Revenue-sharing returns to Argentine political agenda

Significance

In 2015 the economic downturn and the electoral calendar undermined provincial finances. The outlook is no better for 2016, forcing provincial governors to seek fresh funds. In this context, the discussion of a new revenue-sharing regime between the federal and provincial governments has re-emerged.

Impacts

• Provincial adjustment measures would put governability at risk; convergence to fiscal balance is expected to be gradual.
• Governors will exploit their relative political strength to get financial aid from the federal government.
• Though reform of the revenue-sharing scheme is politically difficult, there is room to reduce discretionary bias in other federal transfers.