 did succeed in adopting a centralized scal system. This achievement by the national executive was reached one year after the PRI successfully centralized electoral processes under federal jurisdiction (which also helped consolidate PRI hegemony for the next ve decades). Presidential control over the political system, through the ofcial party, was indispensable in fortifying a scal system that subordinated the regions.15 In 1980, the centralization of the scal system attained its pinnacle with the enactment of the Sistema Nacional de Coordinacin Fiscal (SNCF). This new scal framework introduced the value-added tax (VAT) and gave states the option of signing a non-binding agreement through which they would delegate to the national government what remained of their income collection powers in exchange for greater transfers from the center. Given the abundant federal resources at their disposal which had been generated by the oil boom of the 1980s, all the states agreed to enter to the new system. However, in the long run, the SNCF further weakened the scal autonomy of states, since they became even more dependent on transfers from the national government. Over the last two decades there has been a move to decentralize the Mexican scal system, or, more precisely, to reallocate resources and responsibilities between the federal and subnational authorities. It is important to note two aspects of this process: although decentralization started earlier than the power dispersion described above, it has been mainly driven by this redistribution of power; and decentralization has meant the transfer of administrative controls and resources, rather than a shift in responsibilities for collecting taxes. To give an idea of how administrative decentralization has evolved, it is worth mentioning that in 1993, 25 percent of total federal revenue was redistributed to the states and municipalities. By 2003, that gure had grown to 38 percent.16 The 2004 convention aimed to build consensus and propose means of reassigning the distribution of resources and responsibilities at each
15. For more on these early conventions, see Courchene, Daz-Cayeros and Webb (2000:12325). 16. This gure results from the division of the expenditure of the states and municipalities by the total primary expenditure of the public sector. However, if we only take into account federal income from taxation (excluding grants from oil and other state owned rms), the change is more stark: in 1993 43 percent of this income was transferred to the states and municipalities, whereas in 2003, that same gure grew to 70 percent (Presidencia de la Repblica 2004, 24045).

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level of government so as to give new, better form to the federal pact. Agreements and proposals of the convention spanned a wide range of issues: public spending, income, public debt, public patrimony, administrative simplication, inter-governmental work-sharing schemes and cooperation, and accountability and scal oversight. The convention was a necessary political forum. There is little doubt that a new, decentralized, scal structure could yield signicant benets for municipalities, states, and the entire national economy. As mentioned before, currently, the federal government collects as high as 97 percent of total taxes collected in the country. But the challenges facing reform of the current scal structure are great. As discussions evolved, it became apparent that improving the scal system is much more complicated than simply giving up the taxation powers of the central government to local governments. First, while getting more transfers from the federal government is always desirable, not all of the states are administratively prepared to impose new taxes or to collect those currently in the hands of the national executive. Moreover, even if all of the states were prepared, important disparities among their scal revenue bases exist that require the use of redistributive mechanisms. This is the reason why one of the greatest challenges for the statesand the national executive and legislative branchis to strike a new balance between compensatory mechanisms beneting the poorest states and new incentives to reward those states that make signicant local efforts to collect more revenues. Also, from a political standpoint, even when overall efciency gains could be attained, changes in the current scal organization might imply undesirable costs for new subnational governments, since each governor knows it is unpopular to increase the tax base or simply levy more duties. Therefore, every state executive has the incentive to pass the buck on this issue. 17 In August 2004, the Convencin Nacional Hacendaria ended, with more than 350 proposals accepted by unanimity. However, there was not a complete consensus on how to implement a comprehensive overhaul of the scal system that could generate a substantial increase in revenue for the national and local administrations. In the end, the governors and the president agreed that the national executive would send the 2005 annual budget to the lower chamber of Congress with a proposal to allocate 2 percent of the VAT to the states and 1 percent to the municipalities. They also arranged to include in this package a mecha17. This panorama can become even more complicated when interests created among important political actors straddling state lines are considered. Paramount among them are the teachers unions, whose payroll and perks are received, via states, from federal funds. (Merino 2003: 359).

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nism in which the Congress would determine taxation amounts on food and medicines in order to offset national income redistributed to states and municipalities through the VAT. However, these proposals were timid efforts by the CONAGO and the president to push forward a minor reform in areas related to taxation, while falling short of a comprehensive reorganization of the scal system. From a more optimistic perspective, there was consensus, indeed, on matters advocated by the CONAGO, like the need to cede constitutional ground to the scal system and to clarify areas where the two levels of local government could act jointly.18 Another positive aspect was that the convention did not bring a proposal for radically altering the schemes under which states can borrow, leaving in place the conservative but wise status quo. Under this framework the federal government can use resources allocated for transfers to the states as collateral for their respective debts. Also, state governments cannot borrow nancial resources from the international market since they are not backed by the national government. With this system of incentives, Mexico has averted the vicious cycles into which other federal states in Latin Americaspecically Argentina and Brazilhave fallen. Another positive result was that throughout the convention a recognition prevailed that the principle of distributive equity (i.e., the imperative of transferring wealth from richer states to poorer ones) is central to the Mexican federal system. The economic and social disparities between states and regions in Mexico render unfeasible any move towards an extremely competitive federalism system, as in the United States, establishing predatory tax competition through revenue decentralization. Other areas in which the convention met its original expectations were the areas of transparency and accountability and scal oversight[RAP1]. Many states are still lagging behind the federal government in this respect. Currently, almost half of the states still have cumbersome legal frameworks which limit possibilities for transparent oversight of their budgeting and spending processes.19 Regarding access to public information, almost two thirds of Mexicos states have enacted legislation similar to the federal freedom of information act (The Ley Federal
18. These are, according to the proceedings of the convention, and in line with what CONAGO has been advocating, public security and safety, environment, health, education, commerce, and economic and social development (See Declaratoria Final 2004: 84). 19. A Fitch report released in 2004 clearly signals that at the national level, Mexico gives information on scal and monetary policies that meet international standards of transparency. However, this report also mentions that at the state level, scal policy transparency is still decient. (Fitch Ratings 2004:1). Ambiguous areas in the budgeting and spending process cover a range of issues, from public-servant wages to the use of federal funds earmarked for municipalities.

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de Transparencia y Acceso a la Informacin Gubernamental). Thus, the convention was a good chance to unify criteria on transparency mechanisms for the states and to underscore the importance of the issue. Perhaps one of the most interesting outcomes from the convention was the proposal to eliminate the inequitable amount of federal subsidies for education received by the government of Mexico City. This constitutional amendment passed by a coalition from the PAN and the PRI in the Lower Chamber, represents a setback to its major opponent, Mexico City Mayor Andrs Manuel Lpez Obrador (PRD), who is still the most popular contender for the presidency in 2006.20 This issue also revived tensions between the center and the periphery, since most governors outside Mexico City considered that the capital had always been treated too generously. Finally, one of the most favorable results of the convention was the achievement of a consensus on addressing two problems of public nance in need of a forceful course of action: the growing burden of pensions and social security on nances of local and federal authorities; and the need to halt or at least diminish the drain of resources from PEMEX, the state-owned oil company which provides a third of the federal budget every year.21 Underlying these two concerns was the enormous task of carrying out a comprehensive scal reform to endow the state with more economic resources.22 Unfortunately, as explained below, Congress has fallen short of adequately facing these challenges, and in ratifying the proposals of the convention. Congress was not enthusiastic about the 2004 Convencin Nacional Hacendaria. Historically, and even during the rst decades of the postrevolutionary regime, the national legislature was reluctant to delegate or relinquish constitutional powers. As the hegemonic party structure was dismantled and competition in local politics intensied, congressional members became more assertive and, thus, their inertia has
20. Through this amendment of its constitutional statute, the government of Mexico City will have to share with the federal government the cost of education under the same scheme that other states do. In monetary terms, this new obligation for the government of the Federal District represents around (U.S.) $382 million for the year 2005 (6 percent of its budget). El Financiero 2004: 8). 21. According to ofcial gures, money from mineral combustibles and their taxation generated 35 percent of federal revenue in 2003. (Presidencia de la Repblica 2004: 239). In order to reduce the tax burden of the state-owned rm and stimulate its expansion, the convention agreed to impose lower tax rates on new production of oil and gas. Unfortunately, during its 2004 period, Congress did not turn the conventions proposal into law. According to a Fitch Ratings report, in 2003 60.8 percent of PEMEX revenue was dedicated to paying taxes (Fitch Ratings 2004b: 2). 22. Mexicos revenue from taxation (excluding grants) is very low: according to OECD gures, in the year 2001 it amounted to 18.9 percent of the GDP. While the average for member countries in that organization is 36.9 percent (Clarke and Capponi 2004: 39).

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gained strength too. Therefore, the emergence of legislative power has coincided with the expansion and reinforcement of legislators abilities to offer local-level patronage. These new dynamics showed in the negotiation of the 2005 federal budget. To an unprecedented extent, legislators in the lower house, the Chamber of Deputies, used their prerogatives to dene federal expenditures to favor local constituencies at the expense of federal government priorities.23 While governors can lobby legislators from their states to advance their interests in the Congress, the party leadership remains the most important source of congressional member cohesion. In fact, the proposal endorsed by CONAGO and the president to transfer 2 percent of the VAT to the states and 1 percent to the municipalities and to implement food and medicine taxes was killed in both chambers in October 2004. This clearly shows that the convergence of interests between the national and local executives did not pose a real threat to Congress. In fact, national legislators were clever enough to reallocate extensive resources from the national budget to specic infrastructure projects in their states, effectively dismantling the coalition between the governors and the national executive, and realigning the political allegiances of local executives to their party. In other words, the distribution of surplus revenue from oil sales and the reapportionment of the 2005 national budget can be explained more accurately by a simple political logic: congressional members favored their governors and constituencies, with a direct form of pork-barrel politics to advance their own political careers. In summary, the convergence of interests between the CONAGO, on the one hand, and the national legislature, on the other, can be seen only as a short-term but extremely protable alliance in which the periphery was able to curb the priorities of the federal government. Conclusions Electoral competitiveness is a necessary, but not the only condition needed to revive the federal pact. As pointed out by Eleazar (1987), federalism is a complex mechanism requiring a proper balance between self rule and
23. The opposition parties in the Chamber of Deputies carried out signicant reappropriations of the budget for the year 2005. Among the most important were the reduction of resources to payment of scal debts ($700 milion (U.S.) less, or half the sum proposed by the executive), payment of interest on funds to protect banking savings ($60 million (U.S.) less), and a general cut in administrative payrolls (40 percent less than that proposed by the executive). On the other hand, according to preliminary analyses, the states governed by the PRD and the PRI got the largest share of reallocated resources: differences range from two to four times as much as the amount allocated for the PAN governed states (Reforma 2004).

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shared rule. Thus, federalism entails power sharing, but also competition and cooperation among different units. It also requires dening clear responsibilities in some issues and overlapping sovereignties in others. Changing the rules of the scal system for the purposes of economic efciency and reward are not sufcient to build a new federal pact. Nevertheless, in some respects these are indispensable; for instance, safety valves must be created in case of deadlock in the budgeting process. Further discussion of a new federal pact would have to take into account, as well, new balances between local and national authorities in issues related to education, economic stability and development, redistribution of income, and use of natural resources. The new dispersion of power discussed here implies new spaces for democratic participation. In overall terms this is a change for the better, and it is bringing the federalism to the center of political discussion. Still, from a national perspective, the strengthening of federalism is not always intertwined with the fortication of democracy. In a nutshell, federalism can be seen as enabling democracy (because it fosters pluralism and protects minorities) or as constraining it (when a minority has a veto power over the will of the majority through the Senate or local legislatures), (Stepan 1999). The formal rules of federalism are useful as long as they frame these tensions productively and strike a balance between local and national interests. True federalism in Mexico was impossible under a hegemonic party system. That system inhibited political competition and pluralism. As explained in this article, economic and scal centralization were deeply rooted in the political system that ruled Mexico for most of the last century. Although the constitutional foundations of the federal pact were not eroded, its operative mechanisms were never developed: federalism remained dormant under the single-party regime. Unfortunately, past experiences of federalism in Mexico were of little help in establishing contemporary formal institutions and behavioral rules: they belong to different historical contexts and, in every case, they failed to live up to the expectations of democracy under a federal pact.24 There is a worrisome reality to acknowledge. The new political balance, under the current institutional framework, is generating problems
24. Throughout all of its independent history, Mexican federalism has been more a frustrated goal than a reality. The Constitution of 1824 failed to frame the tensions between the center and the regions that, among other domestic and external factors, stirred upheavals to which federalism nally succumbed. A centralist constitution was enacted in 1836. Although a new federal pact was put in place in the Constitution of 1856, its principles and operative mechanisms were gradually undermined by continued instability, civil strife, and, ultimately, by the political apparatus built by Porrio Daz. The latter ensured peace, but concentrated all relevant political decisions (for the national and regional levels)

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which were unknown in the past and which could well jeopardize efciency of the scal structure and even economic stability. There is a latent contradiction between, on the one hand, the principles underlying a federal pact (sharing responsibilities and gaining efciency on the whole), and on the other hand, the political dynamics and constraints that local democratization has generated. This contradiction is best exemplied by the way the congress, and specically a majority of congressional members in the lower chamber, disregarded the conventions proposals and engaged, instead, in a disorganized ght for resources for their constituencies, at the expense of large portions of the federal governments budget. The outcome of these bargaining processes will benet neither the national government nor the federal entities in the long term. Some preliminary conclusions on the CONAGO and federalism can be drawn. The members of the CONAGO achieved genuine progress in identifying and publicizing a way to rationally predict and direct the scal implications of the dramatic political changes that suddenly surfaced as a result of alternation in the presidency. There were also worthy achievements with respect to allocating resources in areas of local government (infrastructure) and social organization. However, it is clear as well that CONAGOS federalism agenda was designed around a straw man: the national government. Now that the scal convention is over, CONAGO must prove that it has constructed institutional mechanisms that will allow the organization to continue as a permanent forum of debate, coordination, and dispute settlement. This task looks all the more challenging when the role of Congress is taken into account. Thus far, in order to prevail against the presidency, or simply to promote its proposals and turn them into pieces of legislation, the CONAGO has needed to align its objectives to those of a winning coalition in the Congress. The Chamber of Deputies has the last word on at least one issue of the greatest importance for every years politics at the local level: the budget. Furthermore, all governors pursue their own legislative objectives with their respective legislative delegation or with their political parties. The CONAGOs multi-faceted agenda is a result of the new imperatives of politics at the local level (on recruitment, competition, accountability), explained in the rst section of this paper. For these reasons, although the CONAGO has proved to be an important forum for voicing common concerns, it seems not to be in perfect tune with the need for ad hoc alliances that dene everyday issues at the national level. Finally, although a balance of the CONAGO with regards to federalin the person of General Daz. The Mexican Revolution destroyed this structure, but the political system that replaced it (based in the hegemonic party system ruled by the president) was very centralized as well.

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ism would be preposterous at this moment, it is possible to take past experience into account and elucidate two opposing scenarios for the future. In the best-case scenario, the steps taken by CONAGO and the proposals of the Convencin Nacional Hacendaria could yield, gradually, institutional changes to strengthen economic efciency, local governance and accountability. This path of gradual change would need a stronger commitment and effort on the side of local governments to lobby in the Congress for every single reform. In this context, the CONAGO could continue to be a forum to renew the necessary political will to carry out these transformations. In the worst-case scenario, the new interaction of local and national politics, specically those referring to Congress, would bring on a predatory process at the expense of the national executives priorities. Unfortunately for Mexican federalism and for the overall well-being of the state, a comprehensive reform of the scal system is not in sight at this moment. The structural condition of centralization in tax collection remains, just the same as the very weak scal basis of federal and local nances. Although pork-barreling is perhaps an inevitable consequence of power dispersion, it is important to note that it could put the Mexican economy in an even more fragile situation. Unless the urgent structural reforms (scal, energy, labor) are enacted shortly, Mexicos economy will be increasingly vulnerable to the contingencies of politics. In this scenario, the CONAGO could have a chance to prove its capabilities by pressing its members to exert their inuence in Congress in accordance to nationalnot localpriorities. But, for the reasons explained throughout these pages, there are more reasons for skepticism than optimism about this possibility. Annex 1: Methodology of the Indice de Concentracin de Poder The methodology to construct the Indice de Concentracin de Poder was devised by Mony de Swaan and Juan Molinar (2002) according to the following formula: Yx=F[(.5P)+(.225D)+(.05CLL)] + ( Ei[(.5Gi)+(.5Li)] + (Mi(Pmi) Where: Y=Degree of concentration of political and economic power from the incumbent party for the x year. F= Number of resources allocated to the executive vis--vis the legislative and Judiciary Branches as a percentage of the total annual budget. P=Dummy variable that signals if the PRI is in control of the presidency.

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D=Control of the lower chamber. If the party of the president did not reach a majority in this chamber, D is computed as the percentage of seats allocated to the party of the executive. If the party of the President has the bare majority, but less than the qualied majority (this is 2/3 of the seats of the lower chamber) needed to pass constitutional amendments, D takes the value of .75. If the party of the President has a qualied majority, D takes the value of 1. S= Control of the upper chamber (Senate). If the party of the president did not reach a majority in this chamber, S is computed as the percentage of seats allocated to the party of the executive. If the party of the president has the bare majority, but less than the qualied majority (this is 2/3 of the seats of the lower chamber) needed to pass constitutional amendments, S takes the value of .75. If the party of the president has a qualied majority, S takes the value of 1. CLL= Control of subnational legislatures, operationalized as a dummy variable. If the party of the president is in control of more than 16 legislatures, CLL takes the value of one; if not, the volume is 0. This variable was introduced since constitutional amendments need to be approved by Congress and by at least 50 percent of local legislatures. Ei=Percentage of annual resources transferred from the central government to each state (transferencias y participaciones). Gi=Control of the governorship by year operationalized as a dummy variable. If the governor belongs to the same party of the president, Gi takes the value of 1, otherwise 0 Li= Control of local legislature by year. If the party of the president has the majority in a local Congress L takes the value of 1. Otherwise L takes the value of the percentage of seats controlled by the party of the president in the local legislature. Mi= Percentage of resources allocated to municipalities by states (participaciones y aportaciones) Pmi= Percentage of the state population aggregated by municipalities governed by the party of the president. The Index varies from 0 to 100, where 0 means absolute dispersion of power while 100 means an absolute concentration of power in the hands of the national executive. Annex 2: CONAGO Meetings From July 2002 to November 2003 CONAGO has met fteen times: Constituent assembly. Cancun, Quintana Roo. July 13, 2002. Participants discussed principles of federalism, as well as issues of health, education, and scal relations between states and federation.

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First ordinary assembly. Atlihuetzia, Tlaxcala. August 24, 2002. Governors analyzed some aspects that should be included in scal reform. Second ordinary assembly. Pachuca, Hidalgo. September 28, 2002. Members discussed strategies to participate in the negotiations of the 2003 federal budget. Second extraordinary assembly. Metepec, Estado de Mxico. October 16, 2002. Governors presented some of their proposals concerning federalism to the Secretarios of Gobernacin and Hacienda y Crdito Pblico. Third ordinary assembly. Chihuahua, Chihuahua. October 28, 2002. The conference agreed on establishing a permanent dialogue with Congress and national political parties. The main objective of this meeting was to increase the resources allocated to states and the municipalities in the 2003 federal budget. Fourth ordinary assembly. Cabo San Lucas, Baja California Sur, November 22, 2002. Members discussed the path to materialize political agreements based on federalist principles agreed upon by participants of the Conference. Fifth ordinary assembly. Manzanillo, Colima, December 8, 2002. CONAGO decided to establish a closer relationship with the national congress in order to inuence the annual budgeting process and amend some scal laws. Third extraordinary assembly (rst governorsmeeting). Leon, Guanajuato. February 21, 2003. Members made a statement rejecting the war against Iraq, and established a commission that would serve as a link with Congress and the president to negotiate issues regarding La Reforma del Estado. The organization agreed to allocate 50 percent of oil revenue surpluses that they would receive to local infrastructure projects. Sixth ordinary assembly (Second governors meeting). Morelia. March 14, 2003. Members of the conference decided to review with the Secretara de Hacienda y Crdito Pblica, the amount of resources that states would receive from revenues generated by oil surpluses. Seventh ordinary assembly (Third governorsmeeting). Boca del Ro, Veracruz. April 26, 2003. Members decided to elaborate a project for La Reforma del Estado.

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Eighth ordinary assembly (Fourth governors meeting). Aguascalientes, Aguascalientes. April 8 and 9, 2003. The conference discussed with the Secretara de Hacienda which legal instruments and principles were used to calculate resources that each state would receive from the revenue generated by the oil price hike. Ninth ordinary assembly (Fifth governors meeting). Mexico City. June 5, 2003. Unanimously, the twenty-four members who participated in this reunion decided to analyze the convenience to call for a new Convencin Nacional Hacendaria, as part of La Reforma del Estado. Tenth ordinary assembly (Sixth governorsmeeting). San Luis Potos San Luis Potos. July 30, 2003. CONAGO discussed the last details before the call for a Convencin Nacional Hacendara. At this meeting the president and the secretaries of Gobernacin and Relaciones Exterior were invited as active participants. Fourth extraordinary assembly. Cuatro Cienegas, Coahuila. August 20, 2003. The conference made the ofcial announcement of the 2004 Convencin Nacional Hacendara. The governors belonging to the PAN became adherents of the CONAGO. Eleventh ordinary assembly. Monterrey, Nuevo Len, September 29, 2003. The members of CONAGO signed the Cuatro Cienegas Protocol which approved the agenda of the convention. Governors decided to analyze the possibility of including federal administrative and scal justice tribunals in the workshops of the Convention. During this meeting, CONAGO invited CONAMM to participate in the scal forum. References:
Centro de Anlisis y Difusin Econmica (CADE). 1999. La Dependencia Financiera de los Gobiernos Locales en Mxico. CADE: Mexico City. Clarke, Rory and Hielen Capponi (eds.). 2004. OECD in Figures: Statistics on the Number Countries. Paris: OECD. Courchene, Thomas, Alberto Daz-Cayeros and Steven B. Webb. 2000. Historical Forces: Geographical and Political, in Marcelo M. Giugale and Steven B. Webb ed. Achievements and Challenges of Fiscal Decentralization. Lessons from Mexico, Washington D. C.: The World Bank. Declaratoria Final de la Convencin Nacional Hacendaria. 2004 Mexico City: Talleres Grcos de Mxico.

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