Federalism and Public resources in Brazil: Federal Discretionary transfers to States

Abstract

This paper analyses intergovernmental rel ations in Brazil based on the dynamics of t he distribution of federal d iscretionary transfers to the states between 1997 and 2008. The theme becomes more relevant when we consider the process of fiscal recent ralization that has taken place in Brazil, particularly from 1994 on, and the importance of discretionary transfers for state budgets. Our purpose is to ident ify which factors can account for a higher or lower state’s share in overall resources, by building on two explanatory dimensions: t he partisan-political and the social-redistributive. The first one examines how the political dynamic affects resource allocation; the second, if discretionary transfers exhibit a redistributive character across states. Our findings show that a governor’s partisan alignment w it h the president or with the president’s government coalition are important factors in determining higher resource allocation for his/her state, and that states that are overrepresented in the lower chamber are favored. We have also found a redistributive character associated with federal discretionary transfers, favoring states with lower Human Development Index (HDI) rankings.

Keywords

• Federalism
• fiscal federalism in Brazil
• Federal discretionary transfers