To establish a discussion with relevant actors on the subject, such as a governor, an academic specialist in public finances, a legislator in charge of fiscal matters and an international specialist. The discussion will try to point out the existing positions in the subject, and to show the difficulties in reaching agreements. Other items to be discussed are the need to improve the capacities of government officials and the promotion of institutional development in order to allow better coordination and decentralization of the fiscal functions within the three levels of government.

The decentralization in Mexico has been a slow advancing process in comparison with other federal countries with similar development levels. Although there are political and historical explanations which help us understand why Mexico carried out an outstanding decentralization during the 20th Century, today it is important to point out that a considerable part of the problems in relation to the advance of decentralization are caused by the strong institutional imbalances among the government levels.

Firstly, there is a vertical imbalance in relation to the resources available to the three levels of government. Only to mention one example, the public expenditure composition is currently 63% in the federal level, 30% in the state level and only 7% in the municipal level. This means that after 20 years of decentralization reforms, the result is still modest. On the other side, there are great disparities in human resources regarding academic levels and experience.

Secondly, there are large horizontal imbalances between states and municipalities. Those imbalances are generally related to the size of the population in each entity or locality and its capacity to generate resources. These disparities between governments prevent the rapid distribution of resources and fiscal attributions, because they are not treated in the same way. The need to compensate the poorer states and municipalities creates schemes which do not always generate incentives for best performances.

For the states, it is easier to apply for more resources to the federal level and blame it when these are not obtained, than to take on the political cost of collecting taxes. Credit, which can be a good alternative, is not frequently used, among other reasons such as the complications that the public debt had in the crisis of the 80’s and 90’s. The concept of debt has remained since then with a stigma, so few authorities dare to boast about it as an achievement.

In the case of municipalities --considered as a group-- the evolution of their own income has been positive from 1978 to 2004. However, the funds obtained from the federal government have developed more than their own incomes, a situation which shows the growing financial dependency in the same years. In addition, support like Section 33 of the Federal Disbursement Budget, is given to the more marginalized localities, without offering any encouragement to those who effectively are improving their level of marginalization.

One of the most important challenges, not only for the fiscal decentralization, but also for the state and municipal development, is the strengthening of the institutional capacities of the sub-national governments in Mexico. Faced with this scheme, it is indispensable to find new mechanisms allowing sub-national governments to get more resources without depending excessively from the federation, and to develop capacities in order to excercise them out more efficiently.