Territorial inequality, equalization transfers and asymmetric sharing of non-renewable natural resources in Latin America

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Territorial inequality, equalization transfers and asymmetric sharing of non-renewable natural resources in Latin America

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Non-renewable natural resources (NRNR) contribute a large share of tax revenue in Latin American countries; and the fact that these resources are concentrated in just a few regions generates a high level of territorial inequality. This paper aims to analyse how NRNR revenues could be included in equalization grants, and how countries are implementing adequate equalization grant systems, or could do so. Based on fiscal equalization theory, vertical and horizontal systems are evaluated with reference to mid-level governments in Argentina and Peru. The study identifies a variety of political and economic costs for different NRNR revenue systems, where: (i) the provinces own the resources in question (Argentina); and (ii) NRNR revenues are collected and distributed by central government to a large number of subnational governments under a fully asymmetrical scheme (Peru).

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Abstract .-- Introduction .-- I. Inter-jurisdictional equity principle and issues associated with equalization of natural resource revenue .-- II. Approaches to equalization transfers .-- III. Territorial inequality and fiscal disparities of NNRR in Latin America .-- IV. Equalization transfers: options for Latin America .-- V. Final remarks.

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