The June 29, 2009 in the aftermath of President Martin Torrijos Law 37 "It decentralizes Public administration" was enacted. During the administration of President Ricardo Martinelli the implementation of this law was suspended by Law 37 of 2009; in its Article 1 provides that "the force of Law 37 of 2009 that decentralizes Public administration, until June 30, 2014 was suspended." Accordingly, Law 37 has full effect. However, President Juan Carlos Varela is pushing a reform, which will be discussed in this article.
Law 37 contains advanced provisions that contribute to the development of Panamanian democracy, to strengthen management of local governments in a country characterized by excessive concentration of power in the President (described as "presidentialism" by Panamanian).
The objectives of Law 37.
Article 9 establishes the following objectives:
1. Promoting sustainable local development to improve the quality of life, reducing poverty and marginalization, especially among women, persons with disabilities, indigenous people and other vulnerable and focus groups, ensuring equal opportunities.
2. Reorganize and strengthen coordinated relations between the Executive and Local Government from the perspective of collaboration, cooperation and institutional loyalty.
3. Strengthen the unity and efficiency of the State, through the orderly distribution of public powers
and the proper relationship between levels of government.
4. Local Government Approach to citizens encouraging citizen participation processes and information in the municipal government action as an indispensable basis of a transparent process.
5. Promote the development and productivity of the regional and local economy, based on its potential, positioning the municipality as promoter of local development agent.
6. Move gradually administrative and fiscal powers to municipalities.
7. Comprehensively strengthen the management capacity of the local administration.
8. Promote regional development from the perspective of sustainability.
9. Promote governance in local governments.
Financing of Municipalities.
The financing of municipalities, according to Law 37, has two main
sources:
Central government resources.
"The Ministry of Finance shall ensure, by annual transfers to
municipalities considered semi-urban and rural, the financial resources
necessary to create and maintain a basic administrative structure, which is
established in this Law. The metropolitan and urban municipalities shall bear
its structure with its own resources ".
Own resources.
Article 112 stipulates that municipalities have the power "... the
collection of property tax and housing located in the geographical area of the
district". The State, through the Ministry of Finance, initially will
manage collection of property tax and transfer it to the municipalities, while
they prepare and adapt their land for the corresponding payment.
Article 113 states that the municipalities are "... the power to
set and collect fees on the contribution of valuation or revaluation of land,
“ejidos” (area of common land) or goods and property located in the
geographical area of the district".
Bill to Reform Law 37.
The government of President Juan Carlos Varela has presented a bill
amending Act 37 and is justified by the need for some changes are made. The
Government asserts that these changes have taken into account the views of the
Association of Municipalities of Panama (AMUPA), the Association of Mayors of
Panama (ADALPA), the National Coordinator of Representatives of judges
(CONARE), jointly with the Ministry of Government and the support of the United
Nations Program for Development (UNDP).
It main changes are:
1. Moreover, creation of the National Decentralization Secretariat in
the Ministry of the Presidency.
Comment: If decentralization aims to relieve the
"presidential" Why a National Decentralization Secretariat under the
Ministry of the Presidency ?, create an autonomous and independent entity,
managed by the Asociación de Municipalidades de Panama (AMUPA - Association of
Municipalities of Panama), the Asociación de Alcaldes de Panamá (ADALPA -
Association of Mayors of Panama), the Consejo Nacional de Representantes
(CONARE -National Coordinator of Representatives of township)?
2. Sources of funding will be transferred to
municipalities are specified: (a) the property tax (which would dedicate 90% to
10% for investment and operation) and (b) the allocation of resources channeled
so far by the Central Government (USD 110,000.00 by town and township), of
which 70% to 30% for investment and operation will go.
3. A criterion of "solidarity" distribution
of property tax, so that the municipality applies the Capital District and the
municipalities with a larger allocation to USD 500,000.00 provide solidarity
redistribution to ensure that all municipalities receive at least USD
500,000.00.
Comment: the state contribution to municipalities is
insufficient, considering that the government budget for 2016 is $ 20,106,000.
The sum of USD 500.00 for each of the 60 municipalities that rely on government
funding is totally inadequate to meet the objectives of the decentralization
law. The usual practice in most countries is to establish, in the Constitution,
a percentage of the government budget that is implemented gradually.
Nor does justification to cut the budget of the
Municipality of the Capital City (where agglomerates plus 70% of the
population), for distribution to the "poor" municipalities. This only
shows that decentralization has a more declarative than real content.
Education and Health
- Maintenance and improvement of schools.
- Maintenance and improvement of health centers and sub-centers.
- Construction and maintenance of sports, recreation and parks infrastructure.
- Construction and repair of sidewalks.
- Rural road maintenance and improvements in road signs.
- Construction and maintenance of public services such as rural water supply, rural street lighting, garbage collection, recycling, storm sewer easements and dredging.
- Infrastructure for public safety.
- Construction and maintenance of COIF.
- Infrastructure and support for the mitigation of risks and natural disasters.
- Construction of social service centers such as municipal and communal kitchens, among others.
- Infrastructure for local tourism and landscape.
- Construction and Maintenance cultural, artistic and religious infrastructure.
- Urban equipment.
- Improvements to public infrastructure.
- River or lake piers.
- Construction and improvement of municipal markets.
- Infrastructure for local MicroEntrepreneur.
Big losers with decentralization.
The 71 members of the National Assembly received during under the administration of former President Ricardo Martinelli (2009 - 2o14) near des USD 403.5 million (an average of USD 33.6 per year), in respect of "Partidas Circuitales" (state funds given to deputies for discretional use) according to a report Ministry of Economy and Finance (MEF). According to the document, the deputies managed these millionaire funds through the National Assistance Program (PAN), community boards and municipalities. That amount is now transferred to the municipalities.
The "Partidas Circuitales" have been a source of corruption and political manipulation, which has allowed many deputies elected or reelected. It is logical that local decentralization law is not well received by some of them to lose control over these financial resources.
Obviously, the opposition to the bill has not been done with "selfish" criteria but resorting to populist rhetoric, warning the middle class and small urban and rural landowners that the municipalities, to collect property tax, will take over its assets.
Actually, it is clear that the establishment of taxes is a power of the National Assembly at the suggestion of the Executive Branch: municipalities lack such attribution. But municipalities if they have a great capacity to do the job of collecting taxes (compulsion of charge), which would be increased their income. Possibly, many taxpayers who have so far evaded paying taxes, would be required to fulfill their obligations.
An unlikely alliance deputies who refuse to lose control of the "Partidas Circuitales" and owners used to avoid paying taxes, today face the decentralization law.
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