Most analyses of Latin America revolve around national politics and macroeconomic performance, focusing on presidents, elections, headline news and growth figures. This emphasis is understandable. But it ignores a crucial reality. Many of the region’s most pressing challenges are unfolding at the subnational level, where local authorities are confronting citizens’ demands on a daily basis—often in open conflict with central governments.
A comparative study I recently coordinated for the European Commission on decentralization and territorial development in Latin America and the Caribbean reveals a region caught in a structural tug-of-war. On one side stands a deeply rooted tradition of “centralism,” a tendency to concentrate power at the national level, reinforced by top-down and in some cases authoritarian styles of governance. On the other is an unfinished project to empower subnational governments to respond to local needs, reduce inequalities and rebuild democratic legitimacy from the ground up.
Despite decades of reforms intended to decentralize power in places like Bolivia, Colombia, Peru, Dominican Republic, Ecuador or most recently Chile, political power, fiscal authority and strategic policy choices remain overwhelmingly concentrated in national capitals. This mismatch between where people live and where decisions are made has become one of Latin America’s most persistent governance failures.
While this tension is not new, in recent years it has certainly become sharper. Today, a diffuse form of authoritarianism has gained ground in the region, marked by growing tolerance for strong leaders who promise quick wins while sidelining institutions, checks and balances and human rights. It is no coincidence that these leaders operate primarily at the national level, where concentrating power is easier while subnational governments are often portrayed as inefficient, corrupt or politically expendable. We are thus witnessing how some countries are experiencing an accelerated pull toward recentralization, where national governments decide and subnational authorities largely observe.
Since the 1970s, several Latin American countries have made undeniable progress towards decentralization, at least on paper. Constitutions have been rewritten, local elections expanded and legal frameworks updated. Governors are now elected in 12 countries, compared with just one in 1980. With varying degrees, municipal autonomy is constitutionally recognized across the region. Even traditionally centralized states have renewed their commitment to stronger local governance.
Yet the reality on the ground tells a different story. Across both federal and unitary systems, there is a striking gap between de jure recognition of local autonomy and de facto control exercised by national governments. Fiscal policy, regulatory authority and strategic decision-making remain tightly centralized.
In practice, many subnational governments are tasked with delivering public services without the authority or resources needed to do so effectively. One example is El Salvador, where municipalities are often impelled to pay for elementary school teachers, an obligation that would in many countries be the responsibility of the Ministry of Education. Another example is migration. In the Mexican border city of Ciudad Juárez, the municipality faces a constant inflow of migrants despite having no legal mandate, budget nor institutional capacity to manage migration. Yet they must respond to urgent needs for shelter, water, sanitation and immediate healthcare as newcomers arrive, often to camp in public spaces.
Nowhere is national control more visible than in public finance. Subnational governments in Latin America account for just 18% of total public expenditure. Yet their revenues average 5.6% of GDP, approximately a third of the average level in developed economies. Local governments rely heavily on national transfers that are often conditional, discretionary and distorted by partisan rivalries, while their own tax base remains weak.
The study makes a comparative analysis across 22 countries to show that a federal system is no guarantee of fairer fiscal arrangements. Mexico, for example, has some of the most transfer-dependent municipalities in the region. Conversely, unitary states such as Uruguay and Colombia have advanced further than expected in aligning responsibilities with resources. What matters is not the constitutional label, but whether powers, responsibilities and funding are coherently aligned and whether central governments are genuinely willing to let go, which unfortunately does not seem to be the case in most countries.
This uneven fiscal architecture does more than limit efficiency. It undermines democracy. Mayors and governors are held accountable by citizens for service delivery, yet depend on national authorities for funding. The result is a governance trap, where the system incentivizes political loyalty over performance, reinforcing territorial inequalities. Wealthier cities and regions, such as São Paulo, Mexico City or Buenos Aires, can partially compensate thanks to their stronger economic bases. Poorer, rural and peripheral territories cannot. The outcome is a vicious cycle of uneven development, internal migration toward major metropolitan areas, and growing distance between actual local needs and nationally defined priorities. This problem is neatly exemplified by the backlash against recent reforms pushed by Ecuador’s president Daniel Noboa to the code regulating territorial autonomy, where he imposes a much stronger grip on mayors, forcing them to dedicate a larger part of their local budgets to comply with his national investment agenda.
In some countries, a more aggressive concentration of power has taken shape. In Nicaragua and El Salvador, for example, tensions between central governments and local authorities have moved beyond policy disagreement into open confrontation. In 2022, in Nicaragua, Daniel Ortega’s government hollowed out municipal autonomy by intervening against opposition mayors and eliminating municipalities altogether through administrative decrees. In 2023, El Salvador’s President Nayib Bukele reduced the number of municipalities from 252 to just 44 through a sweeping legislative and administrative overhaul, unprecedented in the region. These measures were framed as anti-corruption reforms, while effectively sidelining local governments as political actors. Such moves weaken democratic accountability and reduce opportunities for citizen participation precisely at community level, where democracy is most tangible.
Latin America has often been praised for democratic innovations such as participatory planning, open town halls and public consultations. For example, in the 1980s, the city of Porto Alegre in Brazil became a global reference for participatory budgeting. Today, however, reduced autonomy and constrained resources mean that many municipalities are having less appetite to prioritize these mechanisms.
Weak administrative capacity poses an additional obstacle. Few countries have stable, merit-based civil service systems at the municipal level. High staff turnover, short-term contracts and politicized hiring undermine institutional memory and the predictability of public policy. Smaller municipalities, in particular, lack capacity for sound budget management, while medium to long-term planning across electoral cycles remains rare in the region.
Despite these challenges, the quest for stronger subnational development in Latin America is not a lost cause. The region’s most urgent problems like climate change, migration, insecurity, housing shortages and digital transformation all play out at local level. The issue is brightly summarized by Martin Kaspar in the title of a recent article: “The ministerial dinner is a costly foreign direct investment error: building a factory requires relationships with municipal clerks, not national politicians”.
Decentralization alone is not a magic solution. But without meaningful local autonomy, adequate administrative capacity and real decision-making power at the subnational level, democracy in Latin America will continue to feel increasingly hollow.
ABOUT THE AUTHOR
Eugene Zapata-Garesché
Reading Time: 4 minutesZapata-Garesché is Team Leader of the European Union’s global facility on territorial development. He is a member of Americas Quarterly’s Editorial Board.
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