Zooming in on this one area where the influence of civil society is beyond
controversy, the question whether the increased financial autonomy of the
municipalities and the rules established for their allocation will lead to better
outcomes for the poor depends on whether the municipalities will make the
right spending decisions and propose the right investment projects. That will
partly depend on their technical capacity, which is rated very low by all ex-
perts, and partly on their willingness to propose projects benefiting the poor.
The latter is mainly a political issue. Whether the majority of rural poor will
be able to press their claims through, is highly conjectural, as discussed else-
where in the paper. There are some helpful features, in particular the new
allocation rule favoring poorer municipalities, and the governments’ promise
to submit a law to parliament abolishing the monopoly of the political par-
ties in fielding candidates in local elections. Nevertheless, there is no telling
in advance whether this will bring about increased effectiveness.
It could even be claimed that in some respects there has been an
overdose of participation. There are two reasons for this. First, it might have
been better for technocrats to consult directly with a representative sample
of the poor rather than to filter information about the poor from the dis-
course of local elected officials, only a fraction of whom truly represent the
poor. Somewhat less participation and somewhat more technocratic input
might have been a good idea. Secondly, it remains to be seen whether spend-
ing by municipalities, even if directed towards such things as the provision
of health and education services or rural roads and irrigation, will constitute
sustainable solutions to rural poverty. What is almost completely lacking in
the PRSP document is an acknowledgement of the importance of efficiency,
the idea that public investment spending must have an adequate economic
return, from the point of view of society at large. And efficiency, in the
Bolivian case, is closely intertwined with geography24. There are enormous
regional differences in Bolivia in living standards that have to do with
geography. Many of the rural poor live in harsh conditions on the inhospi-
table, arid high plateau (altiplano) at 3,000 meters or more above sea level.
Bringing social services to them will certainly relieve poverty in the short
run, but also slow down migration. Yet many of those communities are just
not economically viable in the longer run. Spending on rural roads that will
carry very little traffic is investment with a low rate of return, at the expense
of high return investment elsewhere with a greater potential of lifting people
out of poverty. To put it in a different form: by allocating the resources to the
communities on the basis of present population and level of poverty, the im-
plicit assumption seems to be that the present distribution of the population
is optimal from an economic perspective. If this is an incorrect assumption,
as is generally acknowledged, then it would have been better to have substi-
tuted some technocratic analysis for local participation. For once resources
are decentralized to a given municipality, it becomes difficult to say that it
cannot use them because there are no viable investment project it can put
forward25.
24 Bolivia is a landlocked country
with difficult terrain and very
poor infrastructure. Low popula-
tion density (7 people per square
km) further reduces economic
opportunities. Bolivia cannot es-
cape its geographical limitations,
but it can improve long-term
growth prospects by more careful
planning of public infrastruc-
ture and by steering the chaotic
growth of agglomerations in the
corridor La Paz- Cochabamba
- Santa Cruz. On the importance
of geography see Gallup et al.
(1999).
25 Strictly speaking this is not
excluded. Investment spending
will have to be submitted to a
special Fund (Fondo nacional
de inversion productiva y social
or FPS) that will have the
capacity to submit all propos-
als to a rigorous scrutiny of
benefits and costs. It is however
highly unlikely that fully-fledged
cost-benefit analysis will be
performed for most projects. This
is not to suggest that FPS will not
have the capacity to make such
analysis. It is rather that there
will be tremendous political pres-
sure to accept projects for which
the data are missing, or where
a low economic profitability is
overruled in favor of short-term
social benefits.
IDPM-UA Discussion Paper 2002-05 • 27