Background
This project is a partial continuation of earlier work done under the 'Budget governance and state capacity' project. It draws from the findings of working paper 311; 'Aid, Rents and the Politics of the Budget Process', published in 2008. The Inter American Development Bank is in the process of launching a similar research agenda to look at subnational patterns of government spending. The high degree of resemblance between the two research ideas has put additional emphasis on the relevance of the research theme. The concrete challenge ahead is to play an influential role in shaping the IADB’s conceptual proposal, maintain and develop the three case studies outlined in this project, and use DRC funding to match IADB funding to develop joint initiatives and explore further funding options.
Aims and Objectives
This research proposal seeks to advance our understanding of “How do natural resource (non-tax) revenues affect the quality of public spending” in developing countries. The research goal is to test whether the sudden increase of natural resource revenues has improved the state’s ability to deliver good quality services for the poor in three resource dependent countries in the Andean region: Ecuador (mostly oil), Peru (mostly mining) and Bolivia (mostly gas). For analytical purposes, the study focuses on the countries’ budget processes because this is a critical policy arena where relevant political actors (government and opposition, national and subnational, elected and otherwise) bargain spending allocations on repeated interactions over time. The working hypothesis is that the surge of non-tax revenues in the context of weak state institutions provoked a divorce between national and subnational policymakers. This project wants to look at how those realigned “budget coalitions” shaped the quality of spending in the Andean democracies.
Methodology
The development of the proposed research agenda involves a combined use of quantitative and qualitative methods. For the first –exploratory- part, we conducted a series of interviews with country policy makers in the Finance Ministry, Budget Office, Central Bank, as well as party politicians at the national and –where available- sub national level. A second cluster of interviewees included scholars and academics in political science and economics; a third cluster involved civil society organizations, cooperation agencies and watchdogs that work on issues of budget transparency, extractive industry transparency and monitoring of public spending. We also collected some bibliographical sources existing in each country (most of the literature deals with conflicts caused by the extractive industries, but rarely they address the issue of the public finance management implications of the boom). The resulting comparative paper will help identify and operationalise working hypotheses for doing a more detailed case work in each of the three countries. For this stage, we will discuss the analytical implications and applications of the model to each of the cases, revise the assumptions in the light of feedback and country specificities and develop a common strategy for writing the country papers with the team experts from Ecuador, Bolivia and Peru. Research findings will be presented at the Peru Workshop in November 2008, and authors will be asked to publish their research pieces as IDS Working papers and further encouraged to publish into quality journals or an edited book.
Outputs
A comparative paper will provide an analytical framework for studying the effects of natural resource revenues on the quality of public spending as reflected by the budget process. The paper will set out the guidelines for –and benefit from the feedback of- the development of the case studies. The revised analytical framework will be submitted for journal publication at the end of the 2008. There will be three case studies, written by country experts, exploring in detail whether there is a link between increased resource revenues and the quality of health and/or education spending, depending on availability and comparability of data. The end product will be a paper that will be presented at the Peru Workshop in November and later on as an IDS working paper. The second product will be the development of a Comparative Workshop on the Politics of Resource Dependency at the Institute of Peruvian Studies (IEP), Peru during November 2008. The workshop will offer an opportunity to present and revise the empirical findings and policy implications emerging from the Andean case studies, by engaging with scholars, public finance experts and donors concerned with issues of pro-poor budgeting, resource dependency, and sub national politics. The workshop will provide an excellent venue to disseminate and discuss findings with the broader research and policy making community. The conference will be organised around three thematic areas: a. The resource curse revisited: national vs. sub national politics b. The politics of the budget process: actors, rules, and procedures c. Windfall revenues, service delivery and the quality of public spending. The Research Department of the Inter American Development Bank and the Brazil office of DfID are possible co funders of this initiative. The resulting conference proceedings will inform the development of a future funding proposal to draw implications of research in Latin America to the African context during 2009. Lessons learned from Latin American countries should yield useful insights to understand countries in Africa that also benefit from large resource rents in the context of weak states and political decentralisation.
Researchers
Lead researcher and programme convenor: Andres Mejia Acosta
Bolivian Partners: Roberto Laserna (CERES)
Peruvian Partners: Martin Tanaka and Roxanna Barrantes (IEP)
Ecuadorian Partners: Vicente Albornoz (CORDES)
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