May 2001
Part 2
Mexico is a 'long-armed' state, with a traditionally centralized bureaucracy and for many decades little history of grassroots movements. On the other hand, Mexico is formally a Federal country with 31 (subnational) states and over 2,500 municipalities.
1967-1982. López Portillo. Administrative reform. In the 31 (subnational) states, Planning Committees were created.
To overcome the 1982 debt crisis and in accordance with agreements reached with the IMF, Mexico adopted a strict stabilization policy. Privatization, trade liberalization and economic deregulation were the three major pillars of the reform. Control of the main monetary, exchange and fiscal variables were the main policy instruments employed.
1982-88. Miguel de la Madrid. Constitutional reform transferred more power to the (subnational) states and municipalities. A so-called National System of Democratic Planning was created, and coordinating mechanisms between the (central) Federal government and the (subnational) states was established. An official Federalist discourse: to strengthen the federal pact and free municipalities to promote a territorially balanced growth.
1988. Salinas de Gortari. The creation of the rural development districts. Yet citizens' participation was reduced to the ex-post consultation of some programmemes with the "cupula" of the National Peasant Federation, a branch of the ruling party.
The classical pattern of state intervention in rural institutions: "Federal agencies regulated access to land rights through legal-administrative means, markets for key agricultural commodities through prices and service provision, and channels for representation through corporatist membership organizations. The main levers were largely indirect... mediated by the relatively anonymous means of the price mechanism, or by local and regional officials... in agrarian matters... relying on local political bosses whose power depended precisely on their discretionary authority... or via (case of major cop markets) on state enterprises (which) set offical prices" (Fox 1995:5)
1983. First wave of reforms. "Mexico's municipalities gained new responsibilities in 1983, with the reform of Article 115 of the Constitution. Resources lagged behind responsibilities, especially in rural areas, although a Municipal Funds programme was designed to increase the service delivery capacity of local government." (Fox 1995:12)
"The Municipal Funds programme' rural focus was bolstered by supplemental funding from a WB loan, the "Decentralization and Regional Development Project", targeted to Mexico's four poorest states... Communities often participated in project selection, but the projects did not necessarily prioritise the most pressing basic service needs... The (subnational) state government retained discretionary power of inter-municipal distribution of funds as well as de facto veto power over projects through financial controls and a virtual monopoly on the technical assistance needed for community development projects of any magnitude." (Fox 1995:12-13)
1991. The alleged transfer of the administration of irrigation systems to the water users' associations. Yet, the (central) federal government still is responsible for allocating the resource, granting licenses and controlling the consumption of water.
1993. Second wave of reforms
1982-1988. The first wave of reforms
1986. Membership in GATT.
"After 1989, agricultural policy rejected market and price regulation, as well as most public sector input provision. This involved increased opening to the international market, as well as privatisation and downsizing of the major state enterprises involved in agriculture... The pro-regulation policy-makers had predicted that the combinationof subsidy cuts, trade opening and the privatisation of the agrarian reform sector would be likely to reduce the rural population by one half within a decade or two. At first, no serious transition strategy was planned, whether via crop conversion or job creation... Protests were widespread around the issue of cuts in farm credit, but the looming NAFTA-driven drop in the price of corn also provoked increasing concern. By early 1993, policy-makers abruptly recognised that a complete withdrawal of the state from basic crop supports was socially and politically unviable, and instead proposed a new programme of compensatory payments for growers of basic crops. In contrast to support prices, the PROCAMPO programme would not 'distort' market signals, and therefore would not conflict with Mexico's participation in NAFTA and GATT... The issue of these trade compensation payments can be debated... but the process of actual implementation depends on state institutional capacity. The new approach fits well with the new official ideology of 'social liberalism', in which the state combines pro-market economic reforms with continued social concern." (Fox 1995:6-7).
"The reform of land tenure policy... The reform of Article 27 of the Mexican Constitution. The reform formally ended the decades-long land redistribution process. permits the private sale and rental of land for the first time... Privatisation is voluntary, requiring a two-thirds vote of agrarian community members... Like the change in producer price policy, the reform did not provoke immediate open rural resistance." (Fox 1995:8)
"The context for the restructuring of rural state interventions was set after the debt crisis of 1982, when the Mexican state recast its long-standing leading role in the national economic development process. Until then, the post-revolutionary state balanced the competing challenges of economic growth and political stability by closely regulating the distribution of both income and property. After 1982, Mexico's presidents began to restructure the nature of state intervention in the economy, gradually dismantling much of the 'revolutionary nationalist' legacy in favour of increased integration into the international market. (But it involved little public institution-building to occupy the resulting vacuum'"(Fox 1995:4)
Social Safety Nets: "Distributive policy was a partial exception, falling largely under the heading of the National Solidarity Programme. The NSP's targeted projects succeeded in buffering political conflicts driven by the social costs of economic reform... The degree to which the NSP became an effective social safety net, since it devolved many key resource allocation decisions to (subnational) state and municipal authorities.
1992. Constitutional Reform: to debunk state corporativism. Reform of the Constitution: ammendment of the 27th article. 1993. Complemented in 1993 with PROCEDE, a Programme for titling of landtenure rights. 1992. The National Water Rights Law.
1 January 1994. NAFTA.
"New rules and 26 trilateral organizations" (Mohar 108) + "institutional relations derived membership in GATT/WTO"
1 January 1994. The indigenous rebellion in Chiapas. The rebellion showed that the CG's increased funding for rural poverty reduction programmes was not actually reaching its intended beneficiaries.
1994. PROCAMPO. A 15-year transition programme transferring incomes to producers of selected farm commodities to compensate for losses occurred by the economic opening to external markets. The rationale was to facilitate the smallholders' productive conversion into more competitive and profitable products.
1995. The Alliance for the Countryside. Encompasses 22 projects which are directly managed by the (subnational) state governments. In 1998, the resources provided to this programme encompassed around 50 percent of those assigned to the whole agricultural public sector, without considering those allocated through the semi-autonomous agencies of the Ministry of Agriculture and the parastatal enterprises still in place.
Four problems of governance:
"In principle, for smallholders, direct trade compensation payments via Procampo, individual land rights via Procede and the strengthening of rural local government through the Municipal Solidarity Funds, all offered many advantages over the paternalistic centralisation of the past, though they did not add up to a comprehensive strategy to make family farming economically viable... All presumed a high degree of state capacity to reach deeply into rural areas effectively. The state's capacity to reform was dependent upon the construction of new forms of exercising public authority. The state's actual capacity to implement reforms depends on the degree to which accountability mechanisms can be broadened and strengthened. Some accountability mechanisms were announced, such as 'social controllers' for some Solidarity projects, but their effectiveness is likely to remain very limited without system-wide accountability mechanisms to back them up... The determinants of effective governance... lie in part beyond the realm of executive agencies. The construction of accountable institutions of public governance depends in part on broader changes in the nature of the regime..." (Fox 1995:21).
1995. The Presidential slogan for a "New Federalism". Transfer to subnational states of health, social security, agricultural development, rural development, and protection of natural resources"
Yet, as was summarised by one of the academic students of the reform:
"The process of Mexican decentralization resembles the conversion of a huge federal pyramid into 31 smaller state pyramids, with limited results in terms of management, policy differentiation, the incorporation of the environment into the regional development strategies, and the territorial linkage of the institutional instruments and mechanisms for an effective social participation in policy-making" (Mohar 1999:82).
1996. After several attempts to downsize the Ministry of Agriculture, an IDB proposal for reducing the payroll... Yet, in the absence of any comprehensive reform of the State' administrative apparatus... the administration, budget and personnel policy continued to be ruled by former procedures. The final results are the creation of an administrative vacuum, the proliferation of dispersed projects, problems in the inter-governmental links, and a lack of participation of most rural stakeholders in the decision-making process.
"Mexico is a 'long-armed' state with a traditionally centralized bureaucracy... On the other hand, Mexico is a federal country with 31 states. Within the states there are over 2,500 municipalities. In Mexico, subnational officials took 'decentralization' reform as a signal to do more in developing their own policies, even if the reform legislation did not authorise it" (Gershberg 1998:413)
The 1982-1985 period was characterized by macroeconomic instability: extremely high inflation rates, fiscal deficit, and disorganization of domestic markets which led to widespread development of black markets. The effects of macroeconomic instability were unevenly distributed, with smallholder farmers suffering.
The standard technical prescriptions, such as (by and large) macroeconomic policies.
In 1985, Bolivia started a "shock" programme of macroeconomic stabilization and structural reforms. Some of the measures applied in Chile before were now attempted, but within a different political and social scenario: fiscal discipline, a flexible exchange rate regime, trade liberalization, deregulated product and input prices, free movement of capitals, and a monetary policy geared to price stability. Almost at the same time, state reforms --including not only political and administrative reforms-- but also legal reforms such as a Civil Service Statute, aimed at professionalizing the civil service and establishing rigths for public sector employees, were enacted.
Allegedly, these macroeconomic measures were neutral regarding productive sectors, although the effects on the agricultural sector and rural populations were expected to be beneficial. Despite these intentions, the relative abandonment of the rural areas in relation to access to public services: physical infrastructure (e.g. road and communications), social services (e.g. health and education), and productive services (e.g. irrigation), partially explain the negative impacts of the New Economic Policy over the agricultural sector and the rural population.
State reforms and decentralization. Municipalization, a) political: election of mayors, municipal councils, and were designed to reduce the participation of the national government in the economy.
Municipalization together with municipal planning: five-year Municipal Development Plans (PDMs) and Annual Programmeming (POAs), together with local investment projects. A co-financing system was created aimed at supporting Municipalities and Departmental Prefectures with complementary resources necessary to carry out regional and local projects.
The Citizen's Participation Law of 1994 was a major step forward recognizing rural and urban grassroots organizations, the so-called Organizaciones Territoriales de Base, as entities that should participate in and oversee municipal resources. Other organizations, such as grassroots monitoring commissions (comités de vigilancia), were formally created to supervise the allocation and use of funds by local governments. The responsibilities that were completely transferred by the Law to the municipalities are: infrastructure and equipment in areas such as health, education, sports, local roads, small irrigation, and land registry systems; the promotion of rural development; the advancement of women and the protection of children; and the definition of the internal boundaries within municipal jurisdiction. Local tax and fees collection was also transferred to the municipalities. In addition, a Law of Financial Coparticipation was established determining the transfer of resources from central to local governments, as a function of an equity formula based on population and poverty indicators.
Complemented by and Education Reform, which included bilingual intercultural education, a programme to promote the enrolment of girls in the educational system, and a "health and identity" programme aimed at overcoming cultural barriers to access to services. However, the education reform which placed teachers under the control of municipalities confronted the strongest opposition from the former.
The Citizens' Participation Law was also complemented by the Administrative Decentralization Law. The latter aims at delegating some responsibilities from the CG to the nine (subnational) regional departments.
An inter-governmental fiscal transfer fund was established on a per capita basis. It is conceived as cofinance funds, with matching grants for small-scale investment projects.
The norms and procedures of the National System of Public Investment. The investment projects. Small project investment with scant economic impact.
The emergence of Mancomunidades de Municipios. Economies of scale. Strategic economic plans.
Inflation went down. A competitive exchange rate was maintained. Output grew at about 4.7 percent, while domestic savings rose to 12.1`percent of GDP. Yet in 1999 a significant slowdown in activity reflecting the recent international crisis shows that the country is still largely vulnerable to international economic shocks, particularly because of its high degree of dependence on raw material exports particularly from the mining, gas, and (to a lesser extent) non-traditional agricultural exports such as soybeans.
National social indicators are not so encouraging. According to 1992 Census Data, 74 percent of the population are "poor", and 38 percent live in "extreme poverty", as measured by the unmet basic needs (UBN) index. Since that date, however, a unstable economy has reduced even more the incomes of the poor, while low growth rates have limited employment opportunities.
Regional disparities explain in large part the migratory flows to urban areas. Job opportunities are concentrated in the urban corridor, linking the cities of La Paz, Cochabamba and Santa Cruz.
The state in Colombia has three levels of government: the central, departmental and municipal level. The economic importance of some regions and cities, as well as their political influence, are due more to the rugged topography of the country, together with a still poorly structured transport system, than to a clear effort to decentralize government decision-making. By the early 1980s, about 900 municipios existed with appointed mayors and locally elected councils. Most of those had practically no role beyond the administration of street cleaning and slaughter-houses. Deconcentrated agencies of the CG and parastatal enterprises were responsible for the provision of public services, such as water and electricity.
Subsidized credit programmes in the 1940s, agrarian reform during the 1960s, and integrated rural development during the 1970s and 1980s, were all considered 'strategic'.
For the last 50 years Colombia has been suffering from rural violence. Yet, during the last two decades an open civil warfare process has been emerging the increasing presence, particularly in the rural countryside, of several guerrilla armies, drug trafficking arm bodies, and paramilitary forces. Even although within the armed conflict there converges a multiplicity of interests which take the form of parallel warfares, the ultimate victim of all of this is the rural population. Against the backdrop of all these wars an armed struggle for land. In guerrilla warfare, the conflict manifest itself as a military strategy for control over portions of national territory. Within 1985 and 1996 this led to the exodus of more than one and a half million people from the rural to the urban areas. There was a lack of capacity of the state to protect human lives and properties.
With the creation in 1927 of the National Coffee Growers Federation, there energed the Corporatist State. The Federation established an agreement with the national government which established a system of cooperative decision-making based on the establishment of a parafiscal tax administered by the Federation. The commercial growers associations have become powerful lobbies for rent-seeking. The emergence of a neo-corporativist state through the proliferation of agreements between the export-oriented farm growers (flowers, rice, cattle, soybeans, cacao, oil palms, cotton, etc.) and the CG, establishing parafiscal funds, with the exclusion of the vast majority of the rural population oriented toward the production of food for the domestic market.
During the 1960s, a plethora of agencies variously linked to the CG through the Ministry of Agriculture based on clientelistic relationships, and paradoxically referred to as "decentralized entities", formed the core of the corporate state.
State decentralization in Colombia has been defined as political, administrative and fiscal. The Constitutional Reform of 1968. In 1986, the law granting an increasing participation of municipalities in the value added tax. In 1986, a new Constitutional Reform enacted the popular election of mayor.
In 1987, the municipalities received the responsibility of giving technical assistance to smallholder farmers. To do so they were required to create agricultural extension municipal offices (UMATAs). The creation of the UMATAs was influential in the development of a market for small professional firms providing services to the municipalities. In 1992, an inter-governmental co-financing mechanism was set up to support rural development, and the creation of Rural Municipal Development Councils was also approved. In 1993, new responsibilities for rural development were given to the municipalities, sometimes overburdening the limited capacities of the UMATA and the civil servants directly employed by the Municipal Council.
The 1991 Constitution finally led the foundations for the new structuring of national, regional and local public finances, redefining the responsibilities of each level of government, and creating some mechanisms for citizens' participation: e.g. the open municipal council meetings (cabildos abiertos), citizens' monitoring, etc. Yet, in 1993 central control of municipal resources was re-established. Fiscal allocation is a growing percentage of the national public budget transferred to the municipalities, which in 1996 amounted to 24,5%. But transfer of resources did not favour thee raising of local revenues and created an increase in current public spending. Since mayors do not feel involved in most transfer of resources, the emergence of a "fiscal indolence" or "sluggishness". As a result the increased burden of public debt has augmented public debt to about 5% of the NDP. Yet, most of these resources have been used to finance operative disimbursements.
In 1990, the need to restore macroeconomic equilibria was again top on the government's agenda. This new macroeconomic stabilization programme, however, led to an overvalued exchange rate and high inflation index, with an increasing commercial deficit, which led to increased unemployment and the resurgence of protectionist movements agains the new economic model (Machado 1999:41).
The goal of the 1991 Constitution was to dismantle the corporate state that was built up during the whole period of state-led inward economic growth. State reforms were a gradual process which started in 1986 with the political election of the mayors. In Colombia, some inchoated state reform in some ways preceded the first generation of market-oriented reforms between 1990 and 1992. The recipe for market-led reforms includes economic opening, market liberalization, deregulation of the financial and monetary markets, and privatization of public enteprises.
One of the major achievements of the Constitutional Reform of 1988 was to allocate part of the value added tax (VAT) to the subnational governments (departments and municipalities).
In 1990, the economic opening and domestic market liberalization were aimed at dismantling the massive institutional structure of the Corporatist and Centralist State. In 1991, a Free Trade Agreement was signed with Venezuela and in 1994 a Common External Tariff within the five Andean Pact countries was established. In 1995, Venezuela, Colombia, and Ecuador established a Common Price Band with the objective of establishing the markets for thirteen basic farm products. In 1994, a 'crawling peg' system was created for the administration of the exchange rate.
A shift from a centralist State corporativist regime to a decentralized regime in which the CG was reduced. The UMATA (Municipal Unit of Technical Assistance). The municipality became the primary stage for State-peasant relations. In 1991 the National Technology Transfer System (SINTAP) was created reinvigorating the UMATAs. In 1992, the cofinance mechanism was created as a method of resource transfer with matched grants from the local government.
"Only the creation of the UMATAs and to some extent the Integrated Rural Development programme before 1990, and the creation of the SINTAP (Agricultural Extension) identifies a weak process of decentralization" (Machado 1999:63).
Starting in 1988, mayors --previously appointed-- have been popularly elected, and the 1991 Constitution introduced the election of Governors at the Departmental level. Citizen participation was also enhanced through legal means and through the practice of several national programmes. Clientelistic practices were weakened by the elimination of quotas, which were formerly allocated to members of Congress for their own discretionary use. With decentralization, municipal political life has become more clearly local in nature, increasing demands on new leaders to respond to their communities.
In 1990, the CG adopted an irrigation management transfer programme. Soon after, the Water User Associations (WUA) throughout the country formed a national federation (Federriegos). The purpose of the federation was to prepare the WUAs to take over management of the districts from the government. Following Colombian corporatist tradition, each WUA pays fees to support the Federation, which then hires lawyers to assist with transfer negotiations, engineers for technical problems, accountants for financial training, etc. (FAO Irrigation and Drainage Paper 1999:59).
Since the mid-1980s and through the passage of several laws, presidential decrees and a new constitution, Colombia has dramatically changed the framework within which its local governments operate. One of its major components of the reforms was the popular election of mayors since 1988. The 1991 Constitution transferred to the municipalities resources, tasks and decision-making power. Municipalities have now more resources, responsibilities and decision-making authority than under the old centralized regime. Resources have been increased through added revenue authority and a sharp increse in intergovernmental transfers. Local governments are now responsible for the provision of services in education, health, water, sanitation, roads, and agricultural extension.
In 1992, a new generation of reforms emerged as a result of economic crisis. In 1993, a new agrarian law, restoring subsidies to some products and restablishing some degree of protection for some farm products was created.
In 1993, economic recovery restarted, despite low coffee prices in the international markets, due to an increase in oil and agricultural production. The economic recovery, as well as by the effects of money laundering, strengthened the national currency, and pushed for import increases. Yet, in 1996 the first signs of economic recession returned, while unemployment rates and inflation mounted.
Most of the debate has centered around fiscal issues, such as the design of intergovernmental transfers and the appropriate distribution of responsibilities within levels of government.
In some regions of Colombia where the presence of guerrilla groups cannot be disregarded, violence limits the capacity of local governments. Decentralization, and the initiative of new local leaders, allowed some communities to work with both CG's authorities and rebel groups, minimizing the impact of violence on local capacity and performance.
The mechanisms to achieve consensus and to deepen the restructuring of state apparatuses were successfully blocked both by the labour unions of civil servants and by the unwillingness of most of the private sector to accept the reforms.
The excessive tramits increased the transaction costs and gave way to corruption, perverting the market as an efficient allocator of resources for private investment. Instead, there were rent-seeking interests within public agencies.
The multiplicity of funds and entities charged to mitigate the impacts of economic adjustment were captured by the political interests of regional power groups.
The Ministry of Agriculture formulates policies, which should be later on implemented by formally decentralized agencies. There emerged a dispersion of programmes; a lack of coordination; and an overloading of UMATAs.
There was increased rural insecurity and violence and a loss in the legitimacy of public institutions. Tax was payed by the transnational oil firms, mining, and banana plantations, and the domestic farm growers of illicit crops to the guerrilla groups.
Liberalization of financial markets in a context of speculative investment from drugtrafficking operations and smuggling brought together market speculation and concentration of land tenure concentration.
Macroeconomic instability as a result of changes in economic policy have generated uncertainty and increased pressures for a return to protectionism.
The municipalization of rural development was not sufficient. There was a need for strengthening the other two levels of government: i.e. strengthening the institutional capacity of the CG (the Ministry of Agriculture), strengthening the institutional capacity of the subnational Departmental level.
Colombia ended the 20th century with an increasing governability problem. There exist parallel governance institutions and there is a need for political stability (legitimacy, state credibility). Without a clear definition of property rights there is an institutionalization of violence and an increased loss of governability. There is a need for a new social contract.
In 1945, the Venezuelan state was reorganised by an essentially nationalist coalition of political and social forces. Its agenda was "to sow the oil wealth", via an inward-oriented import-substitution industrialisation (ISI) strategy. In 1958, after ten years of military interim rule, an agreement was signed adding two other components to the ISI growth strategy: an employment and welfare policy to distribute more evenly the oil wealth, thus strengthening the domestic market; and a pluralist democracy to take care of popular demands.
The results of the agreement were highly contradictory. On the one hand, the country enjoyed almost three decades of political stability, political consensus and widespread social support. On the other hand, flourishing corruption, the strengthening of clientelist bonds, and the swelling of the state bureaucracy eroded the basis for sustained political stability and legitimacy. The 1983 debt crisis precipitated the financial collapse of the political and economic system.
So, in 1989, a macroeconomic adjustment policy backed up by the IMF and the World Bank, ended four decades of inward-oriented state-led economic growth. The 'Great U-Turn', as the adjustment programme was called, only lasted three years. In June 1993, the Supreme Court impeached the President of the Republic under charges of corruption. This event signaled the beginning of a new transitional period in the search for a new social pact to rule the country. This period has not ended yet.
The 1989 stabilization programme had three main goals: 1. to adjust the domestic markets to the external shock created by the fall in oil prices; 2. to restart the service of the external debt; and 3. to restablish access to the international financial markets and thus restore economic growth. In order to reach these goals the instruments employed were: to deregulate the markets of goods, services, credit, and labour; to restore competitiveness to tradable goods and services via a flexible exchange rate; to open the economy to foreign investments; to reduce tariffs, remove all non-tariff barriers to trade and successfully attain the conditions involved in joining GATT; to substitute direct for indirect consumer product subsidies and gradually eliminate input subsidies; and to restore public sector equilibria by privatizing most major public enterprises.
The public disclosure of the adjustment programme was reckoned with four days of rioting in the country's largest cities. It was the first signal that the adjustment to macroeconomic variables could not be accomplished to the detriment of the already endangered social and political equilibria. This cleared the way, however, for a parallel programme to strengthen the restructuring of the public administration, which although being approved before the macroeconomic adjustment, had still to be fully implemented.
Since 1984, a Commission for the Restructuring of the State (COPRE) had been created. In 1986, the Commission drafted a plan based on three state reforms: the popular election of regional (state) governors and local (municipal) mayors; territorial decentralization, based on the transfer of some responsibilities from CG agencies to the states and local governments; and fiscal decentralization, focused on the transfer of financial resources to the subnational governments to strengthen their capacity to assume the new responsibilities and services2. In 1988, two important laws proposed by COPRE were approved: the Law of Decentralization, focused on the role of state (regional) governments; and the Law of Municipalities. In a sense, therefore, in Venezuela the reform of the public sector preceded the macroeconomic adjustment programme.
In December 1989, the first election of governors took place. These elections had the effect of transforming the newly elected governors into the sponsors of an alternative state restructuring project. From that time on, two alternative decentralization agendas were competing: a proposal sponsored by the CG (CG), in which decentralization was conceived as the transfer of certain 'social' services (i.e. health, education) from national agencies to subnational governments; and a proposal backed by the governors and their regional constituencies, in which decentralization was visualized as both a process of territorial redistribution of wealth and as a process of democratization of decision-making mechanisms.
The popular election of municipal mayors also had the effect of strengthening local political life, as well as the accountability of the newly-elected officers to their local constituencies. In non-metropolitan urban regions, territorial decentralization was also accompanied by the emergence of smaller municipalities, political entities more closely associated to farming and rural constituencies.
The two most contentious issues of the macroeconomic adjustment programme were the deregulation of the agricultural sector and the opening of the economy. In 1990 an across-the-board opening of the economy was decided. Yet, in 1991 some form of protection for certain agrofood circuits, judged as particularly "vulnerable" and some "basic" food price controls had to be restablished. Besides, the government also issued a new basic food basket price list, thus maintaining some price controls, though deregulating the rest. For a long period, these decisions became the de facto public agricultural policy as any other form of intervention was deemed inadequate for a country implementing a sectorially "neutral" commercial policy.
In February 1991, an Agricultural Sector Investment Loan (ASIL), cofinanced by the World Bank (WB) and the Interamerican Development Bank (IDB), was approved. The loan's project had three main components: 1) a public sector investment programme; 2) a policy reform programme involving trade reform, sectoral financial deregulation, product and input deregulation; and a rural cadaster aimed at delivering property rights to the farmers created during the 1960-70 agrarian reform process. A third component was the strengthening of the agricultural public sector, itself also based on three reforms: a) debureaucratization, i.e. reducing civil service employment by a smaller and better qualified staff; b) decentralization, i.e. the transfer of some public functions to state and municipal levels; and c) privatization, i.e. the provision of most agricultural support services to farmers by private enterprises.
The government understood that the intended sectoral reforms would generate strong political opposition among farmers, as they harmed ingrained vested interests. Therefore, to guarantee their sustainability a strategy was set forth binding policy decisions to multilateral loans and international agreements until the reforms were deemed irreversible. Despite these efforts, by June 1991 the persistance of political instability in the countryside produced a partial reversal of some of the policies of the adjustment programme. These early reversals presaged the kind of general political backlash that the reformers were fearful of from the beginning.
In June 1993, the Congress appointed an interim President to finish the five-year governmental term until new presidential elections could be held. The choice of the new administration made evident the consensus already existing in the country that the whole macroeconomic adjustment and state reform programme had to be revised. A revised adjustment programme, calling for a selective and negotiated opening of the economy and some state intervention in domestic market mechanisms, was sanctioned. Although it was deemed as only temporal. Yet state reforms, and particularly territorial decentralization, were in fact strengthened during the interim period.
In 1993, the interim government decided to transfer to the states a large number of functions, including some agricultural support services. Some governors resisted the transfer of most of these responsibilities from the CG until a prior restructuring would not take place for fears that they would entail unwanted liabilities, such as the responsibility to fully finance the costs of an excessive payroll, Yet to reduce the payroll in decentralized functions, the new authorities needed funds to lay off former public officers. Another reason was that, even in important agricultural regions of the counry, the majority of the population lives in urban areas. Therefore, the governors' short-term electoral interests led them to give priority to the transfer of urban social services.
As a result, a de facto decentralization of governmental functions by subnational (regional and municipal) governments took place. Most governors decided to create their own regional agencies from scratch. Contracting out to private enterprises or nongovernmental organizations was the most commonly adopted institutional design. The end result was, however, the emergence of multiple institutional overlappings and jurisdictional conflicts among the different levels of government within the agricultural public sector.
In 1994, a new president was elected, giving rise to a third phase of the reform process. Some days after the transmission of power, the financial sector collapsed, threatening not only the other sectors of the economy but even the survival of the democratic system. Political stability, not market-led reforms, returned to the top of the government's agenda. The combined economic and political crises were used again this time for an allegedly temporal return to market controls and for the rescheduling of the public sector reform programme.
The inter-governmental solidarity fund for financing decentralization, created by the interim government, became one of the main contentious issues. For the CG, the priority was to reduce the deficit of the national budget, whereas for the governors the fund was the most important achievements of the whole reform process. The CG, however, used the lever provided by the fund as a mechanism to moderate the governors' hostility.
In 1995, a new economic crisis exploded. The trigger this time was the debt assumed by the CG with the workers laid off from the services transferred to the states. The governors' general stance was to harden even more their refusal to accept CG's agencies which had not been restructured prior to handling them to the states. This position put a further brake on the decentralization of the agricultural public sector. These conflicts were symptomatic of the crisis of governability that was just emerging. Its most visible expression at the moment was the increasing disenfranchisement between the governors and the traditional elites ruling both the old political parties and the national government.
Parallel to this "bottom up" regionalization process, a more "top down" municipalization was also taking place. In 1994, a new Ministry of Agriculture/World Bank Agricultural Extension Programme (AEP) was created. Some mayors rushed to set up the municipal agencies which were intended to implement the programme to tap its financial resources. Others, even though their municipalities were also rural, did not care too much about the programme. This fact revealed the urban bias of some local authorities in rural areas.
The AEP was tailored to address two important weaknesses in the agricultural sector's reform programme. Firstly, the need for rural societies to reconvert their productive systems in tune with their newly redefined comparative (and competitive) advantages as a result of economic opening. This was a restructuring that could not be successfully achieved without a close link between scientific research, and the dissemination of new technical knowledge and market information. Since 1991, however, the government had been trying also to reorganize the National Agricultural Research Programme, with no much success. Secondly, the need to organize the farmers into local voluntary associations so they could gradually assume control of its financing and management at the end of the Bank's loan. To my knowledge, these two conditions for the success and sustainability of the programme have not been met so far.
Yet there are also cases of successful decentralization in the agricultural sector. A case in point is the de facto transfer of the small irrigation systems of the Venezuelan Andes from the Ministry of Agriculture to farmers' irrigation committees. This was a result of the institutional vacuums created by the sudden withdrawal of the CG from the support services it was formerly providing to the farmers.
This example illustrates another point. The sudden shrinkage of the CG's public sector as a result of the reforms not only has created important vaccums but also has generated the absence of a coherent national agricultural growth strategy able to establish some priorities to subnational governments.
During 1998-99, a fourth stage of the state reform process started. The old party system finally crumbled and a new Constitution was approved. It is too early to decide whether the market-led reforms and the decentralization process have been stalled, as some of the critics of the current government assert, or if the country is still too busy trying to create a new social pact that could provide the conditions for governability. There are some reasons for hope, however. The strength of the previous stages in the decentralization and democratization process would make a return to the old centralist and undemocratic decision-making very hard to sustain.
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