Prepared by the United States Agency for International Development for the Summit Implementation Review Group

Introduction

 At the Santiago Summit of the Americas, the U.S. government accepted the role of Responsible Coordinator�along with Honduras and Chile as Co-Coordinators�for a new initiative not found in the first Miami Summit of 1994: to strengthen municipal and regional administrations. Specifically, the 1998 Summit Action Plan adopted in Santiago calls on member states to undertake four kinds of activities:

• Increasing Citizen Participation: "Within their legal framework and within a reasonable time, establish or strengthen mechanisms for the participation of groups of society in the process of local and other subnational decision-making, such as open public hearings and public budget reviews, and promote transparency in local and other subnational Government finance operations."

• Improving Financial and Human Resource Capabilities: "In accordance with legislation at all levels, provide for financing options for local and other subnational Governments, including groups of local Governments, such as through transfers of national revenue, access to private capital markets, and authority for raising revenue locally, in order to expand the delivery of quality services as well as provide for training opportunities to strengthen local and other subnational administrative capabilities."

• Studying the Transfer of National Functions: "In accordance with circumstances and the legal framework of each country, study the possible transfer of additional national government functions to local and other subnational levels as well as the possibility for enhancing such authorities."

Since 1998 we can point to numerous developments that show the momentum in strengthening local government:

• A growing political consensus that effective, democratic, subnational and local government is vital to the consolidation of democracy;
• Increased legislation and action that devolve resources and authority to subnational governments;
• Increased delivery of public services at local and municipal levels of government;
• The increasing role of municipal associations in public policy debates;
• Recognition by the Inter-American Development Bank and the World Bank that strong local government is a key element in the modernization of the state in the Americas; and
• Increasing funding from the international community to local government and local development.

Another visible example of the increasing importance of building local government capacity is seen in the donor response to Hurricanes Mitch and George: a strong consensus that successful relief and reconstruction efforts must rely on local governments as full partners. With total donor pledges that reach $9 billion over the next several years, the Central American recovery work provides an opportunity not merely to rebuild, but to transform and create new institutional capacity for local governments.

It should be stressed that the Summit objective itself, and the donor resources brought to it, are the result of national governments� own commitment to strengthening sub-national governments. Throughout the region, national governments are transforming themselves and modernizing. In that process, democracy is taking strong root, and governments at all levels are increasingly sharing power and decision-making.

In this decade, electoral reform has led in many cases to the first direct and separate elections for mayors, councilmen, and in some cases regional or district governors and legislators. New decentralization laws now mandate that more funds are funneled directly to regional and municipal governments. Local governments are being included as service-delivery partners in health, education, and other areas. Throughout much of the region, local governments have become the crucible of innovative practices to include citizens, on water boards and school oversight committees, in public meetings, and in local priority-setting of governmental goals. Reflecting these developments, this paper will examine progress in the four local government action items in the Summit Plan of Action.

I. Increasing Citizen Participation

As never before, citizens have the opportunity -- and the impetus -- to influence and direct government decision-making. With the political evolution that has decentralized responsibility, authority and resources to subnational government, real accountability to the citizens at the local level has become possible. Attuned to voters' needs and reactions, more and more local governmental leaders are bringing citizens and civil society organizations into the process of setting priorities, implementing programs, and monitoring results at the local level.

Current Developments. Two of the most common new practices used in Latin America are citizen commissions for local development planning and priority setting and open hearings on municipal budgets and performance.

In countries such as El Salvador, Paraguay, Nicaragua, Argentina, Peru and Chile, mixed public-private entities bring together municipal government representatives and other local actors in citizen advisory committees. These citizens groups are known by different names-- consejos, comites, consortia, asociaciones, or corporaciones de desarrollo-- and vary greatly in their modes of operation so that they are particularized to community needs. Frequently, the groups are created for a specific short-term purpose such as preparing a local development plan. Yet often groups continue to meet after writing a development plan in order to meet newly perceived community needs. In this regard, these new entities create a permanent participatory mechanism that helps guarantee local citizen participation and that can endure beyond the term of an individual mayor.

Municipal open hearings designed to facilitate public participation are becoming widespread in the region. Honduras has helped pioneer the use of these hearings and now requires by law that municipalities have at least five open hearings a year. Other examples of community hearings are found in Mexico, Colombia, Peru, Venezuela, Paraguay, and Bolivia. Open municipal meetings vary in terms of procedure, applicable regulations, level of citizen participation and the impact of citizen input on municipal actions. Some municipalities hold budget review meetings in several different neighborhoods to reduce the burden having to come to a downtown city hall. Some have prepared and distributed simplified budgets to citizens, or have adopted performance measurement planning and budgeting, to make it easier for their citizens to understand the budget issues being considered. To respond to citizens� input at open meetings, the mayor of Leon, Mexico has now computerized all requests to track the municipality�s follow-up actions.

International Donor Support. The Organization for American States (OAS) continues to promote citizen participation in local government decision-making through its policy and information sharing workshops. The OAS-sponsored seminar on "Frameworks and Policies for Citizen Participation at the Municipal Level, " which took place in Cochabamba, Bolivia in July, 1998, facilitated information exchange among some 80 senior policymakers of the region. In Colombia and Argentina this year, training courses for participants from the Andean Community and MERCOSUR, respectively, brought together national and local authorities, civil society and the media for training and exchange of information and experiences on decentralization and citizen participation. Training events for the Caribbean area are being planned for next year.

The U.S. government, through the Agency for International Development (USAID), has increased its long-standing commitment to democratic local government. USAID now assists twelve local government programs in Latin America and programs in many other sectors, such as health and environment, which also seek to strengthen sub-national governments. This is the fastest growing sector of USAID�s democracy portfolio, and now accounts for more than 20 percent of its democracy budget--over $20 million a year.

Citizen participation and transparency are at the heart of USAID�s programming in this area. In Bolivia, USAID works with the Popular Participation Law to foster broader and more effective civil society participation in and oversight of local government. In El Salvador, USAID will measure the success of its program in terms of increased participation in strengthened local government. The USAID local government program in Guatemala, initiated in 1998 in response to the peace accords, brings participatory planning processes to the country�s traditionally conflictive areas.

Next Steps. Citizen participation in Latin America is no longer a new idea or passing fad being tested by a few progressive local leaders. Positive examples abound in the region and are rapidly being replicated. The challenge today is not to convince mayors, governors and their staffs to use participatory approaches, but to expand access to information on what works, what is cost-effective, what responds best to citizen demands, and how to make new methods of local participation become lasting and permanent.

II. Improving Financial and Human Resource Capabilities

The tasks of creating sustainable financing systems for local and subnational governments and increasing the capacity of local officials to manage resources in a democratic, participatory way concerns are daunting and long-term. While some progress since the Summit can be seen, fulfilling this responsibility is largely ahead of us. Although numerous countries have legislation that guarantees resource transfers to localities, improvements in financing systems for municipalities and subnational governments often still lag behind the transfer of responsibilities from the national level.

As the role of municipalities expands in health, education, infrastructure, security and other areas, so obviously does their need for sound financial and institutional management. In addition, local governments urgently need access to additional resources to train personnel, improve service delivery, address critical issues such as poverty, and meet increasingly costly infrastructure needs. This is a complex issue. The financial crises affecting the region in 1999 have accentuated the internal debate over national transfers, access to capital markets remains limited, and the downturn in economic growth has reduced options for local revenue generation. Unless municipalities can receive and generate the necessary resources�and improve their internal ability to manage funds and respond to citizens� demands�countries will not be able to meet the Summit commitments in this area.

Current Developments. Progress to continue to transfer national resources to municipalities still lingers, yet in some countries advocacy efforts have emerged to encourage central governments to fulfill their legal responsibilities in this area. The Honduran national association of municipalities, AHMON, has been particularly active in this regard.

Meanwhile, municipal associations are central to helping local governments develop their capacity and respond to growing need for sound financial management and sustainable financing. The Federation of Municipalities of the Central American Isthmus (FEMICA) convened national municipal associations and other municipal authorities in Central America in September 1999 to review the Santiago Summit mandates for local government. The workshop helped each country team identify the relevance of the stated commitments to their country by developing a work plan that diagnosed problems affecting local government in each country and appropriate solutions within the Summit priorities. Consequently, municipal leadership in the five Central American countries is now better equipped to play a more active role in pursuing the commitments made by the Heads of State to strengthen financial and human resource capabilities. FEMICA continues to provide technical assistance and training to local government leaders and personnel.

In Bolivia, a particularly innovative municipal-level conceptual model for integrated financial management (SIMAFAL) has evolved. The model connects budget, treasury, public credit and accounting systems for improved administration and transparency. By adopting this system, municipalities can reengineer how they approach financial management, clearly defining roles and responsibilities for public officials.

International Donor Support. The Inter-American Development Bank (IDB) and the World Bank have increased their financial and technical assistance programs for urban development. Since the Santiago Summit, the IDB has approved ten loans totaling $750 million for investments and strengthening of urban centers, which include components to modernize municipal and regional administrations. In addition, the Bank approved 20 technical-cooperation operations for a total of $4 million. ("Summit of the Americas Progress Report," September 1999).

In May 1999, the World Bank launched the Cities Initiatives program, targeting development in the poorest areas of select urban centers through the creation of City Development Strategies. The program will provide resources to 20 cities worldwide to help improve the living conditions of the urban poor. Strategies will assess economic growth prospects, assist local authorities to outline financing and investment plans, and develop enabling policies for growth. With USAID support, the World Bank also organized a conference on "Local Strategies to Access Financial Markets: Lessons and Opportunities for Latin America and Central and Eastern Europe" in October 1998.

The donor community, including the German and Danish Government and USAID, has been equally active in carrying out bilateral training programs for local governments in selected countries. USAID supports in-country technical assistance to modernize the financial administration of municipalities and institute integrated financial management systems. On a regional basis, the OAS joined FEMICA in March 1999 to bring together the Central American municipal trainers and technical assistance providers to share experiences and practices. In September 1999, USAID supported a workshop for the Central America Controller Generals and municipal authorities to develop recommendations for improved oversight of municipal finance.

Next Steps. To provide municipalities with the resources needed to meet citizens� demands, central governments must comply with their own national laws on municipal transfers by conveying the full amount of revenue legally established. In addition, legislation must be developed to allow municipalities to administer property taxes and improve their revenue-raising capacity in other ways, to make revenue authority a permanent part of the municipalities� resource base. Finally, actions to improve municipal credit worthiness should be investigated. Priority measures would be to stabilize revenue and transfer systems and improve financial information systems and controls to permit fiscal transparency and demonstrate a sense of municipalities� accountability to their constituents and pertinent national authorities. As a consequence, financial gains will also come by reducing waste and mismanagement and better controlling fraud and corruption.

Training for municipal leaders and personnel is critical to develop the needed capacity to administer these aspects of financial resource management. Efforts to share technical assistance and training experiences across national boundaries, such as those of FEMICA, are limited. Opportunities to take advantage of existing training programs, advances in effective training methodologies, and cost-saving technologies are being missed within the region. As donors and governments consider how best to help permanently improve local governance, assistance must look beyond providing temporary improvements in human resources to helping municipalities create systematic, comprehensive training and capacity-building strategies.

The new International Forum on Donor Cooperation in Local Government in Latin America and the Caribbean (described in section IV below) is an important step toward coordinating and improving municipal-level training. The International City/County Management Association (ICMA), which serves as secretariat for the group, is charged with completing a regional training diagnostic. ICMA has already designed its analytical model for training assessment and began the initial field testing in Bolivia last month.

New functions, previously the sole responsibility of the central government, are increasingly being transferred to municipal and subnational governments. Allocating these duties can be a conflictive process, as central and local governments divide functions and authority. Investigating best practices and various models for decision-making and service delivery is critical to this process.

Current Developments. The Annual World Bank Conference on Development in Latin America and the Caribbean in Chile in June 1999 provided a major contribution toward the call for additional studies on local government set forth in the Summit Action Plan. The theme of the conference � "Beyond the Center: Decentralizing the State"� emphasized to the national governments the urgent need for clarifying the rules of the game for decentralization.

The conference also reviewed recent experiences of decentralization efforts in the region in health, education, and roads. The Bank�s July 1999 publication on the conference provides an excellent discussion of the current issues of transferring new functions and is a valuable contribution towards specifying both the benefits of and constraints to greater decentralization. The study is available in Spanish and English and should be widely distributed.

Next Steps. Careful analysis, discussion and consideration must continue regarding which level of government is best suited to carry out functions and deliver various public services. More work is needed in the region to advance the normative framework for assigning functions, structures and revenues in ways that align the incentives of central and local governments and of citizens in terms of accountability and authority.

IV. Sharing Donor Experiences and Information

The recent creation of an International Forum for Cooperation on Local Government in Latin America and the Caribbean directly addresses the Summit priority for sharing donor information and holds tremendous promise for concretely addressing the local government themes in the Action Plan.

Current Developments. Concurrent with its Annual Board of Governors meeting in March 1999, the IDB hosted a special meeting of interested multilateral and bilateral donors to discuss a proposal for creating a forum to share information and experiences in local government support. Two regional organizations working with municipal governments � FEMICA and the Latin American Chapter of the International Union of Local Authorities (IULA-CELCADEL) � requested the formation of an international donor group in order to improve the effectiveness of technical assistance in support of national decentralization and local government development initiatives in the region.

The IDB, World Bank, UNDP, and OAS, together with USAID and other bilateral donors, agreed to participate in the Forum, recognizing the need to exchange information about their programs, establish greater consensus on technical approaches, identify priority areas for research, and jointly learn about best practices and innovative approaches to local government in the Americas. The first meeting of the technical representatives to the Forum was held in Washington in June 1999 to develop the agenda and operational procedures. At this meeting, representatives placed priority on 1) promoting sustainable municipal finance systems and 2) assessing and diagnosing training needs and existing programs at the municipal level.

As part of its new regional program to strengthen local government, USAID approved over $4 million to support the Forum�s objectives, financing the services of ICMA as secretariat, and increasing the capacities of FEMICA and IULA-CELCADEL to network with national associations of municipalities.

Next Steps. The new International Forum for Cooperation on Local Government will provide the basis for future monitoring and assessment of studies and other measures donors and governments undertake to strengthen municipalities in the region. The Forum will have its own interactive website, managed by ICMA. With USAID assistance, linkages will be established with the networks being developed by IULA-CELCADEL and FEMICA. These new arrangements will facilitate systematically gathering and disseminating information on progress made on the Action Plan mandates and will ultimately form a comprehensive system for reporting on national level achievements toward Summit local governance priorities. The Forum will meet next in New Orleans in March of 2000.

V. Conclusions

The initiatives to support and strengthen sub-national governments are new and bold, demonstrating national governments� realization that the processes of democratization and economic development in their countries will proceed more quickly and more equitably when power and duties are shared with government at all levels. Equally important, by strengthening local governments citizens will have greater opportunities to participate in government and to ensure that their needs are addressed.

As suggested by the World Bank, the process is probably unstoppable:

The emergence of modern economies and an urban, literate middle class has created nearly insurmountable pressures for a broader distribution of political power. The ongoing decentralization efforts in Latin America are a response to these pressures. Rather than attempting to resist them, governments need to accommodate them in a way that maintains political stability while improving public sector performance.

("Decentralization in Latin America and the Caribbean," 1999)

The commitments made at the Summit of the Americas to strengthen local governments are one step toward accommodating these political changes and improving effective governance throughout the region.