Brazilian Municipalities and
Economic and Institutional Obstacles
L U I Z C E S A R Q U I E R O Z D E R I B E I R O /
Brazil is a federal republic composed of 26 states, a federal district and
5,564 local governments. The municipalities became full members of
the federation in the 1988 Constitution. Brazil’s population of 184 million
people is irregularly spread throughout the country, with more than
81 percent living in urban areas. With a per capita Gross Domestic Product
(GDP) of US$ 8,561 (Purchase Power Parity), Brazil is ranked among the
countries with the highest degree of inequality of income distribution. The
country also suffers from huge regional economic imbalances. In 2004,
around 77 million people or 43 percent of the popu-lation livedin the four
states of the Southeast Region, where 55 percent of total GDP was generated.
In contrast, only 14 percent of GDP was produced in the Northeast,
where 28 percent of the Brazilian population lived. The per capita income
of the Northeast was just 39 percent of the wealthier region.
16 Luiz Cesar Quieroz de Ribeiro / Sol Garson
Like the states, Brazilian municipalities are very heterogeneous. They
differ not only with regard to economic and social indicators, but also
from the point of view of their fiscal and technical capacity to manage tax
collection and to provide municipal goods and services to the population.
Although lower income implies a smaller tax base, differences in tax
collection among regions may also be due to deficiencies in tax administration:
a lesser effort given to collecting taxes with similarly low priority
given to improving the technical capacity for tax collection.
The importance of municipal governments in providing public goods
and services to the population increased during the 1980s when, because
of decentralization, they assumed complex and diverse responsibilities.
Despite the unstable economic environment, characterized by high inflation
and even occasional GDP decline, federal transfers to municipalities
increased, allowing them to assume the initiative
in urban development, although under a noncoordinated
process. Notwithstanding the growth
in revenue since that time, financial resources
available to the municipalities are clearly inadequate
to meet the needs of urban development.
Meanwhile, problems caused by accelerated
urbanization are worsening. In 2005, almost
80 million people lived in metropolitan regions
in an environment of blatant inequality. In the
major cities, the general indicators currently
used do not show the extent of the contrast in
standard of living. The core cities in the metropolitan
regions are the richest areas of the country, but they are also where
intra-urban inequality is greatest.
Among the institutional difficulties of Brazilian federalism, a lack of
coordination and the absence of mechanisms for cooperation are sources
of continued inefficiency in financing public investment. An increase in
intergovernmental transfers resulting from the new rules in the Constitution
of 1988 may have strongly reduced the vertical imbalance, but a huge horizontal
unevenness still persists. As a result, the mechanism of sharing revenues
is not used as an instrument for financing expenditures consistent
with the geographic location of the demands for public services.
The institutional environment is a major obstacle to the development of
public policies for the solution of metropolitan problems. Metropolitan
regions were formally created by the authoritarian central government in
1974-1975, in conformance with the Constitution of 1967. With political
crisis in the military regime that oversaw the dynamic of metropolitan
activities, focus on planning was lost and funds for urban areas became
increasingly scarce. In fact, those regions, as well as the structures created
in the states for their administration, had entered into crisis mode from
In 2005, almost
80 million people
lived in metropolitan
regions in an
1979 onwards. In 1988, the new federal Constitution made an attempt to
define an institutional basis for dealing with those highly urbanized areas.
By means of legislation complementary to states’ constitutions, the states
were allowed to establish metropolitan regions to integrate the organization,
planning and operation of public functions within the common
interest of the state and the respective municipalities. Nevertheless, the
initiative suffered from legal and administrative difficulties, as it was politically
inconsistent with the new status of the municipalities as members of
the federation. In fact, one of the basic reasons for the institutionalization
of metropolitan areas is the need for coordinated investments and the integration
of the provision of public services within these regions. Without
effective means to enforce coordination, state governments cannot lead
the effort to avoid conflicting and overlapping policies. The lack of conditions
for coordination is exacerbated at times. For example, when the
governor and the mayor of the core city have different political affiliations,
both will compete for greater influence in the whole region.
To the initial nine regions created by the federal government in 1974-75,
the states added another 20 new regions. If the Integrated Development
Region of the Federal District is included, there is now a total of 463 municipalities.
The criteria adopted by the states to define those regions were
not uniform and were often driven by political motivations. The result is
that most of the present regions vary greatly and include everything from
municipalities with a very low degree of integration to those with real
metropolitan dynamics. This creates obstacles to the development of
governance structures that could drive collective action aimed at solving
problems for these areas.
Successful federalism entails a commitment to partnership and to cooperation.
Alternating periods of explicit centralization with periods of
decentralization and considerable administrative freedom, Brazil has not
been able to create autonomous yet interdependent centers.
Notwithstanding the huge regional inequalities, Brazilian federalism was
not conceived with the guiding principle of citizenship rights, assuring
each individual access to basic public services. Although adequate funding
has been secured for certain social services, this does not generally apply
to urban development. The development of projects in areas such as
transport, housing and sanitation require substantial and timely amounts
of funds as well as strong structures of coordination and cooperation, a
major difficulty in intergovernmental relations in the country.
Brazilian Municipalities and