In the decentralization process that characterizes Latin America today, a key element is the agencies that various cities have set up in order to attract tourists and the foreign and domestic investment that stimulates job creation. This phenomenon began in the early 1990s with public policies aimed at bringing government closer to the daily life of the population. To what extent is this strategy of decentralization sustainable given the competitive challenges facing countries? Can this trend wind up holding back initiatives aimed at uniting countries in the region?


Carolina Rentería, director of Colombia’s national planning agency (DNP), believes that the strategy of decentralization is built on a solid foundation and has had a positive impact on the country’s national development. Colombia’s decentralization process began quietly in 1986, and it was only in 1988 that, through changes to the National Constitution, it was strengthened to permit popular voting for positions in local and state governments. This political process has been accompanied by budgetary autonomy that has developed over two decades, permitting cities and states to carry out their spending programs based on the most important needs that they identify.


In Colombia, this process has earned international recognition by the Organization for Economic Cooperation Development (OECD), which this year published its rankings of the most successful cases of decentralization carried out in Latin America. Garnering first place: Colombia, which received praise for strengthening the decentralization process and for the positive results achieved so far.


Despite the official praise, however, disenchantment with the decentralization effort lies just below the surface, and even after a number of adjustments to the model, it remains a target of much criticism from academics and politicians. Some experts, along with a portion of the public, believe that decentralization has made little progress despite the pat on the back from the OECD. Other critics suggest that any lack of progress results from state governments being handed too many responsibilities and not enough resources to carry them out.


While the ultimate adequacy of funding may be in dispute, an estimated 57% of the country’s total public spending in 2008 will be carried out by the provincial authorities, especially in areas dealing with social needs such as health and education, according to Colombia’s national planning agency (DNP). By 2010, the goal is to provide coverage for such necessities throughout the country.


Unsatisfied Needs

Nevertheless, an enormous number of needs remain unsatisfied. The so-called Internal Agenda, a plan that began in 2006 and culminated at the end of 2007, included more than 1,800 meetings, workshops and encounters between members of the public, government and the business community, which were aimed at defining the productive assets of the country’s 32 states (called “departments” in Columbia).


Using a participatory methodology, representatives of the government, universities, the private sector and social organizations have identified the strengths and weaknesses of their respective regions, with an eye towards searching out corresponding opportunities and threats in the global economy. From this exercise in civil participation, there has emerged a definition of “productive best bets” — sectors, products and services that offer greater competitiveness — as well as a task list for bringing competitiveness to each region.


Initially, the idea of the Internal Agenda was to more clearly define how regions would become more competitive in accessing U.S. markets. The process helped participants identify regional productive strengths, and the degree to which networks of value could be created to improve the standard of living and employment rates. That’s the assessment of Hernando José Gómez, director of the Private Competitiveness Council, an organization created by Colombian trade unions and companies to promote productivity policies in the country.


At the same time, the Internal Agenda permitted people to identify regions that are well prepared to compete internationally and those that fall short. The latter group will require an additional effort to move forward in the complicated process of globalization.


On the one hand, the states’ capital cities today are highly rated in terms of education, human resources and their ability to attract international funding. In fact, in some outstanding cases, midsize cities such as Pereira, Manizales and Bucaramanga appear among the highest ranks of locations cited for their ease of doing business in the World Bank’s recent report Doing Business 2008. In these cities, regional authorities have created an attractive business and investment climate, and promoted entrepreneurial skill — all key measures in the World Bank study.


“The great challenge now is to reduce regional disparities, and to close the gap between some areas that are more developed and others that have not managed to advance,” says Rentería.


The net impact of providing more resources and responsibilities to the regions: Some regions have made significant progress in disseminating basic social services more widely. In 2000, only 53% of the population of Colombia had access to health coverage, for example, but by the end of 2007 that number approached 90%. The DNP hopes to reach 100% by 2010.


The country has also made a lot of progress in education, according to the Ministry of National Education. Basic education was available to 85% of the population in 2002, rising to 89.3% in 2007. Nevertheless, there are significant differences depending on the region. On the one hand, Bogotá, the capital city, offered education to 92% of residents at the end of 2007, but in the remote southern state of Amazonas, bordering Brazil, education barely reached 62%.


Luis Enrique Berrizbeitia, executive vice president of the Andean Development Corporation (CAF), stresses the importance of local initiatives in economic development, quality of life and job generation. For Berrizbeitia, “Attention to social demands takes place on a local level.” That’s why the regions play a leading role in generating optimal conditions for both capital and corporations, and for finding good locations where companies can develop and promote growth. CAF finances and promotes development projects in several Latin American countries.


Bolivia, the Other Side of the Coin

Regional disparities in growth have become the Achilles heel in the decentralization process. The most palpable example is Bolivia, a country where there is political conflict precisely because of the great imbalances in regional development.


Most of the indigenous population of Bolivia is in the Sierras, along the western coast, where social and economic conditions have not advanced a great deal. On the other side of the country, the population of such states as Tarija, Santa Cruz, Chuquisaca, Pando and Beni — the so-called Bolivian “Half Moon” — in the east of the country (along the border with Brazil), benefit from enormous wealth in local natural resources — oil and gas — and from outstanding development in agribusiness. Santa Cruz state, in the far east of the country, is considered the most industrialized region, with 25% of the country’s total population but 29% of Bolivia’s GDP, which reached US$13.2 billion last year, according to the International Monetary Fund. Last year, Santa Cruz paid half of the taxes collected in the entire country. Its per capita GDP of US$1,300 is higher than the national average of US$1,152.


In 2005, following several decades of perceived failure by the central government to improve economic conditions for the majority of the Bolivian population, and after widespread rejection of the governing political class, there began a process of increasing the autonomy of the states, a process that has intensified, according to Alberto Schlessinger, professor of foreign trade at the Sergio Arboleda University in Colombia. Schlessinger notes that this new initiative began by reconsidering the relationship between the national government and the regions, represented by prefectures, civic committees and corporate organizations (headed by entrepreneurs and trade unionists). One result of the decentralization process has been to underline wide disparities in economic development among the regions. While the states of the ‘Half Moon’ seek independence, the poorest states depend on the wealth that the richest states generate.


Schlessinger explains that this model has been threatened by the strong clash between the central government — which promotes a socialist framework in which the State plays a powerful role — and the most advanced regions of Bolivia, which focus on promoting free enterprise and accentuating the decentralization process. The goal of these regions is to achieve greater autonomy in managing financial and natural resources. They even threaten to proclaim their independence from the central government.


Bolivia is a nation of about 9 million people, 83% of whom have basic needs that are not satisfied. Ninety-one percent of the rural population is poor; 38% don’t have sufficient access to education, and 53% lack access to healthcare, according to CRECER, a Bolivian non-governmental organization dedicated to providing loans for rural education.


The Challenge of Building Competitiveness

Although the process of regional autonomy has advanced in Latin America, many lessons remain to be learned. Schlessinger believes that the key error that Colombia has committed in decentralizing has been to focus more and more on increasing regional budgets, but without increasing the responsibilities of the regions to the same degree. This failure has enabled some regions to be more lax when it comes to controlling their costs. They have not fulfilled their initial goals of promoting regional development built on greater autonomy and decentralization.


“In Colombia, decentralization has had a more budgetary focus, guaranteeing the transfer of resources to the region according to defined criteria. But there has been less emphasis on allocating responsibilities. So in recent years there has been talk about taking greater control of this process in order to verify that they are meeting their goals,” explains Schlessinger.


Rentería agrees that the time has come to improve monitoring and control of the resources dedicated to the regions so that they satisfy the needs of their populations. To address this issue, a new system will try to make control of those resources more efficient, beginning in 2009. That way, regional leaders won’t wind up using their budgets in areas that have nothing to do with their key goals.


The various regions will also have to fine-tune their strategies for improving competitiveness. The central goal, says Rentería, will be to reduce the gap between those cities and states that have a higher level of development and those that still lag behind. In this sense, the Internal Agenda, with its emphasis on the regions, will be a determining factor for improving competitiveness and eliminating the development ‘hole’ or gap between some regions and others. “One builds competitiveness through training, technology, innovation and improvement in productivity standards,” argues Francisco Mejía, director of extension programs at Colombia’s University of Rosario. Mejía runs a project that attempts to bring together academia, the private sector and government to generate integrated models for development. Through its extension programs, the University of Rosario manages programs that range from continued education to consulting services in vulnerable communities, providing teaching assistance and social management.


Mejía maintains that “the name of the game in the globalization process is to construct societies that can compete. So it is important to identify the mission, and help people build this competitiveness, beginning with Internal Agendas.” Mejia argues that only by starting with knowledge and its application to development can people achieve a society that is more balanced, fair and just. This process must be managed by the private sector, academia and the government “in order to develop existing resources and enable the population to take best advantage of them.”


In that regard, the government in Colombia is working with the private sector and academia to create conditions that are appropriate for competitiveness. There is an increasing awareness that the regional decentralization process must serve as a support, not as an obstacle, when searching for this goal.

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