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MoNocrdAPH SERrEs, 42 CENTER FoR U.S--MEXICAN STUDIES UM\TRSITY oF CALIFoRMA/ SAN DIEGO

Decentralization and Rural Development in Mexico Community Participøtion in Oøxøcø's Municipal Funds Progrøm by

IONATHAN FoX AND

IOSEFINAARANDA

CEMER

FOR

U.S,.MEXICAN STUDIES

UM\,TRSITY oF CALIFoRNIA, SAN DIEGo

Contents O 1996 by the Regents of the University of Califomia- PubÌished by '.he Cente¡ for U.S.-Mexican Studies at the University of California,

All dghis ¡ese¡ved u¡rder Intemational and Pan-Amedcan Convenlions. No pa of this publication may be reproduced or t¡ansmitted in any form or by any rneans, electronic or mechanical, hcluding photocopy, recording, or any information storage or San Díego.

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in writing f¡om the

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List of Tøbles and Figures

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Acknowledgm.ents

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Map of Mexico Preface: The World Bank and Poverty Lending in Rural Mexico

-lonathan 1

Fox

. Introduction

2 o Research Design

3

CO\GR ENGRAVING by Rini Templeton; courtesy of Amelia Rir.aud and Mauricio Sánchez.

. Municipal Solidarity Funds:

Process

2I

4 o Municipal Funds Project Impact

31

5 o Conclusions

45

Appendix 1: Sample of Oaxaca Municipalities

51

Appendix 2: Selected Municipal Case Summaries

54

Appendix 3: Submunicipal Governance Structures in Mexíco

64

Referenees

69

About the Authors

75

ISBN 1-878-367-33-1 (paper) Pri¡ted in the United States of Ame¡íca

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Tables and Figures

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Tables

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1

Worid Bank Loans to Mexico, 1986-1996

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2

Changing Share of World Bank Poverty and Environmental Lending to Mexico ,1986-7995

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3

Municipal Fund Allocation by Proiect Category,

4

Correlation of Project Impact and Location within Municipality

5

1991

1.7

Co¡relation of Project Selection Process and Social Impact

Figures

1 2

Municipal Solidarity Council Formation by Region in Oaxaca

23

Categories of Operating Projects

33

Rates of

3

Dist¡ibution of Projects According to Social Impact

4

Projects in Operation in Municipal Centers .1)

and Agencùts

5 6

Project Impact According to Location in

36

Observ'ed Project Impact According to Size of

Municipality

7

Municipality

Project Impact and Ethnic ldentity

38 39

Acknowledgments The authors are very grateful to P¡ofesso¡ Fausto Díaz Montes of the Universidad Autónoma "Benito luárez" de Oaxaca a¡d ,Jre membe¡s of the field ¡esea¡ch team: Alejandro Arrellano, Luis Miguei Bascones, Ma¡uel Fern¡índez, Fáti:îa Ga¡cía, SaÌomón Gonzâ\e2, Femandt¡ Guardarrama, and Luis Adolfo Méndez Lugo. Local, state, a¡d fede¡aÌ officials in Oaxaca were very generous with thei¡ time and in-

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formation.

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Special thanks to Marti¡ Disicin fo¡ early input and inspiration. Pablo Policzer provided essential support with the statistical analysis, and Matthew Wexler generously assisted with the figures. Jonaihan

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Schlefe¡, Ronald Dore, artd Aubrey Williams offered very useful comments on earlier d¡afts. And¡ea Silve¡man, Task Manager for the Wo¡ld Bank's Decentralization and Regional Development project, provided c¡ucial insights a¡d const¡uctive criticism throughout the process. Thanks also to Fra¡k Lysy, Lead Economist fo¡ Mexico at the World Bank, for ki¡dly permitti¡g use of the map. This study was funded by the World Bank's i¡ternal participation Learning Group, with support fÌom the Swedish Intemational Deveiopment Agency. The Fo¡d Foundation's Mexico City office provided additional research support via the Unive¡sidad Autónoma ,,Benito lufuez" de Oaxaca, permitting the first pubJication of ¡esearch findings (Díaz Montes and Aranda 1995). This monograph is based on the final study p¡esented to the World Bank and the Mexican Social Development Mi¡istry i¡ Septembe¡ 1994. The empirical findirrgs have not been updated or changed significantly. The data a]ld analysis presented he¡e are the exclusive responsibility of the autho¡s, who håd complete autonomy f¡om both the World Ba¡k and the govemment to carry out their research. A related Spanish-language version of this study will appear in a fortlrcoming issue of the Re:aísta Merícqnr de Sociología (Fox arÅ Aranda n.d.).

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8

Key Project-Selection Decìsion Makers

40

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Tables and Figures Tables

1

World Bank Loans to Mexico, 198Ç1996

2

Changing Share of World Bank Poverty and Environmental Lending to Mexico ,7986-1995

3 4

Municipal Fund Allocation by Project Category, 1991

17

Co¡relation of Project Impact and Location

within Municipality

Acknowledgments

x1t1

3/

The authors are very grateful to Professor Fausto Díaz Montes of the Universidad Autónoma "Benilo Juátez" de Oaxaca and the membe¡s of the field research team: Alejandro Arrellano, Luis Miguel Bascones, Manuel Femández, Fâlilina García, Salomón Gonzâlez, Femando Guardarrama, and Luis AdolJo Méndez Lugo. Local, state, a¡d federal officials in Oaxaca were very generous with, their time and t¡-

formation.

5

Correlation of Project Selection Process and Social Impact

Special thanks to 42

Figures Rates of \4unicipal Solidariry Council Formation by Region in Oaxaca

Categories of Operating Projects

33

Distribution of Projects According to Social Impact Prolects in Operation in Municipal Centers and Agencias

35

Project lmpact According to Location in Municipality

36

Observed Project Impact According to Size of

Municipality

38

Project Impact and Ethnic Identity

39

Key Project-Selection Decision Makers

40

Marti¡ Diskin for early input and i¡spiration.,

Pablo Policzer provided essential support with the statistical a¡alysis, and Matthew Wexler generousìy assisted with the figures. lonathan

Schlefer, Ronald Dore, and Aubrey Williams offered very useful corrtrnents on earlie¡ drafts. Andrea Silverman, Task Malager for the World Bank's Decentralization and Regional Development project, provided crucial insights and constructive criticism throughout the process. Tharks also to Fraak Lysy, Lead Econornist fo¡ Mexico at the World Ba¡k, fo¡ kindÌy perrnittiag use of the map. This study was funded by the Wo¡ld Bank's inter¡al Participation Leaming Group, with support f¡om the Swedish Intemational Development Agency. The Fo¡d For.Erdation's Mexico City office provided additional research support via the Universidad Autónoma "Benito Juátez" de Oaxaca, permitting the first publication of ¡esea¡ch fi¡dings (Díaz Montes arrd Aranda 1995). This monograph is based on the final study presented to the Wo¡ld Ba¡k and the Mexica¡r Social Development Ministry in September 1994. The ernpirical findings have not been updated or cha¡ged significantly. The data ard alalysis presented here are the exclusive responsibility of the authors, who had cornplete autonomy f¡om both the World Bank and the govemment to carry out their ¡esearch. A related Spanish-language version of this study will appear in a forthcoming issue of the Reuista Mexicana. de SocioLogía (Fox and Aranda n.d.).

UNIÍ¡D

STATTS OF ÄA¡ERICÁ

Preface The World Bank and Poverty Lending

in Rural Mexico lonathnn Fox' Mexico has long been one of the World Ba¡k's principal devetopingcolr¡try clients, second only to úrdia as a cumulative bor¡owe¡, Because of the diplomatic sensitivity of the Bark-govemrnerì.t relationship, however, nongovemmental policy analysts have generally been Iimited to making inferences about the Ba¡k's role, with little access to irrdependent empirical evidence about how decisions a¡e made or where the funds actually go. Indeed, u¡ti1 the World Bank's 1994 refo¡m of its information disclosu¡e policy, even the most basic p¡oject information was confidential (UdaII 1994; World Ba¡k 1994a). Most project evaluation i¡fo¡matìon remai¡s confidentialThe followíng study of a community development proiect suggests both possible simila¡ities and diffe¡ences with the rest of the growing

"social sector" component of Mexico's World Bank portfolio. The findings, however, are limited to one subcomponent of one loan i¡ one state, among dozens of past, present, a¡d future rural development ìoars. This preface situates the study i¡ a broader context, presenti¡g a brief overview of World Bank lending to Mexico over the past decade. In the 19ó0s and 1970s, the Wo¡ld Bank invested heavily ìn Mexico's state-led, import-substituting industrialization project- Af ter ihe 1982 collapse of the oil-debt boom, however, both the Bank and the dominant currents within the govemment concluded that the limits of 'This preface d¡aws from the authot's ongoing research into the Wo¡ld Bank,s Mexico potfolio, \ ¡hich began after the followng study was completed. This resea¡ch was made possìble by an I¡temational Affai¡s lellowship ftom the Council on Foreign Relations. as well as ¡esearch glants fiom the John D. and Cathe¡ine T. MacA¡thu¡ Foundation (Program on Peace and Intemationai Cooperation) and the Social Science Research Coùncil.

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this strategy had been reached, and both began pushing the state tot'a¡d dramatic economic liberalization. a 1994 i¡temal World

TABLE 1 WORLD BANK LoANS To MEXiCo, 198G1996

^s found: Bank evaluaúon of its relationship with Mexico

Bank/Mexico ¡elations. while always generally good, have become close¡ and mo¡e stable over the last decade. Improved arrangements for collaboraLion and coordination have inc¡eased the ability of the ¡elations io avoid or wi[hstand fiictions, and extemal events and changes in attiiudes have inc¡eased ihe acceptability of Bank advice and financing by Mexico (World Bank 1994b: iii).?

Loan Commitments Fiscal Years

come Bank policy advice after the debt c¡isis.3 In the rniddle and late 1980s, the Bank's Mexico

Railways V

portfolio concen-

trated on structural ad;ustment, liberalization, and infrastructure, but by the earÌy 1990s the portfolio began to include significant lending for a¡tipoverty and environmental projects.' Table 1 shows the patterns of 1986-1996 World Bank loa¡u to Mexico, including those projects stiLl in the design phase (in chronological order)- The overalì amourìt of lending evolved in a "sideways-S" pattem, rising sharply i¡ the late de la Madrid and early SaLinas presidencies, falling in the early 7990s, and then rising again in response to the 1994 peso crisis.s Total lending commitments for the five-year pedod 198ó-90 totaled U.S.$9.9 billion, with only 8.6 percent aliocated to poverty-targeted Ioa¡s-' As table 2 shows, total lending for 1991-7995 fe1l slightly, to $8.4 bi11ion,

miliions)

't,204

7986

This studv concluded that the Mexican govemment had long ìimited the Bank's role to fina¡ci¡g a¡d to cedain sectors but began to wel-

(US$

Ag¡icultu¡al Credit ìX Housing DeveÌopment Agricultural Development II (Chiapas-PRODERITH) Emergenry Reconstruction Municipal Development Solid Waste Pilot 1987

300 180 150 109' 400' 40

2,073

Trade Policy I Indust¡ial Recovety Technology Development Expo¡t Development II Urban Transpoft Agricultural Financial Intermedration Small and Medium Industry IV Ag¡icultu¡al Extension Highway Maintenance

500' 350 48

250' '125

400 185

20 135

bui the sha¡e allocated to poverty-targeted lending rose 7988

:.'.

1,895

i:)

|.

'This report s.as summa¡ized m Chatte4ee 1995 (publìshed in Mexico as

rl M

l:

Èi ¡1:

* # #

IPS

1995¿).

'This study also found that the pe¡formance of its loans to Mexico was quite unwitiì â 1948 1992 "unsatisfactory" project rate of 32 percent (23 percent highe¡ than lhe average fã ure rate of 26 percent for the same pe¡iod worldwide). Most of these p¡oblem projects were concentrated du¡ing the late 1970s and early 1980s. ln terms of the Bank's economic "sustâinability" evaluation c te¡iâ, of the 7961-1987 p¡ojects aflalyzed (31 of 68), 35 perceni were ¡ated as "sustâinâble," 39 percent as "uncertain," and 26 percent as "unlikely" (World Bânk 1994b: 140). Note that these are ìntemâl e1'aÌuation criteria, based on Bank and goverunent informahon. Nongovernmental polic,.r analysts, wìth different irnpact criteriâ and access to independent, fieldbased informâtíon, might come to different conclusions. 'For a Mexican NGO critique of st¡uctural adjustment, see He.edia and Purcell even.

1994.

'For the Bank's official publjc ânalysis of the causes and effects of the peso crisis, H

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# W

Burki and EdÞ_a¡ds 1995. "Note that the dates of (fiscai year) lending commitments do not cor¡espond to disbu¡se.nents, since projects are carried out over several years, usually followed by a see

frte-ve¿r gr¿ce penod before repa\.ment be8in5.

Manpower Training Trade PoÌicy II Steel Industry Restructuting Agriculture Sector Adjustment I Fe¡tilizer Industry Rest¡uctu¡ing Ports

lV

Housing Finance 7989

Indust¡ial RestructurinE Hyd¡oelectlic Development Financial Secto¡ Adjustment Public Ënterprise Reform Industry Sector Policy Water, Women, ând Development

80 5UU'

400' 300' 50 300

2,230 250 464

500' 500' 500' 20'-'

f, Lr.

I fi

(TABLE 1 coN"nNUED)

1990

¡o¡est y

(TABLE 1 coN"rn ll,TD)

2,607.5 45.5

Low-income Housing II Ag¡icultural Marketing Ii Llte¡esL Suppo¡i Power T¡ansmissron & Distribution Road Transpoit & Telecommunìcations TeÌecommunications Tech¡ical Assistance

1,260'

7991

7,842

350' 100 450

380' 22

Waier Supply & Sanitation Basic Health Care Expoú Sector

30d i80i

Agriculture Sector II

400'

Decentralìzatron & Regional DevelopmenL Mining Sector Restructuring Technical T¡aining ili

350'

1992

Primarv Educalion liii8ation & Drainage Envi¡onmental /Natural Resources Agr icultural Technology Science & Technology lnfiastructure Housrng Market Development 7993

IniCal Educatìon Labor Market & P¡oductivity ìvf edium Cities U¡ban Tianspo¡tatron T¡arìsport Air Quality Management Ëiighway Rehabilitation & Traffic Safety 1994

On-Fa¡m & Mino¡ Irrigation Prìmary Education II No¡thern Borde¡ Envi¡onment Water and Sanitation II Soìid Waste II

300'

200 1.52

\4a9

7995

2347.4

Rairr-fed Areas Development Decent¡alization & Region¿l Development JI

Tech¡ical Education

Financial Sector Technical Assistance Financial Sector Technical Assistance Fin¿nciâl Sector Restructuring Essential Soci¿l Services 1996

Infrast¡ucture Privatization Tech¡ical Assistance Basic Health Ca¡e II

Ru¡aÌ Financial Ma¡kets Technical Assistance Fede¡âl Roads Mode¡nization FinanciaÌ Sector Restructuring II

Housing III Basic Health

III

400

Sustainabie Development

r89 450

7,154 80' 774 200 220'1

480 1,530

200 472'

368' 350' 200'

500'

30 310'

Pr oj ect s unàer pl,ep ø q.ti on

Monte¡¡ey Envi¡onment

50'

13.8 1,000

(partial)

250'

150

85' 500' 265

State ãnd

Munjcipal Management lndustrial Pollution Conk;l Integlated Hazardous Waste Aquaculture Co¡n¡nunity Fo¡estry Powe¡ T¡ansmission & Dist¡ibution Wate¡ Resou¡ces Management P¡eschool Education II

35

300 500 450 2oo1

50' 150'¡ 30 150'

200' 50' 50'2 400 150 320t

P,tojecl lypes

bàsed on World Bank descriptionsr: 'Project tà¡geted primârjly to very Iow rncome citizens. lstructrlfâl adjustñent loans (pol]cy_ ¡ather than project_basedj. >rgnthcant environmental components.

The 1988 and 1993 labo¡ t¡aining projects GROBECAT) also included poverty-targeted subcomponàntÁ focused on ..Ápf.1,J *-i.:,g-j"T, ers.see l

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