Report Nº: 102624/08/2023
The incident between the firms’ registration office and the PRO is very instructive of the consequences of not concluding the transfer of services from the Nation to the CABA. More broadly, to eliminate the fiscal deficit, it is key that the Nation stops intervening in CABA and provincial functions.
The Autonomous City of Buenos Aires (CABA) was established in 1996. By becoming the rank of a province, it means that all the provincial functions that the national government had been exercising over the Federal Capital must be transferred to the CABA. These are, among others, the regulation and management of the public utilities of electricity distribution, water and sanitation, public transportation, the practice of medicine, the administration of ordinary justice (civil, commercial, and labor), and the control of legal entities.
After 27 years of autonomy, this process remains unfinished. This leads to very paradoxical facts. When the crisis of the blackouts and the recent bus strike in CABA took place, the national government demanded the Head of the City to be present in the conversations with the actors, which he does not do because the services have not been transferred. More paradoxical is what happened with the intervention of a foundation linked to one of the leaders of the PRO (the opposition political party). If the firms’ registration office had been transferred to the CABA –as it should be– there would have been no suspicions of political interference.
According to budget data of the Ministry of Economy for the year 2022, the national government spends approximately 2.5% of the GDP on provincial functions. These expenditures executed by the national government, which overlap with functions that are provincial responsibilities, are distributed approximately as follows:
These data show that the Nation allocates a significant fraction of its budget to execute actions that are the provinces’ responsibility and that these expenditures are concentrated mainly in CABA. The national government administers services in CABA that in the rest of the country are managed by the provincial governments. The case of the firm’s registration office is just one example of public functions that in the rest of the country are the responsibility of the provinces, but not in CABA.
It is assumed as natural that the Nation executes programs of education, public health, social development, housing, and habitat. For this purpose, the national government has ministries with large administrative structures. The main argument to defend these national interventions is that they contribute to leveling development throughout the country. Reality says the opposite. These interventions increase inefficiency in public management because they increase bureaucracy and dilute the identification of those responsible for poor results. When the national State overlaps with provincial roles, more inefficiencies inevitably occur. But if national spending is also concentrated in the richest jurisdiction of the country (CABA), this adds a lot of regressivity to public spending.
In order to dismantle this perverse tangle, a comprehensive reorganization of the State must be addressed. The starting point is the unification of national, provincial, and municipal taxes (as Brazil started to do) together with the elimination of co-participation. Each jurisdiction should assume the effort of collecting the taxes it needs to finance its expenditures. In terms of expenditures, the three levels of government should be functionally organized so that the national government only takes care of interprovincial functions, and each province, with its municipalities, finances and manages local infrastructure, provincial public services, and social services such as health, education, housing, urban planning, and social assistance.
The conflict between the firms’ registration office and the opposition political party (PRO) generated an emphatic political questioning. It would be advisable that, with the same emphasis, a deep self-criticism of the fact that in the 16 years that the PRO governs CABA they did not take care of the registration functions, which in the rest of the country are in charge of the provinces. This is a specific example of the huge disorder of functions prevailing in the public sector that has to be reviewed if the challenge of eliminating the fiscal deficit and improving the quality of public management is to be successfully addressed.