Metropolitan regions in Brazil: institutional and fiscal obstacles to cooperation

Abstract

The importance of subnational governments in the provision of goods and services to the population in Brazil has gained ground in the eighties, as much as decentralization went deeper. In 2004, 76.7 million people -42.4% of the population- lived in metropolitan regions in Brazil. Due to the lack of federal resources, initiatives in the area of urban development have been assumed mostly by the municipalities. Despite the importance of this process, we still do not have policies designed to deal with such an environment of blatant inequality.

The analysis of the evolution of federalism in Brazil makes clear that the institutional changes have not contributed to structure incentives for cooperation, a key issue in a country with huge inequality relating to the spatial distribution of product as well as to the personal distribution of income.

The experience in managing metropolitan problems suffers from those institutional deficiencies. Solutions for urban problems in Metropolitan Regions mostly require investment expenditures and so a long term commitment of the constituents of Brazilian federal system -the central government (or the Union), the States and the municipalities.

In 2003, following a recent trend, municipalities presented a general balanced financial situation. The same happened for municipalities belonging to metropolitan regions. Nevertheless, when we analyze them separately, through the use of the indicators of revenues, expenditures, investment and indebtedness, we see that there is great diversity of funding breakdowns among cities of a same region. Although in the social domain an adequate funding has been secured, the same does not apply areas related to urban development -such as transport, housing, sanitation At present, due to credit restrictions, the most important external source of investment financing comes from capital transfers, which are available only during the fiscal year. They are, therefore, not suitable for projects which demand a long implementation period. The lack of proper funding may cause the implementation of a development policy for metropolitan regions to become unfeasible, even though solutions have been found to deal with institutional difficulties.