Report No. 19870-ME Mexico Institutional Coordination for Regional Sustainable Development April 2000 Environmentally and Socially Sustainable Development Sector Management Unit Mexico Country Management Unit Latin America and Caribbean Region Document of the Wortd Bank CURRENCY EQUIVALENTS Currency Unit = Mexican New Peso $1.0 = N$ 9.5 FISCAL YEAR January 1 to December 31 WEIGHTS MEASURES Metric System Vice President: David De Ferranti Director: Olivier Lafourcade Manager: John Redwood Sector Leader: Adolfo Brizzi Task Team Leader: Raffaello Cervigni MAIN ABBREVIATIONS AND ACRONYMS BCI Framework agreement for Institutional Cooperation (Bases De Colaboraci6n Interinstitucional) CDM Municipal Development Councils (Consejos de Desarrollo Municipal) CDR Regional Development Councils (Consejos de Desarrollo Regional) CDS Social Development Agreement (Convenio de Desarrollo Social) COPLADE State Planning and Development Committees (Comite de Planeaci6n y Desarrollo Estatal) COPLADE- Municipal Planning and Development Committees (Comites de Planeaci6n y Desarrollo MUN Municipal) COPRODE Development Committees (Comites Promotores del Desarrollo Econ6mico) CUD Single Development Agreement (Convenio Unico de Desarrollo) DGPyPs Bureaus of Planning and Budget (Direcciones Generales de Programaci6n y Presupuestaci6n) DIF Integral Development of the Family (Desarrollo Integral de la Familia) FAFM Contributions for the Strengthening of the Municipalities and the Federal District Fund (Fondo de Aportaciones para el Fortalecimiento de los Municipios y del Distrito Federal) FAIS Contributions for Social Infrastructure Fund from Item 33 (Fondo de Aportaciones para la Infraestructura Social del Ramo33) FAISM Municipal Social Infrastructure Fund (Fondo de Aportaciones para la Infraestructura Social Municipal) FAM Multiple Contributions Fund (Fondo de Aportaciones Muiltiples) FGP General Contributions Fund (Fondo General de Aportaciones) GDP Gross Domestic Product GOM Government of Mexico INDA National Institute for Agrarian Reform (Instituto Nacional de Desarrollo Agrario) INEGI National Statistics, Geography and Informatic Institute (Instituto Nacional de Estadistica, Geografia e Informrtica) INI National Institute of Indigenous Peoples (Instituto Nacional Indigenista) LAC Latin America and the Caribbean Region LFCF Federal Fiscal Coordination Act (Ley Federal de Coordinaci6n Fiscal) LOAPF Organic Federal Public Administration Act (Ley Organica de la Administraci6n Puiblica Federal) NEP New Programming Structure (Nueva Estructua Programatica) PED State Development Plan (Plan Estatal de Desarrollo) PEF Budget of Federal Expenditure (Presupuesto de Egresos de la Federaci6n) PET Temporary Employment Program (Programa de Empleo Temporal ) PIDER Integrated Program for Rural Development (Programa Integral para el Desarrollo Rural) i PND National Development Plan (Plan Nacional de Desarrollo) POA Annual Operational Program (Programa Operativo Anual) PRI Institutional Revolutionary Party (Partido de la Revoluci6n Institucional) PROAREP Program of Support to Priority Regions (Programa de Atenci6n a Regiones Prioritarias) PROCAMPO System of direct income support payment to producers (Programa Nacional de Modernizaci6n del Campo) PROCEDE Program to Title Ejiditario Rights and Parcels (Programa de Certificaci6n de Derechos Ejidales y Titulos de Solares Urbanos) PRODERS Regiona! Sustainable Development Program, implemented by SEMARNAP (Programa de Desarrollo Regional Sustentable) PROGRESA Education, Health and Food Program (Programa de Educaci6n, Salud y Alimentaci6n) PROMAP Public Administration Modernization Program (Programa de Modernizaci6n y Administraci6n Puiblica PRONASOL National Solidarity Program (Programa Nacional de Solidaridad) RAMO 26 Social and Productive Development in Regions of Poverty- Item 26 (Desarrollo Social y Productivo en Regiones de Pobreza) RAMO 33 Contributions/Conditioned Transfers to States and Municipalities (Aportaciones a Entidades Federativas) SAGAR Ministry of Agriculture, Livestock and Rural Development (Secretaria de Agricultura, Ganaderia y Desarrollo Rural) SARP Sub-committee of support to priority regions of the COPLADE (Sub-comite de Atenci6n a Regiones Prioritiarias) SCT Ministry of Communications and Transport (Secretaria de Comunicaciones y Transportes) SECODAM Ministry of the Comptroller and Administrative Developments (Secretaria de la Contraloria y Desarrollo Administrativo) SECOFI Ministry of Commerce and Industrial Development (Secretaria de Comercio y Fomento Industrial) SED Performance Evaluation System (Sistema de Evaluaci6n del Desempenlo) SEDESOL Ministry of Social Development (Secretaria de Desarrollo Social) SEMARNAP Ministry of Environment, Natural Resources and Fishery (Secretaria de Medio Ambiente, Recursos Naturales y Pesca) SHCP Ministry of the Treasury and Public Credit (Secretaria de Hacienda y Credito Puiblico) SNCF National Fiscal Coordination System (Sistema Nacional de Coordinaci6n Fiscal) SRA Ministry of Agrarian Reform (Secretaria de la Reforma Agraria) SSA Ministry of Health (Secretaria de Salud) UPCP Budgetary Policy and Control Units (Unidad de Politica y Control Presupuestal) .ii The following individuals contributed to the preparation of this study: Messrs./Mmes. Raffaello Cervigni (task manager), Fernando Rojas, Julio Cordoba, Wilfrido Cruz (World Bank); Juan Pablo Guerrero, Allison Rowland, John Scott, David Arellano, Claudia Santizo (Consultants, Centro de Investigaci6n y Docencia Econ6mica). Kulsum Ahmed, with support from Paola Agostini and Paul Martin (World Bank), promoted the initial identification and design of the study. Adolfo Brizzi, Marcelo Giugale, Ricardo Hernandez, Gary Reid, Jennie I. Litvack, Willem Zijp, and Adriana Bianchi (World Bank) provided comments and suggestions. Rocio Sarmiento provided research assistance and editorial support. Peter Brandriss, Dora Posada, Patricia Soto and Cristina Tufn6n provided organizational support in the Washington and Mexico office of the World Bank. Funding was received from the Mexico Country Department and the World Bank Institute. Peer reviewers for this study are Michael Baxter, Andrea Silverman (World Bank); Alain de Janvry (University of Berkely). The team expresses its appreciation to the Directors General and other staff of SAGAR, SEMARNAP, SEDESOL, SCT, SRA, SECOFI for their active participation and support for the study. 111 Al MEXICO - INSTITUTIONAL COORDINATION FOR REGIONAL SUSTAINABLE DEVELOPMENT Table of Contents EXECUTIVE SUMMARY ......................................................................... IX 1. INTRODUCTION ..........................................................................1 BACKGROUND ...................................................................................................................................1 2. THE CONTEXT: DECENTRALIZATION AND REGIONAL DEVELOPMENT IN MEXICO ..........................................................................3 DECENTRALIZATION AND REGIONAL DEVELOPMENT IN THE ZEDILLO ADMINISTRATION .................. 5 Fiscal reforms ...........................................................................................5 Social policy ........................................................................5 Regional policy ...........................................................................................7 Future prospects for decentralization and regional policies ................. ........................................9 3. REGIONAL POLICIES AND INSTITUTIONAL COORDINATION: CONCEPTUAL ASPECTS ......................................................................... 16 INTRODUCTION .......................................................................................... 16 REGIONAL POLICIES .......................................................................................... 16 Geographical scope of regions ........................................................................................... 17 SOCIAL AND INSTITUTIONAL COORDINATION - A CONCEPTUAL FRAMEWORK .......... ..................... 19 Coordination .......................................................................................... 19 Coordination of goals .......................................................................................... 20 Coordination of means .......................................................................................... 21 Coordination with multiple jurisdictions .................................................................................... 24 4. THE NORMATIVE FRAMEWORK FOR COORDINATION ........................................... 27 MUNICIPAL LEVEL .......................................................................................... 27 Comit6s de Planeaci6n y Desarrollo Municipal (COPLADEMUN) .......................................... 27 Consejos de Desarrollo Municipal (CDM) ................................................................................ 28 Constitutional Reform .......................................................................................... 29 STATE LEVEL .......................................................................................... 30 The State Congress .......................................................................................... 30 Comit6s de Planeaci6n y Desarrollo de los Estados - COPLADES ............. ............................. 31 Federal level .......................................................................................... 32 THE BUDGET SYSTEM .......................................................................................... 33 5. REGIONAL DEVELOPMENT AND INSTITUTIONAL COORDINATION: FOUR CASE STUDIES ......................................................................... 37 METHODOLOGY FOR THE CASE STUDIES .......................................................................................... 37 BACKGROUND INFORMATION ON POVERTY, NATURAL RESOURCE DEGRADATION AND LOW PRODUCTIVITY IN THE STUDY AREAS ..................................................... 38 v Montaira de Guerrero ...................................................................................... 38 Hidalgo's Huasteca ...................................................................................... 39 DEVELOPMENT PROGRAMS IN THE STUDY REGIONS ......................................................................... 40 FUNCTIONING OF THE COORDINATION MECHANISMS ....................................................................... 42 Municipal level ...................................................................................... 42 Regional coordination fora ...................................................................................... 43 State coordination fora ...................................................................................... 46 SUMMARY OF FINDINGS ...................................................................................... 47 Problems in information and communication flows .................................................................. 47 Lack of a common regional and municipal vision ..................................................................... 47 Lack of incentives ...................................................................................... 47 Diffuse responsibility and unclear division of work .................................................................. 48 Administrative obstacles ...................................................................................... 48 Political obstacles ...................................................................................... 49 6. INSTITUTIONAL COORDINATION IN SELECTED INTERNATIONAL EXPERIENCES ....................................................................... 50 GENERAL FRAMEWORK ...................................................................................... 50 THE WIDE RANGE OF MECHANISMS FOR COORDINATION AT THE REGIONAL LEVEL ...................... 50 THE ART OF TAILORING AND COMBINING MECHANISMS TO FIT EACH PARTICULAR CONTEXT ...... 51 Matching Grants For Coordination, Decentralization and Participation Through Social Investment Funds - Nicaragua ...................................................................................... 54 Fiscal Grants for Inter-governm ental Investment Agreements - Chile ..................................... 56 Regional-Local Coordination and Private Sector Participation to Enhance Regional Competitiveness - Mendoza, Argentina ..................................................................................... 59 Inter-Sector and Inter-Government Coordination for lntegral Regional Development Programs - Colombia ...................................................................................... 61 Presidential Commissions for Coordination of Decentralization - Venezuela ........................... 63 COMMON LESSONS FROM LATIN AMERICAN EXPERIENCES ............................................................ 64 7. CONCLUSIONS AND RECOMMENDATIONS .................................................................. 65 GENERAL OBSERVATIONS ...................................................................................... 65 Institutional vs. Social Coordination ...................................................................................... 65 The regional scope of institutional coordination ........................................................................ 66 The role of regional forums ...................................................................................... 68 Regional Councils and local heterogeneity ................................................................................ 69 OVERALL RECOMMENDATION ...................................................................................... 71 RECOMMENDATIONS - SHORT TERM ...................................................................................... 71 RECOMMENDATIONS - MEDIUM AND LONG TERM ......................................................................... 74 Goals coordination ...................................................................................... 76 Mechanisms for integral regional planning ................................................................................ 81 Resource Coordination ...................................................................................... 82 Annex 1 - Federal programs in the Huasteca case studies ......................................................... 90 Annex 2 - The Action - Impact Matrix ..................................................................................... 98 vi TABLES Table 1 - Main achievements and obstacles to decentralization in Latin America ........................... 11 Table 2 - Demand, supply of goods and coordination problems ........................................................ 20 Table 3 - A typology of coordination problems ......................................................... 26 Table 4 - Federal programs in the Montafna de Guerrero ......................................................... 41 Table 5 - Regional coordination fora in the study areas .......................................... 44 Table 6 - Most Critical Factors to Design and Categorize Inter-Institutional and Inter-Government Coordination For Regional Sustainable Development ...................................... 53 Table 7 - Restructuring Social Investment Funds for Participation, Inter-Agency and Inter- Governmental Coordination (Nicaragua) ...................................... 56 Table 8 - Inter-Sector and Inter-Government Coordination Via Top-Down Controlled Investment Agreements (Chile) ...................................... 58 Table 9 - Inter-Government and Inter-Sector Coordination for Participatory Development In Regions with Social Capital Accumulation (Argentina) ...................................... 60 Table 10 - Central Government Inter-Sector Coordination Through Presidential Agencies for Sustainable Regional Development, Without Participation of Regional and Local Agents (Colombia) ...................................... 62 Table 11 - Strategies for regional development .................................... 65 Table 12 - Different models of regional development .................................... 69 Table 13 - Regional Development options and local conditions ......................................................... 70 Table 14 - Federal Programs in The Huasteca Veracruzana .............................................................. 91 Table 15 - Federal Programs in The Huasteca de San Luis Potosi .................................................... 94 Table 16 - Federal Programs In The Huasteca De Hidalgo ............................................................... 96 Table 17 - Current Economic Conditions and Proposed Reforms ..................................................... 99 Table 18 - Indicators and Causes of Priority Environmental Problems ........................................... 100 Table 19 - Example of and Action-Impact Matrix ................................................................... 101 FIGURES Figure 1 - Summary framework for regional development ............................................................ xviii Figure 2 - Mexico's high priority regions .................................................................. 7 Figure 3 - Evolution of decentralization .................................................................. 14 Figure 4 - Conceptual framework for the analysis of coordination ................................................... 21 Figure 5 - Trade-off between programs .................................................................. 22 Figure 6 - Coordination with complementary inputs .................................................................. 23 Figure 7 - Coordination with multiple jurisdictions .................................................................. 24 Figure 8 - Horizontal and vertical coordination ................................................................... 25 Figure 9 - The scope for regional coordination: funding and impacts of government programs ....... 67 Figure 10 - A framework for regional development .................................................................. 74 Figure 11 - Regional development and private sector involvement .................................................. 76 vii BOXES Box 1 - - A brief historical overview of decentralization in Mexico .............................................. 4 Box 2 - The rationale for regional policies .............................................. 16 Box 3 - The Budget Process .............................................. 33 Box 4 - Technical Support Units for Regional Councils ................ .............................. 80 Box 5 - Budget coordination without resource pooling .............................................. 83 viii MEXICO - INSTITUTIONAL COORDINATION FOR REGIONAL SUSTAINABLE DEVELOPMENT, EXECUTIVE SUMMARY 1. Mexico's National Development Plan (1995-2000) indicates that regional development is one of the key vehicles for sustainable development at the national level; and that, within a broad national strategic framework, the GOM will promote, in partnership with state governments, specific activities with a regional focus. 2. The Secretaria de Agricultura, Ganaderia y Desarrollo Rural (SAGAR); the Secretaria de Desarrollo Social (SEDESOL); the Secretaria de Medio Ambiente, Recursos Naturales y Pesca (SEMARNAP); the Secretaria de Comunicaciones y Transportes (SCT) and the Secretaria de la Reforma Agraria (SRA) (subsequently joined by SSA, SEP and SECOFI) have undertaken in 1998 an initiative for the coordination of, and improved participation in, their regional programs, based on an inter-institutional agreement. In order to provide analytical elements supporting their ongoing effort of implementing the coordination agreement, the ministries have requested the support of the World Bank through its program of Non-Lending Services. 3. This report analyzes, through a review of the regulatory framework, case studies, and international experiences, current arrangements for coordination of government programs in priority regions in Mexico, as well as opportunities for better addressing the development needs of those regions via enhanced coordination. The Context 4. Ongoing processes of democratization and decentralization in Mexico are dramatically altering the role of government, at all jurisdiction, in the alleviation of state and municipal disparities in income and in general, social and economic well-being. In today's Mexico, regional development can not be the task of one or few single institutions in the federal government: state and municipal governments, civil society organizations and the private sector all have a role to play. 5. In the government arena, the consolidation of national and local electoral processes as the main source of political legitimacy increases the need for coordination. In conditions of subordination, coordination was unnecessary. But with more politically autonomous state governors, imposition became enormously difficult or impossible, making spaces for negotiation and inter-governmental coordination necessary. 6. By the same token, electoral legitimacy as a source of political authority has also modified relations among state and municipal governments: this is especially so since 1998, when most of the transfers became formula-driven, instead of being the result of political negotiations. 1 NOTE: The analysis of this report is based on information current as of September 1999. Facts and situations occurred subsequently (including modifications to relevant government programs) are therefore not addressed by the report. While some of the reccommendastions may require qualifications in light of new information, the bulk of the analysis addresses structural aspects of regional development and institutional coordination, and therefore has longer term relevance. ix 7. The Zedillo government has considerably accelerated the pace of the decentralization process set in motion under previous administrations. Reforms have been of particular significance in the areas of fiscal and social policy, with the transition from Ramo 26 to Ramo 33, and related transfer of a key item in the social policy budget from the federation, to states and municipalities. 8. No less significant reforms are taking place in the area of territorial development policy. In particular, a transition is taking place from an "implicit" to an "explicit" approach to regional policy. In the previous "implicit" approach of the Salinas and earlier Zedillo administration, the territorial focus of sectoral policies was confined to the program execution level: for example, SEDESOL, the agency with the clearest poverty alleviation mandate, pursued a territorial focus by means of the modality of application of its Solidarity Program (PRONASOL). However, there was no policy or institution with a specific mandate to reduce income imbalances in backward regions. 9. Starting in 1996, the federal government identified 91 priority regions (cluster of municipalities within states) and among them a subset of 36 regions of immediate priority. Between 1998 and 1999, eight federal agencies have signed a framework agreement for inter-institutional cooperation in those priority regions (Bases de Colaboraci6n Inlcr- instilucional, BCI). The BCI is the cornerstone of a new integrated approach to regional policy, endorsed at the presidential level. It commits some 30 sector programs implemented by the participating ministries (for a total budget in 1999 of $950 m) to a broad integral approach to regiunal development, stipulating (among others) a) a joint integrated regional diagnostic and regional development program, b) a unified "window" to coordinate institutional support to beneficiaries of the priority regions, c) a coordinated budget negotiation mechanism between line agencies and Hacienda, d) a federal steering group at the director general level, in charge for program implementation and follow-up. 10. Following the signing of the BCI, the participant ministries have taken important steps towards its implementation. These include the establishment and/or activation of the Sub-committees within the COPLADEs for the priority regions (SARPs) to help sharpen the territorial focus of COPLADE's action at the regional (i.e., inter-municipal) level; and the development of integrated packages of support to the agreement's 36 priority regions, worth a total of some 4 billion Pesos. 11. The establishment of priority regions signals the transition towards a more explicit approach to regional policies: the identification of specific areas of intervention at the territorial level puts pressure on the federation to specify clear criteria of resource assignment, thereby reducing the budget unpredictability that characterized the implementation of previous federal programs (especially PRONASOL). Furthermore, a more explicit regional policy creates the conditions for a more transparent dialogue and partnerships with state and municipal governments. States and Municipios have now more to bring to the table, as a result of decentralization in general, and in particular, of the transition from Ramo 26 to Ramo 33. 12. The future pace and shape of the decentralization process is likely to be the single most important factor in determining opportunities and constraints for regional policies. As the balance of power and the division of responsibilities among (and within) levels of government changes, so does the nature of institutional coordination problems. 13. Taking into account comparable experiences in other Latin American countries, it may be observed that democratization creates political conditions for stronger involvement of state and municipal governments in local decision making. Whether or not this will entail better policies for social development, poverty alleviation, and attenuation of income disparities will depend on a number of conditions. These include the allocation across levels of government of planning and execution responsibilities, the relative stance of redistribution and growth objectives in state priorities, the x availability of a suitable (and standardized) regulatory framework, and appropriate capacity for transparent and participatory handling of decentralized public expenditure. 14. The need for vertical coordination may be attenuated if the ongoing decentralization of spending responsibilities will be accompanied by decentralization of revenue collection (and credit access) prerogatives. At the same time, issues of vertical coordination are unlikely to disappear altogether. Poorer states with a weaker tax base are likely to still be dependent on federal transfers to promote local development. Regional policies and coordination: conceptual aspects 15. The broad rationale for Regional Development Policies (RDPs) in Mexico is no different from other countries: improve on a sustainable basis resource allocation and reduce social and economic inequalities. Mexico's recent approach to RDP is based on an inter-municipal notion of regions. There are several justifications for what in a federal system may appear as an additional layer of political, institutional, and administrative complexity (regions are typically territorial units intermediate between states and municipalities). These have to do with socio-economic, ethnic and environmental homogeneity at the sub-state level; with the presence of inter-municipal externalities, with possible economies of scale in production at the regi nal level; and with the incentive framework at work in the three levels of governmenit. 16. Localities comprised in regions share a common challenge: backwardness spanning several development dimensions (including infrastructures, environment, economic productivity, social organization, etc.). The regional development challenge is also characterized by a diversity of actors (civil society, private sector, government agencies), who need to be mobilized to address challenges and seize opportunities. Those actors face a collective action problem in the task of promoting regional development, namely the prioritization and sequencing of programs, projects and activities, as well as the mobilization of the necessary public and private resources. Such a problem will be the more significant, the more pervasive are factors that limit the effectiveness of "automatic" coordination mechanisms, such as the market system. 17. To analyze the coordination problems of regional development, a conceptual framework is proposed, which is based on two fundamental notions of coordination. The first is coordination as "ordering together": that is, ranking goals. The second is coordination as "bringing into common action, or movement": that is, coordinating means. Problems of coordinating goals arise (on the demand side) when there are public goods to be provided to groups of beneficiaries with distinct set of preferences. Problems of coordinating means arise (on the supply side) when several decision-makers in the government are involved in the provision of goods and services to communities. These goods and services may be not only public, but also private, in cases where market failures and equity concerns justify government intervention in input, output, and credits markets. 18. In an "ideal" situation, communities engage in consultations and determine priorities for public goods. If communities can mobilize the necessary funding, these goods are procured directly in the market. Otherwise, community preferences will be transmitted to government agencies, who will design and implement a "package" of programs and project to best meet community needs with the budget available to each of them. Reality may depart from such an ideal framework in several ways. 19. Problems of goal coordination may be due to the scarcity of social and organizational capital, and to inadequate institutional setup, which prevent aggregation and prioritization of individual preferences for local public goods. Problems of means coordination are likely to originate from a combination of exogenous factors (programs' norms) and endogenous factors (officials' incentives) that xi prevent combination of resources available to the different government agencies in programs that efficiently meet community (or individuals) needs. Three cases of means coordination failures seem of significance and are analyzed in the report. These occur when a) government programs are substitutes; b) programs are complements; c) programs are identical. 20. Coordination problems described so far are essentially of a "horizontal" nature. These will be further complicated when "vertical" dimensions are introduced in the framework: multiple levels of government, and (positive and negative) external effects across jurisdictions. In this case, coordination of goals will require consultation among localities and priority setting for public goods with inter- jurisdictional scope. Vertical coordination of means will be needed when the satisfaction of regional demands requires intervention of several levels of government. The normative frameworkfor coordination 21. The Mexican constitutional, legislative and regulatory system contemplates distinct mechanisms for coordination of government policies. At the municipal level, the Cabildo, the COPLADEMUN, and the CDM provide different avenues for prioritizing local needs in support of the municipal presidents' decision making. 22. Shortcoming in _ ommunity participation and limited capacity of the municipal administration to promote it constraint significantly the effectiveness of municipal forums in terms of coordinating goals, and their ability to influence the modalities of execution of federal programs. 23. The recent reform of art. 1152 of the Constitution is likely to increase opportunities and incentives for municipalities to participate in regional development forums. 24. At the state level, the COPLADE is the most important mechanism for the inter-governmental coordination of decisions on public investment, through the formulation, implementation, control and evaluation of state development plans and programs. COPLADEs are also intended as an institutional space for coordination between states and municipalities, especially on decisions related to the funding and execution of federal and state works at the municipal level. They are also supposed to encourage cooperation with social organization. 25. Since their creation in the eighties, the effectiveness of the COPLADEs has been highly variable. It has depended to a large extent on the will of the state governments, which for political reasons have generally been centralist and ill-disposed towards concerted social action for the design of public policies. In recent times, sub-committees are being created in the COPLADE for promoting and coordinating development activities in priority regions (SARP). 26. A range of legal instruments gives the general framework for vertical coordination between the federation and lower levels of government. These include the General Constitution, the Sistema Nacional de Planeaci6n Democritica (Planning Act), the Programa Nacional de Desarrollo and its multiple sub-programs (such as the Programa para un Nuevo Federalismo, 1995-2000), specific coordination agreements between each agency and the states (with their foundations in Article 116 of the Constitution). 2 The recent reform of Article I 15 of the Constitution enables municipal governments to form associations among them to coordinate and improve the provision of local public services. xii 27. In budgetary terms, federal-state budget coordination operates through the budget process (and materializes in the Annual Operating Plans or POAs, prepared by the various government agencies) as well as other non-primarily budgetary mechanisms, such as ad-hoc "Convenios." 28. State-municipal coordination operates by means of higher level approval of lower level budget and indebtedness. In principle, municipal budgets have to conforn to the state development plan, primarily an investment plan. Special convenios between states and municipalities do provide an additional opportunity to reconcile the spending priorities of these two levels as well as an opportunity to coordinate revenue raising goals and instruments. 29. Federal-municipal budget coordination (and even federal-state-municipal coordination) is being pursued through the transformation of Ramo 26 into Ramo 33. Being mostly formula driven, Ramo 33 is in practice a mechanism by which the federal level guarantees territorial allocation of resources to federal priorities. However, accounting and reporting for the effective allocation of the Ramo 33 resources are still deficient and do not stimulate inter-government trust nor allow for monitoring or impact evaluation. 30. In summary, horizontal coordination (i.e., among line agencies in the federal government), is mainly possible "a posteriori"; that is, at the spending, rather than at the programming stage. Vertical coordination (i.e., across levels of government), is mainly confined to mechanisms outside the budget process (Convenios); budgetary coordination in the context of the POA cycle is possible, but it rarely has an explicit territorial focus. Four Case Studies 31. In order to ascertain strengths and weaknesses of current arrangements for institutional coordination in regional development, case studies were undertaken in four priority regions. The research was carried out through the review of government programs and through individual interviews and group meetings held with key informants in government and communities. Due to budget and time constraints, much of the information collected is of a qualitative nature, and is used to infer broad trends on local stakeholders' perceptions of the current situation of coordination and on its limiting factors. 32. The case study regions feature high level of poverty, natural resource degradation and low productivity, attesting to the multidimensional nature of their development challenge and the potential benefit of an integral (and institutionally coordinated) strategy of public action, at the different levels of government. 33. A total of some 40 programs (including sub-programs) with federal (co-) funding were encountered in the case studies, with different degrees of presence in the different regions. These span a wide range of sectors, objectives, modalities of execution. For the present purposes, the following observations on the programs are in order: (a) In most of the cases, the mechanisms for incorporating beneficiaries' preferences into program design are not clear. This makes it difficult to determine if (and how) local needs might be better met by combining programs of different agencies. (b) The set of requirements for an individual, group or community to access program resources is highly varied but generally complex and not particularly "applicant- friendly." xiii (c) Program execution typically follows the logic of the federal budget, governed by the Ley Federal de Presupuesto y Gasto Publico and its specific calendar. This cycle bears little relation to local financing needs. (d) With a few exceptions (such as the PROCAMPO ecological projects), programs do not lend themselves easily to resource pooling with other programs that have complementary objectives. This limits spaces for coordination. (e) In summary, coordination at the program design or at the budgeting stages seem to hardly -if ever- take place. Coordination is possible "ex-post," that is at the execution stage, but complex sets of distinct operational rules make it difficult, and mostly dependent on the administrative ingenuity (and good will) of federal and state government officials. 34. Additional findings of the case studies relate: (a) to inadequate information flows: from the bottom up, on community needs and preferences; and from the top down, on government programs availability and access modalities; (b) to the lack of a strategic common vision of local development challenges and opportunities, in both the municipal and the regional forums; (c) to the lack of an incentive structure encouraging participation and active engagement of public officials at all levels of government; (d) to an unclear assignment of responsibility and division of labor in regional forums, which jeopardizes effective follow-up to council decisions; (e) finally, to political antagonism (especially between levels of government) that generates concerns on "coordination" leading to sub-ordination. International experiences 35. Mechanisms and -more broadly- institutions for inter-governmental coordination with a view to integral regional planning and budgeting have existed in Latin America for nearly fifty years. The 1980s and the 1990s waves of public sector decentralization reinforced the need for more effective fiscal coordination, both vertically and horizontally. It is now widely accepted throughout LAC that effective and efficient decentralization strategies require inter-government coordination, mutual support and reciprocal checks and balances. 36. Each Latin American country has opted for a country-specific package of coordination purposes and mechanisms. As a general rule, the particular vein of decentralization or federalism followed by each country seems to be the single largest explanatory factor behind differences in purposes or mechanisms throughout Latin America. Specific experiences in Chile, Nicaragua, Venezuela, Argentina, Colombia are reviewed in the report and analyzed in terms of their context, purpose, duration, participating agents, territorial scope, and actual incentive mechanisms and procedures adopted. 37. The various experiences reviewed permit to draw the following conclusions: (a) Coordination is easier when responsibilities and resources are clearly divided, yet all sectors and levels of government perceive individual benefits of working together. (b) Program by program or piecemeal approach to coordination may be the first step towards comprehensive or inter-sector coordination. Similarly, horizontal coordination among a few agents located at the same level of government (and the same hierarchical xiv level) may prepare the ground for multi-government coordination. Vertically imposed coordination is not usually sustainable in the medium or long term. (c) Coordination may also be used as a transitional tools towards further decentralization. Indeed, coordination is a trust building tool that gradually stimulates higher levels of government to transfer responsibilities to lower levels. (d) The territory for regional coordination may overlap or not with pre-existent jurisdictions. What is important is that every participant in the coordination effort finds the identified territory relevant to its purposes. (e) Sustainable coordination requires ownership by regional--even local--agents. (f) Budget coordination may be achieved through authoritative decisions or voluntary arrangements. Top-down decisions (budget allocation for special presidential agencies or inter-sector programs) may be effective in the short run, but are not likely to remain in the medium and long term. Creative initiatives for sustainable coordination require voluntary, incentive-compatible, budgetary commitment of participating agents. Conclusions and recommendations 38. The establishment of plural forums for development planning such as the regional councils responds to the need of mobilizing and coordinating the public and private resources that are required to address local development needs. However, there are many ways of conceiving the role of the councils for regional development. 39. For illustrative purposes, two models of (or approaches to) regional councils can be identified. An "administrative" model, where councils are primarily government-driven mechanisms to assemble packages of integrated public support to local needs. And a "leadership" model, in which councils are the forum for the formation of a medium- to long-term shared vision of the region's future, and take on a leadership role in raising and administering public and private resources for translating that vision into reality. 40. The Priority Regions program of Mexico's federal government seem to contain elements of both models, possibly in an effort to compromise among the alternative views of the different agencies signatories of the BCI. The co-existence of the two models may be captured by the image of "the negotiation table," at one end of which seats the civil society representation (community groups, producers association, etc.), and at the other, the different government agencies (at the federal, state, and, where possible, municipal level). The two ends of the table cooperate to reach a consensus for mobilizing resources, mainly via the POA process. In regions where the institutional side has a relatively stronger political/ bargaining weight, the situation will be closer to the administrative model. In a situation where the civic society part is relatively stronger, the situation will be closer to the leadership model. 41. The current reality of many priority regions (including those of this report's case studies) seems to be closer to the "administrative" model. However, it is conceivable that councils may evolve over time; and it is plausible that general processes of decentralization and democratization under way may create the conditions for many councils to eventually evolve towards the leadership model. Such a general trend should not overshadow important variations in local conditions. 42. Heterogeneity of local conditions. In each region, the specific configuration of the council and its evolution over time will respond to site-specific geographic, social, economic, and institutional factors. Two variables appear of special relevance: a) the degree of social cohesion (i.e., the ability of xv civil society to organize itself for prioritizing and pursuing common development objectives); and b) the prevailing social and political context (i.e., the attitude of local governments and local elites towards a development approach based on the notion of region and on participatory methods). 43. Collective action will be more viable where social cohesion is stronger and where the political and institutional context is more supportive. Conversely, it will be more problematic in regions where local organizations are less developed, and/or prevailing political conditions are adverse. In the former case, the federal government may be able to limit its action to a facilitator role. In the latter cases, it may want to consider a much more proactive role, to help strengthen organizational and participatory processes and to mitigate institutional and political conflicts. 44. Overall recommendation. The regional development approach promoted by the ministries participating to the BCI is innovative and promising. It is recommended that it be further pursued. Regions may be initially conceived as an appropriate territorial unit for coordinating federal programs (and budgets). However, institutional coordination of federal program is not by itself sufficient to ensure socially and environmentally sustainable regional development. In order to make a lasting impact on local development, regions should evolve from recipients of federal programs, to proactive catalysts of federal, state, municipal, and private resources for local development. Regional councils should be given clear attributions and accountability in terms of resource programming, budgeting, executing, monitoring and evaluation. To be consistent with the overall objective of promoting development through local participation and civic society engagement, those attributions should: a) provide clear incentives for stakeholder participation; b) be compatible with the relevant normative framework (including the recent reform of art. 115 of the Constitution); c) be flexible to account for variations across regions of political contexts, social cohesion, and administrative abilities/skills. 45. While recognizing the potential of a development approach based on the notion of regions and on regional councils, its experimental and innovative nature should be underlined. The consequent risks should not be underestimated. These include: a) limited local capacity for the design and management of development initiatives; b) lack of support (or outright opposition) from local political leaders; c) dangers of corruption. 46. Short-term recommendations. In the short run, it appears plausible that progress can be made mainly towards implementation of the "administrative" model. The harmonization of programming and implementation procedures of eight federal agencies is a complex enough task, especially in consideration of the tight schedules of the fiscal year 2000 budget cycle. Significant progress appears not too likely at the local level, where the degree of state and local level ownership of the councils is still often constrained by the lack of clarity as to exact prerogatives of the councils and their real ability to make a difference in development planning. 47. On the goal coordination side, it is unlikely that participatory diagnostics and regional programs may be developed in little more than a year. The federal steering group of the PROAREP may wish to consider an inter-ministerial task-force (or hiring expert teams) responsible for consolidating existing studies and developing on that basis a short list of priority areas suitable for federal intervention in fiscal year 2000. Such a list would then be submitted to the regional council for review and endorsement. 48. On the coordination of means front, what could be accomplished before the next presidential election is a) seeking opportunities for coordination in the execution of federal programs for the remainder of fiscal year 1999; and b) promoting some form of coordination in the development of annual operating plans (POAs) for fiscal year 2000. This second objective could be met by: xvi (a) conducting a systematic review of how and where existing programs are being applied - region by region- to detect duplications and avoid their persistence in the future; (b) having the federal delegates in each region developing consolidated programs around simple criteria of division of labor. To promote the responsiveness of resulting programs to local needs, programming sessions could be conducted within the regional councils or one of their committee (wherever established and actively functioning). Priority areas for joint programming should be determined on the basis of consolidated diagnostic studies, if available; (c) The steering group may also promote a technical revision and harmonization of the operational manuals of closely related programs, to facilitate submission of project requests with funding from multiple programs. In some cases, consolidated operational manuals can be developed, following the experience of the Programa de Empleo Temporal (implemented jointly by SEDESOL, SCT and SAGAR). (d) Finally, as a pilot experiment for subsequent systematization, the ministries in the BCI may consider allocating a small percentage of their programs' budget to a regional fund (with specific assignment to each region, and with a single, consolidated operational manual) to be used by the regional councils for funding multi-sector initiatives. This type of pilot shoul"' be accompanied by clear criteria for impact evaluation. 49. To ensure prompt delivery of tangible results in the areas discussed above, the steering group of the PROAREP may wish to hire a small team of experienced consultants. These would be working full time - in close contact with federal delegates in the states- towards meeting, before the end of the administration, selected priority targets. For example, harmonization of "normatividades" of selected programs, validation and consolidation of existing regional diagnostics, development of an operational manual for a single, integrated, multi-sectoral program. xvii 50. Recommendations for the medium to long term. Further progress in the regional model of development initiated by the BCI will necessitate that regions, building on their geographical, ethnic and socio-economic affinities, generate their own institutional identity as development actors, and set up organizational tools to guide local development processes. This in turn requires a clear sense of mandate, a vision of the regional development challenge, and forums for discussion, decision, and follow-up. Figure 1 - Summary framework for regional development 7 6 .2 Prvt Sco 4 |Regional Fund | Regional development Regional RegionaPAs Strategy l . | Councilc |ft . s L: S~~~~~~entanilla Unica|8 8 1 1 0 Cornrun:itie:s + ir ~~~~11 Legend: 1. Community Planning 2. Region-wide Investment ideas 3. Input for program design 4. Single project ideas 5. Region-wide investments 6. Direct transfers to regional fund 7. Joint Programming/ budgeting 8. Execution of sectorial programs and projects 9. Calls for proposals; Technical assistance; funding 10. Project proposals approval 11. Single project investment 51. Figure 1 visualizes a proposed framework of reference to operationalize the BCI towards that direction: (a) Communities in the region engage, under the leadership of the regional council (and subject to strengthening of local organizational processes where necessary), in a process of strategic priority setting: from the bottom up, via community organs, the Cabildo and Municipio, all the way to the regional level. xviii (b) The outcome of the community priority setting would be translated in a regional strategy document endorsed by the council. (c) The regional strategy (or regional program in BCI terminology) would form the basis for the design (or revision) of government programs (primarily sectoral programs in the federal government, but also including programs with state level pari-passu). (d) Government agencies would formulate region -level POAs consistent with the regional strategy. POAs could assign resources to regular, single-agency, sector program, as well as to a pooled regional fund to be administered by the regional council under single operational rules. (e) A "ventanilla uinica" would be established within the regional council for collecting project proposals, primarily regional in scope, which may be eligible for funding from either the sector programs or the regional fund. A technical support unit would invite proposals, screen them, provide support for technical improvements of promising ideas, and recommend to the regional council approval for funding either from individual agency programs or from the regional fund (under some circumstances -discussed below- the ventanilla could be the conduit not only for processing application, but also for managing expenditures). 52. The framework allows for explicit mobilization of private sector resources: (a) The regional development program would contemplate a number of strategic areas with potential for private sector investment (agro-industry, tourism, handicrafts with export potential, etc.). (b) The regional council may offer a forum capable of attracting private sector investors in search for opportunities beyond a minimum scale. In that case, investment resources could be channeled towards the regional fund under contractual terms acceptable to all parties. (c) The ventanilla uinica could also serve as a conduit to identify project-level opportunities for partnerships between the community sector and private entrepreneurs interested in smaller-scale investments. 53. Strengthening of participatory processes and forums of bottom-up planning are of key importance. Municipal forums can promote goal coordination by both aggregating and prioritizing community demands at the municipal level and by transmitting to regional fora (such as regional councils and the COPLADEs' regional sub-committee) needs and demands that, because of their inter- municipal nature, can not be accommodated at the municipal level. 54. In terms of contribution to regional planning, appropriate incentives would need to be provided, to encourage integration of municipal presidents and their staff into regional councils and COPLADE' s SARP. In particular, there needs to be clarity on the role of municipal officials in these forums, and the opportunities open to them for contributing to the decision making process. Training programs on rights and obligations of members of regional forums would appear necessary and perhaps worthwhile to be included as a regular item in the budget of these forums. The reform of art. 1 15 of the Constitution may provide new incentives for municipal participation in regional forums, especially if the latter take the form of associations of municipalities. 55. Regional Councils. To operate effectively in the longer run, Councils will need to have a better- defined role, both internally and vis a vis other institutions. They will need comprehensive strategies xix guiding their action; and they will need an incentive framework promoting stakeholder participation and the support of the various institutions they intend to mobilize. 56. An area in need for clarification concerns the linkages between the Councils and the COPLADE/SARPs. In most regions, councils originated from the need to aggregate and prioritize community needs. The question then is where should a coordinated response (integrated "supply") from public agencies be devised. If the latter function is assigned to the council (as it is happening in some regions), a conflict of attributions with COPLADE/SARP may arise. The problem may be alleviated by appropriate adaptation of the "negotiating table" model. In particular, the regional council may work as meeting point between the "demand" side (community groups, producers organizations), and the 'Wsupply" side (federal and state government agencies). The demand side can be formally constituted as an "asociaci6n civil" (or perhaps even better, as an association of municipalities); the supply side, as the SARP. 57. Each side of the table has separate internal meetings with different purposes (and different procedures: community meetings for determining regional priorities and developing related funding proposals, and technical meetings between 'administrators' to allocate tasks and budget responsibilities among government agencies). The consensus reached at the negotiating table between the two parties sanctions the coordination of goals (decided by community groups) and clarifies the coordination of means (agreed upon by government agencies). 58. In terms of composition, apart from representatives from the three levels of governments, Councils should include a wide representation of the region's social and productive groups, with appropriate presence of vulnerable and disadvantaged groups. Mechanisms for selection of r epresentatives should be transparent and auditable and based on designation by lower level collegial bodies (e.g. ejido assembly, cabildo, etc.). 59. Regional Councils should have an appropriate internal organizational structure aimed at the efficient processing of information, and at the promotion of consensus-based decision making. To ensure consistency with the existing normative framework, decisions of the councils will need to be endorsed (and formally ratified if required) entities constitutionally or legislatively sanctioned, such as COPLADE/SARP or associations of municipalities (AMs). It is possible to distinguish several ways in which formal legitimacy can be attributed to council decisions: (a) If councils are inscribed into the formal structure of either SARP or AMs, formal validation is automatic. (b) If councils have a distinct status, then their deliberations have to be ratified by SARP or AMs. Ratification, however, can be either: (i) granted on a case by case basis, (ii) or agreed upon in advance, via specific "block" delegation agreements (e.g., the regional council receives delegation to deliberate on specific matters/programs for a specific time period). 60. Mechanisms to resolve possible controversies within the councils would vary, depending on the particular configuration selected. In cases a) and b) (i) above, conflict resolution would be sought mostly by negotiations among the different interests represented in the council. In case b) (ii) above, decisions would be taken on the basis of majority of votes. xx 61. The internal structure of the council would include a plenary assembly, working level commissions, and an internal audit commission. Councils should have their own operating budget for financing meetings, the operation of a small secretariat or technical support unit, and studies/reports. 62. The implementation of the regional strategy over the given planning horizon would result from the yearly execution of the annual regional operating plan. Execution of individual programs would remain the responsibility of the funding agencies, which would continue applying their own procurement and disbursement rules. In some cases, public agencies, in consultation with the council may contract out program execution to non-government entities, such as community groups or producers associations. 63. Accountability. lTo be consistent, multi-institutional execution of a single comprehensive regional strategy requires transparent accountability mechanisms. That is, mechanisms generating obligations for all parties in the council to make their activities consistent with the regional strategy. The following elements seem key in defining accountability mechanisms: (a) a set of indicators measuring (in a quantitative or qualitative way) the conformity of individual development programs with the regional strategy; (b) identification of public officials held accountable for the attainment of the indicators; (c) a transparent process for evaluating annual and/or multi-annual program performance in the light of the indicators, and disseminating the results; (d) aset of sanctions for possible inconsistencies between the regional strategy and the agencies' programs. 64. Mechanisms for integral regional planning. Regional Diagnostics and Regional Development Programs are of central importance in developing a shared vision of the region's challenges and opportunities, and therefore for establishing broad mandates, and subsequently, specific responsibilities for each of the public, social and private organizations to be mobilized in regional development. 65. The following points may be considered in the development of Diagn6sticos and Regional Development Programs: (a) The federal steering group would establish minimum standards for processes and products to be followed in the preparation of Diagn6sticos and Regional Development Programs. These standards would include explicit criteria and mechanisms of social participation in the preparation and revision of the documents. (b) Regional Development Programs must include explicit criteria and planning methods for environmental and natural resource sustainability (such as the Action/ Impact matrix). (c) The Regional Council would establish a calendar and a mechanism for periodic revisions of the Regional Development Program, to ensure that new development issues and lessons learned could be reflected in the Program as they arise. Revisions with a three- year cycle could be considered to re-align the strategy with changes in municipal development plans. 66. Resource Coordination. Two different approaches may be considered in improving budget coordination. The first approach entails maintaining the current system of separate programs, budget and operational rules; but proposes a sequential process of institutional consultation aimed at developing consolidated POAs with an explicit territorial (i.e., regional) focus. Broad priority areas for resource coordination would be determined on the basis of the regional strategy. xxi 67. This first approach to budget coordination would have the following advantages: (a) The SHCP would benefit from reduction and simplification of transfer windows to state and municipal government, transparency, efficiency and economies of scale of pari passu programs and simplification of special funds. (b) Participating secretaries would also benefit from sector budgets that cohesively integrate matching programs, special funds and state and municipal requests for territorial expenditures. Besides, secretaries would benefit from mobilization of additional sector resources as well as execution, monitoring and control at levels. (c) State and municipal levels. (d) State and municipal governments would benefit from bottom-up inter-government coordination of priorities and access to clear, predictable sources of revenue from the federal government. (e) Finally, the approach would promote consistency between individual agency programming and overall regional strategy. 68. Information on the regional POAs that would result from such a process would be provided to the administrator of the Ventanilla Unica, along with the operational manuals of the various programs involved. The Ventanilla would then be responsible for disseminating that information at the municipal and community level, soliciting and screening eligible funding proposals. However, it would not consolidate management of outlays, which would remain the responsibility of the individual sectoral programs. 69. The disadvantages of the non-pooled approach are twofold: (a) Transaction costs (technical revision of operational manuals, information exchange, negotiation) are likely to be high. (b) Funding would still be managed on the basis of separate administrative and operational rule (one set of rule for each program). This may make it difficult to fund projects or requests that are multi-sectoral in nature, but that do not "fit" into the normatividad of any of the existing programs. 70. Pooling of resources. To reduce transaction and increase adaptability of programs to a larger -variety of funding requests, a second approach may be considered. The federal secretaries may consider the creation of a special inter-sector regional fund, which would receive a given percentage of each federal agency's budget for the priority regions, with matching contributions from state and municipal governments clearly specified, and transparent rules of access by state and municipal governments. This fund would encompass the corresponding pari passu programs of the federal secretaries in order to prevent additional fiscal pressure. Wherever associations of municipalities are formed, the regional fund can also pool municipal resources. 71. The regional fund would have a specific set of administrative and operational rules (including criteria for impact evaluation) transparent and clear, and yet flexible enough to encourage a wide range of funding proposals. A key requirement that may be established would be the consistency between project proposals and priority areas identified in the regional development program (or regional strategy). Again, information dissemination, screening of and technical support to, funding proposals would be administered through the Ventanilla Unica, which in this case would also be responsible for actual financial management. xxii 1. INTRODUCTION BACKGROUND 1.1 Development varies widely across regions in Mexico. According to a recent study of the OECD (OECD, 1997) infant mortality rates in the five poorest states are more than double those of the five richer ones. Adult illiteracy rates are almost four times higher; less than 60% of the population of the five poorest states has running water, compared to over 90% in the five richest states. 1.2 Social and economic imbalances, even if more prevalent in the poorer states, are scattered throughout the national territory. A total of 91 regions (agglomeration of municipalities) have been identified by the federal government in Mexico's 31 states as priority for poverty alleviation. These regions are home to about 27.3 million people: 7.1 percent of them are indigenous; half is illiterate, and 73% earn less than 2 minimum wages. 1.3 Regional development disparities can be persistent and are not necessarily alleviated by growth in the national income. In the period 1980-85, per capita GDP grew 17% in the two poorest states (Chiapas and Oaxaca), compared to a much lower 3% for Mexico as a whole. However, the 10% growth in per capita GDP at the national level between 1985 and 1993 did not result in faster growth in poor states; on the contrary, per capita GDP in the two poorest states dropped more than 11% in the same years (OECD, 1997). 1.4 Empirical evidence therefore confirms that conventional economic wisdom on long terms "spontaneous" convergence of backward and more advanced regions within nations may not be always applicable. The ability of trade and internal factor mobility to smoothen differences in per capita income seems to be as limited in Mexico as in a number of other developing countries in the LAC region and elsewhere. For example, according to recent World Bank research on a group of eight developed and developing countries during 1920-90, internal labor mobility (measured by migration) increased income convergence rate of only 2% (World Bank, 1998). 1.5 As attested by the figures quoted above, the development problem in backward regions spans a wide spectrum of sectoral issues, including health, education, natural resources, transport infrastructure. While the relative roles of the public and the private sectors in such a multi- faceted challenge may be subject to dispute, there is little question on the need for either an integrated strategy or for mobilizing and coordinating the various actors with a stake in the problem. 1.6 Mexico's National Development Plan (1995-2000) indicates that regional development is one of the key vehicles for sustainable development at the national level; and that, within a broad national strategic framework, the GOM will promote specific activities with a regional focus, which will support State Governments. 1.7 Activities for regional development are taking place in the context of the broad process of decentralization currently under way in the country. Mexico's "new federalism" entails an overall reassessment of the distribution of responsibilities between the federation, the states and the municipalities, with the objective of improving responsiveness and accountability, and encourages institutions to provide services that individuals and local communities demand. 1 1.8 The Secretaria de Agricultura, Ganaderia y Desarrollo Rural (SAGAR); the Secretaria de Desarrollo Social (SEDESOL); and the Secretaria de Medio Ambiente, Recursos Naturales y Pesca (SEMARNAP) have each established programs for promoting sustainable development in priority regions of the country. 1.9 SAGAR, SEDESOL, SEMARNAP, the Secretaria de Comunicaciones y Transportes (SCT) and the Secretaria de la Reforma Agraria (SRA) (subsequently joined by SSA, SEP and SECOFI) have undertaken in 1998 an initiative for the coordination of, and improved participation in, their regional programs, based on an inter-institutional agreement. In order to provide analytical elements supporting their ongoing effort of implementing the coordination agreement, the ministries have requested the support of the World Bank through its program of Non-Lending Services. 1.10 This report analyzes, through a review of the regulatory framework, case studies, and international experiences, current arrangements for coordination of government programs in priority regions in Mexico, as well as opportunities for better addressing the development needs of those regions via enhanced coordination. Broad hypotheses underpinning the analysis are as follows: (a) Poor coordination (within government and between government and civil society) is an impediment to effective use of government resources (and to mobilization of private ones) in backward regions. (b) Participatory planning fora at the regional (i.e. inter-municipal) level may provide an institutional and operational framework through which those impediments can be removed. 1.11 The report is organized as follows. Chapter 2 reviews recent evolution of regional development policies, in the context of broader processes of decentralization in Mexico. Chapter 3 develops a conceptual framework for the analysis of horizontal and coordination problems as they relate to regional policies. Chapter 4 discusses the normative framework for coordination developed in Mexico's laws and regulations. Chapter 5 analyzes current challenges to, and opportunities for, effective coordination in Mexico on the basis of four case studies. Chapter 6 discusses international experiences with horizontal and vertical coordination in several Latin American countries, as well as the relevance and applicability of those lessons to Mexico. Finally, chapter 7 develops tentative recommendations for the short and medium term agenda of institutional coordination in Mexico. 2 2. THE CONTEXT: DECENTRALIZATION AND REGIONAL DEVELOPMENT IN MEXICO 2.1 The subject of coordination among federal agencies and among different levels of government has been on the Mexican government's agenda for a long time. As far back as the beginning of the seventies, the term coordination was brought into government discourse in conjunction with attention to the poorest areas of the country. From this perspective, the current attempts by some government federal agencies are not new. The major differences are undoubtedly to be found in the general political and institutional context of today's Mexico. 2.2 Besides the administrative and economic advantages that go hand in hand with coordination among federal institutions and tiers of government, today fundamental conditions exist that offer great opportunities for coordination. Some of these conditions are summarized below. 2.3 In recent years, the relationship between the federal government and state governments have undergone substantial changes as a result of the consolidation of electoral processes as the main source of political legitimacy. Electoral legitimacy and the possibilities of political alternation have drastically changed the organization of power in Mexico at the territorial level. In conditions of subordination, coordination was unnecessary. But with more politically autonomous state governors, imposition became enormously difficult or impossible, making spaces for negotiation and inter-governmental coordination necessary. 2.4 By the same token, electoral legitimacy as a source of political authority has also modified relations among state and municipal governments. Although a significant part of Municipios' revenues still come from federal and state transfers, their efforts to reduce dependency from the state are today more constrained by lack of institutional and administrative capacity than by political subordination to the governors: this is especially so since 1998, when most of the transfers became formula-driven, instead of being the result of political negotiation. 2.5 Following a first wave of slow reforms, decentralization is now gaining new momentum. When the opposition parties came to occupy key posts both in state and municipal governments and in the federal congress, they were able to bring strong pressure to bear on the executive to make decentralization more effective. It was against that background that the decentralization of social policy took place, especially with respect to the creation of basic infrastructure. Control of funding for those activities is being increasingly transferred to states and municipalities. The fact that such an important item of public action is now largely under the control of local governments makes vertical coordination even more necessary. 2.6 The history of territorial policies in this century has been marked by tension between a "centralized" and a "federated" vision of the role of the state (see Box 1 for details). This tension was particularly strong during the process of consolidation of Mexico as a nation State. During the first half of the century, the national development strategy was mainly concerned with the need to boost economic growth (where the main source of revenue was the exploitation of natural resources) and building up an internal market. The main tool for achieving those two objectives was promoting the country's industrialization, in the context of a centralized and protectionist approach to economic policy. 3 Box 1 - - A brief historical overview of decentralization in Mexico 27In the teedcadres ofolwn the Revolutiosn,dos terigtoie,al polices onpcifitratedlon prmo nti projetri atr,s comm unicatosaknd trasportatof winasrc tue with supotfomte progress i an k throoe flsoehadeducatopmn; alnt baensurenationl integrat. Regionl pla gwasrom approa with ou e xa p the In teg ra Ruvrnal s Tevelonlp nsrmentPojc ofIER oregoalnigwr the Commtra i sstionsan forwatese development,Pojc (Decncen strate etihese undrogthe Ministry d f omornyrui ens ourac iiisaie.sreghnn Anttuthbeionsio (thesvnis h federal angtael vels) mespntiblecamrepuliclvnery e yte rbe of rurldvlp entgioodl and soiime alneede frthe groernes thnseopvaif institutional mhnet esuthn angisms (sutchma s ,R toc proot deprvelopmnterbasedncntua resourcesise,tith an betregionamplaning fortcusiTepration inof proere enitesig wasd plarely due tiathe cntRgOvernm es nee ato pduto orderadconereionan araylafgceset wasagenies wt naion decentralization as ith g egionsni liath th aiomu d ies.Hoo ever, d ecntraleityio the ie of pacnines an the based number of fielsi whic ie tesroo (pef statlev,d thedlopk ofra bacstrengteigions througunicipaligiesedthrough-setor aprticlc11 Fof texape Chenstitution. Theuomit Deveomn Promji elt (PDEsarl OR)or E was repetrliacedion 198nb Comal Developmeaint yPerojec o (DRaD). MCostE ofthese stategramsin instruments chairnednythe oratveitors, aimd ath gtroundwrg frtheng itrnsferutofs (th central admnistratie apparats) tesonstatbdlegtos Howelver,yi is iprtrantt neeotmentht thed maind obectvies,a welas theadiisratv dconoedination.o publicagyenies, rahe than axstriengtenpints tof the leisong maiena strutegydthe pacity of initiautipofal thant tivrerst of tovment. oed establishmenteof-ageny d ineacion and etater plann ngisystes cordinated ithou th r Ldesignav proitt h eiinadmdriaino tt ln n otefruainadimplementation.o uiia develop hegoerment prgrms throughna (98-99) the Programa deNnacionyDsarlo uiial dePADMo Inotisdprioad,tecaio (P O fN A mOL 26ao the federal budget aainsteum diecte atr regional development andth aovendety ofarlvitice15of. theASO Constuio canresaied to haveinrcodued substantlimalanches:t ite wnstitutional desbigng of etalzto aoth regional and,utmtl to aomniis lessver extnt loclmdveopmntpolcy 2.f I i t he ojcoustoihesvetes and eihtes aug number of silsi hc ttidt peific deenalopenth prkogram inarstittonrateg ofederalutand stat leveipls resovensibenfrdlvryotua.dvlpetod n 2.9 More decisive steps towards decentralization and the revamping of a regional approach to poverty alleviation have been undertaken under the Zedillo administration. DECENTRALIZATION AND REGIONAL DEVELOPMENT IN THE ZEDILLO ADMINISTRATION 2.10 In 1995, at the beginning of the administration of President Ernesto Zedillo, the federal government announced a new move towards a reformulation of social development policy. This was included in the basic proposals of what was called New Federalism, contained in the Plan Nacional de Desarrollo 1995-2000. Among the central points of this proposal were the increase in functions and attributions assigned to the lower levels of government (state and municipal), the decentralization and federalization of social policies, reforms in the system of fiscal coordination, and strengthening of the municipal governments. Fiscal reforms 2.11 Since its inauguration, the Zedillo government has proposed the transformation of the current Sistema Nacional de Coordinacion Fiscal (SNCF) into a form of fiscal federalism. This would consist in a decentralization of the sources of revenue, to be tied to a decentralization of expenditure. Actions undertaken in these directions include: (a) tax reforms,, that have allowed the states to establish taxes (for the states or the municipalities) in various areas; (b) the increase of the Fondo General de Participaciones (FGP) in 1996 (a growth of 8% in real terms over the previous year); (c) the Ley de Coordinaci6n Fiscal providing new sources of revenue for the states; (d) the signing of a new Administrative Cooperation Agreement in Federal Fiscal Matters with the Secretaria de Hacienda y Credito Puiblico (SHCP); (e) the addition of a new chapter regulating transfers of federal funds for social policies, with the creation of a new budgetary item, Ramo 33. Social policy 2.12 The Zedillo government's poverty alleviation policy has had three components. The first component is support to individual well being, which takes the form of the Programa de Educaci6n, Salud y Alimentaci6n (PROGRESA). The second component aims at increasing job and income opportunities, through programs for employment and training. The third component of the strategy is targeted at communities, and consists of infrastructure development programs with increasing devolution to states and municipalities of execution responsibilities. 2.13 From the start of the Zedillo administration, the Secretaria de Desarrollo Social (SEDESOL) has undertaken various actions aimed at decentralizing social policy. The process of transferring federal funds to state and municipal levels of government began in 1995 with the transfer of 50% of the resources in Ramo 26 to the country's municipalities. However, the overall logic of the decentralization process was not established until the 1996 budget 5 (Presupuesto de Egresos de la Federaci6n, PEF). The evolution of Ramo 26 is of particular relevance for its implications in terms of inter-governmental relations, and therefore warrants further discussion. The Ley de Planeaci6n provides for inter-governmental agreements on the implementation of programs and the use of resources; the instruments that made this possible were the Convenio Unico de Coordinaci6n (CUC), the Convenio Unico de Desarrollo (CUD), and the current Convenio de Desarrollo Social (CDS). Broad terms of these agreements included: * the matching of state to federal funds, with matching ratios close to 25% in 1998; * the creation of spaces for social participation in committees, councils and other forms of organization; * the requirement of counterpart funding from beneficiaries (in labor, materials or cash). 2.14 Once resources reached the states, assignment to the municipalities were in general based on agreements between SEDESOL and the state governments. However, these agreements typically displayed significant variation of the amounts assigned from year to year in any given municipality; and a wide heterogeneity across states in the formulas used. In many cases a percentage of the resources was split equally among all the municipalities in the state, regardless of levels of poverty or population. 2.15 In 1998, Ramo 26 was re-structured and turned into a fund called Fondo de Desarrollo Social y Productivo en Regiones de Pobreza. This means it lost the local and municipal character it had in previous years, concentrating instead exclusively on the regional dimension, with special emphasis on regions of extreme poverty. 2.16 In parallel to the re-structuring of Ramo 26, a new budget item was introduced: Ramo 33, Aportaciones federales para las entidades federativas y municipios, consisting of five funds. A very large portion of what until 1997 was concentrated in Ramo 26 was transferred to Ramo 33, through the Fondo de Aportaciones para la Infraestuctura Social (FAIS), especially in terms of funding to basic services and infrastructure. The new funds were created to promote redistribution and devolution of spending to states and municipalities. These are: the Fondo de Aportaciones para el Fortalecimiento de los Municipios y del Distrito Federal (FAFM) and the Fondo de Aportaciones Muiltiples (FAM).3 The first of these is intended to contribute to the reorganization of municipal finances and to meet needs directly linked to public security. The second intends to promote social assistance programs to selected segments of the population. In summary, Ramo 33 are aimed at the state and municipal levels of government, with the greatest emphasis on the transfer of resources to the local level. 2.17 The regulation of transfers was established in the Ley Federal de Coordinaci6n Fiscal (LFCF). Following the reform of the above mentioned budget items, the LFCF specified the formula the Federal Government will use for the distribution of resources in the FAIS among the states and the two formulas that the states can apply to distribute the resources of the FAISM to the municipalities. In summary, the LFCF gives states and municipalities a legal security they previously lacked; makes the assignment process more transparent and auditable; and improves 3In 1999, the number of Funds in Ramo 33 rose to 7 6 focus on the poorest populations, by abolishing the practice of uniformly distributing a percentage of the resources among the states or among the municipalities in a state. 2.18 Despite the advantages of the approach to intergovernmental transfers underpinning Ramo 33, some problems remain. In particular: (a) Poverty alleviation programs, previously covered by Ramo 26, now have less resources because Ramo 33 funds do not need matching funds to be included in Convenios with the states. This is a fundamental condition explaining the current need for greater horizontal (among federal agencies) and especially vertical (among the different tiers of government) coordination. (b) The total amount of resources available for this policy instrument decreased because there is no national norm requiring counterpart funding from beneficiaries (in materials, labor or cash). (c) Several municipalities receive fewer resources, not only because of the distribution formula established in the LFCF for the FAISM, but also due to the lack of state contributions that previously benefited municipal administrations. Regional policy 2.19 The reform of Ramo 26 (and related introduction of Ramo 33) may be interpreted not only as a significant change in the design and management of intergovernmental transfers, but also as part of a broader change in Mexico's territorial development policy. In particular, a transition is taking place from an "implicit" to an "explicit" approach to regional policy (see OECD, 1997, for a more detailed discussion of this point). In the previous "implicit" approach of the Salinas and earlier Zedillo administration, there was no policy or institution with a specific mandate to reduce income imbalances in backward regions. The various sectoral policies, however, did have a territorial focus and geographic priorities. SEDESOL, the agency with the clearest poverty alleviation mandate, pursued a territorial focus by means of the modality of application of PRONASOL. Figure 2 - Mexico's high priority regions _lt_ Qov _m6_n Tamlipm Ctasf v\>(> - Cum X r- Ch 3t -,Caaljc 111 | bSd8 J P- clb~ HS9 D l\iU WE N.'.AM A | aj S Hcez nUIflO i *\Uqa i' / S r~t*te 3 s Qai,-Tqjim H, dciS Sart SamNxte 101a *Sda i :sTh't CjM,~8 Jjt ( ______ Tarr Mdl QuiriFaoH dEUgqS.Lis P. 8 Mbet3m\sped- f. i Huasteca o.uTJ Nwi nX Ee, t Sem diNw r L;Ah ; SermNa 3.mGs,b 7 2.20 In 1996 SEDESOL, in consultation with other institutions and the state governments, identified 91 priority regions in the country's 31 states. The criteria to determine priority regions are based on marginalization indicators4. Currently, these regions consist of 1,418 municipalities, from which 1,163 conform geographically compressed regions, and 255 are considered as dispersed priority municipalities. The population of these regions, which amounts to about 27.3 million people (7.1 percent of each indigenous) is highly dispersed: 92 percent of the localities in these areas have 500 inhabitants or less. Half of the priority regions' population is illiterate, and 73% earn less than 2 minimum wages. Within the 91 regions, 36 are considered of very high priority, in need for immediate governnent attention: these are mapped in Figure 2. The high priority regions consist of 811 municipalities in 22 states. These regions have a population of nearly 13.1 million people. 2.21 The establishment of priority regions signals the transition towards a more explicit (and programmatic) approach to regional policies: the explicit identification of specific territorial areas of intervention puts pressure on the federation to specify clear criteria of resource assignment, thereby reducing the budget unpredictability that characterized the implementation of previous federal programs (especially PRONASOL). Furthermore, a more explicit regional policy creates the conditions for a more transparent dialogue and partnerships with state and municipal governments. States and Municipios have now more to bring to the table, as a result of decentralization in general, and in particular, of the transition from Ramo 26 to Ramo 33. 2.22 In addition to SEDESOL, other federal agencies have been developing a regional approach to their policies. SAGAR has developed a classification of the national territory in regions with homogenous agronomic characteristics and productive potential. Furthermore, it has set up (with financial assistance from the World Bank) a program of support to marginalized regions, entailing the establishment of participatory councils for community-based program management. SEMARNAP has its own program for regional sustainable development (PRODERS) in areas of high poverty and significant risk of natural resource degradation. 2.23 In 1998, SAGAR, SEDESOL, SEMARNAP, SCT and SRA have signed a framework agreement for inter-institutional cooperation in priority regions (Bases de Colaboraci6n Inter- institucional, BCI). The political momentum generated by the agreement prompted subsequent joining of three additional Ministers: Commerce (SECOFI), Health (SSA) and Education (SEP). The process culminated with the formal presidential launch of the multi-institutional approach to regional policy in the spring of 1999. 2.24 The BCI is the cornerstone of the new integrated approach to regional policy in Mexico. It commits some 30 sector programs implemented by the participating ministries (for a total budget in 1999 of $950 m) to a broad integral approach to regional development based on the following basic elements: (a) a joint integrated regional diagnostic intended to form the basis for a joint regional development program; 4 The marginalization indicators include lack of access to piped water and sanitation, Earth floor, lack of electricity, overcrowded dwelling, employed populations eaming under two minimum wages, illiteracy, population without completed primary education, localities with fewer than 5,000 inhabitants. Other indicators, known as Vocation Indicators, are productive potential and natural resources endowment 8 (b) a single "window" of institutional support to beneficiaries of the priority regions, to be managed through Regional Councils the sub-committees for priority regions in the COPLADE; (c) a single integrated capacity building program; (d) Regional Development agreements with the state governments to establish specific implementation arrangements of the BCI at the state level; (e) a coordinated budget mechanism, whereby the budget negotiation of each ministry with SHCP is based on regional needs and priorities identified with the other ministries (as emerging from the regional diagnostic and program); (f) a federal steering group at the director general level, in charge for program implementation and follow-up. 2.25 Following the signing of the BCI, the participant ministries have taken important steps towards its implementation. First, they have promoted the establishment and/or activation of the sub-committees within the COPLADEs for the 36 priority regions (SARPs). The SARPs, which are sanctioned by yearly Social Development Agreements (Convenios de Desarrollo Social) between the federation and state governments, help sharpen the territorial focus of COPLADE's action at the regional (i.e., intermunicipal) level. Constraints and opportunities for improving the effectiveness of SARPs' action are analyzed in chapters 4 and 7 of this report. 2.26 Second, between the spring and the summer of 1999, the ministries participating to the BCI have developed integrated packages of support to the agreement's 36 priority regions. The packages are worth a total of some 4 billion Pesos, are financed by the budget of existing programs, and are to be administered in a coordinated fashion through the SARP mechanism. No analysis of the functioning or effectiveness of these packages is proposed here, since field work conducted under this study pre-dates their introduction. 2.27 The implications of the BCI for regional development (and the challenges for its implementation) are significant, and will be analyzed in further detail in the rest of this report. Future prospects for decentralization and regional policies 2.28 The final section of this chapter attempts to outline some of the key elements that will determine how the overall context of regional policies may change in the medium term future in Mexico. In particular, the pace and shape of the decentralization process is likely to be the single most important factor in determining opportunities and constraints for regional policies (and the related needs for institutional coordination). 2.29 A short review of the main achievements of, and the main obstacles to, decentralization in Latin America may set the basis for forecasting the most likely evolution of decentralization in Mexico within the next few years (see Table 1 for a summary). 2.30 Decentralization and democratization. Generally speaking, Latin American countries initiated the present wave of decentralization in connection with broader processes of democratization. Although fiscal factors have been critical for shaping the model of decentralization in each country, few countries have decentralized with a view to correct a 9 structural fiscal problem. The driving force behind decentralization has been the multiplication of centers of political power and policy making, either through representative or participatory democracy. Therefore, decentralization has reinforced the trends towards a new style of politics at state and municipal levels, one that is capable of competing and eventually superseding the prevailing style of patronage and clientelism that links governments and civil society in a top- down fashion. 2.31 Decentralization has also strengthened the search for substitutes for the deeply rooted tradition of strong presidential systems throughout Latin America. Although decision making centers have multiplied and diversified as a result of decentralization, strong presidential powers tend to maintain a high degree of control of state and municipal governments via political coalitions that branch out from the center to the periphery. Electoral reform and party reform have been widely debated and often approved and implemented in Latin America (including Mexico) during the last fifteen years. Some countries have even attempted parliamentary forms of government that create a more positive environment for decentralization by introducing checks and balances to presidential power. 10 Table 1 - Main achievements and obstacles to decentralization in Latin America ACHIEVEMENT& OPPORTUNITIES LIMITATIONS, OBSTACLES PROSPECTS Political Dimension: Political Dimension Political Dimension I. Increased number, diversification of centers of political power 1. Prevailing clientele-patronage relations 1. Increasing competition between national-clientele and state 2. Decentralization as part of an encompassing process of 2. Strong presidentialism and political party fragmentation & and municipal-participatory ways of doing politics internal peace and democratic strengthening mobility favor re-centralization 2. Electoral and party reform. Some trends towards 3. Growing number of democratically elected officers, bodies at 3. Lack of appropriation of decentralization when it has been parliamentary systems state and municipal transplanted from abroad 3. Growing independence of elected governments at state and 4. Central use of intermediate governments to maintain control municipal levels over state and municipal units 4. Gradual definition of proper profile for intermediate governments Fiscal: Fiscal: Fiscal 1. Numbers of good practice in terms of state and municipal 1. Increased overall fiscal pressure during transition to 1. Increasing state and municipal access to capital markets fiscal effort, mobilization of resources on a voluntary basis and decentralization Growing regulation and controls to prevent over-indebtedness increased efficiency in public expenditure 2. Few advances in fees and contributions and instability 2. Territorial redistribution of resources. Decentralization has 3. Transfers of resources did not match transfers of responsibilities 2. Switching tax criterion, from capacity to pay to benefit also been a vehicle for (individual) safety nets, poverty 4. Persistence of explicit and implicit bail-outs prevents efficient taxation, from theoretical neutrality to reducing transaction alleviation programs and responsible fiscal management at state and municipal levels costs 5. Lack of adequate sources of revenue for regional governments 3. Growing use of conditional transfers and piggy backing national VAT and income tax Institutional Coordination Institutional Coordination Institutional Coordination I . Legal & constitutional framework for transfers of resources & 1. Overlapping responsibilities, weak framework for individual 1. Initial emphasis on legal frameworks is gradually replaced responsibilities accountability by experimentation, consensus building, replication. Initial 2. Advances in delegation and deconcentration facilitate 2. Fragile sustainability when decentralization has been primarily emphasis on distribution of resources and responsibilities is coordination at state and municipal levels the task of one or a few central agencies twined with emphasis on inter-sector and inter-government 3. Simultaneous experimentation with four models of service 3. Unclear role (and lack of resources of their own) at regional or coordination delivery: privatization, decentralization, public-private alliances intermediate governments 2. Shift from centralized technical assistance to horizontal and service modernization to re-inventing government 4. Few incentives to central governments. National level resistance exchanges and mutual support for learning by doing to switch roles from execution to planning, regulation, evaluation 3. Growing public-private partnerships, municipal 5. State and municipal governments reproduce central-periphery associations, metropolitan areas hierarchy 4. Strengthened monitoring and regulatory capabilities at the 6. Centrally administered programs that bypass state and national level municipal governments and reach communities directly 5. More focused incentives and regulations in recognition of 7. Separate decentralization strategies between Finance and Sector state and municipal differentiation ministries. 6. Growing tax harmonization and budget coordination Administrative Dimension Administrative Dimension Administrative Dimension I . Participatory planning and budgeting, increased civil society I. Limited professionalization at state and municipal levels I. Increasing influence of New Public Management monitoring, growing use of impact and performance indicators, 2. Few innovations as many state and municipal governments 2. Increased use of participatory planning and budgeting new production functions for service delivery in combination reproduce the pattern of operations of national level. Persistence of 3. From problem-oriented to development/competitiveness with civil society rigidly-divided sector budgets oriented state and municipal administrations. Strategic visions 3. Persistence of anticipated controls rather than impact, and planning performance indicators and controls 4. Growing gap between management capacity at large cities and small municipalities. 11 2.32 Devolution of responsibilities. Selection of the adequate level of government for assumption of responsibilities previously managed at the federal or central level remains an open question in Latin America. Even federal countries like Argentina and Brazil differ significantly since Argentina gives preference to the intermediate and provincial level while Brazil has transferred more significant resources and responsibilities to the local or municipal level. Like Argentina, Venezuela also favored the state level. Mexico--that had been clearly inclined for the state level--seems to be trying the two models, as evidenced by the transformation of Ramo 26 into Ramo 33 and the higher degrees of freedom enjoyed by the Aportaciones as opposed to the Participaciones. 2.33 With a few exceptions, decentralization in Latin America -and Mexico is not among the exceptions--has not stimulated state and municipal fiscal effort. As a result of the combination of traditional fiscal dependency with poorly designed incentives and supporting programs geared towards strengthening local governments,, states and municipalities are now more dependent on transfers than before the current wave of decentralization flooded the region. 2.34 Redistribution vs. fiscal independence. The Mexican fiscal pact is also an example of the way transfers that were initially designed to compensate for limiting state and municipal fiscal capacity were aimed later at accomplishing two sets of goals that are not always compatible. These are equity, compensation or redistribution on the one hand; and growth, fiscal effort and fiscal autonomy, on the other. Although heavily dependent on transfers, local governments are pushing for higher access to credit markets, in Mexico and everywhere in the Latin American sub-continent. The fiscal agenda of decentralization for the years to come includes a more adequate design of incentives for additional fiscal effort, regulation of state and municipal access to credit and expanding the sources of local governments' own revenues. 2.35 The political and institutional space for regional policies will be determined by the way in which the overall amount of resources available for development initiatives at the state level (from credit and fiscal sources) will be allocated to redistribution and growth objectives. If attenuating income disparities within and across states is a higher priority for the federation than for the states, decreased fiscal dependency of the states (e.g. via better access to credit markets) may in fact entail fewer resources available for regional policies. 2.36 Transparency and accountability. To a major or a lesser extent, decentralization has frequently brought about some degree of overlapping of responsibilities that jeopardize accountability and ownership at state and municipal levels as well as maintenance and sustainability of public investments. Countries have begun to react to overlapping responsibilities by introducing uniform accounting, budget coordination, and procedures for exchanges of information as well as by strengthening monitoring and regulation capabilities at the federal level. Mexico's current program of Homologaci6n is a good example of how countries are seeking to specialize the role of every level of government in a way that builds confidence among the main stakeholders of decentralization, particularly at the federal level. Inter- government and inter-sector agreements of general or specific purpose are also proliferating throughout the region, again as a means to revitalize the cooperation and coordination dimensions of decentralization. These dimensions were initially neglected for the sake of separation and autonomy among levels of government and are being reinvigorated as 12 governments realize that clear division of labor is the basis for accountability and coordination is essential to efficiency in decentralized public expenditure. 2.37 Capacity at the state and municipal level. Decentralization necessarily implies the development of new capacities at state and municipal levels. Although the initial approach to management strengthening was to provide training and technical assistance from the center, the experience throughout the region indicates that local governments and communities learn much faster from peer experience.. Exchanges and dissemination of good practices towards professionalization or service delivery as well as participatory approaches to resource allocation and controls are being experimented creatively throughout the region and are likely to keep expanding in the coming few years. 2.38 In summary, democratization creates political conditions for stronger involvement of state and municipal governments in local decision making. Whether or not this will entail better policies for social development, poverty alleviation, and attenuation of income disparities will depend on a number of conditions. These include the allocation across levels of government of planning and execution responsibilities, the relative stance of redistribution and growth objectives in state priorities, the availability of a suitable (and standardized) regulatory framework, and appropriate capacity for transparent handling of decentralized public expenditure. 2.39 As the balance of power and the division of responsibilities among levels of government changes, so does the nature of institutional coordination problems. The new momentum of the decentralization process makes it necessary to put the broad subject of intra- and inter- governmental coordination into perspective. Figure 3 purports to illustrate the point. 13 Figure 3 - Evolution of decentralization C, High B 2Os (pHoorer states) 2000s? .~ 0i(wealthier states) r ~ ~~~~~~~~~~~~ stes Cd I 1990s§ 0~~~90 Low '>a~ ege of reeu deetaiain loca accountabilit 0 bD ~~1970s ' a Low Low High D)egree of revenue decentralization! local accountability 2.40 A simple way to capture essential features of Mexico's decentralization process is to consider the two sides of the fiscal equation: spending on the one hand, and revenue collection/ accountability to local electors and taxpayers, on the other. Figure 3 proposes a simplified framework in which the particular situation of a country may be characterized by its position in terms of spending and revenue decentralization. 2.41 Starting off with relatively low levels of decentralization in both dimension, Mexico has been evolving since the late 1 980s in a direction of increasing devolution of spending responsibilities to states and municipalities. Centralized spending entails risks of horizontal coordination (among line agencies in the federal level); and it may make transmission of information on local preferences problematic. Vertical coordination problems start to arise when spending prerogatives are transferred to the state and municipal level (the situation of quadrant B in Figure 3). 2.42 However, possible further evolution of decentralization on the revenue collection side may have significant implications in terms of coordination. Stronger revenue collection capacity of local governments may reduce the dependency on federal transfers and hence the need for vertical coordination, thereby giving state and municipal governments stronger voice in demanding consistent application of the subsidiarity principle. Furthermore, if fiscal decentralization takes place in a context of overall improvement in local accountability via the electoral mechanism, and, more generally, via a stronger presence of civil society in public affairs, that will also improve coordination of community goals and better inclusion of those goals into the design and implementation of public policies. 14 2.43 Principle of subsidiarity. The overall need for coordination, especially in the vertical sense, may be attenuated if increased clarity is made on the distribution of attributions among the three levels of governnent, on the basis of transparent criteria of subsidiarity. The simultaneous presence of federal, state and municipal governnent in decisions related to local public goods is a remnant of an old, centralized approach to public policy. Significant changes have been taking places in recent years, especially with the decentralization of responsibility for public work provision entailed by the introduction of Ramo 33. 2.44 To be sure, even in a context of more pronounced fiscal decentralization, the need for vertical coordination is unlikely to disappear altogether. The important role for the federal government is to ensure that decentralized provision of local public goods is not conflict with national objectives of equity, fairness, environmental protection standards, etc., across local jurisdictions. In particular, it is plausible that stronger revenue decentralization will have tangible impacts mainly in wealthier states (quadrant C in Figure 3). Poorer states with a weaker tax base will still be dependent on federal transfers, and will therefore be closer to a situation such as C'. 15 3. REGIONAL POLICIES AND INSTITUTIONAL COORDINATION: CONCEPTUAL ASPECTS INTRODUCTION 3.1 As discussed in the previous chapter, during the course of the Zedillo administration, Mexico has been embracing an approach to poverty alleviation founded on three cornerstones or premises. The first premise is that poverty is fundamnentally a territorially determined phenomenon: it is not uniformly distributed across the country, but it concentrates in regions. The second premise is that in those regions, development is a multi-dimensional challenge, spanning social, economic, environmental issues. The third premise is that no single federal agency has an unequivocal mandate for mitigating the backwardness of underdeveloped regions: all the ministries in the BCI are involved in the regional development effort. 3.2 This chapter analyzes key conceptual underpinnings of regions as territorial units for promoting local development policies and of institutional coordination as a vehicle for those policies. Such an analysis will help provide an organizing framework for the subsequent discussion of challenges to, and opportunities for, integrated regional policies in Mexico and for the analysis of experiences in other countries of the LAC region. REGIONAL POLICIES 3.3 Persisting and significant disparities in income, wealth and productivity across state and municipal jurisdictions have led in developing and developed countries alike to the design and implementation of a broad range of regional development policies (RDPs). The objectives of these policies are to improve resource allocation within countries and reduce inequalities in economic welfare. Box 2 - The rationale for regional policies eAt dttpefie anety I the foirdt ce iPs argud tat s bckwad rgios ctch p wth oreadvacedone, Pretoimpoveent inthe o istribt ion'f of stEabilt cocern;s associated withineqa ties in ecoanomcwl£fare acrss regios.0000 0 ;0 jAt therinsk oformpfting arichsc hlarlydebate on the 0subjet, twvo broa apraches to thedesign of RDPs000 produc should bringat conrg in regional ince levels over tie Technology or know-how diffuses thro wi:mitionacrossrionsadmig reducest diaitiesin pul rth. From this perspecive dispersionofregionalper capita incom eis mAinly adisequibrium phe andso policy is generally directed, to 0removing barriers tofactor andgoodsmobility dress imereciionsin the tanse ofinformation aMn Supporters 9w a more :activeapproach to RXDP argue that t:he origins ofregional disparities are internal economies ao : scalein production, exteralities such as agglomeration economies present in urban centers, and/or feator market size effects. These factors combined determine a gradually ini age of some areas at the exnseofothers;andresultinmob fgodsand forstg r han mo g in l 16 The policy implication of such a -structural", view of regional imbalances is to recommend interventions such as (a) raising productivity levels in backward regions by public investment in education and infrastructure; (b) jump- starting the achievement of economies of scale through employment and investment incentives for new businesses and strategic public investment in productive assets; and more recently (c) the promotion of local development efforts aimed at small- and medium-sized enterprises. Source: adapted from Lampart (1998) Geographical scope of regions 3.4 The recognition of the need for development policies with an explicit territorial focus opens up the question of what the appropriate spatial scale of those policies should be. That is, the question of what constitutes a region. There is no single definition of regions and of their territorial delimitation. In general, regions refer to state and municipal divisions of a country's territory. The type of political, administrative, or jurisdictional units that make up that division will depend on the specifics of the country under consideration and in particular on its form of governance. In the literature on federal systems (and on Mexico in particular- see for example OECD, 1997, Juan-Ramon and Rivera-Batiz, 1996; Looney and Frederikesn, 1981), the notion of region has been used in reference to individual states, groups of states, clustering of municipalities (within a single state, or across several states). 3.5 In view of Mexico's approach to regional policy, the notion of region used here will refer to agglomerations of municipalities within a given state5. Regions are therefore territorial entities intermediate between state and municipalities. The rationale for what in federal systems may appear -at first sight- as an additional layer of political, institutional, and administrative complexity deserves some discussion. 3.6 Socio-economic homogeneity. A first argument has to do with the significant degree of intra-state heterogeneity of economic, social, and ethnic conditions. For several of the poor Mexican States, low aggregate levels of per capita income conceal significant differences between better off urban areas and far more disadvantaged remote rural areas. Cases such as Guerrero or Quintana Roo are emblematic: in these states affluent tourist resorts like Acapulco or Cancun coexist with highly marginalized areas such as La Montafia in Guerrero or the Zona Maya in Quintana Roo. 3.7 Intra-state patterns of variation in income and wealth are often associated with similar patterns in availability of infrastructures, fragility of the natural resource base, concentration of ethnic groups. Several of the regions identified as priority for federal programs exhibit significant levels of homogeneity in terms of social and cultural identity -and correspondingly heterogeneity with respect to the rest of the municipalities in their state. Furthermore, these regions are typically endowed with poor physical infrastructure (roads, water, and sanitation), and are prone to high levels of natural resource degradation, such as soil erosion, deforestation, depletion of wildlife and biodiversity. 3.8 Poverty is not exclusive to any particular set of states (OECD, 1997): even if states such as Chiapas, Oaxaca, Michoacan have per capita income much lower than the national average, 5 There are however a few cases in which regions span more than one state. For example, the Huasteca region (discussed in chapter 5) includes municipalities in the states of Veracruz, Hidalgo and San Luis Potosi. 17 pockets of poverty are to be found in most of Mexico's States. Therefore, since state level targeting of territorial policy would be too "coarse" (and therefore unable to reach effectively Mexico's poor), and generalized municipal targeting would be too disperse and therefore expensive, some intermediate unit would seem adequate for optimal management of territorial policy. 3.9 Inter-municipal externalities. A second line of argument is based on the existence of externalities across municipalities. Local commons such as watersheds, forests, or wildlife habitats rarely fall within the jurisdiction of a single municipality. Unless those commons are of federal or state significance, it would appear that management decisions taken at the level of the individual municipality will be unlikely to take into account the effects of those decisions onto neighboring communities. In Mexico, this element is of particular concern in the context of the implementation of Ramo 33, as discussed at greater length in other sections of the report (see chapters 2 and 7). 3.10 Economies of scale. A further justification for a region-like approach to local development refers to economies of scale in production or consumption. Trade-related opportunities for growth, at the State, National and International levels, may not be seized unless a minimum scale is reached, in the production of goods where local producers may have a potential comparative advantage (e.g. citric fruit, organic agriculture, shaded coffee). It is unlikely that producers residing in a single municipality will be able on their own to reach such a minimum scale. Coordination among producer groups belonging to municipalities with similar production patterns is likely to result in economies of scale in access to input (technology, extension) and output markets (reductions in the margins of intermediation). 3.11 Political incentives, institutional attributions. Another argument concerns political and institutional incentives. It can be summarized from the above discussion that the challenge of development in clusters of homogenous municipalities has bearings for all the three constitutionally sanctioned orders of government (Federation, States and Municipios). And yet, there does not seem to be a natural institutional "home" for addressing that challenge in a way that is consistent with prevailing political incentives and existing institutional attributions6. 3.12 Municipalities lack incentives, capacity, or both for addressing local externalities. States may not attach high priority to development initiatives that typically are costly in terms of time, human, and financial resources, and that may have limited political payoff especially if constituencies in those Municipalities have limited political and electoral weight. The federation has a fairly clear institutional mandate to correct inequities and mitigate poverty throughout the nation. However, the federation's ability to steer local development policies in the desired direction is likely to be constrained in countries -such as Mexico- embarking in far reaching decentralization processes.7 6 However, the recent reform of article 1 15 of the Constitution may provide for such a "home" in the form of association of municipalities. See chapter 4, and in particular paragraph 4.17 for details. 7 In Mexico the federal government coordinates with the states in fora (such as COPLADE) that are state-wide, and therefore are not necessarily equipped as yet to address effectively the specifics of underdevelopment patterns at the sub-state level. However, several states are now establishing sub-committees in the COPLADE with a mandate at the regional (i.e. sub-state) level. These will be discussed in chapter 4. 18 3.13 To summarize the above discussion, localities comprised in regions share a common challenge: backwardness spanning several development dimensions (including infrastructures, environment, economic productivity, social organization, etc.). The homogeneity of challenges (and opportunities) within regions, coexists therefore with a diversity of regional actors (civil society, private sector, government agencies), who need to be mobilized to address challenges and seize opportunities. Those actors face a collective action problem in the task of promoting regional development, namely the prioritization and sequencing of programs, projects and activities, as well as the mobilization of the necessary public and private resources. Such a collective action problem will be the more significant, the more pervasive are factors that limit the effectiveness of "automatic" coordination mechanisms, such as the market system. SOCIAL AND INSTITUTIONAL COORDINATION - A CONCEPTUAL FRAMEWORK 3.14 The present section proposes a conceptual framework to capture in a simplified manner the basic elements of the problem of coordination, and to help organize the rest of the material in the report. In this part of the report, the framework has mainly a normative purpose (describing how an "ideal" process of coordination may work) and is developed abstracting from much of the specifics (and complexity) of Mexico's social and institutional context. In subsequent chapter, the application of the framework to the case of Mexico's priority regions will be made more explicit. Coordination 3.15 The notion of coordinating is normally associated with the two following meanings (Webster, 1998): (a) to put in the same order or rank (co-ordinating, i.e. ordering together); (b) to bring into a common action, movement, or condition. Broadly speaking, coordinating thus describes agreements among multiple decision-makers both on goals and on means to achieve those goals. When there is only one decision-maker and all goods and services are available in the market, coordination problems do not arise or become trivial. Individuals select goods that best meet their preferences subject to the budget available. 3.16 Coordination problems do arise when it comes to the provision of goods benefiting more than one decision-maker, and/or when more than one government agency is involved in the provision8 of public (or private) goods. In the first case, preferences of distinct decision-makers have to be aggregated and prioritized (goal coordination). In the second case, distinct government agencies concur in meeting the needs of beneficiaries. Goals are given (as a result of either individual or collective choice), but government agencies must "bring their action into 8 Notice that is government agencies are involved in thefunding but not in the provision, coordination problems may be alleviated, since beneficiaries could pool funds from various sources (if allowed to do so by the different agencies' procurement rules) and purchase the desired bundle of goods services directly in the market. See more on this in the report's final section, conclusions and recommendations. 19 common movement": coordination of means, according to the second definition in 3.15. Table 2 summarizes the various possible cases. Table 2 - Demand, supply of goods and coordination problems Supply (provision) Many government Market One government agency agencies 1 2 (*) 3 () I Individuals No coordination problem No coordination problem Coordination of means E (Private goods) E D 4() 5 6 Communities Coordination of goals4Coordination of goals; Coordination of goals and Communities.Coordination of goals transmission of information means _ (Public goods) Notes: (*) Government may provide private goods to compensate for failures in the credit, output and inputs markets () Organized community groups may agree to purchase local public goods/ club goods (i.e. non-rival but excludable) _ from the market, without government intervention (e.g.. street maintenance) Coordination of goals 3.17 The first meaning refers to consensus on goals. In the present context, goals are development goals, typically of a public good nature9; those who "co-order," or "rank together," these goals, are residents of underdeveloped regions. In this first sense, coordination is therefore a process whereby several individuals or organized groups agree on a set of priority development activities intended to increase the well being of the community (and directly or indirectly of its individual members). Figure 4 provides a graphical illustration of the framework. Communities enter in a process of consultation (Arrow "A") to agree upon development priorities. Consultations may result in some cases in direct market provision (arrows "E" and "F") of local public goods (should communities have the ability to collect the necessary funds directly). In other cases, the outcome of the consultative process is transmitted (Arrow "B") to government authorities for incorporation into the program design process. 9 Choice of privately appropriable goods or services is still based on a process of ranking alternative options, but does not require consensus of more than one person. 20 Figure 4 - Conceptual framework for the analysis of coordination Program design: Coordination of Infonnation Means (human and flows Government financial resources) Priorities E Market Programs < < rDV ,< Resource _J ~~~~~~~~~~~flows (goods, Planning tech. Assist.) process: Goals co- A Communities ordination In Figure 4, therefore, problems of "goal coordination" refer to constraints to the ability of communities to determine agreed-upon priorities (arrow "A"). Or, in case of goods and services supplied by the government, there may be constraints to communities' ability to manifest those priorities to decision-makers at the various levels of government (arrow "B"). For example, political or social divides in communities will interfere with consensus building processes "A"; the lack of institutionally established channels of communication between communities and the government will act as impediment to information flows "B." Coordination of means 3.18 The second meaning of coordination of paragraph 3.15 -coordination of means- applies in this framework mainly to goods and services provided by (multiple) government agencies. In the present context, the means are instrumental to the achievement of development goals, as determined by the ultimate beneficiaries (communities in underdeveloped regions). Those who (have to) agree on the means and their linkages are the government agencies responsible for providing development assistance to backward regions. 3.19 Coordination may in this second sense be therefore defined as any arrangement whereby activities of different government organizations are deliberately designed and executed in a structured manner, to reach a given objective. "Structured manner" means that certain relationships (e.g., complementarity, substitutability, sequencing, hierarchization) are established among resources (human, financial, technological, informational resources) available to different organizations; and the establishment of these relationships is instrumental to pursuing the given objective. In the "ideal" situation of Figure 4, the various government agencies record community priorities (as expressed through Arrow "B"), engage in a process (Arrow "C") of analysis of how expressed priorities map into institutional attributions, and come up with an integrated program of intervention. The common frame of reference and the joint programming process should ensure that duplications are avoided, and synergies are taken advantage of. Once designed, programs are executed at the community level (Arrow "D"). Program execution obeys 21 the same principles of activity coordination (complementarity, substitutability, sequencing, hierarchization) that were followed during program design. 3.20 Lack of coordination may therefore be defined as occurring when the given objective is being pursued by the different organizations, without structured relationships being established arnong the resources available to them. It may be worthwhile to consider three specific means- coordination problems, which occur when a) government programs are substitutes; b) programs are complements; c) programs are identical. These cases are analyzed below with simple partial- equilibrium diagrams. Figure 5 - Trade-off between programs Y2 i u' u* Y2. Y2 o < BB Yi, yi Yi 3.21 Substitute programs. A first case of means coordination problems concerns substitutability. The total public budget in a given locality is allocated to sectoral programs (education, health, infrastructures) of distinct agencies. The relative share of each program (and of the agency that implements it) may not reflect relative preferences of beneficiaries. In Figure 5, for example, the total budget of, say, education y1 and infrastructure y2, is divided by government agencies in yj and y' instead of the combination preferred by the community, which is y and y*. Notice that in this case, aligning government spending with community preferences would entail loss of budget (and presumably power) of one agency to the advantage of another one. 3.22 Complementary programs. A second situation refers to coordination of complementary inputs. Production of goods or execution of projects may depend upon the provision of inputs by distinct agencies according to some technology-determined relationships. For example, one agency (a) may have a fertilizer program, and another agency (b) may have a plantation program. To make a joint project possible (say agroforestry) they will have to combine their inputs according to some technical proportions: for example, in Figure 6, the ratio LL. The optimal provision of each agency will have to be determined in consultation with the other 22 agency. If agency a supplies x' of its input/ program, and the objective is to help beneficiaries reach output level y,, then agency b must supply z' of its input z. Figure 6 - Coordination with complementary inputs z Y1 Y2 LL z 2 . .... . . ._.._.._......_.._... b .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ z1 SI~~~~~~~~~~~~~~ ,^a xa~ ~ ~ ~ 3.23 Any amount in excess of Zb will have no effect on production (and it will in fact result in a waste of public funds), unless it is matched by a proper increase in the provision of agency a's services. For example, if agency b increases the supply of its program to level Z2, there must be a coordinated response of x2 from agency a. If that does not happen (because of a's budget constraints, or because budgeting and programming are not coordinated), production will stay constant aty,, and misallocation of resources will result. 3.24 Duplication of programs. A final case concerns duplication of programs/inputs. There may be situations in which agencies with mandates in related sectors (e.g. environment and agriculture) manage very similar programs and/or provide the same inputs or services. In the absence of appropriate coordination mechanisms, very similar services may be offered in the same localities. Improved coordination would entail that services would be provided by either agency in different localities or communities to improve coverage and increase impact. 3.25 In all the three cases described above, problems of coordination of means are likely to originate from a combination of exogenous factors (programs' norms) and endogenous factors (officials' incentives) that prevent eliminating duplication, seeking complementarities, and achieving optimal combination of programs. Norms and incentives problems may occur both at the program design (arrow "C" in Figure 4) and execution stages (arrow "D"). 23 Coordination with multiple jurisdictions 3.26 The framework developed so far is clearly highly simplified. In particular, it refers to a "close" system, with one group of beneficiaries and one level of government. In such a system, the area of impact (positive or negative) of development programs coincides with the area of residence of beneficiaries. In reality, several programs or development activities will have "external" impacts on neighboring areas, subject to different jurisdictions. Examples of negative externalities could include downstream impacts of agricultural development entailing land use changes; there may be positive external effects, such as improved access to markets for vertically or horizontally linked localities. 3.27 Figure 7 attempts to incorporate external effects and multiple jurisdictions in the conceptual framework of coordination. There are now two localities (these could be villages, towns, provinces) each of which follows the cycle described in Figure 4 above to allocate public goods and services with locally circumscribed effects. However, because there are activities that can yield positive or negative externalities, the two localities cooperate to form district-level planning fora, which engage in higher order priority setting exercises (the district could be any aggregation of localities: a municipality, a province, a state). Again, if funds can be mobilized directly, local public goods are procured directly in the market. Otherwise, the outcome of the priority setting exercise is manifested to a district government, which formulates and executes development program intended to meet needs with multi-locality scope. Figure 7 - Coordination with multiple jurisdictions )01 District Government|-i tX X L~ora es Prograrns (2); oa Progas()Lr Pririties 0 g l 0 j u l0||Programs | ~~~~~~District |4 I Communities I 3.28 Possible causes of coordination problems in the multiple jurisdictions case parallel the single jurisdiction case. On the goal coordination side, there may be no mechanisms that brings beneficiaries from different localities together, there may be obstacles to joint planning, and 24 infornation on relative priorities at the district level may not get transmitted properly to higher order government. On the coordination of means, resources of the district government may not be allocated to meet district needs; or -at the execution stage- different programs may not be synchronized or sequenced properly. 3.29 The presentation of the two cases of coordination under single and multiple jurisdictions as distinct assumes implicitly that the principle of subsidiarity applies. That is, provision of goods and services is determined at the lowest possible level of government, subject to adequately taking into account (positive or negative) impacts onto neighboring localities and higher-order jurisdictions. This implies that the planning forum at the district level does not determine priorities for activities with a local impact; and similarly, that the district government does not get involved in the design (or execution) of programs with local coverage. 3.30 When the subsidiarity principle does not apply, there will be simultaneously horizontal and vertical coordination problems. This situation is portrayed in Figure 8, where the two additional dotted lines denote that the district government is intervening into the design and execution of local programs. In this case, allocation of government resources will have to be not only consistent within each of the levels of government involved (that is, across the different agencies at any given level of government), but also between them. Figure 8 - Horizontal and vertical coordination Intervention of district govermnent mtol design of local programs P 3.31 Basdoteaovedio> , Distris s Govemmenv ( trdinati on a) csta th Comlte 1 Communitiesl 3.31 Based on the above discussion, it is possible to develop (see Table 3) a typology of coordination problems based on a) the stage of the program cycle at which the problem occurs, and b) the horizontal or vertical nature of the problem. 25 Table 3 - A typology of coordination problems 0I11 Horizontal Vertical Horizontal and (across sectors, line agencies, (across levels of government, Vertical or beneficiary groups) territorial jurisdictions) Goal Local level planning not working Higher-level planning fora not coordination available or not working properly Information Needs at the local level not properly Needs at the district level not flows transmitted or recorded properly transmitted or recorded Integral Sector or line agencies program Agencies across levels of Sector or line agencies, both within resource allocation in isolation government program resource and between levels of government, planning, allocation in isolation program resource allocation in budgeting isolation Joint execution Synchronization/ sequencing of Synchronization/ sequencing of Synchronization/ sequencing of programs execution is not possible programs execution across levels of programs execution, both within govemment is not possible and between levels of government, is not possible 26 4. THE NORMATIVE FRAMEWORK FOR COORDINATION 4.1 The present chapter reviews the arrangements existing in the Mexican institutional, legislative and regulatory systems to provide for coordination, in the sense defined by chapter 3's conceptual framework. The actual functioning of these arrangements will then be discussed in chapter 5 on the basis of the findings of case studies. The review of coordination mechanisms will be conducted by order of government, starting from municipal level. MUNICIPAL LEVEL 4.2 The decision-making body in the municipality is the Cabildo (municipal council), formed by the municipal president and the aldermen. Work is organized into council sessions, in which formal decisions are made on policies and projects. On occasions, the council holds sessions open to the public, to discuss government matters with any members of the community who want to be present. 4.3 Much of the activities of the council are centered around the figure of the municipal president"0. The need for political negotiation with social and political groups from parties other than the one in the municipal administration, as a condition for the governability of the municipality, is very recent and limited to a few cases mainly located in cities. This traditional municipal presidentialism explains the proliferation of alternative instances for social participation (outside of the official municipal council). Other tiers of government have normally promoted such bodies, although sometimes pressure has come from communities themselves. 4.4 The limited ability of the Cabildo to set itself up as the body truly representing diverse sectors of society and expressing the community's demands, and to negotiate with different forces for the apportionment of resources, has evidenced the need for institutional reform that is being discussed by various forums (an analysis of which is beyond the scope of this study). Meanwhile, the bodies described below (and particularly the Municipal Development Council) have tried to partially substitute those fundamental functions. Comit0s de Planeaci6n y Desarrollo Municipal (COPLADEMUN) 4.5 The COPLADEMUN is an auxiliary body of the municipality: the municipal president, at the beginning of his term, must call upon the community's social organizations to constitute it (the Committee is reorganized with every new municipal administration). The Cabildo must approve the COPLADEMUN's rules of procedure and budget. 4.6 The COPLADEMUN is the body responsible for municipal development planning. Its main purpose is to contribute to the socioeconomic development of the municipality, by seeking to make the planning efforts of federal, state and municipal governments compatible, and by including the organized participation of the social and public sectors (normally members of the 10 An exception is given by municipalities governed under the "usos y costumbres" system. 27 citizens' participation councils also join). It was designed to facilitate the analysis of the different projects and programs that have an impact on the development of the municipality. 4.7 The legal foundations for the COPLADEMUN are in the Ley de Planeaci6n Federal (Constitutional Article 26, amended in 1983), in state constitutions and in each state's municipal organic laws. 4.8 Despite those clear legal bases, participation in COPLADEMUN's planning and decision-making on the assignment of resources does not seem to function well. There seems to be no clear mechanism through which community representation in the Committees is encouraged, or instruments to take advantage of public funds. (As evidence there is the fact that the planning act dates from 1983, and it was not until the introduction of the Programa Nacional de Solidaridad, in 1989, that the committees began systematically becoming involved on a national level in decisions on public works). 4.9 To be sure, deficiencies in COPLADEMUN functioning have to do with deeper, structural problems of municipal planning. In a survey by the Instituto Nacional de Estadistica Geografia e Informatica (INEGI) and the CEDEMUN, carried out in 1994, only 40 percent of municipal presidents confirmed that their governments prepared development plans. Often, the municipalities have lacked a strategic vision in their working plans, giving priority to short-term actions and works that are decided through insufficiently democratic or participatory processes. Among other things, in some states the legal frameworks regulating the working of the COPLADEMUN' s internal bodies need to be fine-tuned; and the responsibilities and methodological guidelines for the formulation, instrumentation, follow-up, and evaluation of municipal development plans have to be defined. In addition, several ad-hoc commissions or councils exist at the municipal level. They are often created to help implement state or federal programs or to design or execute specific public works. Unless explicit mechanisms are developed to ensure consistency between these ad-hoc bodies and the COPLADEMUN, there are risks of duplication or conflict of functions and activities". Consejos de Desarrollo Municipal (CDM) 4.10 The federal government (through SEDESOL) and the state governments created the CDMs to coordinate execution of federal programs for poverty alleviation (mainly Ramo 26). The CDM therefore is a body of cooperation that brings together state and federal and municipal authorities in order to reach agreements on programs, actions and resources to be carried out within the municipal boundaries and in areas of municipal competence. The main functions of the CDMs are formulating, updating, implementing and evaluating the municipal development plan, in ways that take into account the actions and guidelines from the state and federal governments. 4.11 In several states, such as the states of Mexico, Guerrero and Hidalgo, over time the CDMs have evolved into (new) instruments for operationalizing at the municipal level the The situation may improve following the amendment to Article 115. This sets the Ayuntamiento as the only valid interlocutor with agencies belonging to other levels of government, to prevent ad-hoc commissions or councils which try to help to implement programs in parallel to the Ayuntamiento. 28 planning activity of the Comite de Planeaci6n y Desarrollo Estatal (COPLADES). To the extent that they have promoted community participation into social development planning, they have taken over functions of the COPLADEMUN. 4.12 In several cases the CDMs have functioned as a "double bridge," linking the Municipios both with federal and state governments, and with the communities. On the one hand, CDMs serve as the link between Municipalities and state and federal authorities, in terms of helping coordinate the transfer of state and federal resources, and the formulation and execution of municipal development plans. 4.13 On the other hand, the CDMs serve as a link for community organizations with municipal authorities. Unlike in many COPLADEMUN -often dominated by the figure of the municipal presidents- the presence in the CDM of state and federal officials -and their control of resources- makes it difficult for municipal officials to ignore community participation. 4.14 The Convenio de Desarrollo Social (CDS) reserve a privileged place in CDMs for communities in determining, executing, supervising, and evaluating social works financed with federal resources (the legal basis for the CDM are those Agreements and the Convenios de Desarrollo Municipal, among others). In this sense, the CDM complements the work of the Cabildo by bringing in representatives of social organizations and community groups. 4.15 The CDMs are assisted by the Community Committees (Comites Comunitarios, CC) in the execution of the actions and works authorized. The CC is another body for participation, bringing public and social representatives together to deliberate, decide or execute acts to the benefit of the community. The decision-making authority of the CCs emanates from the Community Assembly. 4.16 CDMs are a product of the decentralization of Ramo 26, which is based on the assumption that local planning should include the viewpoints of the beneficiaries of the program (subject to COPLADE endorsement). In theory they are not supposed to be a replacement for the Comites de Planeaci6n y Desarrollo Municipal (COPLADEMUN) nor the Cabildos, but should complement the work of both and facilitate their interaction. In some cases the COPLADEMUN and the CDM tend to merge into one commission, committee or council in order to avoid duplication. However, the legal foundations of the two bodies are different. In practice, because the lack of an electoral-sanctioned link with the municipalities, the CDMs have a weaker legal and political footing than the COPLADEMUN. In the past, their functioning and effectiveness depended mainly on political (and budgetary) support from SEDESOL. Constitutional Reform 4.17 The recently introduced reform of the article 115 of the Constitution is of particular importance for the purposes of the present report. The new article recognizes the Municipalities' right to govern and not only to administer. It further identifies specific matters (such as on water, streets, parks) which are of exclusive competence of the Municipalities unless they decide to transfer them to the States. This competence includes provision and regulation of local goods and services, as well as promotion and development. But perhaps more importantly, the new art. 115 enables municipal governments to form associations among them to coordinate and improve the 29 provision of public services. Municipal governments are also allowed to sign agreement with state governments to transfer some of their prerogatives or to exercise them in a coordinated fashion. 4.18 Application of the reformed article 115 has the potential to solve one of the problems that has been plaguing the establishment or the operation of forums for development planning at the regional level: the problem of the lack of a suitable juridical configuration. In several cases, regional councils have been questioned on the ground that they introduced a fourth level of government, devoid of constitutional status. Under the new regime, regional councils may be legitimately created as associations of municipalities, or as a result of agreements ("Convenios") between state and municipal government. To be sure, article 1 15 rules out possible normative (and budgetary) competitions between the regional and the municipal level by stipulating that no other authority can act between municipal and state governments. This implies that the Ayuntamiento is the only valid counterpart for programs needing a local partner. STATE LEVEL The State Congress 4.19 Legislation in the states is the responsibility of the state congresses, all of which are unicameral. The legislative jurisdictions of the Congreso de la Uni6n and the state legislatures are demarcated by Article 124 of the Constitution, which establishes that those powers not expressly assigned by the Constitution to the federation, are understood to pertain to the states. As an extension of this principle, the federal Congress may only issue laws exercising an express power granted in the general constitution; in addition, local legislatures may play a legislative role, in the absence or lack of such power, provided that there exists no constitutional prohibition. 4.20 The composition of local congresses is variable in number from state to state (as are their pernmanent commissions). There are two different formulas to determine the number of their members. In most states, the local constitution indicates how many deputies shall make up the legislative power. On other occasions, each deputy represents a certain number of inhabitants and the number of legislators is directly proportional to the number of inhabitants. The legislatures are renewed every three years and State constitutions indicate the requirements to be a deputy, as well as the powers, obligations and prohibitions both for the Congress and its members. 4.21 Local congresses are empowered to issue, interpret, amend and repeal law acts in all fields of public administration. Furthermore, they approve the budget proposed by the State Governors, and appoint the employees of the Contaduria Mayor de Hacienda, Oficialia Mayor and other congress employees. Congress is responsible for the control and oversight of the public accounts of the state and municipal governments. In case of programs funded with federal resources, the function of control pertains to the federal Congress, or to a combination of federal and state congresses, if resources from the federal and state (and/or municipal) treasuries are being used. 30 4.22 Similarly to the federal Congress, the principle of no consecutive reelection applies to the representatives of the legislative power in all the states. This has prevented the development of parliamentary careers and the specialization (and professionalization) of legislative bodies. In most cases the majority in the congress belongs to the governor's party: coalition governments are a very recent phenomenon. As a result, state congresses have traditionally been subordinate to the state executive, preventing them from fulfilling their task of representing the social sectors of the state and influencing public policies on their behalf. Comites de Planeaci6n y Desarrollo de los Estados - COPLADES 4.23 The National System for Democratic Planning (Sistema Nacional de Planeacion Democratica) calls for the COPLADEs to function as the link between national and state planning. COPLADEs are the most important mechanism for the inter-governmental coordination of decisions on public investment, through the formulation, implementation, control and evaluation of state development plans and programs. 4.24 The COPLADEs are meant to ensure consistency, at the local level, between the efforts of different government bodies, both in the comprehensive planning process, and in the execution of works and the provision of public services. They must also encourage cooperation by different social sectors. The COPLADEs are public entities, with a legal status and assets of their own. 4.25 COPLADEs are also intended as an institutional space for coordination between states and municipalities, especially on decisions related to the funding and execution of federal and state works at the municipal level. 4.26 The COPLADE is formed by: (a) a president, the governor of the state; (b) a coordinator general, each State's Development Minister (the legal representative of the body); (c) a technical secretary, SEDESOL's the regional delegate in the state; (d) state Ministers, as indicated by the governor; (e) the delegates in the state of federal agencies; (f) the heads of commissions on which the public, social and private sectors participate, whose actions are of interest to the socioeconomic development of the state; (g) the municipal presidents, community and social representatives, local and federal deputies and senators for the state. 4.27 Since their creation in the eighties, the effectiveness of the COPLADEs has been highly variable. It has depended to a large extent on the will of the state governments, which for political reasons have generally been centralist and ill- disposed towards concerted social action 31 for the design of public policies. The federal government has repeatedly embarked in efforts of strengthening these forums for state coordination. 4.28 Recently, the Convenios de Desarrollo Social signed in 1998 have introduced significant enhancements to the COPLADE mechanism. At the national level, a National Commission for the Coordination of COPLADEs was established (Comisi6n Nacional Coordinadora de COPLADEs), to exchange experiences and to improve homogenization of state approaches to development planning. At the level of individual states, the process of coordination with the federation is as follows: (a) The state government undertakes to formulate in COPLADE an action program for social and regional development (the technical secretary of the COPLADE is a SEDESOL official). (b) Based on the program, the state and the federation undertake to share information and coordinate actions through the COPLADE. (c) Within the COPLADE working sub-committees should be created, to deal with specific subjects such as priority regions, municipal institutional development, regional and urban development. Sub-committees within COPLADE 4.29 The establishment of sub-committees within the COPLADE has particular importance for regional polices. In several states, sub-committees are created for promoting and coordinating development activities in priority regions. This gives a specific territorial focus (at the inter- municipal, i.e., sub-state level), based on the concept of region, to the development action of the COPLADE. 4.30 The regional sub-committee of the COPLADE is involved in the determination of the budget for government intervention in the region. Federal and state agencies report at predetermined times on the total of amounts destined for the priority regions. This assists in the preparation of annual operating programs for activities in the region, and the distribution of investments in each of the municipalities. The budget is assigned using a top-down approach (central bodies take the decisions); the Convenios de Desarrollo Social do not stipulate the logic for distribution nor the type of links that exist between municipal and community demands and budget assignments. Federal level 4.31 The general framework for vertical coordination between the Federation and lower levels of government is given by a range of legal instruments. These include the General Constitution, the Sistema Nacional de Planeaci6n Democratica (Planning Act), the Programa Nacional de Desarrollo and its multiple sub-programs (such as the Programa para un Nuevo Federalismo, 1995-2000), specific coordination agreements between each agency and the states (with their 32 foundations in Article 116 of the Constitution). And the mechanisms (described above) of information sharing and consultation based on the COPLADE and related sub-committees. 4.32 In terms of horizontal coordination, the Ley de la Administraci6n Publica Federal determines the attributions and competencies of the various federal agencies. In the specific sphere of social policy, a cabinet committee operates within the President's office. The coordination mechanisms for regional development are those established by BCI, and described in detail earlier on in the report (see paragraph 2.24). THE BUDGET SYSTEM 4.33 The budget system is the crucial vehicle that determines the way in which development priorities, expressed at the various territorial levels, get translated into resources available for concrete activities. In terms of the conceptual framework of chapter 3, the ability of the budget process to record beneficiaries' priorities and accordingly allocate resources to government programs, is key in determining the degree of goals and means coordination of the system. 4.34 The budget process in Mexico is based on a formal logic of procedures and stages (summarized in Error! Reference source not found.3) and on an informal logic involving several actors in political parties and interest groups. The legal foundations for the current cycle were established in 1976, on the basis of the Ley Organica de la Administraci6n Puiblica Federal, the Ley de Presupuesto, Contabilidad y Gasto Puiblico and the Ley General de Deuda Puiblica. Box 3 - The Budget Process The budgetary cycle is divided into six stages. * Programming * Formulation * Discussion and approval * Execution * Control * Evaluation g. Every year the programming exercise is carried out to define in detail each of the components comprising government activity. It translates long-term goals into immediate targets and defines their contents through working programs. The document resulting from this stage is the Annual Operational Program (Programa Qperativo Anual, POA), and it exists at the macro, sectoral, agency, and state level. POAs are the tools that translate national planning into concrete, short-term targets; they define responsibilities, timetables and territorial space for actions. The setting of financial ceilings is a fundamental instrument in the control of the budget. Once Hacienda (SHCP) determines the overall size of the overall fiscal spending, financial ceilings ('techos") for the various agencies are determined. Formulation. In this stage the planning and programming provisions of the POAs are wanslated by SHCP into the Budget Project (Proyecto de Presupuesto de Egresos de la Federaci6n), with the application of a series of rules, guidelines, processes and timetables. The Presupuesto de Egresos de la Federaci6n is the legal, accounting and economic policy document approved by the Chamber of Deputies of the Congress of the Union on the initiative of the President of the Republic. It stipulates the amount of public spending for each expenditure item included in theb ? 0 Contro* The purpose of this instrument is to e thep ss of mopblie rjs ad,i particular the physicalandfinancial progress ofpri pr ttde e ane r rtiv meases.I C%ontrolis exercised throg vrous agenis ta dpn ibot n h Lgsltr adth xeuie. : For the Executive, the SEDAM and ith S.ICP inms of itnalt oft Amin Plica Fedra. In the Letr,conrl fsphendicoiig00 c0 all to th Cotdul Mayo de Hacienda. Evaluation. The istrument for.the evauionofsca tiousth Cue P s* s ana n report presentedk by the Executi ve -to theChambrof Duties. It isminlyeared. y theCgrsde Ia Un6 by meas :ofvarious mechanisms. These include:thCuenttad Haiend lia Fedra,maeup ofthe acouningand financial staeents recording tihe tons derivi fr the ap f th federal e executionfof the Federal spending budge based on proa, rms ad targets. The timeline for the budget process is as follows:-- *Frmom eruary toA Auust, the government prepares the POAs, * From June to August, SHCP carries out preliminaryp atpiono f the budget; * Fom Jul to August the preliminaryspding reerence are deteined; 3 Between August and October the nancial ceilings sfos ding eh rm.* sateo epartment are determined; * From September to OctobertheFederal Spending Budget Bl is r e a p t e a presentation November 15. 4.35 Mechanisms for budget coordination are different for federal-state coordination and state- municipal coordination. Given the process of decentralization in Mexico, it is also possible to talk about federal-municipal coordination. 4.36 Federal-state budget coordination operates through the budget process as well as other non-primarily budgetary mechanisms. (a) States submit sector POAs at the time of preparation of the federal budget. These POAs are then adjusted and incorporated into the federal sector POA that is submitted to the SHCP. Hacienda further filters the sector POAs for the submission of the budget bill to the Congress of the Union. Although this mechanism is not always based upon clear criteria for allocation of federal resources across the territory, it does ensure some information exchanges and opportunities for reconciliation of federal and state priorities. (b) Non-primarily budgetary mechanisms for budget coordination are the convenios for the sector matching grants programs. These programs that have been growing in number and sectors involved. Another non-primarily budget mechanism are the 34 earmarked transfers for sector decentralization, such as the Federalizaci6n Educativa. Extraordinary transfers for specific investment purposes may also be seen as coordination mechanisms."2 In fact, extraordinary transfers have stimulated the convenios for uniform accounting and reporting between the federal government and the states.'3 The quarterly meetings between the SHCP (both Ingresos and Egresos) and the Secretaries of Finance of the states also serve budget coordination purposes. (c) Revenue coordination and tax harmonization between the federal level and the states is mainly achieved through the Fiscal pact and the corresponding general revenue transfer of nearly 22% of the Receta Federal Participable (the Participaciones). There seems to be a recent trend towards complementing the Fiscal Pact with piggy backing of the (federal) income tax or the value-added tax. 4.37 State-municipal coordination operates by means of higher level approval of lower level budget and indebtedness. In principle, municipal budgets have to conform to the state development plan, primarily an investrment plan. Special convenios between states and municipalities do provide an additional opportunity to reconcile the spending priorities of these two levels as well as an opportunity to coordinate revenue raising goals and instruments. 14 4.38 Federal-municipal budget coordination (and even federal-state-municipal coordination) is being pursued through the transformation of Ramo 26 into Ramo 33. The seven special funds of Ramo 33 -primarily but not exclusively sector funds-are increasingly formula driven. Therefore, Ramo 33 is in practice a mechanism by which the federal level guarantees territorial allocation of resources to federal priorities. Accounting and reporting for the effective allocation of the Ramo 33 resources are still deficient and do not stimulate inter-government trust nor allow for monitoring or impact evaluation. 15 The budget system and the limits to coordination 4.39 The above discussion permits to make some observation concerning the scope for coordination at the regional level within the current budget system. In terms of horizontal coordination (i.e., among line agencies in the federal government), coordination is mainly possible "a posteriori"; that is, at the spending, rather than at the programming stage. A "stronger" form of coordination would entail that different agencies are enabled to (and have the capacity for) submitting consolidated or integrated POAs for their programs. Ideally, consolidated POAs at the program level should be the result of multiple integration exercises, undertaken at the level of each priority region where the federal agencies striving for coordination are active. 12 Although the primary purposes of these transfers between 1995 and 1998 were fiscal bail outs for over-indebted states. 13 Homologaci6n Program coordinated by the SHCP. 4 The convenios are often used to commit local govemments to effectively administer the property tax. Formation and updating of the fiscal cadaster is often -not always-the responsibility of the state govermnent. 15 Accounting and reporting should improve with the enhanced Contadurias Mayores de Hacienda, which result from the mid-1999 amendments to the Constitution (articles 73, 74, 78 and 79). 35 4.40 Efforts required for program and accounts integration among federal agencies involved in priority regions are likely to be considerable. Federal agencies are likely to have stronger incentives for such endeavor, in so far as SHCP's decision on financing ceilings are taken on the basis of the merit of the consolidated "package" of integrated programs in any given region, as opposed to evaluating each program in isolation. The expectation of "making a better case" with Hacienda for a program, on the basis of its functional relationship other ones may act as a powerful incentive for coordination. 4.41 In terms of vertical coordination (i.e., across levels of government), there seem to be opportunities at the stage of budget execution, by means of consultation in state, regional, and municipal fora (COPLADE, COPLADE-REG, COPLADEMUN). However, at the programming stage, coordination is mainly confined to mechanisms outside the budget process (Convenios); POA-based coordination is possible, but it rarely has an explicit territorial focus. Under a "strong" vertical coordination approach, POAs of the various government bodies present in any given region would be conceived and structured as interrelated -even if administratively distinct- blocks of an overall strategy of public intervention in the region. 4.42 Clearly, neither horizontal and vertical integration of the POAs, nor joint negotiation of the "techos financieros" will per se be a guarantee of better government intervention in the regions. The crucial, additional element needed is the ability of the various government programs to effectively reflect need and priorities of beneficiary communities. In terms of the conceptual framework of chapter 3, coordination of means is of limited usefulness unless it is based on coordination or "co-ranking" of goals. 4.43 In this sense, the fundamental challenge to achieving effective vertical and horizontal coordination in the budget cycle is to establish efficient ways to channel and aggregate information from the communities, through the municipal, state and federal governments, all the way to federal-level programming in SHCP. This information can be used for programming resource use and spending ceilings across broad themes and among localities; allocation to specific activities can be assigned to a decentralized and participatory decision making process. A logic that is being already embraced in the operation of Ramo 33 FAIS. 4.44 Unless these information flows are smooth and timely, the disconnect between government action and local level development needs will continue. Under current budget practices, it is safe to say that in many regions, by the time community demands are expressed in the established fora for coordination (COPLADEs, COPLADEMUJNs, etc.), many important budget decisions are already taken. 36 5. REGIONAL DEVELOPMENT AND INSTITUTIONAL COORDINATION: FOUR CASE STUDIES 5.1 In order to ascertain strengths and weaknesses of current arrangements for institutional coordination in regional development, case studies were undertaken in four priority regions. This chapter summarizes the methodology used in the case studies, provides background information on the study areas, and presents the findings of the fieldwork. METHODOLOGY FOR THE CASE STUDIES 5.2 The analysis was based on a "bottom up" methodology, beginning with the collection of information at the municipal and community levels to permit an analysis of current practices in the coordination of government interventions. The underlying argument is that the communities are the ultimate beneficiaries of programs, and therefore they should also be the starting point for regional planning. In later stages, the rules and incentives guiding these practices in the three tiers of government were analyzed. 5.3 At the indication of the federal government, the four priority regions used as case studies were the Montafia de Guerrero (Guerrero) and the Huastecas (in the states of Hidalgo, Veracruz and San Luis Potosi). The research was carried out through the review of government programs and through fieldwork, consisting of individual interviews and group meetings held with key informants residing in the capital of the states, and in eight municipalities"6 of the study areas. A total of 44 individual interviews and 15 group meetings (gathering some 350 participants) were held during a total of four weeks in the spring of 1998. 5.4 Due to budget and time constraints, much of the information collected is of a qualitative nature. This limits the scope for presenting fieldwork findings in terms of quantifiable statistical indicators. However, it permits to infer broad trends on local stakeholders' perceptions of the current situation of coordination and on its limiting factors. 5.5 Key informants selected for the interviews and group meetings are officials at the three levels of government, as well as community representatives. At the federal level, the directors general of the four agencies. At the state level, they include the state delegates of the four agencies, plus the coordinators of the COPLADEs. At the municipal and regional level, the informants are the regional representatives of the four agencies and the Instituto Nacional Indigenista (INI), the municipal presidents, and the other members of the municipal council and of the COPLADEMUN and/or the regional forum (e.g. representatives of the communities and small farmers). At the community level the informants include heads of ejidos and other community leaders. 5.6 The basic subjects in all the meetings or interviews were: (a) formation and communication of demands / citizens' participation (in each phase of the "policy cycle"); 16 Malinaltepec, Olinala (Guerrero); Huejutla, San Felipe OrizatlAn (Hidalgo); Aquism6n, Xilitla (San Luis Potosi); Ixhuatlan de Madero, Zontecomatlan (Veracruz) 37 (b) planning and budgeting in inter-governmental and intra-institutional relations; (c) successes and failures in the coordination among the four agencies; (d) sustainability/continuity of coordination among the four agencies. The choice of the subjects is consistent with the approach to the coordination problem proposed in chapter 3. The first set of questions refers to coordination in the sense of agreements on goals. The other address coordination in terms of agreement on means and distribution of responsibilities for undertaking related activities. BACKGROUND INFORMATION ON POVERTY, NATURAL RESOURCE DEGRADATION AND LOW PRODUCTIVITY IN THE STUDY AREAS 5.7 This section provides a brief summary of the linkages between poverty, natural resource degradation and low productivity in the Montafia and, as an illustration of the situation in the broader Huasteca, in the Hidalgo portion of that region. These linkages are symptoms of the multidimensional nature of the development challenge in the study areas, and therefore point to the potential benefit of an integral (and institutionally coordinated) strategy of public action, at the different levels of government. Montafia de Guerrero 5.8 Land use in the Montafia de Guerrero follows to a large extent the typical patterns of poor regions located in mountainous areas. Production is concentrated on staples such as maize, beans for subsistence use and chili. The production of these crops is characterized by low yields due both to the topographical and climatic conditions that hinder growth and the lack of resources among farmers. Most of the land under crops is rain fed and farming technology is extremely limited. On increasingly unproductive land with severe erosion problems, the fertilizers that do reach the region (provided by the SAGAR) either are not used or are improperly used, due to the lack of training for farmers. 5.9 Lack of other energy sources in the area pushes up the demand for firewood. Extraction of firewood is not regulated, and as a result not only affects the sustainability of wood in the area but also has an impact on the availability of water, leads to excessive sedimentation, and harms animal and plant life. 5.10 Every year slash and burn practices turn woodland into farmland and temporarily fertilize the new areas opened to farming. These areas are normally used for the cultivation of staples or opened up for dry grazing, with consequent envirornmental impacts, such as soil degradation, possible loss of biodiversity, and reduction of ground water recharge, etc. Occasionally, in the first few years after clearing land is used to grow alternative crops such as rice and tomatoes. In the best case the land is used for the development of perennial or semiperennial crops such as coffee and sesame. 5.1 1. Access to state market is limited to rice, thanks to successful effort of producers' organizations. Cultivation of tomatoes has slowly been promoted in the Montafia but access to 38 output markets is scarce. As a result, tomato is mainly still imported from Sinaloa, which is also the destination of temporary migration of much of the region's labor force. Due to insufficient access to technology and commercialization channels, crops such as coffee and sesame, which would have the additional benefits of benign environmental impacts, have not been developed efficiently. 5.12 The entire area of the Montania of Guerrero has a water shortage problem. This is perhaps currently due to the lack of water infrastructure but it will undoubtedly worsen in the future due to damage to water tables. This is made more serious as unsuitable areas are used for latrines, sedimentation is increased by changes in land use, and water catchment areas are reduced as tree cover is removed. 5.13 There appears to be no systematic analysis of alternative cropping and resource use patterns that would be better suited to the different micro-regions in the Montafia, and which may be capable of breaking the cycle of the growing need for farmland, energy and housing needs and the increasing damage to soils, forests, and water tables. Hidalgo's Huasteca 5.14 Favorable climatic and hydrological conditions (the region is located in the catchment area of the Moctezuma River and is irrigated by many of its tributaries) make for significant agricultural potential in the Huasteca Hidalguense, especially in terms of oranges and other citric tree crops. 5.15 Nevertheless, adverse topographic conditions have discouraged investment in infrastructure (despite the abundance of water, irrigation is underdeveloped) and in value-adding activities (processing centers are mainly located outside the state) and have constrained the ability of local producers to access output markets directly. 5.16 Slash and burn practices in the area serve two purposes: fertilization and clearing space for more farmland. Shortened slash and burn cycles entail that over time soil nutrients become exhausted. In addition, less fertile land is often used as dry grazing, which worsens the situation because the topsoil is worn away constantly, lessening the possibilities of re-use. For soil to recover and water rain cycle not to be altered there must be trees; however, in this area there has been excessive felling; urgent actions seem needed to promote reforestation. 5.17 All of the above, and the fact that the increased population encroaches on farmland and other productive areas, added to excessive felling, mean that the area available as farmable land keeps shrinking, reducing development opportunities and adding to environmental degradation. 5.18 Much as in the other regions analyzed, there appears to be no well-founded study of the community's main needs; neither there seems to be widespread awareness on the availability of development programs promoted by the government. There would be ample opportunities for beneficiaries and providers of government support to develop a comprehensive strategy to tackle the region's backwardness. 39 DEVELOPMENT PROGRAMS IN THE STUDY REGIONS 5.19 A total of some 40 programs (including sub-programs) with federal (co-) funding were encountered in the case studies, with different degrees of presence in the different regions. These span a wide range of sectors, objectives, modalities of execution. A summary of the main features of programs reviewed in the Montafia de Guerrero is provided in, and the full list of programs is reported in Annex 1. 5.20 For the present purposes, the following observations on the programs are in order: (a) In most of the cases, the mechanisms for incorporating beneficiaries' preferences into program design are not clear. This makes it difficult to detennine if (and how) local needs might be better met by combining programs of different agencies. (b) The set of requirements for an individual, group or community to access program resources is highly varied but generally complex and not particularly "applicant- friendly." (c) Program execution typically follows the logic of the federal budget, governed by the Ley Federal de Presupuesto y Gasto Publico and its specific calendar. This cycle bears little relation to local financing needs. (d) With a few exceptions (such as the PROCAMPO ecological projects), programs do not lend themselves easily to resource pooling with other programs that have complementary objectives. This limits spaces for coordination. (e) In summary, coordination at the program design or at the budgeting stages seem to hardly -if ever- take place. Coordination is possible "ex-post," that is at the execution stage; but complex sets of distinct operational rules make it difficult, and mostly dependent on the administrative ingenuity (and good will) of federal and state government officials. 40 Table 4 - Federal programs in the Montafia de Guerrero PROGRAMS DEPENDENCY OBJECTIVES REQUIREMENTS FINANCING OPERATION COOPERATION COORDINATION FONAES SEDESOL Productive. Simple. Mixed (dependency and Fonacs There appears to be no cooperation None provided for among (Nat Support social sectors). with another federal agency. dependencies, but informal Fund for Social However, cooperation with the coordination. Vert. coord. Enterprises) Private and Social Sector in some With state and mun. bodies cases. _ _ _ _ _ _ _ _ _ _ _ _ _ FEDAPIG SEDESOL-INI Training, Simple. Mixed: SEDESOL, Federal-State The Govemment of the State of The Fund permits (State Fund for infrastructure. State of Guerrero. Guerrero, the National Indigenous coordination between state Autonomous Affairs Institute, the municipal pres. goverAment and SEDESOL, Dev. of from the area of indigenous under federal (SECODAM) Indigenous influence, and publ. and priv. and state rules. Peoples of Gro) dependencies and bodies considered _______________ ______________________ ____________________ suitable by the General Assembly. Program of SEMARNAP Training, Advice. The dependency identified Own (SEMARNAP). For the preparation of Basically a SEMARNAP program. Provided for at the vertical Sustainable 150 pilot communities. bases and proposals Rules are set by SHCP and level through Regional Development Selection criteria are: there are: A Regional SECODAM. Development Councils. (PRODERS) 1. High levels of poverty Council, Pilot Cooperation with State and 2. High levels of Communities, Regional Municipal Govemments, Federal biodiversity Coordinator and an Government Agencies involved and 3. Presence of social Academic Group. organizations from civil society. organizations The operators are the 4. Existence of studies by DGPR and Regional academic groups. Council. ____ Program of SEMARNAP Productive, Depends on each Own. The state government, SEDESOL, Govemment of the Coordination provided for Sustainable preservation, basic dependency and each of municipalities, social State of Guerrero, SAGAR, INI, and via Regional Council. Transformatio infrastructure, the sub-programs. and political social organizations of the Regional n of the training. organizations, and the Council. Montafta de A program that seeks different federal Guerrero. to integrate different agencies of the region programs and efforts participate. of the dependencies. PROCAMPO SAGAR Productive. Complex because Own financing through SAGAR and its SEMARNAP in ecological projects. Coordination provided for compliance with all the evaluation by the decentralized structure, Govemments of the States, but modes not defined. requirements can require dependency and its especially ASERCA, decentralization agreements signed the participation of several agencies. (Supports and Services with SAGAR. govemmental bodies. Financial amounts not for Agricultural Sales). _ available. Ecological SEMARNAP Productive, training. Simple, fully adjusts to N.A. SAGAR, through the DDRs, CADERs and ASERCA, SAGAR and SEMARNAP. Projects PROCAMPO operating PROCAMPO operating together with SAGAR and PROCAMPO rules. rules. SEMARNAP, define selection of land. 41 FUNCTIONING OF THE COORDINATION MECHANISMS 5. 21 An important element for the evaluation of current arrangements for coordination is reviewing the functioning of coordination fora as emerging from the field work. Municipal level 5.22 The two most important mechanisms at the municipal level are, as mentioned earlier, the COPLADEMUN and the Consejos de Desarrollo Municipal (CDM), bodies that formally have different legal standing, but which in practice operate as one single forum in the municipalities studied (albeit under different names). 5.23 In theory, the COPLADEMUN/CDM is the institutional space at the municipal level where different community demands are set forth to be discussed, prioritized, and recorded by federal and state agencies. However, the fieldwork revealed important obstacles to the flow of information in both directions-from below (from the communities to the COPLADEMUN/ CDM), and from above (from the agencies to the COPLADEMUN/CDM), as is described below. 5.24 All the municipalities studied have administrative mechanisms that regulate the selection of representatives of the community (or district, in the municipalities with urban areas) through residents' public assemblies. Later community assemblies discuss and decide the works requested by the community (or district). This formal structure for the communication of demands to municipal governments was found in the eight municipalities studied. 5. 25 Communication of demands is made difficult, to a lesser or greater degree, in all cases by the lack of organization within the municipal government. Meetings with the representatives of the communities revealed that the formal and appropriate channels for the expression of demands are often unknown to the community representatives or are not very effective. The large number of representatives at the community level (ejido organizers, peasants' councils, etc., apart from the community representatives) contributes to this confusion but are not the sole cause. Moreover, the municipal governments and the COPLADEMUJN/CDM have not managed to develop and put into effect a systematic mechanism to detect and organize community demands. For this reason, the community representatives turn to personal and informal contacts with external authorities (state or federal) to express their demands. 5.26 This situation reflects another limitation of the COPLADEMUTN/CDM as channels of information between the communities and federal agencies. In many cases, the municipal officials and community representatives have little information on available development programs. The limits to the municipalities' institutional memory are due to a large extent to the short permanence in office (three years) of almost all their officials. Short tenure and scarce information, compounded with limited planning skills of municipal officials entail that COPLADEMUN/CDM have an extremely limited influence both in the design of the programs and in their subsequent implementation, budgeting and evaluation stages. 5.27 The problem of lack of information is especially serious in the two municipalities studied in the state of Veracruz, as well as in Malinaltepec, Guerrero. In these cases, municipalities are not even aware of the existing sources of financing, or the training programs, of federal and state 42 agencies. In the municipalities studied in Hidalgo and San Luis Potosi, a greater level of knowledge about the processes for communicating community demands to state and local agencies was detected, which presumably implied greater ability to take advantage of them. 5.28 Only one municipal government out of the eight municipalities studied (Olinala) showed both the ability to govern and the vision to carry out coordination with the agencies through its COPLADEMUN/CDM. In this case, the local officials are well aware of the institutional supply and seem capable of putting pressure on the higher levels of government to achieve their goals. The success in Olinald seems to derive from the municipal president's abilities and ex-perience in government as a former official in SEDESOL more than fromany other factor. In the other municipalities studied, the municipal presidents tend to be less capable in the tasks and challenges of government. 5.29 In the municipal governments that are less active in the coordination of federal programs in their territory, state intervention seems often to play an important role. In Hidalgo and San Luis Potosi, the municipalities studied tend to accept the initiatives of state agencies and rarely intercede in the selection of communities and projects within their jurisdictions. In Veracruz, the municipalities studied seem completely excluded from the process of selection, planning, implementation and budgeting of projects within their jurisdictions. The state level executes state and federal programs and projects in local communities without coordinating with, or even informing municipal authorities. Regional coordination fora 5.30 According to the formal structure for regional planning, a sub-committee of the COPLADE (or a Regional COPLADE) must deal with designated priority regions in each state and coordinate not only the state and federal agencies, but also link them with the municipalities. This is what happens in the regions of the Huasteca of Hidalgo and Veracruz, where the officials of the COPLADEs regularly call together the many state and federal actors in each region. On the other hand, the participation of the municipal presidents (or other local representatives) in the Regional COPLADEs is much more restricted for reasons to be discussed later. 43 Table 5 - Regional coordination fora in the study areas State Name Participants Guerrero Regional Council of the Montafia Regional representatives of SAGAR, SEDESOL, SEMARNAP, municipal presidents, producer associations, NGOs, representatives of COPLADEG (invited but rarely present). Hidalgo Comite de Planeaci6n para el Representatives of federal and state agencies Desarrollo Estatal, Regi6n de la in the region and municipal presidents. Huasteca Hidalguense (COPLADERHH) San Luis Comite de Coordinaci6n Representatives of federal and state agencies Potosi Interinstitucional in the region and municipal presidents (invited but rarely present). Veracruz Centro de Atenci6n Social (CAS) Representatives of federal and state agencies del Comite de Planeaci6n para el in the region and municipal presidents and Desarrollo Estatal Veracruz COPLADEMUN/CDM. (COPLADEVER) 5.31 In the cases of the Montafia de Guerrero and the Huasteca of San Luis Potosi, the lack of an active presence of the COPLADEs has left spaces for the creation of regional councils that operate with a certain degree of cooperation with the state governmnents. However, unlike the regional sub-committees of the COPLADEs, regional councils do not have the power to fornally request the participation of state and federal institutions. Furthermore, their lack of formal legal status considerably limits their ability to manage public resources. 5.32 In the Montafia de Guerrero and the San Luis Potosi Huasteca, the participants in the regional fora basically include the same personnel as in Hidalgo and Veracruz. However, their participation is less in response to formal reasons (an administrative obligation) and more related to a personal commitment to the task of regional development on the part of the officials at all levels of government. This leads to some problems that are discussed below. 5.33 Another type of forum is the Consejo Regional de Desarrollo Sustentable (Sustainable Regional Development Council), an initiative of SAGAR with the cooperation of SEMARNAP. These exist in the regions of the study but their levels of organization and the scope of their actions are still embryonic. It should be mentioned here that the degree to which these forums duplicate the functions of the regional COPLADE sub-committees concerns some of the federal delegates who were interviewed and seems to confuse the municipal representatives. 5.34 In Veracruz, COPLADEVER has adopted the same term, Consejo Regional de Desarrollo Sustentable, for the work that the state government does in conjunction with SAGAR 44 and SEMARNAP, making it difficult to distinguish between the achievements of this program and the work of CAS (Centro de Atenci6n Social) in general. In Hidalgo, the institutional participation to the Consejo Regional de Desarrollo Sustentable is not universal. In particular, some directors of development programs with regional coverage (FONAES, for example) express reservations about the advantage of participating to the Consejo, given limits to the possibility of pooling financial resources. 5.35 Despite differences in structure and functions observed in the various regional fora for coordination, they all seem to fulfill two important functions. First, they are useful as spaces for the exchange of information among the agencies on their own efforts and thereby reduce duplication in federal and state projects and programs. Second, these forums have facilitated the resolution of specific coordination problems among the federal and state agencies through informal agreements among their participants. For example, in Veracruz, the CAS has served as the space to discuss problems reported by many agricultural workers who could not sign up for PROCAMPO's program in 1998 because they lack the correct documentation on their landholdings. Officials in SAGAR received these complaints and managed through the CAS meetings to coordinate with their counterparts in the Procuraduria Agraria to resolve these problems. 5.36 Unfortunately, the field research revealed that all these forums share major limitations on their effectiveness. In general, they are not used as planning bodies for regional development: in no case was it found that they prepare regional plans to organize and coordinate the programs, projects and other activities of federal and state agencies with the municipal governments. And in the fora, no mechanisms were found for the design of inter-institutional programs or projects that meet the specific demands of the regions in question, with the exception of the CAS of the COPLADEVER, as was mentioned previously. 5.37 Four additional limitations should be mentioned regarding daily performance and the ability to broaden the scopes of these regional fora. First, the follow-up of the informal agreements reached at the coordination forums is weak and in some cases non-existent. 5.38 Second, the participation by the municipal presidents is limited to presenting problems and listening to the discussions by the representatives of the higher tiers of government. Their full engagement in the regional fora is constrained by their limited skills in municipal or regional planning and development, as well as by the lack of incentives for participation, given the limits of their roles in the decisions of these fora. 5.39 A third limitation on the effectiveness of the fora is related institutional incentives and organizational shortcomings. The incentives for the representatives of federal and state agencies to participate to regional fora tend to be weak and at times, negative. Representatives of federal and state agencies report that their participation in coordination fora rarely enjoys support from their organizations to cover cash expenditures and investments of time. At times, the practices of these agencies actually make the participation of their representatives more difficult, leaving only their personal commitment as the only motivating force. 5.40 The last important limitation on the working of these fora-mentioned by all staff interviewed-is the lack of flexibility in federal agency programs, in terms of spending 45 regulations. While interviewees recognize the need for these types of rules, they emphasized that they often limit the creative possibilities for coordination among representatives of federal agencies and of other levels of government. State coordination fora COPLADE 5.41 In general, the effectiveness (and relevance) of COPLADE appears to depend mainly on the political will of state governments to use them as coordination mechanisms for planning. The modality of work of COPLADEs also determines the results of the local work by federal agencies. 5.42 In Hidalgo, the current state government is notable for its administrative ability and the capacity of the governor to negotiate with federal agencies, according to the federal representatives in this state. For this reason, all the actions of the federal agencies are subject to discussion and approval by the state's COPLADE. Paradoxically, this solid presence of the state government does not appear to shrink the scope of federal actions: the federal representatives instead refer to this type of state-federal relationship as something that facilitates the fulfillment of their responsibilities. 5.43 The case of the State of Guerrero reveals the opposite extreme of state behavior and relationships with the federal level. The lack of relevance of the COPLADEG as a forum of coordination and its marginalization from activities in the Montania explains why it is not considered to be of much use by federal agencies. In this region, federal agencies essentially "jump" the state level and participate directly in the Regional Council of the Montafia in order to try to coordinate their work. Only SCT has a tight relationship with the COPLADE for the planning of rural roads. This translates into an absence of SCT in the coordination efforts of the Regional Council. 5.44 The government of the State of Veracruz has achieved results more similar to those of Hidalgo. The local COPLADE (COPLADEVER) is the site of intergovernmental coordination, particularly with SCT and SEMARNAP, which appear to have more fluid channels of communication with the state government than do the other federal agencies. However, some federal representatives in Veracruz noted problems in the organizational nature of the COPLADE, and questioned the degree to which partisan political questions influence the process of decision making in this body. 5.45 In San Luis Potosi, the reorganization in process under the new state administration made the evaluation of the COPLADE more difficult, especially because this forum does not seem to be playing the same role of promoter of regional planning and development as in the previous state administration. In the current situation, it appears unlikely that San Luis Potosi will reach the achievements of Hidalgo and Veracruz. At this point, there is no state organization which functions as the integrator of inter-institutional coordination, and the relations among the various federal and state agencies thus lack formal and institutionalized mechanisms to coordinate among one another. Federal representatives in the region agree that if in fact a reasonable degree 46 of coordination now exists among their agencies and with the state, this is the result of informal mechanisms rather that an institutionalized attempt promoted by the state government. SUMMARY OF FINDINGS Problems in information and communication flows 5.46 Problems related to deficiencies in information flows and channels of communication take at least three forms. There are failures from the "bottom-up," that is, from the communities toward the authorities, from the municipalities towards the state and federal bodies, and from the states to the federal agencies. There are also failures in the opposite direction, "top-down." Finally, there are failures in horizontal information and communication, among each of the tiers considered (among municipalities, among state bodies and among federal agencies). 5.47 "Bottom-up" information flows. Existing channels for expression of community needs are hardly accessible for some sectors of the communities (especially those located in remote areas) and are often controlled by other sectors, which have developed a capacity for organization and established relatively stable relations with officials in charge of program design or execution. Furthermore, even if information on community needs is available, there are no well-established mechanisms to let them have an impact on program design. Often the supply of programs arrives in the conmmunities ready made, mainly having followed the administrative logic and regulatory restrictions of the federal agencies. 5.48 "Top-down" information flows. Each of the federal agencies involved in the development of the regions studied has a set of programs that are not always known at the state, regional or community level. Once again, this means that the target communities are not in a position to benefit to institutional supply. 5.49 Horizontal information flows. Programs of one agency are often unknown to another in terms of both content and regulations. This leads to overlapping efforts or inconsistencies in federal objectives and actions, as well as wasted resources due to the lack of coordination. Lack of a common regional and municipal vision 5.50 The shortcomings in forums and processes of social participation and community planning at the municipal and regional level entail that it is very difficult to form a shared vision of the challenges and opportunities of local development. In the absence of a common strategic approach, it becomes almost inevitable that most of the existing coordination forums are used as mechanisms for managing ear-marked sector programs, with little space for developing an integrated, inter-sectorial approach. Lack of incentives 5.51 Incentives for participation to state and municipal coordination fora are often inadequate. Municipalities play a marginal role in the regional fora; in fact, the structure of the fora prevents the participation of municipal officials from being engaged and proactive. In addition, the legal 47 foundation of the regional fora that have already been set up is not solid enough when compared to other bodies such as the COPLADEMUN and COPLADE, which are the coordination bodies normally given priority by the state governments. 5.52 Coming to other levels of government, there are no institutional incentives (positive and/or negative) to ensure the presence of the state officials or the federal delegates and regional representatives in the regional forums. First, agencies have to comply with the rules of their programs, concentrating the responsibility of their officials on the regions and taking up a great deal of their time. Second, some agencies (such as SEDESOL, SAGAR and SEMARNAP) have been developing comprehensive approaches to rural development. Integrating those into a single common vision is not necessarily a straightforward proposition. Finally, there is lack of resources (human, material, financial, etc.) to carry out joint projects and coordinate programs. Diffuse responsibility and unclear division of work 5.53 Neither the division of tasks nor the assignment of responsibilities is clearly defined in regional coordination fora, because their internal organization remains deficient. Institutions and organizations forming the regional fora depend on administrative structures that are diverse and that have unclear degrees of responsibility. The design of the fora does not favor either teamwork or decision-making for planning. No particular individual, group or office is charged with the responsibility of ensuring follow-up to agreements reached. Furthermore, there appears to be duplication of functions among fora with neighboring or overlapping jurisdictions at the regional (or micro-regional)level, such as CAS, Consejos Regionales, SARP, etc. Administrative obstacles 5.54 Linked to all the questions reviewed above, we have the presence of bureaucratic inertia and resistance to comprehensive reform. (a) First, existing programs have significant sectorial earmarking and distinct operational manuals, which make the integration of local demands and coordination difficult. When some flexibility exists in federal programs, the necessary requirements for adjustments are difficult for the beneficiaries to comply with. (b) Secondly, several of the agencies' programs do not provide for an exchange of information and inter-institutional coordination: each agency has a set of programs with their own rules and budgetary cycles. (c) Thirdly, the federal budget cycle has no explicit built-in mechanism to enable bottom-up programming (with a territorial focus), multi-institution budgeting, and flexible execution to meet the schedule of local financing needs. 48 Political obstacles 5.55 Actual or potential political rivalries work as powerful impediments to coordination in many aspects of regional development. Some states see the strengthening of the municipalities as a potential threat to their regional policies. When there are partisan differences with the municipality, the lack of trust in the fora is exacerbated. These differences are often also seen between the Federation and the states. On occasions, the forum is felt to be a federal initiative that gives insufficient consideration to the states' points of view (the cases of Guerrero and San Luis Potosi). The supplies of programs and resources depend principally on federal bodies and tend to potentially reduce the states' freedom of action in the region. 5.56 The situation does not always improve as we move up the government hierarchy: generally, state administrations hinder municipal initiatives and provide insufficient support for municipal coordination fora. Municipal authorities often see little to gain politically by participating in regional councils. 5.57 At the federal level, each agency has made its own individual networks of regional contacts and "clientele." Political incentives for sharing access to this clientele with other agencies are limited. Furthermore, vertical political networks (i.e. networks linking different stages of production chains, for example) are unlikely to lend themselves to integration with horizontal networks (i.e. those linking the same stage of a production chain across distinct locations). 5.58 Finally, for several government agencies, "coordination" equates to sub-ordination: this determines a concern for losing control over budgets or their execution. In addition, it is feared that more efficient use of public resources caused by coordination may be used as an argument for curtails in the individual agencies' budget. 49 6. INSTITUTIONAL COORDINATION IN SELECTED INTERNATIONAL EXPERIENCES GENERAL FRAMEWORK 6.1 A Glance at Recent Approaches to Coordination for Integral Regional Planning in Latin America. Mechanisms and -more broadly- institutions for inter-governmental coordination with a view to integral regional planning and budgeting have existed in Latin America for nearly fifty years. Special districts with a rather cormprehensive scope were tried throughout the fifties and sixties in some regions such as Northeast Brazil, the Venezuelan Guyana or the Cauca River Valley in Colombia. Integrated Rural Development Programs were widely tried in the seventies and eighties from Mexico to Paraguay. 6.2 The structural adjustment programs of the 1 980s created new demands for inter-sector coordination with a view to poverty alleviation programs. The ongoing processes of state modernization and public administration reform have also reinforced the need for institutional coordination at the regional level. As the private sector assumes more responsibilities and state organizations are permeated by civil society participation, national governments tend to concentrate on policy formulation and regulation while regional governments are becoming principal agents in the promotion of public-private alliances of all sorts. 6.3 The 1980s and the 1990s waves of public sector decentralization reinforced the need for more effective coordination, particularly fiscal coordination, both horizontal (inter-sector, inter- agency) and inter-governmental (among layers of government). After an initial attempt to rigidly divide public sector responsibilities among layers of government (Colombia 1986, Brazil 1988, Venezuela 1988, Bolivia 1994), it became evident that no single level of government could be exclusively responsible for a given sector or service. The growing autonomy of state and municipal governments demanded the strengthening of regulation, orientation and incentives from the federal or central level. In turn, the federal level became aware of the fact that coordination with lower levels of government was an essential input for sustainable investment and redistribution policies in the territory."7 The inescapable appeal of the subsidiarity principle led to further decentralization to the lowest possible level and -consequently-to new demands on deconcentration to and coordination at the regional level. As a result, it is now widely accepted throughout LAC that effective and efficient decentralization strategies require inter- government coordination, mutual support and reciprocal checks and balances. THE WIDE RANGE OF MECHANISMS FOR COORDINATION AT THE REGIONAL LEVEL 6.4 Latin American countries have experimented with practically all the established purposes of institutional coordination, from simple economies of scale to the most advanced forms of 17 In the case of Mexico, the state credit push originated in the transfer of federal responsibilities (i.e., education) and the rather continuous process of federal support for state debt restructuring that started in 1995 made evident the need for further coordination schemes. The Homologaci6n Program of the Secretaria de Hacienda is a telling example of attempts to reach inter-governmental fiscal coordination through uniform accounting, reporting and budgeting systems. The INSOL program (SEDESOL) for large cities is another example of attempts to strengthen both state and municipal govermnents and inter-government coordination. 50 networks and partnerships among public and private agents for local or regional competitiveness. Similarly, the region has known a wide array of inter-governmental and inter-sector coordination mechanisms, particularly fiscal ones: * Standardization of information and information exchange has been tried in every country - -with different degrees of success. * Indicator-related coordination, especially impact and performance indicators, is being introduced in several countries, Chile, Argentina and Colombia being some of the most advanced countries in this regard. * Balanced budget requirement, "the golden rule" (which limits the budget deficit to capital outlays of government), regular reporting and monitoring on contingency debt and other borrowing parameters are being introduced to prevent state and municipalover- indebtedness in Argentina, Brazil, Colombia. * Conditional or earmarked fiscal transfers, matching grants, subsidized credit lines exist in most countries of the region. * Metropolitan areas or municipal associations for joint planning and co-financing. * Micro-level or detailed regulation and procedural rules. Cost control, staffing are frequently applied (Argentina, Colombia, Venezuela) to state and municipal social expenditures, including social investment funds. * Budget coordination is still relatively underdeveloped in the region. * Investment agreements have been especially practiced in Chile. Brazil and Colombia have numbers of examples of public-private inter-governmental partnerships for specific programs or projects. * Regional or local inter-sector councils or committees and inter-sector commissions at the presidential or secretarial (ministerial) level.'8 6.5 Since all the above coordination mechanisms correspond to rather flat (inter-sector or inter-government) structures, they coexist in tension with more traditional, top-down or hierarchical decision making from the National Executive (Presidency, Ministry of Finance or Planning) or other independent bodies (i.e., central bank) to lower levels or line-ministries."9 THE ART OF TAILORING AND COMBINING MECHANISMS TO FIT EACH PARTICULAR CONTEXT 6.6 Each Latin American country has opted for a country-specific package of coordination purposes and mechanisms. As a general rule, the particular vein of decentralization or federalism followed by each country seems to be the single largest explanatory factor behind differences in purposes or mechanisms throughout Latin America. 18 The main component of institutional coordination for regional sustainable development is usually expenditure coordination. However, it is conceivable that coordination at the regional level may also entail the revenue side of the fiscal equation. Examples of the latter are tax sharing, tax harmonization and joint access to capital markets. 19 Grants Commission (Australia) or Premiers' Conferences for horizontal coordination, as characteristic of some federal countries, have not been tried in Latin America. However, countries like Mexico have organized regular meetings of the finance secretaries of the states with the Secretaria de Hacienda of the Federal level. 51 6.7 To mention a few examples, the Chilean system of fiscal transfers and deconcentration for inter-governmental coordination at the regional level seeks primarily efficiency in investment allocation and production. Therefore, regional coordination in Chile is geared towards project financing through investment agreements. In Colombia, on the other hand, decentralization has been driven by redistribution purposes through reallocation of social sector resources. As a result, earmarked transfers and inter-sector community participation programs have been the privileged tools of Colombian central authorities since the beginning of the decentralization process. Mexico has experimented with inter-sector community participation programs such as PRONASOL, general revenue sharing that are in practice tied to specific social sectors (Participaciones), and earmarked transfers and matching grants offered to municipalities for infrastructure and social sectors (Aportaciones del Ramo 33). The Colombian and the Mexican approaches, while potentially effective in terms of implementation of national policies, make it difficult for the (national) line-secretaries to take initiatives towards regional coordination since their resources are rather rigidly defined on a sector basis. It is also difficult for local governments to take initiatives towards regional (sector or inter-sector) coordination since most resources at state and municipal levels have been -in practice-- pre-allocated by the national level. 6.8 Since coordination instruments are not good or bad by themselves, what is important is to tailor them to the context and the goals of each particular country or region and combine them in such a way that, taken altogether, they form a harmonious package capable of dealing with the specific needs of each region. It is also critically important to comply with the essential requirements of each instrument in terms of accounting and reporting, communication and control; clear division of responsibilities and accountability, efficient design (incentives), managerial capacity and effective controls. 6.9 Table 6 presents a template of the most basic factors that categorize approaches to inter- government and inter-institutional coordination for decentralization, as practiced today in Latin America. The cases included in some of the cells correspond to the approaches to coordination actually adopted in some countries, as briefly described below. Therefore, the cases listed in the cells do not necessarily reflect the overall approach of each country to coordination for decentralization; they are only meant to categorize the particular example discussed below. 52 Table 6 - Most Critical Factors to Design and Categorize Inter-Institutional and Inter-Government Coordination For Regional Sustainable Development Objectives Objectives Objectives Improving service delivery Mitigating inter- Addressing economies (quality, quantity, jurisdictional of scale sustainability, participation) externalities Institutional Horizontal 1 2 3 Scope (across sectors, Colombia's Inter-Sector Municipal Municipal Associations, line agencies) Agency for Regional Associations, Meteropolitan Areas Development Metropolitan Areas Vertical 4 5 5 (across levels of Nicaragua's Participatory Mendoza's City and Mendoza's City and Provincial government) Municipal Maintenance Provincial Coordination Fund for Social Coordination Infrastructure Horizontal and 7 8 9 Vertical Chile's Investment Mexico's Inter- Agreements, Secretarial Venezuela's COPRE for Agreement for Coordination of transport Decentralization infrastructure, environmental protection, agricultural _ development 53 LATIN AMERICAN EXPERIENCES WITH INTER-INSTITUTIONAL AND INTER-GOVERNMENTAL COORDINATION FOR REGIONAL AND LOCAL DEVELOPMENT 6.10 This section summarizes five coordination schemes that have been recently developed in one or more Latin American countries. It also evaluates the factors for the effectiveness and sustainability of each scheme and links these experiences with some of the coordinating challenges presently faced by Mexican governments. In reviewing the various experiences, it should be borne in mind that two of the countries analyzed (Chile and Nicaragua) are unitarian. While the basic insights from those experiences are still relevant, some caveat in order on their transferability to a federal context such as Mexico's. Matching Grants For Coordination, Decentralization and Participation Through Social Investment Funds - Nicaragua 6.11 Social investment funds created throughout the region during the 1980s and early 1990s are being gradually transformed. From agencies that operated in isolation, the funds are now developing links with line-ministries. From top-down operations to ensure prompt investment in social and utility infrastructure, the funds are becoming participatory institutions where both communities and local governments converge with the national government to ensure coordinated action and sustainability. 6.12 Reform of social investment funds along the lines of participation, inter-institutional and inter-governmental coordination is taking place in Bolivia, Colombia, Guatemala, El Salvador, Honduras, Nicaragua, and Venezuela. Since the case methodology requires that the analysis is restricted to a particular experience, the subsequent Analysis is drawn exclusively from the case of the Preventive Maintenance Fund (FMP) for water, sanitation and social infrastructure put forward by the Fondo de Inversi6n Social de Emergencia, FISE, ofiNicaragua, since mid-1997. 6.13 The Nicaraguan context seems hostile to decentralization, inter-govetument and inter- sector coordination. Yet the evidence of lack of maintenance for the infrastructure it was building led the FISE to capitalize on the informal tradition of community and local government participation in the maintenance of schools and health posts. Preliminary surveys indicated that municipalities and communities had been contributing to maintain social, urban and rural infrastructure even in the absence of a law that made them clearly responsible for this task. When necessary, mayors or communities called upon national agencies or line ministries to support their own initiatives in terms of excavation, installation of pipe lines or teachers and doctors assignments. This bottom-up tradition moved the FISE to offer matching grants to those municipalities and communities that prepared maintenance plans and provided monetary and in kind contributions towards the maintenance of social and utility infrastructure. The invitation by FISE was positively responded by more than 90% of Nicaraguan municipalities that quickly prepared participatory maintenance plans and introduced maintenance provisions in local budgets. After an initial period of skepticism and even active resistance, sector ministries joined the maintenance scheme with technical assistance and monitoring of maintenance works. The Contraloria General de la Republica also joined the scheme with training courses for local agents and special audits on participatory maintenance programs. 54 The relevant lessons of this Nicaraguan experience are: (i) Confidence building is an essential input of coordinated decentralization. When the federal or central level has reasons to presume state and municipal governments or communities are not prepared to assume a given responsibility, conditional grants that require uniform accounting and reporting for a given pilot project are effective tools to train state and municipal governments to produce the monitoring, evaluation and planning information needed by central government agencies. The Homologaci6n Program of the Secretaria de Hacienda y Credito Publico and other sector initiatives for uniform reporting and budgeting may be seen as Mexico's first steps in this direction. (ii) If adequately trained and stimulated, municipal governments are the most effective layers for coordination of public agencies for local public expenditure. Directly reaching the communities with federal or state programs that bypass local governments leads to discoordinated action, inefficiencies in allocation and lack of local sustainability. 55 Table 7 - Restructuring Social Investment Funds for Participation, Inter-Agency and Inter- Governmental Coordination (Nicaragua). CONTEXT PURPOSES DURATION PARTICIPAT- TERRITORIES INCENTIVES & ING AGENTS MECHANISMS: AGENCIES, RULES, PROCEDURES Vacuum in the Ensure Temporary National and Communal Matching grants distribution of sustainability of coordination as local territories as as incentives for responsibilities: maintenance of FISE is governments in defined by sector systematic no agency or multiple sector conceived as a coordination (school, health mobilization of level of infrastructures temporary with community post, water local resources, government is through organization and organizations. source, etc.) appropriation and responsible for mobilization of sustainability units. sustainability at maintenance of local resources in requires Division of the local level. infrastructure coordination increasing Labor: FISE is Municipalities created by FISE. with current and responsibility of responsible for for aggregation Micro (detailed) capital local (public and promotion, and prioritization rules for access to A tradition of expenditures by private) agents in incentive design of sector units. national matching community national partial and matching grants on the organization to agencies. substitution of grant operation basis of maintain local national and control. Line standardize report infrastructure. Train executing ministries formats. communities and agencies. monitor and Scarcity of municipalities to evaluate impact. Budget monetary assume new coordination is resources at the responsibilities Communities achieved between local level. and ensure plan unit by unit FISE, sustainability at maintenance and municipalities and Decades of the local level. commit in-kind -to a lesser centralization resources. extent-line deter ownership ministries. by local Local governments or governments Unit councils (ex: communities. aggregate and parents and prioritize teachers FISE has municipal associations) are flexibility for maintenance the seeds of inter- budget needs and sector local coordination and commit budget- councils. participatory matching budgeting. resources. Inter-sector Monitor committees at the Lack of effective execution by national controls at the communities. (ministerial) level local level. have not operated Contraloria properly. Nacional sample-audits municipalities. Fiscal Grants for Inter-governmental Investment Agreements - Chile 6.14 Several countries have developed inter-governmental agreements for regional development. The national government establishes the legal and financial framework within 56 which regional governments may seek resources and other forms of central government support for a given menu of sector or inter-sector programs. These agreements are, in practice, mechanisms for joint (inter-government, inter-sector) selection of priorities. The agreements selected for this report are the multi-sector agreements for investment planning in Chile.20 6.15 Chile has followed a gradual process towards decentralization. The first phase of decentralization in Chile consisted of deconcentration of the national government to the Intendencias (regional administrative units that were transformed in 1993 in regional governments properly speaking). The Intendencias are at the core of Chile's horizontal and vertical coordination among sectors and levels of government. Regional Councils (Consejos Regionales, COREs) are elected by municipal governments that ensure vertical coordination between local, regional and national governments. 6.16 In order to provide clear signs to the regions, the central government budget specifies how much of each sector investment program is to be spent in each region of the country. On the basis of this information (which is known in advance by regional and local governments), the line-ministries propose investment agreements to the regions. These agreements are, therefore, coordinating mechanisms that reconcile the investment priorities of both the national and the regional governments. Regional governments monitor every investment project within its region, regardless of which sector or sectors it belongs to. Moreover, when regional governments believe they are prepared to assume sector responsibilities by themselves, they request the transfer of such responsibilities from the line-ministries. The latter option paves the way for regional ownership of assets and services located within the region. 6.17 The shortcomings of the Chilean inter-governmental agreements for public investment are due to the fact that the regional governments cannot truly take initiatives by themselves since they have no resources of their own. As a result, regional governments are still heavily dependent on the menu of sector and inter-sector options offered by the central government. Also as a result of the lack of a minimum degree of fiscal autonomy, the regional governments keep no accounts nor prepare budgets of their own. In practice, regional governments have to keep separate sector, program and project accounts in accordance with the rules and menu options established by the central government. The main lessons from this Chilean experience that are relevant to the challenges of coordination in Mexico, as identified by this report, are: (i) State and municipal governments are an adequate level for integral or inter-sector planning and financing. Even under the very limited autonomy of Chile's intermediate level of government, when regions are given clear signs as to resource availability and clear information on the framework for sector- national policies, they adequately combine sector priorities and mobilize resources of their own to optimize resource allocation for public goods and services. (ii) Inter-sector coordination requires the support of finance (Hacienda) ministries (secretaries) for budget transparency towards sectors and regions as well as budget coordination with state and municipal governments. (iii) As a transitional, second best option, state and municipal governments may find it necessary to keep separate sector or programs accounts for purposes of reporting to separate sector secretaries at the national level. If properly done, separate accounts will not jeopardize integrality in planning and execution. 20 Since 1988 Venezuela resorted to agreements between the federal and the state governments for sector planning for transfer of sector responsibilities to the states. In 1993 Colombia established a somewhat similar procedure (called "certification") for the transfer of health and education responsibilities to the departmental level. 57 Table 8 - Inter-Sector and Inter-Government Coordination Via Top-Down Controlled Investment Agreements (Chile) CONTEXT PURPOSES DURATION PARTICIPAT- TERRITORIES INCENTIVES & ING AGENTS MECHANISMS: AGENCIES, RULES, PROCEDURES Deconcentration Gradual Temporary Nationial, 13 regions for Common rather than strengthening of coordination as regional and the entire knowledge of decentralization; regional capacity regions gradually (indirectly) local country, investment limits unclear for vertical and evolve towards a governments. supersede any by region distribution of horizontal more other sector stimulates responsibilities coordination autonomous division of the negotiations between levels of with a view to level of territory for between national, government. enhancing government. Division of purposes of regional and local efficiency of Labor: investment governments. Tradition of public agreements. private capital investment. Weak regional Some and community capacity to plan mobilization of involvement in and implement regional and local local and makes the private resources regional regions heavily stimulated by decisions. dependent on projected sector decisions investments Lack of regional at the center. within the region. fiscal autonomy. Line ministries Inter- Decades of still monitor and governmental centralism evaluate impact. budget nurture top-down coordination is ministerial No co-financing automatically decisions. (via matching the tral grants or other the central Top-down mechanisms) budget. No multi- budget since regional layer (central, preparation and governments regional) budgets rigidities prevent have no fiscal properly regional capacity of their speaking. creativity for own. regional inter- Municipal sector programs. Regional pressure (and govemments some indirect Transparency in aggregate and degree of central- budget allocation prioritize local and investment investment needs coordination) on projects for the entire goter- facilitates social region, including govestmental and government municipal investment controls of priorities. agreements is regional ensured through programs. the COREs. 58 Regional-Local Coordination and Private Sector Participation to Enhance Regional Competitiveness - Mendoza, Argentina 6.18 The city and the province of Mendoza, Argentina, illustrate how local and regional governments may capitalize on traditions of social capital and productive clusters within the framework of a decentralized state. The economy of Mendoza is based upon agriculture and wine production. Historically isolated from the capital of the country, the people of Mendoza have developed their own irrigation systems, democratically controlled and distributed among all producers. They have created their own "Research and Innovation" Centers to serve their own agricultural and wine-producing needs. Property rights are clearly vested among an overwhelming majority of small and medium size landowners. 6.19 Beginning in 1988, the newly elected provincial and local governments committed themselves to mobilizing and fostering inter-community integration in order to make Mendoza more competitive in national and international markets. They transformed the largest publicly owned warehouse into an efficient cooperative. Basic infrastructure was substantially improved to reduce costs of production and marketing; public expenditures were reallocated to better serve the needs of the rural communities; a new system of health services also ensured that those living in the countryside would receive services similar to those enjoyed by urbanites. The public budget was transformed into a "goal-oriented budget" which transcribed into line item allocations the clear and transparent developmental goals identified and prioritized by the communities. New information and dissemination systems, close linkages between the local/regional universities and the governments, and a well-publicized set of performance indicators completed the package of modernization of public administration agencies and relations between governments and civil society organizations. The coordinated strategy followed by the governments of Mendoza City and the Mendoza Province had the virtue of capitalizing on pre-existing social capital to provide these agricultural communities with a solid new basis to compete in today's globalized economies. 6.20 The weak side of the Mendoza case seems to be the dependence of this type of coordination on the commitment of the provincial governor and the local mayor. Since there is no national policy framework that stimulates coordination and participation for development at the local level, changes in provincial and municipal administration may lead to vanishing support from regional authorities and the gradual abandonment of this form of coordination. Regional social capital accumulated over the years will of course remain as a potential asset. But capitalization of this precious asset needs of incentives capable of reactivating and funneling what would otherwise be an idle intangible asset. The main lessons that can be drawn from the Mendoza experience for Mexico's current challenges in coordination for decentralization are: (i) The feeling of ownership of -or at least the capacity to mobilize-urban & rural public assets is necessary to stimulate local and regional initiatives for the development of state and municipal strategic visions and innovations in inter-sector resource allocation. (ii) Cohesive civil society and articulated private capital are powerful factors for the articulation of local and regional governments over and above party fragmentation. (iii) State and municipal leadership may be required to stimulate the formation of social capital or the mobilization of pre-existent social capital for optimization of local and regional resources. However, leadership is an insufficient condition for sustainable mobilization of social capital. Transparent and predictable signals and incentives from the federal level are needed to reinforce confidence and risk- redistribution at state and municipal levels. 59 Table 9 - Inter-Government and Inter-Sector Coordination for Participatory Development In Regions with Social Capital Accumulation (Argentina) CONTEXT PURPOSES DURATION PARTICIPAT- TERRITORIES INCENTIVES & ING AGENTS MECHANISMS: AGENCIES, RULES, PROCEDURES Clear Integral planning Coordination is Regional and The region is Public-private distribution of and coordinated perceived as a local perceived as an partnerships and responsibilities public (province, permanent governments economic unit, benefit taxation between levels of city) and private feature of with active with capacity to mobilize private government. financing for regional and participation of mobilize all and public strengthening local communities, existing resources on the Tradition of competitive administrations. private capital resources within basis of individual private capital position of the However, there and universities. the territory, benefits to and community region in is no (federal or private and individuals, involvement in international state) legal Division of public -including cooperatives and local and markets. framework nor Labor: local and sector corporations. regional regional or expenditures by decisions. federal Strong regional the federal Coordination of incentives seek capacity to plan government. regional and local Regional fiscal to ensure and implement budgets is autonomy. participatory makes the region achieved through coordination at relatively common goals Lack of federal state and autonomous to and targets as pre- government municipal levels, effectively adopt defined through incentives for s a result, strategic join planning and coordination at continuity in decisions pubic-private state and coordination towards partnerships. municipal levels depends truly on competitiveness. municipal levels, the personal inclinations of Monitoring and Participatory governors and evaluation at the preparation mayors. regional level. stimulates private sector Co-financing by creativity for regional and regional inter- local agents sector programs. guarantees regional Transparency in ownership and budget allocation commitment to and investment investment projects maintenance. facilitates social and govemment Regional controls of governments regional & local prioritize programs. investment needs for the entire region, including municipalities. 60 Inter-Sector and Inter-Government Coordination for Integral Regional Development Programs - Colombia 6.21 In late 1994, an earthquake devastated crops, housing and infrastructure in the primarily indigenous communities of Southwest Colombia, killing several hundred people and elevating the risks of disease and environmental degradation. Although commonly identified as settlements of indigenous people, the affected area hosts several distinctive indigenous communities as well as peasants, rural workers and landowners of different racial backgrounds. As inter-sector and inter-government coordination failed to bring effective relief for the embattled area, the government created a special agency, charged with inter-sector and inter-government coordination. With direct dependency from the President of the country, this agency had some degree of success as an effective coordinator for emergency disaster relief. By 1996 Congress passed a law to stimulate sustainable social and economic development in the disaster area by means of tax, credit and other incentives aimed at private sector investment. The agency originally created for emergency relief was then transformed into a regional development agency, charged with granting and monitoring incentives to stimulate and coordinate private- public cooperation for sustainable investment. Since the disaster region covers areas of two departments or intermediate governments (Cauca and Huila) and nearly a dozen municipalities, inter-governmental coordination --both vertical and horizontal-- was as much as challenge as properly targeting incentives and mobilizing private capital. 6.22 This Colombian experience has the benefits and costs of any other centrally run program, with little appropriation by regional agents. Indeed, there has been little effort to organize and mobilize the local technical and social resources of centuries-old communities. Heavily geared to attracting external capital, the agency's concept of development had little interest or concern for endogenously accumulated social capital. Disconnected from local and regional agents, the agency's efforts focused on attaining new investment in forestry, manufacture and agriculture. Inter-sector coordinated efforts between Finance (Hacienda), Economic Development, Foreign Trade, Health, Education and Public Works were carefully orchestrated at the national level. However, the program had limited impact at the end, with little or no sustainability. Previously established business claimed they had added some new investments and were able to take some advantage of the --rather convoluted-- incentives offered by the central government. Few or none business was relocated to the area in response to tax or credit incentives. Although central government agencies were effectively coordinated, there were no incentives specifically aimed at the communities and the local governments were not brought to the negotiating tables as partners on an equal footing with the central government. The main lessons that can be drawn from the Colombia experience for Mexico's current challenge in coordination for decentralization are: (i) Inter-sector coordination for regional development, imposed from the center by strong presidential powers, may not be enough to overcome sector resistance in the territories, especially in cases where there is limited regional social capital or civil society has not been part of the design and control of the coordination process. (ii) Effective commitment of regional private capital and civil society for a process of inter-sector and inter- government coordination demands recognition of the particular forms of regional cohesiveness as well as of regional resources however meager they might be. Therefore, inter-sector and inter-government coordination must allow for in kind, small contributions from regional actors, as part of the public-private alliance that is at the core of the coordination process. Flexibility in budget and control rules for the transfer of public resources to regional bodies is often a sine qua non condition for the consolidation of a coordinating alliance. 61 Table 10 - Central Government Inter-Sector Coordination Through Presidential Agencies for Sustainable Regional Development, Without Participation of Regional and Local Agents (Colombia) CONTEXT PURPOSES DURATION PARTICIPAT- TERRITORIES INCENTIVES & ING AGENTS MECHANISMS: AGENCIES, RULES, PROCEDURES Emergency- Sustainable Community and Central The region is Incentives exceptional regional inter-government government perceived as a exclusively redistribution of development coordination ministries or socially and addressed to responsibilities. through private with central specialized economically external private Central sector government was agencies, dependent from capital government investment attempted as coordinated by external investments. assumes direct stimulated by emergency presidential resources, leadership, central scheme for agency created lacking capacity Coordination of superseding local government disaster relief for this particular to mobilize central and regional incentives. Central program. resources on government governments. government their own. sector-budgets is coordination Division of achieved through Little tradition of with state and Labor: common goals private capital municipal or and targets as participation. communities Weak regional defined by Disregard for disappeared capacity to plan presidential communal when the and implement coordinating tradition of emergency programs is agency. involvement in program was replaced by local and superseded by a central regional more permanent government decisions, incentive scheme inter-sector for private coordination. Scarce regional capital fiscal resources. investment. Monitoring and evaluation at the Lack of federal No national central level. government incentives seek incentives for to ensure Weak participation and participatory commitment by coordination at coordination at regional agents; state and state no local municipal municipal ownership nor levels. levels. sustainability. No tradition of public-private partnerships or business- community associations. Local and regional agents have no control on investment decisions. 62 Presidential Commissions for Coordination of Decentralization - Venezuela 6.23 Determining who is in a position to effectively coordinate is one of the key dimensions of coordination. Attempts to establish horizontal coordination, like inter-secretary agreements (national level) or conferences of governors, mayors or finance secretaries (state and municipal level) have generally failed in Latin America. Vertically imposed coordination may be more effective at times; however, it is generally counter-productive to stimulate sector or state and municipal initiatives or ensure sustainability. 6.24 The Presidential Commission for the Reform of the State (Comisi6n Presidencialpara la Reforma del Estado, COPRE) was an attempt to strengthen sector coordination at the national level with a view to support decentralization. Besides the President of the country (or his delegate), the Commission was integrated by the key sector ministries for decentralization (finance, planning, interior, social sector). A few governors often participated in the activities of the Commission on behalf of the states. Besides, the COPRE had a regional (deconcentrated) office in every state, headed by the governor of the state, with participation of the national COPRE and the sector ministries. Through this mechanism, the governor was made in practice the coordinator of deconcentrated agencies and overall public expenditure at the state level.2' 6.25 The COPRE was tasked with the responsibility for ensuring implementation of the Law of Decentralization. It monitored transfers of revenue and expenditure responsibilities, evaluated and strengthened state capacity to assume new responsibilities, designed and exchanged accounting and reporting systems, proposed legal and constitutional reforms and developed progress indicators for the decentralization process as a whole. 6.26 Presidential authority backed the inter-sector coordinating efforts of COPRE. Investment planning in the states was articulated between COPRE, the ministry of planning (CORDIPLAN) and sector ministries. The planning exercise at the federal level took into account the inputs and initiatives coming from the states via the regional COPREs and deconcentrated units of sector ministries. 6.27 As the effectiveness of the Commission depended on the continuous and vigilant support of the President, both the Commission and the process of decentralization suffered when President Carlos A. Perez was ousted from office and the later Presidents failed to support COPRE adequately. The main lessons that can be drawn from the Venezuelan experience for Mexico's current challenge in coordination for decentralization are: (i) Presidential commissions are hardly sustainable as they depend heavily on the support of the president that created them in the first place. (ii) Besides inter-sector representation, presidential commissions or committees need the active commitment of finance and planning agencies. They also need a strong linkage with regional authorities, especially when governors play a significant coordinating role for deconcentrated federal agencies. 21Decentralization in Venezuela is practically limited to the state level. 63 COMMON LESSONS FROM LATIN AMERICAN EXPERIENCES 6.28 Besides the particular lessons from each individual experience sketched above, this section draws the main common lessons from those experiences as well as from other experience, from Latin America and elsewhere, with institutional coordination for regional sustainable development. (a) There is a more favorable context to coordination when responsibilities and resources are clearly divided yet all sectors and levels of government perceive the benefits of working together for achieving inter-sector or inter-government externalities. Social capital is a significant asset, but adequate incentives are necessary to activate regional willingness to participate. Deconcentration is particularly helpful to coordination when federal secretaries and agencies are responsive to the national level and receptive to regional and local initiatives. (b) Program by program or piecemeal approach to coordination may be the first step towards comprehensive or inter-sector coordination. Similarly, horizontal coordination among a few agents located at the same level of government (and the same hierarchical level) may prepare the ground for multi-government coordination. Vertically imposed coordination is not usually sustainable in the medium or long term. (c) Coordination may also be used as a transitional tool towards further decentralization. Indeed, coordination is a trust building tool that gradually stimulates higher levels of government to transfer responsibilities to lower levels. As secretaries and governments develop uniform accounting, reporting and monitoring, they develop confidence in their peers' capacity to act with the same competence as if they were acting by themselves. (d) The territory for regional coordination may overlap or not with pre-existent jurisdictions. What is important is that every participant in the coordination effort finds the identified territory relevant to its purposes. (e) Sustainable coordination requires appropriation by regional --even local-- agents. (f) Incentives are essential to the design of coordination. Every participant must perceive the coordination exercise as a win-win process capable of effectively mobilizing everyone's will. Fiscal incentives have proved to be effective ones. On the other hand, strict sector-budget rules and formal control rules are usually serious obstacles to regional coordination. On the contrary, budget flexibility and performance or impact controls favor coordination. (g) Budget coordination may be achieved through authoritative decisions or voluntary arrangements. Top-down decisions (budget allocation for special presidential agencies or inter-sector programs) may be effective in the short-run, but are not likely to remain in the medium and long term. Creative initiatives for sustainable. coordination require voluntary budgetary commitment of participating agents. (h) Capacity building for coordination may be more efficiently achieved by learning from previous experiences and horizontal exchanges among agents located within the same sector or level of government. 64 7. CONCLUSIONS AND RECOMMENDATIONS 7.1 Previous chapters have summarized the regulatory framework of institutional coordination for regional development in Mexico (chapter 4), analyzed strengths and weaknesses of its application in four case study areas (chapter 5), and reviewed international experiences of coordination in the LAC region (chapter 6). This chapter draws conclusions from that material, and proposes recommendations for improving the effectiveness of coordinating development activities in priority regions. GENERAL OBSERVATIONS Institutional vs. Social Coordination. 7.2 As recognized by the BCI, institutional coordination is not an end in itself, but an instrument to promote sustainable development in Mexico's priority regions. If several instruments exist for enhancing regional development, a balanced assessment of efforts to be infused in each instrument (including improved coordination of government institutions) should be based on the relative contribution of each instrument towards attainment of the ultimate goal (regional development). 7.3 As suggested by the conceptual framework of chapter 3, and confirmed by international experiences (such as those illustrated by chapter 6), regional development typically requires the mobilization of a number of different actors in the government, private sector, and civil society at large. Different strategies are conceivable to address the collective action problem posed by the mobilization of multiple actors. Table 11 - Strategies for regional development B 2 ~~~~~Supplyl Make One government A Many government . ~~~~agency -agencies -_ Individuals No coordination problem No coordination problem Coordination of means E (Private goods) 4 _ _ _ _ B_5 E 4(-) Cordntinofgal;trnmisono 6 Communities Coordination of goals Coordination of goals; transmission of Coordination of goals and means _ (Public goods) I_I Notes: () Govemment may provide private goods to compensate for failures in the credit, output and inputs markets (') Organized community groups may agree to purchase local public goods from the market, without govemment intervention (e.g., street maintenance) 7.4 Table 11 reproduces the typology of coordination problems introduced earlier (Table 2, see page 20), and proposes a few schematic approaches to mitigate coordination problems. A first 65 approach (arrow A) consists in determining the involvement of public agencies on the basis of simple criteria of sectoral comparative advantage at the horizontal level, and, at the vertical level, of jurisdictional competency.22 A transition from a multiple to a single agency mode is clearly likely to attenuate problems of means coordination (even though it will not solve issues of goal coordination and of bottom-up information transmission). In particular, it would substantially reduce duplications of efforts that can be observed across very similar programs implemented by federal agencies such as SAGAR, SEMARNAP and SEDESOL. 7.5 Another approach (arrow B), which is becoming increasingly mainstream in Mexico and several other developing countries, consists in minimizing the role of the government in the provision of services to individual and communities. Wherever feasible in efficiency terms (and viable politically), transition to market supply is likely to reduce the need for coordinating means (ce'l 3, 5 and 6). 7.6 If justified on equity grounds, the government may still be the financier of private goods and services, but it does not need to be its provider. Under appropriate principles of transparency and sustainability, funds may be transferred to beneficiaries for direct selection of goods and services that best meet local needs. This may be a particularly desirable arrangement in situations where the co-existence of many development programs with complex (and often incompatible) operational rules would make government coordination especially cumbersome. In Table 11, this point is represented by the transition from multiple agencies funding/ execution (cell 6) to community execution (cell 4) (more on this below, in the section on "Resource Coordination"). 7.7 Notice, however, that when it comes to public goods (cells 5 and 6), market provision can not normally be associated with individual choice: even if given execution responsibilities (arrow B'), communities will still have to prioritize local public goods (and solve the related goal coordination problems). 7.8 In summary, while in general desirable, coordination of government action need not be always a pre-condition for regional development. In several cases, the issue is much more promoting coordination of civil society groups for the prioritization and satisfaction of regional needs. The government may still play an important role by facilitating community consensus, and providing legal and technical instruments for community-based execution of development projects. Many relevant lessons can be drawn from the experience of social (or demand-driven) investment funds, both in Mexico and in several other countries of the LAC region (see for example, Wiens and Guadagni, 1998). The regional scope of institutional coordination 7.9 Coordination problems may be alleviated by redesigning the distribution of decision- making and execution responsibilities among government, civil society and the private sector, as discussed in the sub-section above. Even so, there may be still cases where several government programs at multiple levels of government will remain (at least in the short to medium terms). A relevant question is which of those programs should be coordinated in regional forums. 22 The involvement of multiple levels of govermment may not be eliminated (and in fact may be necessary) in presence of inter-jurisdictional extemalities and/or inter-governmental transfers. See section on "The regional scope of institutional coordination" below. 66 7.10 To answer that question, Figure 9 proposes a classification of government programs along the two dimensions of source of funding (federal, state and municipal), and of breadth of impact (federal, state, regional--i.e. inter-municipal--and municipal). Wherever the area of impact coincides with the jurisdiction financing the program, there appears to be no need for (vertical) coordination. Figure 9 - The scope for regional coordination: funding and impacts of government programs Source of funding_| Federal State iunicipal 1 Federal ______ _ ___ m - : - --.... . .. .....-.,-,, - Om State E E Regional .: :::::: :::_____ ....... ::::: :::::: ...... . . . . . . . . . . .: - I . . . . . . . . . . . . . _ Municipal ..: :.:: - : Legend: | l Principle of subsidiarity applies: government programs generate benefits at the same territorial level in which funds for their financing are raised Inter-governmental transfers: higher level of government transfer resources to lower levels to compensate for :: :-:: :: ::: .::: .::::::: development imbalances , .:.-..::::-:::::: Inter-jurisdictdional extemalities: these are programs financed at lower levels of govemment which tend to have impacts at broader jurisdictional levels. In the absence of internalization mechanisms, programs with negative FNEE\ ~~ externalities may be over-funded, and programs with positive externalities may be under-funded L 3 1.. Priority area for institutional coordination at the regional level _ _ .... ||Additional area for institutional coordination (no regional impacts) 7.11 However, the federation (and to a lesser extent the states) does finance programs with regional and local impacts, with the rationale of mitigating infra-national differences in income and wealth. Conversely, there are programs funded (or executed) at the state and municipal level, which may have inter-jurisdictional effects (positive or negative). For example, agricultural development programs (some of them co-funded by the state) may have negative environmental externalities (agro-chemical pollution, soil erosion). Infrastructure programs funded by Municipios (under Ramo 33) may help generating economies of scale at the regional level. In the absence of a regional forum for the identification and internalization of externalities, programs with negative external effects may end up being over-funded, and programs with (potential) positive effects may end up under-funded. 7.12 Cells 7, 8 and 9 would appear to be primary candidate to delimit the scope of institutional coordination in regional forums. In addition, cells 10 and 11 identify programs funded by the federation and the states with primarily impacts local (community and municipal level). Despite the absence of regional impacts, management of this type of programs through a regional mechanism may still be justified if executing agencies can decrease administrative costs by 67 grouping local demands in regional clusters. In this case, goal ranking at the inter-municipal level is not needed. What is necessary is for federal (and state) agencies to de-concentrate decision making at the regional level and to promote consultation among regional delegates on joint funding/ execution of multi-sectoral projects that necessitate the involvement of more than one agency or program. The role of regional forums 7.13 It is unlikely that overcoming infra-national income imbalances may be accomplished by simply removing obstacles to local market forces. Alternative mechanisms must therefore be devised to address the collective action problem of regional development. The notion of regional councils for sustainable development proposes (implicitly or explicitly) a solution to that problem: the creation of a space for integral development planning and comprehensive resource mobilization. However, there are many ways of conceiving the role of the councils for regional development. 7.14 For illustrative purposes, two models of (or approaches to) regional councils can be identified. In the first one (which can be called the "administrative" model) councils are primarily mechanisms to assemble packages of integrated public support to local needs. The initiative rests by and large with government agencies (mainly federal), which promote the formation and finctioning of councils, and match every year community demands with their pre-designed development programs. The fundamental objective of the administrative model is to improve efficiency in the use of a given public budget. Under the administrative model, the main rationale for regional councils is participating into the operation of federal programs (possibly including state pari-passu contributions). The legal forms that council can acquire are all those compatible with such a function (e.g., asociaciones civiles, etc.). 7.15 In the second model (which can be defined the "leadership" model), councils are the forum for the formation of a medium- to long-term shared vision of the region's future, and take on a leadership role in raising and administering public and private resources for translating that vision into reality. The fundamental objective of the leadership model is to promote long-term social sustainability of regional development. The initiative rests much more with civil society organizations (such as the council) than with federal agencies (who can in some cases be the initial facilitators of the process). To the extent that the necessary agreements are politically viable, the councils can take on the form of associations of municipalities, now constitutionally sanctioned by the amended article 115. Under those circumstances, regional councils have the ability to mobilize and coordinate a broader array of funding, including federal, state, municipal and private sector resources. 7.16 The Priority Regions program of Mexico's federal government seem to contain elements of both models, possibly in an effort to compromise among the alternative views of the different agencies signatories of the BCI. The co-existence of the two models may be captured by the image of "the negotiation table." 7.17 At one end of the negotiation table seats the civil society representation (comrnunity groups, producers association, etc.), and at the other, the different government agencies (at the 68 federal, state and, where possible, municipal level). The two ends of the table cooperate to reach a consensus for mobilizing resources, mainly via the POA process. 7.18 In regions where the bargaining power and political weight of the community groups are stronger, regional councils will be closer to the leadership model; in regions where they are weaker, regional councils will approximate the administrative model. Table 12 summarizes the key elements of the different models discussed so far. Table 12 - Different models of regional development Regi onal development models Administrative Negotiating Table Leadership Mismatch between govemment Inability of civil society to catalyze Main problems Duplications and untapped programs and community needs; and coordinate public and private addressed complementarities among government difficulty in funding multi-sector support for long-term, integral programs projects with edsting sectoral regional development programs of Fundin Mainly federal and state Federal, state; some municipal municipal and prnvate sector Approaches to: _ Govemment infers regional priorities from Goal diagnostic studies (these could reflect more Consensus between civil society Civil society groups Coordination or less closely communities' actual groups and government preferences) Resource Negotiation between civil society Coordiation Govemnment agencies (via SARP) gopangvemntRegional council Coordination groups and government 7.19 The current reality of many priority regions (including those of this report's case studies) seems to be somewhere in between the "administrative" and the negotiating table model. However, it is conceivable that councils may evolve over time; and it is plausible that general processes of decentralization and democratization under way may create the conditions for many councils to eventually evolve towards the leadership model. Regional Councils and local heterogeneity 7.20 It is important to recognize that in each region, the specific configuration of the council and its evolution over time will respond to site-specific geographic, social, economic, and institutional factors. Even if the identification of the conditioning factors that are most important should itself be conducted on a case by case basis, for the sake of analysis it is convenient to propose a few categories of variables that are likely to be of relevance in most regions. 7.21 Establishing regional development forums (as indeed, any form of organized collective action) entails both the ability of stakeholders to promote change and the likelihood that those changes will be supported (or at least accepted) at the political and institutional level. Borrowing from analytical frameworks that have been developed in greater details elsewhere (see for example Fox, 1996), it is therefore proposed here to consider as key variables: 69 (a) the degree of social cohesion (which refers to the processes through which civil society organizes itself for prioritizing and pursuing common development objectives); (b) the prevailing social and political context (i.e., the prevailing attitude of local governments and local elites towards an approach to local development based on the notion of region and on the use of participatory methods). Collective action will be more viable where social cohesion is stronger and where the political and institutional context is more supportive. Conversely, it will be more problematic in regions where local organizations are less developed and/or prevailing political conditions are adverse. Table 13 summarizes the proposed typology in schematic terms, with only two values for each of the variables considered. The choice of regions (or states) to exemplify the 4 different cases, which is based partly on the case study material of chapter 5 and partly on the analysis of Fox (1996), has purely illustrative purposes, and should not be interpreted as conclusive. Table 13 - Regional Development options and local conditions Political Climate Favorable Unfavorable A ~~~~~~~~~~B A Example: Some regions in Chiapas High vpll* ExampsleSoment: progress towards leadership model * nhIpralf aPmPnt: progress towards leadership model Hfge* a .ib in progress .to l.edershipmel feasible in the mid term, but constrained by local political feasible in the mid term, with limited govemment codtosNetiinrquedomtgaeheskf = ~~~~interventions in institutionsl capacity building podtolarNgoization ofeonficedts withinat councils f |Government| Region-wide Investment ideas rivate Sector Single Project h ginvestments ideas| nennt FRegional Fund Regional development Regional Regional POAs Strategy Council Ventanilla Unica Community planning |\ Single project investment Goals coordination 7.40 Coordination of government actions without a clear sense of the goals, needs and priorities of local communities would be fruitless. The process of eliciting, aggregating and ordering preferences of beneficiaries is very important, but by no means straightforward. Communities must be enabled to fonnulate their needs in an integrated, programmatic way, in which priorities, trade-offs and time horizons are worked out and made explicit. Strengthening of municipal and regional forums for community planning appears to have a key role. Municipal level 7.41 Municipal level forums have two important functions in support of goal coordination. The first function is aggregating and prioritizing community demands for goods and services that can be provided at the municipal level. The second function is transmitting to regional fora (such as regional councils and the COPLADEs' regional sub-committee) needs and demands that, because of their inter-municipal nature, can not be accommodated at the municipal level. Clearly, only the second function relates to regional development planning. However, efficient and participatory municipal level decision making has also relevance, albeit indirectly, because it is the building block of higher level planning; and because it in its absence unmet local needs may search institutional and political outlets at the regional level. 76 7.42 In terms of municipal level goal coordination, there appears to be a need both for improving participation and for enhancing capacity. Actions to enhance participation in municipal decision making may include: (a) revitalizing the role played by the Cabildo (the local congress) in program oversight and assessment; (b) promotion or strengthening of plural fora for the expression of sectoral and community demands, so they can be effectively included in municipal development plans; (c) selected use of conditionality in state or federal matching grants to promote participation. 7.43 Strengthening the administrative and planning skills of municipal government is becoming a recurrent item in the list of recommendations of many studies of decentralization. In the present context, building capacity appears particularly important to ensure that the process of developing municipal plans has built-in mechanisms that guarantee community consultation and consensus. 7.44 In terms of contribution to regional planning, appropriate incentives would need to be provided, to encourage integration of municipal presidents and their staff into regional councils and COPLADE's SARP. In particular, there needs to be clarity on the role of municipal officials in these forums, and the opportunities open to them for contributing to the decision-making process. Training programs on rights and obligations of members of regional forums would appear necessary, and perhaps worthwhile to be included as a regular item in the budget of these forums. The reform of article 115 of the Constitution may provide new incentives for municipal participation in regional forums, especially if the latter take the form of associations of municipalities. 7.45 The very short duration of municipal administrations (three years) is likely to constraint significantly the ability (and incentives) of the Municipio to promote community goal coordination and to contribute to regional planning. Pending a legislative reconsideration of municipal tenure, it may be important to consider alternative mechanisms to ensure continuity of municipal action on both fronts. These could include contracting out to independent professional offices selected functions of follow-up and liaison between the Municipio and regional forums. Regional Councils 7.46 To operate effectively in the longer run, Councils will need to have a better-defined role, both internally and vis a vis other institutions. They will need comprehensive strategies guiding their action; and they will need an incentive framework promoting stakeholder participation and the support of the various institutions they intend to mobilize. The findings of the case studies suggest that despite progress made, regional councils still face significant challenges to their ability of aggregating and prioritizing beneficiaries' demands and coordinating institutional response to those demands. 77 7.47 Regional councils have been (or are being) established in most of the priority regions.24 Their detailed structure, list of attributions and criteria for the delimitation of territorial influence is likely to vary across regions and state to accommodate local circumstances and constraints. The following discussion will focus on a minimum set of common features that would be desirable for all Councils to possess, and that the federal government may consider in its effort of establish a common platform of dialogue with the states.25 7.48 One central set of issues concerns the Councils' legal and institutional standing, as well as their source of political recognition. In particular, an area that remains unclear concerns the linkages between the Councils and the COPLADE/SARPs. In most regions, councils originated from the need to aggregate and prioritize community needs. The question then is where should a coordinated response (integrated "supply") from public agencies be devised. If the latter function is assigned to the Council (as it is happening in some regions), a conflict of attributions with COPLADE/SARP may arise." 7.49 The problem may be alleviated by appropriate adaptation of the "negotiating table" model. In particular, the regional council may work as meeting point between the "demand" side (community groups, producers organizations), and the "supply" side (federal and state government agencies). The demand side can be formally constituted as an "asociaci6n civil" (or perhaps even better, as an association of municipalities); the supply side, as the SARP. 7.50 Each side ofthe table has separate internal meetings with different purposes: community meetings for determining regional priorities and developing related funding proposals, and technical meetings between 'administrators' to allocate tasks and budget responsibilities among governnent agencies. In this model, it does not matter how many people from either side of the table attend the other side's meeting; nor does it matter how each. side's internal decisions are made. There is no need for cross participation: neither federal agencies trying to define regional priorities nor local 'beneficiaries' being referees in administrative or institutional jurisdiction disputes. What really matters is the consensus reached within the regional council: this sanctions the coordination of goals (decided by community groups), and clarifies the coordination of means (agreed upon by govemment agencies). 7.51 The nature of the negotiations between the two parties will determine the specific functioning of councils, as well as the balance of attributions (and power) therein. Reference to the taxonomy proposed in Table 13 might be helpful. In regions where limited capacity, weak social cohesion, or insufficient trust prevails, negotiations may be limited to setting broad priorities and targets for the local application of federal or state programs. In some other cases, 24 According to information provided by staff of the Federal Government, as of May 1999, regional councils had been established in 31 of the 36 priority regions. 25 At the time of drafting this report (spring - summer 1999), the federal government was in the process of drafting guidelines for regional councils. The discussion in the text takes into account a working draft of those guidelines. 26 One solution that is being followed in some cases, to avoid interference with the policy making attributions of the state government, is to give Councils responsibility for developing a regional strategy and, year after year, and for developing (for SARP's approval) a proposal for an integral (i.e. multi-agency) regional program, consistent with the strategy. The solution selected does not seem satisfactory, however. If endorsement from the SARP is guaranteed, then the double reading is redundant; if it is not, then it implies that agreements negotiated at the council level have in fact little weight since they can be re-negotiated (and modified) in a different forum. 78 the SARP side of the council may want to devolve program execution responsibility to the municipality association, retaining general broad attributions of setting standards and monitoring implementation. To build confidence gradually, devolution may take the form of time-bound agreements ("convenios"). 7.52 In addition to representing the "supply side" within regional councils, SARP may have other important roles. A first one relates to the existence of several priority regions in one state. In that case, the SARP could play an important role of ensuring minimum standards across regions in its jurisdiction in areas such as regional diagnostics and regional development program, capacity building, etc. Furthermore, if regional budgets are assigned on a state basis, the SARP may be charged with the task of determining individual region allocations (preferably on the basis of a transparent formula). Once regional allocations are determined, assignment of individual regional budgets across programs or projects should be negotiated at the regional council level. Finally, SARP could have a subsidiary role of intervening if and when a Regional Council does not function appropriately. This role would include, inter alia: appointment of government side coordinator/spokesperson, promotion and facilitation of meetings, monitoring, supply of technical assistance, dissemination of best practices. SARP however, should not take unilateral decisions about regional priorities and other substantive aspects of the POAs process. 7.53 The Council should be the collegial body charged with the authority of developing, approving, supervising and evaluating comprehensive regional development strategies. That is, a strategy for all those activities that have inter-municipal scope and that can not be executed by any given institution in isolation (see paragraph 1 and subsequent ones). 7.54 In addition to representatives from the three levels of governments, Councils should include a wide representation of the region's social and productive groups, with appropriate presence of vulnerable and disadvantaged groups. Mechanisms for selection of representatives should be transparent and auditable and based on designation by lower level collegial bodies (e.g. ejido assembly, cabildo, etc.). 7.55 Regional Councils should have an appropriate internal organizational structure aimed at the efficient processing of informnation and at the promotion of consensus-based decision-making. To ensure consistency with the existing normative framework, decisions of the councils will need to be endorsed (and formally ratified if required) by bodies constitutionally or legislatively sanctioned, such as COPLADE/SARP or associations of municipalities (AMs). It is possible to distinguish several ways in which formal legitimacy can be attributed to council decisions: (a) If councils are inscribed into the formal structure of either SARP or AMs, formal validation is automatic. (b) If councils have a distinct status, then their deliberations have to be ratified by SARP or AMs. Ratification, however, can be either: (i) granted on a case by case basis, (ii) or agreed upon in advance, via specific "block" delegation agreements (e.g., the regional council receives delegation to deliberate on specific matters/ programs for a specific time period). 79 7.56 Mechanisms to resolve possible controversies within the councils would vary, depending on the particular configuration selected. In cases a) and b) (i). above, conflict resolution would be sought mostly by negotiations among the different interests represented in the council. In case b) (ii) above, decisions would be taken on the basis of majority votes. 7.57 The internal structure would include a plenary assembly, working level commissions and an internal audit commission. Rules of procedures would govern the operation of the council and of its internal organs. In the interest of transparency, appropriate publicity should be given to the meetings and decisions of the Regional Council. Councils should have their own operating budget for financing meetings, the operation of a small secretariat or technical support unit and studies/ reports (see Box 4). Box 4 - Technical Support Units for Regional Councils 7.58 The council may contract out technical work to extesnal professional organizations (individual consultants or consulting firns, universities, etc.) Out-sourced activities would include the preparation of the comprehensive regional strategy and annual regional operating plans; as well as specific studies, and monitoring and evaluation reports. 7.59 In addition to privathe Vesnianal prepcouncil may rely on the federal network of technicians and extension workers to facilitate the exchange of technical, program and project information between the regional council and the communities. 7.60 The implementation of the regional swategy over the given planning horizon would result from the yearly execution of the annual regional operating plan. The plan would encompass a range of programs and projects executed by the different public agencies, coantunity and producers groups, represented in the Regional Council and supporting the regional strategy. The Regional Council would have no mandate for centrally controlling the execution of individual activities.7 These would remain the responsibility of the various agencies, which would continue applying their own procurement and disbursement rules. In some cases, public agencies in consultation with the council may contract out program execution to non-goveoment entities, such as co umunity groups or producers associations. 7.61 Accountability. The regional council approach should not entail centralizing development management. Instead, it should entail integral planning and accountability for compliance with 27 Monitoring information could be provided to the council by the SARP, however. 80 the agreed-upon strategy. To be consistent, multi-institutional execution of a single comprehensive regional strategy requires transparent accountability mechanisms. That is, mechanisms generating obligations for all parties in the council to make their activities consistent with the regional strategy. The following elements seem key in defining accountability mechanisms: (a) A set of indicators measuring (in a quantitative or qualitative way) the conformity of individual development programs with the regional strategy. In particular, conformity may be measured in terms of the program's ability to contribute to progress towards pre-determined development goals (e.g. number of new jobs created, new areas brought under sustainable cultivation techniques, etc.). (b) Identification of public officials held accountable for the attainment of the indicators (e.g. state-level delegates of federal agencies, staff in the state government, etc.). In case of programs executed by NGOs, accountability would rest with the NGOs' legal representatives (as well as with a public officer responsible for overseeing the program and the compliance of NGOs as outside contractors). (c) A transparent process for evaluating annual and/or multi-annual program performance in the light of the indicators. It should be clear who commissions the evaluation, who funds it and who undertakes it. A possible arrangement would have the Regional Council finance and commission the evaluation to an independent body (e.g., consulting firm). (d) A set of sanctions for possible inconsistencies between the regional strategy and the agencies' programs. These could assume various forms. For example, a commitment from federal and state agencies to include the results of the independent regional evaluation into their own procedures for evaluating staff performance. In the case of NGO-executed programs, the sanction would be the discontinuation of the program execution agreement. Mechanisms for integral regional planning 7.62 The BCI stipulates the development of a consolidated joint regional assessment (Diagn6stico Regional Unico) as a premise for the preparation of a Regional Development Program. Such documents may be of central importance in developing a shared vision of the region's challenges and opportunities and, therefore, for establishing broad mandates, and subsequently, specific responsibilities for each of the public, social and private organizations to be mobilized in regional development. 7.63 The following points may be considered in the development of Diagn6sticos and Regional Development Programs: (a) The federal steering group would establish minimum standards for processes and products to be followed in the preparation of Diagn6sticos and Regional Development Programs . (b) These standards would include explicit criteria and mechanisms of social participation in the preparation and revision of the documents. 81 (c) Regional Development Programs must include explicit criteria and planning methods for environmental and natural resource sustainability, such as for example the Action-Impact Matrix (see Annex 2 for details). (d) Both Diagn6stico and Regional Development Program would be commissioned by the regional council to either a task force of government institutions, or to independent external expert; they would then be reviewed (modified as necessary) and approved by the Regional Council. (e) Terms of reference would be prepared by the Council's technical support unit and submitted to the council for approval. In particular, the Terms of Reference should ensure that the Regional Development Program be structured in a way that enables simple translation of its provisions into government programs and projects. (f) The Regional Council would establish a calendar and a mechanism for periodic (say every 2 to 4 years) revisions of the Regional Development Program, to ensure that new development issues and lessons learned could be reflected in the Program as they arise. Revisions with a three-year cycle could be considered to re-align the strategy with changes in municipal development plans. Resource Coordination 7.64 Budget coordination is currently pursued by and large a posteriori, that is, at the execution stage. COPLADEs and COPLADEMUNs should serve the purposes of inter-sector and public- private coordination at the state and municipal levels. However, these are predominantly spending mechanisms that are not usually concerned with fiscal responsibility or balancing the revenue and spending columns of the fiscal equation. As a result, they have not been particularly effective for mobilization of additional local and regional resources. 7.65 The existing mechanisms for budget--primarily spending-- coordination tend to restrain state and municipal autonomy and initiative. Rather than stimulating more efficient allocation of resources in the territories, they seem to serve the purpose of federal control of the effective allocation of resources. As a result, these mechanisms do not help clarifying distribution of responsibilities among levels of government nor do they facilitate accountability of each level of government. Neither appear these mechanisms to be particularly effective for spending coordination, as they are mainly formal budget and planning tools. Besides, sector fragmentation of the budgets discourages inter-sector coordination within one level of government (not to speak of inter-government and inter-sector coordination) for allocation of resources in a specified region or sub-region. 82 7.66 Measures can be considered, which could help create the basis for strengthening budget' coordination towards regional development in the short term. Key initial steps include establishing uniform accounting and exchanges of sector and inter-sector information, both top- down and bottom-up. And ensuring similar patterns of deconcentration across sectors: federal delegates in the states should have matching jurisdictions and comparable authority to be able to cooperate effectively. Ideally, each federal agency should have a representative, within the staff of the "delegaci6n," with sufficient decision making power over any given region. 7.67 However, horizontal and vertical coordination of public resource use would require the development of some additional ad-hoc mechanism. Indeed, the Framework agreement for institutional coordination (Bases de Cooperaci6n) contemplates a "Ventanilla Unica de Atenci6n Institucional" (single window for institutional support) to be managed through Regional or Municipal development councils. Two different approaches may be considered in the definition of such a mechanism. In the first one, the ventanilla would be a mechanism to process all funding applications, but not outlays (coordination without pooling). In the second case, the ventanilla would operate as a mechanism for both applications and outlays processing (coordination with resource pooling). 7.68 Coordination without pooling. In this first scenario, a sequential process of institutional consultation would be followed during the development of the POAs for each level of govermment (see Box 5 for details). Broad priority areas for resource coordination would be determined on the basis of the regional strategy (see section starting in paragraph 7.2) under the leadership of the federal government, but with incentives -at the planning and execution stages- for the other governments to participate. Box 5 - Budget coordination without resource pooling Participating secretaries and local governments would follow these steps: reaato .lannin During the first few months of each year. participating secretaries would prepare sub-regional investment plans in conjunction with participating states and municipalities within the regional councils or simnilar participatory forums. Municipalitie, By April, based on earlier discussions in regional fora, participating municipalities -would make a prelirinary estimate of the amount of local resources they could contribute to thjoint subregional planning during the next fiscal year. These estimates would be reported to the state. State. Munic&4ml associ tions. The states would aggregate the proposed municipal contributions, prepare similar estimates and --by May each year- submit the investment plan and the proposed state and municipal matching contributions (divided by sector) to the sector secretaries involved. This submission would be similar to the POAs the states used to present to sector secretaries. The states would stimulate formation of municipal associations for the purpose of proposed investment projects at the regional level, and document the existence and operation of formal or informal associations at the time they submit their sector proposals for sector matching contributions. The budget proposal by the states would include a plan for municipal and state participation in execution as well as state monitoring and control of project execution and an estimate of administrative costs. eral S cretaries. Par passu nrograms and special.funds. By June each year participating sector secretaries would estimate the sector matching contributions required from the federal government and include theem within each secetary's budget proposal to the SHCP. 44. One or more of the secretaries may be developing a pari passu program with states or municipalities that may potentially incilude all or some of inter-sectortinter-govemment projects. In that cases, the secretary will fit the 83 7.69 An approach to budget coordination along those lines could be a win-gsin for all participating agents: (a) The SHCP would benefit from reduction and simplification of transfer windows to state and municipal government, transparency, efficiency and economies of scale of pari passu programs and simplification of special funds. (b) Participating secretaries would also benefit from sector budgets that cohesively integrate matching prograss, special funds and state and municipal requests for territorial expenditures. Besides, secretaries would benefit from mobilization of additional sector resources as well as execution, monitoring and control at state and municipal levels. (c) State and municipal govenments would benefit from bottom-up inter-goveyment coordination of priorities and access to clear, predictable sources of revenue from the federal government. (d) Finally, it would promote the consistency between individual agency programming and overall regional strategy. 7.70 Information on the regional POAs that would result from such a process would be provided to the administrator of the Ventanilla Unica, along with the operational manuals of the various programs involved. The Ventanilla would then be responsible for disseminating that information at the municipal and community level and soliciting eligible funding proposals. There would be a technical unit for providing technical assistance to applicants in the design and revision of proposals. However, funding would be administered through the existing sectoral program, and not through the ventanilla. 7.71 The disadvantages of the non-pooled approach are twofold: (a) Transaction costs (technical revision of operational manuals, information exchange, negotiation), are likely to be high. (b) Funding would still be managed on the basis of separate administrative and operational rule (one set of rule for each program). This may make it difficult to fund projects or requests that are multi -sectoral in nature, but that do not "fit" into the normatividad of any of the existing programs. 7.72 Pooling of resources. To reduce transaction and increase adaptability of programs to a larger variety of funding requests, a second scenario may be considered. This could be a possible evolution of the first one once confidence is built, information is homogenized and administrative arrangements are streamlined. Or it may be considered directly, perhaps initially on a pilot basis, as suggested in paragraph 7.32. 84 7.73 In such a scenario, the secretaries may propose the creation of a special inter-sector regional fund, collecting a given percentage of each federal agency's budget for the priority regions, with matching contributions from local governments clearly specified, and transparent rules of access by state and municipal governments. This fund would encompass the corresponding pari passu programs of the federal secretaries in order to prevent additional fiscal pressure. Wherever associations of municipalities are forned, the regional fund can also pool municipal resources. 7.74 The special fund would reinforce the potential advantages of the first scenario concerning simplification and coordination of budget preparation and transparency in purposes and allocation of fiscal transfers. It might also benefit from the more rigorous monitoring and control mechanisms that are being conceived for Ramo 33 transfers. 7.75 The regional fund would have a specific set of administrative and operational rules, transparent and clear, and yet flexible enough to encourage a wide range of funding proposals. A key requirement that may be established would be the consistency between project proposals and priority areas identified in the regional development program (or regional strategy). Again, information dissemination, screening of and support to, funding proposals would be administered through the Ventanilla Unica. 85 BIBLIOGRAPHY Buschor, Ernst and Schedler, Kuno, Eds. 1994. Perspectives on Performance Measurement and Public Sector Accounting. Berne - Stuttgart - Vienna: Haupt. Barros, Pedro Luiz and Cabral, Vera Lucia. 1995 "Decentralizacao e Crise da Federacao" in R. de Britto Alvares Affonso and P. L. Barros Silva, Eds. A Federacao em Perspectiva. 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World Bank 1995 Local Government Capacity in Colombia: Beyond Technical Assistance. Washington D.C.: The World Bank. World Bank 1998. "Can backward sub-national regions catch up with advanced ones?" PREM Notes n. 6, July 1998. Washington D.C.: The World Bank. 89 Annex 1 - Federal programs in the Huasteca case studies This Annex summarizes in tabular form the essential elements of the federal development programs reviewed during the field work in the Huasteca region. The following clarifications are in order on the tables' headings: Objectives : The following classification is proposed: (a) productive, (b) direct income support, (c) capacity building, (d) health, (e) basic infrastructure, (f) conservation, (g) advisory/technology transfers, (h) Other. Requirements: these are the requirements to access the programs' funds (human, informational, material requirements). For simplicity, two types of requirements are considered: * Simple: one agency and/or one process are involved in the verification of the requirements; * Complex: several agencies or processes are involved in the verification of the requirements. Financing: three possibilities are considered: * Own funding, which is when the program has its own budget; * External: the budget comes from a source other than the program's implementing agency; * Mixed, which is when the budget is funded both by the implementing agency and by other sources. Execution: State and municipal agencies may be involved in the execution. The summary table specifies if this is the case, and if coordination mechanisms are envisaged. Coordination may take the following forms: * Among federal agencies, * Federation - State, * Federation - State - Municipality, * Government and social organizations. Cooperation: The table indicates if any of the program's operational rules manuals allow for collaboration with other federal agencies. 90 Table 14 - Federal Programs in The Huasteca Veracruzana PROGRAMS OFFICE OBJECTIVES REQUIREMENT FINANCING OPERATION COLLABORATION COORDINATION FONAES SEDESOL Productivo. Sencillo Mixto (la dependencia Fonaes Parece no existir la No prevista entre dependencias, (Fondo Nacional de y sectores sociales). colaboraci6n de otra aunque hay coordinaci6n Apoyo para Empresas El monto para 1997 dependencia federal. informal. Sociales). es: Se preve coordinaci6n vertical $ 6,277,398.68. con instancias estatales. Programa de SEDUVER Productivo, Sencillo Mixto, cuenta con Dependencia SAGAR A traves del Gobierno del Desarrollo Productivo preservaci6n, aportaciones federal, Estado. Sustentable en Zonas asesoria. estatal y de los Rurales Marginadas. productores, el monto total es: $ 9,820,000.04 pesos). Programas de SEDESOL Capacitaci6n, Sencillo Para 1997, el * Coordinaci6n Parece no existir la Ejecutivo Federal y Ejecutivo Superaci6n de la salud, Ejecutivo Federal, a Nacional de colaboraci6n de otra Estatal. Pobreza, dentro de alimentaci6n, traves del Ramo 26, Educaci6n, dependencia federal. este se encuentran: infraestructura. asignara al Ejecutivo Salud y Programa de Estatal recursos Alimentaci6n Educaci6n, federales por un (CONPROGRE Salud y monto de SA), Alimentaci6n $40,696,400.00, Copladever, (Progresa) complementado por Subcomitd de Y el Ramo 26: aportaciones estatales Atenci6n a "Desarrollo Social y por un monto de: Regiones Productivo en $ 13,565,467.00. Prioritarias. Regiones de Pobreza", incluye los programas: empleo temporal, cr6dito a la palabra, empresas sociales, atenci6n a zonas aridas, jornaleros agricolas, mujeres y servicio social. Programas de SEDESOL Infraestructura, Sencillo N.D. * Sucomite de Parece no existir la Ejecutivo Federal y Estatal. Desarrollo Urbano y Vivienda. Desarrollo colaboraci6n de otra Vivienda. Urbano y dependencia federal, Vivienda del .______ _______ _______ _______ ___ _ .Copladever 91 PROGRAMS OFFICE OBJECTIVES REQUIREMENT FINANCING OPERATION COLLABORATION COORDINATION Alianza para el Campo. Dentro SAGAR Productivos, Complejo Mixto, se hace con Opera con el apoyo Parece no exisitir la instituciones a nivel de este programa se encuentran capacitaci6n y aportaciones federal, de los colaboraci6n con otra federal, estatal y para 1997 los siguientes asistenciales. estatal y productores Ayuntamientos, las dependencia federal. principalmente programas: los montos para organizaciones municipal. 1997 (pesos) existentes en la S 108,800,000.00. regi6n, y los * Hule Municipios, los • Fertirrigaci6n $ 5,000,000.00* cuales tienen la * Mecanizaci6n $ 5, 550,000.00 operaci6f de algunos * Establecimiento de Praderas $ 18,775,000.00 programnas en * Equipamiento Rural $ 30,000,000.00 particular. * Fomento Lechero S 19,100,000.00* * Ganado Mejor $ 5,050,000.00 • Salud Animal ~~~~~~~~~~~~~~$ 11,003,200.00 * Sanidad Vegetal $ 11,349,726.00 * Mejoramiento Genetico $ 9,502,000.00 * Capacitaci6n y Extensi6n $ 14,000.000.00* * Transferencia de $ 6,500,000.00* Tecnologia $ 12,828,000.00* * Kilo por Kilo $ 750,000.00* * Sistema de Informaci6n Agropecuaria $ 48,351,800.00 * Impulso a la Producci6n del Cafe $ 5,472,003.00** * Elemental de Asistencia Tdcnica para la Producci6n de Granos $ 9,050,000.00* Basicos $ 1,000,000.00 * Oleaginosas *Falta la aportaci6n * Apicola de los productores ** S61o aportaci6n estatal. Programa de Empleo SCT Infraestructura Complejo Parece ser que los Se llevara a cabo por No parece que exista la El COPLADE, las Temporal. Basica recursos se obtienen medio del Centro colaboraci6n de otra dependencias estatales solamente de la SCT y el Comite dependencia. y federales y el dependencia. Pro-Camino. Director General del El financiamiento Centro SCT. para 1997: $55,000,000 ,cl cual incluye construcci6n, reconstrucci6n y conservaci6n. Para 1998: .___________________________ .______________ $ 17,814,000.00. 814.00000 _ 92 PROGRAMS OFFICE OBJECTIVES REQUIREMENT FINANCING OPERATION COLLABORATION COORDINATION PROCAMPO SAGAR Productivo Complejo por que Es financiamiento SAGAR y su SEMARNAP en proyectos Si preve coordinaci6n aunque no el cumplimiento propio a traves de la estructura ecol6gicos. Los gobiernos de define sus modalidades. del conjunto de evaluaci6n de la desconcentrada, en los Estados, con los que requisitos puede dependencia y sus particular ASERCA, SAGAR firme convenios de demandar la agencias. (Apoyos y Servicios descentralizaci6n. participaci6n de Montos financieros no a la varias instancias disponibles. Comercializaci6n gubemarnmental. Agropecuaria). Programa de SEDUVER Infraestructura N.D. El monto de inversi6n COPLADEVER Colaboraci6n de las Prevd la coordinaci6n Desarrollo Integral bdsica, autorizada para 1997: autoridades municipales, interinstitucional en el quc de la Huasteca Alta producci6n, $255,182,010.57. participaci6n organizada de participan los 3 niveles de Veracruzana. educaci6n, Es un financiamiento la poblaci6n, por medio de gobierno. salud, abasto y mixto que incorpora los Centros de Atenci6n alimentaci6n. los recursos que cada Social, en la definici6n, dependencia tiene en programaci6n, ejecuci6n, sus programas. seguimiento y evaluaci6n de las obras y acciones que realiza cada instancia de gobiemo en las comunidades. Programa de SEDUVER Planeaci6n N.D. N.D. Dependencias- Las dependencias que La Coordinaci6n del Subcomitd Regiones Prioritarias Estado-Municipio, colaboran en este programa esta a cargo de la Secretaria de del Estado de Autoridades y son: SEC, INI, IMSS, Desarrollo Urbano del Gobierno Veracruz. Organizaciones DICONSA, S.A de C.V., del Estado (SEDUVER), Sociales. INEA, CFE, SSV, PA, participando colegiadamente por SAGAR, CONAFE, CNA, parte del Gobierno Federal la SEDESOL, SCT, CAPFCE, Delegaci6n Estatal de la FIDELIST, LICONSA, S.A. Secretaria de Desarrollo Social de C.V., SRA, SEMARNAP, (SEDESOL), en su calidad de SCE, DIF, SEDAP, SEE, Secretaria Tecnica del FONAES, BANRURAL, COPLADE y por lo tanto, SEDUVER, PAREB Y tambien del Subcomite. PRODEI. 93 Table 15 - Federal Programs in The Huasteca de San Luis Potosi PROGRAMS OFFICE OBJECTIVES REQUIREMENT FINANCING OPERATION I COLLABORATION I COORDINATION (i) SAGAR Productivo Complejo por que Es financiamiento SAGAR y su SEMARNAP en proyectos Si preve coordinaci6n aunque no el cumplimiento del propio a traves de la estructura ecol6gicos. Los gobiernos de define sus modalidades. conjunto de evaluaci6n de la desconcentrada, en los Estados, con los que requisitos puede dependencia y sus particular ASERCA, SAGAR firme convenios de demandar la agencias. (Apoyos y Servicios descentralizaci6n. participaci6n de Montos financieros a la varias instancias no disponibles. Comercializaci6n gubemamental. Agropecuaria). Programas de SEDESOL Capacitaci6n, Sencillo Para 1997, el * Coordinaci6n Parece no existir la Ejecutivo Federal y Ejecutivo Superaci6n de la salud, Ejecutivo Federal, a Nacional de colaboraci6n de otra Estatal. Pobreza, dentro de alimentaci6n, traves del Ramo 26, Educaci6n, dependencia federal. este se encuentra: infraestructura. asignara al Ejecutivo Salud y Programa de Estatal recursos Alimentaci6n Educaci6n, federales por un (CONPROGRE Salud y monto de SA), Alimentaci6n $58,900,000.00, COPLADESLP, (Progresa) complementado por Subcomite de Y el Ramo 26: aportaciones Atenci6n a "Desarrollo Social y estatales y los Regiones Productivo en municipios por un Prioritarias. Regiones de monto de: Pobreza", incluye los $ 19,633,333.00. programas: empleo temporal, credito a la palabra, empresas sociales, atenci6n a zonas aridas, jornaleros agricolas, mujeres y servicio social. Programas de SEDESOL Infraestructura, Sencillo N.D. * Subcomite de Parece no existir la Ejecutivo Federal y Estatal. Desarrollo Urbano y Vivienda. Desarrollo colaboraci6n de otra Vivienda. Urbano y dependencia federal. Vivienda del COPLADESLP 94 PROGRAMS OFFICE OBJECTIVES REQUIREMENT FINANCING OPERATION COLLABORATION COORDINATION Alianza para el Campo, dentro SAGAR Productivos, Complejo Mixto, se lleva a * Opera con el apoyo Parece no existir la Instituciones a nivel federal, de 6ste se encuentran los capacitaci6n y cabo con de los colaboraci6n con otra estatal y principalmente siguientes programas: asistenciales. aportaciones federal, Ayuntamientos dependencia federal. municipal. estatal y de los las productores, los organizaciones montos para 1997 existentes en la * Fomento Citricola (pesos): regi6n, y los . Fertirrigaci6n Municipios, los . Mecanizaci6n $69,323,900.00 cuales tienen la . Establecimiento de Praderas $ 2,642,800.00 operaci6n de * Fomento Lechero $ 7,555,600.00 algunos . Ganado Mejor $ 8,160,000.00 programas en * Salud Animal $ 6,780,000.00 particular. * Sanidad Vegetal $ 4,800,00000. . Mejoramiento Genetico $ 1,101,100.00 * Capacitaci6n y Extensi6n $ 2,720,000.00 * Transferencia de Tecnologia $ 8,255,400.00 * Kilo por Kilo $ 4,200,000.00 . Sistema de Informaci6n $ 2,300,000.00 Agropecuaria $ 5,207,000.00 . Impulso a la Producci6n del $ 1,506,000.00 Cafe * Elemental de Asistencia $ 6,380,000.00 Tecnica para la Producci6n de Granos Basicos $ 1,630,000.00 * ApoYo al Desarrollo Rural $10,770,300.00 Programa de Empleo Temporal. SCT Infraestructura Complejo Parece ser que los Se llevarA a cabo por No parece que exista la El COPLADE, las Basica recursos se obtienen medio de el Centro colaboraci6n de otra dependencias estatales y solamente de la SCT y el Comite dependencia. federales y el Director dependencia. Pro-Camino. General del Centro SCT. El financiamiento para 1997: $31,000,000 el cual incluye construcci6n, reconstrucci6n y conservaci6n. Para 1998: $13,764,00.00. Programa de Desarrollo SAGAR Productivo Sencillo Es mixto, se integra Consejo Estatal No existe colaboraci6n con Gobierno del estado de Productivo Sustentable en con aportaciones Agropecuario, la alguna otra dependencia. S.L.P., Banco Mundial y Zonas Indigenas del Estado de federal, estatal y de Comisi6n de asistencia tecnica de la FAO. S.L.P. los productores, el Desarrollo Rural y el monto para 1997 es: Consejo Regional de $ 13,250,000.00. Desarrollo Sustentable. 95 Table 16 - Federal Programs In The Huasteca De Hidalgo PROGRAMS OFFICE OBJECTIVES REQUIREMENT FINANCING OPERATION COLLABORATION COORDINATION Programa de Empleo Temporal. SCT Infraestructura Complejo Parece ser que los Se llevara a cabo por No parece que exista la El COPLADE, las Basica. recursos se obtienen medio de el Centro colaboraci6n de otra dependencias estatales y solamente de la SCT y el Comite Pro- dependencia. federales y el Director dependencia. Camino. General del Centro SCT. El financiamiento para 1997: $ 35,000,000, el cual incluye construccifn, reconstrucci6n y conservaci6n. Para 1998: $12,417,000.00. _Programa Alianza pars e SAGAR Productivos, Complejo Mixto, con Opera con el apoyo de Parece no existir la Instituciones a nivel federal, Campo, dentro de este capacitaci6n y aportaciones los Ayuntamientos las colaboraci6n con otra estatal y principalmente programs se encuentran los asistenciales. estataes, federales y organizaciones dependencia federal. municipal. siguientes programas: de productores, los existentes en la regi6n, montos totales para y los Municipios, los 1997 (pesos): cuales tienen la * Fertirrigaci6n $62,141,142.00. operaci6n de algunos * Mecanizaci6n prograperas en * Establecimiento de Praderas $10,950,000.00 particular. * Fomento Lechero $21,172,000.00 * Ganado Mejor $ 7,458,430.00 * Salud Animal $ 5,758,000.00 * Sanidad Vegetal $ 1,423,700.00 * Mejoramiento Gen6tico $ 1,600,000.00 * Capacitaci6n y Extensi6n $27,812,800.00 * Transferencia de Tecnologia $ 7,083,500.00 * Kilo por Kilo $ 3,000,000.00 * Sistema de lnformacion $10,625,610.00 Agropecuaria $ 340,000.00 * Impulso a la Producci6n del Cafe $ 8,600,000.00 * Elemental de Asistencia Tecnica para la Producci6n $ 3,900,000.00 de Granos Basicos • Equipamiento Rural $17,025,000.00 Programa de Desarrollo SAGAR Productivo Sencillo Mixto, con la Consejo Estatal No existe colaboraci6n con Gobiemo del estado de Productivo Sustentable en colaboraci6n federal, Agropecuario, la alguna otra dependencia. Hidalgo, Banco Mundial y Zonas Indigenas del Estado de estatal y de Comisi6n de asistencia tecnica de la FAO. Hidalgo. productores, el Desarrollo Rural y el monto para 1997 Consejo Regional de son: Desarrollo Sustentable. $ 23,656,875.00. 96 PROGRAMS OFFICE OBJECTIVES REQUIREMENT FINANCING OPERATION COLLABORATION COORDINATION Programas de Superaci6n de la SEDESOL Capacitaci6n, Sencillo Para 1997, el * Coordinaci6n Parece no existir la Ejecutivo Federal y Estatal. Pobreza, dentro de este se salud, Ejecutivo Federal, a Nacional de colaboraci6n de otra encuentra: alimentaci6n, traves del Ramo 26, Educaci6n, dependencia federal. Programa de infraestructura. asignara al Ejecutivo Salud y Educaci6n, Salud y Estatal recursos Alimentaci6n Alimentaci6n federales por un (CONPROGRE (Progresa) monto de SA), Y el Ramo 26: "Desarrollo $92,520,800.00, COPLADEHI, Social y Productivo en complementado por Subcomite de Regiones de Pobreza", incluye aportaciones Atenci6n a los programas: empleo estatales por un Regiones temporal, credito a la palabra, monto de: Prioritarias. empresas sociales, atenci6n a $10,280,088.00. zonas aridas, jornaleros agricolas, mujeres y servicio social. Programas de Desarrollo SEDESOL Infraestructura, Sencillo N.D. . Sucomite de Parece no existir la Ejecutivo Federal y Estatal. Urbano y Vivienda. Vivienda. Desarrollo colaboraci6n de otra Urbano y dependencia federal. Vivienda del COPLADEHI 97 Annex 2 - The Action - Impact Matrix 1. The Action-Impact Matrix is a tool that was originally developed to help assess the environmental consequences of national and sectoral policies being planned by government. Application to region planning and policy coordination is quite straightforward because various agency or sector activities can easily be incorporated in the process. 2. In essence the AIM is a matrix that can systematically relate proposed government policy actions with their likely environmental or social impacts. The AIM approach is useful for planning and policy coordination because many environment or social problems arise from inappropriate development or growth-oriented policies. Most often the ministries or agencies involved in designing those policies are those dealing with productive services (e.g., industry and trade, agriculture), but with limited or unclear mandates in preventing or mitigating negative effects on the environment. 3. Even if there were discussions among different agencies, it is not clear how these can be structured to really promote inter-agency coordination regarding sustainable development. The AIM approach provides an easy-to-use framework and process for sector officials at various levels of government to prepare for discussions and to identify the common points of interest with other sector counterparts. 4. For example, if government officials were interested in a quick assessment of what are the environmental implications of their various development-oriented policies and programs, the first step would be to organize and summarize the main sectoral plans, from the main development agencies (e.g. agriculture). In this step, the proposed reforms are systematically presented in a table. Each agency would prepare a table, based on their existing plan. These tables would then be consolidated into a table such as Table 17. 98 Table 17 - Current Economic Conditions and Proposed Reforms Development Current Economic On-going/Proposed Environmental and Policies and Conditions/Policy Programs and Social Implications Programs Goals Policy Reforms of Programs or Reforms Example of a Current agriculture is Promote new While the program sectoral unproductive and cultivation practices may increase development farmers are not using or new crops. agricultural output, program or reform: new inputs and Subsidize fertilizers waterways and wells Increasing technologies. and pesticides. may become agricultural polluted. productivity, The new through increased technologies may be fertilizer and especially difficult to pesticide use adopt in indigenous communities if their existing practices substantially differ from the program. This may lead to differential rates of adoption and increase existing income disparities. Other programs/ policies to be listed by other agencies 5. The next step would be for environment or social services agencies to list their main environment or social problems, including indicators of extent or priority of these problems in a table on "Indicators and Causes of Key Environmental Problems." Often these would already be available in documents, such as the Environmental Action Plan or regional environmental plans). A consolidated table would then be developed using inputs from each environment or social agency, such as Table 18. This table would provide a quick survey of national and regional environment and social concerns and priority problems. It could also attempt an initial assessment of the underlying (in contrast to proximate) causes of the environmental problem. These underlying causes could include both existing policies that distort incentives (e.g., inappropriate resource prices), as well as the lack of policies to address market failures (e.g., absence of pollution penalties). In addition to economic factors, 99 the role of institutional factors, such as the conditions of access to natural resources or land rights could also be included, if appropriate. Table 18 - Indicators and Causes of Priority Environmental Problems Key Environment/ Bio-physical Socio-Economic Underlying Policy Social Problems Indicators Indicators and Institutional _ _ _ _ _ _ j j j ~~~~~~~~~~~Causes Deforestation and Excessive decline in Sedimentation of Incentives for Watershed forest area. Increase waterways; decline in expansion of Degradation in erosion rates on- irrigation services. pastures; ill-defined site and land tenure in upper sedimentation watershed areas. downstream. Poverty among Not applicable. Large disparities in Inadequate accesses indigenous income and access to and rights to communities social services. productive land and to water resources. Other environment and social concerns to be listed 6. Of course, these steps could be undertaken in parallel. However, it is critical for all participating agencies to do an initial preparation of their own tables or charts, perhaps with technical support from an outside facilitator or expert. 7. In the third step, the information from these two tables is combined to develop the Action Impact Matrix. In the AIM example below, the possible links between an agricultural production-oriented program (listed in the first column of the table) and priority environment and social concerns (listed along the top of the table) are identified. It is important to note that the matrix should not be viewed as the final step of the process. Indeed, it should be clear that this matrix should serve as a systematic guide for policy dialogue and coordination, perhaps in a workshop that would involve middle- to senior- level officials. At this stage, it would be possible to emphasize that the matrix will identify two types of interactions or linkages: (a) those where links are beneficial (with a positive sign); (b) those where links are detrimental to environment or social priorities (with a negative sign). 100 Table 19 - Example of and Action-Impact Matrix Environment and Social Issues Development Deforestation and Poverty among Other Programs or Watershed indigenous communities environment Policy Reforms Degradation and social concerns Example of a -] While the program [-] The new technologies sectoral may increase may be especially difficult development agricultural output, to adopt in indigenous program or waterways and wells communities, if their reform: may become polluted. existing practices substantially differ from Increasing the program. This may agricultural lead to differential rates of productivity, adoption and increase through increased exstn income fertilizer and existig icome pesticide use l Other reforms 8. As a practical matter, the priority for policy coordination would probably be to identify potential negative linkages, which is what is presented in the matrix. With a fully articulated matrix, decision-makers would be able to discuss specific actions to better estimate the extent of the problem or to design mitigation policies. 101