The Political Economy of Fiscal Reforms in Latin America: Mexico

Abstract

This paper describes the main features of the Mexican fiscal system, details the most important changes that have occurred/not occurred over the past two decades, and explains what factors influenced the rate, degree and direction of change. In brief, we contend that there have been profound and ideologically consistent changes in spending assignment and in the institutional arrangements governing taxes, spending and debt management. Over the past 20 years, Mexico has moved from a highly centralized fiscal system characterized by extensive presidential discretion to a moderately decentralized system with more meaningful checks and balances. Decentralization of spending assignments has been coupled with steps designed to increase transparency, efficiency and accountability over public funds. Changes to the revenue collection system, by contrast, have been considerably smaller in magnitude and not quite as consistent in ideational terms; while the general trend has been to increase tax revenue in an equitable manner, not all changes in tax law have increased revenue or equity.

Keywords: Fiscal reform, decentralization, democratization, Mexico