The drama in Chaco originates in Bueno Aires - IDESA

Report Nº: 102221/06/2023

The drama in Chaco originates in Bueno Aires

This is not the first time that an abuse of power occurs in a northern province. As it happened in the past, the indignation is channeled against the local leadership. But the causes of the institutional degradation are the incentives generated by the co-participation and the national transfers to provinces.

The tragic event that took place in Chaco is shocking. A person who started as a piquetero leader became politically linked to the provincial government and appropriated an enormous amount of public resources. In one of his premises, a family member was murdered and his remains are still missing. Beyond the fact that the case is under the analysis of Justice, the level of impunity with which people linked to power proceed is outrageous.

It is not the first time that an abuse of power with presumptions of impunity occurs in the northern provinces. It is worth remembering, for example, the case of María Soledad Morales in 1990 in Catamarca, the excesses on human rights of the current governor of Formosa in his management of the pandemic, the apparent murder of a minister in Catamarca and now this dramatic event in Chaco. What are the causes that explain this predisposition of the local leaders to abuse power? 

In order to find out the answers, it is necessary to start from the rule that in Argentina 85% of the taxes paid by the people are centralized in the national State. From there, fiscal resources are redistributed to the provinces through co-participation, discretionary transfers and expenditures directly executed by the national government in the provinces. According to the study by Garcia L. and Vera, L. it is observed that, in the year 2022, the provinces of northern Argentina:

  • Contributed fiscal resources to the national state equivalent to 3% of GDP.
  • Received through co-participation 2.7% of the GDP.
  • Received through transfers and direct spending from the national government 2.6% of GDP.  

These data show that the northern provinces receive almost 80% more resources from the national government than they contribute. This is an enormous transfer that in the political discourse is presented as solidarity of the richer regions in favor of the poorer ones. But evidence is showing that the centralization of fiscal resources, for their subsequent redistribution, leads to the economic impoverishment and extreme institutional degradation of the provinces benefiting from it. 

The centralization of resources leads the most productive provinces, which are net contributors, to be underfinanced. The most eloquent testimony is the Province of Buenos Aires, which is the most adversely affected by co-participation. On the other hand, the beneficiary provinces also fall behind because their leaders are encouraged to use the public funds that come to them free of charge from the central level to perpetuate themselves in power. The excesses of public employment and other clientelistic actions, as have been made public in Chaco, demonstrate the perversity of the scheme. 

To be angry with the local leaders of Chaco is hypocritical and unproductive. They are directly responsible for the aberrant acts and must answer to Justice. But the main responsibility lies with the national rules and decisions that allow and encourage local leaders to waste funds and abuse power. The political and institutional degradation that became explicit in Chaco is not an atypical situation but a consequence of the perverse incentives generated by the co-participation, the discretionary transfers from the national State to the provinces, and the overlapping expenses made by the Nation on provincial functions. It must be assumed that in a federal regime each constituent state (in the Argentine case, the provinces) is responsible for its own development and that national development is the result of the sum of provincial developments. 

The next government has the opportunity to change this reality. The general rule should be that each province should be financed by the taxes collected from its citizens. In other words, their development should depend on their own efforts and not on what they receive from co-participation or from the “generosity” of national officials in the discretional distribution of funds. In order to contemplate the situation of the most backward regions, co-participation -as an instrument of geographic redistribution- should be replaced by a Convergence Fund. 


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