Nearby solutions: The role of regional and local governments in Latin America and the Caribbean

Economy and Development Report (RED)

Nearby solutions: The role of regional and local governments in Latin America and the Caribbean

Publication date: 2025-01-01

Authors: Alves, Guillermo ; Brassiolo, Pablo ; Buccari, Florencia ; Camacho, Carolina ; Cifuentes, Rodrigo ; Estrada, Ricardo ; Fajardo, Gustavo

The 2025 edition of CAF's Report on Economy and Development (RED) addresses the complex challenge of governmental decentralization in the region. This ongoing process has aimed to strengthen the competencies of subnational authorities, deeply linking with sustainable development actions. Through detailed analysis, the report highlights how local and regional governments, with their close knowledge of local realities, play a crucial role in providing public services and implementing development policies. CAF reaffirms its commitment to supporting these governments by providing financial resources and relevant knowledge to improve governance and move towards more equitable, resilient, and inclusive societies.

Download

Available languages

Spanish Portuguese

Related material

RED 2025 Nearby Solutions Executive Summary – pdf

Technical sheet

Language: en

Country / Region: Latin America

Format: pdf

Licence

CC-BY-NC-ND image
pencil icon

Unless otherwise stated, the licence for the item is described as CC-BY-NC-ND

Cite publication

Alves, Guillermo; Brassiolo, Pablo; Buccari, Florencia; Camacho, Carolina; Cifuentes, Rodrigo; Estrada, Ricardo; Fajardo, Gustavo. (2025). Nearby solutions: The role of regional and local governments in Latin America and the Caribbean. Caracas: CAF

Chapters

Chapter 1

The territorial organization of countries and the challenges faced by local and regional governments
This chapter examines the reality of subnational governments in Latin America and the Caribbean. A public database is presented alongside the report, providing details on jurisdictions, population, area, and various indicators linked to the Sustainable Development Goals. The diversity in the regional territorial organization is analyzed, and challenges such as accelerated urbanization, disparities in territorial development, and the need to adapt to global phenomena such as climate change and digitization to strengthen local and regional governance are addressed.
 

Authors: Alves, Guillermo Fajardo, Gustavo

Chapter 2

Roles of local and regional governments
This chapter examines the growing autonomy of regional governments in Latin America and the Caribbean, highlighting that although it has increased since the 1980s and 1990s, it still falls below OECD standards in areas such as tax collection. Differences in the attributions of local governments are emphasized, with countries like Brazil, Chile, Colombia, and Peru having broader competencies that include education and primary healthcare. The impact of asymmetric decentralization is analyzed, which can foster the closing of gaps and learning among jurisdictions, although there is a warning about the risk of deteriorating public policies in places with limited governmental capacities. Colombia stands out as an exceptional case in the implementation of this type of decentralization in the region.
 

Authors: Alves, Guillermo Fajardo, Gustavo

Chapter 3

What subnational governments spend on and how they spend it
This chapter examines the increase in public spending managed by subnational governments in Latin America. The diversity in per capita spending is highlighted, which tends to decrease with the increase in population. Subnational debt is addressed, focusing on financial sustainability rules. The importance of spending floors in key areas such as health and education is mentioned, as well as efficiency in subnational public procurement and the relevance of audits and results-based financing to enhance the transparency and effectiveness of public spending.
 

Authors: Brassiolo, Pablo Cifuentes, Rodrigo

Chapter 4

How subnational governments invest and finance their investments
This chapter analyzes the diversity in public investment in Latin America and the Caribbean, the importance of intergovernmental coordination to avoid inefficiencies, and the need to train and professionalize investment management. The financing of subnational investment through transfers, own resources, and debt is addressed, highlighting the importance of a strong institutional framework to ensure fiscal sustainability and balance flexibility and stability in the design of transfers.
 

Authors: Brassiolo, Pablo

Chapter 5

Subnational government revenues: The role of taxes and transfers
This chapter examines the revenue structure of subnational governments in Latin America and the Caribbean, where, on average, 58% comes from transfers and 42% from own resources. The importance of funding with own resources for the quality of spending is highlighted, and the disparity in local revenues is addressed, proposing tax reforms to enhance collection. The role of transfers in reducing inequalities and the need to strengthen their redistributive component are discussed. Governance of natural resources to promote the extraction of critical minerals and hydrocarbons in the region is also analyzed.
 

Authors: Camacho, Carolina Estrada, Ricardo

Chapter 6

Management of fee-based services and interjurisdictional cooperation
This chapter examines the roles of regional and local governments in the provision of fee-based services in Latin America and the Caribbean. It highlights the importance of regulation and planning in urban transportation and direct provision in water and sanitation. The need to consolidate services to increase efficiency and ensure financial sustainability is mentioned. Additionally, the importance of clarifying responsibilities and strengthening interjurisdictional coordination to address challenges stemming from administrative fragmentation in the region is emphasized.
 

Authors: Alves, Guillermo Fajardo, Gustavo

Chapter 7

Who are the public officials of subnational governments?
This chapter addresses the importance of having a high-quality bureaucracy in subnational governments, composed of capable officials who are motivated by public service. It is mentioned that building efficient bureaucracies at the subnational level can be challenging due to institutional weakness and a lack of specialized human capital. It is also highlighted that detailed data on subnational public officials are available in few countries in Latin America and the Caribbean. Additionally, it is noted that remuneration in these governments is competitive compared to the private sector in some countries, and there are differences in the proportion of professional and technical positions between subnational and national governments.

Authors: Estrada, Ricardo

Chapter 8

Digitalization and management capacities
This chapter explores how digital tools can enhance the internal administration, procedures, and urban management of subnational governments. The importance of digitization in areas such as cadastre management and public procurement to increase efficiency is highlighted. Although the offering of digital services by local governments is limited, the potential of technology to improve security and urban management is emphasized. It is mentioned that the cost of digital tools can be a challenge for small jurisdictions, underscoring the crucial role of national governments in providing standardized systems to promote adoption and interoperability. Additionally, the importance of addressing digital divides to prevent the exclusion of population groups from government services is emphasized.

Authors: Buccari, Florencia Fajardo, Gustavo

Authors

Alves, Guillermo

No. of publications 30

Brassiolo, Pablo

No. of publications 36

Buccari, Florencia

No. of publications 5

Camacho, Carolina

No. of publications 5

Cifuentes, Rodrigo

No. of publications 3

Estrada, Ricardo

No. of publications 32

Fajardo, Gustavo

No. of publications 23

Recommended reading