Absolutely central to the passage of the labour reform (and almost all the Congress bills to follow) is the assent of the provincial governors controlling the deputies and senators needed to take the ruling La Libertad Avanza party over the top to an overall parliamentary majority. This situation leads to negotiations between federal and provincial governments whose extreme flexibility can only remind us that the scope for haggling would be far more limited if an institutional system were in place to administer the distribution of the public purse, as mandated by the 1994 constitutional reform (to come into force by the end of 1996 at the latest, thus making it three decades overdue).
“Coparticipación federal” is the local term for what can perhaps be best translated into English as “federal revenue-sharing” (the phrase long used in Canada for this system, although the current terminology there is “fiscal federalism”). Argentina’s original 1853 Constitution strictly separated each tax as belonging to either the national or provincial jurisdictions with the concept of sharing between both only originating in legislation of 1934-1935 (with only one peso in every six for the provinces). Yet for the next half-century this concept was largely hollow because those were years of either military or mostly Peronist civilian rule when provincial governors tended to be adjuncts of the central government with the spoils divided on a personal rather than institutional basis with constantly shifting percentages.
When democracy returned for good as from 1983, Raúl Alfonsín faced plenty of other problems but towards the end of his Presidency he did address this issue in the form of Law 23,548 in early 1988, which to this day remains the only attempt to legislate federal revenue-sharing in over four decades. This stipulated that 42.34 percent of all shared revenues should accrue to the national Treasury and 54.66 percent to the provinces with the remainder going into compensatory funds but this law had so little faith in the rectitude of the central government (the recipient of all revenues with possession nine-tenths of the law) that Article 7 specified that the provincial share should never fall below a third. A transitory mechanism from the start (although continuing by default to this day) – so much so that only a few years later the need for a permanent system was manifest to the constituent assembly delegates of 1994. But their insistence on consensus between the 24 districts made any such system the mission impossible it continues to be.
In the years since, the national government has encroached on the provincial share with various ups and downs according to electoral needs but 70 percent retained by the national Treasury is not uncommon in the past three decades with even higher percentages at times. But amid the oscillations there has been a chronic injustice within the provincial share in favour of the hinterland. Last year Buenos Aires Province with 38.5 percent of the country’s population received 23.6 percent of the federal revenue-sharing funds distributed among the provinces and its cut has been even lower in the past. Set at 21.3 percent by the 1988 law, it came close to a quarter of the pie when Carlos Menem created the compensatory Greater Buenos Aires Fund in 1996 but two decades later it had fallen to 18 percent after this fund was frozen at 650 million pesos. Tweaked upwards by first Mauricio Macri (on behalf of PRO Governor María Eugenia Vidal) and then Alberto Fernández (at this city’s expense), BA province’s slice of the cake remains absurdly below its demographic percentage, going far towards explaining its attraction to the politics of envy and resentment tapped by Kirchnerism.
This city is also short-changed – regardless of whether the percentage is the 1.9 percent assigned under the 1988 law, the 1.4 percent to which Alberto Fernández slashed its share in the midst of the pandemic lockdown or the 2.95 percent ruled by the Supreme Court in 2022 (gaining more verbal than monetary respect from the Javier Milei administration), it falls woefully below what might be considered due to a metropolis with 7.2 percent of the country’s population and an even higher percentage of revenue collection. Both the Buenos Aires districts are thus deprived of their fair share yet their claims are almost invariably directed against each other instead of questioning the fact that the inland provinces with 55 percent of the country’s population walk off with three-quarters of the federal revenue-sharing funds not accruing to the national government – almost the “two bald men fighting over a comb” of Jorge Luis Borges.
The political clout of the inland provinces is solidly grounded in the upper house of Congress where they have 66 senators as against only six for Buenos Aires City and Province (three members per district) although they do not do at all badly in the lower house either (162 of the 257 deputies). This clout makes the federal revenue-sharing system relative – when senators can trade in their votes for the construction of a bridge in their province, for example, who needs a just system of distribution? Yet these inequities are detrimental to parliamentary life because it makes all too many members of Congress feel entitled to place the defence of the legitimate interests of their provinces ahead of legislating for the country.
Not that we are going to see a reform of federal revenue-sharing any time soon (not even in the pipeline for a hypothetical second Milei term) but when it does come, it could take two forms – the permanent law weeding out inequities and loopholes demanded by the 1994 constituent assembly or a return to the strict separation of 1853, giving the provinces an adequate revenue base and making them accountable for their own financing. But perhaps the time has come to change the map – the United Provinces of the River Plate were formed two centuries ago on the basis of the 14 town halls of an Argentina of half a million people being allowed to promote themselves to provinces but should those boundaries be engraved in stone?
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