OECD Multi-level Governance Studies

2414-679X (online)
2414-6781 (print)
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Governments at all levels are increasingly required to do more and better with less. They are searching for solutions to improve the quality of public services, the effectiveness of public investment and the fiscal sustainability of public finances. To meet these challenges, co-ordination arrangements between national, regional and local governments, as well as across jurisdictions, are needed, along with subnational capacity building. Countries are also seeking guidance in making decentralisation and territorial reforms happen. This series is part of a larger body of OECD work on regional development and provides international benchmarks based on statistics, analysis and good practices.

Making Decentralisation Work in Chile

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Making Decentralisation Work in Chile

Towards Stronger Municipalities You do not have access to this content

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19 Sep 2017
9789264279049 (PDF) ;9789264279032(print)

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This report provides a comprehensive analysis of the challenges confronting Chile’s centralised growth model and recommendations towards developing a more integrated territorial approach, capable of mobilising regional productivity catch-up potential in order to strengthen the role of regions and municipalities.

The Chilean government has launched an ambitious decentralisation agenda, aimed at empowering municipalities by providing them with the legitimacy, financial resources, human capacities and tools required to improve their autonomy and performance. This study seeks to assist the government by covering several dimensions, looking at municipal responsibilities, fiscal and human resources, equalisation mechanisms, local public service performance,  citizen participation, and co-ordination mechanisms across levels of government.

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  • Foreword

    The OECD Regional Development Policy Committee (RDPC) is a leading international forum in the fields of regional, urban, and rural development policy and in multi-level governance. It has led the way in acknowledging the importance of multi-level governance and place-based approaches tailored to local and regional needs. To support the RDPC's leadership in this policy dialogue, the OECD created the Multi-Level Governance Studies series in 2016, focusing both on country and thematic work.

  • Acronyms and abbreviations
  • Executive summary

    The Chilean government requested that the OECD conduct a comprehensive analysis of the country's municipal system, identifying the main challenges and recommending policy options for reform in the framework of the current governmental decentralisation agenda.

  • Assessment and recommendations

    Chile’s complex geography, history and economic development model are all factors which account for why it is particularly challenging to implement a decisive decentralisation process. Chile has a long tradition of being a heavily centralised unitary country despite a history marked by several decentralisation pushes, and even an attempt at federalism. During the dictatorship, the governance reform in the 1980s, which transferred several central government tasks (education and health, for instance) and associated resources, was more a policy of deconcentration of state responsibilities to local entities than a real decentralisation policy. Since the return of democracy, progress has been made towards decentralisation and regionalisation which are seen as a means of re-democratising the country and reforming the state. Progress, however, has been slow. The centralist heritage remains strong and deeply-rooted in Chile's politicaladministrative culture and behaviour, thus slowing and scaling back the decentralisation initiatives.

  • The Chilean municipalities in the evolving national multi-governance system

    This chapter provides an overview of Chile’s multi-level governance system, including its organisation, and of the decentralisation process in a historical perspective. It ends with an analysis of the role of municipalities in a changing institutional system, underscoring the challenge to transform Chilean municipalities from being mainly “public service providers” to genuine “local governments”. It is important to acknowledge the diversity of municipal realities and to reconsider the current uniformity principle by encouraging more asymmetrical approaches to local development.

  • The fiscal challenge

    This chapter is dedicated to fiscal challenges in the current context and with respect to further devolution or reorganisation of tasks. While there is a general propensity to limit financial public intervention, the chapter shows the extent to which public finances are particularly centralised in Chile. The first part of the chapter provides a comparative overview of Chile with Latin America and OECD countries, based on macroeconomic public finance indicators at national and subnational levels. The second part focuses on the diagnostic through a retrospective analysis which provides greater insight into the trajectories of municipal budgets. The third part examines the weaknesses of the Chilean local government finance system. It suggests ways to improve it in order to provide municipalities with the financial capacity to better exercise their responsibilities, looking at the grant and tax systems as well as the ways to diversify municipal revenue sources. Finally, the chapter provides options for reform of the current budgetary and fiscal framework in order to ensure greater transparency of municipal functioning, reinforce the responsibility and accountability of local elected representatives, and guarantee fiscal sustainability of public policies. It also includes recommendations for expanding municipal borrowing abilities in a prudent and controlled manner.

  • The equity challenge

    This chapter focuses on the need to design more appropriate equalisation mechanisms, ones that go beyond the current system based on the Municipal Common Fund (FCM), a “compensation” system based on the horizontal redistribution of municipal resources across municipalities. This equalisation mechanism is commendable, however, it is not fully efficient and has some counter-productive effects on local and regional development. It should be complemented by other equalisation arrangements to combine solidarity and equity principles, as well as economic efficiency. Various avenues are proposed to help accomplish this, based on two approaches, in the short term through several adaptations of the current allocation rules and in a longer term approach through a more ambitious reform process, through more “verticalisation” and “regionalisation” of the mechanism.

  • The management challenge

    This chapter focuses on improving municipal management and performance through adequate human resources and efficient tools for public service production, delivery and monitoring across the whole national territory. The first part is dedicated to the modernisation of human resource management (HRM) in Chilean municipalities, looking at the development of workforce planning and management, the strengthening of human resources capacity and the need to reinforce the HRM function at municipal level. The second part focuses on how to enhance the quality and efficiency of municipal services in Chile through the development of a municipal services management model, including the establishment of minimum standards for municipal services as a means to reduce territorial disparities, and the provision of appropriate incentives as well as a suitable institutional framework.

  • The participatory challenge

    The fifth crucial dimension of decentralisation reform is community participation and democracy at the municipal level as a means to building a more inclusive and more democratic society through formal mechanisms but by promoting transparency and accountability practices and greater citizen participation. The chapter begins with a brief overview of the state of participatory governance in Chile using engagement, community, voter turnout and trust in government as indicators. It then presents the country’s main levers for promoting transparency, accountability and participation, and identifies some of the key issues surrounding their implementation. Following this is a discussion of what may help address the primary challenges, and the chapter concludes with a series of recommendations for action.

  • Strengthening strategic co-ordination within and across levels of government

    This last chapter deals with the need to strengthen strategic co-ordination and co-operation among and across levels of government. Co-ordination and co-operation are all the more necessary due to the decentralisation process which will profoundly transform the Chilean multi-level governance framework. It is, therefore, essential to ensure that: 1) reforms at the central, regional and municipal levels are well co-ordinated; 2) the governance framework is well-balanced and coherent; and 3) the role of municipalities is adequately acknowledged. This chapter focuses on the need to build a coherent multi-level institutional framework which implies managing institutional fragmentation at both national and subnational levels, as well as reinforcing regions for more efficient and stronger municipalities. It also looks at instruments that could be able to strengthen multi-level co-ordination and dialogue, as well as those that could better support horizontal co-operation between municipalities, including municipal associations and better metropolitan governance.

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