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Reconstituting the fiscal bargain: the politics of taxation in Latin America's emerging markets

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Reconstituting the fiscal bargain: the politics of taxation in Latin America's emerging markets

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Reconstituting the Fiscal
Bargain:
The Politics of Taxation in Latin America’s
Emerging Markets

Christina Wagner Faegri
Ph.D Dissertation
Degree conferred Aug. 2013
Politics and International Relations (POIR)
University of Southern California
1

Abstract

This dissertation focuses on the role of political parties in the formation of tax policy in
contemporary Latin America. Taxation is conceptualized as an instrument of public policy that
policymakers have at their disposal to pursue their respective policy objectives and cater to
their political bases, be they broad or narrow in scope. The essential questions are: to whom
are policymakers catering? To what extent are tax instruments used to promote particularistic
interests? I draw on an extensive scholarship on political parties, clientelism and political
accountability to provide a unique framework for studying the politics of taxation. This
framework makes a distinction between the formation of policy in inchoate, non-programmatic
and institutionalized, programmatic party systems. In the latter, one observes at least the
contours of parties competing for votes by articulating distinct policy positions, thereby
catering to broader political bases; by contrast, in the former, parties compete for votes by other
means. As a result, in inchoate, non-programmatic party systems, parties do not pursue clearly
articulated policy goals and interests go under-represented. Clientelism is prevalent across
Latin America, but one observes variation in the passing rates of tax policy initiatives which
aim to secure policy benefits for select firms, sectors and geographic regions. Hence, rent-
seeking pressures appear to be curbed by a more competitive political process in
institutionalized, programmatic party systems. This dissertation contributes to extensive bodies
of scholarship on political parties, clientelism, political accountability and political
competition.

2

Committee Members
Dr. Carol Wise (dissertation chair)
Dr. Saori N. Katada
Dr. Patrick James
Dr. Jefferey M. Sellers
Dr. Manuel Pastor (outside member)

3

Table of Contents

Acknowledgements .......................................................................................................... 6
List of Tables .................................................................................................................... 9
List of Figures ................................................................................................................. 11
Graphs ............................................................................................................................. 12
Party Names and Other Acronyms and Abbreviations ................................................... 13

Introduction: The Politics of Taxation in Contemporary Latin America ...................... 28
Setting the Stage for Studying Taxation ......................................................................... 30
A Framework for Studying Taxation in Contemporary Latin America ......................... 34
Political Parties and Public Policymaking .................................................................... 36
The Dynamics of Taxation .............................................................................................. 39
The Dataset on Tax Initiatives ........................................................................................ 40
Coding Procedures and Assumptions ............................................................................. 41
Overview of Variables Recorded in the Dataset ............................................................ 42
Overview of Chapters ..................................................................................................... 44
Contributions to the Literature ....................................................................................... 47

Chapter 1: The Politics of Taxation in Latin America’s Emerging Markets ................. 52
Setting the Stage for the Post-1982 Reform Effort ........................................................ 54
Taxation in Contemporary Latin America ..................................................................... 57
Contentions around Taxation and Consequences for Tax Capacity ............................... 60
Research on Economic Reform since the Debt Crisis .................................................... 62
Scholarship on the Politics of Taxation .......................................................................... 65
The Political Science-Sociology Tradition ..................................................................... 65
The Political Economy Tradition ................................................................................... 66
The Public Policy Tradition ........................................................................................... 68
Research on Taxation in Developing Countries ............................................................. 69
Conclusion ...................................................................................................................... 70
4

Chapter 2: Political Parties and Preferences for Tax Instruments .................................. 77
“Why Parties?” Political Parties and Representation ..................................................... 80
Political Parties in Contemporary Latin America .......................................................... 81
Party Institutionalization and the Consolidation of Democracy .................................... 82
Party Programmation and Political Representation ...................................................... 84
Comparing Concepts: Party Institutionalization and Party Programmation .................. 86
A Framework for Studying Taxation in Contemporary Latin America ......................... 87
Strategies to Promote “Equity” and “the Market” through Taxation ........................... 88
Factor Analysis ............................................................................................................... 89
Taxation and Clientelism ................................................................................................ 91
Equity vs. Market in Contemporary Latin America ....................................................... 92
Parties and Policy Goals ................................................................................................ 94
The Policy Space: Ideology and Programmation .......................................................... 95
Programmatic Parties in Contemporary Latin America ................................................ 97
Conclusion ...................................................................................................................... 98

Chapter 3: Party Programmation and Relations of Political Accountability ................ 116
Clientelism and Patronage ............................................................................................ 119
Clientelism as a Political Strategy ............................................................................... 122
Economic and Political Implications of Targeted Tax Incentives ................................ 126
Tax Expenditures in Contemporary Latin America ..................................................... 127
Tax Expenditures in Contemporary Latin America ..................................................... 130
Framework and Propositions ....................................................................................... 133
Taxation and Targeted Benefits .................................................................................... 134
Conclusion .................................................................................................................... 139

Chapter 4: Political Competition, Policy Objectives, and Clientelism ........................ 150
Latin American Legislatures and Democratic Governance .......................................... 154
Scholarship on the Formation of Public Policy in Latin America ............................... 155
Political Competition and the Formation of Tax Policy ............................................... 159
5

Political Parties and the Legislative Process ............................................................... 159
Whose Interests? “Equity” or “the Market”? ............................................................... 162

Chapter 5: Strategies to Promote Equity through Taxation in Contemporary Latin America
...................................................................................................................................... 180
Social Marginalization and Redistributive Politics ...................................................... 182
Political Consequences of the “Incorporation Crisis” .................................................. 184
Taxation and the “New Left” ....................................................................................... 186
Political Parties and Equity in Contemporary Latin America ...................................... 189
Conclusion .................................................................................................................... 192

Chapter 6: Conclusion .................................................................................................. 195

Appendix ...................................................................................................................... 200
Tax Expenditure Reports by Country ........................................................................... 200
Work Cited ................................................................................................................... 203

6

Acknowledgements

The fieldwork for this dissertation began in Mexico City only a few days after the 2009
swine flu epidemic became international news. Arriving at Benito Juárez International, I found
myself at an almost deserted airport with long lines of taxi drivers eager to take me to my
destination. Only a few days later, Mexico City’s public schools and restaurants reopened, but
analyses and op-eds of its longer-term economic impact filled national newspapers in the
months that followed. While initial assessments of the swine flu were primarily concerned
with the immediate impacts of lost economic activity, many political pundits started drawing
attention to the role of the state in mitigating the adverse effects of unforeseen crises. At the
core of these debates were concerns about the weak tax capacity of the Mexican state and its
inability to alleviate the suffering that they brought about.
A similar debate on the role of the state in mitigating the adverse consequences of crises
was triggered by the Chilean earthquake the following year. Just as in Mexico, Chilean debates
on taxation concerned the ability of the state to undertake the roles and functions that citizens
expected of the state. In Chile, the debates that followed culminated in negotiations around a
temporary increase in taxation that would secure funds for rebuilding the parts of the country in
which the earthquake damages were the most extensive.
Taxation stirs political conflict: no one wants to pay taxes, but almost everybody is
happy to ripe the benefits of the goods and services that the state provides. Many developing
countries have attempted relatively extensive reform efforts, but as studies show, few have
succeeded in substantially increasing their revenue gathering capacity. In many countries,
those of Latin America among them, political opposition is stark and yet, our understanding of
7

its political dynamics is relatively poor. Relying on a unique dataset of tax policy initiatives
(proyectos de ley) introduced in the respective legislatures of eight Latin American countries,
this dissertation is designed to map variation in the relative positions of the major actors
involved in the formulation of tax policy in contemporary Latin America.
The successful completion of this dissertation was made possible by the generous
support of many individuals and institutions. First and foremost, I would like to thank my
committee members: my dissertation chair Carol Wise and the members of my committee,
Jefferey Sellers, Saori N. Katada, Patrick James and Manuel Pastor whose guidance and
support were essential to the completion of this project. I would like to express my gratitude to
POIR at USC for facilitating an intriguing learning environment and for providing financial
support for language studies and fieldwork in in Lima, Mexico City, and Santiago. Many
thanks to staff of POIR and the School of International Relations (SIR), especially Veri, Luda
and Linda, and Indira at the Center for International Studies (CIS). Special thanks to my great
friends at USC: Cintia, Yesim, Kate, Jove and Fabian, and Maria for being part of this fantastic
experience.
In Mexico City, I would like to thank my friends Stine Møller Nilsen and Alejandro
Lopez Tenori, Stine Skjerdal and her late husband Juan Pablo de la Mora for giving me a place
to live. Many thanks to Aldo Flores Quiroga for being a great friend away from home and to
Eduardo Revilla for assisting me with the interview process. In Lima, I would like to thank
Cynthia Sandborn and Eduardo Marón at El Centro de Investigación, Universidad del Pacífico
for providing me with office space while conduction my fieldwork in Lima. In Chile, I would
like to thank my friends Alcides Pinto Garcia and Maria Jesus Pinto for ensuring my wellbeing.
8

I extend my gratitude to the policymakers, members of the lower and upper houses of
congress, and others who I interviewed in Chile, Mexico and Peru. Many thanks to those who
contributed to various aspects of this study: to the members of the panel at LASA 2012
especially Eric Hershberg and Leslie Armijo. To Carlos Scartacini at the Inter-American
Development Bank (IADB) and the Phil Keefer and Norbert Fiess at the Economic Policy Unit
of the World Bank. Special thanks to Virginia Scardamaglia for invaluable research assistance.
Lastly, I would like to thank my family for their support over the years and my husband Dave
for his enormous patience. This dissertation is dedicated to my great grandmother Ragna and
to my grandmother Eva who only saw the beginning this very long journey.

9

List of Tables
Table 1: Data Coverage By Legislative Period (Table A) ......................................................... 49
Table 2: Data Coverage By Legislative Period (Table B) .......................................................... 50
Table 3: Tax Initiatives By Origin .............................................................................................. 51
Table 4: Efforts To Improve Tax Administraion ....................................................................... 76
Table 5: Theoretical Expectations On The First Dimension Of The Framework .................... 100
Table 6: Party Institutionalization And Party Programmation Scores ..................................... 101
Table 7: Measures Of “Equity” And “The Market” ................................................................. 103
Table 8: Indicators Of “Equity-Promoting” Objectives ........................................................... 104
Table 9: Indicators Of “Market-Promoting” Objectives .......................................................... 105
Table 10: Distribution Of Equity- And Market-Promoting Initiatives By Country ................. 106
Table 11: Factor Analysis Of “Equity” And “The Market” ..................................................... 107
Table 12: Correlations Between "Equity" And "Market" Factors ............................................ 108
Table 13: Measures Of Other Policy Objectives ...................................................................... 109
Table 14: Correlations Between “The Market” And “Clientelism” ......................................... 110
Table 15: Correlations Between "Equity" And “Clientelism” ................................................. 111
Table 16: Distribution Of "Equity- And Market-Promoting” Initiatives ................................. 112
Table 17: Political Parties On "Equity" And "The Market" (Table A) .................................... 113
Table 18: Political Parties On "Equity" And "The Market" (Table B) .................................... 114
Table 19: Theoretical Expectations .......................................................................................... 141
Table 20: Tax Expenditures In Latin America, 2000-2013 (% of GDP) ................................. 142
Table 21: Tax Expenditures In Latin America By Tax, 2010 (% of GDP) .............................. 143
Table 22: Initiatives Aiming To Promote Targeted Benefits By Country ............................... 144
Table 23: Political Parties And Targeted Tax Benefits (Table A) ........................................... 145
Table 24: Political Parties And Targeted Tax Benefits (Table B) ............................................ 146
Table 25: Political Parties And Targeted Tax Benefits (Table C) ............................................ 147
Table 26: Correlations Between "Merit Goods" And Key Measures ....................................... 148
Table 27: Party Programmation And Clientelism In Contemporary Latin America ................ 149
Table 28: Passing Rates According To Origin Of Policy Initiatives ........................................ 168
Table 29: The Composition Of Latin American Legislatures (Table A) ................................. 169
Table 30: The Composition Of Latin American Legislatures (Table B) .................................. 170
Table 31: The Composition Of Latin American Legislatures (Table C) .................................. 171
Table 32: Passing Rates By Political Party (Table A) .............................................................. 172
Table 33: Passing Rates By Political Party (Table B) .............................................................. 173
Table 34: Passing Rates Of "Equity" And "Market" In Contemporary Latin America ........... 174
Table 35: Passing Rates Of "Equity" And "Market" Initiatives (Table A) .............................. 175
Table 36: Passing Rates Of "Equity" And "Market" Initiatives (Table B) .............................. 176
Table 37: “Clientelism And Passing Rates (Table A) ............................................................. 177
10

Table 38: "Clientelism" And Passing Rates (Table B) ............................................................. 178
Table 39: Clientelism, Political Parties, And Passing Rates .................................................... 179
Table 40: Targeted Social Benefits And Benefits To Firms, Sectors And Geographic Regions
.................................................................................................................................................. 193
Table 41: Overview Of Equity-Promoting Policy Goals ......................................................... 194

11

List of Figures
Figure 1: A Framework For Studying Taxation ......................................................................... 48
Figure 2: Party Programmation v.s. Party Institutionalization ................................................ 102

12

Graphs
Graph 1: Trends In Indirect Taxes And Taxes On Trade In Latin America, (Ave. 1990-2011) 72
Graph 2: Trends In Direct And Indirect Taxes In Latin America, (Ave. 1990-2011) ............... 73
Graph 3: Tax Capacity By Types Of Tax ................................................................................... 74
Graph 4: Trends In Taxation, (Ave. 1990-2010) ........................................................................ 75
Graph 5: The Projected Cohesiveness Of Latin American Political Parties ............................ 115

13

Party Names and Other Acronyms and Abbreviations

Party Names

Argentina
8 de Octubre Justicialista 8 de Octubre (8th of October Justicialist)
ACyS Acuerdo Cívico y Social (Civic and Social Accord)
ADP Agrupación Dignidad Peronista (Peronist Dignity Association)
AG Alianza Grande (Large Alliance)
AIU Alianza Izquierda Unida (United Left Alliance)
Alianza 2001 Alianza 2001 (2001 Alliance)
Alianza Alianza por el Trabajo, la Justicia y la Educación (Alliance for Work,
Justice and Education)
AR Acción por la República (Action for the Republic)
ARI Autónomo Afirmación para una República Igualitaria Autónomo (Autonomous
Affirmation for an Egalitarian Republic)
ARI Afirmación para una República Igualitaria (Affirmation for an Egalitarian
Republic)
AS Alianza Santafesina (Santa Fe Alliance)
AxM Alianza por Mendoza (Alliance for Mendoza)
AxSJ Alianza por San Juan (Alliance for San Juan)
AyL Autodeterminación y Libertad (Self-determining and Freedom)
BA Buenos Aires (Buenos Aires)
BAPT Buenos Aires Para Todos (Buenos Aires for Everyone)
BEP Bloque Eva Perón (Eva Peron Block)
14

BTdF Bloque Tierra del Fuego (Tierra del Fuego Block)
CC Coalición Cívica (Civic Coalition)
CE Concertación Entrerriana (Entre Rios Compromise)
CF Córdoba Federal (Federal Cordoba)
ConFe Consenso Federal (Federal Consensus)
Conv Convergencia (Convergence)
CP Concertación Plural (Plural Compromise)
CPC Compromiso para el Cambio (Compromise for Change)
CPF Corriente de Pensamiento Federal (Current of Federal Thinking)
CR Unión por Todos - Cruzada Renovadora (Union for Everyone –
Reformist Crusade)
CRSJ Cruzada Renovación San Juan (San Juan Reformist Crusade)
DIP Democracia Igualitaria y Participativa (Egalitarian and Participative
Democracy)
DxBsAs Diálogo por Buenos Aires (Dialogue for Buenos Aires)
Encuentro Encuentro por la Democracia y la Equidad (Encounter for Democracy
and Equity)
EP Encuentro Popular (Popular Encounter)
EyJ Emancipación y Justicia (Emancipation and Justice)
FCC Frente Cívico Córdoba (Cordoba Civic Front)
FCJ Frente Cívico Jujeño (Jujuy Civic Front)
FCS Frente Cívico por Santiago (Civic Front for Santiago)
FCS Frente Cívico y Social (Civic and Social Front)
FCS Frente Cívico y Social de Catamarca (Civic and Social Front of
Catamarca)
FDC Frente por los Derechos Ciudadanos (Front for Citizen Rights)
15

FdT Frente de Todos (Everyone’s Front)
FFJ Frente Fundacional Justicialista (Justicialist Foundational Front)
FG Frente Grande (Large Front)
FJ Santa Fe Frente Justicialista por Santa Fe (Justicialist Front for Santa Fe)
FMP Frente del Movimiento Popular (Popular Movement Front)
FNP Frente Nuevo País (New Country Front)
FORJA Partido de la Concertación-FORJA (Compromise Party-FORJA)
FP Frente Peronista (Peronist Front)
FPB Frente Popular Bonaerense (Popular Front Buenos Aires)
FPC Frente para el Cambio (Front for Change)
FPF Frente Peronista Federal (Federal Peronist Front)
FPI Frente por la Integración (Front for Integration)
FPT Frente Producción y Trabajo (Production and Labor Front)
FpV Frente para la Victoria (Front for Victory)
FR Fuerza Republicana (Republican Force)
FREJULI Frente Justicialista Unión y Libertad (Justicialist Union and Freedom
Front)
FREJUPO Frente Justicialista Popular (Justicialist Popular Front)
FrePaCa Frente Justicialista para el Cambio (Justicialist Front for Change)
FREPASO Frente País Solidario (Supportive Country Front)
FRP Frente Renovador Peronista (Peronist Reformist Front)
FS Federalismo Santafesino (Santa Fe Federalism)
FUP Frente de Unidad Peronista (Peronist Unity Front)
FUProv Frente de Unidad Provincial (Provincial Unity Front)
FUSJ Frente Unidos por San Juan (United for San Juan Front)
16

FyL Federalismo y Liberación (Federalism and Liberation)
GEN Generación para un Encuentro Nacional (Generation for a National
Encounter)
GP Guardia Peronista (Peronist Guard)
IF Interbloque Federal (Federal Interblock)
IU Izquierda Unida (United Left)
JpDA Justicialista para Diálogo de los Argentinos (Justicialist for Argentinian’s
Dialogue)
LADLV La Argentina de los Valores (The Argentina of Values)
LDJ Lealtad Dignidad y Justicia (Dignity and Justice Loyalty)
LdS Libres del Sur (Free of the South)
MCyS Movimiento Cívico y Social (Civic and Social Movement)
MEP Movimiento Eva Perón (Eva Peron Movement)
MI Movimiento Independiente (Independent Movement)
MIJD Movimiento Independiente Justicia y Dignidad (Justice and Dignity
Independent Movement)
MMTA Movimiento Multisectorial por el Trabajo y la Autodetermina-
ción (Multisectoral Movement for Labor and Self-Determining)
MPF Movimiento Popular Fueguino (Tierra del Fuego Popular Movement)
MPN Movimiento Popular Neuquino (Neuquen Popular Movement)
MPS Movimiento Pampa Sur (South Pampa Movement)
MPS Movimiento Polo Social (Social Pole Movement)
MPS Movimiento Proyecto Sur (South Project Movement)
MPU Movimiento Popular Unido (United Popular Movement)
MyD Memoria y Democracia (Memory and Democracy)
NEE Nuevo Espacio Entrerriano (Entre Rios New Space)
17

NEPS Nuevo Encuentro Popular y Solidario (New Popular and Supportive
Encounter)
PNS Partido Nacional Sindical (Union National Party)
PA Partido Autonomista de Corrientes (Corrientes Autonomous Party)
PANU Partido Nuevo (New Party)
PAUFE Partido Unidad Federalista (Federalist Unity Party)
PB Partido Bloquista (Block Party)
PC Proyecto Corrientes (Corrientes Project)
PDM Partido Demócrata de Mendoza (Mendoza Democrat Party)
PD Partido Demócrata (Democrat Party)
PDP Partido Demócrata Progresista (Progressist Democrat Party)
PDyJ Partido Desarrollo y Justicia (Development and Justice Party)
PF Partido Federal Provincia de Buenos Aires (Province of Buenos Aires
Federal Party)
PPF Partido Peronista Federal (Federal Peronist Party)
PFF Partido Federal Fueguino (Tierra del Fuego Federal Party)
PFIS Partido FISCAL (FISCAL Party)
PI Partido Intransigente (Intransigent Party)
PI Partido Puntano Independiente (San Luis Independent Party)
PJ Azul y Blanco Partido Justicialista Azul y Blanco (Blue and White Justicialist Party)
PJ Jujuy Peronismo Jujeño (Jujuy Peronism)
PJ La Pampa Partido Justicialista La Pampa (La Pampa Justicialist Party)
PJ Republicano Justicialismo Republicano (Republican Justicialism)
PJ Salta Peronismo Salteño (Salta Peronism)
PJ San Luis Partido Justicialista San Luis (San Luis Justicialist Party)
18

PJ Santa Cruz Partido Justicialista Santa Cruz (Santa Cruz Justicialist Party)
PJ Partido Justicialista (Justicialist Party)
PJN Partido Justicialista Nacional (National Justicialist Party)
PL Partido Liberal (Liberal Party)
PNCHT Partido Nuevo contra Corrupción por Honestidad y Trasparencia (New
Party Against Corruption, for Honesty and Transparency)
PP Partido Peronista (Peronist Party)
PPer Propuesta Peronista (Peronist Proposal)
PProg Proyecto Progresista (Progressist Project)
PPC Partido Participación Ciudadana (Citizen Participation Party)
PPP Peronismo Popular (Popular Peronism)
PRO Propuesta Republicana (Republican Proposal)
PROBAFE Proyecto Buenos Aires Federal (Federal Buenos Aires Project)
PRS Partido Renovador de Salta (Reformist Party of Salta)
PS Partido Socialista (Socialist Party)
PS Polo Social (Social Pole)
PSA Proyecto Social Alternativo (Alternative Social Project)
PSP Partido Soberanía Popular (Popular Sovereignty Party)
PSP Partido Social Popular (Social Popular Party)
PUB Partido Unidad Bonaerense (Buenos Aires Unity Party)
PV Partido de la Victoria (Victory Party)
PV Por la Verdad (For the Truth)
RB Unipersonal Ricardo Balbín (Ricardo Balbin Single-Member)
RECREAR Recrear para el Crecimiento (Recreate for Growth)
RedES Red de Encuentro Social (Social Encounter Network)
19

RI Partido Radical Independiente (Independent Radical Party)
RR Partido Radical Rionegrino (Rio Negro Radical Party)
SFEM Santa Fe en Movimiento (Santa Fe in Movement)
SFF Santa Fe Federal (Federal Santa Fe)
SI Solidaridad e Igualdad (Solidarity and Equality)
SIxUP Sí por la Unidad Popular (Yes for Popular Unity)
SST Salta Somos Todos (We Are All Salta)
TyD Trabajo y Dignidad (Labor and Dignity)
UA Unión por Argentina (Union for Argentina)
UCB Unión Celeste y Blanco (Light Blue and White Union)
UCeDé Unión del Centro Democrático (Democratic Centre Union)
UCR Unión Cívica Radical (Radical Civic Union)
UdeSO Unión para el Desarrollo Social y la Equidad (Union for Social
Development and Equity)
UP Unidad Popular (Popular Unity)
UPer Unión Peronista (Peronist Union)
UxBsAs Frente Unión por Buenos Aires (Union for Buenos Aires Front)
VN Vecinalista Nuevo (New Neighboring)
VPMP Valores para mi País (Values for my Country)
VyC Partido Movimiento Vida y Compromiso (Movement Life and
Compromise Party)

Chile
DC Democracia Cristiana (Cristian Democracy)
MAS Movimiento Amplio Social (Social Ample Movement)
20

PC Partido Comunista (Communist Party)
PPD Partido por la Democracia (Party for Democracy)
PRI Partido Regionalista de los Independientes (Regionalist Party of the
Independents)
PRSD Partido Radical Social Demócrata (Social Democrat Radical Party)
PS Partido Socialista (Socialist Party)
RN Renovación Nacional (National Reformism)
UCCP Unión de Centro-Centro Progresista (Centre Union- Progressive Centre)
UDI Unión Demócrata Independiente (Democratic Independent Union)
UPC Unión por el Progreso de Chile (Union for Chile’s Progress)

Colombia
AEC Alas Equipo Colombia (Colombia Wings Team)
AICO Movimiento de Autoridades Indígenas de Colombia (Indigenous
Authorities Movement of Colombia)
ASI Alianza Social Indígena (Indigenous Social Alliance)
ASI Partido Alianza Social Independiente (Independent Social Alliance Party)
AV Afro Vides (Afro Vides)
CC Convergencia Ciudadana (Citizen Convergence)
CPC Convergencia Popular Cívica (Civic Popular Convergence)
CR Partido Cambio Radical (Radical Change Party)
FP Fuerza Progresista (Progressist Force)
MAL Movimiento Apertura Liberal (Liberal Opening Movement)
MCV Movimiento Colombia Viva (Colombia Alive Movement)
MDC Movimiento Defensa Ciudadana (Citizen Defence Movement)
21

MIPOL Movimiento Integración Popular (Popular Integration Movement)
MIR Movimiento Integración Regional (Regional Integration Movement)
MIRA Movimiento Independiente de Renovación Absoluta (Independent
Movement of Absolute Renovation)
MNC Movimiento Nacional Conservador - Alianza Nacional (National
Conservative Movement – National Alliance)
MNP Movimiento Nacional Progresista (National Progressist Movement)
MOIR Movimiento Obrero Independiente Revolucionario (Independent
Revolutionary Labor Movement)
MOL Movimiento Oxígeno Liberal (Liberal Oxygen Movement)
MPU Movimiento Popular Unido (United Popular Movement)
MRDN Movimiento Reconstrucción Democrática Nacional (National
Democratic Reconstruction Movement)
MSN Movimiento de Salvación Nacional (National Salvation Movement)
NC Nueva Colombia (New Colombia)
NFD Movimiento Nueva Fuerza Democrática (New Democratic Force
Movement)
Partido de la U Partido Social de Unidad Nacional (Social Party of National Unity)
PCC Partido Conservador Colombiano (Colombian Conservative Party)
PCD Partido Colombia Democrática (Democratic Colombia Party)
PDA Polo Democrático Alternativo (Alternative Democratic Pole)
PIN Partido Integración Nacional (National Integration Party)
PLC Partido Liberal Colombiano (Colombian Liberal Party)
PV Partido Verde (Green Party)

22

Costa Rica
ALA Acción Laborista Agrícola (Agricultural Labor Action)
BP Bloque Patriótico (Patriotic Block)
FD Fuerza Democrática (Democratic Force)
ML Movimiento Libertario (Libertarian Movement)
PAC Partido Acción Ciudadana (Citizen Action Party)
PALA Partido Acción Laborista Alajuense (Alajuense Laborist Action
Party)
PAN Partido Agrario Nacional (National Agrarian Party)
PASE Partido Accesibilidad Sin Exclusión (Accesibility Without Exclusion
Party)
PFA Partido Frente Amplio (Ample Front Party)
PIN Partido de Integración Nacional (Party of National Integration)
PLN Partido Liberación Nacional (National Liberation Party)
PRC Partido Renovación Costarricense (Costa Rican Renovation Party)
PRN Partido Restauración Nacional (National Restauration Party)
PUSC Partido Unidad Social Cristiana (Social Cristian Unity Party)
UAC Unión Agrícola Cartaginesa (Carthaginian Agricultural Union)
UC Unión para el Cambio (Union for Change)
UN Unión Nacional (National Union)

Ecuador
AP Alianza PAIS (Country Alliance)
ARE-APL Acción Regional por la Equidad-Alianza Popular
Latinoamericana (Regional Alliance for Equity-Latinamerican Popular
Alliance)
23

CC Conciencia Ciudadana (Citizen Conscience)
CFP Concentración de Fuerzas Populares (Concentration of Popular Forces)
DP Democracia Popular (Popular Democracy)
FRA Frente Radical Alfarista (Alfarist Radical Front)
ID Izquierda Democrática Democratic Left
MAR Movimiento Autonómico Regional (Regional Autonomous Movement)
MCIFY Movimiento Independiente Ciudadano Futuro Ya (Future Now
Independent Citizen Movement)
MCND Movimiento Concertación Nacional Democrática (Democratic National
Compromise Movement)
MDG Movimiento Cívico Madera de Guerrero (Madera de Guerrero Civic
Movement)
MHN Movimiento Honradez Nacional (National Honesty Movement)
MIOSA Movimiento Independiente Obras son Amores (Works are Love
Independent Movement)
MIUP Movimiento Independiente Unidos por Pastaza (United for Pastaza
Independent Movement)
MMIN Movimiento Municipalista por la Integridad Nacional (Municipalist for
National Integrity Movement)
MPD Movimiento Popular Democrático (Democratic Popular Movement)
MPIAY Movimiento Político Independiente Amauta Yuyai (Amauta Yuyai
Independent Political Movement)
MSC Movimiento Social Conservador (Social Conservative Movement)
MUPP NP Movimiento Unidad Plurinacional Pachakutik Nuevo País (Pachakutik
New Country Plurinational Unity Movement)
PCE Partido Conservador Ecuatoriano (Ecuadorian Conservative Party)
PRE Partido Rodolsista Ecuatoriano (Ecuadorian Rodolsist Party)
24

PRIAN Partido Renovador Institucional Acción Nacional (National Action
Reformist Institutional Party)
PSC Partido Social Cristiano (Social Cristian Party)
PSE Partido Socialista Ecuatoriano (Ecuadorian Socialist Party)
PS-FA Partido Socialista - Frente Amplio (Socialist Party – Ample Front)
PSP Partido Sociedad Patriótica (Patriotic Society Party)
RED Red Ética y Democrática (Ethical and Democratic Network)
UNO Una Nueva Opción (A New Option)

Guatemala
ANN Alternativa Nueva Nación (New Nation Alternative)
BG Bancada Guatemala (Guatemala Legislators)
BIEN Partido Bienestar Nacional (National Welfare Party)
CASA Centro de Acción Social (Social Action Center)
CREO Compromiso, Renovación y Orden (Compromise, Renovation and
Order)
DCG Democracia Cristiana Guatemalteca (Guatemalan Cristian Democracy)
DIA Desarrollo Integral Auténtico (Authentic Integral Development)
EG Encuentro por Guatemala (Encounter for Guatemala)
FDNG Frente Democrático Nueva Guatemala (New Guatemala Democratic
Front)
FRG Frente Republicano Guatemalteco (Guatemalan Republican Front)
GANA Gran Alianza Nacional (Great National Alliance)
INT Bancada Integracionista (Integrationist Legislators)
LIDER Libertad Democrática Renovada (Renewed Democratic Freedom)
LN Listado Nacional (National List)
25

MAS Movimiento de Acción Solidaria (Supportive Action Movement)
MLN Movimiento de Liberación Nacional (National Liberation Movement)
MR Movimiento Reformador (Reformer Movement)
MSN Partido Solidaridad Nacional (National Solidarity Party)
PAN Partido de Avanzada Nacional (National Advanced Party)
PDCN Partido Democrático de Cooperación Nacional (Democratic Party of
National Cooperation)
PLP Partido Libertador Progresista (Progressist Liberator Party)
PP Partido Patriota (Patriot Party)
PU Partido Unionista (Unionist Party)
PV Partido Victoria (Victory Party)
TODOS Bloque Independiente Todos (Independent Everyone Block)
UCN Unión del Cambio Nacional (National Change Union)
UD Unión Democrática (Democratic Union)
UNE Unidad Nacional de la Esperanza (National Union of Hope)
URNG Unidad Revolucionaria Nacional Guatemalteca (Guatemalan National
Revolutionary Unity)
VIVA Visión con Valores (Vision with Values)
WINAQ Partido WINAQ (WINAQ Party)

Mexico
CD Convergencia por la Democracia (Convergence for Democracy)
CON Convergencia (ahora Movimiento Ciudadano) (Convergence)
PAN Partido Acción Nacional (National Action Party)
PANAL Partido Nueva Alianza (New Alliance Party)
26

PAS Partido Alianza Social (Social Alliance Party)
PASoc Partido Alternativa Social (Social Alternative Party)
PMC Partido Movimiento Ciudadano (Citizen Movement Party)
PRD Partido de la Revolución Democrática (Democratic Revolution Party)
PRI Partido Revolucionario Institucional (Institutional Revolutionary Party)
PSN Partido de la Sociedad Nacionalista (Nationalist Society Party)
PT Partido del Trabajo (Labor party)
PVEM Partido Verde Ecologista de México (Ecologist Green Party of Mexico)
Peru
AP Acción Popular (Popular Action)
ApF Alianza Por el Futuro (Alliance for the Future)
APGC Alianza Por el Gran Cambio (Alliace for the Great Change)
CP Concertación Parlamentaria (Parliamentary Compromise)
CPA Célula Parlamentaria Aprista (Aprist Parliamentary Cell)
F-2011 Fuerza 2011 (2011 Force)
FdC Frente de Centro (Centre Front)
FIM Frente Independiente Moralizador (Moralizing Independent Front)
GP Gana Perú (Peru Wins)
GPAP Grupo Parlamentario Alianza Parlamentaria (Parliamentary Alliance
Parliamentary Group)
GPDI Grupo Parlamentario Democrático Independiente (Independent
Democratic Parliamentary Group)
GPE Grupo Parlamentario Especial (Special Parliamentary Group)
GPF Grupo Parlamentario Fujimorista (Fujimorist Parliamentary Group)
GPN Grupo Parlamentario Nacionalista (Nationalist Parliamentary Group)
27

NUPP Grupo Parlamentario Nacionalista Unión por el Perú (Nationalist Union
for Peru Parliamentarty Group)
PA Perú Ahora (Peru Now)
PAN Partido Alianza Nacional (National Alliance Party)
PAP Partido Aprista Peruano (Peruvian Aprista Party)
PP Perú Posible (Possible Peru)
PSN Partido Solidaridad Nacional (National Solidarity Party)
PUN Partido de Unidad Nacional (National Unity Party)
RA Renacimiento Andino (Andean Rebirth)
RN Restauración Nacional (National Restauration)
SP Solución Popular (Popular Solution)
SP Somos Perú (We are Peru)
TpV Todos por la Victoria (Everyone for Victory)
UPD Unión Parlamentaria Descentralista (Decentralization Parliamentary
Union)
UPP Unión por el Perú (Union for Peru)

Other Acronyms and Abbreviations
IMF International Monetary Fund
OECD Organization for Economic Cooperation and Development
WB World Bank
WC Washington Consensus
28

Introduction: The Politics of Taxation in
Contemporary Latin America

“Despite the far-reaching economic impact of taxes, economic
considerations do not go very far in explaining the features of tax
policy. Countries with similar levels of income, income distribution,
or sectoral composition of output have very different tax structures.
There is clearly no economic model that explains tax outcomes”
(Stein et al. 2005, 185).

“The fiscal reality found in most countries reflects less analysis or
empirical realities than a changing mixture of ideas, interests, and
institutions (Bird 2003, 15).

The debt shocks of the 1980s forced fundamental economic and political reforms in
Latin America. Profound economic crises throughout the 1980s resulted in the abrupt
abandonment of Import Substitution Industrialization (ISI) and the rapid implementation of
market-oriented strategies based on privatization, deregulation and liberalization under the so-
called Washington Consensus (WC) (Williamson 1990). Simultaneously, political responses
led to a new wave of democratization which facilitated the re-constitution and re-emergence of
previously marginalized political actors across the Latin American region. Amidst these
fundamental changes, policymakers have faced monumental challenges in the design of public
policies which balance the demands of private sector actors with those making claims for the
greater provision of state-administered goods and services. Taxation remains critical to this
transformation, as fiscal revenues provide the state with the resources essential for promoting
29

higher levels of sustainable growth and balancing civic demands for a more equitable
distribution of economic gains.
Against this turbulent backdrop, some observers of Latin American politics have
focused on the need for an explicit bargain to help smooth the difficult politics of economic and
political adjustment (Webb and Gonzalez 2004; Basombrío 2009; Lora 2008; Breceda,
Rigolini, and Saavedra 2008; Teichman 2008). As Jeffrey Timmons has argued, a so-called
“fiscal contract” rests on the notion that “governments have pecuniary incentives to cater to
taxpayers, thereby encouraging an overlap between the distribution of taxes and the distribution
of public benefits” (2005, 530).
1
In most of Latin America, however, a fiscal contract has been
difficult to achieve and even harder to sustain, as both the capacity to collect tax revenue and
the ability of the state to distribute public benefits remains weak across the region (Scott 2001;
Huber and Stephens 2012).
Despite substantial reform efforts over the last decades (Morley, Machado, and
Pettinato 1999; Bird 1992a; Lora 2012), most Latin American countries still collect a lower
percentage of gross domestic product (GDP) in taxes than many other countries at comparable
levels of economic development (Tanzi 2000, 2007; Bird 1992a; Bahl and Bird 2008).
2
This
means that the capacity of the Latin American state to assume a more active role in the
economy and offset unanticipated hardship, as seen for example with the 2009 Swine Flu
epidemic in Mexico and the damages brought about by the massive 2010 Chilean earthquake, is

1
See also Teichman’s (2008) article on the need to achieve a “redistributive compromise” in Latin America.
2
The tax/GDP ratio is the standard indicator used to compare the collection of tax revenue across states. For a
review of tax measures, see Berry and Fording (1997). For potential downsides of using this measure, especially
in political science research, see Lieberman (2002).
30

considerably weaker than in those countries with similar development ranking but higher tax
capacity.
3

Although this study is fundamentally about the politics of taxation in contemporary
Latin America, research on tax capacity in emerging markets more broadly suggests that the
political challenges associated with reforming tax systems are far from unique to this region.
For instance, tax scholars Roy Bahl and Richard M. Bird (2008) have looked at tax capacity in
developing countries as a group and found that tax shares have increased only slightly over the
last thirty years. Despite repeated reform efforts, a great number of lower income countries
continue to face significant political obstacles to broadening the tax base and strengthening
revenue gathering capacities. These findings alone suggest that a study of the politics of
taxation and a better understanding of the obstacles at play is essential for achieving the kinds
of institutional development that could better foster more sustainable and equitable growth in
the Latin American region.

Setting the Stage for Studying Taxation
The parameters for fiscal reform in Latin America have changed substantially as a result
of the dynamic economic and political reform efforts which followed the debt shocks of the
early 1980s (Scartascini 2007; Spiller, Stein, and Tommasi 2008; Scartascini, Stein, and
Tommasi 2010; Hallerberg, Scartascini, and Stein 2009). While the initial round of post-crisis

3
As discussed in the preface, the outbreak of the swine flu in Mexico and the earthquake in Chile prompted taxes
debates. In both cases, these debates centered on the need to increase the revenue gathering capacity of the state in
order to mitigate the social and economic hardships imposed by these unexpected crises.
31

overhaul of tax institutions was primarily undertaken by executive decree and carried out by
teams of technocrats, fiscal reform has now become part of the broader policymaking process
in which adjustments to the standing tax code require that policy players reach a consensus on
the particular objectives that instruments of taxation will be used to achieve. In this study, I
analyze how these changes have impacted the formation of tax policy in contemporary Latin
America.
Four developments in taxation are critical for understanding the politics of taxation
following Latin America’s adoption of a more market-oriented development model. These
particular trends concern: a) changes in the thinking around taxation and the specific use of tax
instruments; b) unsuccessful efforts by many governments to increase overall tax and spending
capacity; c) the expansion of general consumption taxes which has shifted the tax burden from
trade to consumers; and, d) the failure of many governments to increase the reliance on direct
forms of taxation such as taxes on income and wealth. Below I will briefly discuss how each of
these developments has impacted the politics of taxation in contemporary Latin America.
First and foremost, theories of taxation, and thus broader conceptions of the use of fiscal
policy instruments, have changed considerably as a result of the worldwide economic crises of
the 1970s and the turn to neoliberalism in the early 1980s (Simmons, Dobbin, and Garrett
2006; Dobbin, Simmons, and Garrett 2007; Swank and Steinmo 2002; Swank 2006). As
Chapter 2 discusses, changes in economic policy and growth strategies trickled into Latin
America by the way of International Financial Institutions (IFIs), particularly the International
Monetary Fund (IMF) and the World Bank (Williamson 1990; Stotsky 1995). These particular
policy prescriptions altered the general tax structures of the region and have had profound
32

consequences for the use of tax instruments in both developed and developing countries since
the early 1980s (Slemrod 2004; Hines and Summers 2009; Hallerberg and Basinger 1999;
Genschel 2002; Wibbels and Arce 2003; Tanzi 2004; Sanchez 2006; Tanzi and Zee 2000).
In the aftermath of the Latin American debt crises, the neoliberal economic agenda
equated the reliance on tax instruments to redistribute income via levies on trade and provide
protection for industrialization as part of the region’s development drive with excessive state
intervention (Bird and Wulf 1973; Jiménez, Gómez Sabaini, and Podestá 2010). In order to
make the fiscal systems of the region more compatible with a market-centered model, the
reform prescriptions stipulated by the Washington Consensus focused primarily on dismantling
the complicated web of existing tax policies and tailored tax arrangements (Tanzi 2011; Bird
1992a; Bird 2003; Williamson 1990). The immediate consequence was a sharp reduction in
trade-related taxes while the reliance on tax instruments to promote industrialization and
protect strategic firms and sectors was discouraged.
A second trend has concerned the ability of Latin American countries to undertake tax
reform and increase the capacity of the state to collect taxes. During the borrowing spree of the
1970s, external loans from private international banks papered over budget deficits and
distracted policymakers from their fundamental responsibility to garner sufficient state revenue
to provide public goods (Bulmer-Thomas 1996, 2003; Edwards and Teitel 1986; Edwards
1995). Consequently, in the wake of the virtual collapse of state finances, there was an urgent
need to establish a broader and more extensive revenue base. However, as efforts to increase
taxes have met stark political opposition, only modest increases in tax capacity have been
33

observed since the Washington Consensus set this goal for policymakers in the early 1990s
(Williamson 1990; Bird 1992a; Bird 2003).
Finally, throughout the 1990s and 2000s, the efforts to increase state revenues resulted
in a significant expansion of value added and broad-based consumption taxes along the lines of
the European model (Tanzi 2000; Jiménez, Gómez Sabaini, and Podestá 2010; Kato 2003;
Wibbels and Arce 2003; Mahon 2004, 2012). As the shift toward general consumption taxes
has continued to dominate as a key tax policy tool in Latin America, this has resulted in a
substantial increase in the burden shouldered by lower income earners. At the same time, the
general failure of governments to increase the collection of taxes on income and wealth has
contributed to widespread perceptions of injustice and tensions among essential policy players
(Jiménez, Gómez Sabaini, and Podestá 2010; Mahon 2012; Fairfield 2010; Boylan 1996). As a
result, many contemporary politicians and policymakers have cast taxation as an issue of
distributive justice in order to appeal to Latin America’s lower income earners (Flores-Macias
2012).
In this dissertation, I argue that the confluence of these particular trends has shaped
contemporary tax debates such that fiscal reform is construed as a tradeoff between the use of
tax instruments to promote “equity” or “the market.” The argument is essentially that the
tension between social equity and market-led growth, and thus the different politics of
achieving both, colors contemporary tax debates across Latin America. The framework
presented in the subsequent section outlines the theoretical foundations for exploring this
particular argument.
34

A Framework for Studying Taxation in Contemporary Latin America
This study conceptualizes taxation as an instrument of public policy that policymakers
have at their disposal to pursue their respective policy objectives and cater to their political
bases, be they narrow or broad in scope. The data on policy initiatives collected for this study
documents extensive variation in the policy goals pursued by policymakers. This suggests that
policymakers have distinct preferences for the use of tax instruments and enjoy some degree of
discretion in the articulation of policy proposals. In turn, extensive variation in policy goals
raises a set of essential questions: 1) what is the nature of the policy objectives pursued
through instruments of taxation? 2) To what extent have policymakers promoted competing
policy objectives? 3) To whom are policymakers catering? 4) Have policymakers aimed to
establish tax benefits targeting larger constituencies or are they beholden to more narrow
political bases?
Implicit in this approach are two factors essential to the formation of fiscal policy: a)
preferences for the use of explicit tax instruments; and, b) the extent to which these objectives
aim to benefit particularistic interests. The theoretical framework presented below integrates
these factors by studying the politics of taxation through two distinct dimensions. The first
dimension of the framework accounts for variation in the goals that policymakers have sought
to achieve through taxation while the second estimates the extent to which tax instruments have
been used to cater to narrow political bases. The chapters that follow explore these dimensions
in a unique dataset which consists of tax policy initiatives that carry actual legal implications
(proyectos de ley) which were introduced in the legislatures of eight Latin American countries.
35

Despite explicit similarities in political and economic trends in the aftermath of the
1980s debt crises, the data collected for this study demonstrate substantial variation in the
politics around tax reform in Latin America. First, Latin American parties differ in their ability
to develop programmatic policy. The absence of shared policy goals among party officials and
weak organizational capacities often result in policymakers pursuing conflicting policy
objectives. Furthermore, the absence of longer-term policy goals hampers the capacity of the
respective parties to bargain vis-à-vis other parties, as well as the executive. Second, weak
party organizations are often associated with policymaking relying on tax instruments to cater
to particularistic political bases. However, as the analyses conclude, increased political
competition tends to curb the ability of policymakers to institute particularistic policy benefits.
Finally, the role of Left-wing political parties in the formation of tax policy has played out very
differently across countries. The data also reveal clear variation in both the levels of
participation of Left-wing parties and in the nature of the particular policy objectives pursued
by those who have assumed an active role in the policymaking process. For example, concerns
with equity in taxation have had a substantially greater impact on the politics of taxation in
Argentina, Mexico and Peru than in Chile, Ecuador and Guatemala. A major objective of the
chapters that follow is thus to explore variation in the politics of taxation as a function of party
institutionalization and party programmation. The subsequent section turns to the theoretical
framework.

36

Political Parties and Public Policymaking
In placing political parties center stage I analyze the relationship between party
programmation – the capacity of a party to put forth a programmatic policymaking agenda –
and the formation of fiscal policy in contemporary Latin America. Although marginalized
under authoritarian rule, Latin American parties have regained their role in the policymaking
process with the region’s return to democracy. However, as many observers of Latin American
politics have demonstrated, there is extensive variation in the capacity of party organizations to
perform the essential roles and functions that democracy has assigned them (Dix 1992, 1989;
Coppedge 1998; Mainwaring and Scully 1995a; Roberts and Wibbels 1999; Roberts 2007;
Flores-Macias 2012; Luna 2007; Kitschelt, Hawkins, Rosas, et al. 2010a). As such, this study
looks the relationship between the ability of parties to articulate programmatic policy and the
formation of tax policy in contemporary Latin America.
Two strands of the literature on Latin American parties are essential for understanding
the role of party organizations in the formation of fiscal policy. Both of these frameworks aim
to understand how particular constitutional and organizational attributes of parties affect central
issues of political representation and democratic accountability (Carey and Reynolds 2007;
Carey 2009; Aldrich 2011, 1995; Shefter 1994). A first strand, mainly credited to Scott
Mainwaring and colleagues, attributes differences in parties and party systems to variations in
levels of institutionalization (Mainwaring, O'Donnell, and Valenzuela 1992; Mainwaring and
Scully 1994; Mainwaring and Scully 1995a; Mainwaring and Shugart 1997b; Mainwaring
1999; Jones 2010, 2012; Flores-Macias 2012). A second strand, associated with Herbert
Kitschelt and others, focuses on differences in the ability of parties to develop a programmatic
platform and to compete for votes by articulating discrete policy packages (Kitschelt, Hawkins,
37

Luna, Rosas, and Zachmeister 2010; Shefter 1994; Aldrich 1995, 2011). As I show in chapter
2, existing estimates of party institutionalization (Jones 2010) and party programmation
(Kitschelt, Hawkins, Rosas, et al. 2010b) capture similar constitutional and organizational
features of political parties which are essential to study political parties in Latin America.

The Main Propositions of the Framework
Drawing on an extensive literature on party institutionalization and party
programmation(Kitschelt, Hawkins, Luna, Rosas, and Zachmeister 2010; Shefter 1994; Aldrich
1995, 2011), I build a theoretical framework comprised of two essential dimensions for
studying the politics of taxation in contemporary Latin America (figure 1). The first dimension
looks at variation in policy goals pursued by policymakers while the second dimension
estimates the extent to which policymakers have relied on tax instruments to cater to narrow
political bases.
The framework makes a critical distinction between policy formation in
institutionalized, programmatic parties and inchoate, non-programmatic parties. On the first
dimension of this framework, institutionalized, programmatic parties are expected to compete
for votes by articulating distinct positions on key issues of public policy. Hence, the main
proposition is: if parties are institutionalized and programmatically structured, then the
respective parties will cater to distinct constituencies by articulating competing policy
positions. On the second dimension, programmatic parties are associated with the
representation of broader political bases and thus the formation of “public-regarding” policy
38

(Haggard and McCubbins 2001). This yields the proposition that, if parties are
institutionalized and programmatically structured, then one expects to observe the respective
parties cater to broader political constituencies.
By contrast, inchoate, non-programmatic party organizations are characterized by the
lack of organizational capacity and internal cohesion. Low organizational capacity and the
absence of an internal consensus on longer-term policy objectives tend to hamper the ability of
parties to formulate programmatic policy. This leads to the following proposition: if party
systems are inchoate and non-programmatically structured, then competition for votes is not
expected to fall along partisan lines. This implies that a traditional Left-Right policy axis is
generally not discernible in inchoate, non-programmatic party systems. On the second
dimension of the framework, inchoate, non-programmatic party systems are associated with the
greater representation of narrow political interests, or classic forms of clientelism. Thus, if
party systems are inchoate and non-programmatically structured, then public policy will be
directed toward narrow political bases.
The testing of these propositions requires a) a theory of political conflict around
taxation and b) explicit measures of variation in policy preferences pursued by those essential
to the formation of policy. Given the particular dynamics of taxation discussed in the
subsequent section, the politics of taxation is conceptualized as an issue of distributive politics
which revolves around a tradeoff between the use of policy instruments to promote “equity” or
“the market.” In terms of policy, this tradeoff reflects the essential challenges involved in
formulating public policies that balance the demands of an emergent market sector with
increasing claims for the greater provision of state-administered social compensation programs.
39

The subsequent discussion turns to the dynamics of taxation and a reformulation of the
propositions outlined above which reflects the essential “equity/market” tradeoff.

The Dynamics of Taxation
Political conflict over the use of tax instruments stems from two essential dynamics of
taxation. On the one hand, contentions around taxation are attributed to the unequal return to
taxes among economic actors. Inevitably, some contribute more to the state coffers than they
receive in terms of state-administered goods and services; by contrast, others receive more from
state-run social compensation programs than they contribute in taxes. Consequently,
differential returns to taxation pit those who pay for the provision of public services against
those who benefit from state-provided programs.
Second, conflicts over taxation also revolve around its effects on investment decisions
and patterns of production and consumption. As tax instruments shift economic resources from
one segment to another, both the imposition of taxes and the exemption from taxes will affect
economic behavior in some way. Therefore, it is the uneven distribution of costs and benefits,
coupled with discretion involved in policymaking which creates pecuniary incentives for rent-
seeking. From the perspective of public policy, however, rent-seeking can be a slippery slope,
as interest groups proliferate and increase the pressure on policymakers to include those left out
of any fiscal bargain (Hayek 1944; Krueger 1974).
With these dynamics of taxation in mind, the general expectation is that parties on the
Left will cater to lower income earners while parties on the Right will seek to serve the interest
40

of higher income earners. This leads to a reformulation of the propositions on the first
dimension of the framework:
H
1a
: if parties are institutionalized and programmatically structured, then one
observes Left-wing parties catering to lower income earners and Right-wing
parties catering on higher income earners.
By contrast,
H
1b
: if parties are inchoate and non-programmatically structured, then
competition for votes is not observed along partisan lines.

The Dataset on Tax Initiatives
This dissertation is underpinned by a unique dataset composed of tax policy initiatives
with actual law implications (proyectos de ley) introduced in the national legislatures of eight
Latin American countries. The dataset consists of around 3,900 policy proposals and includes
the following eight countries for the specific time period noted: Argentina (2000-2011), Chile
(1990-2011), Colombia (2000-2011), Costa Rica (1996-2011), Ecuador (2002-2011),
Guatemala (2002-2011), Mexico (2000-2011) and Peru (2002-2011). As summarized in Tables
1 and 2, the dataset covers 21 legislative periods in contemporary Latin America. Tax
initiatives (proyectos de ley) typically originate with the executive office (or the ministry in
charge of taxation), elected representatives in the national legislatures (both upper and lower
houses), and in some countries with local and/or provincial legislatures. Through such
41

initiatives, policymakers seek to: a) introduce new legislation; b) alter existing legislation; or c)
abolish prevailing tax codes.
As demonstrated in Table 3, the vast majority of the tax initiatives recorded in this
dataset originates in the region’s legislatures. The more active participation of political parties
in tax policymaking reflects the decentralization of the policymaking process that has followed
the region’s return to democracy. For example, in Argentina, Colombia, Costa Rica, Ecuador,
Mexico and Peru, between 80 and 96 percent of all tax proposals originated in the legislature;
by contrast, the initiation of tax policy is still dominated by the executive in Chile.

Coding Procedures and Assumptions
The dataset complied for this study is designed to capture variation in policy objectives
pursued by policymakers. The coding procedure relies in a questionnaire designed to capture
the arguments for changing the tax code as articulated by those sponsoring the particular bills.
The arguments are found in the preamble (exposición de motivos) of a given legislative
proposal. This particular approach rests on the assumptions that policymakers generate policy
initiatives in order to accomplish two goals: 1) to muster support from fellow policymakers;
and, 2) to signal their commitment to promote the interests of a particular political base, be it
narrow or broad in scope. These procedures presume that policy preferences are objectives are
derived from political interests. Consequently, there is no assumption of sincerity embedded in
this particular coding scheme.
42

The policy initiatives included in this dataset are collected from the webpages of the
respective national legislatures and recorded in a spreadsheet. In order to maximize the
reliability of the data, a blind coder was hired to record the content of these initiatives. The data
creation and verification process consisted of several steps. The first phase focused on
developing definitions of variables and guidelines for coding. This step included selecting a
sample of representative policy initiatives across a number of countries and conducting a pilot
test for intercoder reliability. The second phase focused on redefining definitions and
developing coding guidelines. A second pilot sample was then developed. Overall, around 30
percent of the initiatives are coded by the author and 70 percent coded by a blind coder.
Approximately 25 percent of the initiatives are double coded. Given that the coding procedure
aims to capture the author(s) argument(s) for altering the tax code, an argument must be
explicitly stated in order to be coded as one; by contrast, the absence of an argument is coded
zero.

Overview of Variables Recorded in the Dataset
The dataset that underpins my analyses is designed to offer comparable measures of the
policy objectives pursued by policymakers. On the first dimension of the proposed framework
– which looks at the distribution of preferences for the use of tax instruments – I code
initiatives that aim to promote “equity” or “the market.” Each of these measures consists of
four separate indicators.
43

First, to create the “equity” measure, I code efforts by policymakers to: a) reduce the
impact of regressive forms of taxation on lower income earners; b) shift the tax burden toward
more progressive forms of taxation; c) alter income distribution and/or alleviate poverty; and
lastly, d) close loopholes and abolish special tax arrangements that benefit select tax payers.
Second, to compose the “market” measure, I record policy proposals that aim to: a) abolish
taxes that distort the market; b) use tax incentives to channel investments and/or spur Research
and Development (R&D); c) harmonize the domestic tax system with those of trading partners
in order to promote the flow of goods and capital; and, d) increase employment and/or
stimulate economic activity in order to spur longer-term growth. On the second dimension,
which aims to capture the reliance on tax instruments to promote clientelistic interests, I code
policy proposals that explicitly aim to benefit identified sectors, firms, and geographic regions.
In addition to the variables designed to capture equity- and market-promoting efforts
and the measure of targeted policy benefits, the dataset also provides indicators which capture
efforts to: 1) increase the overall tax revenue of the state; 2) establish tax benefits for select
social groups, predominately the disabled, seniors, and single caretakers; 3) alter aspects of the
tax code dealing with non-profit organizations and/or cooperatives; 4) establish or alter
earmarked taxes; 5) establish or alter the tax code covering so-called merit goods, including
education, sports, the environment, and medical research; 6) regulate the informal economy
and/or combat tax evasion; 7) modernize various aspects of tax administration and/or alter the
legal framework underpinning the existing tax code; 8) increase the tax revenue base of local
and/or provincial governments; and, 9) alter or establish revenue sharing schemes.
44

In order to ensure transparency, each initiative is coded with the following information:
1) the date introduced in the legislature; 2) the original record number of the policy initiative;
3) the title of the initiative provided in the legislative record; 4) the exact origin of the
initiative: the executive; legislature, both lower and upper houses, or local/provincial
government; 5) the name(s) of those who introduced the bill; and, 6) the particular party
affiliation of the individual(s) who introduced the initiative. If those that sponsored the bill
represent different political parties, the initiative is coded as a “joint” initiative; 7) whether or
not the initiative has a preamble in which the motivations are articulated; 8) the particular
action sought by the initiative: introduce new law, amend existing law, abolish existing law; 9)
the specific tax in question is recorded with country specific designations; 10) whether the
proposal was voted on; 11) whether it passed or failed; and, 12) the distribution of votes where
available.

Overview of Chapters
The main objectives of the chapters that follow are to: a) set the stage for studying the
politics of taxation in contemporary Latin America (chapter 1); b) analyze variation in the
objectives that policymakers have pursued through instruments of taxation and estimate the
ability of parties to articulate programmatic policy (chapter 2); c) look at variation in the extent
to which Latin American policymakers have relied on tax instruments to cater to narrow
clientelistic bases (chapter 3); d) understand how political competition and the policymaking
process have shaped the formation of tax policy in contemporary Latin America (chapter 4);
45

and, e) examine the ways in which tax instruments have been used to promote social and
economic equity (“equity”) across the region (chapter 5).
Chapter 1 sets the stage for studying the politics of taxation in contemporary Latin
America by discussing important developments since the debt shocks of the 1980s and the
fundamental change in economic re-orientation that followed. I focus on changes in the use of
tax instruments and look at the political consequences of the reform effort that was put in place.
The second part of this chapter situates the study of the politics of taxation within an extensive
body of literature on economic reform and policymaking and discusses a broad
multidisciplinary body of work on taxation which has in various ways informed the design and
execution of the present study.
Chapter 2 turns the first dimension the analytical framework (figure 1). It maps the
policy space available to voters by focusing on the distribution of policy preferences and makes
an argument for studying the relationship between party programmation and the formation of
public policy in new democracies. I discuss existing theories of party institutionalization
(Mainwaring and Scully 1994; Mainwaring and Scully 1995a; Jones 2010; Flores-Macias
2012) and party programmation (Kitschelt, Hawkins, Luna, Rosas, and Zachmeister 2010) and
demonstrate that there is considerable overlap between the major theoretical frameworks that
have been developed to explain differences in the capacity of Latin American parties to
perform the essential roles and functions that democracy has awarded them.
Chapter 3 looks at a second dimension of political representation by studying the extent
to which policymakers have relied on tax instruments to promote particularistic interests (figure
1). Patterns of political representation can have important implications for political
46

accountability, as those primarily catering to narrow political bases may be more loyal to
his/her narrow political base than to the political party itself. Clientelism, it is argued, can
further undermine the ability of parties to formulate public policies which balance the interests
of diverse societal groups.
Chapter 4 turns to the policymaking process. Building on previous chapters on the
distribution of policy objectives and discretion in policymaking, this chapter looks at how
increased political competition since Latin America’s return to democracy has shaped the
ability of the respective actors involved in the formation of policy to successfully translate their
policy objectives into actual law. This chapter tests propositions on the role of the executive in
tax policymaking and looks at the role played by national legislatures in the lawmaking effort
across countries.
Chapter 5 focuses on the role of the “new” Left in Latin America which has marked its
presence in policymaking since the late 1990s. While there is considerable variation in the
political projects of Left-wing political parties, they generally converge on the need for greater
state involvement in establishing social compensation programs which will help alleviate
pressing concerns with poverty and socio-economic marginalization. I discuss their respective
policy goals in terms of taxation and look at the various strategies that they have used to
achieve their respective policy objectives.
Chapter 6 concludes by summarizing my main findings and discussing the broader
implications of my research on the politics of taxation in contemporary Latin America.

47

Contributions to the Literature
Existing theoretical perspectives predict convergence of measures around tax policy
given similar levels of political and economic development. Scholars of economic
development have predominantly focused on variation in the capacity to tax and understood
differences in tax capacity in terms of economic development. Political scientists have
generally explained tax reform, or the lack thereof, as a function of external pressures,
particularly Latin America’s re-integration into international trade and capital markets since the
1990s. However, when controlling for these variables, there emerges some variation in
taxation that has not been accounted for by the prevailing scholarship. It is this explanatory
gap that motivates this study.

48

FIGURE 1: A FRAMEWORK FOR STUDYING TAXATION
Political Parties
Institutionalized Inchoate
Programmatically
structured
Non-
programmatically
structured
Programmatically
structured
Non-
programmatically
structured
Dimension 1:
Policy Objectives and
Party Preferences
Dimension 2:
Clientelism and
Political
Accountability
H1: if party systems are programmatically structured,
then the respective parties will compete for votes by
differentiating their policy packages.
H2: if party systems are non-programmatically
structured, then competition for votes is not expected
to fall along partisan lines.
H1a: If parties are programmatically structured, then one
observes a Left-Right policy spectrum in which the Left
caters to lower income earners and the Right to higher
income earners.
H2a: If parties are non-programmatically structured,
then a Left-Right policy spectrum is not readily
observable.
H3: If parties are programmatically structured, then
public policy will be directed toward broad-based
political constituencies.
H4: If party systems are non-programmatically
structured, then public policy will be directed toward
broad-based constituencies.
49

TABLE 1: DATA COVERAGE BY LEGISLATIVE PERIOD (TABLE A)
Argentina
Data coverage: 2000- 2011
Legislative
period
1997-2001 2001-2003 2003-2007 2007-2009 2009-2011 2011--present
Presidency Carlos Menem
(1990-1999)
Fernando De La Rúa (1999-
2001)
Eduardo Duhalde
(2002-2003)
Néstor Kirchner
(2003-2007)
Cristina Fernández de
Kirchner
(2007-)
Cristina Fernández de
Kirchner (2007-)
Cristina Fernández de Kirchner
(2007-)
Party of
president
Menem: Partido Justicialista
De La Rúa: Alianza
(UCR+Frepaso)
Partido
Justicialista
Frente para la
Victoria
Frente para la
Victoria
Frente para la Victoria Frente para la Victoria
Chile
Data coverage: 2000-2011
Legislative
period
1998-2002 2002-2006 2006-2010 2010--
President Eduardo Frei
(1994-2000)
Ricardo Lagos
(2000-2006)
Ricardo Lagos (2000-2006) Michelle Bachelet (2006-2010) Sebastián Piñera (2010-)
Party of
president
Partido Demócrata Cristiano Partido por la Democracia Partido Socialista Renovación Nacional
Costa Rica
Data coverage 1997-2011
Legislative
period
1994-1998 1998-2002 2002-2006 2006-2010 2010--
President José María Figueres Olsen
(1994-1998)
Miguel Ángel
Rodríguez
Echeverría (1998-
2002)
Abel Pacheco de la Espriella
(2002-2006)
Oscar Arias Sánchez
(2006-2010)
Laura Chinchilla Miranda
(2010-to date)
Party of
president
Partido Liberación Nacional Partido Unidad
Social Cristiana
Partido Unidad Social
Cristiana
Partido LiberaciónNacional Partido Liberación Nacional
Colombia
Data coverage: 2000-2011
Legislative
period
1998-2002 2002-2006 2006-2010 2010--
President Andrés Pastrana Arango (1998-2002) Álvaro Uribe Vélez
(2002-2010)
Álvaro Uribe Vélez (2002-2010) Juan Manuel Santos
(2010-)
Party of
president
Partido Conservador Colombiano Primero Colombia Primero Colombia Partido de la U
50

TABLE 2: DATA COVERAGE BY LEGISLATIVE PERIOD (TABLE B)
Ecuador
Data coverage: 2000-2011
Legislative
period
1998-2002 2002-2006 2007-2008 2009-2012
President Jamil Mahuad
(1998-2000)
Gustavo Noboa
(2000-2003)

Gustavo Noboa
(2000-2003)
Lucio Gutiérrez
(2003-2005)
Alfredo Palacio
(2005-2007)
Rafael Correa
(2007-)
Rafael Correa
(2007-to date)
Party of
president
Mahuad: Unión Demócrata Cristiana
Noboa: Unión Demócrata Cristiana
Noboa: Unión Demócrata Cristiana
Gutiérrez: Partido Sociedad Patriótica
Palacio: Partido Sociedad Patriótica
Alianza PAIS Alianza PAIS
Guatemala
Data coverage: 2002-2011
Legislative period 2000-2004 2004-2008 2008-2012
President Alfonso Portillo
(2000-2004)
Óscar Berger
(2004-2008)
Álvaro Colom
(2008-2012)
Party of president Frente Republicano Guatemalteco Gran Alianza Nacional Unidad Nacional de la Esperanza
Mexico
Data coverage: 2000-2011
Legislative period 2000-2003
LVIII Legislature
2003-2006
LIX Legislature

2006-2009
LX Legislature

2009-2012
LXI Legislature

President Vicente Fox
(2000-2006)
Vicente Fox
(2000-2006)
Felipe Calderón (2006-2012) Felipe Calderón
(2006-2012)
Party of president Partido Acción Nacional Partido Acción Nacional Partido Acción Nacional Partido Acción Nacional
Peru
Data coverage: 2001- 2011
Legislative period 2000-2001 2001-2006 2006-2011 2011--
President Valentín Paniagua
(2000-2001)
Alejandro Toledo
(2001-2006)
Alan García
(2006-2011)
Ollanta Humala
(2011-)
Party of president Acción Popular Perú Posible Partido Aprista Peruano Partido Nacionalista Peruano

51

TABLE 3: TAX INITIATIVES BY ORIGIN

Country

Number of tax-related
initiatives
Origin of initiative Percentage of total
Argentina
(2000-2011)
1095
Executive 4.0
Legislature 96.0
Chile
(1990-2011)
71
Executive 69.0
Legislature 31.0
Colombia
(2000-2011)
4

136
Executive 13.1
Lower House 86.9
Costa Rica
(1996-2011)
378
Executive 13.8
Lower House 86.2
Ecuador
(2002-2011)
75
Executive 20.0
Lower House 80.0
Guatemala
(2002-2011)
107
Executive 15.9
Lower House 84.1
Mexico
(2000-2011) 689
Executive 5.2
Legislature 92.5
Local legislature 2.3
Peru
(2002-2011)

1014
Executive 8.5
Legislature 87.6
Local or provincial
legislature
3.9

4
Around 10 percent of the policy initiatives introduced by the lower and upper houses of Colombia are joint
proposals.
52

Chapter 1: The Politics of Taxation in Latin America’s
Emerging Markets

“Consider…the much discussed trade-off between growth and equity. Most
societies want to be richer. Most also want…wealth to the distributed fairly.
Are these objectives compatible?” (Bird 2003, 19).

Tax reform in Latin America was part of the original package of market-oriented reforms
implemented under the auspices of the International Monetary Fund (IMF) and the World Bank
in the aftermath of the debt shocks of the early 1980s (Stotsky 1995; Williamson 1990). The
immediate impact of the abrupt abolishment of ISI development strategies was a sharp decline in
government revenue which had been tied to trade-related taxes. Consequently, in the midst of
spiraling economic crisis, the revenue-strapped governments of the region aimed to find an
alternative source of tax revenue (Tanzi 2000). As most Latin American governments had
already implemented the basic structures of the Value Added Tax (VAT), the expansion of
general consumption taxes became the most expedient alternative to taxes on trade under the new
model of market-oriented development (Barreix, Bes, and Roca 2010; Tanzi 2007; Bernardi
2007).
The reform agenda that trickled into Latin America via international tax specialists
reflected a “new” consensus on taxation as stipulated by the neoliberal approach to growth and
development (Tanzi 2011; Stotsky 1995; Biersteker 1990). As a result of the worldwide oil price
shocks and economic crises of the 1970s, the general thinking around taxation, and thus
53

conceptions of the proper use of tax instruments, changed substantially. Up until the turn to
neoliberalism the late 1980s, tax instruments were commonly used to alter market outcomes by,
for example: a) stimulating sectors and economic activities, b) channeling resources into
strategic sectors or activities; and, c) redistributing economic gains through a progressive tax
structure. Stipulating less government intervention in the economy, the neoliberal model
changed the nature of the policy objectives that taxation would be used to achieve. The broader
implication of this change was that prescriptions for fiscal reform in the aftermath of the Latin
American debt crisis focused primarily on eliminating market distortions built up as a result the
region’s reliance on tax instruments to promote strategic or otherwise desirable market
outcomes.
As most other post-crisis reforms in Latin America, those pertaining to taxation were
designed and carried out by teams of technocrats in collaboration with tax advisers representing
major international financial institutions (Centeno and Silva 1998; Tanzi 2000). The
technocratic nature of this particular reform process implied that most societal actors had few
opportunities to influence the general course of policies put in place. While economically and
politically expedient in the immediate aftermath of the 1982 debt shocks, the substantial shift to
consumption taxes has raised concerns about the equitable distribution of the tax burden in a
region characterized by high pre-existing levels of economic inequality and social
marginalization (Mahon 2012; Huber and Stephens 2012; Bulmer-Thomas 1996). In many
countries, the re-entrance of the Left into the political arena has focused on a greater role for the
state in mitigating widespread concerns about social and economic inequality (Schamis 2006;
Beasley-Murray, Cameron, and Hershberg 2010; Flores-Macias 2010; Reygadas and Filgueira
2010; Moreno-Brid and Paunovic 2010; Levitsky and Roberts 2011b; Baker and Greene 2011).
54

Consequently, taxation became a controversial issue once the region's returned to democracy and
previously marginalized political actors regained access to the policymaking process.
The main objective of this chapter is to establish the recent historical backdrop for
studying the politics of taxation in Latin America. The first section frames conflict around the
formation of tax policy in within the broader reform program that followed the debt shocks of the
early 1980s. The second section situates the contemporary politics of taxation within an
extensive literature on fiscal policy and the broader debates about the need to balance equity with
sustainable growth. Focusing on major trends and developments, I divide this research program
into four generations, each of which emphasizes core issues of economic reform. Lastly, I
discuss taxation from the standpoint of various academic fields, including sociology, political
science, economics and public policy, as well as the various ways in which each discipline has
informed the design and execution of the present study.

Setting the Stage for the Post-1982 Reform Effort
The worldwide economic downturn of the 1970s and the subsequent embrace of
neoliberal economic policies stipulated a new role for tax policy. Up until the late 1970s,
taxation was commonly used as a key policy instrument for: a) fostering economic development;
b) stimulating economic activity; and, c) redistributing economic gains through a more
progressive tax structure.
5
Under the neoliberal economic model that followed, the prevalent use
of tax instruments to alter economic outcomes that characterized the 1950s and 1960s became

5
For policy prescriptions of the “old” development model, see for example, the much cited work on taxation in
developing countries by Kaldor (1963b, 1963a, 1973).
55

synonymous with excessive state intervention and market distortions. As tax scholar Richard M.
Bird wrote, “[t]he interventionist policy represented by incentives was replaced by the ideal of a
uniform ‘level playing field’ in which market forces rather than government officials made
investment decisions” (2008, 197). Neoliberal principles of tax reform were disseminated in
Latin America mainly via international financial institutions such as the International Monetary
Fund (IMF) which profoundly affected the politics of taxation in the years that followed (Tanzi
2011; Bird 1992b).
In the 1950s and 1960s, the use of tax instruments to stimulate economic activity and
promote growth was commonplace (Bird 1992b; Tait 1993). Discussing tax policy in developing
countries, Nicholas Kaldor’s article entitled Will Underdeveloped Countries Learn to Tax?,
argued that it was paramount for underdeveloped countries to increase their revenue gathering
capacity in order to achieve their goals of economic development (1963b). As he stated in a
related article, “the importance of public revenue from the point of view of accelerated
economic development could hardly be exaggerated” (1963a, 7).
6
Consequently, as part of the
region’s effort to spur industrialization, governments relied upon various tax instruments in order
to channel resources into strategic or otherwise desirable economic activities. While this may
have contributed to Latin America’s industrialization drive, the net result of this particular
strategy was a complicated web of tailored tax arrangements which targeted strategic firms,
sectors and geographic regions (Villela, Lemgruber, and Jorrat 2010).
Throughout the 1950s and 1960s, taxation was also commonly used to redistribute
economic gains through a progressive tax structure characterized by high income tax rates (Kato

6
See for example, Kaldor’s (1973) advice to Mexico on taxation.
56

2003; Steinmo 1993). Richard M. Bird, for example, has noted that efforts to alter the
distribution of income through taxation resulted in the imposition of exceedingly high tax rates.
As he shows, the average income tax rates reached around 60 and 70 percent while the corporate
rate hovered around 50 percent.
7
Intentions aside, Latin American governments fell short of
improving the highly skewed distribution of income through the fiscal system. This failure is
attributed to a number of factors, including extensive tax evasion (Alm and Martinez-Vazquez
2007; Gómez Sabaini and Jiménez 2012), the reliance on tailored tax arrangements granting
exemptions and loopholes, and the inability of the state to redistribute income via spending
(Gómez Sabaini and Jiménez 2012; Bird and Zolt 2005a; Mahon 2012; Huber and Stephens
2012).
In sum, the thinking around taxation changed substantially as a result of the turn to
neoliberalism. As Duane Swank has concluded, “while the system of high marginal statutory
rates, targeted investment incentives, and other tax expenditures were once viewed as a means to
foster both equity and growth, the extant structure of taxation had by the 1980s become
emblematic of unfairness, undue complexity, and inefficiency” (2006, 859). The following
section turns to a discussion of the major reform objectives implemented in the wake of the debt
shocks and financial crisis of the 1980s and to their broader political implications.

7
Similarly, studies of taxation in the OECD countries show that progressive forms of taxation were essential to the
development of the social and economic safety net that characterizes many European countries, see, for example
Kato (2003).
57

Taxation in Contemporary Latin America
The first and most immediate goal of the reform agenda implemented in the wake of the
debt crisis centered on establishing a viable alternative to trade-related taxes which had
constituted an essential source of government revenue under the region’s ISI development
strategies. A second objective has involved an ongoing effort to reduce market distortions,
especially those stemming from the discretionary use of tax incentives that had built up in the
course of relying on tax instruments to promote industrialization. A third goal has been to
modernize various aspects of tax administration in order to reduce the costs around tax collection
and combat widespread evasion. I discuss each of these policy objectives in turn.
The expansion of the VAT witnessed in Graph 1 over the last decades has reflected the
shift from state-led development strategies to a more market-oriented and export-led
development model (Tanzi 2000; Bird 1992a).
8
In most Latin American countries, preexisting
structures of the VAT made the expansion of consumption taxes the most expedient source of
government revenue (Cnossen 1998; Bird 1992a; Tanzi and Zee 2000).
9
The basic structure of
the VAT was already established in the late 1960s when cyclical fiscal causes made the need for
a more substantial revenue base readily apparent. Brazil was the first to introduce a system of
general consumption taxes in 1967; Uruguay followed a year later. By the early 1980s, most

8
Comparable cross country data prior to 1990 is difficult to obtain, but various publications report estimates for a
number of countries. For example, Tanzi (2000) has compiled data on changes in collected tariff rates and taxes on
international trade starting in 1985. This data indicate a substantial decline in revenue collected from trade-related
taxes as a result of Latin America’s reintegration into global trade and capital markets.
9
Most European countries had already made the change to consumption based taxation (Kato 2003). Furthermore,
the neoliberal economic agenda stipulated that consumption taxes were the more neutral forms of taxation within
market-oriented economies.
58

countries in the region had followed suit.
10
The essential shift in the distribution of the tax
burden that followed the abrupt abandonment of the ISI model and the adoption of the neoliberal
reform agenda can be observed in Graph 1 which shows a decline in taxes on trade and
transactions accompanied by a substantial increase in consumption taxes.
A second objective has involved creating a more neutral tax system. In this context,
neutrality refers to the reduction of market distortions, especially those caused by the excessive
use of preferential tax arrangements benefitting select economic sectors and actors (Barreix, Bes,
and Roca 2010; Villela, Lemgruber, and Jorrat 2010). The heavy reliance on particularistic tax
arrangements had resulted in excessive rent-seeking while the state lost a significant amount of
tax revenue through preferential tax arrangements benefitting narrow political interests. As I
discuss in greater detail in chapter 3, official estimates of tax expenditures show that the Latin
American state still foregoes substantial tax revenue through tax exemptions and tailored tax
arrangements designed to benefit select economic actors (Villela, Lemgruber, and Jorrat 2010).
A third reform objective has involved relatively extensive efforts by Latin American
governments to simplify and modernize various aspects of tax administration. As a number of
studies have shown, such reforms have been relatively successful in terms of reducing
transaction costs around tax collection and the combat prevalent problem of evasion in many
developing countries (Mansfield 1988; Bird and Casanegra de Jantscher 1992; Shome 1999;
Taliercio 2004; Durand and Thorp 1998; Everest-Phillips 2010; Bird, Martinez-Vazquez, and

10
Dates for which the VAT was introduced or proposed in Latin American include: Argentina (1975), Bolivia
(1973), Chile (1975), Colombia (1975), Costa Rica (1975), Dominican Republic (1983), Ecuador (1970), Guatemala
(1983), Honduras (1976), Mexico (1980), Nicaragua (1975), Panama (1977), Paraguay (1993), Peru (1976), and
Venezuela (1993) (Tanzi 2000).
59

Torgler 2008). The expansion of general consumption taxes contributed to this objective by
replacing a number of taxes that yielded little revenue with taxes that are less costly to collect
and enforce. Ongoing efforts to streamline administrative procedures, invest in better technology
and software, and train personnel have also improved the region’s administrative capacity.
11

Nevertheless, the region as a whole has a long way to go in terms of reducing corruption and
improving the overall administrative capacity to undertake future reforms (Alm and Martinez-
Vazquez 2007; Taliercio 2004; Fauvelle-Aymar 1999).
Many Latin American governments have continued the effort to improve various aspects
of tax administration in order to reduce costs and incentives for tax evasion. To gain insight into
such efforts, I recorded policy initiatives that aimed to improve some aspects of tax
administration. This particular measure accounts for efforts to policymakers to: a) simplify the
tax code; b) strengthen the capacity of the state in order to enforce existing regulations; c) invest
in computers and software; and d) professionalizing the workforce by for example training
personnel.
As demonstrated in Table 4, Chilean policymakers have spearheaded such efforts in Latin
America in that around 45 percent of the initiatives introduced in the national legislature since
1990 have focused on the strengthening of administrative capacity of the state. Efforts to
develop and professionalize various aspects of tax administration have also been relatively
important in Mexico (23.7 percent), Peru (22.8 percent), Colombia (17.7 percent), and Costa
Rica (15.9 percent); by contrast, much less attention has been paid to this matter in Guatemala

11
The rationalization of the Peruvian revenue agency is an example of this effort, see Durand and Thorp (1998).
60

(5.6 percent), Ecuador (9.3 percent) and Argentina (11.7 percent) where a relatively small
portion of the tax proposals have attempted to deal with pressing issues of institutional capacity.

Contentions around Taxation and Consequences for Tax Capacity
The expansion of consumption taxes and the general failure of Latin American
governments to collect more taxes from wealthier members of society and big business has
fuelled perceptions of unfairness in taxation (Boylan 1996; Fairfield 2010; Wibbels and Arce
2003). As critics observe, corporate tax rates have been cut in order to make the domestic
market more attractive for foreign investment and Latin America’s income tax regimes have
been unable to provide the basis for a more progressive taxation alternative because of their
weak administrative capacity (Bird and Zolt 2005b; Bird and Zolt 2005a; Ardanaz and
Scartascini 2011). Graphs 2 and 3 demonstrate that the share of direct taxes – taxes on income
wealth and corporations - remains low across the region.
Critics of the VAT generally conceptualize taxation as an essential issue of distributive
justice (Mahon 2012; Boylan 1996; Bird 2003; Wibbels and Arce 2003; Huber and Stephens
2012). From this perspective, the substantial reliance on regressive forms of taxation violates
traditional principles of fairness which is commonly defined in terms of horizontal and vertical
equity (Steinmo 1993). The former stipulates that people with similar ability to pay taxes should
contribute equally to the state while the latter specifies that those with the greater ability to
contribute to the state should face a higher tax burden (Bird 2003). More explicitly, from this
61

standpoint, the VAT encroaches upon the principle of vertical equity, as lower income earners
pay a greater proportion of their earnings in consumption taxes then do higher income earners.
12

Proponents of the VAT, on the other hand, contend that consumption taxes are the more
neutral or less distortive in open, market-oriented economies. From this angle, potential
increases in direct forms of taxation, particularly on income, wealth and corporations have a
greater distortionary impact on the allocation of resources and investment decisions than do
general consumption taxes (Harberger 1985; Hines and Summers 2009). Moreover, advocates of
consumption taxes make the point that the relative ease with which the VAT is collected matters
greatly given the weak administrative capacity of many developing countries (Mansfield 1988;
Shome 1999; Bird and Casanegra de Jantscher 1992).
13
According to this argument, the VAT is
a relatively efficient source of revenue and one better suited to the administrative conditions
which prevail in Latin American countries.
Finally, it should be stressed that there are considerable disagreements around what
constitutes an appropriate level of taxation. As such, this debate revolves around the pursuit of
contending policy objectives. Those who advocate a greater role for the state tend to argue that
more revenue is needed to establish and sustain more extensive social safety networks.
Conversely, those who aim to promote the market emphasize the distortive impact of taxation,
maintaining that exports and foreign investment are critical to the future success of emerging

12
For interesting ideas on increasing revenue collection and compensating the poor,” see Barreix and colleagues
(2010).
13
Reform efforts in Latin America have also focused on various technical aspects of tax administration. This has
included the development of better administrative procedures, training of personnel, as well as improvements in
machinery (computers) and software which facilitate the administration of taxes. Such improvements can greatly
reduce the costs associated with the enforcement of existing tax codes and help combat prevalent tax evasion.
62

markets. The subsequent section places the study within an extensive literature on fiscal justice
and economic reform since the early 1980s in Latin America.

Research on Economic Reform since the Debt Crisis
The literature on fiscal reform in Latin America can be divided into four generations of
research, each of which corresponds to major political and economic developments in the region
since the early 1980s. Seen together, these generations of scholarship reflect critical shifts in
economic policy questions: from concerns with immediate macroeconomic stability to longer-
term questions around equity and socio-economic marginalization; from insulated technocratic
policymaking to the formation of policy under the influence of new political actors; and, from
fundamental questions of the durability of democracy to longer-term concerns with the quality of
democratic institutions, political representation and accountability, and the formation of public
policy. I briefly review each of these conceptual phases before turning to the scholarship on
taxation in the section that follows.
First generation scholarship on economic reform was mainly concerned with structural
adjustment. Scholars focused predominately on the privatization of state assets, trade opening
and macroeconomic stability, including currency stabilization and counter-inflationary measures
undertaken in collaboration with major international financial institutions (IFIs). This literature
looked extensively at the various aspects of the reform effort and compared the responses of
incumbent political leaders to the immediate challenges imposed by the 1982 debt crisis and the
adoption of the Washington Consensus (Edwards 1995; Frieden 1991; Centeno and Silva 1998;
Haggard and Kaufman 1992).
63

Scholars of the second generation turned to the scrutiny of various policy measures
intended to consolidate first generation reforms (Armijo, Biersteker, and Lowenthal 1994; Kurtz
2004). Discussing this literature, Manuel Pastor and Carol Wise (1999) identify three
overlapping trends in the region. The first addresses market-completing measures intended to
bring liberalization initiatives started under the first phase to fuller fruition. The second is
concerned with “equity-oriented” programs designed to ameliorate poverty and income
inequality. The third focuses more broadly on institution-building initiatives aimed at “good
governance” and citizen input into the policymaking process. These measures have included the
establishment of equity-enhancing and poverty-reducing programs which aimed at balancing the
predominant focus on market-enhancing prescriptions advocated by the Washington Consensus
(Nelson 1989; Haggard and Webb 1993, 1994; Encarnacion 1996; Biersteker 1990).
Studies of the third generation deepened the focus on social policy developments and
documented substantial variation in social spending and welfare efforts throughout the region
(Kaufman and Segura-Ubiergo 2001; Segura-Ubiergo 2007; Avelino, Brown, and Hunter 2005;
Haggard and Kaufman 2008; Huber 2002; Teichman 2008; Huber and Stephens 2012). This
extensive research agenda has focused on the determinants of variation in public spending,
particularly education and health spending, social expenditures, and the reconstitution or
reorganization of social pension systems (Mesa-Lago 2008, 2010; Brooks 2009; Huber and
Stephens 2000). Although most of these inquiries are framed in terms of the classic
globalization/domestic autonomy debate (Evans 1997; Rodrik 1997; Garrett and Mitchell 2001;
Strange 1996; Stokes 2001; Dobbin, Simmons, and Garrett 2007; Boix 1998), a number of
studies have challenged the globalization hypothesis and found that domestic political
configurations can seriously shape both the design and content of domestic reforms (Pribble,
64

Huber, and Stephens 2009; Kaufman and Segura-Ubiergo 2001; Segura-Ubiergo 2007; Murillo
2009). Thus, third generation studies mark an important turning point in the explanatory
framework and have inspired a new generation of scholarship that focuses on the impact of
regime type, party preferences, and political competition on the policymaking process in
contemporary Latin America.
Fourth generation scholarship has focused on the nuances and variation in policymaking
and is characterized by the much greater integration of traditional theories of comparative
politics and comparative political economy (Haggard and Kaufman 2008; Scartascini 2007;
Spiller, Stein, and Tommasi 2008; Scartascini, Stein, and Tommasi 2010). These studies
typically draw on an extensive literature on political systems (Mainwaring and Shugart 1997c),
political parties (Jones 2010; Mainwaring and Scully 1995a), legislatures (Morgenstern and Cox
2001; Morgenstern 2002b) and a number of other variables such as the electoral system and
candidate selection procedures (Carey and Shugart 1998; Morgenstern and Vázquez-D’Elía
2007; Siavelis and Morgenstern 2008) to explain differences in public policy. As a result, the
fourth generation typically shifts focus from external variables which have tended to dominate
past generations of research to the domestic foundations of public policy formation. Overall, this
work is vital for understanding differences in the policymaking process and policy outcomes
across the region.
This dissertation spans the third and fourth generations discussed above by focusing on
the formation of tax policy in contemporary Latin America. It aims to contribute to the existing
literature by providing a better understanding of the fiscal underpinnings of such efforts.
Scholarship to date has stressed the importance of studying the politics of taxation, but has
65

lacked the data on the distribution of policy preferences across countries to gain better insight
into the obstacles at play (Huber and Stephens 2012; Segura-Ubiergo 2007; Flores-Macias
2012). To this end, I build on fourth generation scholarship as discussed above by mapping the
policy space in which tax policy is negotiated. I draw on extensive studies of Latin American
party systems and look at how variation in the capacity of parties to formulate programmatic
policy impacts the formation of public policy in contemporary Latin America. My approach
gathers insights into the bargaining around taxation and increases our understanding of the
ability of political parties in the region to perform the formal functions that democracy has
assigned them.

Scholarship on the Politics of Taxation

The Political Science-Sociology Tradition
Studies in sociology and political science generally explain the development of modern
tax institutions and increases in tax capacity in terms of warfare (North and Thomas 1973; Tilly
and Ardant 1975; Levi 1988; Arbetman and Kugler 1997; Greif 2006; Sokoloff and Engerman
2008).
14
In this scholarship, the capacity of the state to extract taxes and mobilize resources is
seen as an essential attribute of the modern state. As Margaret Levi succinctly writes, the
“history of state revenue production is the history of the evolution of the state” (1988, 1).
15

14
For applications of the war hypothesis to Latin America, see Centeno (1997) and Thies (2005).
15
On the relationship between warfare and progressive forms of taxation, see Scheve and Stasavage (2010).
66

Taxation is furthermore central to the scholarship that emerged in the mid-1980s which
brought the “state back in” (Skocpol 1985, 2008). In this scholarship, the state is typically
conceptualized as an arbiter of social and economic conflict (Evans, Rueschemeyer, and Skocpol
1985).
16
This implies that the state is as important agent in the redistribution of economic gains
and in the establishment of various social compensation programs to protect the economically
marginalized. Inevitably, the role of state as the agent of redistribution is also a major source of
conflict, as the design and implementation of policy instruments require that essential policy
players agree on the extent to which the state should regulate the economy (Evans and
Rueschemeyer 1985, 66; Polanyi 1944; Hayek 1944). Hence, as Sven Steinmo has argued,
taxation primarily concerns the redistributive efforts of the state and continues to be at the center
of ideological conflict over its proper roles and functions in the economy (1993, 2).

The Political Economy Tradition
Studies of taxation within the political economy tradition have mainly focused on the
relationship between globalization and taxation (Garrett and Mitchell 2001; Genschel 2002;
Wibbels and Arce 2003; Hines and Summers 2009; Hallerberg and Basinger 1998, 1999; Swank
and Steinmo 2002; Swank 2006; Tanzi and Zee 2000; Tanzi 2004; Bird 2008). In its most
extreme articulation, the globalization hypothesis predicts that domestic policy will dance to the
tune of international markets. This idea is most clearly articulated by Susan Strange, who
predicted that international markets would become “the masters over the governments of states”

16
For a review of this literature, see Levi (2000) and for an assessment of the research agenda, see Skocpol (2008).
67

(1996, 4). Among scholars of globalization, the consensus has been that the influence of
domestic political actors in policymaking will diminish substantially with the greater integration
of global trade and capital markets.
17

In terms of taxation, the globalization hypothesis advanced a number of propositions.
First, greater integration into international trade and capital markets would result in a substantial
decline in tax rates. Capital mobility, in particular, would lead to a shift in the tax burden from
mobile to fixed assets. Second, competition for capital would cause a “race-to-the-bottom” in
capital taxation, as governments would rush to undercut one another to attract mobile assets.
Third, the globalization hypothesis predicted a general shift from direct to indirect forms of
taxation, such as consumption taxes and user fees.
In response to this scholarship, an extensive body of work has sought to reevaluate the
proposition that domestic political actors are void of autonomy in policymaking. Critics
essentially argue that globalization scholars have overstated their claims and highlight a more
nuanced picture of interactions between variables at the domestic and international levels (Evans
1997; Rodrik 1997; Brune and Garrett 2005).
18
Many studies have thus concluded that domestic
interest groups, political parties, legislative politics, and domestic veto players remain pivotal
actors in the formulation and execution of public policy, even in those states which have
integrated furthest into international trade and capital markets (Evans 1997; Rodrik 1998; Crepaz
2002; Potrafke 2009).

17
For comprehensive reviews of the scholarship on globalization, see, for example, Rodrik (1997) and Garrett
(1998).
18
See Rudra (2008) for a compelling reformulation of the globalization hypothesis.
68

A number of scholars have looked specifically at the relationship between globalization
and taxation. In a series of articles, Mark Hallerberg and Scott Basinger (1998, 1999; 2004)
provide data which demonstrate that although cuts in tax rates coincided with the onset of
globalization in all members of the Organization for Economic Cooperation and Development
(OECD), tax policy is first and foremost determined by domestic political configurations.
Similarly, in a study of corporate taxes, Duane Swank (2006) finds that most countries reduced
corporate tax rates around the time of market integration. Nonetheless, this study also concludes
that political parties and the preferences of voters remain vital determinants of policy. These
findings are further reinforced by a number of studies that have looked at changes in taxation
over a longer period of time (Garrett 1995; Garrett and Mitchell 2001; Steinmo and Tolbert
1998; Swank and Steinmo 2002; Plumper, Troeger, and Winner 2009).

The Public Policy Tradition
Scholars of public finance, many of whom have served as advisers to developing
countries on tax reform, have produced an extensive body of case studies which draw attention to
important aspects of the reform process. Although the politics of taxation is generally absent
from these studies, they have focused on: general guidelines for undertaking tax reform (Bird
and Oldman 1975, 1990; Ahmad and Stern 1991); the technical aspects of tax administration
(Mansfield 1988; Bird and Casanegra de Jantscher 1992; Shome 1999; Taliercio 2004); the
relationship between economic development and tax structure (Bird 1992b; Skinner 1993); and,
pivotal distributional aspects of tax policy (Bird and Zolt 2005b). As one keen observer has
noted, the “fiscal reality found in most countries reflects less analysis or empirical realities than a
69

changing mixture of ideas, interests, and institutions” (Bird 2003, 15). This suggests that
understanding the politics involved in the promulgation of tax policy is pivotal for furthering our
knowledge of tax reform in contemporary Latin America.

Research on Taxation in Developing Countries
Among political scientists, taxation in developing countries has received relatively short
shrift. As Deborah Bräutigam writes “[r]aising revenue is the most basic task of the
state…Through its key role as the tie the binds the ruler and the ruled, taxation supports
representation, accountability, and state capacity. Yet taxation and revenue are rarely mentioned
as democracy and governance issues in developing countries” (Bräutigam 2002, 10). Scholars of
developing countries have generally understood taxation within the historical and sociological
traditions discussed above. Within this broader scholarship, studies have looked at the
relationship between warfare and state capacity (Centeno 1997; Thies 2005); state-society
relations broadly defined (Lieberman 2001, 2002; Bräutigam 2008; Easter 2008); relations
between big business and the state (Boylan 1996; Fairfield 2010); state building and institutional
capacity (Taliercio 2004; Durand and Thorp 1998; Everest-Phillips 2010); and, issues of tax
incidence, equity, and changes in the tax burden among societal actors (Wibbels and Arce 2003;
Mahon 2004, 2012; Boylan 1996).

70

Conclusion
Taxation in Latin America changed substantially with the collapse of state finances and
ISI development strategies throughout the 1980s and 1990s. A new reform agenda was
introduced into the region via international economists and tax scholars representing major
international financial institutions. With the implementation of the neoliberal economic model,
the revenue-strapped governments of the region looked to the relatively successful European
model of broad-based consumption taxes. Given that the basic structures of the VAT were
already in place in many countries, this became the most expedient alternative for raising
desperately needed revenues. Initial reform efforts were undertaken by relatively insulated
teams of technocrats, meaning that other societal actors had little opportunity to influence the
reforms that were put in place. However, with the region’s return to democracy and the
decentralization of the policymaking process that followed, the policymaking process around
taxation changed substantially with number of new political actors re-entering the process. As
the neoliberal reform agenda had put concerns with equity and other issues of distribution on the
backburner, societal demands for compensation programs and greater government involvement
in mitigating the adverse effects of market reform increased rapidly. Those concerned with
socio-economic marginalization and the skewed distribution of income typically cast taxation as
an issue of redistributive justice. A number of Latin American politicians and policymakers took
immediate issue with the substantial increase in consumption taxes that accompanied trade
liberalization and the failures of government to collect more taxes from big business and
wealthier income groups. Others emphasized the need to alter the region’s fiscal regimes and
lower taxes in order to attract much needed foreign investment and facilitate Latin America’s re-
entrance into global markets.
71

In this dissertation, I argue that contemporary tax debates in Latin America revolve
around the extent to which taxation should be used to promote “equity” or “the market.” While
critics of general consumption taxes contend that the heavy reliance on regressive taxes unduly
burdens lower income earners, proponents of the VAT maintain that consumption taxes are the
least distortive form of taxation in globally integrated economies. Essentially, those concerned
with equity argue for more progressive forms of taxation while those who prioritize the market
claim that more progressive forms of taxation unduly distort economic behavior.

72

GRAPH 1: TRENDS IN INDIRECT TAXES AND TAXES ON TRADE IN LATIN AMERICA, (AVE. 1990-2011)

Source: ECLAC tax revenue statistics.
0
1
2
3
4
5
6
7
8
9
10
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
PERCENTAGE OF GDP
YEARS
Trends in Indirect Taxes and Taxes on Trade
(Ave. 1990-2011)

Taxes on international
trade and transactions
Indirect Tax Revenue
73

GRAPH 2: TRENDS IN DIRECT AND INDIRECT TAXES IN LATIN AMERICA, (AVE. 1990-2011)

Source: ECLAC tax revenue statistics.

0
1
2
3
4
5
6
7
8
9
10
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
% OF GDP
YEARS
Trends in Direct and Indirect Taxes (Ave. 1990-2011)
Direct Taxes
Revenue
Indirect Taxes
Revenue
74

GRAPH 3: TAX CAPACITY BY TYPES OF TAX

Source: OECD tax revenue statistics.

75

GRAPH 4: TRENDS IN TAXATION, (AVE. 1990-2010)

Source: OECD tax revenue statistics.

76

TABLE 4: EFFORTS TO IMPROVE TAX ADMINISTRAION
Country
Percentage of policy initiatives that aim to
professionalize tax administration
(% of total introduced in the respective legislatures)
Argentina 11.7
Chile 45.1
Costa Rica 15.9
Colombia 17.7
Ecuador 9.3
Guatemala 5.6
Mexico 23.7
Peru 22.8

77

Chapter 2: Political Parties and Preferences for Tax
Instruments

“…[P]olitical parties are arenas for new contracts, new types of
association, as well as important networks of communication and
information. As national groups the parties may serve to bridge the gaps
between one locale and the next; by recruiting new groups into activity
they may also overcome status distinctions that traditionally separated
one class or ethnic group from the next” (Weingrod 1968, 384-5).

Latin America’s return to democracy thrust political parties to the center stage of
policymaking and facilitated the reappearance of previously marginalized actors across the
region. Some countries witnessed the rebuilding of traditionally strong parties; others saw the
reconstitution of weak party organizations which mainly served the immediate interests of
ambitious politicians.
19
Consequently, whereas the fall of authoritarian regimes was met with
great enthusiasm, variation in the composition and organization of the region’s party
organizations raised concerns around their ability to assume a constructive role in the
consolidation of democracy and the articulation of a viable longer-term public policy agenda.
As Herbert Kitschelt has noted, “[i]n the institutional sense, all bands of politicians that run
under joint labels may be called parties. However, parties in the institutional sense are not

19
See, for example, Sanchez (2009).
78

always parties in the functional sense, namely collective vehicles that solve problems of
collective action and of collective choice” (2000, 848).
The main goals of this chapter are: to a) map variation in the policy objectives pursued
by policymakers through various instruments of taxation; and, b) look at the capacity of the
region’s parties to articulate programmatic public policy. Party programmation concerns vital
issues of political representation and democratic accountability. Voters remain under-
represented, if not un-represented, when parties fail to develop an internally cohesive
policymaking agenda and do not compete for votes by articulating distinct policy positions.
Party leaders can be policymakers in their own right; by looking at the distribution of
preferences among essential policymakers one gains insight into the policy space available to
voters. I organize this chapter around three essential questions: What is the nature of the
objectives promoted by policymakers through instruments of taxation? To what extent have
parties articulated competing policy goals? To what extent have parties pursued a
programmatic policymaking agenda as it pertains to taxation?
I conceptualize taxation as an instrument of public policy that policymakers have at
their disposal to promote their policy objectives and cater to their respective political bases.
The first part of the analysis tests the proposition that the politics of taxation in contemporary
Latin America is an issue of distributive politics involving contentions around the extent to
which instruments of taxation should be used to promote “equity” or “the market.” I use factor
analysis to; a) assess the extent to which my coding scheme measures the purported concepts
of “equity” and “market;” and, b) to estimate the extent to which these are competing policy
objectives. The second part of the analysis uses the equity/market dichotomy to look at the
79

cohesiveness of party positions in order to assess the capacity of parties to articulate
programmatic policy. I close with a discussion of the nature of the policy space in which
taxation is negotiated across Latin America.
This chapter will show that few parties in Latin America are programmatic in terms of
taxation. In most countries, contentions around the formation of tax policy revolve around the
equity/market axis, but variation in policy objectives does not necessarily fall along partisan
lines. This suggests that the region’s parties are internally divided and pursue competing
policy goals through taxation. The result is a relatively small policy space which is primarily
characterized by the policies pursued by Right-leaning parties. The region’s parties on the
Left, by contrast, are marked by their relative absence from agenda-setting in the fiscal arena.
Having noted the Left’s absence, it should be emphasized that Left-leaning parties are the
primary promoters of equity-related policy proposals, but have largely failed to articulate an
independent policy platform. Consequently, the Left has first and foremost reacted to the tax
proposals set forth by the Right rather than staking out its own position on fiscal policy.
The first section of this chapter discusses the roles that political parties play in
democratic governance and highlights pivotal issues of political representation and
accountability. The second section turns to an extensive scholarship on party
institutionalization and party programmation and tests the proposed framework for studying the
formation of tax policy in Latin America. This particular framework makes a critical
distinction between policymaking in institutionalized, programmatic party systems, on the one
hand and non-programmatic, inchoate party systems, on the other hand. The third section
presents the data and discusses variation in policy objectives across countries and political
80

parties. The final section concludes with a discussion of the extent to which Latin American
parties have pursued programmatic policies which pertains to taxation.

“Why Parties?” Political Parties and Representation
20

Programmatic political parties perform a number of functions essential to democratic
forms of representation and accountability (Aldrich 1995, 2011; Mainwaring and Scully 1995a;
Kitschelt, Hawkins, Rosas, et al. 2010a; Carey and Reynolds 2007; Carey 2009; Shefter 1994).
Parties resolve collective action problems by organizing and aggregating the interests of diverse
political actors (Olson 1971; Keefer 2011; Kitschelt, Hawkins, Rosas, et al. 2010a; Kitschelt
2000). They are also crucial in terms of delineating the policy space available to voters. The
policy space increases if the respective parties offer distinct policy options; by contrast, it
shrinks when parties fail to differentiate their respective policy packages or converge on a
uniform agenda (Stokes 2001; Aldrich 1995, 2011; Lyne 2005; Kitschelt, Hawkins, Rosas, et
al. 2010a).
Institutionalized party organizations also offer incentives for policymakers to adhere to
party platforms by awarding loyal partisans and establishing mechanisms for disciplining party
members that deviate from official party platforms. On the contrary, inchoate party systems
are characterized by scarce institutional resources which may create incentives for politicians to
pursue alternative forms of political linkages that cater to narrow political bases (Ames 1995a;

20
This essential question is the title of Aldrich’s (1995, 2011) seminal publications on the formation of
programmatic political parties.
81

Kitschelt 2000; Kitschelt and Wilkinson 2007a). The fostering of alternative linkage strategies
(Kitschelt 2000) may mean that policymakers are primarily loyal to their own narrow political
bases, which further undermines the capacity of their party to engage in programmatic
policymaking. Finally, parties ensure stability and continuity in public policy which is vital for
the ability of policymakers to negotiate and honor inter-temporal agreements. In short, parties
make it possible to sustain political bargains over time (Scartascini 2007; Flores-Macias 2012).
A substantial scholarship has demonstrated that Latin American party organizations
vary extensively in their capacity to undertake their responsibilities and perform the functions
that underpin party-based democratic governance. This chapter shows that available indicators
of party institutionalization (Mainwaring and Scully 1995a; Jones 2010) and party
programmation (Kitschelt, Hawkins, Luna, Rosas, and Zachmeister 2010) measure similar
aspects of Latin American party organizations. Drawing on these studies, I build a framework
which portrays how variation in political parties, or more specifically party institutionalization
and party programmation, affects the formation of public policy as it pertains to taxation in
contemporary Latin America. The discussion that follows situates this framework within an
extensive scholarship on Latin American political parties.

Political Parties in Contemporary Latin America
The third wave of democratization in Latin America (Huntington 1991; Hagopian and
Mainwaring 2005) spurred renewed interest in political parties (Mainwaring, O'Donnell, and
Valenzuela 1992; Mainwaring and Scully 1995a; Mainwaring and Shugart 1997a; Roberts and
82

Wibbels 1999) and legislative assemblies as primary sources of policymaking in the newly
democratized countries of the region (Morgenstern and Cox 2001; Morgenstern 2002b;
Morgenstern and Vázquez-D’Elía 2007; Saiegh 2010).
Largely in response to the wave of democratization starting in the 1970s, the classic
studies of the 1980s and 1990s focused on the constitutional and organizational characteristics
of parties and their capacity to contribute positively to the consolidation of the region’s new
democracies (Mainwaring, O'Donnell, and Valenzuela 1992; Mainwaring and Scully 1994;
Mainwaring and Scully 1995a). The relative political stability that followed prompted greater
interest in issues around the “quality” of democratic governance (Weyland 2004; Diamond and
Morlino 2004; O'Donnell, Vargas Cullel, and Iazzetta 2004; Altman and Luna 2007).
Consequently, recent scholarship on political parties has turned to variation in the ability of
parties to develop programmatic policy. Central to this literature are concerns with authentic
political representation and democratic accountability (Kitschelt, Hawkins, Luna, Rosas, and
Zachmeister 2010). I discuss these particular theories in the subsequent section and provide the
foundations for building a framework for understanding the politics of taxation in
contemporary Latin America.

Party Institutionalization and the Consolidation of Democracy
In their seminal work, Scott Mainwaring and Timothy Scully (1994; 1995b)
demonstrated that Latin American parties exhibit qualitative differences and suggested that
variation in their composition and capacity to perform essential democratic functions is related
83

to “…whether or not a competitive party system is institutionalized” (1995b, 5). Given the
volatility of democratic rule that characterized the region, these studies looked primarily at the
relationship between institutionalization and the consolidation of democracy. Within the
broader context of democratization, Mainwaring and Scully argued that a key feature of
institutionalized party systems is the ability of policy players to “entertain clear and stable
expectations” about the rules of the game (1995b, 5). By contrast, inchoate party systems were
seen as impediments to democratic consolidation, as such parties are weak and prone to
electoral volatility and the fostering of anti-system candidates.
21

From the broader literature is it possible to construct a party institutionalization
framework based on four essential measures:
22
a) party competition; b) party roots in civil
society; c) a party’s electoral legitimacy; and, d) and party organization.
23
Party competition,
which implies regularity in contestation for political office and policy positions, is most
associated with institutionalized party systems; irregularity in competition is thus associated
with inchoate parties. Extensive party roots are linked to the development of discernible party
labels which allow voters to infer essential policy positions; in contrast, the absence of this
association is considered an indication that voters “have trouble locating what the major parties
represent even in the broadest terms” (Mainwaring and Scully 1995b, 5). The third measure

21
At the time of publication (1995), Mainwaring and Scully classified Venezuela, Costa Rica, Chile, Uruguay,
Colombia, and to a lesser extent Argentina as institutionalized competitive party systems. Inchoate party systems
prevailed in Peru, Bolivia, Brazil, and Ecuador, while the then transitioning hegemonic parties of Paraguay and
Mexico constituted a residual category.
22
These indicators have provided the foundations for comparing political parties in Latin America (Jones 2010;
Kitschelt, Hawkins, Luna, Rosas, and Zachmeister 2010; Flores-Macias 2012) and in new democracies more
broadly (Kuenzi and Lambright 2001; Stockton 2001; Randall and Svåsand 2002; Kuenzi and Lambright 2005).
23
For alternative measures, see Sanchez (2008).
84

concerns the legitimacy of parties as actors in democratic policymaking. High levels of
legitimacy indicate strong party institutionalization; low levels signify inchoate party systems.
The fourth measure concerns the organizational capacities of parties: the more complex the
party organization, the more institutionalized the party.
Despite the extensive scholarship on Latin American parties, few studies have looked at
the relationship between institutionalization and the formation of public policy. One exception
is a recent study by Gustavo Flores-Macias (2012) which seeks to understand why various
Latin American Left-wing executives have pursued radically different policy courses.
Following Mainwaring and Scully (1995a), he distinguishes between the particular dynamics
which characterize party systems and the nature of the particular candidate who is most likely
to reach the presidency. In this framework, the “centripetal incentives,” which characterize
institutionalized parties, make it difficult for an anti-system candidate to reach the presidency;
“centrifugal incentives” are associated with inchoate parties and these tend to facilitate the rise
of an anti-system candidate with transformative policy objectives (Flores-Macias 2012, 60-71).
Hence, Flores-Macias’ argument is essentially that institutionalized party systems guard against
candidates who are likely to pursue radical changes while inchoate parties facilitate their
emergence.

Party Programmation and Political Representation
Recent scholarship has turned to political representation and accountability within a
broader research program on the quality of democratic institutions and good governance
85

(Levine and Molina 2011; Diamond and Morlino 2004; O'Donnell, Vargas Cullel, and Iazzetta
2004; Posner 2008). Within this broad research program, a main concern is the capacity of
parties to develop programmatic policy agendas and provide voters with distinct policy options
(Kitschelt, Hawkins, Luna, Rosas, and Zachmeister 2010; Luna and Zechmeister 2005; Altman
et al. 2009).
In a series of articles, Herbert Kitschelt and colleagues (2010) develop a measure of
party programmation which they use to estimate the extent to which parties compete for votes
by offering discrete policy alternatives. Parties are considered “programmatically structured if
teams of politicians compete for votes by offering citizens alternative packages of policies that
they commit to enact if elected to political office with sufficient support” (Kitschelt, Hawkins,
Luna, Rosas, and Zachmeister 2010, 16 my italics).
The Party Programmation Structuration (PPS) indicators offered by Kitschelt and
colleagues are comprised of two distinct components (Table 6). The first – “programmatic
coordination” – measures the “extent to which politicians employ party labels to develop
coherent policy alternatives.” The second component – “programmatic linkages” – gauges the
capacity of parties to “coordinate around programmatic appeals to voters by assembling distinct
electoral coalitions” (2010, 16). According to this framework, high PPS scores mean that
policy varies with the partisan composition of government; by contrast, low PPS scores indicate
that parties compete for votes by other means (Kitschelt, Hawkins, Rosas, et al. 2010a, 3). In
essence, if the respective parties compete for votes by differentiating their policy positions, then
one expects the formation of a low-dimensional policy space in which parties of different suits
offer distinct policy packages.
86

Comparing Concepts: Party Institutionalization and Party Programmation
The relationship between institutionalization and programmation is essential for
building a framework that aims to understand how variation in the composition and
organization of parties affect the formation of public policy. To this end, three questions are
essential: 1) are institutionalized parties generally programmatic? 2) Can parties be
institutionalized, yet non-programmatically structured? 3) Are inchoate parties by definition
non-programmatically structured? Below, I show that indicators of party institutionalization
and programmation measure similar attributes of Latin American party organizations. This
yields a framework (Figure 3) which consists of two distinct categories: a) inchoate, non-
programmatic party organizations and b) institutionalized, programmatic party organizations.
My research draws on Mark P. Jones’ (2010) study of party institutionalization which
provides measures for 18 Latin American countries.
24
According to these measures, the party
system in Uruguay (with a score of 76) is the most institutionalized while Bolivia’s party
system is the most inchoate (with a score of 48). I use the institutionalization scores to create
dichotomous categories by sorting the region’s party systems around the mean score (62.28) of
the Jones’ index. Party systems with scores below the mean are considered inchoate; those
with scores above the mean are institutionalized. I use the party programmation scores
provided by Kitschelt and colleagues to create a second axis (Table 6). The result is a matrix in
which the institutionalized, programmatic category is comprised of Uruguay, Mexico, and

24
Jones creates measures for each of the four components comprising the original party institutionalization
framework: a) electoral volatility; b) party roots; c) a party’s electoral legitimacy; and, d) party organization.
These measures are added to in order to compose an index of party institutionalization in contemporary Latin
America.
87

Chile; the inchoate, non-programmatic category is made up of Colombia, Brazil, Bolivia,
Venezuela, and Ecuador. The two remaining countries, Costa Rica and Argentina, are
borderline cases in both frameworks.
25

A Framework for Studying Taxation in Contemporary Latin America
I develop a set of indicators to measure efforts by policymakers to promote “equity” or
“the market” through instruments of taxation. Through factor analysis, I obtain an “equity
factor” and a “market factor” which are used to evaluate the extent to which parties are
programmatic. As summarized in Table 5, the first dimension of the general framework
illustrated in Figure 1 (of the introductory chapter), yields the following propositions:

H
1a
: if parties are programmatically structured, then one observes Left-wing
parties catering to lower income earners and Right-wing parties catering to
higher income earners.
By contrast,

25
Conceptual disagreements have emerged in the classification of Argentina, Costa Rica and the Dominican
Republic. In the latter two cases, differences may be attributed to Argentina and Costa Rica constituting
borderline cases in both frameworks. Disagreements are more pronounced over the Dominican Republic which is
assigned a high institutionalization score, but a low programmation score. This discrepancy suggests that
differences in classification may be due to measurement errors in one or both frameworks.

88

H
1b
: if parties are non-programmatically structured, then competition for
votes is not expected along partisan lines.
Strategies to Promote “Equity” and “the Market” through Taxation
The particular strategies employed by Latin American policymakers to promote a level
playing field fall into four broad categories (Table 8). These include efforts to: a) reduce the
impact of regressive forms of taxation on lower income earners; b) shift the tax burden toward
more progressive forms of taxation; c) alter income distribution and/or alleviate poverty; and
lastly, d) close loopholes and abolish special tax arrangements that benefit select tax payers.
The distribution of the “equity-promoting” measure and its constituent indicators is
summarized in Table 8.
The first of these indicators aims to capture efforts by policymakers to shield lower
income earners from regressive forms of taxation. Taxes on goods and services, such as the
VAT, fall into this category. The second indicator looks at efforts to increase the reliance on
progressive forms of taxation. Commonly observed strategies include adjusting the ceiling for
non-taxable income and/or altering tax brackets. Contentious debates on the introduction of
taxes on windfall profits and inheritance are also observed in a number of countries.
26
Third,
policymakers have in various ways sought to alter income distribution and/or alleviate poverty
by establishing particular tax arrangements benefitting select social groups, including the

26
Efforts to decrease the reliance on regressive forms of taxation and increase the reliance on progressive forms of
taxation are two sides of the same coin. However, these are split into two separate indicators because
policymakers generally pursue concise arguments in their introduction of initiatives. Hence, I use two distinct
measures in order to avoid conflating arguments for promoting equity through taxation.
89

disabled, senior citizens, and single caretakers. Lastly, those concerned with equity have aimed
to abolish existing loopholes, special consolidation regimes and other tailored tax arrangements
designed to benefit select taxpayers.
Strategies to promote the market are also captured by four indicators. As summarized in
Table 9, Latin American policymakers have sought to promote the market by: a) abolishing
taxes that distort the market; b) using tax incentives to channel investments and/or spur
Research and Development (R&D); c) harmonizing the domestic tax system with those of
trading partners in order to promote the flow of goods and capital; and, d) increasing
employment and/or stimulating economic activity to spur longer-term economic development.
The subsequent section uses factor analysis to look at the extent to which the suggested
indicators capture the purported concepts of “equity” and “the market.”

Factor Analysis
I use factor analysis to look at the extent to which the indicators of “equity” and
“market” form distinct clusters of variables. By casting taxation as an issue of distributive
politics, the analysis is expected to yield an “equity-promoting” and a “market-promoting”
factor. As postulated, my analysis positively supports the proposition that these are competing
policy goals.
27
Furthermore, the relatively low correlations between the these two factors
strengthens the argument that taxation can be viewed as an issue of distributive politics which

27
I retain the factors with eigenvalues higher than 1.00.
90

revolves around the extent to which such instruments will be used to promote equity or market
efficiency (Table 12).
28

One gains insight into the relative importance of the respective indicators by looking at
the composition of each factor. The factor loadings show that concerns with regressive taxes
assert the most substantial “weight” on the equity factor. This implies that those who have
promoted equity through taxation have been mostly concerned with the reliance on regressive
taxes and their adverse effect on lower income earners. A close second are efforts by
policymakers to shift the tax burden toward more progressive forms of taxation which implies
increasing levies on income and wealth. Also important are policy initiatives which aim to use
tax instruments to mitigate some aspect of poverty and inequality. Lastly, efforts by
policymakers to abolish loopholes and tailored tax regimes assert some weight on the equity
factor.
The interpretation of “the market factor” is more complicated, however. As observed
in Table 11 which summarizes the results of the factor analysis, this factor is composed of three
of the four indicators developed to conceptualize efforts by policymakers to promote “the
market.” First, the composition of this factor indicates that tax instruments have mainly been
used to reactivate economic activity and promote development. Second, is the use of tax
instruments to encourage investment and spur technological innovation. Last, are efforts to
reform various aspects of the domestic tax system in order to facilitate foreign economic

28
The composition of each factor as specified by the factor loadings yields insight into the relative weight asserted
by each of the measures included in the coding scheme.

91

exchange, broadly defined. Absent from the market factor is the measure that captures efforts
to reduce distortionary taxes. This is an unexpected finding, as the proposed framework
hypothesizes that policymakers concerned with market efficiency would make the elimination
of taxes that distort the allocation of resources and prices a primary policy objective.
One possible explanation is that measures of market-enhancing objectives are correlated
with efforts by policymakers to cater to narrow political bases. As I discuss in Chapter 3, this
expectation is consistent with the prevalent use of tax instruments to stimulate industrialization
and growth under the ISI development model. It is also consistent with an extensive literature
on clientelism and patronage in contemporary Latin America. I thus extend the analysis of the
market factor by looking at correlations between the indicators used to measure market-
promoting objectives and efforts to promote particularistic policy benefits.

Taxation and Clientelism
An extensive literature demonstrates that clientelism shapes the formation of public
policy and policy outcomes in most Latin American countries (Kitschelt 2000; Kitschelt and
Wilkinson 2007a; Ames 1995a). Given the prevalence of clientelistic relations across the
region, the data collected for this study offer a measure of efforts by policymakers to channel
particularistic benefits through taxation. As Table 13 demonstrates, contemporary Latin
American policymakers routinely rely on tax instruments to channel particularistic policy
benefits to select firms, sectors and geographic regions.
92

To estimate the extent to which market-promoting objectives are tied to clientelism, I
look at the correlations between the constituent indicators of “the market factor.” As expected,
relatively high correlations indicate that these two measures are intertwined (Table 14).
Indeed, the two indicators that assert the most substantial “weight” on the factor are the highest
correlated with the clientelism measure. It should be noted that this finding stands in contrast
to the relatively low correlations between equity-promoting objectives and clientelism as
shown in Table 15.
High correlations raise the question of whether the constituent indicators of the market-
promoting variable actually measure the purported concept. I argue that they do given that the
majority of policy initiatives coded as “market-promoting” are unrelated to the clientelism
measure. Furthermore, “the market factor” offers valuable insights into the particular policy
objectives pursued by policymakers while highlighting the complexity involved in the
policymaking process. Therefore, I conclude that taxation has been used to promote three
essential policy objectives across the region: to promote equity, the market, and to serve the
interests of particularistic political bases. The subsequent section looks at the extent to which
political parties have articulated programmatic policy. Chapter 3 returns to taxation and
clientelism.

Equity vs. Market in Contemporary Latin America
The data demonstrate that the “equity/market” tradeoff constitutes an important
dimension of the politics of taxation in contemporary Latin America. As observed in Table 10,
the majority of the tax proposals introduced in Argentina (70 percent), Chile (60 percent),
93

Colombia (60 percent), Mexico (65 percent) and Peru (58 percent) deal with some aspect of
“equity” or “the market.” Only Ecuador (24 percent) and Guatemala (18 percent) stand out as
notable exceptions to this general trend where the politics of taxation has not revolved around
the equity/market tradeoff (Table 16). Hence, the distribution of policy objectives across
countries supports the general proposition that contentions over taxation revolve around the
extent to which instruments of taxation will be used to promote “equity” or “the market.”
The data reveal significant variation in the use of tax instruments to promote equity
across countries. Three groups are discernible from the data summarized in Table 16. The first
group is comprised of Argentina (30.0 percent) and Peru (21.8 percent) where a significant
portion of the initiatives aim to promote some aspects of socio-economic equality. The second
group is composed of Costa Rica (18.0 percent) and Mexico (17.3 percent) where equity-
promoting objectives are substantial and have influenced the formation of tax policy. This
leaves the last group in which concerns with equity have not taken priority. This group consists
of Chile (4.3 percent), Ecuador (5.3 percent), Guatemala (6.6 percent), and Colombia (10.3
percent) where policymakers have been relatively less concerned with issues around equity in
taxation.
Efforts to promote “the market” constitute a primary goal in most countries. For
example, in Chile (54.9 percent) and Colombia (50.7 percent) around half of the recorded tax
bills seek to promote some aspects of the market. A similar trend is observed in Mexico (48.2
percent) and Argentina (41.0 percent), and to a lesser extent in Peru (39.6 percent) and Costa
Rica (29.8 percent). These trends are markedly different in Ecuador (18.7 percent) and
94

Guatemala (11.9 percent) where such efforts remain low compared with other states in this
study.
In conclusion, the overwhelming trend in the data is that efforts to promote the market
dominate concerns with equity. This is clearly observed in Chile (54.9 percent/4.2 percent),
Colombia (27.8 percent/10.3 percent), and Costa Rica (27.8 percent/18.0 percent). Exceptions
to this trend are Argentina (40.9 percent/30.0 percent) and Peru (36.4 percent/21.8 percent)
where efforts to promote equity and the market are relatively comparable. The overall
framework falls short of capturing the politics of taxation in both Ecuador (5.3 percent/18.7
percent) and Guatemala (6.6 percent/11.9 percent). In the latter two countries, this suggests
that the politics of taxation revolve primarily around some other dimension which is not
accounted for by the equity/ market dichotomy as postulated.

Parties and Policy Goals
I extend the analysis by looking at the objectives pursued by the respective parties that
have assumed an active role in the formation of tax policy. Tables 17 and 18 list the political
parties that have sponsored more than five percent of the bills. Those that have proposed less
than five percent of the initiatives are included in the category labeled “other parties.” The
initiatives sponsored by policymakers representing different parties are recorded as “joint
initiatives.”
As already discussed, efforts to promote equity through taxation have been relatively
extensive in Argentina, Peru, Costa Rica, and Mexico (Table 16). First, in Argentina, a
95

considerable portion of the initiatives introduced by the Peronist party (PJ) and Unión Cívica
Radical (UCR) has sought to promote some aspects of equity. Second, in Peru equity has been
a relatively important concern among policymakers affiliated with Unidad Nacional (UN) and
Perú Posible (PP). The Partido Liberal Nacional (PAN) has led such efforts in Costa Rica
while Mexico’s Left-wing Partido de la Revolución Democrática (PRD) has spearheaded
similar efforts in that country. However, in several countries a substantial portion of the bills
concerned with equity have been introduced by parties responsible for less than five percent of
the total legislative initiatives put forth. Consequently, while constituting an important (and
sometimes vocal) counter-force to the agenda setting by Right-wing parties, these parties are
not agenda-setters in their own right.

The Policy Space: Ideology and Programmation
To create a measure of party ideology, I rely on measures provided by the Elites Survey
for indicators of party affiliation and party programmation which asks deputies to rank all
parties other than their own on a ten point party ideology scale.
29
A score of one represents the
far Left and a score of ten denotes the far Right. Second, I use the standard deviation of these
scores as indicators of party programmation. As demonstrated in Graph 7, the standard
deviations of these scores vary extensively which suggest that even fellow policymakers have
trouble inferring policy objectives from party labels. This specific use of the standard deviation

29
This survey is carried out by the Instituto de Estudio de Iberoamérica y Portugal, University of Salamanca,
Spain.
96

assumes that institutionalized, programmatic parties will project a more coherent policy agenda
than their inchoate non-programmatic counterparts. Consequently, the expectation is that the
more cohesive the party, the lower the standard deviation of the ideology measure; by contrast,
the less cohesive the party, the greater the standard deviation. Tables 17 and 18 summarize the
party ideology scores and the standard deviations reported for each party.
The distribution of policy initiatives by party affiliation demonstrates that Right-wing
parties have been most active in the introduction of tax policy initiatives. As a general trend,
Right-wing parties have primarily pursued initiatives aiming to promote some aspect of the
market. Indeed, with the exemption of Costa Rican and Peruvian parties, very few parties on
the Right have pursued equity-related policy goals. This lends support to the general
proposition that the Right is the main promoter of the market.
By contrast, the Left’s relative absence from agenda-setting constitutes the main
obstacle to evaluating the nature of the policy objectives that Left-wing parties have pursued.
As discussed above, several parties have promoted equity through taxation, but there is
considerable debate around whether these can be considered Left-wing, as their placement on a
traditional Left/Right axis is contested. As shown in Tables 17 and 18, the standard deviations
are high for most of the region’s parties which, as discussed above, indicates that fellow
politicians have trouble inferring policy positions from the party label. Moreover, a general
statement about the Left’s efforts to promote equity is challenged when we look at the
distribution of policy proposals in Peru. As much as one-fourth of the policy initiatives
introduced in the Peruvian legislature aim to level the playing field through taxation. Yet, as
commonly argued, Peru does not have a traditional Left-wing party (Roberts 1996; Dietz and
97

Myers 2007; Levitsky and Cameron 2009). Nevertheless, several of Peru’s party officials have
run on agendas designed to appeal to Left-wing voters and their respective strategies have made
it beneficial to adopt an agenda focusing on equity promotion and social justice.
30

Programmatic Parties in Contemporary Latin America
The data collected on tax proposals indicate that few Latin American party systems are
programmatically structured according to the framework offered by Kitschelt and his
colleagues. With the notable exceptions of Argentina, Mexico, Peru and Costa Rica, the policy
agenda pertaining to taxation is predominately defined by Right-wing political parties. This
implies that the policy space consists of a single dimension, leaving those concerned with
equity under-represented.
Furthermore, parties tend to be internally divided in terms of the objectives pursued.
The lack of a clear party platform on taxation is a strong indication that many parties lack the
capacity to develop shared policy principles to which its members adhere. The failure to agree
on policy goals, in turn, undermines their respective capacity to formulate programmatic
policy. Notably, Chile’s Renovación Nacional (RN) and Unión Democrática Independiente
(UDI) and Mexico’s Partido Acción Nacional (PAN), and Costa Rica’s Movimiento Libertario
(PML) are relatively programmatic. These parties are also assigned the lowest standard
deviations of the parties in the sample which indicates that there is less confusion around their
policy principles and party positions. By contrast, Peru’s parties receive very high standard
deviations, indicating that their ability to articulate programmatic policy is relatively low. The

30
As discussed in Chapter 5, the first part of Peru’s Ollanta Humala serves as a case in point
98

inability to articulate programmatic policy is also reflected in the distribution of policy
initiatives introduced in the Peruvian legislature.

Conclusion
The proposed framework for understanding the politics of taxation in contemporary
Latin America draws on an extensive literature on party institutionalization and party
programmation which seeks to understand variation in policy positions taken by Latin
America’s political parties. As demonstrated, these theoretical frameworks measure similar
attributes of Latin American party organizations. Kitschelt and colleagues attributed the
relationship between these frameworks to the fact that “[p]oliticians who have more time to
hone relations with constituencies and build experienced party organizations are more likely to
develop programmatic appeals and compete against other parties on the strength of their
programmatic reputations…” (2010, 203).
Aiming to better understand the politics behind the formation of tax policy in Latin
America, I created a framework which systematically analyzes the distribution of preferences
pursued by those policymakers who are central to the policymaking process. The first
dimension of this framework postulates that conflict revolves around the extent to which
taxation should be used to promote equity and the market. In this study, efforts to promote
equity refer to policy initiatives that aim to accomplish one or more of the following four
objectives: 1) to reduce regressive taxes; 2) to increase progressive taxes; 3) to reduce
99

inequality, alter income distribution, and/or alleviate poverty; and, 4) to abolish tax
arrangements benefitting select tax payers. By contrast, efforts to promote “the market” denote
tax proposals that aim to: 1) reduce taxes that distort the market; 2) promote investment and
technological innovation; 3) facilitate foreign exchange broadly defined; and, 4) reactivate
economic activity.
Factor analysis and the low correlations between the equity and the market factors
indicate that these constitute competing policy objectives in Latin America. I therefore
hypothesized that the Left would be the primary promoter of equity and the Right of “the
market.” In line with the party programmation literature, a key characteristic of programmatic
party systems is that parties compete for votes by articulating distinct options which target
relatively broad political bases. However, few contemporary Latin American party systems
have achieved a low dimensional policy space in which parties compete for votes by
articulating discrete policy packages. As I argued above, the failure of parties to articulate
programmatic policy results in a constrained policy space in which a substantial portion of the
electorate is under-represented. Under-representation in terms of taxation can be attributed to
the failure of the Left to articulate an independent policy agenda in terms of taxation. The
chapter that follows turns to the second dimension of the proposed framework and in doing so
looks at the extent to which policymakers have relied upon instruments of taxation to cater to
particularistic political bases. Demonstrating considerable variation in clientelism and taxation,
the latter part of Chapter 3 returns to the questions involving party programmation, political
representation and accountability.

100

TABLE 5: THEORETICAL EXPECTATIONS ON THE FIRST DIMENSION OF THE FRAMEWORK
Institutionalized parties Inchoate parties
Programmatically structured

Parties articulate programmatic policy platforms.
Expectations:
1. Differences in policy positions along
partisan lines.
2. The formation of a Left/Right policy
spectrum:
a) Left-wing parties are expected
to promote the interests of lower
income earners;
b) Right-wing parties are expected
to promote the interests of higher
income earners.

Resulting in:
1. A broader policy space available to
voters in which:
a) The Left is associated with efforts
to promote “equity” through
taxation.
b) The Right is associated with
efforts to promote “the market”
through taxation.
2. More authentic political representation
in which a broader range of interests
are represented.

Non- programmatically structured
Parties do not articulate programmatic policy
platforms. Expectations:
1. Variation in policy positions, but not
clearly articulated along partisan lines.
2. Absence of a Left/Right policy
spectrum.

Resulting in:
1. A narrow policy space available to
voters.
2. Less authentic political representation
in which a narrow range of interests
are represented.

101

TABLE 6: PARTY INSTITUTIONALIZATION AND PARTY PROGRAMMATION SCORES
Country
Jones’s Party
Institutionalization Index
Kitschelt et. al.’s Economic
PPS Index
Uruguay 76 +3.0
Dominican Republic* 74 -2.0
Nicaragua 70 N/A
Honduras 68 N/A
Mexico 67 +1.0
Panama 67 N/A
El Salvador 66 N/A
Chile 65 +3.0
Paraguay 64 N/A
Argentina* 62 +1.0
Costa Rica* 61 +1.0
Colombia 60 -2.0
Brazil 59 -0.2
Bolivia 56 -0.3
Venezuela 55 -1.0
Peru 53 -2.0
Ecuador 50 -2.0
Guatemala 48 N/A

102

FIGURE 2: PARTY PROGRAMMATION V.S. PARTY INSTITUTIONALIZATION
High Party
Institutionalization (Jones
2010)
High Party
Programmation
(Kitschelt et. al.2010)
Low Party
Programmation
(Kitschelt et. al. 2010)
Low Party
Institutionalization
(Jones 2010)
Colombia
Brazil
Bolivia
Venezuela
Peru
Ecuador
Borderline cases:
Argentina
Costa Rica
Contested cases:
Dominican Republic
Uruguay
Mexico
Chile
Borderline cases:
Argentina
Costa Rica
Contested Cases:
Dominican Republic

103

TABLE 7: MEASURES OF “EQUITY” AND “THE MARKET”
Question Equity-Promoting Dimension Coding
1 Is the regressive nature of (a) specific tax(s) an explicit concern?
Yes=1
No=0
2 Does the initiative aim to make (a) specific tax(s) more progressive?
Yes=1
No=0
3
Is the initiative explicitly concerned with inequality, income
distribution and/or poverty alleviation?
Yes=1
No=0
4
Is the ending of particular tax privileges and/or special tax regimes en
explicit goal?
Yes=1
No=0
Market-Promoting Dimension
1
Is the distortive effect of (a) specific tax(s) and/or market efficiency
(an) explicit concern(s)?
Yes=1
No=0
2
Is the promotion of investment and/or technological innovation an
explicitly stated goal?
Yes=1
No=0
3
Is the harmonization of (a) specific tax(s) and/or foreign exchange an
explicitly stated concern?
Yes=1
No=0
4
Is the initiative explicitly concerned with reactivating economic
activity and/or promoting economic development?
Yes=1
No=0

104

TABLE 8: INDICATORS OF “EQUITY-PROMOTING” OBJECTIVES

Aggregate measure

(Percentage of all initiatives)

Constituent indicators of “Equity”

(Percentage of all initiatives)

Equity-Promoting Policy
Initiatives

Concerns with
regressive taxes
Efforts to increase reliance
on progressive taxes
Efforts to alter income
distribution and/or alleviate
poverty
Efforts to close
loopholes and/or abolish
special tax arrangements
Argentina
(2000-2011)
30.0 13.15 11.6 13.2 6.6
Chile
(1990-2011)
4.3 0 1.4 0 2.8
Colombia
(2000-2011)
10.3 3.7 5.2 2.2 3.0
Costa Rica
(1996-2011)
18.0 4.5 5.8 8.7 4.2
Ecuador
(2002-2011)
5.3 0 1.3 0 4.0
Guatemala
(2002-2011)
6.6 1.9 0 4.6 0.9
Mexico
(2000-2011)
17.3 6.9 3.9 6.8 5.8
Peru
(2002-2011)
21.8 6.7 2.0 15.9 7.0

105

TABLE 9: INDICATORS OF “MARKET-PROMOTING” OBJECTIVES

Aggregate measure

(Percentage of all initiatives)

Indicators of “Market-Promoting” Policy Objectives

(Percentage of all Initiatives)

Market-Promoting
Policy Initiatives
Efforts to abolish
distortive taxes
Efforts to promote investment
and technological
development
External pressures
Efforts to reactive the
economy and/or
promote development
Argentina
(2000-2011)
41.0 12.9 19.0 12.2 22.0
Chile
(1990-2011)
54.9 7.1 32.2 39.4 14.1
Colombia
(2000-2011)
50.7 8.1 36.8 21.0 12.5
Costa Rica
(1996-2011)
29.8 13.5 7.9 11.6 7.4
Ecuador
(2002-2011)
18.7 2.7 8.0 2.7 16.0
Guatemala
(2002-2011)
11.9 1.8 3.7 6.6 6.4
Mexico
(2000-2011)
48.2 9.6 20.0 21.5 27.3
Peru
(2002-2011)
39.6 12.1 21.3 10.3 21.2

106

TABLE 10: DISTRIBUTION OF EQUITY- AND MARKET-PROMOTING INITIATIVES BY COUNTRY
Country/dates Equity-Promoting goals
(% of all initiatives)
Market-Promoting goals
(% of all initiatives)
Number of initiatives
introduced in the national
legislature
Argentina
(2000-2011)
30.0 40.91 1095
Chile
(1990-2011)
4.2 54.9 71
Colombia
(2000-2011)
10.3 50.7 136
Costa Rica
(1996-2011)
18.0 27.8 378
Ecuador
(2002-2011)
5.3 18.7 75
Guatemala
(2002-2011)
6.5 12.2 107
Mexico
(2000-2011)
17.2 48.8 689
Peru
(2002-2011)
21.8 36.4 1014

107

TABLE 11: FACTOR ANALYSIS OF “EQUITY” AND “THE MARKET”
Variable
“Equity Factor”
(Eigenvalue: 2.38)
“Market Factor”
(Eigenvalue: 1.11)
Factor 3
(Eigenvalue: 0.52)
Concerns with regressive taxes 0.83
Efforts to make taxes more progressive 0.74
Efforts to alter income inequality and/or alleviate
poverty
0.63 -0.43
Efforts to close loopholes and end favorable tax
arrangements
0.38
Efforts to reduce distortions in the economy 0.51
Efforts to promote investment 0.67
External pressures 0.52 0.38
Attempts to promote employment and/or reactive
economic activity
0.77
N= 3263
(1) Results are obtained by using the polychoric command which generates polychoric correlations with categorical variables. The factormat commend
is used to perform an exploratory factor analysis using the matrix as input.

108

TABLE 12: CORRELATIONS BETWEEN "EQUITY" AND "MARKET" FACTORS
Country
Correlation between aggregate measures of
“Equity” and “Market”
Argentina
(2000-2011)
-0.1508
Chile
(1990-2011)
0.1903
Colombia
(2000-2011)
0.0918
Costa Rica
(1996-2011)
-0.0906
Ecuador
(2002-2011)
0.0386
Guatemala
(2002-2011)
0.0191
Mexico
(2000-2011)
-0.0753
Peru
(2002-2011)
-0.0593

109

TABLE 13: MEASURES OF OTHER POLICY OBJECTIVES
Country
Initiatives that aim to augment
tax revenue
Clientelism
(firms, sectors, geographic regions)
Targeted social benefits
(Disabled, senior citizens, single
caretakers)
Number of
initiatives
Argentina
(2000-2011)
3.4 37.4 10.2 1095
Chile
(1990-2011)
0 23.9 1.4 71
Colombia
(2000-2011)
10.3 61.0 3.7 136
Costa Rica
(1996-2011)
8.2 21.4 6.9 378
Ecuador
(2002-2011)
0 36.0 2.7 75
Guatemala
(2002-2011)
10.1 6.4 26.6 109
Mexico
(2000-2011)
9.2 35.5 12.8 740
Peru
(2002-2011)
5.7 34.8 11.1 835

110

TABLE 14: CORRELATIONS BETWEEN “THE MARKET” AND “CLIENTELISM”
Country “Market”/Clientelism
Efforts to abolish
distortive taxes
/Clientelism
Efforts to promote
investment and
technological development
/Clientelism
External pressures
/Clientelism
Efforts to reactive the
economy and/or
promote development
/Clientelism
Obs.
Argentina
(2000-
2011)
0.4019 0.0301 0.3095 0.2532 0.3007 1095
Chile
(1990-
2011)
0.1102 -0.0254 -0.2654 0.0200 0.2472 71
Colombia
(2000-
2011)
0.1475 0.0159 0.1403 -0.1897 -0.0171 136
Costa
Rica
(1996-
2011)
0.1655 0.1712 0.2044 0.0919 0.1417 378
Ecuador
(2002-
2011)
0.2823 0.2207 -0.1188 0.0483 0.2788 75
Guatemala
(2002-
2011)
0.0987 0.0724 0.1033 0.0963 0.0665 109
Mexico
(2000-
2011)
0.2762 0.0559 0.1722 0.2440 0.2802 741
Peru
(2002-
2011)
0.3840 -0.0243 0.3867 0.1245 0.3712 836

111

TABLE 15: CORRELATIONS BETWEEN "EQUITY" AND “CLIENTELISM”
Country
“Equity”
/Clientelism
Concerns with
regressive taxes
/Clientelism
Efforts to increase
reliance on progressive
taxes /Clientelism
Efforts to alter income
distribution and/or alleviate
poverty /Clientelism
Efforts to close
loopholes and/or abolish
special tax
arrangements
/Clientelism
Obs.
Argentina
(2000-
2011)
-0.2082 -0.1440 -0.1971 -0.0826 -0.0906 1095
Chile
(1990-
2011)
-0.021 - -0.0143 - 0.0203 71
Colombia
(2000-
2011)
-0.0271 -0.0842 -0.0868 0.1200 0.0499 136
Costa Rica
(1996-
2011)
-0.0432 -0.0822 -0.0197 -0.0702 0.0137 378
Ecuador
(2002-
2011)
-0.0393 - -0.0192 - -0.0338 69
Guatemala
(2002-
2011)
-0.0730 0.0724 - -0.0328 -0.579 109
Mexico
(2000-
2011)
-0.0916 -0.0917 -0.0918 -0.0874 -0.0275 741
Peru
(2002-
2011)
0.0773 -0.0454 -0.1053 0.1078 0.0080 836

112

TABLE 16: DISTRIBUTION OF "EQUITY- AND MARKET-PROMOTING” INITIATIVES
Country/dates
Equity-Promoting goals
(percentage of all initiatives)
Market-Promoting goals
(percentage of all initiatives)
Number of initiatives introduced in the
national legislature
Argentina
(2000-2011)
30.0 40.91 1095
Chile
(1990-2011)
4.2 54.9 71
Colombia
(2000-2011)
10.3 50.7 136
Costa Rica
(1996-2011)
18.0 27.8 378
Ecuador
(2002-2011)
5.3 18.7 75
Guatemala
(2002-2011)
6.6 11.2 109
Mexico
(2000-2011)
16.5 48.2 741
Peru
(2002-2011)
21.8 36.4 1014

113

TABLE 17: POLITICAL PARTIES ON "EQUITY" AND "THE MARKET" (TABLE A)
Political Party
Party
Score
Std.
party
score
% of all initiatives
introduced in the
national legislature

Equity-Promoting
Initiatives
(% of all by party)
Market-Promoting
Initiatives
(% of all by party)
Argentina
(2000-2011)
Partido Justicialista 5.7 1.43 21.7 24.0 47.8
Unión Cívica Radical 5.9 1.37 19.3 27.1 42.4
Frente para la Victoria - - 12.1 27.3 35.6
Joint initiatives - - 20.7 41.0 41.5
Other parties - - 31.0 19.5 36.8
Executive - - 4.0 20.5 45.5
Chile
(1990-2011)
Renovación Nacional 7.6 1.19 9.9 0 0
Unión Democrática
Independiente
9.6 0.76 14.1 0 0
Joint initiatives - - 14.8 0 0.1
Other parties - - 7.0 0 20.0
Executive - - 69.1 6.1 75.5
Colombia
(2000-2011)
Partido Liberal Colombiano 5.8 1.38 18.38 4.0 56.0
Partido Conservador
Colombiano
8.2 1.68 16.2 18.2 41.0
Partido de la U 8.4 1.32 9.6 7.7 53.8
Joint initiatives - - 11.7 0 37.5
Other parties - - 29.4 12.5 42.5
Executive - - 13.2 16.7 83.3
Costa Rica
(1996-2011)

Unidad Social Cristiana 7.6 1.34 27.8 16.2 14.3
Partido Liberación Nacional 6.3 1.22 16.7 22.2 12.7
Movimiento Libertario 9.1 1.10 15.1 10.5 52.6
Joint initiatives - - 13.5 15.7 25.4
Other parties - - 15.6 30.5 15.3
Executive - - 13.8 11.5 65.4
Sources: Party scores and standard deviations are from the Elites Project, University of Salamanca, Spain.

114

TABLE 18: POLITICAL PARTIES ON "EQUITY" AND "THE MARKET" (TABLE B)

Political Party
Party
Score
(Ave.)
Standard
Deviation of
Party Score
% of all initiatives
introduced in the
legislature

Equity-Promoting
Initiatives
(% of all introduced by
party)
Market-Promoting
Initiatives
(% of all introduced by
party)
Ecuador
(2002-2011)
Izquierda Democrata 5.0 2.17 12.0 25.5 12.5
Partido Social Cristiano 9.2 1.21 16.4 0 12.5
Partido Rudolsista 7.7 1.88 12.0 0 0
Joint Initiatives - - 1.3 12.5 0
Other parties - - 38.7 3.5 20.7
Executive Initiatives - - 19.4 6.25 31.25
Guatemala
(2002-2011)
Unidad Nacional de la
Esperanza
4.9 1.35 11.4 0 35.0
Gran Alianza Nacional 8.4 1.64 7.6 12.5 12.5
Frente Republicano
Guatemaltco
8.4 2.1 22.9 8.4 4.34
Joint Initiatives - - 12.4 15.4 0
Other parties - - 14.2 0 13.3
Executive - - 17.3 11.1 22.2
Mexico
(2000-2011)
Partido Acción Nacional 16.4 1.06 16.4 9.9 44.6
Partido Revolucionario
Institucional
6.21 1.51 37.6 14.1 51.8
Partido de la Revolución
Democrática
2.55 1.43 15.2 33.9 44.6
Joint initiatives - - 3.8 10.7 57.1
Other parties - - 6.5 53.3 28.1
Executive - - 4.9 3.8 72.2
Peru
(2002-2011)
Unidad Nacional 8.5 1.63 18.5 24.2 29.5
Partido Aprista Peruano 7.6 1.71 16.9 18.9 29.7
Perú Posible 6.8 1.61 15.8 20.1 23.8
Joint initiatives - - 8.1 25.4 10.3
Other parties - - 27.0 23.6 36.7
Executive - - 8.6 15.3 48.6
Sources: Party scores and standard deviations are from the Elites Project, University of Salamanca, Spain.

115

GRAPH 5: THE PROJECTED COHESIVENESS OF LATIN AMERICAN POLITICAL PARTIES
31

31
Source: The Elites Project, University of Salamanca, Spain. Various country reports.
0
1
2
3
4
5
6
7
Standard deviation
The Projected Cohesiveness of Latin American Political Parties
Partido Justicialista
Unión Cívica Radical
Frente para la Victoria
Renovación Nacional
Unión Demócrata Independiente
Partido Liberal Colombiano
Partido Conservador Colombiano
Partido de la U
Unidad Social Cristiana
Partido Liberación Nacional
Movimiento Libertario
Partido Social Cristiano
Partido Rodolsista
Unidad Nacional de la Esperanza
Gran Alianza Nacional
* Data from the years 2008 (Guatemala), 2009 (Ecuador, Mexico) and 2010 (Argentina, Chile, Colombia, Costa Rica, Peru).
** No data available for Izquierda Democrática (Ecuador).

116

Chapter 3: Party Programmation and Relations of
Political Accountability

“The consensus in the literature is that clientelism has profound
negative implications for the way in which democracy functions,
citizen attitudes about the quality of their democracy, and the capacity
of governments to produce needed public policies” (Hicken 2011,
302).

Latin American politicians and policymakers are known to trade anything from food
and shoes to public works projects and tax benefits in return for votes and other forms of
political support.
32
Policymaking in Latin America’s democracies is therefore commonly
associated with excessive pork barreling and clientelism, which undermine the legitimacy of
the policymaking process and divert scarce resources from the provision of public goods and
services toward narrow political bases. However, in spite of its negative connotations,
clientelism also represents an essential “mode of exchange” between voters and politicians
(Kitschelt and Wilkinson 2007b, 7), especially in lower income countries where capital is
scarce and the capacity of government to provide public resources is limited.
Clientelism is commonly conceptualized as an essential linkage strategy between
politicians and voters (Kitschelt 2000; Kitschelt and Wilkinson 2007a; Piattoni 2001b; Levitsky

32
The literature on clientelism in Latin America is extensive. See, for example, Brusco et. al (2004); Nazareno et.
al. (2006); Calvo and Murillo (2004; 2012); Hagopian et. al. (2009); Hagopian (1996); Ames (1995a);
Middlebrook (2009); Magaloni (2006); Auyero (1999, 2000); and, Levitsky (2003).
117

2003). For voters, loyalty to local party machines and elected representatives may imply access
to essential goods and services; for policymakers, particularistic exchanges can be an effective
strategy for buying votes and building essential coalitions of voters. The casting of clientelism
as a strategy can facilitate the study of intricate political relations which involve pivotal
tradeoffs between short-term access to government-administered goods and services and the
longer-term institutionalization of democratic forms of political representation and
accountability (Keefer 2007, 2011; Kitschelt and Wilkinson 2007a; Piattoni 2001a, 2001b).
Political parties are at the center stage of contemporary studies of “political clientelism”
(Weingrod 1968; Lemarchand and Legg 1972; Hopkin 2006; Hicken 2011; Muno 2010;
Kitschelt 2000; Kitschelt and Wilkinson 2007a; Piattoni 2001b). Latin American parties, as
discussed in chapter 2, vary extensively in their capacity to undertake the essential roles and
functions that democracy has awarded them. One tradition has looked at variation in party
institutionalization (Mainwaring and Scully 1994; Mainwaring and Scully 1995a; Jones 2010;
Flores-Macias 2012) while another has focused on differences in the capacity of parties to
develop programmatic policy (Kitschelt, Hawkins, Rosas, et al. 2010b). Drawing on these two
traditions, the main proposition of this chapter is: the less institutionalized and programmatic
the party, the greater the reliance on policy instruments to promote particularistic interests.
The main objective of this chapter is to examine the second dimension of the proposed
framework for studying the formation of tax policy (Figure 1, introductory chapter). This
dimension focuses on the extent to which Latin American policymakers have relied on tax
instruments to cater to parochial political bases. In this chapter, efforts by policymakers to
trade policy benefits are understood as “quid pro quo relations ruled by economic principles”
118

(Piattoni 2001a, 11)
33
and the term “clientelism” is used to describe the distribution of
particularistic tax benefits aimed for select firms, sectors and geographic regions. I create this
measure by coding tax initiatives which aim to establish special perks for select beneficiaries.
34

This chapter is organized around three essential research questions: 1) to what extent
have policymakers used tax instruments to cater to parochial interests? 2) Is clientelism more
prevalent in inchoate, non-programmatic parties than in institutionalized, programmatic
parties? 3) To what extent does clientelism infringe upon democratic principles of political
representation and accountability?
Studies show that politicians and policymakers continue to rely extensively on
instruments of taxation to accomplish essential economic and political objectives in
contemporary Latin America. However, the data on tax initiatives collected for the purpose of
this study uncover interesting variation across countries and political parties. For example,
Colombian policymakers have relied the most extensively on fiscal instruments to promote tax
benefits for select firms, sectors, and geographic regions while similar efforts in Chile and
Costa Rica are remarkably low. Costa Rican policymakers have frequently used taxation to
alter market outcomes, but correlations between efforts to provide particularistic benefits and
stimulate the production of so-called “merit goods” are high (Musgrave 1959). This includes
tax incentives intended for education, sports and other cultural activities, the environment, and
Research and Development (R&D). Although it is difficult to separate intensions by

33
Piattoni argues that this approach “resolves the contradiction inherent in culturalist and developmentalist
approaches and allows us to subsume under the concept of clientelism both personal and group relations” (2001a,
11).
34
It should be noted that this approach differs from measures of tax expenditures, which estimate revenue
foregone through particularistic tax legislation.
119

policymakers, it may indicate that there is a “public” dimension to the reliance on
particularistic policy benefits.
35

The first section of this chapter locates the study within the extensive literature on
clientelism and “alternative linkage strategies” which spans three generations of research.
36

Within the broader scholarship on clientelism, the second section discusses the use of tax
instruments to cater to narrow political interests. I focus on the nature of the policy objectives
that policymakers have sought to achieve through instruments of taxation and the broader
implications of this reliance on public policy instruments to achieve such goals. The third
section discusses official estimates of tax expenditures – which gauge the revenue lost through
to special tax arrangements – in contemporary Latin America. The fourth assesses the variation
in reliance on tax instruments to establish benefits for select firms, sectors and geographic
regions. The chapter concludes by comparing the two dimensions of the framework for
studying the politics of taxation and draws attention to pivotal issues of political representation
and accountability in the formation of tax policy.

Clientelism and Patronage
An extensive scholarship on clientelism in contemporary Latin America draws on a
broad range of studies which run the gamut from patron-client relations in peasant societies
(Scott 1972; Lemarchand and Legg 1972) to politicians exploiting privileged access to state-

35
It should be noted that government support for the development of so-called “merit goods” is contested among
economists, see for example, Head (1969) and Koch (2008).
36
This term is associated with Kitschelt’s (2000) work on clientelism.
120

administered goods and services in democratic countries (Kitschelt 2000; Kitschelt and
Wilkinson 2007a; Brusco, Nazareno, and Stokes 2004; Weingrod 1968).
37
Among many
scholars, the “third wave of democratization” (Huntington 1991; Diamond 1997) prompted
interest in the “quality of democracy” and political representation (Diamond and Morlino 2004;
O'Donnell, Vargas Cullel, and Iazzetta 2004; de Sousa 2008). From this perspective,
clientelism and patronage undermine essential principles of democratic governance (Kitschelt
2000; Kitschelt and Wilkinson 2007b; Kitschelt, Hawkins, Luna, Rosas, and Zachmeister
2010). Hence, central to the broader research program are key issues around more authentic
political representation and political accountability (Carey and Reynolds 2007; Carey 2009).
First generation scholarship on patronage is attributed to anthropologists and political
scientists studying various modes of exchange between patrons and clients in peasant societies
(Scott 1972; Powell 1970; Lemarchand and Legg 1972). In this tradition, “patronage”
designated a “particular kind of interpersonal relationship” and a form of “social interaction”
(Weingrod 1968, 379) underpinned by asymmetric relations of power. Among these scholars,
patronage was understood as (asymmetric) relations of necessity under difficult social and
economic conditions, much like in the contemporary literature on vote-buying in Latin
America’s lower income communities in which lower income earners often gain preferential
access to basic goods and services by declaring their loyalty to a local party organization
(Auyero 2000; Auyero, Lapegna, and Poma 2009; Calvo and Murillo).

37
Studies of clientelistic relations in newly democratized countries typically draw on concepts from this extensive
body of scholarship. While resulting in a rich literature on particularistic modes of exchange and alternative forms
of political representation, the scholarship lacks conceptual clarity. For extensive reviews on differences in usage,
see Hicken (2011), Hopkin (2006), and Muno (2010).
121

Strongly influenced by modernization theory which was prevalent in the social sciences
in the 1950s and 1960s (Almond and Verba 1963; Lipset 1959; Arat 1988), first generation
scholarship sought to specify the particular socio-economic conditions under which parochial
modes of exchange prevailed. For instance, James S. Scott’s study of patron-client relations in
Southeast Asia attributed clientelism to high economic inequality, the absence of physical and
economic security, and the inability of the kinship unit to effectively protect its members (1972,
101).
38
Within this general framework, scholars assumed that clientelism would diminish with
economic and political development, including the formation of public institutions that would
mitigate prevalent concerns around poverty and security (Hicken 2011; Hopkin 2006; Kitschelt
2000; Kitschelt and Wilkinson 2007b).
A second generation of scholars challenged the modernization hypothesis by
demonstrating the widespread existence of particularistic forms of exchange in industrialized
democratic countries (Lemarchand and Legg 1972; Weingrod 1968). Notwithstanding
differences in the goods and services traded, the parochial or non-universalistic nature of the
relationship remained virtually the same in countries characterized by higher economic and
institutional development. Hence, second generation studies typically ascribed the “survival”
of clientelism to the expanding social and economic roles of the state, placing political parties
at the center of inquiry (Weingrod 1968; Lemarchand and Legg 1972). Thus, as one scholar
has argued, “political clientelism” is “largely the study of how political party leaders turn to

38
For a discussion of the origins of clientelism, see also Lemarchand and Legg (1972, 157-159).
122

public institutions and public resources for their own ends, and how favors of different kinds
are exchanged for votes” (Weingrod 1968, 379).
39

In response to the third wave of democratization (Huntington 1991), scholars of Latin
American politics and of developing countries more broadly, have drawn on these scholarly
traditions in order to construct a systematic framework for understanding how the over-
representation of narrow political interests can affect democratic principles of political
representation and accountability. The cumulative result is a growing research program which
conceptualizes clientelism as a particular strategy employed by politicians and policymakers in
order to cater to strategic political bases (Roniger 2004, 356; Piattoni 2001a, 2). The
subsequent section discusses clientelism as a vote-buying strategy in contemporary Latin
America and the essential tradeoff between access to basic goods and services in the short run
and the provision of public goods in the longer term.

Clientelism as a Political Strategy
Clientelism represents an essential political strategy for voters and politicians alike.
From a voter’s perspective, declaring loyalty to a political party machine can mean access to
basic goods and services; from the perspective of a politician, clientelism is a tool used for
building and maintaining important coalitions.
40
However, the provision of exclusive policy

39
In general terms, clientelism is defined as “asymmetric but mutually beneficial relations of power and exchange,
a nonuniversalistic quid pro quo between individuals or groups of unequal standing” (Roniger 2004, 353). See
also Weingrod (1968) and Lemarchand and Legg (1972).
40
This strand of research has focused on the vote-buying strategies of political parties and the targeting lower
income earners and the indigent. In Latin America, vote-buying is commonly observed in districts in which party
123

benefits in return for votes is a short term strategy which, in the longer term, is associated with
the under-provision of public goods and the overrepresentation of narrow political interests
(Keefer 2007, 2011; Ames 1995a, 1995b). Consequently, clientelism as a political strategy
violates democratic principles of political representation and accountability and undermines the
legitimacy of political parties.
For many voters in developing countries close ties with politicians and local party
machines facilitate access to essential goods and services such as clean water, medical services,
a bridge or schools. In India, as one scholar points out, “[c]ast and patron-client links have
been regarded most often as the building blocks of political organization” (Krishna 2007, 141).
In Peru, impoverished communities in remote parts of the Amazon and the Andes mountains
have benefited from extensive tax incentives designed to stimulate growth and development
(Ministerio de Economia y Finanzas. June 2003). Furthermore, in many ethnically divided
societies, clientelistic ties have been essential for those that have been marginalized by ruling
parties (Van de Walle 2007). Therefore, in many countries where resources are scarce and
institutional capacity is low “patrons and brokers offer alternative channels for getting things
done while avoiding bureaucratic indifference” (Auyero, Lapegna, and Poma 2009, 4).
Clientelism is also a strategy for politicians and policymakers to garner essential
political support in the form of monetary contributions and votes. As I discussed in the
previous chapter, not all political parties are parties in the institutional sense. Inchoate political

machines make extensive efforts to construct personal relationships with voters through embedded community
organizations, offering essential goods and services such as blankets, food, clothing and public employment in
return for votes (Calvo and Murillo; Auyero, Lapegna, and Poma 2009; Brusco, Nazareno, and Stokes 2004;
Levitsky 2003; Auyero 2000; Gibson and Calvo 2000; Magaloni 2006).

124

parties and so-called electoral vehicles characterized by weak organizational capacity often lack
sufficient resources to rally broad-based electoral coalitions around the provision of public
goods. Hence, from the perspective of politicians, clientelism represents a “political investment
strategy designed to deter voter exit and, simultaneously, to hedge electoral risks when
investment in public goods is required to win elections” (Magaloni, Diaz-Cayeros, and Estevez
2007, 183). As Steven Levitsky notes in his study of Argentina, essential political coalitions
are commonly “cemented with patronage” (2007, 216).
41

Studies of policymaking in Latin America have found that a policymaker’s commitment
to a particular party organization is a function of incentives and personal motivations rather
than loyalty to party platforms and ideologically derived policy principles. For example, in
studying the Brazilian legislature, Barry Ames (1995a) found that elected deputies tend to rely
on available policy instruments to maximize personal gains at the expense of pursuing national
policy objectives if politically expedient. Similarly, Scott W. Desposato (2006) argues that
Brazilian deputies frequently switch party affiliation in the event that his or her party is unable
to offer the desired or anticipated remunerations and career advancements.
In general terms, frequent party switching (Desposato 2006), the formation of political
parties as electoral vehicles (Levitsky and Cameron 2009), the reliance on informal coalitions
for policymaking purposes (Mejía Acosta 2009), and the disintegration of parties and party
systems (Roberts 2003, 1996; Dietz and Myers 2007; Sanchez 2008, 2009; Levitsky and
Cameron 2009) suggests that contemporary Latin American politicians and policymakers invest
very little in their respective party organizations. The broader implication of the failure to

41
See also Magaloni’s work on the Mexico’s PRI (2006) and Levitsky’s (2003) study of the Argentine Peronist
Party.
125

invest in party organizations is that the policy principles and platforms of politicians are
malleable and can easily be adapted to new political opportunities. It furthermore implies that
many political parties lack the organizational capacity needed to undertake their essential
functions of democratic governance.
42
Therefore, inchoate, non-programmatic party systems
are associated with the over-representation of particularistic interests and the development of
alternative political linkages which undermine democratic principles of representation and
accountability (Kitschelt 2000; Kitschelt and Wilkinson 2007b).
43

In sum, at the heart of these inquiries is the relationship between clientelism and
political representation, on the one hand, and clientelism and political accountability, on the
other hand. Of primary interest here is the extent to which particularistic forms of
representation encroach upon democratic principles of policy formation: to what extent are the
respective political parties pursuing policy that aims to benefit particularistic interests? And to
what extent does clientelism violate democratic principles of political representation and
accountability? The section below turns to broader political and economic consequences
associated with the reliance on clientelistic tax incentives to alter market outcomes.

42
On clientelism and credibility, see for example Keefer (2007).
43
Carey (2009) makes a critical distinction between “collective” and “individual” accountability. See also Carey
and Reynolds (2007).
126

Economic and Political Implications of Targeted Tax Incentives
The use of tax incentives to achieve essential economic and political objectives is
almost universally construed in negative terms (Surrey 1970; Bird 2007; Villela, Lemgruber,
and Jorrat 2010). The main arguments for moving away from the reliance on tax incentives
are: a) their effect in the misallocation of resources (market distortions); b) the unequal
distribution of costs and benefits; c) administrative costs; and, d) increased rent-seeking
pressures. I briefly discuss each of these arguments in turn.
First, from the perspective of liberal economic theory, the main critique is that tax
incentives distort the market by altering the distribution of scarce economic resources into
government-mandated economic activities. This implies that tax policy may be used to support
economic activities that would not have existed without the intervention of government (Surrey
1970; Slemrod 1990; Boskin 1976).
Second, from the perspective of equality, tax incentives can affect both horizontal and
vertical equity, thus instilling perceptions of unfairness among tax payers. For example, tax
incentives affect horizontal equity by altering the relative prices of goods and services. Given
that consumers have different preferences, some gain from such incentives while others pay a
greater cost because of their imposition. As for vertical equity, tax incentives designed to
benefit higher income earners are essentially regressive, as lower income earners will not gain
from the imposition of such incentives (Villela, Lemgruber, and Jorrat 2010; Surrey 1970).
Third, tailored tax benefits increase the costs around the collection of taxation and
enforcement. Complexity in taxation is a common concern in developing countries where the
various institutions and organizations involved in taxation frequently lack the administrative
127

capacity required to enforce existing regulations.
44
In turn, the lack of capacity to enforce the
tax code facilitates greater tax evasion which further undermines the state’s ability to collect
taxes (Gómez Sabaini and Jiménez 2012).
Finally, from a political perspective, the reliance on tax incentives to accomplish
essential economic and political goals implies considerable discretion in policy design. The
exploitation of policy instruments to cater to particularistic interests provides pecuniary
incentives for economic actors to lobby policymakers for preferable tax arrangements.
Discretion also makes rent-seeking a slippery slope in terms of policymaking, thus infringing
upon the ability of the state to formulate autonomous policy (Hayek 1944; Krueger 1974).
Consequently, the misuse of tax expenditures will not only increase the costs (the deadweight
loss of taxation) it will also lead to increased pressure on policymakers to expand existing tax
arrangements in order to include those who have been left out of public goods delivery.

Tax Expenditures in Contemporary Latin America
Despite efforts to reduce the reliance on tax incentives under the neoliberal reform
agenda, tailored tax arrangements are commonly used to accomplish a number of policy
objectives in contemporary Latin America (Bird 2007). These include tax packages designed
to stimulate economic activity, increase employment, protect strategic economic actors from

44
Villela et. al. (2010) point out that the transparent implementation of tax expenditures is a relatively complex
process which involves the: 1) construction of an adequate legal and institutional framework; 2) application of a
coherent and transparent methodology; 3) information management; 4) the integration of tax expenditures into the
regular budget process; 5) development of a systematic procedure for evaluating the costs and benefits inherent to
this approach; and, 6) mechanisms for administration and control.
128

foreign competition, increase the production of select goods and services (“merit goods”),
discourage the consumption of specific products, mitigate adverse social and economic
conditions, spur growth in remote geographic regions, attract foreign direct investment, and
award political allies and strategic political bases.
Tax incentives such as exemptions, allowances, credits and rate relief are often used
together to achieve specific policy goals (Surrey 1970). In the literature on taxation,
exemptions are defined as transactions excluded from the tax base, allowances and credits are
deductions from the tax base and tax liability, and rate relief is the establishment of
differentiated tax of rates (Villela, Lemgruber, and Jorrat 2010). Although differentiated by
their legal implications, these particular instruments share the goal of reducing the tax burden
shouldered by select economic actors.
45
Tax incentive packages are often composed of various
measures which make it difficult to evaluate the benefits of their use as well as the costs
involved.
Peru’s reliance on tax incentives to spur growth and development in remote regions
serves to illustrate the complicity involved in the development of particularistic tax regimes.
Originally introduced in 1982, the Peruvian government implemented an extensive tax
arrangement as part of the larger effort to mitigate the difficult economic and social conditions
that characterized the remote regions comprising the Peruvian Amazon (Amazonas, Loreto,

45
The use of tax deductions to accomplish such policy goals is often contrasted with the use of direct expenditures
to accomplish similar goals. The main argument is that a direct expenditure approach tends to be more
transparent. For example, see Surrey (1970) for a general discussion of these topics.
129

San Martin, Madre de Dios, and Ucayali).
46
The goal here was to attract investment in order to
stimulate the region’s economy and provide greater employment opportunities in communities
characterized by very high rates of poverty. The arrangements currently in place consist of
around twenty different tax incentives. Among these are: 1) a general tax exemption to the
national sales tax; 2) exemption from the Selective Consumption Tax for gasoline producers,
wholesalers and retailers; 3) general sales tax refunds for businesses importing various inputs;
and, 4) a substantially lower corporate tax rate. Despite conflicting evidence as to their
effectiveness, this particular incentive package has been revised a number of times, often
adding new exemptions in order to achieve the original objectives of mitigating poverty and
spurring long-term growth.
As in the Peruvian Amazon, the objectives that policymakers aim to achieve through tax
incentives are generally complex. It is primarily the difficulty involved evaluating the costs
and benefits of such arrangements, coupled with the lack of transparency around their
implementation, which makes the reliance of tax incentives to obtain socially and economically
outcomes so controversial (Ministerio de Economia y Finanzas. June 2003).
47
The subsequent
section discusses official estimates of tax expenditures which are efforts by governments to
make this particular use of tax instruments more transparent. As I discussed below, it should be
noted from the onset that differences in methodology, concepts, and counting procedure may

46
To my knowledge, the most comprehensive source on tax expenditures in Peru is a detailed study undertaken
by Apoyo Consolatoria, a Peruvian consulting company. This report was commissioned by the Peruvian Ministry
of Economics and Finance (Ministerio de Economia y Finanzas. June 2003).
47
As economists stress, public spending generally represents a less complex and more transparent alternative
(Surrey 1970).
130

undermine both the accuracy and comparability of these estimates (Villela, Lemgruber, and
Jorrat 2010).

Tax Expenditures in Contemporary Latin America
The tax revenue that the state foregoes through such tax arrangements is referred to as
“tax expenditures.”
48
Available estimates show that Latin American countries continue to
forgo a substantial proportion of GDP through the reliance on incentives in order to achieve
essential economic and political objectives. As a joint publication by the Inter-American
Development Bank (IDB) and the IMF writes, “[a] tax expenditure is a commitment of fiscal
resources as valid as any other component of public spending, and recognized as such in fiscal
accounts” (Villela, Lemgruber, and Jorrat 2010). While tax expenditure budgets have been
extensively implemented in the member states of the Organization for Co-operation and
Development (OECD), many developing countries still relinquish substantial revenue often
through an opaque legislative process.
In the Latin American region, tax expenditure budgets were adopted in the late 1990s
and government issued reports of relatively detailed tax expenditures are now available in
Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Nicaragua and Peru (Villela,

48
Tax expenditures as a concept was introduced in the 1960s when Germany and the United States started taking
stock of foregone revenue due to preferential tax legislation. In the 1980s, this practice was adopted by virtually
all members of the OECD.
131

Lemgruber, and Jorrat 2010).
49
The main purpose of such budget is to establish transparent
accounting procedures for “counting” revenue that the state “spends” through legislation.
Detracting from this transparency principle, however, is the availability of multiple
methodologies and accounting procedures which underpin official estimates. Through a
simulation of available methodologies, Villela and colleagues (2010) explicitly show that the
choice of methodology can radically affect official estimates of tax expenditures. This implies
that public figures may or may not provide an accurate estimate of the revenue “spent” through
the legislative process.
Most countries provide tax expenditure estimates of: 1) total revenue foregone through
tax expenditures; 2) VAT expenditures; and, 3) revenue spent through legislation affecting the
income tax regime. As observed in Tables 20 and 21, official estimates of tax expenditures
vary substantially: for example, Peru reports the lowest estimate of total tax expenditures,
averaging just over two percent of GDP for the years 2003-2013; by contrast, Guatemala
estimates that annual tax expenditures account for around 8.8 percent of GDP (average of the
years 2000-2013). Overall, countries fall into two categories with regard to the revenue
forgone through tax legislation. The first group is comprised of Argentina, Brazil and Peru
where total tax expenditures constitute around 2.5 percent of GDP; the second group is
comprised of Chile, Colombia, Costa Rica, Ecuador and Mexico where official estimates
account for somewhere between 4 and 6 percent of GDP.
In principle, instruments of tax expenditures can be used to adjust any tax. However, as
shown in Table 21, the most substantial revenue is “spent” through the VAT regime and the

49
For example, Brazil was the first to publish tax expenditure reports in 1998. Guatemala followed in 2001,
Mexico in 2002, Colombia in 2003, and Ecuador in 2007.
132

income tax. In terms of the VAT, estimates for the year 2010 show that Brazil reports the
lowest figure (0.46 percent of GDP) with Chile as a close second (0.66 percent of GDP).
Colombia (2.73 percent) and Costa Rica (3.68 percent) forego a considerably larger proportion
of their GDP through established tax arrangements. In terms of revenue foregone through
income taxes, Argentina (0.46 percent of GDP) and Peru (0.28 percent of GDP) report the
lowest estimates while Chile (4.35 percent of GDP) and Guatemala (5.85 percent of GDP)
report the highest figures.
Variation in methodology raises questions around the reliability as well as the
comparability of official tax expenditure estimates (Villela, Lemgruber, and Jorrat 2010). For
policymaking purposes, the main problem relates to the substantial impact of tailored tax
arrangements designed to stimulate economic activity. While perhaps beneficial for those on
the receiving end, the costs carried by society as a whole can be much greater. Second, from
researchers’ standpoint, variation in methodology across countries precludes the use of such
estimates for comparative inquiries.
50
Official country data on tax expenditures should
therefore be interpreted with caution.
The subsequent section turns to the second dimension of the proposed framework for
studying the politics of taxation in contemporary Latin America (Figure 1, introductory
chapter). By looking at the extent to which Latin American policymakers rely on tax

50
The literature on comparative studies of tax expenditures in Latin America is scarce. This is mainly due to the
lack of comparable data. See Villela et. al (2010) for a comprehensive review of the subject, including estimation
techniques, data availability, and problems of comparability.
133

instruments to cater to narrow political interests, one gains a better understanding of the
political dynamics that shape the formation of tax policy.

Framework and Propositions
The second dimension of the analytical framework looks at variation in the extent to
which policymakers have relied on taxation to cater to particularistic political bases (Figure 1,
introductory chapter). To estimate variation in the reliance on tax instruments to promote
targeted policy benefits, the dataset codes tax initiatives that aim to establish tax benefits for
select firms, sectors, and geographic regions. Table 19 outlines the main propositions and
Table 22 summarizes the distribution of the “clientelism” measure for the eight countries
included in this study. The party programmation framework postulates that policymakers
representing inchoate, non-programmatic party systems are more likely to rely on public
resources to cater to particularistic political bases than those that represent institutionalized,
programmatic parties.
These propositions rest on the assumptions that in institutionalized, programmatic
parties, policy demands are channeled through extensive party organizations in which public
policy formation is underpinned by shared principles. In turn, this implies that parties target
broader political constituencies. By contrast, in inchoate, non-programmatic parties, policy
demands are channeled through individualistic networks in which policymakers enjoy grater
discretion in the formation of policy. Therefore, non-programmatic parties are associated with
the greater reliance on particularistic policy benefits for personal gains. Clientelism is
134

associated with the formation of these “alternative linkages” which may undermine democratic
principles of political representation and accountability (Kitschelt 2000).
The analysis that follows discusses variation in the reliance on tax instruments to
promote particularistic interests across countries. In broad terms, policymakers across the
region have relied heavily on such instruments to promote particularistic tax benefits. Chilean
and Costa Rican policymakers represent a notable exception to this trend. I extend the analysis
by looking at variation across those parties that have been actively involved in the formation of
tax policy. As in the previous chapter, I include parties that have introduced more than five
percent of the total initiatives recorded in the congressional record. Those that have introduced
less than five percent are included in the category labeled “other parties.” As a general trend,
my analyses indicate that the reliance on tax incentives to promote desirable economic and
political objectives is not a vestige of the past in Latin America.

Taxation and Targeted Benefits
Table 22 summarizes the clientelism measure across countries which accounts for
efforts by policymakers to cater to select firms, sectors and geographic regions. The
distribution of this measure forms two distinct groups with Colombia as a clear outlier. In the
first group, which consists of Argentina (37.4 percent), Ecuador (36.0 percent), Mexico (36.4
percent) and Peru (36.5 percent), more than one-third of the tax bills introduced in these
respective legislatures have aimed to establish targeted policy benefits. In the group consisting
of Chile (23.9 percent), Costa Rica (21.4 percent) and Guatemala (26.2 percent) around one-
fourth of the tax proposals have sought to achieve similar purposes. In Colombia, about 60
135

percent of all tax initiatives introduced in the legislature are tied to select firms, sectors or
regions.
As expected, most Latin American parties have been heavily involved in the
establishment of particularistic policy benefits. First, the non-programmatic Argentine parties -
Partido Justicialista (PJ) (42.9 percent), Unión Cívica Radical (UCR) (40.7 percent) and
Frente para la Victoria (43.9 percent) – which together introduced around fifty percent of the
legislation pertaining to taxation in the national legislature, rely extensively on taxation to
award particularistic political bases. The story is very similar in Mexico where all of the major
parties, including the Right-wing and more pragmatic Partido Acción Nacional (PAN) (30.6
percent), appear to have deep ties with narrow political interests. The same can be said for
Partido Revolucionario Institucional (PRI) (36.6 percent) and Partido de la Revolución
Democrática (PRD) (42.6 percent). On a final note, clientelism appears to be rampant in
Colombia where policymakers within all of the main parties – Partido Liberal Colombiano
(76.0 percent), Partido Conservador Colombiano (68.2 percent), and Partido de la U (53.8
percent) – have relied extensively on tax instruments to garner tax benefits for select firms,
sectors and geographic regions.
Both Costa Rican and Chilean parties exhibit very different behavioral patterns from
those discussed above. My data for Costa Rica suggest that policymakers there have relied
much less on tax instruments to establish particularistic benefits for their respective political
bases. Indeed all the major parties involved in the formation of tax policy – Unidad Social
Cristiana (USC), Partido Liberal Nacional (PLN) and Movimiento Libertario (ML) – as well
as the executive, have largely refrained from relying on instruments of taxation to pursue
particularistic policy benefits.
136

This leaves Chile where the formation of tax policy is almost exclusively in the hands
of the executive. As observed in the data, Chilean parties introduce relatively few initiatives
(Table 3, introductory chapter) and a substantial portion of those put forward have aimed to
deal with some aspects of tax administration. A substantial number of policymakers
interviewed for this particular project alluded to the existence of a consensus on the role of tax
policy in Chile. This appears to have been true for the relatively privileged role of the
executive as well as the existing distribution of the tax burden. However, Chile’s policy space
is defined by one dimension, leaving those concerned with “equity” in terms of taxation
underrepresented.

Tax Incentives and “Merit Goods”
In spite of the negative consequences perceived around the reliance on tax incentives to
accomplish essential political and economic goals, many observers of politics in resource poor
countries have noted that parochial political relations may constitute an important avenue to
“getting things done” when governments are strapped for revenue and the institutional capacity
to satisfy competing demands is especially low. The reliance on targeted incentives to promote
the production of so-called “merit goods” is a case in point. “Merit goods” are goods and
services that are in one way or another socially desirable. Included in this category would be
education, Research & Development (R&D), medical services and research, sports and various
cultural activities, and the environment broadly defined (Musgrave 1959; Head 1969; Koch
2008). To compare such efforts across countries, I code tax proposals which aimed to promote
the production of merit goods such as these.
137

The distribution of the merit goods measure reveals substantial variation across Latin
American countries. As observed, it has been a particularly important objective in Costa Rica
(52.2 percent) where more than half of the tax bills introduced in the national legislature have
sought to use tax incentives to stimulate the production such goods and services (Table 22).
Efforts have also been relatively vigorous in Guatemala (31.0 percent) and in Mexico (21.4
percent). It has also been relatively important in Argentina (15.1 percent) and Colombia (14.8
percent). By contrast, the use of tax incentives to encourage the development of socially
desirable goods has not taken priority in Chile (4.2 percent), Ecuador (10.7 percent) or Peru
(9.2 percent).
It should be noted that these incentives are generally not highly correlated with efforts
by policymakers to cater to particularistic political bases. In Costa Rica (where efforts to
establish particularistic tax benefits is relatively low), the measure is highly correlated. This
suggests that “merit goods” are produced by specific firms or sectors that stand to gain from
potential tax incentives. Furthermore, in Colombia a substantial portion of so-called “merit
goods initiatives” are geared toward establishing benefits for targeted social groups which
include the disabled, single caretakers, and senior citizens (Table 26).

Comparing Dimensions
As discussed, the party programmation framework consists of two dimensions for
studying the formation of tax policy in contemporary Latin America. The first dimension,
which I examined in Chapter 2, looks at variation in policy preferences and mapped the policy
138

space available to voters. The second dimension, which was discussed in this chapter, focuses
on variation in the extent to which policymakers have relied on tax instruments to cater to
narrow political interests.
On the first dimension, I found that few party systems in contemporary Latin America
are programmatically structured in terms of taxation. First, in many countries, with the notable
exceptions of Argentina, Costa Rica and Mexico and Peru, the policy space is predominately
defined by the policy agenda promoted by Right-wing political parties. With some exceptions,
the Latin American Right has generally promoted “the market” through taxation. By contrast,
the Left has been relatively absent from agenda-setting and the majority of “equity-promoting”
initiatives has originated with the smaller parties. Furthermore, many Latin American parties
have pursued conflicting policy goals which is indicative of the inability of party members to
achieve a consensus on the particular objectives that instruments of taxation will be used to
achieve. On the second dimension of the framework, my analyses show that policymakers
have relied extensively on taxation to cater to narrow political bases. The notable exceptions to
this trend are Chile, Costa Rica, and to a lesser extent Guatemala.
These findings raise questions around the relationship between party programmation
and the reliance on policy instruments to cater to particularistic political bases. Essentially, are
members of non-programmatic parties more likely to exploit instruments of public policy to
pursue particularistic aims?
The matrix produced in Table 27 yields some interesting results. First, as expected
from the vantage point of theory, the concentration of parties in the “non-programmatic,
clientelistic” category is evident. This category is composed of a variety of parties in
Argentina, Colombia, Mexico, and Peru. By contrast, the “programmatic, non-clientelistic”
139

rubric consists of only two Chilean parties. Third, the Costa Rican parties fall into the “non-
programmatic, non-clientelistic category.” Finally, the “programmatic, clientelistic” cell
consists of parties in Mexico and Colombia. Overall, however, non-programmatic parties tend
to be clientelistic.

Conclusion
As with many other instruments of public policy, Latin American policymakers have
relied extensively on taxation to cater to strategic political bases. With the decentralization of
the policymaking process following Latin America’s return to democracy, old clientelistic
networks facilitated the channeling of tax benefits to political allies. Some tax incentives were
designed to prop up firms and sectors whose existence depended upon government support,
others sought to channel resources into strategic economic activities and stimulate economic
activities in impoverished communities.
More broadly, policymakers have relied on tax instruments to accomplish a variety of
objectives. These include, for example, spurring industrial activity, increasing the competitive
edge of strategic firms and sectors, reactivating economic activities in remote geographic
regions, adjusting the tax burden shouldered by lower income earners, discouraging the
consumption of harmful goods, and encouraging the production of what Richard Musgrave
terms “merit goods.” The latter are tax incentives implemented in order to stimulate the
production of socially desirable goods and services such as education, environmentally friendly
technology, sports and cultural activities, and Research and Development (R&D) broadly
defined.
140

Despite constituting an avenue for “getting things done,” clientelism is almost
universally construed in negative terms. For economists, clientelistic politics is associated with
excessive market distortions, including the misallocation of scarce economic resources and
price distortions; from the perspective of politics, clientelism results in excessive rent-seeking,
the over-representation of narrow political interests and the under-provision of public goods.
Consequently, clientelism raises pivotal questions around democratic forms of political
representation and political accountability. In the following chapter I analyze an alternative
route for “getting things done” under conditions for greater political competition; clientelism is
still eve-present, but I shall analyze its presence through a slightly different lens.

141

TABLE 19: THEORETICAL EXPECTATIONS

Institutionalized parties Inchoate parties
Programmatically
structured parties
- Parties are expected to cater
to relatively broad segments
of the population.
- Provision of public goods or
collective goods for broad-
based constituency.
- Political accountability
revolves around constituency
relations.

Non-
programmatically
structured parties
- Over-representation of
particularistic interests.
- Under-provision of public
goods.

142

TABLE 20: TAX EXPENDITURES IN LATIN AMERICA, 2000-2013 (% OF GDP)
51

Country 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Ave.
Argentina - 3.01 2.71 2.41 2.01 2.21 2.11 2.20 2.14 2.09 2.14 2.51 2.60 2.57 2.36
Brazil 1.58 1.51 1.78 1.70 1.40 1.69 1.99 2.29 2.77 3.20 3.42 2.98 3.22 3.42 2.35
Chile - 4.43 4.22 3.87 3.45 4.38 4.05 4.88 3.96 3.96 5.01 5.09 4.45 4.93 4.36
Colombia - - - - - 3.70 3.96 3.52 3.50 3.85 4.53 - 4.50 - 3.94
Costa Rica - - - - - - - - - - 5.81 - - - 5.81
Ecuador - - - - - 4.7 4.7 4.3 4.4 5.0 5.0 5.5 - - 4.80
Guatemala
12.0
0
12.3
0
12.70 12.50 12.30 8.40 8.50 8.60 8.01 7.97 7.9 7.8 8.1 8.1 8.83
Mexico - - 5.26 6.05 5.28 6.32 5.59 5.38 5.74 3.87 3.97 3.94 3.82 3.60 4.90
Peru - - - 2.5 1.83 2.07 2.24 2.22 2.05 1.81 2.13 2.04 1.94 1.91 2.07
Ave. - 5.31 5.33 4.84 4.38 4.18 4.14 4.17 4.13 3.97 4.43 4.26 4.04 4.09

51
This table is adopted from Villela et. al. (2010) and supplemented with data obtained from original country reports listed in the appendix.

143

TABLE 21: TAX EXPENDITURES IN LATIN AMERICA BY TAX, 2010 (% OF GDP)
52

Argentina Brazil Chile Colombia Costa Rica Ecuador Guatemala Mexico Peru
VAT 1.14 0.46 0.66 2.73 3.68 2.5 1.59 1.51 1.56
Income 0.46 1.37 4.35 0.97 1.82 2.5 5.85 1.80 0.28
Social
Security
0.21 1.02 - - - - - - -
Excises 0.19 0.00 - - - - 0.01 - 0.11
External
trade
0.10 0.08 - - - - 0.19 - 0.19
Others 0.04 0.49 - 0.83 0.31 - 0.26 0.66 -
Total 2.14 3.42 5.01 4.53 5.81 5.0 7.9 3.97 2.13

52
This table is adopted from Villela et. al. (2010) and supplemented with data obtained from original country reports listed in the appendix.

144

TABLE 22: INITIATIVES AIMING TO PROMOTE TARGETED BENEFITS BY COUNTRY
Country
Benefits to select firms,
sectors, and regions
Benefits to targeted
social groups
“Merit goods”
Argentina 37.4 10.2 15.1
Chile 23.9 1.4 4.2
Costa Rica 21.4 3.7 52.2
Colombia 61.0 6.9 14.8
Ecuador 36.0 2.8 10.7
Guatemala 26.2 6.5 31.0
Mexico 36.4 12.9 26.4
Peru 36.5 9.3 9.2

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TABLE 23: POLITICAL PARTIES AND TARGETED TAX BENEFITS (TABLE A)
Political Party % of all bills

% of bills that aim to benefit firms, sectors
and regions
Passing rates of bills that aim
to establish benefits for firms,
sectors and regions
Argentina
53

(2000-2011)
N= 1095
Partido Justicialista 21.7 42.9 6.9
Unión Cívica Radical 16.2 40.7 5.6
Frente para la Victoria 12.1 43.9 2.1
Joint initiatives 20.7 - -
Other parties 32.4 3.89 1.8
Executive 4.0 31.8 85.7
Chile
54

(1990-2011)
N=71
Renovación Nacional 5.6 0.0 0.0
Unión Democrática Independiente 5.6 0.0 0.0
Joint initiatives 14.1 10.0 0.0
Other parties 6.0 0 0.0
Executive 69.1 31.7 93.8

53
In Argentina: Partido Liberal, Partido Socialista, Frepaso, Acción por la Republica, Partido Demócrata, Movimiento Popular Neuquino, Bloquista,
Demócrata Progresista, FZA Republicana, Desarrollo y Justicia, Cruzada Renovación, Renovador de Salta, Colocación Cívica, Federal (Prov. de Buenas Aires,
Frente para el Cambio, Justicialista Azul y Blanco, ARI, Frente Cívico y Social de Catamarca, UCEDE, Frente del Movimiento Popular, Encuentro, Unión por
Argentina, Compromiso para el Cambio, Fiscal, Polo Social, Autodeterminación y Libertad, Partido Nuevo, Partido Nuevo contra Corrupción por Honestad y
Transparencia, Unidad Federalista, Convergencia, PRO, Peronista Federal, Justicialista Nacional, Movimiento Pampa Sur, Vida y Compromiso, Demócrata de
Mendoza, Emancipación y Justicia, De la Concertación, Frente Justicia Unión y Libertad – Frejuli, ARI Autónomo, Santa Fe Federal, Frente Producción y
Trabajo, Unión Celeste y Blanco, Frente Cívico por Santiago, Consenso Federal, Justicialismo Republicano, Solidaridad y Igualdad (SI), Frente Grande,
Proyecto Corriente, Partido Intransigente, Frente Popular Bonaerense, Eva Perón, Unipersonal Ricardo Balbín, MMTA, and Concertación Entrerriana.
54
In Chile: Partido por la Democracia, Partido Socialista, Democracia Cristiana, Partido Radical Social Demócrata, Movimiento Amplio Social, and
Independientes.
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TABLE 24: POLITICAL PARTIES AND TARGETED TAX BENEFITS (TABLE B)
Political Party % all bills in legislature

% bills that aim to benefit
firms, sectors and regions
Passing rates of bills that aim to establish
benefits for firms, sectors and regions
Colombia
55

(2000-2011)
N=136
Partido Liberal Colombiano 18.7 76.0 21.1
Partido Conservador Colombiano 16.5 68.2 33.3
Partido de la U 9.8 53.8 28.6
Joint initiatives 11.9 56.3 66.7
Other parties 29.7 60.0 25.0
Executive 13.4 38.9 57.1
Costa Rica
56

(1996-2011)
N=378
Unidad Social Cristiana 27.8 20.9 18.2
Partido Liberación Nacional 16.7 17.7 36.7
Movimiento Libertario 15.1 14.0 0.0
Joint initiatives 13.4 35.3 44.4
Other parties 15.6 27.1 6.25
Executive 13.8 17.3 33.3
Ecuador
57

(2002-2011)
N=75
Izquierda Democrata 12.0 33.3 33.3
Partido Social Cristiano 10.7 25.0 0
Partido Rudolsista 10.7 25.0 50.0
Joint Initiatives 1.3 100.0 100.0
Other parties 38.7 44.8 8.0
Executive 20.1 40.0 83.3

55
In Colombia: Movimiento MIRA, Movimiento de Autoridades Indígenas Colombia, Partido Cambio Radical, Partido Social de Unidad Nacional, Movimiento
Apertura Liberal, Alianza Social Independiente, Convergencia Popular Cívica, Movimiento Nueva Fuerza Democrática, Movimiento Nacional Conservador –
Alianza Nacional, Movimiento Independiente Revolucionario – MOIR, Movimiento Integración Popular Mipol, Conservador Colombiano- Movimiento de
Salvación, Convergencia Popular Cívica, Alas Equipo Colombia, Polo Democrático and Alternativo.
56
In Costa Rica: Acción Laborista Agrícola, Fuerza Demócrata, Unión Agrícola Cartaginés, Agrario Nacional, Unión Nacional, Acción Ciudadana, Frente
Amplio, Renovación Costarricense, Accesibilidad sin Exclusión, and Independiente.
57
In Ecuador: Conciencia Ciudadana, Partido Social Cristiano, Acción Regional por la Equidad, Movimiento Concertación Nacional Demócrata, Movimiento
Autonómico Regional, Movimiento Popular Democrático, Alianza Pais, Democracia Popular, Partido Renovador Institucional Acción Nacional, MUPP-NP-
MC, Movimiento Unidad Plurinacional Pachakutic, MPAIS/PS-PA, Partido Socialista- Frente Amplio, Partido Sociedad Patriótica, and Independiente.
147

TABLE 25: POLITICAL PARTIES AND TARGETED TAX BENEFITS (TABLE C)
Political Party
% all bills in legislature

% bills that aim to benefit firms,
sectors and regions
Passing rates of bills that aim to establish
benefits for firms, sectors and regions
58

Guatemala
59

(2002-2011)
Unidad Nacional de la Esperanza 9.6 20.0 -
Gran Alianza Nacional 4.7 0 -
Frente Republicano Guatemalteco 8.4 11.1 -
Joint Initiatives 20.6 36.7 -
Other parties 14.0 46.7 -
Executive 15.9 23.5 -
Mexico
60

(2000-2011)
N=683
Partido Acción Nacional 16.4 32.5 29.7
Partido Revolucionario Institucional 37.4 37.1 10.2
Partido de la Revolución
Democrática
14.1 44.3 27.9
Joint initiatives 3.8 41.7 20.0
Other parties 6.8 19.2 22.2
Executive 4.9 44.4 75.0
Peru
61

(2002-2011)
N=953
Unidad Nacional 18.7 33.0 52.5
Partido Aprista Peruano 16.9 45.0 33.3
Perú Posible 16.7 33.4 32.7
Joint initiatives 8.2 42.2 51.4
Other parties 27.0 36.3 35.1
Executive 8.5 32.6 75.0

58
Voting information is not available for the years included in this study.
59
In Guatemala: Partido de Avanzada Nacional, Alternativa Nueva Nación, Partido Integracionista, Centro de Acción Social, Unidad Revolucionaria Nacional
Guatemalteco, Independiente, Partido Libertador Progresista, Partido Unión Centro Nacional, and Unión del Cambio Nacionalista.
60
In Mexico: Convergencia, Partido del Trabajo, Nueva Alianza, and Partido Verde Ecologista de México.
61
In Peru: Unión Parlamentaria Decentralista, Frente Independiente Moralizador, Grupo Parlamentario Democrático Independiente, Somos Perú-Acción
Popular- Unión por el Perú, Perú Ahora, Concertación Parlamentaria, Alianza Nacional, Nacionalista Unión por el Perú, Alianza Parlamentaria, Grupo
Parlamentaria Nacionalista, Grupo Parlamentaria Especial, Solución Popular, and Alianza por el Futuro.

148

TABLE 26: CORRELATIONS BETWEEN "MERIT GOODS" AND KEY MEASURES
Country Clientelism/Merit goods
Targeted social
groups/Merit goods
Market/Merit goods Equity/Merit goods
Argentina 0.0817 0.1610 -0.0749 -0.1197
Chile 0.2101 -0.0251 0.0495 -0.0441
Costa Rica 0.3522 -0.0477 -0.0595 -0.2087
Colombia 0.0544 0.2398 -0.0591 -0.1178
Ecuador -0.0792 0.2109 -0.0547 -0.0820
Guatemala 0.1040 0.1507 -0.1864 -0.1864
Mexico 0.0732 -0.0539 -0.0092 -0.1063
Peru 0.0784 0.0907 -0.0029 -0.0779

149

TABLE 27: PARTY PROGRAMMATION AND CLIENTELISM IN CONTEMPORARY LATIN AMERICA
Non-programmatically structured parties Programmatically structured parties
Non-clientelistic parties
- Unidad Social Cristiana (COR)
- Partido Liberación Nacional (COR)
- Movimiento Libertario (COR)
- Renovación Nacional (CHL)
- Unión Demócrata Independiente (CHL)

Clientelistic parties
- Partido Justicialista (ARG)
- Unión Cívica Radical (ARG)
- Frente para la Victoria (ARG)
- Partido Conservador Colombiano (COL)
- Partido de la Revolucionario Institucional (MEX)
- Unidad Nacional (PRU)
- Partido Aprista Peruano (PRU)
- Perú Posible (PRU)
- Partido Liberal Colombiano (COL)
- Partido de la U (COL)
- Partido Acción Nacional (MEX)
- Partido Revolucionario Institucional (MEX)

150

Chapter 4: Political Competition, Policy Objectives,
and Clientelism

“In the same way that children decide how to allocate their allowance
between candies and toys, societies decide how to allocate scarce public
resources between competing uses” (Scartascini and Stein 2009, 1).

On September 8, 2009 Mexico’s former President Felipe Calderón submitted the budget
proposal for the year 2010 to the Mexican Congress. The center piece of the President’s tax
initiative was the introduction of a general tax on sales and services set at two percent in order
to increase the revenue gathering capacity of the state. The proposed tax was unrelated to
Mexico’s Value Added Tax (IVA) and would indeed include many of the goods and services
currently exempted from the VAT regime. Anticipating fierce opposition from Mexico’s lower
income earners, Calderón’s Finance Minister Agustín Carstens, strategically linked the increase
in consumption taxes to a spending plan which targeted the alleviation of poverty and
socioeconomic marginalization. As such, the President’s initiative became known as “el
impuesto contra la pobreza,” the tax against poverty. In the effort to placate concerns around
increasing taxes, Mr. Carstens emphasized Mexico’s need to find an alternative to volatile oil
revenues by establishing a broader revenue base which would provide stable funding for
essential state-administered social compensation programs that would benefit a substantial
proportion of the country’s lower income earners (Universal Sept. 9, 2009).
151

The proposed tax increase triggered opposition from the Left and the Right. Those on
the Right who were concerned with government intervention in the market opposed the bill on
the grounds that taxation is an inappropriate policy instrument for achieving desirable social
and economic objectives. As one observer argued in the market-oriented newspaper, El
Economista, “[n]ningún impuesto genera crecimiento económico,” no tax generates economic
growth (Sept. 13, 2009). By contrast, those concerned with “equity” contended that Calderón’s
tax represented a “disguised” (disfrazado) VAT.
62
From their perspective, the new tax would
place a disproportionate burden on lower income earners, as it would levy many of the goods
and services currently exempted from consumption taxes. Of particular concern were efforts
by the executive to tax food and medicines which remain at the center of debates around
taxation in Mexico. Only a week after its introduction, the leadership of the old party machine
Partido Revolucionario Institucional (PRI) and Convergencia, a smaller party with a few seats
in Congress, jointly announced that the proposal “is practically dead” (Economista Sept. 14,
2009). Members of the Leftist Partido de la Revolución Democrática (PRD) and the Partido
del Trabajo (PT) had already proclaimed their opposition to the initiative (Economista Sept. 9,
2009). The president’s tax proposal was in fact dead.
The decentralization of the policymaking process that has followed Latin America’s
return to democracy has redefined the parameters of policy formation by facilitating the greater
participation of previously marginalized political actors (Scartascini 2007; Spiller, Stein, and
Tommasi 2008; Hallerberg, Scartascini, and Stein 2009; Scartascini, Stein, and Tommasi 2010;
Murillo 2009). In terms of taxation, this means that reforms and adjustments to the standing

62
The PRD’s Vidal Llerena Morales stated that the tax against poverty is the “IVA disfrazado que afectara a la
publication de menores ingresos” (Economista Sept. 9, 2009).
152

tax code are no longer solely in the hands of the executive. Indeed, as observed in Table 28,
with the exception of Chile, the vast majority of tax initiatives that appear in the legislative
records of the eight countries included in this study originate in the lower house of the
legislature. Despite substantial variation in the capacity of parties to translate their policy
objectives into law (as also observed in Table 28), high initiation rates indicate that the region’s
political parties have assumed a more proactive role in the formation of tax policy.
Consequently, as I discuss in this chapter, taxation in contemporary Latin America is best
understood as a political process defined by the contending interests of a growing number of
policy players (Scartascini 2007; Spiller, Stein, and Tommasi 2008; Hallerberg, Scartascini,
and Stein 2009; Scartascini, Stein, and Tommasi 2010).
The main objective of this chapter is to gain a better understanding of the political
process that shapes the formation of tax policy in contemporary Latin America. I organize the
analysis around three essential research questions. First, to what extent have the respective
parties succeeded in translating their policy objectives into law? Second, whose interests have
been promoted by the legislative process? Third, to what extent has political competition
curbed rent-seeking pressures and efforts by individual policymakers to cater to narrow
clientelistic interests?
The first section of this chapter sets the stage for understanding how the policymaking
process has shaped the formation of public policy in Latin America’s newly democratized
countries. I place the analysis that follows within an extensive literature on the asymmetric
relationship between a constitutionally preponderant executive and a Latin American
legislature which generally lacks the institutional capacity to assert itself as an independent
actor in the policymaking process. The second section turns to the analysis which aims to
153

better understand: a) the extent to which the region’s legislative assemblies have impacted the
executive’s agenda; and, b) the relative capacity of political parties to successfully translate
their policy objectives into law. In line with existing scholarship, the former assesses the
legislature’s “reactive powers” while the latter provides insight into its “proactive powers.” I
further look at the particular policy goals that have been promoted through the legislative
process and close with a discussion of the extent to which the policymaking process has curbed
efforts by policymakers to provide particularistic policy benefits to strategic political bases.
This chapter concludes that taxation is no longer solely in the hands of the executive or
the general government. Although the executive remains a powerful agenda-setter across the
region, these leaders are dependent upon the support of their respective parties within the
legislature in order to successfully translate their objectives into law. Despite greater
participation in terms of introducing policy initiatives, political parties have been less
successful in gathering sufficient political support for their policymaking objectives. As such,
the success rates of their initiatives remain low in many countries. Furthermore, the
policymaking process has generally favored efforts to promote the market, although there is
evidence that there is some support for so-called equity-enhancing policy initiatives, especially
if promoted by the executive. Clientelism is still rampant in Latin America and my analysis
shows that the policymaking process does not effectively curb efforts to promote particularistic
benefits. This supports my conclusion that the reliance on tax incentives constitutes an integral
part of politics in contemporary Latin America across political parties, executives, and
countries.

154

Latin American Legislatures and Democratic Governance
A fundamental role of the legislature in a democratic regime is to ensure adequate
political representation by arbitrating distributional conflicts and promulgating public policy
that serves the interests of the general public (Cox and McCubbins 2001; Carey and Reynolds
2007; Carey 2009). However, as in the case of Latin American political parties, an extensive
literature has questioned the ability of the region’s law-making bodies to undertake these
essential functions as key actors in democratic legislatures (Ames 1995a, 1995b; Mainwaring
and Shugart 1997c; Morgenstern and Cox 2001; Morgenstern 2002a; Saiegh 2010). Indeed,
observers of Latin American politics have described legislative institutions as destructive and
illegitimate (Morgenstern 2002b) and questioned whether they are more than “rubber stamps”
which serve at the behest the preponderant executive (Mezey 1979; Cheibub, Elkins, and
Ginsberg 2011; Saiegh 2010).
The scholarship makes a critical distinction between “reactive” and “proactive”
legislatures according to the extent to which they influence the policymaking process and
constitute a democratic counterforce to the executive (Morgenstern and Cox 2001; Morgenstern
2002b). Among scholars of legislative politics, the consensus is that these institutions lack the
essential attributes of a “proactive” agenda-setter on par with the legislative assemblies of
Europe and the United States. As a consequence, Latin American legislatures are best
described as “reactive” actors. This implies the lack of capacity to define the policymaking
agenda and investigate activities of the government, but they are able to insert themselves in the
policymaking process by obstructing or altering the president’s initiatives (Morgenstern and
155

Cox 2001; Morgenstern 2002b). In essence, as Scott Morgenstern has argued, “although [Latin
American legislatures] may not take the most prominent role in the policymaking process,
democratic politics revolve around their most representative bodies. It is therefore not possible
to gain an understanding of the nature of the politics in these countries without a careful
analysis of their legislatures” (2002b, 2).

Scholarship on the Formation of Public Policy in Latin America
The formation of public policy in contemporary Latin America is generally described as
an “asymmetric” process which remains predominately overshadowed by a constitutionally
powerful executive (Morgenstern and Cox 2001, 173; Mainwaring and Shugart 1997c;
Cheibub, Elkins, and Ginsberg 2011; Mainwaring 1990). Against the backdrop of the 1970s
scholarship which dismissed the legislature as an inconsequential actor, studies of the post-
authoritarian period have primarily aimed to understand the ways in which the legislature
influenced the president’s policymaking agenda (Mainwaring and Shugart 1997b; Morgenstern
and Cox 2001; Morgenstern 2002b; Siavelis 2000). Thus, recent scholarship generally rests on
the assumption that Latin American legislatures assert some influence on the formation of
public policy. As such, the primary goal of these scholars has been to analyze the various
factors that undermine the capacity and legitimacy of the region’s legislatures (Stein et al.
2005; Stein and Tommasi 2007; Saiegh 2010; Carey and Shugart 1995). Starting with studies
of the first generation, the section that follows will briefly review this literature.
First generation scholarship focused on developing various indicators of “influence”
which were used to measure the capability of Latin American legislatures to affect the
156

formation of public policy. Adopting a very broad definition, this literature documented
anything from the legislature subverting and disrupting the president’s policymaking platform
to contributing positively to the formation of public policy. For example, studies focused on
presidents circumventing the legislature by relying disproportionally on decree-making
authority (Mustapic 2002; Carey and Shugart 1998); others looked at a benevolent Chilean
executive whose (informal) brokering practices facilitated greater cooperation between the
executive and the legislature (Siavelis 2000). Yet others, as in the case of Mexico, found that
the legislature was undergoing substantial internal changes in order to play a more constructive
role in democratic governance (Casar Amparo 2002). While factors of “influence” were
classified as “reactive powers,” there was a general consensus that the region’s legislatures had
some impact on the executive’s ability to formulate public policy.
Second generation studies have developed extensive analytical frameworks and looked
at a broader range of variables in order to gain a more comprehensive understanding of the
specific factors which undermine the capacity and legitimacy of Latin American law-making
institutions. Broadly defined, these variables fall into three categories: a) the constitutional
powers of the president vis-à-vis the legislature (Mainwaring and Shugart 1997a; Casar
Amparo 2002; Mainwaring 1990); b) weak and internally divided party organizations
(Mainwaring and Shugart 1997a; Coppedge 1998; Roberts and Wibbels 1999); and, c) electoral
systems and candidate selection mechanisms (Ames 1995a, 1995b; Carey and Shugart 1995;
Mainwaring and Shugart 1997a). I briefly discuss each in turn.
Traditional studies of policymaking in Latin America assumed that the formation of
public policy is dominated by a constitutionally strong executive. However, as suggested
157

above, the executive’s relationship with the legislature varies across the region. In order to
better understand the nature of this relationship, scholars have engaged in extensive efforts to
develop comparative measures of executive authority (Carey and Shugart 1998; Cheibub,
Elkins, and Ginsberg 2011). For example, relying on a dataset developed by the United
Nations Development Program (UNDP), Sebastian Saiegh documents variation in legislative
powers and shows that the presidents of Chile, Brazil, Ecuador, Colombia, and Peru are
considerably more powerful than the presidents of other Latin American countries (2010, 56,
Table 3.2).
63
On the contrary, measures of the law-making abilities of Latin American
legislatures indicate that their institutional capacity remains low across the region. With the
exception of Chile, this is particularly true in Brazil, Ecuador, Colombia and Peru where
presidential powers are comparatively strong (Saiegh 2010, 68, Table 3.5). Hence, available
measures indicate an inverse relationship between executive power and the capacity of the
respective legislatures to fulfill their roles as primary law-making institutions. Adding to this
asymmetric picture are data which show that the public’s confidence in the Latin American
legislatures is dismally low. Chile constitutes an exception to these trends, however, where the
capacity of the legislature and perceptions of law-making institutions are considerably higher
than in the other countries discussed above (Saiegh 2010, 68, Table 3.5).
The respective parties that comprise Latin American legislatures vary considerably in
their organizational and programmatic capacities (Mainwaring and Scully 1994; Mainwaring
and Scully 1995b; Mainwaring and Shugart 1997c; Morgenstern 2002b; Morgenstern and

63
This measure is composed to two dimensions: a) “proactive powers” such as decree and budgetary authority and
b) “reactive powers” which include veto powers and exclusive initiation powers (2010, 56, Table 3.2).
158

Vázquez-D’Elía 2007). As discussed in Chapter 2, available measures of Latin American party
systems show that the region’s institutionalized parties tend to be programmatic while their
inchoate, non-programmatic counterparts tend to be characterized by internal divisions which
undermine their institutional capacity. Moreover, as I discussed in Chapter 3, inchoate, non-
programmatic parties are associated with the greater representation of particularistic interests
and the exploitation of public resources for personal gain. Therefore, there is ample reason to
expect that the weakness of the region’s party organizations will affect the organizational
powers of the region’s legislature as well as their negotiating powers vis-à-vis a constitutionally
powerful executive.
Lastly, existing scholarship attributes institutional weakness to various electoral rules
and candidate selection procedures (Ames 1995a, 1995b; Amorin Neto and Cox 1997; Carey
and Shugart 1995). For example, Barry Ames’ studies of the Brazilian legislature associated
open-list proportional representation with the greater distribution of pork (1995a, 1995b).
Other studies have emphasized that constitutional constraints on reelection create incentives for
nationally elected deputies in Mexico (Nacif 2002) and Costa Rica (Carey 1996) to be loyal to
their respective party organizations.
64
Hence, the main lesson of this particular strand of
scholarship is that rules and institutions create particular incentive structures within which party
officials and elected deputies calculate their decisions as policymakers. Some rules and
institutions generate incentives for individuals to invest in political parties, legislatures and the
bureaucracy which will result in the building of greater institutional capacity (Geddes 1994;

64
The essential argument is that deputies rely on their parties for future career opportunities often at provincial or
local levels.
159

Hagopian, Gervasoni, and Moraes 2009) while others create incentives for the exploitation of
public resources and public instruments for personal gain (Carey and Shugart 1995; Ames
1995a, 1995b; Geddes and Ribero Neto 1992).
The subsequent section considers the broader context of policymaking and focuses on
the extent to which the policymaking process – or political competition more broadly – has
affected the promulgation of tax policy in contemporary Latin America. The first part of the
analysis addresses the relationship between the executive and the legislature and looks at the
extent to which: a) the executive has dominated the legislature agenda; and, b) the relative
capacity of political parties to translate their policy initiatives into actual law. The second part
builds on previous chapters by analyzing the nature of the policy goals that have been promoted
through the legislative process and the extent to which political competition has curtailed
efforts by policymakers to cater to particularistic interests.

Political Competition and the Formation of Tax Policy
Political Parties and the Legislative Process
The data collected for this study suggest that Latin American political parties have
assumed a more extensive role in the formation of tax than is generally portrayed in the
literature to date. The high initiation rates of bills and proposals by political parties, as
observed in Table 28, drive home this point. Furthermore, my analysis indicates that the
traditional role of the Latin American executive is waning as presidential tax proposals are
subject to much greater scrutiny of political parties and the legislature overall. This is even
160

observed in those countries where the president has retained the traditional position as the most
important agenda-setter. However, despite evidence of a more “proactive” role in the
policymaking process, the relatively low proportion of initiatives that became law demonstrates
that the capacity of many Latin American parties to translate their objectives into law remains
low (Table 28, Tables 32 and 33). Overall, these findings lead to the overall conclusion that
Latin American parties have generally assumed a greater role in the policymaking process, but
their agenda-setting powers remain weak as observed in their inability to translate their policy
objectives into law.
Despite increased political competition, the Latin American executive can still play a
significant role as an agenda-setter in matters of taxation. Argentina constitutes the classic
example of the executive retaining a traditional role in the formation of tax policy. As
observed in Table 28, a substantial portion of the bills (96.0 percent) collected for this study
was initiated by political parties. Yet, only four percent of these initiatives became law; in
contrast, the Argentine executive put forth four percent of the proposals, but succeeded in
turning 80 percent of these into law. However, the preponderance of the executive as
illustrated in the case of Argentina is no longer as marked in the rest of Latin America.
My data indicate that the executive’s policymaking agenda is subject to substantial
scrutiny by political parties. For example, in the legislative assemblies of Mexico, Chile and
Costa Rica, there is ample evidence that political support in the legislature is essential for the
ability of the executive office to translate its tax agenda into law. For example, as in Argentina,
the Mexican executive has introduced a very small percentage of the total bills (5 percent).
Yet, the success rates for the executive since the transition to democracy in 2000 have been
161

relatively high (78 percent). Unlike Argentina, however, the bills originating in the Mexican
Congress have enjoyed a considerably higher success rate (19 percent). Although a 19 percent
success rate may seem low, this finding is best interpreted within the context of institutional
change marked by the decline of the PRI’s (Partido Revolucionario Institucional) absolute
hegemony during which Congress was no more than a “rubber stamp.” Hence, the relative
success rate of congressional initiatives in Mexico reflects the increasing participation by
political parties. This pattern is also observed in Chile where the executive clearly dominates
the initiation of legislation (69 percent), but has nevertheless faced considerable opposition in
Congress. As a result, around 40 percent of the executive’s proposals never materialized. A
similar ability of the legislature to assert itself in the policymaking process is observed in Costa
Rica, where Congress thwarted almost 60 percent of the executive’s proposals in the period
studied here. The lower success rate of Chilean and Costa Rican executives suggests that the
legislatures of these countries are able to shape the president’s own agenda.
Despite their “proactive powers,” the capacity of Latin American parties to turn their
tax initiatives into law varies extensively across countries. First, the political parties of
Argentina and Ecuador have been largely unable to garner political support for their respective
agendas in terms of taxation. In Costa Rica, however, the two major parties – Unidad Social
Cristiana (19 percent) and Partido Liberación Nacional (22 percent) – which occupy a
substantial number of seats in the legislature (Table 30) enjoyed higher success rates than most
other parties in these eight countries (Tables 32 and 33). In Mexico, the executive’s party –
Partido Acción Nacional (27 percent) – enjoyed the highest success rates prior to the return of
the PRI; by contrast, Mexico’s Partido Revolucionario Nacional (16 percent) has faced
considerable opposition to its tax bills (Tables 30 and 33). In Colombia, Partido Liberal
162

Colombiano (16 percent), which has lost a substantial number of seats in Congress over the
period 2000-2010 (Table 30), has experienced a lower success rate than its rivals (Tables 28
and 30). Furthermore, in Peru under the governments of Alejandro Toledo (Perú Posible,
2001-2006) and Alan García (Partido Aprista Peruano, 2006-2011), the three main parties in
the Peruvian Congress (Table 31) – Unidad Nacional (37 percent), Partido Aprista Peruano
(28 percent) and Perú Posible (37 percent) – enjoyed similar success rates. Hence, my analysis
overall suggests that many Latin American parties are essential to the formation of tax policy,
but most of the region’s parties face the challenge of developing programmatic policy
platforms that would increase their bargaining powers vis-à-vis a constitutionally strong
executive as well as rival political parties.
In sum, while Latin American parties have begun to assume the role of a democratic
counterforce to traditionally powerful Latin American executives, their capacity to define the
policymaking agenda remains relatively low. While Argentine and Ecuadorian parties are
generally unable to translate their objectives into law, their Chilean, Colombian, Costa Rican,
Mexican and Peruvian counterparts have become more “proactive” in the formation of tax
policy. The section that follows analyzes variation in the policy objectives that have been
promoted in the legislative process and the extent to which political competition has curtailed
the ability of policymakers to cater to narrow political bases.
Whose Interests? “Equity” or “the Market”?
In this dissertation I have argued that contemporary Latin American policymakers face
the challenge of formulating public policies which satisfy the demands of a growing market-
oriented economy with increasing demands for government-administered programs that
163

alleviate poverty and mitigate concerns with socio-economic marginalization. Chapter 2
conceptualized taxation as an issue of distributive politics which revolves around the essential
tradeoff between market efficiency and equity. Hence, I suggested that the politics of taxation
in contemporary Latin America has revolved around the extent to which instruments of taxation
should be used to promote “equity” or “the market.”
As discussed in previous chapters, the measures of “equity” and “the market are
composite variables designed to capture variation in policy objectives. To briefly recap, the
“equity” measure consists of efforts to: 1) mitigate the impact of regressive forms of taxation
on lower income earners; 2) shift the tax burden toward more progressive forms of taxation; 3)
alter income distribution and/or alleviate poverty; and, 4) close loopholes and abolish
particularistic tax arrangements. By contrast, “the market” measure is comprised of efforts to:
1) reduce market distortions; 2) promote investment and/or spur Research and Development
(R&D); 3) harmonize the tax system with those of trading partners; and, 4) increase
employment and/or stimulate economic activity. Chapter 2 showed that Right-leaning
governments have primarily led efforts to promote market efficiency; in contrast, the Latin
America’s Left-wing parties, which are associated with efforts to promote equity through
taxation, have assumed a less “proactive” role in the policymaking process. Building on these
findings, the following analysis looks at how the policymaking process has shaped the
objectives that tax instruments have been used to achieve in contemporary Latin America.
My analysis indicates that the political process has generally favored efforts by
policymakers to promote market efficiency. The dominance of “the market” is clearly
observed in Chile and, to a lesser extent, in Argentina and Costa Rica. By contrast, the success
164

rates of efforts to promote the market are fairly similar in Colombia, Mexico and Peru (Table
34). On the one hand, these findings are consistent with an extensive literature which
documents that concerns with market-promoting tax policies has dominated Latin American
policymaking since the debt shocks of the 1980s (Remmer 1998; Stokes 2001; Edwards 1995);
on the other hand, my analysis also demonstrates a growing concern with equity – particularly
with the heavy over-reliance on consumption taxes – and the formation of political
counterforce whose mandate rests on the ability to provide an alternative to the prevailing
market-oriented political project (Flores-Macias 2012; Schamis 2006; Cameron and Hershberg
2010; Levitsky and Roberts 2011b).

Political Competition and Clientelism
An extensive literature discussed in Chapter 3 has demonstrated that clientelism is
commonplace in Latin American politics. At the same time, tax incentives constituted an
important tool of industrial policy under the region’s ISI development strategies. Therefore,
dismantling the intricate web of tailored tax packages and curbing the rent-seeking pressures
that had built up were primary goals under the neoliberal reform agenda. As discussed in
Chapter 3, in this study clientelism is understood as efforts by policymakers to establish
particularistic tax benefits for select firms, sectors, and geographic regions. Indeed, Chapter 3
demonstrated that policymakers in Argentina, Colombia, Ecuador, Mexico and Peru frequently
165

rely on tax instruments to cater to particularistic political bases; by contrast, clientelism is not
as prevalent in Chile and Costa Rica (Table 22, Chapter 3).
Generally speaking, the literature on clientelism attributes its prevalence to institutional
weaknesses. As such, the main expectation is that politicians and policymakers will rely less
on such parochial exchanges as political development progresses. However, scholars of
developing and middle income countries have questioned this assumption and suggested that
political competition may indeed increase policymakers’ reliance on public resources and
various instruments of public policy in order to compete for votes. For example, Steven
Levitsky’s (2007) study of the Peronist party in Argentina and Beatriz Magaloni and her
colleagues (2007) found that the distribution of particularistic goods to woo political supporters
has constituted an important strategy for Mexico’s PRI. My data on efforts by policymakers to
promote tailored tax packages suggest that the observations of these two studies might more
accurately describe contemporary politics in the region. Hence the question: has the Latin
American policymaking process promoted or curbed efforts by policymakers to cater to
particularistic political bases?
My analysis indicates that Latin American policymakers do indeed continue to rely on
tax incentives to cater to strategic political bases. As observed in Table 37, the passage rates of
such bills are relatively high in most countries. The notable exception is Argentina where the
parties have had little success in turning their policy objectives into law. Thus, tailored tax
benefits in Argentina are generally promulgated by the executive. The same can be said for
Chile, although efforts to promote particularistic benefits in the latter are substantially lower
than in Argentina (Table 37).
166

This leaves Colombia, Mexico and Peru where tax incentives are still commonly used to
accomplish essential economic and political policy objectives. As indicated in Tables 37 and
38, the respective parties, as well as the executives, in these countries have achieved
considerably higher rates of passing legislation than in Argentina and Chile. Such high passage
rates do indeed suggest that the political process facilitates the reliance on tax instruments in
order to accomplish essential economic and political objectives. Table 39, which categorizes
the respective political parties according to their overall efforts to promote clientelism and their
success rates, supports this conclusion. As one also observes in Table 39, explicit efforts to
promote targeted policy benefits are strongly correlated with legislative approval rates. In the
end, political competition may have diminished clientelistic pressures, but policymakers
continue to rely heavily on taxation to cater to strategic political bases across the region.

Conclusion
My analysis shows that Latin American executives continue to be powerful agenda-
setters in taxation. Yet, their hegemonic position in terms of taxation has been eroded by the
greater participation of political parties and legislative politics in the region’s new democracies.
It turns out, however, Latin American parties have greater “reactive” than “proactive” powers.
That is, although Latin American presidents have often faced trouble passing their legislation
through congress, the region’s political parties have faced even greater obstacles in their efforts
to translate their policy objectives into law. While Latin American legislatures may no longer
deserve the label of “rubber stamp,” institutional weaknesses continue to undermine their
capacity to assert themselves in the effective formation of public policy.
167

Across countries, efforts to promote market efficiency through taxation have generally
dominated those to promote equity. Yet, the dominance of “the market” is somewhat corrected
by the political process, as the region’s executives have had greater success in turning their
“equity” initiatives into law. As cautioned above, however, simple averages of legislative
passage rates do not account for substantive differences in the content of these tax bills. In
other words, this point should be not construed to imply that the political process has ensured
equity. Furthermore, as demonstrated in this chapter, Latin American policymakers have
continued to rely on tax incentives to cater to parochial political bases. This yields the broader
conclusion that clientelism remains an integral component of the politics of fiscal reform in
Latin America.

168

Table 28: Passing Rates According To Origin Of Policy Initiatives

Country

Number of
tax-related
initiatives
Origin of
initiative
% of total
% of initiatives that
became law
Argentina
(2000-2011)
1095
Executive 4.0 80.0
Legislature 96.0 4.0
Chile
(1990-2011)
71
Executive 69.0 59.1
Legislature 31.0 9.1
Colombia
(2000-
2011)
65

136
Executive 13.1 72.2
Legislature 86.9 27.1
Costa Rica
(1996-2011)
378
Executive 13.8 40.4
Legislature 86.2 15.6
Ecuador
(2002-2011)
75
Executive 20.0 60.0
Legislature 80.0 11.7
Guatemala
66

(2002-2011)
107
Executive 15.9 -
Legislature 84.1 -
Mexico
(2000-2011)
689
Executive 5.2 78.4
Legislature 92.5 19.0
Peru
(2002-2011)
1014
Executive 8.5 71.0
Legislature 87.6 32.5

65
Around 10 percent of the policy initiatives introduced by the lower and upper houses of Colombia are joint
proposals.
66
Voting information is not available for Guatemala in for the period included in this study.

169

TABLE 29: THE COMPOSITION OF LATIN AMERICAN LEGISLATURES (TABLE A)
Argentina (2000- 2011)
Legislative
period
1999-2001 2001-2003 2003-2005 2005-2007 2007-2009 2009-2011 2011--present
Composition
of legislature
Number of
seats: 257/259
Alianza:
102/39.7%
PJ: 100/38.9%
Other parties:
55/21.4%
PJ: 99/38.5%
UCR: 51/19.8%
ARI: 15/5.8%
Other parties:
92/35.8%
PJ: 129/50.2
UCR: 45/17.5%
ARI: 10/3.9%
Other parties:
73/28.4%
FpV: 115/44.9%
UCR: 40/15.6%
P. Federal: 19/7.4%
Other parties: 32%

FpV: 128/49.8%
UCR: 24/9.3%
CC-ARI-GEN-UPT:
18/7%
Other parties:
87/33.9%

FpV: 86/33.2%
UCR: 42/16.2%
P. Federal:
29/11.2%
Other parties:
102/39.4%

FpV: 116/45.1%
UCR: 37/14.4%
Frente
Peronista:
20/7.8%
Other parties:
84/32.7%
President
Party of
president
Menem (1990-
1999)
PJ
De La Rúa (1999-
2001)
Alianza
Duhalde (2002-2003)
PJ
Kirchner (2003-2007)
FpV
Kirchner (2003-
2007)
FpV
Fernández de
Kirchner (2007-)
FpV
Fernández de
Kirchner (2007-
)
FpV
Fernández de
Kirchner (2007-
)
FpV
Chile (2000-2011)
Legislativ
e period
1998-2002 2002-2006 2006-2010 2010-2014
Composition
of legislature
Number of
seats: 120
PDC: 38/31.7%
RN: 25/20.8%
UDI: 22/18.3%
PPD: 16/13.3%
Other parties: 19/15.8%
UDI: 33/27..5%
PDC: 24/20%
RN: 24/20%
PPD: 21/17.5%
Other parties: 18/15%
UDI: 33/27.5
RN: 20/16.7
PPD: 19/15.8
PDC: 16/13.3
Other parties: 32/26.7
UDI: 37/30.8%
PDC: 19/15.8%
PPD: 18/15%
RN: 18/15%
Other parties: 28/23.3%

President
Party of
president
Frei (1994-2000)
PDC
Lagos (2000-2006)
PDC
Lagos (2000-2006)
PDC
Bachelet (2006-2010)
PS
Piñera (2010-)
RN

170

TABLE 30: THE COMPOSITION OF LATIN AMERICAN LEGISLATURES (TABLE B)
Costa Rica (1997-2011)
Legislative
period
1994-1998 1998-2002 2002-2006 2006-2010 2010-2014
Composition of
legislature
Number of seats: 57
PLN: 28/49.1%
PUSC: 25/43.9%
Other parties: 4/7%

PUSC: 27/47.4%
PLN: 23/40.3%
Other parties: 7/12.3%
PUSC: 19/33.3%
PLN: 17/29.8%
PAC: 8/14%
Other parties: 13/22.8%
PLN: 25/43.9%
PAC: 17/29.8%
ML: 6/10.5%
Other parties: 9/15.8%
PLN: 24/42.1%
PAC: 11/19.3%
ML: 9/15.8%
Other parties:
13/22.8%
President
Party of president
Figueres Olsen (1994-
1998)
PLN
Rodríguez Echeverría (1998-
2002)
USC
De la Espriella (2002-2006)
USC
Arias Sánchez (2006-2010)
PLN
Chinchilla Miranda
(2010-)
PLN
Colombia (2000-2011)
Legislative period 1998-2002 2002-2006 2006-2010 2010--
Composition of
legislature
Number of seats:
161/166
PL: 86/53.4%
PC: 26/16.1%
Other parties: 49/30.4%
PL: 54/32.5%
PC: 21/12.7%
Other parties: 91/54.8%
PL: 35/21.1%
PC: 29/17.5%
P de la U: 29/17.5%
PCR: 21/12.6%
Other parties: 52/31.3%
P de la U: 48/29.1%
PL: 38/23%
PC: 36/21.8%
Other parties: 43/26%
President
Party of president

Pastrana Arango (1998-2002)
PCC
Uribe Vélez (2002-2010)
Primero Colombia
Uribe Vélez (2002-2010)
Primero Colombia
Santos (2010-)
P de la U
Mexico (2000-2011)
Legislative period 2000-2003 2003-2006 2006-2009 2009-2012
Composition of
legislature
Number of seats: 500
PRI: 211/42.2%
PAN: 206/41.2%
PRD: 50/10%
Other parties: 33/6.6%
PRI: 207/41.4%
PAN: 147/29.4%
PRD: 95/19%
Other parties: 51/10.2%
PAN: 207/41.4%
PRD: 127/25.4%
PRI: 106/21.2%
Other parties: 60/12%
PRI: 242/48.4%
PAN: 142/28.4%
PRD: 63/12.6%
Other parties: 53/10.6%
President
Party of president

Fox (2000-2006)
PAN
Fox (2000-2006)
PAN
Calderón (2006-2012)
PAN
Calderón (2006-2012)
PAN

171

TABLE 31: THE COMPOSITION OF LATIN AMERICAN LEGISLATURES (TABLE C)
Peru (2001- 2011)
Legislative period 2000-2001 2001-2006 2006-2011 2011--
Composition of
legislature
Number of seats:
120/130
Perú 2000: 52/43.3%
PP: 29/24.2%
FIM: 9/7.5%
Other parties: 30/25%
PP:45/37.5%
PAP: 28/23.3%
UN: 17/14.2%
Other parties: 30/25%
UPP: 45/37.5%
PAP: 36/30%
UN: 17/14.2%
Other parties: 22/18.3%
Gana P: 47/36.1%
F 2011: 37/28.5%
PP: 21/16.2%
Other parties: 25/19.2%
President
Party of president
Paniagua (2000-2001)
AC
Toledo (2001-2006)
PP
García (2006-2011)
APRA
Ollanta Humala (2011-)
PNP
Ecuador (2000-2011)
Legislative period 1998-2002 2002-2006 2007-2008 2009-2012
Composition of
legislature
Number of seats:
89/130
DP: 35/29.7%
PSC: 28/23.7%
PRE: 22/18.6%
Other parties: 33/28%
PSC: 24/24%
ID: 16/16%
PRE: 15/15%
Other parties: 45/45%
AP: 80/61.5%
PSP: 19/14.6%
PRIAN: 8/6.2%
Other parties:23/17.7%
AP: 59/47.6%
PSP: 19/15.3%
PRIAN: 7/5.6%
MG: 7/5.6%
Other parties: 32/25.8%
President
Party of president
Mahuad (1998-2000)
UDC
Noboa (2000-2003)
UDC
Noboa (2000-2003)
Gutiérrez (2003-2005)
PSP
Palacio (2005-2007)
PSP
Correa (2007-)
AP
Correa (2007-)
AP
Guatemala (2002-2011)
Legislative period 2000-2004 2004-2008 2008-2012
Composition of
legislature
Number of seats:
FRG: 63/56.3%
PAN: 37/33%
DIA-URNG-ANN: 9/8%
Other parties: 3/2.7%
GANA: 47/29.7%
FRG: 43/27.2%
UNE: 32/20.3%
Other parties: 36/22.8%
UNE: 51/35.4%
GANA: 37/ 25.7%
PP: 29/20.1%
Other parties: 27/18.8%
President
Party of president

Alfonso (2000-2004)
FRG
Berger (2004-2008)
GANA
Colom (2008-2012)
UNE

172

TABLE 32: PASSING RATES BY POLITICAL PARTY (TABLE A)
Country Political Party % introduced in the legislature % of initiatives that became law
Argentina
(2000-2011)
N= 1095
Partido Justicialista 21.7 5.1
Unión Cívica Radical 16.2 3.4
Frente para la Victoria 12.1 9.1
Joint initiatives 20.7 -
Other parties 32.4 1.4
Executive 4.0 80.0
Chile
(1990-2011)
N=71
Renovación Nacional 7.1 25.0
Unión Democrática Independiente 5.6 25.0
Joint initiatives 14.1 20.0
Other parties 7.1 0
Executive 69.1 59.1
Colombia
(2000-2011)
Partido Liberal Colombiano 18.4 16.0
Partido Conservador Colombiano 16.2 27.3
Partido de la U 9.6 30.8
Joint initiatives 11.8 43.8
Other parties 29.4 25.0
Executive 13.2 72.2
Costa Rica
(1996-2011)
N=57
Unidad Social Cristiana 27.8 19.5
Partido Liberación Nacional 16.7 22.6
Movimiento Libertario 15.1 1.8
Joint initiatives 13.5 27.5
Other parties 15.6 11.9
Executive 13.8 40.4

173

TABLE 33: PASSING RATES BY POLITICAL PARTY (TABLE B)
Country Political Party % of total introduced % of initiatives that became law
Ecuador
(2002-2011)
N=75
Izquierda Democrata 12.0 11.1
Partido Social Cristiano 14.7 0
Partido Rudolsista 10.7 12.5
Joint Initiatives 1.3 100.0
Other parties 38.7 13.8
Executive 20.0 60.0
Guatemala
67

(2002-2011)
Unidad Nacional de la Esperanza 9.4 -
Gran Alianza Nacional 4.7 -
Frente Republicano Guatemaltco 8.41 -
Joint Initiatives 20.6 -
Other parties 14.2 -
Executive 17.3 -
Mexico
(2000-2011)
N=740
Partido Acción Nacional 16.5 27.2
Partido Revolucionario Institucional 38.3 16.3
Partido de la Revolución
Democrática
14.1 24.8
Joint initiatives 3.4 12.5
Other parties 6.8 14.9
Executive 4.9 78.4
Peru
(2002-2011)
N=1014
Unidad Nacional 18.4 36.8
Partido Aprista Peruano 16.9 28.4
Perú Posible 16.7 36.7
Joint initiatives 8.4 48.2
Other parties 27.0 24.7
Executive 8.4 71.0

67
Information on votes and outcome of the initiative is not available in Guatemala.

174

TABLE 34: PASSING RATES OF "EQUITY" AND "MARKET" IN CONTEMPORARY LATIN AMERICA
Country Passing rates of Equity-
Promoting initiatives
68

(% of total)
Passing rates of Market-
Promoting initiatives
(% of total)
Passing rates of “Clientelism”
(% of total)
Argentina
(2000-2011)
4.3 8.7 8.6
Chile
(1990-2011)
- 50.3 88.2
Colombia
(2000-2011)
28.7 36.2 33.7
Costa Rica
(1996-2011)
7.4 22.9 24.7
Ecuador
(2002-2011)
- - 33.3
Guatemala
(2002-2011)
- - -
Mexico
(2000-2011)
19.5 21.7 22.7
Peru
(2002-2011)
30.5 40.8 41.8

68
In Chile, Ecuador and Guatemala (-) indicates that the number of proposals is too small to calculate a meaningful statistics.
175

TABLE 35: PASSING RATES OF "EQUITY" AND "MARKET" INITIATIVES (TABLE A)
Political Party
Equity-Promoting
Initiatives
(% of all introduced by party)
Passing Rates of Equity-
Promoting Initiatives
(% of all introduced by party)
Market-Promoting
Initiatives
(% of all introduced by party)
Passing Rates of Market-
Promoting Initiatives
(% of all introduced by party)
Argentina
(2000-
2011)
Partido Justicialista 24.0 3.5 47.8 5.3
Unión Cívica Radical 27.1 2.1 42.4 2.7
Frente para la Victoria 27.3 5.6 35.6 8.5
Joint initiatives 41.0 - 41.5 -
Other parties 0.8 36.8 1.6
Executive 20.5 88.9 45.5 85.0
Chile
(1990-
2011)
Renovación Nacional 0 - 0 -
Unión Democrática
Independiente
0 - 0 -
Joint initiatives 0 - 0.1 -
Other parties 0 - 20.0 0
Executive 6.1 66.7 75.5 54.1
Colombia
(2000-
2011)
Partido Liberal
Colombiano
4.0 0 56.0 14.3
Partido Conservador
Colombiano
18.2 25.0 41.0 22.2
Partido de la U 7.7 0 53.8 28.6
Joint initiatives 0 - 37.5 50.0
Other parties 12.5 20.0 42.5 23.5
Executive 16.7 66.7 83.3 73.3
Costa Rica
(1996-
2011)

Unidad Social
Cristiana
16.2 5.9 14.3 13.3
Partido Liberación
Nacional
22.2 14.3 12.7 0
Movimiento Libertario 10.5 7.4 52.6 0
Joint initiatives 15.7 0 25.4 46.2
Other parties 30.5 5.6 15.3 22.2
Executive 11.5 33.3 65.4 47.1

176

TABLE 36: PASSING RATES OF "EQUITY" AND "MARKET" INITIATIVES (TABLE B)
Political Party
Equity-Promoting Initiatives
(% of all introduced by party)
Passing Rates of Equity-
Promoting Initiatives
Market-Promoting Initiatives
(% of all introduced by party)
Passing Rates of
Equity-Promoting
Initiatives
Ecuador
(2002-
2011)
Izquierda Democrata 25.5 0 12.5 0
Partido Social
Cristiano
0
-
12.5
-
Partido Rudolsista 0 - 0 -
Joint Initiatives 12.5 100.0 0 -
Other parties 3.5 0 20.7 0
Executive Initiatives 6.25 0 31.3 83.3
Guatemala
(2002-
2011)
Unidad Nacional de
la Esperanza
0
-
35.0
-
Gran Alianza
Nacional
12.5
-
12.5
-
Frente Republicano
Guatemaltco
8.4
-
4.34
-
Joint Initiatives 15.4 - 0 -
Other parties 0 - 13.3 -
Executive 11.1 - 22.2 -
Mexico
(2000-
2011)
Partido Acción
Nacional
9.9
41.7
44.6
18.4
Partido
Revolucionario
Institucional
14.1
12.2
51.8
11.6
Partido de la
Revolución
Democrática
33.9
16.7
44.6
21.0
Joint initiatives 10.7 33.3 57.1 23.1
Other parties 53.3 12.5 28.1 7.7
Executive 3.8 100.0 72.2 84.6
Peru
(2002-
2011)
Unidad Nacional 24.2 43.8 29.5 43.3
Partido Aprista
Peruano
18.9
22.9
29.7
39.7
Perú Posible 20.1 28.6 23.8 36.7
Joint initiatives 25.4 35.3 10.3 42.1
Other parties 23.6 19.1 36.7 28.6
Executive 15.3 81.2 48.6 77.5
177

TABLE 37: “CLIENTELISM AND PASSING RATES (TABLE A)
Political Party % of all bills

% of bills that aim to benefit firms,
sectors and regions
Passing rates of bills that aim to
establish benefits for firms, sectors
and regions
Argentina
(2000-2011)
N= 1095
Partido Justicialista 21.7 42.9 6.9
Unión Cívica Radical 16.2 40.7 5.6
Frente para la Victoria 12.1 43.9 2.1
Joint initiatives 20.7 - -
Other parties 32.4 3.89 1.8
Executive 4.0 31.8 85.7
Chile
(1990-2011)
N=71
Renovación Nacional 5.6 0.0 0.0
Unión Democrática
Independiente
5.6 0.0 0.0
Joint initiatives 14.1 10.0 0.0
Other parties 6.0 0 0.0
Executive 69.1 31.7 93.8
Colombia
(2000-2011)
N=136
Partido Liberal Colombiano 18.7 76.0 21.1
Partido Conservador
Colombiano 16.5 68.2 33.3
Partido de la U 9.8 53.8 28.6
Joint initiatives 11.9 56.3 66.7
Other parties 29.7 60.0 25.0
Executive 13.4 38.9 57.1
Costa Rica
(1996-2011)
N=378
Unidad Social Cristiana 27.8 20.9 18.2
Partido Liberación Nacional 16.7 17.7 36.7
Movimiento Libertario 15.1 14.0 0.0
Joint initiatives 13.4 35.3 44.4
Other parties 15.6 27.1 6.25
Executive 13.8 17.3 33.3

178

TABLE 38: "CLIENTELISM" AND PASSING RATES (TABLE B)
Political Party % of all bills

% of bills that aim to benefit firms,
sectors and regions
Passing rates of bills that aim to
establish benefits for firms, sectors
and regions
Ecuador
(2002-
2011)
N=75
Izquierda Democrata 12.0 33.3 33.3
Partido Social Cristiano 10.7 25.0 0
Partido Rudolsista 10.7 25.0 50.0
Joint Initiatives 1.3 100.0 100.0
Other parties 38.7 44.8 8.0
Executive 20.1 40.0 83.3
Guatemala
(2002-
2011)
Unidad Nacional de la Esperanza 9.6 20.0 -
Gran Alianza Nacional 4.7 0 -
Frente Republicano Guatemalteco 8.4 11.1 -
Joint Initiatives 20.6 36.7 -
Other parties 14.0 46.7 -
Executive 15.9 23.5 -
Mexico
(2000-
2011)
N=683
Partido Acción Nacional 16.4 32.5 29.7
Partido Revolucionario
Institucional
37.4 37.1 10.2
Partido de la Revolución
Democrática
14.1 44.3 27.9
Joint initiatives 3.8 41.7 20.0
Other parties 6.8 19.2 22.2
Executive 4.9 44.4 75.0
Peru
(2002-
2011)
N=953
Unidad Nacional 18.7 33.0 52.5
Partido Aprista Peruano 16.9 45.0 33.3
Perú Posible 16.7 33.4 32.7
Joint initiatives 8.2 42.2 51.4
Other parties 27.0 36.3 35.1
Executive 8.5 32.6 75.0

179

TABLE 39: CLIENTELISM, POLITICAL PARTIES, AND PASSING RATES
Low Passing Rates High Passing Rates
Low efforts to promote targeted
benefits
- Renovación Nacional (CHL)
- Unión Democrática Independiente (CHL)
- Unidad Social Cristiana (COR)
- Movimiento Libertario (COR)
- Partido Revolucionario Institucional (MEX)
- Partido Liberación Nacional (COR)
- The Executive (COR)
High efforts to promote targeted
benefits
- Partido Liberal Colombiano (COL)

- Partido Justicialista (ARG)
- Unión Cívica Radical (ARG)
- Frente para la Victoria (ARG)
- Partido Conservador Colombiano (COL)
- Partido de la U (COL)
- Partido Acción Nacional (MEX)
- Partido de la Revolución Democrática (MEX)
- Unidad Nacional (PER)
- Partido Aprista Peruano (PER)
- Perú Posible (PER)
- The Executive (ARG)
- The Executive (CHL)
- The Executive (COL)
- The Executive (MEX)
- The Executive (PER)
180

Chapter 5: Strategies to Promote Equity through
Taxation in Contemporary Latin America

“Few observers of Latin America’s recent history would dispute the contention
that states of the region are plagued by weaknesses. Starved of resources, deficient
institutional capabilities, and lacking widespread legitimacy, Latin American states
predictably fail to coordinate processes of economic development and, to engage
the populace in the construction of universal citizenship, or even simply to respond
from below in any adequate form” (Beasley-Murray, Cameron, and Hershberg
2010, 1).

The political Left’s economic policies were discredited by the economic crisis that seized
most of Latin America during the 1980s. Import Substitution Industrialization (ISI), which had
been the cornerstone of most of Left-wing development programs during the post-World War II
era, came to be seen as a strong contributing factor to the slow growth that plagued the region
following the 1982 debt shocks. Largely because of the accompanying inflation and job losses,
support for Left-wing economic programs, politicians and political parties declined precipitously
during this period. Not until the late 1990s did the political Left begin to recover popular support
in at least some parts of Latin America, as indicated by the election of Hugo Chávez in
Venezuela in 1998.
Chávez’s coming to power in Venezuela was perhaps the most spectacular example of
the Left’s resurgence. The late 1990s and early 2000s saw other notable electoral victories on
the Left, including that of Luiz Inacio Lula da Silva on the Worker’s Party ticket in Brazil in
2003 and the unexpected return of Alan García to the presidency in Peru in 2006 with backing
181

from the populist APRA party. However, in both of these latter cases, and contrary to the
example of Chávez in Venezuela, avowedly Left-wing politicians acted to fine tune free-market
reforms without making substantive changes to the basic market model that had been at adopted
in their respective countries in the aftermath of the debt crisis.
69
Thus, apart from a shared vision
of the need for state sponsorship for poverty reduction and equity-promoting policies, there has
been considerable variation in the Left’s approaches to leveling the playing field in
contemporary Latin America (Baker and Greene 2011; Weyland 2011; Levitsky and Roberts
2011a; Flores-Macias 2010, 2012; Beasley-Murray, Cameron, and Hershberg 2010).
The main departure point for this chapter is to capture some of this variation through the
lens of tax policy. As a substantial literature now exists on the economic policy choices of Left-
wing executives, I will examine the tax initiatives put forth by Left-leaning political parties. In
particular, I will look at variation in the goals and the range of tax instruments which political
parties have embraced in order to achieve their objectives. Given that taxation concerns issues of
equity as well as state capacity, Leftist candidates have presented a case for increasing public
revenue; shifting the tax burden away from lower income earners; and, abolishing loopholes and
special arrangements which benefit the wealthy. Within the broader context of concerns with
equity, this chapter focuses on two main questions concerning the use of tax instruments to
promote a more level playing field in contemporary Latin America. First, what is the specific
nature of the objectives that Leftist political parties have pursued through taxation? Second,
what are the strategies pursued by policymakers concerned with equity?

69
For variation in the political projects of the Latin American Left, see, for example: Levitsky and Roberts (2011a);
Beasley-Murray and colleagues (2010); Reygadas and Filgueira (2010); Moreno-Brid and Paunovic (2010);
Cameron and Hersberg (2010); Weyland (2011); and, Flores-Macias ; (2010, 2012).
182

The first section of this chapter places the role of the “new” Left in taxation within the
broader context of prevalent concerns with social and economic marginalization. Despite
substantial variation in the “new” Left’s approaches to economic development, many have
argued that their “social policy toolkit” has been designed to offer greater policy choice to the
region’s voters. Hence, among many, the “new” Left has instilled hopes of more authentic
political representation. As discussed in the section, many Left-wing candidates have cast
taxation as an issue of distributive policy and made tax reform an integral issue of their
campaign.
The second section turns to the agenda of the “new” Left and discusses specific tax
proposals put forth in Peru and Chile before turning to an analysis of the strategies pursued by
those that have promoted equity-enhancing policy goals. As commonly observed in Latin
America, tax reform has instilled staunch opposition from politically powerful groups. Having
said this, my analysis of Latin American Left-wing parties uncovers another side to this story,
one which has been left largely unexplored. This pertains to the relative failure of the Left to
assume a more active role in agenda-setting and to provide viable alternatives to the policies put
forth by the Right.

Social Marginalization and Redistributive Politics
A highly skewed income distribution and widespread indigence have left a substantial
portion of the Latin American population with few opportunities for upward mobility (Gasparini
and Lustig 2011; Birdsall, de la Torre, and Menezes 2001; Birdsall, Lustig, and McLeod 2011;
Pribble, Huber, and Stephens 2009). Despite recent improvements in income distribution
183

(Gasparini and Lustig 2011; Birdsall, Lustig, and McLeod 2011), socio-economic
marginalization and indigence are immediate continue to plague the region’s lower income
earners (Pribble, Huber, and Stephens 2009; Jones 2012; Arnold and Samuels 2011). This point
is clearly articulated by Evelyne Huber and John D. Stephens in their recent study on social
policy developments in Latin America. Here, they conclude that “two-thirds of Latin American
households, whether seen from the point of view of class position or position in income
distribution, have an interest in egalitarian social reforms” (2012, 6). Clearly, the demand for
anti-poverty and state-led compensation programs remains high across the region.
In most of Latin America cutbacks in social spending and government-administered
programs are associated with the agenda for market re-orientation put in place in the wake of the
1980s debt crisis and carried out under the auspices of the International Monetary Fund (IMF)
and the World Bank (Huber and Stephens 2012, 206-207; Birdsall, De la Torre, and Caicedo
2010). While these reforms prioritized economic liberalization, privatization, and deregulation
(Williamson 1990; Edwards 1995), they drew stark criticism for downplaying their adverse
effects on poverty and equity (Birdsall, de la Torre, and Menezes 2001; Pastor and Wise 1999).
This criticism was further empowered by the steep budget cuts that followed which greatly
affected the region’s already under-funded compensation programs, including essential
healthcare services and pension schemes (Mesa-Lago 2008; Huber and Stephens 2012).
Against this backdrop, it is widely argued among experts on Latin America that the
failure of the neoliberal policy agenda to simultaneously balance growth with equity-enhancing
policies has had vital consequences for Latin American politics (Silva 2009; Roberts 2008). In
particular, the failure to shield the region’s poor from the heavy adjustment has provided Left-
184

wing candidates and their political parties with ammunition to credibly promise policy reforms
that will aggressively tackle the lopsided distribution of economic gains in the region (Levitsky
and Roberts 2011a; Cameron and Hershberg 2010). Consequently, as Flores-Macias writes, the
“severe economic inequality affecting Latin America made the left’s project increasingly popular
following the generalized adoption of market reforms” (2012, 16). The following section turns
to the broader political consequences of the failure to balance equity and growth since the debt
shocks and the financial turmoil of the 1980s.

Political Consequences of the “Incorporation Crisis”
Since the later 1990s, the “resurgence” of the Latin American Left has tinted campaign
trails extending from Mexico in the North to Chile and Argentina in the far South (Levitsky and
Roberts 2011b; Flores-Macias 2012).
70
Despite substantial variation in the new Left’s political
projects (Beasley-Murray, Cameron, and Hershberg 2010; French 2010; Flores-Macias 2010),
many of these movements and political parties have shared an electoral strategy which has
centered on a greater role for the state in alleviating prevalent social and economic grievances
(Levitsky and Roberts 2011a; Beasley-Murray, Cameron, and Hershberg 2010; Weyland 2011).
In a recent article, Luis Reygadas and Fernando Filgueira argue that the “shift to the Left
represents the political expression of…an incorporation crisis” (2010, 173). Reygadas and
Filgueira attribute this crisis to the general failure of policymakers to adequately address difficult

70
For overviews of Leftist electoral victories or near victories see, for example, Flores-Macias (2012), Levitsky and
Roberts (2011a), and Baker and Greene (2011).
185

social and economic conditions and to meet the fundamental needs of a significant portion of the
population.
71
In essence, the “incorporation crisis” reflects the failure of political representation
in contemporary Latin America (Luna and Filgueira 2009; Filgueira and Luna 2009; Kitschelt,
Hawkins, Rosas, et al. 2010b).
As discussed in Chapter 2, the lack of adequate political channels for redress is frequently
attributed to the low quality of Latin American democratic institutions. Of particular concern is
the ability of the region’s political parties to formulate programmatic policy and articulate
distinct policy packages (Kitschelt, Hawkins, Luna, Rosas, and Zachmeister 2010; Jones 2010,
2012; Mainwaring and Scully 1995b; Mainwaring and Scully 1994; Levitsky and Cameron
2009). Although the return to democracy beginning in the late 1970s facilitated the re-
emergence of previously marginalized actors, access to the political process did not necessarily
result in an expanded policy space (Levitsky and Cameron 2009; Sanchez 2008). In fact, in the
wake of the debt crisis, Latin America was associated with shrinking policy choice, as elected
governments of various partisan persuasions converged on the implementation of the neo-liberal
policy agenda (Stokes 2001; Murillo 2009). As Maria Victoria Murillo has noted, “[a]s
democracy was returning to Latin American in the 1980s and 1990s, the citizens of the region’s
fledgling democracies experienced a paradoxical combination of expanding political rights and
shrinking policy choice” (2009, 1).

71
For example, as a recent study of Venezuela has noted, “[t]he Chávez government sought power in order to
redistribute resources…as a result of a wave of popular grievances and frustration expressed in spontaneous protests
throughout the 1990s” (McCoy 2010, 85).
186

The re-emergence of the Latin American Left has therefore brought hope of expanded
policy choice and more authentic political representation. As a number of studies have found,
the “new” Left has indeed articulated an alternative model of economic governance. For
example, Juan Carlos Moreno-Brid and Igor Paunovic argue that the “new” Left has
implemented “economic strategies that combine orthodox and heterodox elements, thus
departing from the neoliberal toolkit centered on downsizing the state and severely restricting its
intervention…” (2010, 193). Along similar lines, Steven Levitsky and Kenneth M. Roberts
observe that the “post-1998 wave of leftist victories ushered in a new era of policy
experimentation in which governments expanded their developmental, redistributive, and social
welfare roles” (2011a, 2). Consequently, seen from the perspective of political representation,
concrete efforts to provide explicit policy alternatives to the neoliberal model appear to have
resonated with the Latin American electorate.

Taxation and the “New Left”
The Latin American “new” Left nevertheless continues to face the formidable challenge
of satisfying an extraordinarily high demand for redistributive programs with scarce economic
resources (Scott 2001, 2009; Huber and Stephens 2012). Despite recovering tax revenue since
the early 1990s, the capacity of the region’s governments to provide stable funding for
government programs remains low in most Latin American countries. Consequently, as noted by
many scholars of economic development and social policy, Left-wing politicians and
187

policymakers tend to see taxation as the “Achilles’ heel of most Latin American welfare states in
the making” (Huber and Stephens 2012, 259).
72

As argued in this dissertation, Latin American policymakers have embraced quite
different solutions for financing the state. On the Left, fiscal reform has tended to involve efforts
to: a) increase taxes on income and wealth in order to fund social programs; and, b) alleviate the
tax burden on lower income earners. Conversely, among those concerned with tax capacity on
the Right, reform proposals have focused on expanding general consumption taxes. For
example, in contrast to President Calderón’s efforts to finance government programs in Mexico
by implementing a new sales taxes preferred by the Center-Right, Left-wing President Rafael
Correa’s Ley de Redistribución del Gasto Social targeted the finance sector by eliminating
exemptions and introducing taxes on financial transactions (Telegrafo Dec. 4, 2012).
73
As I
discuss below, Peru’s Ollanta Humala and Chile’s Marco Enríquez-Ominami ran similar
campaigns on the Left and met with little success in rallying lower income earners around their
respective proposals for more equitable taxes. While Humala generated stark criticism from the
Right, Enríquez-Ominami largely failed to gather support from Chile’s lower income earners.
Tax reform constituted an integral component of the 2011 Peruvian election when Ollanta
Humala, the founder of the Peruvian Nationalist Party (Partido Nacionalista Peruano), ran on a

72
In a recent study Juan Carlos Gómez Sabaini and his colleagues (2010) attribute the low capacity of the tax
system to redistributive economic gains to low tax collection, a general bias toward consumption taxes, and
prevalent tax evasion.
73
Correa’s initiative passed with an overwhelming majority in Congress on Dec. 4, 2012.
188

presidential bid to augment the country’s tax capacity by four percent of GDP.
74
With a
campaign tailored toward “el pueblo Peruano,” Humala proposed increasing the reliance on
more progressive taxation, particularly property and inheritance taxes, which he believed would
provide the necessary financing for programs designed to alleviate the extreme poverty which
afflicts many Peruvian voters. However, after a series of televised interviews, political
opposition to Humala’s tax reform proposals mounted rapidly.
75
In response, his campaign
scaled back considerably. By the election, Humala had publicly declared that his administration
would not pursue the creation of new taxes if he were elected as president.
76

A similar outcome occurred in Chile only a few months earlier when presidential
candidate, and founder of the Progressive Party (Partido Progresista), Marco Enríquez-Ominami
proposed a similar tax program. As with Humala, Enríquez-Ominami aimed to muster support
from a substantial portion of the Chilean electorate concerned with socio-economic inequality
and called for increasing the state’s tax capacity to make resources available for combatting
poverty and leveling the socio-economic playing field. While facing opposition from big
business and higher income groups, it also became apparent that taxation had failed to ignite the
level support expected among lower income earners. Enríquez-Ominami lost the first round of
the presidential election and later explained that Chile was simply not ready for tax reform.
When asked to comment on President elect Sebastian Piñera’s tax agenda, Enríquez-Ominami

74
See, for example, a televised interview with Humala’s economic adviser Félix Jiménez on Rumbo Economico,
Canal N on Dec. 10, 2011.
75
Humala discussed his tax program in an interview with Rosa Maria Palacios on Prensa Libre on January 13, 2011.
76
See, for example, “Ollanta Humala aseguró que no se crearán ni elevarán impuestos” (El Comercio Online, May
25, 2012) and “Presidente Humala: No vamos a subir los impuestos” (La Republica online, May 25, 2012).
189

stressed that the efforts pursued by the Right-wing president elect constituted nothing more than
minor adjustments to the existing tax code.
77

Observers of Latin American politics and generally attributed the failure to increase taxes
to political opposition from big business and higher income earners (Boylan 1996; Fairfield
2010). While opposition from the Right has been an important factor, my analysis suggests that
the general failure of the Left to articulate an alternative policy agenda constitutes another less
explored part of the story. Hence, I explore the “Left side” of the story in the section that
follows.

Political Parties and Equity in Contemporary Latin America
Contrary to the campaign rhetoric of some Leftist political candidates, the Left has been
relatively absent from agenda-setting as it pertains to taxation. To gain a better understanding of
the role that Left-wing parties have played, I analyze tax bills that have sought to promote some
aspect of “equity.” The analysis that follows will primarily focus on Argentina, Mexico and
Peru where a considerable proportion of the initiatives have been directly concerned with issues
of socio-economic equality. I find that: a) those concerned with “equity” have primarily
targeted income and consumption taxes; b) tax increases have not constituted a dominant
strategy among those concerned with equity; and, c) many policymakers who are concerned with
equity have aimed to establish targeted benefits for specific social groups and remote geographic
regions, many of which have not experienced substantial growth and development.

77
Author's interview with Marco Enríquez -Ominami, Mexico City, May 2011.
190

My analysis indicates that policymakers who have sought to introduce greater equity
have primarily targeted taxes on income and general consumption (Table 41). This is clearly
observed in Peru where policymakers have sought shield lower income earners from regressive
taxes (40.9 percent) of the so-called “equity” bills have aimed to make changes to consumption
taxes. One observes similar trends in Argentina (30.3 percent) and Mexico (35.6 percent).
Similarly, many policymakers have sought to introduce greater equity into the region’s income
tax regimes.
At the same time, my data show that increasing overall tax levels has not been a primary
strategy for political parties (Table 40). Among the eight countries included in this study, efforts
to increase taxes have been most substantial in Colombia (10.3 percent), Guatemala (10.1
percent), and Mexico (9.2 percent). In Mexico, these initiatives are primarily associated with the
PRI and the PRD, which represent a substantial portion of Mexico’s lower income earners. In
Argentina, Frente para la Victoria, which was founded by a group of Peronists in 2003, has led
similar efforts. By contrast, tax bills that aim to increase taxes in Peru are generally associated
with smaller political parties with no real ability to impact the policymaking agenda. This leads
to the general conclusion that, contrary to the narratives reviewed above, tax increases have not
been the preferred strategy of the respective parties actively involved in tax debates in
contemporary Latin America.
There is some indication in the data that policymakers concerned with equity have opted
for more targeted strategies. For example, in Argentina (10.2 percent), Guatemala (26.6
percent), Mexico (12.8 percent), and Peru (11.1 percent) a significant portion of all tax bills
introduced in the national legislatures have sought to establish tax benefits which aim to benefit
191

particular social groups. Notably, among Guatemalan policymakers this has consisted of an
important strategy, especially considering that the overall framework of this study did not fit as
well as in other countries. For the purpose of this study, this measure codes benefits aimed at
groups that have few opportunities to participate in the economy, such as the disabled, single
caretakers, and senior citizens. However, as relatively few proposals have been introduced, a
more detailed study of these initiatives is needed in order to conclude that those concerned with
equity have preferred targeted benefits over general increases in taxation.
However, it should be noted that although Chapters 2 and 3 associated the danger of
targeted benefits for firms, sectors, and geographic regions with efforts to promote “the market,”
some policymakers have also made an “equity-based” argument for granting tax exemptions to
select firms, sectors and geographic regions. Indeed, many Latin American policymakers have
argued that the use of tax incentives can be defended on the grounds of equity. As discussed in
the case of the Peruvian Amazon, remote geographic regions have not experienced the economic
growth enjoyed by those residing in larger cities. Hence, policymakers have put forth the
argument that tax incentives can be used to attract investment in strategic sectors that will
increase employment in remote and underdeveloped geographic regions. For example, my
analysis shows that around twenty-five percent of the initiatives that sought to establish tailored
tax regimes in Peru were directly concerned with equity. Similar efforts are also observed in
Argentina (17.6 percent) and to a lesser extent in Mexico (12.4 percent). However, as in the case
of targeted social benefits, a more in-depth analysis of the particular initiatives is needed in order
to draw the conclusion that this is a preferred strategy among those concerned with equity.

192

Conclusion
The resurgence of the Latin American Left in the late 1990s instilled hope of expanded
policy choice among a substantial portion of the region’s lower income earners who have had
few prospects for upward mobility. While the “new” Left has more heterodox policies and the
development of social compensation programs, the revenue base necessary to sustain such
projects is generally not in place. Consequently, many on the “new” Left have cast taxation as
an issue of distributive justice and sought to undertake tax reforms which would alleviate the tax
burden falling on lower income earners and increase reliance on progressive forms of taxation in
order to increase the fiscal capacity of the state.
However, despite efforts to increase taxes and rally lower income earners around tax
reform, many of these candidates have faced considerable opposition to their tax agendas, as
seen in the cases of Peru’s Humala and Chile’s Enríquez-Ominami. The failure of Latin
America to increase taxes and undertake substantial tax reform is commonly attributed to
political opposition on the Right. However, my analysis of the relative involvement of Leftist
political parties indicates that their absence from legislative agenda-setting in the realm of tax
reform may be a vital part of the story. As my analysis suggests, rather than assuming a
considerable role in agenda-setting Latin American Left-wing parties instead opted for a more
reactive position.

193

TABLE 40: TARGETED SOCIAL BENEFITS AND BENEFITS TO FIRMS, SECTORS AND
GEOGRAPHIC REGIONS
Country
Initiatives that aim to
augment tax revenue
(% of all tax initiatives)
Targeted social benefits
(Disabled, senior citizens, single
caretakers)
(% of all policy initiatives)
Argentina
(2000-2011)
3.4 10.2
Chile
(1990-2011)
0 1.4
Colombia
(2000-2011)
10.3 3.7
Costa Rica
(1996-2011)
8.2 6.9
Ecuador
(2002-2011)
0 2.7
Guatemala
(2002-2011)
10.1 26.6
Mexico
(2000-2011)
9.2 12.8
Peru
(2002-2011)
5.7 11.1

194

TABLE 41: OVERVIEW OF EQUITY-PROMOTING POLICY GOALS
Argentina Mexico Peru
Percentage of initiatives
aiming to promote “equity”
30.0 17.1 22.3
Percentage of “equity”
initiatives targeting income
taxes
30.0 43.2 14.1
Percentage of “equity
initiatives” targeting
consumption taxes
30.3 35.6 40.9

Other policy goals

Targeted benefits to firms,
sectors and geographic regions
connected to “equity”
17.7 12.4 25.2
Efforts to increase state
revenue (% of all initiatives).
3.4 9.3 5.7

195

Chapter 6: Conclusion

“The central social and economic problem in many Latin American countries is
inequality. On the other hand, the key…governance problem is lack of
accountability. A good tax system is critical to the solution of both problems”
(Bird 2003, 43).

The demise of state-led development strategies in the aftermath of the debt shocks and
financial turmoil of the 1980s resulted in substantial changes in Latin American tax systems.
While initial reform efforts were undertaken by relatively insulated teams of technocrats, the
return to democracy since the late 1970s has altered the dynamics of public policy formation by
increasing opportunities for political participation and thrusting political parties to the center
stage of the policymaking process. However, marginalized under authoritarian rule, Latin
America’s party organizations have struggled to reconstitute themselves as policy players in their
own right. At the same time, many ambitious politicians have exploited the region’s parties for
personal gain and invested very little in their institutional and organizational capacity.
Consequently, there is extensive variation in the ability of Latin American parties to articulate
programmatic policy.
In this dissertation, I contribute to existing research agendas on the formation of public
policy in contemporary Latin America. This includes extensive bodies of literature on Latin
American political parties and legislatures, pork-barrel politics and the role of the “new” Left, all
of which have a common interest in issues around political representation and accountability. As
196

discussed, existing theoretical perspectives on taxation expect policy convergence against the
backdrop of similar levels of political and economic development. Scholars of economic
development have therefore focused on variation in tax capacity measured as a proportion of
GDP. Political scientists have generally focused on: a) the failure to undertake comprehensive
tax reform which they have attributed to external pressures around Latin America’s re-
integration into global trade and capital markets since the 1980s debt shocks; and b) the
opposition of big business and owners of wealth to increase income taxes. However, as
demonstrated in this study, there are substantial differences in the politics around the formation
of tax policy in contemporary Latin America. The lack of comparable data necessary to map the
policy space across countries has precluded comparative studies of the variance in policy
formation across the region’s emerging markets. It is this explanatory gap that motived this
study.
The cornerstone of this dissertation is an analytical framework designed to reveal the
politics of taxation in Latin America’s emerging market economies. Underpinned by a unique
dataset composed of policy initiatives introduced in national legislatures and extensive bodies of
work on political parties and policymaking, this framework provides a more comprehensive
explanation for the formation of tax policy across countries. The first dimension of this
framework (Chapter 2) mapped the distribution of policy preferences and estimated variation in
the ability of parties to articulate programmatic policy. The second dimension (Chapter 3)
looked at the extent to which policymakers have relied on tax instruments to cater to narrow
political bases, including firms, sectors and geographic regions. To gain insight into the ways in
which the policymaking process has shaped policy, Chapter 4 looked at the ability of the
respective actors to successfully translate their objectives into actual law.
197

My analyses of these chapters were largely concerned with mapping the policy space
available to Latin American voters and better understand the role the policymaking process in the
formation of policy. As argued in Chapter 2, most of Latin America’s political parties are
plagued by internal divisions which are manifested in party officials pursuing contending policy
objectives. As a result, the policy space available to the Latin American electorate is defined by
one dimension: the policymaking agenda of Right-wing political parties. Furthermore, as I
discuss below, non-programmatic parties are associated with the over-representation of
particularistic interests which has resulted in the formation of tailored tax incentive packages
aimed for strategic political actors. Thus, as many studies have demonstrated, Latin America’s
long history of pork-barrel politics shaping public policy remains largely intact. Future studies
on taxation and clientelism would learn a great deal about the relationship between clientelism
and public policy by looking at the relationship between political parties and particular sectors.
Lastly, Chapter 5 looked at the role of the “new” Left in the formation of tax policy.
While their programs, politicians and institutions were discredited in the aftermath of the debt
shocks, increased political mobilization on the Left resulted in a wave of Leftist electoral
victories in the late 1990s. Largely in response to dissatisfaction with the dominance of
neoliberalism and the failure of reformers to balance equity and growth, the “new” Left brought
the hope of a more equity-oriented political project and more authentic political representation.
However, the “new” Left’s “mandate” to undertake change has varied considerably across the
region.
78
Although many politicians and presidential candidates cast taxation as an issue of

78
This term is borrowed from Baker and Greene’s (2011) excellent article on the mandate of the “new” Left in Latin
America.
198

distributive justice, their success in terms of rallying the Latin American electorate around a tax
agenda has been less than spectacular.
A major finding in this study is that the Left has been relatively absent from agenda-
setting when it comes to taxation. Left-wing parties have introduced very few initiatives in
comparison with the Right and their relative absence makes it difficult to discern the exact nature
of their strategies. This might be attributed to the Left’s difficulties in achieving an internal
consensus on the policy goals that taxation should be used to achieve. Or, it may simply mean
that the best strategy is to oppose the Right’s agenda to promote the market. Hence, a more
extensive analysis of the Left, as well as differences among Left-wing parties, is needed to
explain its relative absence from agenda-setting. It should nevertheless be noted that the data
collected for this paper finds that the enthusiasm for undertaking tax reform among some Leftist
candidates is not always shared among the region’s Left-wing parties.
The Latin American Left continues to find itself in a difficult situation in state finance.
On the spending side, the creation of social programs is constrained by the inability to establish a
stable revenue source ability to pay for such programs. As a result of insufficient political
resources and the need to build support among voters, the Left appears to have opted for
exclusive targeting strategies that focus on particular political segments within their budget
constraints. On the tax revenue side, the Left’s inability to articulate an independent position on
tax policy which has left policymakers with the strategy to mitigate burden carried by lower
income earners. This has meant the pursuit of exemptions and lower taxes rates on particular
consumption goods. Again, the strategy is targeted in nature and far less comprehensive than
articulated in the Left’s visions for comprehensive tax reform. In essence, on fiscal policy the
199

Left is “caught between a rock and hard place” while the Right faces mounting challenges in
formulating public policies that balance the demands for an a larger market-oriented sector with
those of equity.

200

Appendix

Tax Expenditure Reports by Country
BANCO MUNDIAL (2012), “El Gasto Tributario en Colombia: Una propuesta de evaluación
integral y sistémica de este instrumento de política pública”, Bogotá.

REPÚBLICA FEDERATIVA DEL BRASIL (2011), “Demonstrativo dos Gastos Tributários
2012”, Ministerio de Hacienda, Brasilia.

REPÚBLICA FEDERATIVA DEL BRASIL (2013), “Demonstrativo dos Gastos Tributários
2013”, Ministerio de Hacienda, Brasilia.

REPÚBLICA ARGENTINA (2009), “Estimación de los gastos tributarios para los años 2010 a
2012”, Dirección Nacional de Investigaciones y Análisis Fiscal, Secretaría de Hacienda,
Ministerio de Economía y Finanzas Públicas.

REPÚBLICA ARGENTINA (2012), “Proyecto de Ley de Presupuesto General de la
Administración Nacional para el Ejercicio Fiscal del año 2013”, Ministerio de Economía y
Finanzas Públicas, Buenos Aires.

REPÚBLICA DE CHILE (2011), “Informe de Finanzas Públicas. Proyecto de Ley de
Presupuestos del Sector Público para el año 2012”, Dirección de Presupuestos, Ministerio de
Hacienda, Santiago de Chile.

REPÚBLICA DE CHILE (2011), “Informe de Finanzas Públicas. Proyecto de Ley de
Presupuestos del Sector Público para el año 2013”, Dirección de Presupuestos, Ministerio de
Hacienda, Santiago de Chile.

201

Parra, Gloria; Albarracín, Ivon & Sierra Reyes, Pastor (2010), “El gasto tributario en Colombia.
Principales beneficios en el impuesto sobre la renta e IVA. Años gravables 2008 y 2009”,
Cuaderno de Trabajo Nº 40. Coordinación de Estudios Económicos, Subdirección de Gestión de
Análisis Operacional, Dirección de Gestión Organizacional.

REPÚBLICA DE COLOMBIA (2010), “Principales Beneficios Tributarios en el Impuesto sobre
la Renta y en el Impuesto al Valor Agregado (IVA) - Año Gravable 2010.”

REPÚBLICA DE COSTA RICA (2011), “Estimación del Gasto Tributario para Costa Rica en el
2010: Impuesto de Ventas, Impuesto de Renta y otros Tributos”, Centro de Investigación y
Formación Hacendaria, Ministerio de Hacienda. San José.

REPÚBLICA DEL ECUADOR (2012), “Una Mirada al Gasto Tributario en Ecuador”,
Exposición en Jornadas Tributarias, Centro de Estudios Fiscales, Dirección Nacional de
Planificación, Servicio de Renta Internas del Ecuador, Quito.

REPÚBLICA DEL ECUADOR (2010), “Manual del Gasto Tributario en Ecuador. Año 2010”,
Centro de Estudios Fiscales, Servicio de Rentas Internas, Quito.

REPÚBLICA DE GUATEMALA (2012), “Presupuesto General de Ingresos y Egresos del
Estado Ejercicio Fiscal 2012”, Ministerio de Finanzas Públicas, Ciudad de Guatemala.

ESTADOS UNIDOS MEXICANOS (2009), “Presupuesto de Gastos Fiscales 2009”, Secretaría
de Hacienda y Crédito Público, México D.F.

ESTADOS UNIDOS MEXICANOS (2010), “Presupuesto de Gastos Fiscales 2010”, Secretaría
de Hacienda y Crédito Público, México D.F.

ESTADOS UNIDOS MEXICANOS (2011), “Presupuesto de Gastos Fiscales 2011”, Secretaría
de Hacienda y Crédito Público, México D.F.
202

ESTADOS UNIDOS MEXICANOS (2012), “Presupuesto de Gastos Fiscales 2012”, Secretaría
de Hacienda y Crédito Público, México D.F.

REPÚBLICA DEL PERÚ (2011), “Informe de Gastos Tributarios 2012”, Gerencia de Estudios
Tributarios, Intendencia Nacional de Estudios Tributarios y Planeamiento, Superintendencia
Nacional de Administración Tributaria, Lima.

REPÚBLICA FEDERATIVA DEL BRASIL (2011), “Gastos Tributários no Brasil”, II
Workshop de Gastos Tributários, Receita Federal do Brasil, Brasilia.

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Abstract (if available)

Abstract This dissertation focuses on the role of political parties in the formation of tax policy in contemporary Latin America. Taxation is conceptualized as an instrument of public policy that policymakers have at their disposal to pursue their respective policy objectives and cater to their political bases, be they broad or narrow in scope. The essential questions are: to whom are policymakers catering? To what extent are tax instruments used to promote particularistic interests? I draw on an extensive scholarship on political parties, clientelism and political accountability to provide a unique framework for studying the politics of taxation. This framework makes a distinction between the formation of policy in inchoate, non-programmatic and institutionalized, programmatic party systems. In the latter, one observes at least the contours of parties competing for votes by articulating distinct policy positions, thereby catering to broader political bases

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Asset Metadata

Creator Faegri, Christina Wagner (author)

Core Title Reconstituting the fiscal bargain: the politics of taxation in Latin America's emerging markets

School College of Letters, Arts and Sciences

Degree Doctor of Philosophy

Degree Program Politics and International Relations

Publication Date 08/07/2013

Defense Date 05/16/2013

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag clientelism,fiscal policy,Latin America,Left in Latin America,OAI-PMH Harvest,party institutionalization,party programmation,political accountability,Political parties,Taxation

Format application/pdf (imt)

Language English

Contributor Electronically uploaded by the author (provenance)

Advisor Wise, Carol (committee chair), Katada, Saori N. (committee member), Pastor, Manuel, Jr. (committee member), Sellers, Jefferey M. (committee member)

Creator Email cfaegri@gmail.com

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c3-319871

Unique identifier UC11294052

Identifier etd-FaegriChri-1989.pdf (filename),usctheses-c3-319871 (legacy record id)

Legacy Identifier etd-FaegriChri-1989.pdf

Dmrecord 319871

Document Type Dissertation

Format application/pdf (imt)

Rights Faegri, Christina Wagner

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Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the a...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus MC 2810, 3434 South Grand Avenue, 2nd Floor, Los Angeles, California 90089-2810, USA