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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
JOSl MA. SERNA DE LA GARZA*
INTRODUCTION
Four Latin American countries have adopted federal state structures.
The current constitutions of Venezuela, M6xico, Brazil, and Argentina have
organized their respective polities as federal states.' However, theoretical
debate on federalism has problemized the "federal" nature of States in which
constitutionalism, and the rule of law, have not developed strong roots.2 For
example, is the mere use of the term "federal" in the constitutions of Venezuela,
M6xico, Brazil, and Argentina enough to make these countries "true"
federations? Or does federalism depend on specific qualities and characteristics
that must be present in order to qualify these countries as "federal"
States?
The historical experience of Latin America proves that constitutional labels
can misguide our senses. Constitutions might expressly define themselves
as "democratic" or protectors of the "rule of law," but these labels
may be obscuring the real existence of authoritarian governments, as well as
situations of uncontrolled instances of political power.
Whether Venezuela, M6xico, Brazil, and Argentina qualify as "federal"
States or not, depends on how federalism is defined. Yet, anyone who has
studied federalism will recognize that there is not a single and undisputed
definition of this concept.' This article will not tackle the task of creating a
new definition for federalism." Rather, central elements which are essential
. Graduate in Law, Universidad Nacional Aut6noma de Mdxico; M.A., Ph.D., Government,
University of Essex; Researcher for the Instituto de Investigaciones Jurfdicas, Universidad
Nacional Aut6noma de M6xico; Visiting Professor of Law, University of Texas at Austin.
The author would like to thank Gabriela Brannan for editing assistance.
I. Each of these countries utilizes the term "federal" to describe the type of state organization
each has established. See CONST. VENEZ. art. 1 (1961); CONST. ARG. art. 1; C.F. art.1
(Braz. Constitution); CONST. VENEZ. art. 4 (1999); CONST. MEX. art. 40.
2. See, e.g., FEDERALISM AND FEDERATION IN WESTERN EUROPE (Michael Burgess ed.
1986) (discussion on the relationship between constitutional government and the federal system).
3. For a thorough discussion concerning the difficulties in defining "federalism" and
"federation" see PRESTON KING, FEDERALISM AND FEDERATION (1982).
4. One can find many definitions of "federalism" in literature. For example, K. C.
Wheare defines federalism as a system of government in which the federal and regional gov-
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278 CALIFORNIA WESTERN INTERNATIONAL LAW JOURNAL [Vol. 30
characteristics present explicitly or implicitly in most definitions of federalism
will be considered, and employed as a basis of a comparative study. The
aim of this comparative study will be to identify common grounds and
trends, as well as contrasts in the federal systems of Latin America.
The formal approach referred to above (which is the one that will be followed
in this article) is only part of the discussion that will follow on federalism
in Latin America. In addition, the issue of whether a country's constitution
is respected and complied with is clearly relevant in the analysis of
this subject matter. Nevertheless, this article will not discuss whether Venezuela,
M6xico, Brazil, and Argentina comply with their constitutions
(including the constitutional federal arrangement). Suffice it to say that each
of these four countries have complex systems of constitutional justice, with
different kinds of remedies and procedures to protect constitutional norms,
in spite of which some specialists insist that constitutionalism in Latin
America has failed.-
If Venezuela, Mexico, Brazil, and Argentina do not comply with their
constitutions, then federalism is non-existent, and as such, this article should
not be written. On the contrary, it would be a lie to unequivocally state that
each of these countries always complies with their constitutions and that
their mechanisms to protect constitutional norms are absolutely efficacious.
Yet if constitutionalism is considered as existing on a spectrum that admits
diverse degrees of compliance with a constitution, or different degrees
of constitutional efficacy, Venezuela, Mexico, Brazil, and Argentina could
still be considered "federal" states. A point must also exist on this spectrum
which would determine when a government should not be considered a constitutional
government.6 As such, tying the notion of federalism to that of a
constitutional government, there must also be a point on the spectrum that
does not make a polity a federation. But above all, it is important to note that
different versions of constitutional government and federalism can exist.
Putting these important theoretical considerations aside, this article will
formally discuss, analyze, and review the formal allocation of legislative
powers in general, and the allocation of tax powers in particular, as they
ernments are both coordinate and independent. See generally K.C. WHEARE, FEDERAL
GOVERNMENT (4th ed. 1963). Preston King defines a federation "as an institutional arrangement,
taking the form of a sovereign state, and distinguished from other such states solely by
the fact that its central government incorporates regional units into its decision procedure on
some constitutionally entrenched basis." KING, supra note 3, at 77. More recently and applied
to the discussion about federalism in Latin America, Keith Rossen defined federalism as "a
form of government in which sovereign powers are constitutionally divided between a central
government and geographically defined, semi-autonomous levels of government." Keith
Rossen, Federalism in the Americas in Comparative Perspective, 26 INTERAM. L. REV. 1, 5
(1994).
5. See, eg., Keith Rossen, The Success of Constitutionalism in the United States and Its
Failure in Latin America: An Explanation, 22 INTERAMER. L. REV. (1990).
6. 1 am aware of the theoretical difficulty of finding the position of such a "point" on a
spectrum. This kind of approach would force an answer to the question of how much inefficacy
is necessary in order to be able to state that a constitutional government is non-existent.
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
have been established in the constitutions of Venezuela, M6xico, Brazil, and
Argentina. Finally, in order to make a global evaluation on the experience of
federalism in Latin America, this article will identify the differences and
common characteristics that are present in each country mentioned.
I. VENEZUELA
A. The Allocation of Legislative Powers
Under the Constitution of 1961 (1961 Constitution), Venezuela's 7 division
of legislative powers rested on articles 17 and 18. Article 17 defined a
series of explicit powers given to the states, and established a residual clause
in favor of the states that defined their area of power as being formed by
"[wihatever is not in conformity with the Constitution, within national or
municipal power."8 Article 18 established specific prohibitions for the states,
particularly with regards to the creation of a domestic market free of barriers.
For example, states could not create customhouses, taxes on imports, taxes
on exports, or transit taxes on foreign or domestic goods.9 Additionally,
states could not tax consumer goods before they entered into circulation
within their territory, nor could they prohibit the consumption of goods produced
outside their territory. States were also not permitted to levy taxes on
livestock or on their products or by-products.'0 In sum, the constitutional
formula for the allocation of powers was based in principle on: 1) a small list
of explicit powers to the states; 2) a residual clause that gave each state jurisdiction
of all remaining powers that the constitution did not make national
or municipal; and 3) a prohibitions-to-the-states clause.
The new Constitution of Venezuela, adopted in 1999 (1999 Constitution),"
follows in general terms the same method for the allocation of legislative
powers described above, including 1) a small list of explicit and exclusive
powers to the states; 2 and 2) a residual clause that gives states
jurisdiction over powers that the constitution does not make national or municipal.
3 However, unlike the 1961 Constitution, a prohibitions-to-the-states
clause does not exist. As such, the question now remains under the 1999
Constitution, whether the states may exercise the power that under the 1961
Constitution they could not.
7. This law review article was written before the adoption of the 1999 Constitution of
Venezuela. To the extent possible, observations concerning Venezuela's new Constitution
relating to federalism have been included.
8. CONST. VENEZ. art. 17 (1961).
9. See id. art 18.
10. See id.
11. Venezuela adopted a new constitution on December 15, 1999. See CONST. VENEZ.
(1999).
12. See id. art. 164.
13. See id art. 164.11
2000]
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In spite of the absence of a prohibitions-to-the-states clause in the 1999
Constitution, states may not exercise the powers that were prohibited by article
18 of the 1961 Constitution. Article 18 of the 1961 Constitution prohibited
the states from creating a series of taxes, including customs taxes, import
taxes, export taxes, transit taxes on foreign or domestic goods, taxes on
consumer goods, and taxes on livestock."4 On the other hand, article 156.12
of the 1999 Constitution reserves to the federal government all the taxes, excises
and revenues not attributed to the states or municipalities by the constitution
and other enactments. Therefore, since the taxes formerly listed on article
18 of the 1961 Constitution have not been attributed to the states (nor to
the municipalities), they are reserved to the federal government and the
states cannot create them. 5
The scope of the power of both the state and municipal governments
under the old and new constitutions is defined by the powers assigned to the
state and municipal levels of government. The scope of the powers of both
the state and municipal governments is rather limited, this because article
136 of the 1961 Constitution and article 156 of the 1999 Constitution make
an exhaustive allocation of power in favor of the federal government, leaving
little, if any room for the other two levels of government.
The municipal government powers in Venezuela were defined by article
30 of the 1961 Constitution:
[i]t is within the municipal sphere of power, the government and administration
of the interests peculiar to the municipality itself, particularly in
relation to its property and revenues and to the matters of concern to local
life, such as urban development, supplies, traffic, culture, health, social
welfare, popular credit institutions, tourism and municipal police. 16
For its part, article 178 of the 1999 Constitution has extended to some degree
the amount of matters that fall within the powers of the municipalities."
Nevertheless, the bulk of the legislative powers in Venezuela still remain in
the hands of the federal government.
14. See CONST. VENEZ. art. 18 (1961).
15. A doubt would arise concerning the only item foreseen in article 18 of the 1961
Constitution which does not refer to a tax. According to article 18, the states were not allowed
to "prohibit the consumption of goods produced outside their territory." Id.
16. Id. art. 30.
17. Including urban zoning, parks, gardens, public squares, and public shows. This in
addition to commercial advertising and publicity in the municipality, protection of the environment,
potable water, electricity, the use and disposition of waste waters, cemeteries, and
justice of peace. And, social services including the protection of children, adolescents, and the
elderly. See CoNrsT. VENEZ. art. 178 (1999). In this context, "justice of the peace" refers to
the lower level courts of the Venezuelan system of courts. These courts have jurisdiction over
small claims, both criminal and civil. Traditionally, in Venezuela, the jurisdictional function
has been performed by federal courts only. However, the 1999 Constitution defines "justice
of the peace" as one that falls within the sphere of powers of the municipalities. See id. art.
178.7.
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
The extent to which article 136 of the 1961 Constitution centralized
power in favor of the federation, can be better understood by comparing it to
the system of allocation of powers which exists in the United States. Apart
from the powers that the United States allocates to its federal system (preservation
of peace, monetary system, circulation of foreign currencies, and
organization of the military),18 the powers that article 136.24 of the 1961
Constitution permitted to be regulated by federal law included legislation
regulating guarantees conferred by the Constitution, an civil, commercial,
criminal, penitentiary and procedural legislation.19 This in addition to legislation
on elections, expropriation by reason of public or social utility, and labor.
2"
Article 156 of the 1999 Constitution also adds a series of new matters
that fall under the exclusive sphere of the federal government's legislative
power, such as legislation on "private international law" (conflict of laws),
on indigenous peoples and their territories, on the organization and functions
of the organs of the "National Public Power," and other national institutions
of the state. It must be pointed out that contrary to the formulation of article
136 of the 1961 Constitution, the power to pass legislation on tourism no
longer appears in the 1999 Constitution.'
Moreover, article 136.23 of the 1961 Constitution defined federal powers
as those related to "the administration of justice and the creation, organization
and powers of the courts, and the Public Ministry."22 Similarly, article
156.31 of the 1999 Constitution reserves to the federation the power to legislate
on everything related to the organization and administration of national
justice and to the Public Ministry. In practical terms, this means that in
Venezuela there are no "state courts" nor "state (local) prosecutors," leaving
only federal ones.
As if the latter was not enough, article 136.25 of the 1961 Constitution
established an open clause that allowed for the absorption of almost any matter
under federal authority. According to this clause, "[a]ny other matter
which the present Constitution assigns to the National Power or which pertains
to it by its nature or kind" was within the power of the National
Power. This clause remains in the 1999 Constitution in the same terms.
The Exposici6n de Motivos of the 1961 Constitution identified this formulation
as the implicit powers clause.26 Notably, differences exist when compar-
18. See U.S. CONST. art. I § 8.
19. See CONST. VENEZ. art. 136.24
20. See id.
21. See id. art. 136; CONST. VENEZ. art. 156 (1999).
22. CONST. VENEZ. art. 136.23 (1961).
23. See CONST. VENEZ. art. 156.31 (1999).
24. CONST. VENEZ. art. 136.25 (1961).
25. See CONST. VENEZ. art. 156 (1999).
26. See Carlos Ayala Corao, Naturaleza y Alcance de la Descentralizaci6n Estadal, in
LEYES PARA LA DESCENTRALIZACION POLITICA DE LA FEDERACiON 94 (1990).
20001
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282 CALIFORNIA WESTERN INTERNATIONAL LAW JOURNAL [Vol. 30
ing Venezuela's implicit powers clause with that of the United States and
Mexican Constitutions.
Both the United States and Mexican Constitutions define implicit powers
in a similar, yet not identical manner. The Constitution of the United
States indicates that Congress has the power "to make all laws which shall
be necessary and proper for carrying into execution the foregoing powers,
and all other powers vested by this Constitution in the Government of the
United States, or in any department or officer thereof."" On the other hand,
the Mexican Constitution states that Congress has the power to pass all the
statutes that are necessary for making effective its own explicit powers and
the explicit powers of the other branches of government of the Union.28 In
both the United States and Mexican Constitutions, implicit powers are a
function of explicit ones. Implicit powers can only be "discovered" by reference
to explicit powers.
The Venezuelan Constitution does not link implicit powers with explicit
ones. Rather, implicit powers are a function of the nature and kind of implicit
powers in question. The determination on whether a matter pertains by
its nature or kind to the National Power, corresponds solely to the Venezuelan
National Congress.29 This element further supports the argument that
Venezuela does not have a federal system.
The 1961 Constitution allowed the existence of concurrent powers between
the federation and the states. Yet, the actual centralization of power by
the federal government made concurrent powers irrelevant. As a matter of
fact, it was not until the late 1980s when a process of decentralization gained
momentum, that the notion of concurrent powers was revived and reinvigorated.
The way in which this process took place can only be understood by
analyzing the "decentralization clause" established in article 137 of the 1961
Constitution."
Article 137 of the 1961 Constitution states that "Congress, by a vote of
two thirds of the members of each Chamber, may assign to the states or municipalities
particular matters within the national power, in order to promote
administrative decentralization."'" The process of decentralization envi-
27. U.S. CONST. art. VIII.
28. See CONST. MEX. art. 73.
29. See Allan Brewer-Carias, Bases Legislativas para la Descentralizaci6n Polftica de la
Federacion Centralizada, in LEYES PARA LA DESCENTRALIZACION POLITICA DE LA
FEDERAc16N 17 (1990).
30. See CONST. VENEZ. art. 137 (1961).
31. Id. It is important to note that the terms of the "decentralization clause" also imply that
Congress alone can modify the constitutional allocation of powers, disregarding the procedure
for amending the constitution established in title X, which allows the participation of Legislative
Assemblies of the states. See id. This of course, is another element to take into consideration
in the debate about the federal nature of the Venezuelan state. The "decentralization
clause" is also foreseen by article 157 of the 1999 Constitution. See CONST. VENEZ. art. 157
(1999). The transfer of powers may occur with a majority vote of the members of the National
Assembly, and not by a vote of two thirds of the members of each house of Congress, as it
was required under the 1961 Constitution. See id.
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
sioned by the 1961 Constitution started to take shape in the late 1980s. In
this context, a group of jurists commissioned to prepare studies in support of
decentralization considered the possibility of identifying a list of powers that
were allocated not to the federal government nor to the local or municipal
levels of government, but in general to "the State," that is to the Venezuelan
State as a whole. In this way, every power allocated by the Constitution to
the State could be considered a power that was concurrently shared by the
federal, the state, and municipal governments."2
Examples of this allocation of powers to the "state" can be found in articles
72, 73, and 77 of the 1961 Constitution.
The State shall protect associations, corporate bodies, societies and communities
that have as their purpose the better fulfillment of the aims of
human beings .... The State shall protect the family as the fundamental
nucleus of society .... The State shall strive to improve the living conditions
of the rural population.33
The studies of these jurists were the basis for the later drafting of the
Organic Law for Decentralization, Delimitation and Transfer of Powers of
the Public Power (Law for Decentralization) which was approved by the
Venezuelan Congress on December 20, 1989, and entered into force on
January 1, 1990.' The Law for Decentralization did not only transfer a series
of powers of the federal government to the states, but it also identified the
concurrent powers provided for under the 1961 Constitution.33 Additionally,
the Law for Decentralization predicted the "progressive transfer" of the
listed powers from the federation to the states.
In other words, during the many years in which centralization has been
rampant, most concurrent powers had been "occupied" by the federal government.
As the moment of decentralization arrived, the Law for Decentralization
"uncovered" concurrent powers that until then had remained "dormant"
(as it were), and established the mechanism for their progressive
transfer to the states, through "[a]greements for the transfer of services."'36
However, in practice, the transfer was rather slow, due in part to the fact that
the states did not have either the administrative or financial capacity to assume
new responsibilities.
32. See Brewer-Carias, supra note 29, at 21.
33. CONST. VENEz. arts. 72, 73, 77 (1961).
34. See Ley Orgfnica de Descentralizaci6n, Delimitaci6n y Transferencia de Competencias
del Poder Piblico (1989) (hereinafter Ley Orgdmica].
35. See id. art. 4. Article 4 of the Law for Decentralization refined the list of concurrent
powers that had been identified by the pioneering group of jurists mentioned above, and
ended up with a list that includes powers in areas such as planning, protection of the family
and of minors, the improvement of living conditions for rural populations, the protection of
indigenous communities, education, culture, sports, training of workers, agricultural, industrial,
and commercial promotion. See id.
36. Id. art. 6.
2000] 283
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For its part, the 1999 Constitution refers explicitly to "concurrent powers"
in article 165, in the following terms: "[t]he matters that are the object
of concurrent powers shall be regulated by acts of bases [leyes de bases]
passed by the National Power, and by development-acts of the States. This
legislation shall be oriented by the principles of interdependence, coordination,
cooperation, responsibility and subsidiarity."3 At the moment, it is difficult
to surmise the exact meaning of this article, except for the general idea
that the 1999 Constitution allows the existence of concurrent powers. Moreover,
although article 165 states that concurrent powers in Venezuela exist,
they are supposed to function according to the basic criteria established by
the federal legislative power, through the so-called leyes de bases. Therefore,
this is an additional element that strengthens the position of the central government
within Venezuela's federal system.
B. The Constitutional Allocation of Tax Power
Under the 1961 Constitution, the basic principle for the allocation of tax
powers was derived from an application of the residual clause of article 17.7,
which gave the states the power to establish those taxes the Constitution did
not assign to the national or municipal spheres of power.38 However, the final
part of article 136.8 of the 1999 Constitution established a residual clause in
favor of the federation in the area of taxation, which states that the national
government has the power to create "[aill other taxes, excises, and revenues
not attributed to the States or municipalities which the law may create with a
national character."39
In addition, the scope of the tax power of the states was limited by article
18 of the 1961 Constitution, which established a series of taxes that the
states could not create including import and export taxes, and taxes on livestock.'
Morever, articles 31 and 34 defined, respectively, the few taxes that
corresponded to the municipalities including taxes on urban real property,'
and the limitations to the tax power of municipalities.
This formulation meant that the cornerstone of the whole tax system
was with the scope of taxes allocated to the federal government, which leads
directly to the consideration of article 136.8 of the 1961 Constitution.42 Arti-
37. CONST. VENEZ. art. 165 (1999).
38. See CONST. VENEZ. art. 17.7 (1961).
39. CONST. VENEZ. art. 136.8 (1999).
40. See CONST. VENEZ. art. 18 (1961).
41. See id. arts. 31, 34. It must be noted that although article 31.6 of the 1961 Constitution
stated that municipalities could create "[a]ny other special taxes, excises and contributions
that they impose according to the law," meant that the federal government could transfer to
the municipalities the power to impose certain taxes. Id. art. 31.6; see Romero-Muci, Humberto,
Aspectos Tributarios en la Ley Orgdnica de Desceniralizaci6n, Delimitaci6n y Transferencia
de Competencias del Poder Paiblico, in LEYES PARA LA DESCENTRALIZAcION
POLTICA DE LA FEDERACI6N 217-19 (1990).
42. See CONST. VENEZ. art. 136.8 (1961).
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
cle 136.8 gave the federal government broad powers to establish different
kinds of taxes including taxes on income, estates and gifts, imports, fiscal
stamps, and on the production and consumption of goods. Additionally, article
136.8 admitted that the law could reserve in whole or in part with the
federal government taxes on alcohol, liquors, cigarettes, matches and salt
works. 3 Furthermore, the federal government retained power to tax mines
and hydrocarbons, and "[a]ll other taxes, excises and revenues not allocated
to the States or municipalities which the law may create with a national
character.""
It is important to note that the predominant legal doctrine in Venezuela
has accepted a systematic interpretation of the residual clause which allows
the recognition of the original powers of taxation to the states."3 That is to
say, originally the states were perceived as being competent to create taxes
on consumption, because the law did not reserve in whole, or in part, this
power to the national power. However, in spite of this interpretation, these
residual powers of taxation of the states remained largely unexercised.
The Law for Decentralization transferred to the states three areas of
taxation: 1) fiscal stamps; 2) taxes on the exploitation of non-metallic and
non-precious minerals, salt works, and oyster pearl beds; and 3) taxes on
consumption not allocated to the National Power.'
The 1999 Constitution repeats in very similar terms the formula for the
allocation of tax powers of the 1961 Constitution. Article 156.12 of the
1999 Constitution lists the taxes that fall under federal jurisdiction: income
tax, estates and gifts, capital, production value added tax, hydrocarbons and
mines, import and export of goods and services, consumption of liquors, alcohol,
cigarettes and other products of tobacco. 7 After comparing the 1961
Constitution with the 1999 Constitution, taxes that have been transferred to
the states can be identified, including taxes for registration and fiscal stamps,
production, and the value added tax. Notwithstanding this transfer, the 1999
Constitution repeats the residual clause in favor of the federation in the area
of taxation."
Finally, to complete the discussion on Venezuela's "fiscal constitution,"
the Situado Constitucional will be addressed. 9 This concept encompasses a
formula for the distribution of certain amounts of federal public revenues to
the states, that was established since the mid-1920s as a sort of compensation
for the centralization of public revenues by the federal government. In
short, this concept refers to a part of the federal budget that must be distributed
among the states, the federal district, and the federal territories in the
43. See id.
44. id.
45. See id. art. 17.7; CONST. VENEZ. art. 138.8 (1999).
46. See Ley Orgdnica, supra note 34, art. 11.
47. See CONST. VENEZ. art. 156.12 (1999).
48. See id.
49. See id. art. 167.4.
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following manner: 30% of its total amount in equal parts, and the remaining
70% to be divided in proportion to the population of each of the entities
mentioned.' For its part, the Law for Decentralization modified this scheme
increasing the percentage of the Situado Constitucional from the total estimated
ordinary revenues."
The 1999 Constitution repeats the centralized scheme in the distribution
of the power to tax, and it also confirms the operation of the so-called
Situado Constitucional. According to article 167.4 of the 1999 Constitution,
the Situado is an item of the federal budget that amounts to a maximum of
20% of the total ordinary revenues of the national government, that shall be
distributed among the states and the Capital District in the same way as article
229 of the 1961 Constitution accomplished.52
Federalism as practiced in Venezuela, is the most centralized in Latin
America. Not only is legislative activity in most important areas centralized
by the federal legislature, but the application of the law is also centralized.
Moreover, the peculiar manner in which implicit powers have been understood,
has created an additional instrument that can be used by the federal
government to expand its powers. Morever, concurrent powers depend on
the "bases" set forth by the National Assembly, and the most important and
profitable taxes are in the hands of the federation. Notably, this pattern of
centralized federalism was not changed by the recent 1999 Constitution.
II. MPexICO
A. The Allocation of Legislative Powers
The principle for the division of powers in M6xico's federal system is
found in the residual clause of article 124 of the 1917 Mexican Constitution."
Partially inspired by the Tenth Amendment of the United States Constitution,
article 124 states that "it shall be understood that the powers not
expressly attributed by this Constitution to the federal authorities, are reserved
to the states."' The similarity between article 124 of the Mexican
Constitution and the Tenth Amendment of the United States Constitution is
50. See CONST. VENEZ. art. 229 (1961). Part of the federal budget that must be distributed
among the states, which shall amount to no less than 15% of the total estimated ordinary
revenues of the budget. See id.
51. See Ley Orgdnica, supra note 34, art. 13. The Law for Decentralization, foresees a
"Situado Municipal," that is, a percentage of the total revenues of the states that must be allotted
to the municipalities. The percentage for 1990 amounted to 10%, but the law established
that it would be increased 1% every subsequent year, until a figure of 20% was reached. See
id. art. 14.
52. See CoNsT. VENEZ. art. 164.4 (1999); CONST. VENEz. art. 229 (1961). The 1961
Constitution allocated 30% of its total amount in equal parts, and 70% in proportion to their
respective populations. See CONST. VENEZ. art. 229 (1961).
53. See CONST. MEX. art. 124.
54. Id.
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
readily apparent," however, the clauses are not identical and therefore their
meaning and impact upon the allocation of powers is diverse.
One of the differences is the use that article 124 of the Mexican Constitution
makes of the adverb "expressly." Interestingly, the use of the word
"expressly" was a controversial issue in the debates that led to the adoption
of the Tenth Amendment. Section two of the Articles of Confederation
stated that "each State retains its sovereignty, freedom and independence,
and every power, jurisdiction, and right, which is not by this Confederation
expressly delegated to the United States in Congress assembled."56 Eventually,
the Tenth Amendment did not include the word "expressly." As such, it
was understood that the federal government could exercise powers that were
not expressly allocated to it by the constitution. 7
The antecedent of article 124 of the Mexican Constitution is article 117
of the Mexican Constitution of 1857. The Mexican constituent assembly of
1856-1857 borrowed part of the United States' Tenth Amendment formulation,
but decided to include the adverb "expressly." It was not a casual
circumstance, but a manifestation of intent. The intention was to create a
more rigid system of division of power between the federation and the states,
in such a way as to make it perfectly possible to distinguish which limited
set of powers belonged to the former, and which to the latter."
Another difference between article 124 of the Mexican Constitution and
the Tenth Amendment of the United States Constitution lies in the reference
that the Tenth Amendment makes of "prohibitions to the States." Article 124
of the Mexican Constitution does not make this reference, but a systematic
interpretation of the Mexican Constitution allows room for an identical reading
of article 124. The Mexican Constitution itself establishes a series of
prohibitions to the states. Some of these prohibitions have an absolute character,
and are defined by article 117.9 The absolute prohibitions do not permit
in any way that these powers be exercised by the states.' Others prohibitions
are relative, which means that they could eventually be exercised by
the states, but only with the authorization of the federal Congress. These are
listed in article 118.61
55. The Tenth Amendment of the United States Constitution states: "The powers not delegated
to the United States by the Constitution, nor prohibited by it to the States are reserved to
the States respectively or to the people." U.S. CONST. amend. X.
56. Articles of Confederation, § 2.
57. See JORGE CARPIZO, ESTUDIOS CONSTITUCIONALES (2d ed. 1983).
58. See CONST. MEX. art. 117 (1857); U.S. CONST. amend. X.
59. See CONST. MEX. art. 117.
60. For example, they cannot enter into a treaty with a foreign government; they have no
currency power; they cannot impose levies upon the transit of persons or merchandises
through their territory; nor can they borrow money from foreign governments or institutions,
amongst many others. See id.
61. See CONST. MEX. art. 118. For example, states cannot, without the authorization of
Congress, impose export and import taxes, or have a permanent army or a war fleet. For its
part, it must be mentioned that article 115 foresees a sphere of powers that belong to the municipalities.
Municipalities have the power to pass rulings related to the public services that
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Therefore, by identifying the quantity and quality of the powers expressly
allocated to the federation, we can determine what the balance of
power is between the federation and the states. Most of the powers allocated
to the federal government are listed in article 73 of the Mexican Constitution.
62 This enumeration includes matters such as labor legislation, legislation
on federal crimes, oil, mining, commercial matters, electric and nuclear
power, and financial services."
Notably, in contrast with Argentina, Brazil, and Venezuela, article 73 of
the Mexican Constitution does not delegate to the federal Congress the exclusive
power to issue civil and criminal legislation." Nor, does the federal
legislature have complete power to pass procedural legislation, as is the case
in Venezuela. In Mexico, the states have the residual power to draft their
own civil, criminal, and procedure codes. In addition, the administration of
justice and the prosecution of crimes in Mexico is not in the exclusive hands
of federal authorities, as is the case in Venezuela.
The Mexican version of the implicit powers clause can be found in the
last section of article 73 of the Mexican Constitution.' The implicit powers
clause of the Mexican Constitution resembles that of the United States Constitution,
but is in sharp contrast to that of the Venezuelan Constitution, in
the sense that an implicit power can only be deduced or derived from an explicit
one. However, in Mdxico the implicit powers clause has not had the
relevance that it has had in constitutional practice in the United States.'
Mexican jurists have debated for a long time on the subject of concurrent
powers. In principle, it can be argued that the rigid system for the division
of powers derived from the formulation of article 124 of the Mexican
Constitution allows no room for concurrent powers to exist. If a power has
not been expressly delegated to the federation (or prohibited to the states) by
the constitution, or if it cannot be identified as federal through the application
of the implicit powers clause, then it has to be a power of the states.
However, the Mexican Supreme Court has referred to the existence of "confall
under their exclusive jurisdiction, such as potable water, cemeteries, markets, parks, public
security and transit. However, this power has to be exercised according to the bases provided
by the legislature of the state to which they belong. See id. art. 115. It must be pointed
out that unlike the federal and local legislatures, the municipalities cannot pass "enactments"
(leyes). They are able to produce rulings that are known as bandos de policia y buen gobierno,
reglamentos, circulares, and disposiciones administrativas. See id.
62. See id. art. 73 (referring only to legislative powers). For other powers expressly delegated
to the federal government see CONST. MEX. art. 74 (referring to the powers of the
Chamber of Deputies), art. 76 (listing powers of the Senate), art. 89 (listing powers of the
President), and art.s 103-07 (enumerating powers of the federal courts).
63. See id.
64. See id. art. 73.
65. See id.
66. In Mexico, the expansion of federal powers has taken place through multiple reforms to
article 73 and not through judicial interpretation based on the implicit powers clause. See id.
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
current powers" in the Mexican legal system,' and the Mexican Constitution
itself uses the term in article 73."
There is a semantic problem at the root of this discussion. Specifically,
whether "concurrent powers" exist or not in Mexico depends on the content
that is assigned to this notion. If through the use of "concurrent powers" we
mean the possibility of cooperation or coordination of different levels of
government in the design and implementation of public policies in one subject
area, then we must accept that concurrent powers are possible in the
Mexican legal system. However, if we understand that the notion of "concurrent
powers" refers to an area of powers delegated to the federation, but
that can be "occupied" by the states, as long as the federation does not decide
to step in, then these types of powers are not possible under the Mexican
legal system.' This is the case because of the rigidity of article 124 of
the Mexican Constitution concerning the distribution of powers between the
federation and the states that was discussed previously. Drawing on this notion,
two distinguished Mexican jurists, Mario de la Cueva and Jorge Carpizo,
70 argue that the existence of "concurrent powers" is not possible in the
Mexican legal system. On the one hand, no constitutional clause refers explicitly
"concurrent powers," and their existence cannot be deducted from
any constitutional article (or a combination of articles). On the contrary, the
"rigid" system for the allocation of powers as defined by article 124 of the
Mexican Constitution, impedes the appearance of the powers that can be
"occupied" by the states until the federation decides to step in. 1
The words "concurrent powers" are used in M6xico with different
meanings. The Mexican Supreme Court has stated that there are "concurrent
powers" in the federation and the states in the area of taxation, which means
that both levels of government are able to tax the same bases. Moreover,
when article 37 of the Mexican Constitution defines the Congressional
power to issue legislation to establish the "concurrence" of the federal government,
the states and the municipalities in the area of "human settlements"
(asentamientos humanos) and in the area of environmental protection, it refers
to the possibility of cooperation amongst the different levels of govern-
67. As will be discussed, several decisions of the Mexican Supreme Court have referred to
the existence of "concurrent powers" of the federation and the states in the area of taxation.
68. According to sections of article 73 of the Mexican Constitution, the National Congress
has the power to pass enactments that establish the "concurrence" of the federal, state and
municipal governments in the areas of "human settlements" (asentamientos humanos) and
environmental protection. See CONST. MEX. art. 73.
69. See JACiNTO FAYA VIESCAS, EL FEDERALISMO MEXICANO 103-06 (1998).
70. See generally CARPIZO, supra note 57.
71. The wording employed by article 72.1 of the German Basic Law could be useful to illustrate
what the second notion of "concurrent powers" refers to in the Mexican Constitution.
Article 72.1 of the German Basic Law states that "in the area of concurrent legislation, the
Lander has the power to legislate, as long as the Federation has not made use, through an Act,
of its legislative competence." Grundgesetz (Constitution) art. 72.1 Lander means land in
English (translated by author).
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ment in relation to the same policy area, 2 but not to the phenomenon of "occupation"
of areas and possibility of displacement that is characteristic of the
second notion of "concurrent powers" described above.
There is another notion that adds to the already existing confusion on
the use and understanding of the term "concurrent powers" in Mexico. Forensic
law uses the term "concurrent jurisdiction" to refer to the possibility
that litigants have of bringing their case before either federal or state courts.
This occurs whenever the controversy involved requires the application of a
federal enactment or an international treaty in the areas of civil or criminal
law, and only when private interests are involved."
Finally, it must be mentioned that the Mexican Constitution foresees
other kind of powers, which have been called by legal doctrine "coinciding
powers" (facultades coincidentes) and "coexisting powers" (facultades coexistentes).
The former may be exercised both by the federal government and
the states. An example of this kind of power can be found in paragraph 4 of
article 18 of the Mexican Constitution which states that "[tihe Federation
and State Governments shall create special institutions for the treatment of
delinquent minors."7 4 Coexisting powers refer to a situation in which part of
the subject matter can be regulated by federal law and part by the state. For
example, section XVII of article 73 of the Mexican Constitution states that
the federation has the power to legislate in the area of "general communication
routes" (vias generales de comunicaci6n), which implies that state legislatures
have the power to legislate in the area of "local" communication
routes.75
B. The Constitutional Allocation of Tax Power
In principle, one would have to resort to the residual clause to define the
allocation of tax powers in the Mexican federal system. As such, it must be
understood that all those areas of taxation not expressly allocated to the federation
(nor prohibited to the states) in the Mexican Constitution, are reserved
to the states.
By analyzing article 73 of the Mexican Constitution the taxes allocated
to the federation can be discovered."' Article 73 defines the bases that can be
taxed by the federal congress. On the other hand, articles 117 and 131 establish
some taxes that cannot be created by the states. ' In addition, according
to article 115 of the Mexican Constitution, taxes on real property correspond
to the municipal level of government." This simple picture of the distribu-
72. See CONST. MEX. art. 39.
73. See id. art. 104.
74. Id. art. 18.
75. See CARPZO, supra note 57, at 99-101; CONST. MEX. art. 73.
76. See CONST. MEX. art. 73.
77. See id. arts. 117, 131.
78. See id. art. 115.
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
tion of taxes in M6xico in reality does not correspond to the actual distribution
of tax powers.
The simplicity of this picture has been complicated by the interpretation
that the Mexican Supreme Court has given to article 73, section VII of the
Mexican Constitution which states that the federal Congress has the power
"to create the taxes that are necessary to meet the requirements of the
budget." 9 The Mexican Supreme Court has interpreted this to mean that
Congress has the power to create all taxes necessary to finance all the items
of the budget.' The relevance of this interpretation lies in the fact that article
73 does not mention either income tax or the value-added tax as taxes that
belong to the federation. In spite of this, however, the federation taxes income
of individuals and corporations, as well as value-added to services and
goods." Simply, the federation has unlimited powers of taxation.
Both the Mexican Supreme Court and legal commentators have asserted
that in M6xico there are "concurrent powers" in the area of taxation. By this,
they mean that some (not all) bases can be taxed in equal terms by the federal
government and the states.82 The federation can tax all imaginable bases,
while the states can tax those bases that are not expressly allocated to the
federation and those that are not prohibited. This is why Sergio de la Garza
asserts that in the area of taxation, the federation has "unlimited concurrent
powers" and that states have "limited concurrent powers."83
In the past, the practical result of the application of these criteria was a
situation in which the federation had very wide powers to tax any base or
source, even those that after a reading of the residual clause, could be identified
as belonging to the states, thus, creating conflicts between federal and
state authorities in taxation. After many years of fiscal chaos, a system of
fiscal coordination was envisioned in order to delimit the taxable bases that
corresponded to each level of government, and to provide some uniformity."
The first law on fiscal coordination was adopted in 1953, but the system was
strengthened and reinvigorated between 1979 and 1980, as part of a "tax
package" that also introduced the value-added tax in M6xico.
79. Id. art. 73, § 7.
80. See CARPIZO, supra note 57, at ,110.
81. See CONST. MEX. art. 73.
82. See the decision of the Supreme Court on the constitutionality of the federal act that
created the tax for the possession or use of automobiles (Impuesto Sobre la Tenencia o Uso de
Atom6viles). See 44 S.J.F. 14 (1972).
83. See SERGIO FRANCISCO DE LA GARZA, DERECHO FINANCIERO MEXICANO 220-30 (1990).
84. See id.
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The logic of this system of coordination can be summarized as follows:
the federation and the states enter into agreements of coordination, by which
the latter give up their power to create certain taxes in exchange for participation
in a federal fund integrated with 13% of all tax revenues of the federal
government (excluding those related to taxes on external trade)." By the
1990s, as a result of the system of fiscal coordination, 81% of the tax revenues
of the total public sector were received by the federal government,
while the states and the municipalities received only 16% and 3%, respectively.
86
III. BRAZIL
A. The Allocation of Legislative Powers
Brazil's Constitution of 1988 organized the distribution of legislative
powers on the basis of a peculiar version of the residual clause. Article 25.1
of the Brazilian Constitution states that "[t]o the States is reserved jurisdiction
over the matters not forbidden to them by this Constitution."87 This version
is peculiar because the reservation of powers to the states seems to depend
not on an enumeration of the limited powers that the federation is
allowed to exercise, but on an enumeration of prohibitions to the states.
However, in spite of this wording, both Brazilian doctrine and judicial interpretation
state that the powers not delegated to the federation nor to the municipalities
are reserved to the states. 88
Articles 21 and 22 of Brazil's Constitution enumerate powers that have
been delegated to the Union. Interestingly, article 22 gives the federal legislature
exclusive power to create civil, penal, procedural, electoral, and labor
law. This means that the states cannot draft their own "codes" in any of these
matters. However, in contrast to the Venezuelan Constitution, in Brazil each
state has its own system of courts.8
It is important to note that an important difference does exist between
the afforded powers of articles 21 and 22. Article 22 allows the delegation of
powers to the states:"[a] supplemental law may authorize the States to legislate
on specific questions to the matters listed in this article."' For this reason,
constitutional doctrine in Brazil identifies the non-delegable powers of
article 21 as "exclusive powers" and the delegable powers of article 22 as
"privatized powers" (competencia privativa)9 '
85. See JAIME SEMPERE, LAS FINANZAS POBLICAS EN MtxiCo 95 (1995).
86. See id. at 97.
87. C.F. art. 25.1 (1988).
88. See JOSE AFONSO DA SILVA, CURSO DE DIREITO CONSTITUCIONAL POSITIVO (9th ed.
1994).
89. See C.F. arts. 92, 125.
90. Id. art. 22.
91. See DA SILVA, supra note 88, at 419-20.
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For its part, article 30 of Brazil's Constitution defines the powers allocated
to the municipalities. These powers include the power "to legislate on
matters of local interest," to supplement federal and state legislation where
applicable, to institute and collect the taxes under their jurisdiction, to create,
organize and suppress districts, to organize and render either directly or by
concession or permission, essential public services.'
In addition, the system for the allocation of powers of Brazilian federalism
foresees "common powers" and "concurrent legislation." Article 23 refers
to areas in which the Union, the states, the Federal District, and the Municipalities
can legislate simultaneously. Coordination amongst these entities
is achieved through supplemental law.93 Examples of areas which may be
regulated simultaneously include the area of public assistance and health,
protection of documents, works, and other assets of historical, artistic, and
cultural value.9 ' This is in addition to culture, education and science, and the
protection of the environment.
The notion of "concurrent legislation" in Brazil is defined in article 24
of Brazil's Constitution which states that the absence of a federal law means
that the states can exercise full legislative jurisdiction until the federation
decides to "occupy" the area with a federal enactment which prevails over
state law. However, article 24 also includes an important qualification which
makes clear that the scope of the Union's "concurrent power" is restricted to
establishing "general rules."'95 The matters that fall within the field of "concurrent
legislation" include tax, financial, penitentiary, economic and city
planning law, commercial registries, production, and consumption.96
There is no implicit powers clause mentioned in the text of the Brazilian
Constitution of 1988. However, Brazilian courts have developed this concept
through a series of decisions.' Therefore, implicit powers are a functional
element for the operation of the Brazilian federal system.
92. See C.F. art. 30.
93. See id. art. 23. In Brazil, "supplemental laws" are those that require an absolute majority
in Congress to be approved. See id. art. 69.
94. See id. art. 23.
95. See id. art. 24. Article 24 of Brazil's Constitution, paragraphs (1) to (4) states:
(1) Within the scope of concurrent legislation, the jurisdiction of the Republic is
limited to establishing general rules;
(2) The jurisdiction of the Republic to legislate under general rules does not preclude
the supplementary jurisdiction of the States;
(3) if there is no federal law on general rules, the States exercise full legislative jurisdiction
to provide for their peculiarities;
(4) The supereminence of a federal law over general rules suspends the effectiveness
of a State law to that extent that it is contrary thereto.
Id.
96. See id. art. 24. Other matters that fall within "concurrent legislation" include forests,
hunting, fishing, fauna, preservation of nature, protection of the environment, education, culture,
court procedure, social security, and health protection. See id.
97. See DA SILVA, supra note 88, at 420. The Supreme Federal Tribunal of Brazil interpreted
a section of Brazil's 1891 Constitution to state that the Union had the power to expel
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B. The Constitutional Allocation of Tax Power
In Brazil, the constitutional technique for the allocation of tax power is
different from the method used to divide powers among the federation,
states, and the municipalities.98 The Brazilian Constitution has adopted an
exhaustive, integral, and complete method for the allocation of powers in the
area of taxation." This is a "rigid" system in which each component of the
Brazilian federal structure (Union, states, Federal District and municipalities)
is conferred express power to institute specific taxes.
The complex system for the allocation of powers in Brazil can be understood
by looking at the system as an articulation of two different principles.
On the one hand, the power to tax specific bases or sources is allocated to
different components of the federal structure (discrimina~do pela fonte), but
they also have to share with the others the revenue yielded from their taxes
(discrimina~do pelo produto) according to formulas defined by the Constitution."
10
In this way, some taxes are allocated exclusively to the federation. For
example, the Union has the power to institute taxes on imports of foreign
goods and exports, on income, industrialized products, credit and foreign exchange
transactions, rural property, and large fortunes.'' It also has a residual
power to create taxes that are not listed in article 153 "provided [the
powers] are non-cumulative and have a specific taxable event or assessment
basis other than those specified in the Constitution."'" This in addition to
having an "extraordinary tax power" to create taxes whether or not included
in its taxing power, upon the imminence or in the case of foreign war. 3
For their part, the states and the Federal District have the power to create
taxes on the transfer by death and donation of any property or rights, on
transactions relating to the circulation of goods, and on the ownership of
automotive vehicles.'" Moreover, according to article 156, the municipalities
can institute taxes on urban real property and on retail sales of liquid and
gaseous fuels. 5
As we have seen, the Union, the states, the Federal District and the municipalities
have fixed and perfectly defined constitutional powers to institute
specific kinds of taxes. However, this does not mean that the revenues
foreigners, this, in spite of the fact that the Constitution did not mention such power expressly.
See id,
98. This section of the essay will refer only to taxes (impostos) and not to fees (taxas) and
assessments by virtue of public works (contribugdo de melhoria), which are also regulated by
Brazil's Constitution.
99. See generally DA SILVA, supra note 88.
100. See id. at 609.
101. See C.F. art. 153.
102. Id. art. 154.
103. See id.
104. See id. art. 155.
105. See id. art. 156.
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
yielded by these taxes remain in the hands of the authority that collected
them. Following a constitutional tradition that started since the 1930s, the
Brazilian Constitution of 1988 has established a system for the appropriation
of tax revenues by which the different levels of government share part of
their revenues with the others.
In some cases, it is the federal government that creates and collects the
tax, but its yields have to be shared with the states, the Federal District and
the municipalities. For example, the proceeds from the collection of federal
tax on income and earnings of any nature paid by the states and the Federal
District, by their autonomous government entities and by foundations instituted
or maintained by them, shall be attributed to the states and the Federal
District.'"
In other cases, Brazil's Constitution distributes fixed percentages of tax
revenues to the different levels of government. For example, the states are
entitled to 20% of the proceeds from the collection of taxes not listed expressly
in the Constitution in favor of the federation, but collected by the latter
in terms of article 154.1.1' For their part, municipalities are entitled to
50% of the proceeds from the collection of the federal tax on rural property,
for property located in the municipalities, and to 50% of the proceeds from
the collection of the state tax on the ownership of automotive vehicles licensed
in their territories. This, in addition to 25% of the proceeds from the
collection of state tax on transactions of distribution of goods and on the
rendering of services of interstate and inter-municipal transportation and of
communication services.'
Brazil's Constitution also allocates tax revenues collected by the federal
government to special funds from which other levels of government can
benefit. For example, article 159 states that 47% of revenue collected from
taxes on income and earnings and on manufactured products collected by the
federal government shall be distributed in the following manner: a) 22.5% to
the Participation Fund of the states and of the Federal District; b) 22.5% to
the Participation Fund of the municipalities; and c) 3% for allocation to programs
to finance the productive sector of the North, Northeast, and Center
West regions."6 Furthermore, article 160 of the Brazilian Constitution specifically
states that the federal government shall not withhold nor restrict in
any way the delivery and use of the money in the special funds by the states,
Federal District, or municipalities."'
State public finances have been significantly strengthened as a result of
the new constitutional arrangement concerning the allocation of tax powers
among the different levels of government in Brazil. Through this method of
106. See id. art. 157.
107. See id.
108. See id. art. 158.
109. See id. art. 159.
110. See id. art. 160. However, this prohibition does not prevent the Union from delivering
the funds on condition of payment of its credits. See id.
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allocating tax powers, the federal government now absorbs 45.6% of tax
revenues, the states absorb 47.4%, and the municipalities receive 7.0%.' As
such, it is fitting to state that Brazil has developed a successful process of
fiscal decentralization." 2
IV. ARGENTINA
A. The Allocation of Legislative Powers
The cornerstone of the system of allocation of powers in Argentina's
Constitution lies in its residual clause."3 Article 121 of the Constitution of
Argentina states "[tihe provinces reserve to themselves all the powers not
delegated to the Federal Government by this Constitution, as well as those
powers expressly reserved to themselves by special pacts at the time of their
incorporation.""' The first part of this clause resembles the residual clause of
countries like the United States and Mexico, but it uses the term "provinces"
instead of the concept of "states," to refer to sections of the Argentinean federation."'
Jurists have debated on whether these components are "states"
with "sovereignty" or "provinces" with "autonomy." There are a series of
Supreme Court decisions that accept the former notion. But there are others
in which "sovereignty" has been denied, while accepting their nature as
",states."' 16
For practical purposes, "provinces" have the power to create local governmental
institutions, elect governors, legislators and other authorities, this
without the intervention of the federal government."7 In addition, they have
the power to pass their own (local) constitution, create regions, sign international
treaties (with specific limitations), and exercise the eminent domain
(dominio originario) on the natural resources that exist within their territory.
11
The second part of article 121 establishes an exception to the principle
of equality among the provinces. This was included in order to constitutionalize
the Pacto de San Josg de Flores, of November 11, 1859, entered into
by the State of Buenos Aires and the Argentinean Confederation."" This Pact
111. See Ministerio de Fazenda (visited Feb. 25, 2000) <http.www.receita.fazenda.gov>.
112. See generally Gabriel Agh6n & Carlos Casas, Un Andlisis Comparativo de los
Procesos de Descentralizacirn Fiscal en la Amirica Latina, in Mtxico, HACIA UN NUEVO
FEDERALISMO FISCAL: EL TRImESTRE ECON6MICO 55 (Rogelio Arellano Cadena ed. 1996).
113. Argentina adopted its Constitution in 1853, however it was widely reformed in 1994.
See CONST. ARG. (1994).
114. Id. art. 121.
115. See id.
116. See NESTOR PEDRO SAGOUS, ELEMENTOS DE DERECHO CONSTITUCIONAL 530 (1993).
117. See id.
118. See id. CONST. ARG. arts. 123, 124.
119. See generally SAGOtS, supra note 116.
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
granted a special status to Buenos Aires, in exchange for its reincorporation
into the Argentinean Confederation.'
Article 126 of the Argentinean Constitution is also relevant to complete
the picture of Argentina's federal system."' It establishes a series of prohibitions
to the states. In general, states cannot exercise the powers delegated to
the Nation. In particular, the states cannot enact laws dealing with commerce,
inland or foreign navigation, establish provincial customs, or coin
money.' But most important, states cannot enact civil, commercial, criminal,
or mining codes after "Congress has enacted them."' 2 Congress has enacted
all these codes, leaving no "provincial" codes on civil, commercial,
criminal or mining matters.2 4
Article 75 of the Argentinean Constitution enumerates the powers that
have been delegated to the National Congress. Apart from those matters that
one would expect to find within the jurisdiction of the federal government,'25
section 12 of article 75 grants the National Congress the power to "enact the
civil, commercial, criminal, mining, labor and Social Security laws, in unified
or separate bodies, provided that such codes do not alter local jurisdictions.""'
2 But their enforcement shall correspond to the federal or provincial
courts depending on the respective jurisdiction for persons and things.'27
The Congress of Argentina has implied powers, specifically "Congress
has the power to make all appropriate laws and rules to put into effect the
aforementioned powers, and all other powers granted by this Constitution to
the Government of the Argentine Nation."'28
The Constitution of Argentina refers to the existence of concurrent
powers in article 75.2 (the power to levy internal indirect taxes).'29 However,
it seems that by this concept both legal doctrines and Argentina's Supreme
Court decisions give credence to a series of powers that can be exercised
both by the National Government and by the provinces.' 3 In spite of the fact
120. The secession of Buenos Aires occurred in 1852. The pact granted wide powers to the
State of Buenos Aires. See id. at 533.
121. See CONST. ARG. art. 126.
122. See id.
123. Id.
124. However, the provinces have the power to enact procedural codes. In other words, forensic
law is a matter of provincial law.
125. An example of the powers one would expect to find within the jurisdiction of the federal
government include the power to borrow money on the credit of the Nation, decide about
the use and sale of national lands, establish a federal bank, settle the payment of the domestic
and foreign debt of the Nation, regulate the free navigation of inland rivers, coin money, regulate
trade with foreign nations and of the provinces among themselves, and to regulate the
general post offices of the Nation. See CONST. ARG. art. 75.
126. Id.
127. See id.
128. Id.
129. See id.
130. See SAGtS, supra note 116, at 560; GERMAN BIDART CAMPOS, MANUAL DE LA
CONSITUCION REFORMADA 444 (1996).
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that "concurrent powers" in relation to other matters are not mentioned expressly,
it has been argued that there are other powers of such nature that are
foreseen in the Constitution, such as the power to protect environmental
rights, and the power to protect indigenous peoples. 3'
With respect to the municipal level of government, its constitutional position
in Argentina was always one of subordination to provincial governments.
However, the constitutional reform of 1994 introduced for the first
time the principle of autonomy at the municipal level of government. According
to article 123 of Argentina's Constitution, "[e]ach province enacts
its own Constitution as stated in article 5, ensuring municipal autonomy and
ruling its scope and content regarding the institutional, political, administrative,
economic and financial aspects."' 32 The extent of the powers of the municipalities
depend on the provincial constitutions and other enactments, but
at least their autonomy has been recognized at the level of the national Constitution,
which implies that the provinces must ensure the existence of some
measure of municipal autonomy.
B. The Constitutional Allocation of Tax Power
The tax power of the National Congress of Argentina is mentioned in
article 75, section one through three. Yet, these rules go beyond the simple
allocation of tax power to the federation, and establish the general bases of a
system of revenue sharing between the federation, the provinces, and the city
of Buenos Aires.
In principle, and by understanding of the residual clause, taxes not allocated
to the federation nor prohibited to the provinces are reserved by the
provinces. Article 75 section one establishes that national customs, and import
and export duties are a matter of federal jurisdiction.'33 Article 75 section
two states that the National Congress has the power to levy direct taxes
"for a specified term and proportionally equal throughout the national territory,
provided that the defense, common security and general welfare of the
State so require it," which means that those direct taxes that do not fall
within this notion, belong to the provinces."3 For their part, indirect taxes are
considered a matter of concurrent powers of the federation and the provinces.
3'
131. See CAMPOS, supra note 130, at 444; CONST. ARG. arts. 41, 75.
132. CONST. ARG. arts. 5, 123.
133. See id. art. 75, § 1.
134. Id. § 2; CAMPOS, supra note 130, at 173.
135. The Argentinian Supreme Court has played a relevant role in the definition of the
reach and limits of the provinces' power to tax. For example, it has stated that provinces can
only create taxes on transactions that exist within their territories, and that the provinces must
not damage the policies implemented by the federal government in use of its Constitutional
powers, through their power to tax. See SAGO9S, supra note 116, at 681.
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CONSTITUTIONAL FEDERALISM IN LATIN AMERICA
Both direct and indirect taxes are subject to a system of joint participation,
except for those, which in part or in all "have specific allocation." The
system of "joint participation" on tax matters takes shape through an
"agreement-law" (ley convenio). The federal government and each of the
provinces negotiate the distribution of the taxes that can be shared (coparticipables),
such agreements acquire the form of an act once approved by
both chambers of Congress. Moreover, the Act passed by Congress requires
the approval of each province's legislature. Through this approval, the provinces
adhere themselves to the system of coparticipaci6n36
The system of coparticipation is the result of a long historical process of
centralization of tax revenues by the federal government. Describing this
process, Ratil Bazin reported that in 1935, 90% of public revenues of the
province of Catamarca came from its own taxes, while only 10% came from
federal subventions.' In contrasts, in 1995 10% of that province's revenues
came from its own taxes, and 90% from the federal government.' Moreover,
and to complete this picture of fiscal centralization that prevails in Argentina,
it must be noticed that by 1998, 81.52% of tax revenues were collected
by the federal government, while 18.47% corresponded to the
provinces."'
Pedro J. Farias has pointed out that in spite of the federal structure of the
Argentinean state, political behavior has been leaning towards centralization,
a circumstance that has been the expression of the strength of the federal executive
power and the inability of the provinces to resist."
CONCLUSION
From a distance, it seems that federalism in Latin America has followed
general traits of the federal experience of the United States. A residual clause
in favor of the states, the implicit powers clause, and the notion of concurrent
powers are all operative elements of the constitutions studied in this article.
However, a closer inspection shows important differences in design
and in the manner in which they function in practical terms.
The constitutions of Venezuela, M6xico, and Argentina each contain a
residual clause in favor of the states (or provinces), which resemble the residual
clause of the United States. However, Brazil's Constitution has a different
formula, but legal doctrine and judicial interpretation has assigned to
136. Bidart has noticed a series of defects in the formulation of this part of article 75, and
has pointed out a series of problems of interpretation concerning the procedure to negotiate
and approve the so-called leyes convenio related to the sharing of tax revenue. See German
Bidart, Tratado Elemental de Derecho Constitucional Argentino, in VI LA REFORMA CONSTITUCIONALDE
1994, 366, 366-69 (1995).
137. See Armando Rail Bazdn, El Federalismo Argentino: Orden Constitucional y Praxis
Politica, in CUADERNO DE FEDERALISMO 141 (1995).
138. See id.
139. See SUBSECRETARiA DE INGRESOS PUBLICOS, SECRETARIA DE HACIENDA (1998).
140. See Bazdn, supra note 137, at 128 (citing Pedro J. Farfas).
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it the same meaning as that of the other three countries. Yet, the combination
of the residual clause with the actual allocation of legislative powers in favor
of the federal legislature, has resulted in a highly centralized pattern that
characterizes the federal experience of the four Latin American countries
discussed in this article.
For example, the states (provinces) in Venezuela, Brazil, and Argentina
do not have the power to draft their own civil or criminal codes. Venezuela's
states do not even have the power to draft procedural codes (and they also do
not have a system of state courts or prosecutors for the administration of justice).
On the contrary, Mexican states do have all these powers, but this has
to be qualified by the fact that state legislatures tend to follow very closely
(with some exceptions) the trends set forth by the federal legislature in civil
and criminal matters.
With respect to the implicit powers clause, the constitutions of M6xico
and Argentina have closely followed the Constitution of the United States.
On the other hand Brazil has not followed the Constitution of the United
States, but legal doctrine and judicial interpretation has made the notion of
implicit powers an operative element of the Brazilian constitutional system.
For its part, Venezuela's Constitution (both the 1961 Constitution and the
1999 Constitution) include an implicit powers clause that works in a different
way. Under Venezuela's version of the implicit powers clause, these
powers are not connected to the exercise of an explicit power of Congress or
of another federal authority, but instead are a function of a circumstance
which has encouraged further centralization.
The implicit powers clause in Latin America has not been as relevant as
in the United States. Particularly in the case of M6xico, where the centralization
of legislative powers around the national Congress has taken place
through multiple reforms to its Constitution, and not through an expansive
interpretation based on the implicit powers clause, as in the United States.
The notion of concurrent powers differs significantly in each of the federal
systems of Latin America. In Venezuela's constitutional tradition, concurrent
powers seem to be those that can be exercised both by the federation
and the states. However, the new Venezuelan Constitution mandates that
concurrent powers shall be subjected to the "leyes de bases" passed by the
national power. In M6xico, legal doctrine still discusses the appropriateness
of concurrent powers, while the Mexican Supreme Court has consistently
pointed out that on tax matters there are concurrent powers, which means
that there are some bases or sources that can be taxed both by the federation
and the states. In Brazil, the notion of concurrent legislation refers to a number
of areas or matters in relation to which it is possible for the Union, the
states and the Federal District to legislate. But the scope of the federation's
concurrent power is restricted to establishing general rules. In Argentina,
concurrent powers are those powers that can be exercised both by the national
government and by the provinces.
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Finally, the "fiscal constitution" of the four Latin American countries
discussed with regards to the allocation of tax powers can be classified in
one of two groups. On the one hand, the constitutions of Venezuela, M6xico,
and Argentina use different formulas to achieve the same result, which is the
the centralization of tax revenues in the hands of the federal government.
Moreover, these three countries have created systems to compensate the
states or provinces for their lack of revenues including the "Situado Constitucional"
in Venezuela, the system of fiscal coordination in M6xico, and the
system of "Coparticipaci6n" in Argentina. Each of these systems continue to
give predominance in the area of political and financial matters to the federal
government. On the other hand, the "tax arrangement" of Brazil's Constitution
has developed an equal pattern of distribution of fiscal resources
amongst the three levels of government.' 4'
Historically speaking, centralization has been a common characteristic
of Latin American federal systems. But today, decentralization of powers is
part of the political agenda. Brazil has taken decisive steps towards this aim,
notably in the area of taxation, but it has also started to suffer from unexpected
effects derived from the difficulties to coordinate economic policy in
an environment of financial instability, such as that of the late 1990s. Decentralization
might not be a good in itself, mainly when it is not accompanied
with mechanisms to assure coordination on matters that are vital to the nation.
One might also draw some important lessons from these Latin American
federal countries, specifically from Venezuela's experience with decentralization.
However, one must understand that it is not possible for the states or
provinces to build up financial and administrative capacity in one day. This
means that decentralization must be seen as a long term process of institutional
building that will require a very important mobilization of human and
financial resources, the breakdown of inertias, as well as the existence of a
good measure of political will and determination.
141. This situation might be good from the point of view of the political autonomy of the
states, but might not be so good from the perspective of coordinated economic policy and stabilization.
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