December 12, 2016 Print

Municipal spending is rising in Mexico, growing by 66.8 percent during the decade from 2004 to 2014, according to the seventh edition of the Municipal Budget Information Index (IIPM), an annual publication from Atlas Network partner Instituto Mexicano para la Competitividad (IMCO). In fact, Mexican municipalities and delegations spent 411.2 billion pesos in 2014 alone (about US$31 billion at average 2014 exchange rates), based on the 2,070 municipalities out of 2,458 for which data is available.

IMCO discovered in 2009 that there was little to no public information available regarding how much municipal governments in Mexico were spending, and on what. The organization decided that it could both measure and improve transparency of municipal budgets in Mexico through thorough research that compiled budget information from the country’s several hundred municipalities.

IMCO reports a success story in the state of Coahuila, where the superior auditor (ASEC) has, for the past three years, invited the 38 municipalities within that state to participate in the IIPM. Both IMCO and ASEC trained those municipal governments how to work with budget data, and formulated a model for municipal budgeting that was implemented by all municipalities in Coahuila. All 38 municipalities have achieved 100 percent compliance in IIPM reporting for both 2015 and 2016, after implementing the methodology devised by ASEC and IMCO.

In its research for the 2016 edition of IIPM, analysts with IMCO consulted the websites of 407 municipal governments (46 of the 453 municipalities evaluated do not have Internet portals), 32 local congresses, and 32 official newspapers. IMCO also evaluated 382 income laws, 277 expense budgets, and 152 citizen budgets. The national average spending per municipality in 2014 was 199 million pesos (about US$15 million in 2014). Specific public services provided by the municipalities examined include garbage collection, provision of potable water, drainage and sewage, street lighting, roads, and public parks and gardens.

IIPM also examines the sources of funding for Mexican municipalities. In 2016, Mexico’s federal government provided 238,445.3 million pesos (about US$18 billion in 2014) to municipal governments, accounting for 82 percent of all municipality funding for the year. Falling prices for commodities such as oil, however, have forced a significant reduction in the amount of federal funding for municipal governments in the prospective 2017 budget.

In order to address the looming budget headache to come in 2017, IMCO proposes three courses of action for municipalities to take: deduct more from their budgets, spend more efficiently, and improve tax collections. IMCO also suggests seven proposals that would improve sustainability for public finances of the subnational governments, beginning with a formal standard at the state level that would require municipalities to include specific information in their expense budgets. Other proposals included fostering bilateral efforts between municipalities and higher levels of government to consolidate budgetary transparency at the municipal level, as well as strengthening sanctions via the Financial Discipline Law and the General Law of Government Accounting.

IMCO has also published other indices this year, including the State Competitiveness Index 2016, the State Budget Information Index 2016, the Urban Competitiveness Index 2016, and the Legislative Report 2016. IMCO continues to base its nonpartisan policy proposals on hard evidence in order to enhance Mexico’s capability to attract and retain talent and investment for the country’s development.