Brazil: An evolving federation

Abstract

Brazil is a highly decentralized federation. The twenty-seven states (including the Federal District) and over 5,500 municipalities together account for more than one-third of total government spending and revenue collection. The states and municipalities combined also account for almost 40 percent of the public sector’s net debt stock. Revenue mobilization capacity is concentrated in the more prosperous states and municipalities of the South and Southeast, and some equalization of expenditure capacity has been pursued through mandated revenue sharing. Political and administrative decentralization are extensive. Each subnational jurisdiction has its own directly-elected legislature and executive branches, as well as an independent judiciary. The federal government has limited control over subnational tax administration; budget formulation, execution, and oversight; and wage and investment policies.

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