argentina: many failed attempts on the way to state reform

8/6/2019 Argentina: Many Failed Attempts on the Way to State Reform

1/29

1

Argentina: Many Failed Attempts on the Way to State Reform

Mara Ester GarcaSindicatura General de la Nacin

The opinions expressed in this paper strictly represent the authors personal judgments and they coulddiffer from the opinion sustained by the institution where she works. The author is very grateful to Carlos

Ballanti, Marina Caracini and Lia Gens for their contribution.


2/29

2

Abstract

Major state reforms in Argentina were legislated and to a great extent implemented

during the 90s. They didnt result in all the renovation and benefits foreseen but, in a

contra factual exercise, it is an unpleasant idea to think of Argentina without thosereforms. Some of them were addressed to modify State according to the Washington

Consensus premises, other were designed to enhance public management issues in order

to support the first ones. These reforms dont fully accomplish the proposed outcomes.

The processes that create policies are central at the time of explaining the failure. The

reform process results in a weaker, a little smaller but not less expensive State and

impoverished in its human capital and values. Internal control matters followed the

changes produced.


3/29

3

Politics lies at the core of management reform, not vice versa. Management reforms have their genesis and sustenance in thedegree to which they help solve political problems. Larry Jones & Donald Kettl

Introduction

Trying to explain our paradoxical recent past very often seems to be an impossible task.

Lots of political and economical inconsistencies paved our road. In the paper it will be

exposed, in a limited scope, the ordinate sequence of the most important effort made to

modernize State in Argentina, with special consideration to the public management

policy making process involved and its impact on control issues. The author will try also

to explain the factors that undermine these reform processes. This case seems an

interesting and complex example of a major effort that was successful at its beginningand was then dilapidated by political ambitions and managerial incapacity in just 10

years.

The main research questions addressed in this paper are:

Was the state reform in Argentina successful?

How did the public management policies perform during the 90s state transformation?

Were those policies the best to fit proposed reforms?

Which factors could explain the outcomes achieved?

Which issues need to be addressed in order to accomplish the goal of a modern andeffective state?

This paper is organized in four sections, and continues in some way, the analysis made

in previous works1. So, many of already stated arguments will be presented. In section 1

a brief and partial analysis introduces the context in which the state reform performed.

Section 2 reviews the experiences of Argentina on modernizing its Public Sector and the

related public management policies implemented. Section 3 deals with the consequences

of reform on control issues, with regard to internal control practices. Section 4 offers

some concluding remarks.

Section 1: Context

Argentina has had in the past a strong economy, a significant middle class segment,

high levels of literacy and infatuated itself as a rich true European enclave in Latin

America. It was in 1913 in the sixth world position due to its GDP per capita. All of this

remains in the collective unconscious.

The 1930 crisis motivated an abrupt change in its conditions. As a consequence of the

fall in commodities prices, the export incomes fell a 34% and the production a 14%.Imports were suspended by the crisis and the domestic industry substituted them,


4/29

4

favored by exchange controls. The state intervened throughout regulation in order to

stabilize markets. From this deep crisis a new State role emerged: one that related

economics with social matters. This welfare state reach its momentum during Pern

administrations (1945-1955). State managed agricultural and industrial promotion, the

credit, insurance and international commerce.

As times goes by, different populist and military governments ruled the country while

the model exhausted and the economy tried to find new ways. That richness has been

lost along with values associated to rule of law and democracy. In the late 80s

Argentina faced a severe crisis, both financial and energetic, assuming the dominant role

that an over-dimensioned State had played in its situation. It was the reform momentum

and state reform was enforced. Due to its good performance, Argentina became an

enfant gte of international capitals and multinational lending institutions as model of

those benefits derived from the free market reforms adoption. The new century found us

in the middle of an economic recession that could be handled - if taken seriously - but

the prevalent political preferences didnt adopt that way. Partisan and sectorial interestsdrove us to the major crisis and the biggest default in history, with a Congress

applauding that measure. They were the same legislators that a few months before had

granted Executive Branch widen powers for opposite policies. We passed from a kind of

world to another very different. Reforms related to modernization had played a

significant role in the recent past and now they have disappeared from the political

agenda. The matter is today only addressed as IMF conditions for continuing lending

operations on matters as utility legal regulatory frame and bank sector reform. And

everybody knows that to many politicians and a significant part of our public opinion

IMF is the mother of all our disgraces. Our behavior is just an exogenous variable.

During the 90s Argentina developed an unprecedented, ambitious and deep structural

state reform mainly at federal level, framed in what is known as Washington

Consensus. Its program of macroeconomic stabilization, transfer of services and

publicly owned firms, and deregulation, was implemented in a very fast way with the

immediate support of both its people and the international community, specially the

multilateral lending institutions. During the first years the macroeconomic performance

of the plan was impressive. In 1998 the economy suffered a recession. It was motivated

by Argentinas fiscal misconduct and its dependence on external capitals to balance the

budget, at a moment when international financial markets were in crisis. Tax measures

adopted in 1999 worsened the situation. This scenario drove Argentina in December

2001 to an unparalleled crisis in history. We stay still there and the analysis of the pathfollowed indicates the cut and paste of the measures adopted in a very short period,

the lack of previous assessments, institutional weaknesses never addressed (lack of

effective organizations), a debt-based development addiction that began with the nation,

our own social behavior (systematic transgression to basic rules of democracy and

society, rule of law), the dearth of a regulatory framework for the privatized enterprises

and, last but not least, the peculiarities of policy making processes in Argentina. I am

going to focus, in next section, some of these aspects.

Of those major reform efforts performed, the first one was the wider and most

comprehensive, addressed to reform the State. It was implemented during PresidentMenem administration and took almost four years to be implemented. That state reform


5/29

5

was associated to a constellation of public management policies, among them control

issues made a significant shift. Then, during the brief President De la Rua administration

the reform effort was more focused to very detailed public management policy

proposals but it didnt disdain to expose the roles State must play. The reform should

affect the control model introducing the concept of performance and results to be

considered. All these attempts greatly differed in its outcomes from the stated rules.

Much of the public management measures proposed were common to both attempts,

due in part, to the presence of the same high-level technocratic groups involved. The

policy making processes, that could be easily described as proper by the so called

delegative (ODonnell) or hybrid (Malloy) democracies (those who have some formal

democratic features as electoral processes, coexisting with authoritarian forms of

political control, linked to clientelism, bureaucratic patrimonialism and corporatism)

were also similar. The idea of civil society intertwining with the State is in these latitudes

still vague rhetoric.

To these efforts the common features were:

o Top-down strategies adopted in an inner circle without any kind of previous

debate (but with formal legislative treatment for its approval during President

Menem administration)

o Reforms made within the frame of negotiations with multilateral lending

institutions such as World Bank, IMF, IDB.

o Decision making authority in hands of technocrats who strongly influenced the

policy agenda

o Highly personalized policy processes

o

Use of legislative powers by the Executive Brancho Lack of strategic planning

o Short time allowed to do the reform job2

The present (2 years after default) scenario could be characterized as follows:

While oursociety is massively declaring its adhesion to democracy versus any other

type of government disdains its constituent institutions, while parties and politicians

have got a generalized anathema.

Lack of an explicit economic program, instead: contingency measures

implementation referred to as pragmatism.

A very poor investment environment.

A decrease in unemployment rate to 19.4% after reaching more than 24%

A prudent monetary policy has been maintained as well as the independence of

central bank policies3

Devaluation got a precarious primary surplus on fiscal budget, basically by duties

collected on agricultural exports and an exceptional international price for

commodities (soy) and a price increasing trend;

50% of the population is below the poverty line, with recently impoverished middle-

class segments.

Fiscal spending is growing slowly, as long the government needs political support for

some of its proposals: direct assistance programs, public infrastructure and the

recreation of national enterprises are among the main reasons. In the last times some


6/29

6

signs of economic desacceleration have appeared; pensions have been increased and

a wages rise announce is also in the air. All of this results in an increased expending,

despite the primary surplus.

The key structural reforms requested by IMF refer to sustainable public finances with

special emphasis on provincial fiscal behavior, tariff increases, restructuring public

debt, central bank independence and legal predictability.

Following an Argentinean Memorandum4 to IMF authorities, the main risk to the

program is that key elements of fiscal and banking reforms that are crucial to

sustainability will only be formulated at a long run.These main risks detected are the

uncertainties about the eventual political consensus for the essential aspects of the

reforms needed and the credibility of the debt structuring strategy with private creditors.


7/29

7

Section 2: The Reform Issues in Argentina

In this section the experience of Argentina on modernizing its Public Sector and the

related public management policy making processes will be introduced, in a limited

scope.

1977-1983

Reform issues were present many times and with different strength in the domestic

agenda. During the military regime (1976-1983), referred to as Proceso de

Reorganizacin Nacional5, strategies were followed in order to restore balance to public

finances6. They tried to bring to public sector some of the ordering and information

systems proper of private and military sectors. During this period the idea of privatizing

some public enterprises, of the few broken ones that the State took over its custody, was

suggested. Public expenditure on personnel fell down from 12% of GDP in 1975 to lessthan 7% in 1977. Tax collection improved, provincial budgets were adjusted and

financial control of state owned enterprises got some success at the beginning. In order

to sustain the stabilization, during 1978-81 period, the exchange rate and the public

service tariffs were regulated. During period 1981-83 the fiscal unbalance increased, due

among other reasons, to military equipment procurement for Malvinas war, a strong fall

in the tax collect, inflationary acceleration and tax evasion.

1983-1989

Argentina returns to democracy in 1983. President Alfonsns administration devoted all

its energy to strengthening of political framework and tried to moderate, to a certain

extent, the fiscal unbalance. During 1985 and 1986, an important increase in the tax

revenues and in the fiscal incomes in general helped to mend the situation; it was based

on high exports duties, special taxes and tariffs advanced in relation to the public

enterprises wages. Public expenditure on ordinary outlays was not reduced. In 1987

President Alfonsns administration contemplated a heterodox economic adjust plan in

order to get some stabilization -Plan Austral- that ended in a fiasco7 and reinforced the

assumption on the structural origins of the crisis. It has to be pointed out the emerging

idea of a Third Historical Movement, a populist expression that contributes to erode his

political situation. The political reinforcement did not include the institutional building

and reform of every democratic transition in order to keep abreast to the times. An ideaof constitutional reform was introduced, one to aim a shift from a presidentialist regime

to a parliamentarian one besides the strong historical roots the former one has. As

ODonnell8 points, the State was conquered by the party, putting its people in every key

place, practicing an extensive clientelism in order to accumulate power with no

conception of general interest in mind.

In August 1988, it appears the so called Plan Primavera that tempted to control inflation

and improve real wages in order to be better positioned to cope with the electoral time.

To reinforce that purpose, the elections were advanced letting 8 months between them

and the new presidential term. President Alfonsin contemplates privatization of somepublicly owned enterprises, such as the national airline (Aerolneas Argentinas), but


8/29

8

faced strong opposition of theJusticialist Party at the Congress. The economical aspects

were not properly addressed and several months before the end of his term the country

faced social revolts provoked by hyperinflation. It ended in a declaration of the state of

siege. Capital flight has intensified, and the national currencywas almost dismissed. The

persistent inflationary process, the over dimensioned state and its functions, the poor

quality of the services delivered, the increased public expenditures and consequentbudget deficit, among other conditions, drove politicians and public opinion to realize

that the recurrent crisis were due to structural determinants and it was necessary to face

deep reforms. In the policy making process associated to this view, the action of strong

power groups, such as UIA (Industrial Union) and SRA (Rural Society) had to be

recognized. For many years and throughout many press releases and economical studies

it had been showed to public opinion the adduced origins of the severe crisis9. The 1989

debacle drove to a radicalization of the argumentation and state reform became part of

the political discourse.

Late 1989- 199910

It was time of presidential election and the opposition won the contest. The confidence

in the ability of State to perform key functions had extensively diminished. In a

turbulent scenario, Government trespassing was anticipated and President Menem took

his period five months before the proper date. Prior to his anticipated inauguration he

got the outgoing partys compromise to support the legislative approval of economic

instruments to be proposed by his new administration.

The electoral campaigns platform, as all of them, was imprecise about the measures to

be sustained but Menems administration comes preceded by a populist label, not the

best label indeed to gain the support of the economic establishment. During the first

months of the new administration, the economics recipe applied was similar to the

previous ones and the confidence didnt appear; so, a shift in the economic policy was

made.

Electoral promises are promptly forgotten in Argentina and who wins a presidential

election is enabled to govern the country as he sees fit 11. The new administration

assumed as own the prevailing opinion about the causes of the crisis, the need for a

change became widely accepted and state reform was the resulting outcome. To perform

such changes President Menem called Dr. Domingo Cavallo as Economy Minister and

implemented his plan to fight inflation and introduce fiscal discipline, thereforegenerating great confidence in the markets. The reform process had followed the formal

democratic procedures, including the legislative approval, but the entire process was

conducted in a personal decision making style, thus avoiding deliberative mechanisms.

The main idea was that economic stability would ensure political stability to the fragile

democracy. The public support, after the hyperinflation nightmare, was broad.

Technocrats monopolized the policy agenda, while politicians got some kind of reward

for their loyalty to the program in exchange relations. Why did technocrats monopolize

the agenda? Mostly because the more severe the crisis was, more dependent were the

politicians on them in order to get results that enabled the first ones to maintain their

situation.


9/29

9

In 1989 was declared an emergency status in the Executive Branch 12. This exceptional

measure allowed to transform the legal status of all operating administrative units, to

create new agencies and to put publicly owned enterprises to partial or complete

privatization (after legislative approval) and also to install government appointees in

agencies.

In own words of the then current Treasury Secretary, Ricardo Gutirrez13, it is possible

to get a clear definition on the reform process: In Argentina there was not an explicit

definition of the new State roles. All Argentineans knew which the unwanted State was.

Then, a reform appeared. But if someone asked me if the reform theory was written, I

would say no. It was a political movement toward a solution.... Who are authentically

convinced of the advantages of this model are we, technicians.

In a brief and partial glance, Argentinas macroeconomic conditions in the pre-reforms

scenario featured:

closed economy: protectionism that distorted industrial competitiveness; economic stagnation;

considerable domestic and external public debt (partially explicited and partially

shadowed);

national public debt financed by Central Bank, as long as provincial banks did to

provincial states14 ;

public sector annual cash deficits had run of 6-10% of GDP throughout the 80s;

strong state intervention on markets and subsequent income transfers among

sectors;

minimum investment levels;

state owned enterprises with old fashioned and non productive structures, losinglarge quantities of money and providing very poor public services, with a weakened

management and privileged working conditions for over dimensioned personnel

structures.

The macro social conditions scenario, also in a brief and partial glance, included:

a politically skeptical population, while it was trying to rebuild the concept of

democracy15;

political institutions adversely affected after years of extreme inflation, broken rules

and inefficient administrations;

a popular feeling about the lack of managerial control in the different levels ofgovernment and the belief that transparency in the government activities is just for

other countries;

low credibility on government as a solution provider, and the subsequent loss of

governance plus a very poor opinion about public officials;

growing social expectations;

a bureaucracy affected by very frequent political changes (that does not necessarily

mean a ruling partys change, but an internal faction change inside the governing

party) ;

citizens demanding better service quality and drawing attention to their customers

rights;

wide consensus about the urge of a deep reform in the State, without precision about

its features.


10/29

10

During Menem Administration reforms were made in two differentiated phases, the first

one mainly addressed to reform the State and the later to reinforce that process

enhancing public management. In order to accomplish its task, the Government

implemented the so-called State Reform I (1989)16 and late the State Reform II

(1996)17. The first stage was oriented toward a redefinition of the State role, mainly atfederal level. The reform comprised key functions to be performed, state owned

enterprises privatization, a proposed fiscal and monetary discipline, changes in public

management and the introduction of new technologies. The second one was mainly

addressed to public management issues.

State Reform I

Under this label a comprehensive program that included fiscal, monetary and structural

reforms was implemented. The main tools were:

convertibility (a sort of Currency Board), cornerstone of the stabilization process, thatfixed the parity one peso equal one American dollar,

elimination of fiscal and quasi fiscal deficits,

selling of the state owned enterprises,

a new Financial Management Law,

deregulation and market liberalization

an administrative emergency was declared and governmental apparatus gone into

radical revision.

.

This constellation of changes was implemented in a relatively short period of time, in a

very fast and decided way alleging the critical situation. Policies were adopted followingcontemporaneous events in other countries and based in a very strong political

leadership, with the technical support of well-formed elite. The respective policy making

process (one which avoided transparency and former deep discussion of the measures to

be implemented) affected to some extent public perception on the legitimacy of the

reforms. An arising question in some sectors of society was if government did manage

in order to social interest or private ones and for many people the privatization process

was inseparable from corruption related to state practices. In just four years the national

oil company, the railways, electric energy, telecommunications, airline, TV and radio

stations, petrochemicals, steels and ship-yards were sold. The call to auction

characteristics favored the presence of few offeror groups and in many cases the process

was subject to irregularities. The systems of checks and balances were weakened: the

Supreme Court of Justice was modified in its members number and the possible

debates in the domestic political arena were impaired by the agreement made between

the two major political parties prior to the advanced assumption.

In order to reinforce the measures adopted within the State Reform Act frame, a new

Decree was issued in November 1990, addressing public management issues. It

intended to attack the operative inefficiencies, which were affecting the administrative

organization and the quality of services. The situation was characterized as reaching

dangerous limits. The measures were oriented to obtain a substantial enhancement in

administrative efficiency and rationality, decision capacity and to restructure theadministrative body. The idea of less complicated administrative procedures and smaller


11/29

11

organizational units was dominant. Such as were the ideas of technological

modernization and improvement of public attention. All the administrative structures

had to be derogated and the new ones had to be submitted to an Executive Control

Committee for the Administrative Reform (CECRA).

A new Civil Service regime project should be presented by the Public FunctionSecretariat to the Executive Committees consideration. Said project should feature a

modern and professional Civil Service, one that brings prestigious status to agents labor,

introduces new managerial technologies and privileges training, merit, competitiveness

and productivity as foundations of a Civil Service career. The idea of a professional

Civil Service was materialized through the approval in 1991 of the National System of

Administrative Profession - SINAPA, following the name in Spanish: Sistema Nacional

de la Profesin Administrativa. The system was supported by principles of merit,

training, unbiased selection and productivity systems as foundations for recruitment and

progress in the public servant career. The tool had been considered as guaranty of

immediate administrative restoration of accountability at all levels. The system failed inits implementation due to the lack of a previous personnel assessment and to the

absence of a professional guidance in the process. The mismanagement of the change

from the old system to SINAPA caused many inequities and organizational discomfort.

It relied almost entirely on political premises.18

Meanwhile, it has been a dramatic turnaround in the economic and social scenario. The

economic program was succeeding and social optimism was growing. Such conditions

brought Government great confidence about certain possibilities for its reelection.

The idea of a Constitutional reform regains forces (it was once favored during President.Alfonsn administration). The reform was conducted by strong political leaders (Menem

and Alfonsn) who prefer, as usual, weak institutions. The main objective, from the point

of view of President Menem and his party, was aimed at the presidential reelection and

the softening of conditions to go to ballotage. In 1994, a 70% of the original

Constitution was modified, during three months of work. The reform has as an explicit

objective to attenuate the strong presidencialism throughout a new figure (the Cabinet

Chief); instead it gives constitutional status to the legislative powers of the Executive

Branch (the so called emergency decrees). A bicameral Committee is in charge of

controlling the governments use of emergency decrees. It was ordered in the

constitutional reform but never carried out. The real fact is that Congress play since long

time ago a passive role. Many legislative functions were delegated by it: those related totax revenues, national universities, public services, customs, and electoral system.

Other features of the new Constitution were semi direct democracy mechanisms,

customers and environmental rights, transparency for the political parties functioning,

regulatory frame for public services and regulatory agencies. It shows what was called

constitutional snobbism19, introducing juridical novelties from over the world.

President Menem was reelected in 1995. Among his campaign promises was the

reforms deepening and it meant reinforcing public management issues because major

surgery was performed and the state has changed its role to a great extent. The country

had faced a severe financial situation due to the consequences of Mexico crisis but couldrespond successfully to outside events. Fiscal control was difficult, due to the federal


12/29

12

system of government20 combined with the reluctance of provincial states to curb their

expenditure growth and their poor revenue performance. In 1996 Dr. Cavallo was not

anymore Economy Minister, but the main features of the former plan were still in place.

State Reform II

Under this label another public management reform was introduced to cope with the

needs of the new State and to assure the state reform recently performed. In February

1996, Act 24629 was enacted. Its purpose was to develop a management model for

central administration and decentralized entities, and to transform the respective

regulatory frame in order to get a total state reengineering, orienting allocation of

resources and results toward citizen service. This process would be held through

modifications, mergers or consolidations, transference of agencies to provincial

governments, partial or complete abolition of objectives, competencies, functions andoverlapped or unnecessary duties, and privatization. The Executive Branch implemented

a special fund21 in order to give to those civil servants whose positions were suppressed

(due to the measures adopted under this Act mandate), training and technical assistance

for self-employment programs and other kind of community associative organizations.

It was financed out of public assets sales or public indebtedness and was the managed

by the Labor Ministry.

During this implementation no effort was made to retain valuable human capital, and

said valuable human capital, that have opportunities in the labor market, made no effort

at all to stay in the civil service. Many of them just wanted the compensation in order to

develop personal projects. A further analysis shows that the financial effort made was

not followed by the definitive suppression of all positions held vacant due this measure,

as it was stated. Since at the moment neither the mechanism rejects determined

positions or qualifications, nor establishes the necessary conditions to monitor the

program or any kind of assessment of the measures, it was designed as a legal procedure

to obtain money from the State. It was a bogus mechanism: it didnt block the chance

of reentering under other contractual regimes and it served as the revolving door for

many people who do have the contacts and may be the skills.

Among another factors, it is widely accepted that one of the reasons that conspired

against the effectiveness of the reform measures was the decision of President Menemof running for a third consecutive term in 1999 forcing a Constitutional reinterpretation.

The momentum was not the same for reforms: some problems were emerging22 and

credibility on government was attenuated. The economical cost of the measures taken

and the fiscal consequences of the informal pro-reelection campaign (public funds

allocated among provincial Governors according to political needs) have had strong

influence in the following events. The differences between Mr. Menem and other

members of his Party were eroding the situation and this entire drove us very far from

the institutional quality required in order to get sustainable reforms. The Justicialist Party

lost the elections.

1999-2001


13/29

13

In 1999 Dr. Fernando De la Rua followed Dr. Menem in the Presidency; he represented

a political coalition that made of ethic and fight to corruption its motto. During President

De la Rua administration the reform issue in order to modernize State became a very

important one, in theory at least. The change was heading to a second generation of

reforms: state promoting social and economic development, responsible for the lessfavored sectors, based on ethic and transparency. It was accepted that previous reform

attempts had failed due to the generalist practice adopted. So, this time concrete and

specific actions will be imposed aimed mainly at enhancing operational aspects of public

management. The reform design was targeted to modernize federal government but the

conceptual corpus could fit provincial and local governments too. The proposed reform

contemplated the predominant tendencies on public management policies. It was

ambitious and precisely defined, but emerging questions arouse: with which people and

in which society this process could be successfully performed. Previous voluntary

separation regimes produced a sort of severe human decapitalization, and the last

separation was accepted as a mistake by President De la Rua (responsible for themeasure) in his inauguration address to 2001 CLAD conference23.

The Vice-president Alvarez (from a different party than Dr. De la Rua) was in charge of

the State Modernization process. A Secretariat and a Commission were created for that

purpose; the members of the Commission were four State Secretaries, the Sndico

General de la Nacin24, and the Deputy Secretary of Gestin Pblica (Public

Management). The Secretariat was conceived as technical support to the Vice-president.

According to words of the current Secretary in charge (Marcos Makn) State

Modernization was created under a wider vision than traditional administrative reform

concept or public management reform25. The three pillars of the reform were:

modernization of public management, political reform and knowledge and society. The

political reform idea was looking for transparency in the political relations, the political

parties role and their strengthening, a transparent financial support for the parties

management, and transparency also in electoral processes and candidates selection to

public duties. Knowledge and society implied to formulate a new role for State in a

globalized world and get how Argentina could enter in the knowledge society. Fiscal

balance was considered as a main issue in this reform, and visualized as a basic but not

sufficient need if the existing structural rigidities were not removed. State was defined as

costly and inefficient. A core issue for this reform did not involve the amount of the

public expenditures, but the quality of the services provided. At that time, public

expenditures were 30% of the GDP; not too much considering USA and EU rates. Buthere the problem laid on tax revenues. The widespread opinion about the high public

expenditure was explained as related to the burden taxs inequities on population and to

the fact that the middle class segment paid taxes and also had to buy services from

private providers that could be publicly provided (education, health, and security). The

public expenditure redefinition connoted the change in the way public management

performs its duties.

This process also put on discussion, once again and very limited in time and actors, the

kind of State Argentina wants: its key functions26. The main features of the proposed

reform were: a friendly and committed with the citizens State; a high quality, efficientand effective services provider State; a social and economic development promoter State


14/29

14

that takes care of the less protected sectors of the society and was financed by a wide

based and equitable tax system. It was also appraised that social expenditure must not

represent a heavy burden for society and that transparency was a goal.

The axes articulating the plan were:

1. a results oriented management;2. a rational imputation of functions eliminating overlapping,

3. an strengthening of basic policies on justice, health, education, social security, social

promotion, employment, security, defense and science and technical promotion;

4. regulatory capabilities

5. tax administration and

6. enhancement of civil society participation.

This public management reform took as major transversal change the human capital

management in a competencies based frame. All what was stated represented the last

and best in market. But how reasonable was to adopt such radical changes withoutprevious assessments about the resources to be applied to the process? Another

transversal change was the procurement system. State was characterized as an inefficient

purchaser, due to outdated (1956) rules and regulations, technology and criteria. Those

rules let aside wide possibilities, brought by communications, science and technology

developments. The goal was to obtain efficient and effective procurement practices that

could be controlled by civil society.

Previous efforts made on the Financial Management System during the Menem

administration were praised as essential. The systems underwent a comprehensive

revision due to their non-integrated, autonomous and anarchic operatives. But important

duties were pending on this matter: the development of automatic registration of human

and physical resources procurement in the accounting registers, in order to get financial

information that accurately reflects transactions. A reengineering process was proposed

as a solution in order to implement an unique financial management system for the

entire Central administration.

The reform would also include transparency and anti-corruption policies. Corruption

was declared as central question on public agenda; it was perceived not only as a moral

issue, but also as a public management one. This was one that affects economic,

institutional and social development. The problem would be addressed through ruling

quality, public access to information and civil society participation.

Once again, government failed to impose fiscal discipline: public expenditure was

growing and in order to finance current expenditures outlays more public debt was

issued. The goal of a balanced budget was not obtained through the use of genuine

financial resources. The whole situation worsened and reforms remained in paper.

Vice-president Alvarez resigned on October, 2000 amidst his accusation of improper

payments to Congressmen in order to get from Legislative the enacting of an IMF

requirement on labor market conditions. In January 2001 IMF supported Argentina with

a large package, the so-called blindaje. The Economy Minister Machinea resigned andPresident De la Rua called Dr. Lpez Murphy to office to replace him. He lasted 10 days


15/29

15

in office, after declaring the need of a deep structural reform and mentioning the

personnel surplus. In order to give the markets good signs and to multilateral lending

institutions a well known name, President De la Rua called Dr. Cavallo for a second time

to office as Economy Ministry. This time, the markets didnt answer to Dr. Cavallos

appeal and the severe financial situation deteriorated day to day.

In July 200127 a Presidential Order, stated the acceleration of the comprehensive state

reform in order to reinforce the zero deficit principle. Section 2 of this Presidential

Order call for an accentuate profesionalization of civil service, giving participation to

unions in the reform issues, fight against tax evasion, limited the wages (the top was the

Ministry remuneration), etc. But the situation deteriorated daily and the proposed

measures had no impact at all. The banks suffered runs on deposits and restrictions on

the use of cash were imposed. Bank system was almost collapsed, government ended up

using the reserves of the entire system. December 2001 Dr. De la Rua left the power

among popular riots.

2002-2004

A sequence of wrong economic measures transformed a recession into a depression.

The story follows with many presidents in a very few days, the public debt repudiated in

the biggest default of history, bank deposits frozen, property rights undermined, the

peso Convertibilidad annulled and all these extreme measures were approved by the

same legislators that granted full powers to Executive Branch, just a few months before.

Also has to be punctuated the condemnation of the measures adopted during the 90 as

the mother of all the problems and the Manichaean discussion on state reform. Recently

the IMF28 stated ... the fundamental causes of the crisis, it is our judgment that it was

essentially a combination of the failure of Argentinean policy makers throughout the

1990s-and during the crisis period of 2000-2001-to take the necessary corrective action

to make sure that domestic policies were compatible with the choice of the exchange

rate regime. ..., but the fundamental problem of policy making was the inconsistency

between fiscal policy, particularly the size of the public debt and the fact that most of it

was borrowed externally; the incompatibility between that and the choice of exchange

rate regime-the hard peg, convertibility regime that essentially constrained other

macroeconomic management choices.

At the present time, there are some clear indications of the government's willingness to

play a more active role in the economy reassuming functions let aside, after the state's

withdrawal in the 90s. The official discourse talks about breaking the neoliberal chain of

the 90s and not to return to state monopoly29: a middle point between the free-market

reforms and the state interventionism. Following that idea, at this moment it is discussed

at Congress the creation of an new state-owned energy enterprise which will play a

regulation role in that market, avoiding oligopolistic practices. This company will explore

and develop oil fields, as well as transport, storage, distribution and commercialization

of those products. It is interesting to point out that the legal format proposed by

Executive Branch is closer to private sphere and that Congress rejected that formatalleging control failures. ENARSA was designed as private stock company of mixed


16/29

16

capitals: will be 53% on hands of federal State, 12% will be controlled by provincial

governments and 35% will be listed on Stock Exchange. Some of the privatized

enterprises are returning to the state ownership and/or management: as the Post Office

(Correo Argentino) whose concession has been rescinded due to unsatisfactory

inversion records and some railways sections. Also State has taken care of airlines

companies in crisis and a new airline was created (LAFSA), which will be privatizednext December, accordingly, to press releases. The renegotiation of utility contracts,

whose discussions are supposed to be completed by the end of the year, is still a

pendent matter.

At this moment, September 2004, the public management modernization issue doesnt

appear neither in the official agenda or the presidential discourse. Despite that absence,

during the term of Dr. Beliz as Justice Minister, many administrative reform initiatives

were introduced. His recent resignation and the controversial public statements made

about the reforms by his successor, avoid assessingtheir continuity.


17/29

17

Section 3. - Control Issues30

To be accountable for collecting and spending citizens money is an ancient concept so

old as democracy itself. The subsequent control of activities afforded with that money

too. Since 1870 the control within the Central Administration was in charge ofContadura General de la Nacin, and in 1956 the Tribunal de Cuentas (Court of

Accounts) headed it. On April 1991 the Executive Branch sent to the Congress a bill in

order to reorganize the financial administration and the management control within the

Public Sector. The aim was to support the process of State modernization and

subsequent public management reforms initiated in late 1989. Until that moment the

control within the public sector had been undertaken by the Tribunal de Cuentas de la

Nacin for the Public Administration and by Sindicatura General de Empresas Pblicas

for the state owned enterprises. A previous control within the Public Administration was

exercised by Contadura General de la Nacin (National General Accounting Office) and

also by Tribunal de Cuentas de la Nacion delegates, accredited in every entity. Thismeant in practice previous control undertaken by an external Body.

As part of the reform process, the Act 2415631 was passed in 1992 and it was named as

Financial Administration and Control Systems in the Public Sector. It establishes a

control model for the Executive Branch (Central Administration and decentralized

organizations), and government agencies that have not been privatized. It is supported

by an internal control system and an external one. The internal one is ruled by the

Sindicatura General de la Nacin (SIGEN), the General Controllers Office, and is

integrated also by the Internal Audit Units (142 at this time). The conceptual frame first

appeared in the Integrated Model for Financial Management System, Control and Audit

for Latin America (SIMAFAL in Spanish), presented by the International Development

Agency in April 1991.

The Act has established an integrated and integral control model based in the 3Es:

economy, efficiency and effectiveness. The model was sustained on two pillars:

legislative external control and internal control conceived in a very modern way. This

law apprehends the evolution that the concept of control has suffered, from a formal,

legal and financial approach to a management process focus. One peculiarity of the

enacting is that the law links Financial Management and Control.

In the considerations of the message presented to the Congress32, it was stated: The project rules in order to bring rationalization to the Public Sectors financial

administration and to build a structure of internal and external control over the

financial and operative management of public organizations.

It shall motivate a great advance in the improvement of the republican system of

governance and in the reinforcement of democratic practices in the country.

It shall also be a new barrier for the diverse forms of corruption, which had

proliferated in Argentine society, favored by the 1989 economic crisis that also

affected the public sector.

It shall facilitate a great transparency in the mechanisms for controlling the

procurement and the allocation of public resources following the objectives andpolicies defined.


18/29

18

The practice of a previous control carried out by external institutions was defined

as inconsistent with modern financial administration schemes in public sector.

Previous control included in the internal control structure, becomes one of the top-

level duties in each one of the state entities.

Sindicatura General de la Nacin has to be the Presidents Auditor, conducting and

ruling the internal control performed throughout a net of Internal Audit Units. The existence of a Supreme Control Body, under technical and financial Congress

dependence, becomes necessary. Its mission is the ex-post control about the States

resources employment, the economic and effective assessment of public sector

activities and their achievements.

These are the main features of the Sindicatura General de la Nacin (SIGEN):

1. SIGEN is an entity with administrative and financial autarchy, which directly reports

to the President.

2. The Sndico General de la Nacin (General Comptroller) and three Deputy SndicoGeneral, all of them political appointees, head it.

3. It is defined as a normative, supervisory and coordinating Body.

4. The Higher Official in every jurisdiction or entity will be responsible for the

sustenance of an adequate internal control system.

5. Among SIGEN functions the following ones can be mentioned:

To issue and apply the internal control rules.

To issue and supervise the enforcement of the internal audit rules

To guide the program, project and operational assessment.

To report to the President the facts that may cause severe damage to the national

wealth.

Each Internal Audit Unit reports to the highest authority of its jurisdiction and it acts

under the technical coordination and supervision of SIGEN. The responsible for the

maintenance of an adequate internal control system is the above-mentioned highest

authority. The internal control model applied must be integral and integrated, with regard

to budget, economical, financial, assets, normative and management issues, plus

program, project and operational evaluation. This system implies that ex-ante and ex-

post controls tools have to be integrated in the organizations and internal audits

planning, rules and procedural handbooks. It must be pointed that the new instrument

had left a gap on functionaries responsibility (a sort of accountability). One of the

problems faced is that the Internal Auditor does not always interact at the level required

to make his/her opinions heard in the decision locus neither is recognized as a reliable

advisor by the political authorities. The system shows itself as of limited aptitude in

order to follow policies33.

During the first years after the enacting officers were devoted to, among other goals, to

develop its General Internal Control Rules34 and to ground the basis of internal control

in the field. During 1998, almost five years after the law was enacted, the General Rules

deeply rooted in the principles stated by the Internal Control Integrated Framework

(COSO)35 were published. Control is concerned with means as well as ends. The control

model adopted was pursuing explicitly36:


19/29

19

To improve within the public sector a control environment as an expression of a

cultural change based on accountability, ethics and transparency.

To evaluate if performance was done according the 3Es principles, within a legal

context...

A value added performance, better timing in the decisions and timely corrective

actions... To generate a useful, complete, trustful and timely information system to be of

assistance for the President.

Until the Act 24156 was promulgated, control performed by the Tribunal de Cuentas

could be characterized as a formal compliance with law and governmental accounting

standards. This law proposed a shift around in which the organizations history and

culture have an important role to play. But, the point is if a change is possible when the

entire system is in the middle of a radical revision and mainly when it is culture what has

to be modified. As long as Control Environment depends strongly on the factors that

compose it, it will be as good, fair or poor as they are. Predominating organizationalculture determines what actually happens, and which rules will be followed, bent or

ignored. In all these years no special measures have been taken to address these cultural

aspects.

Other control environment factors to take into consideration are: managements

philosophy and operating style and the way management assigns authority and

responsibility, and how it organizes and develops its personnel. In the proposed model

everyone in the organization has responsibility for internal control and must be prepared

to face it. But when the entiresystem is under downsizing and no specific human capital

policies are been implemented, the adoption of such kind of measures seems hardly everpossible.

The effectiveness of internal control must be undoubtedly associated to integrity,

commitment to ethical values, and competence of the people who perform it. Conspiring

against these preconditions were (still are) a society where the rule of law is not a high-

appreciated value, a system where competence and merit are not preferences for career,

instead nepotism and clienteles are. Within an administration that has as its historical

behavior doing just what is ruled as much as avoiding new paths, the superior officials

were asked to play the role of managers (focusing on achieving ends) and administrators

(focusing on the means being used) of public services oriented to the users. Once again

the main question arises: if the State was in suitable conditions to carry out the

transition, regarding its human capital and administrative values.

As in many other Argentinas bodies the frequent change of authorities and the

consequent changed profile to perform the duties had an impact in the organizational

performance. In ten years there have been 8 Sndicos Generales (one just nominated

but then no confirmed), the first four graduates from the Economic Sciences, the

following three were lawyers and the last one also in economics. Is this relevant? We

will see. The changing profile has meant a change in the control approach under the

same legal instrument, as long as the model didnt have time enough to be consolidated

and the long standing tradition of giving a personal touch to the public function. Duringthe first six years, the control activities really performed were towards financial and legal


20/29

20

compliance, limiting in some way the control performed to compliance audits, but the

operational audit was mentioned very often. The difficulties for rooting the model are

associated with the deep changes involved not appropriately addressed and the lack of

interest authorities showed on internal control matters.

The actors

1984-1999

SIGEN is the legal continuity of the Sindicatura General de Empresas Pblicas (SIGEP):

the former external and concomitance legal, financial and managerial control of publicly

owned enterprises. The first Sndico General (Alberto Abad) headed before the SIGEP

and was an active player during the legislative treatment of the Act 24156. SIGEPs

people constituted mainly SIGENs staff; they were specialized in external control in an

administrative environment ruled by laws of private sector application, and organizedmore as private enterprise than as central administration. All these aspects made out the

necessity to be trained in the new vision and be familiarized with Central Administration

management. The first times of the new entity were dedicated to examine the business

of the areas under control and the control performed was based on financial and legal

compliance. The training on the new model was basically in charge of the Canadian

Comprehensive Audit Foundation (1993-1994) when an ambitious program was

implemented. But three E audit was not so easy to root, also the idea of internal control

as advise and so, mainly the audits performed were dedicated to compliance (financial

and legal). Mr. Abads contribution to define the model implementation was decisive

but he resigned to take other responsibilities within the Executive just two years after the

enacting.

His successor (Hctor Agustini) was at that time one of three Deputy Sindicos, and his

previous position as member of the Tribunal de Cuentas is not a minor detail. The

control orientation toward compliance was maintained and the internal control concept

was under analysis once again. During his term the Internal Rules were approved and

after two years he resigned. The Internal Rules took five years to be approved and the

change of the Sndico General delayed its diffusion and factual application thereof.

Following the reformed Constitution (1994) and the state Reform II, SIGEN defined its

role in 1997as37: promoting organizative structures adapted to institutional needs, with a defined

command chain, an effective function separation with primary allocation of

responsibilities due to clearly established actions;

implementing an administrative responsibility regime for the officials, including both

management and results (so is accepting the absence of one);

enhancing the control environment on jurisdictions;

reporting and advising the Executive;

detecting problems and proposing its solutions;

tending to excellence in public management and control;

being a technological and doctrinaire referent on internal control matters in Argentinaand Latin America.


21/29

21

The tools chosen to promote changes in order to achieve the 3Es plus transparency in

Public Sector were: integral and special audits, technical assistance to Internal Audit

Units and technical diagnosis of the Executive entities. The diffusion of the internal

control concept among the managerial performers was never undertaken. So, the internal

control became more related to Administrative Directors (and administrative procedures)than to high level authorities (and policy implementation) , limiting its scope and impact.

The third Sndico General (Cristina Benzi) came from a Legislative Bicameral

Committee dedicated to the Accounts Revision. She was a year on charge, until the new

administration arrived and during her term no main changes were adopted.

2000 - 2002

During President De la Rua administration, the professional profile required to be

Sndico General was widened from exclusive professionals on Economic Sciences tolawyers among those eligible but maintaining an experiences requisite in administrative

management and audit of 8 years, and the modification was presented in a section of the

Ministry Act38. The designated lawyer (Rafael Bielsa) didnt meet with the experience in

Financial Management and Audit required by law. During his period SIGEN

experienced important changes in its internal organization and it was approved the first

strategic plan. A vast personnel movement was implemented and it implied everybody

coping with new matters to manage. The main features of the strategic plan were

strengthening high direction systems (integrated by something named Techno-political

Processing System, Strategic Planning, Accountability and Managerial Operative

Programming and Control System). The Plan established a SIGENs certification, and it

was defined as the set of rules that established evaluation criteria for the internal control

system. The intended aim was the improvement of processes associated with the

Program Agreements set forth in the Act 25152 and with external financial aid. Another

distinctive attributes of the Plan were the idea of passing a rule in order to punish those

who didnt provide complete and timely information, the establishment of

Accountability procedures, and the institution of an Integral Internal Control System for

the entire Administration. None of these measures was implemented; none of them

passed the ideal level due (among other reasons) to the abbreviated administration of

President De la Rua. During this period it became a fashion to endorse SIGEN the

compliance verification of administrative orders such as entrance time, use of cell

phones and official cars, etc. The Action Plan 2001 included a large number of the sodenominated performance and results audits; a real curiosity given the fact that no

performance or results management was performed. During this period it was approved

the voluntary separation of 50 % of the top managerial staff. Those positions were

fulfilled mainly by professionals who didnt meet the suitable requirements and depend

of political or personal support to maintain wide wage differentials. The way adopted by

Mr. Bielsa to manage the human capital, beyond the approved rules and regulations,

could be considered as a serious threat to the auditors independence.

A significant change followed to this experience. In January 2002 it was designed as

Sndico General de la Nacin a well known administrative jurist: Rodolfo Comadira. Hisidea of control was absolutely biased to legal aspects, neglecting the managerial ones. A


22/29

22

study on the Title VI of the 24156 Act was published by SIGEN in April 200339 and

some of his thoughts on these matters are stated there. They illustrate fairly good how

constrained they were. In the page 58 one unidentified commentator says:... only the

strict rules observance can drive to ensure that management is based on economic,

efficiency and effectiveness criteria in the attainment and allocation of public resources.

In page 67: ... Never an adequate management can be, pursuing efficiency and efficacy,in the wrong way with legal acceptance. The equation is inverse: only the strict

normative observance can drive to ensure that management is based in economic,

efficiency and efficacy criteria... Despite all advocacy to legal aspects, during Mr.

Comadira period, the prior violations to normative aspects in human capital

management were sustained.

After the distinguished administrative jurist another two Sndico General were

appointed, none of them met the experience required by law. The first one performed

his duties for a 13 months period on office and the second just one month. No major

modifications were impressed to the control orientation. For the time being, no SndicoGeneral de la Nacin is in charge and the model performed, definitively oriented towards

compliance, is still maintained.


23/29

23

Section 4- Conclusions

The reform issues have been present for 17 years in the national agenda, the strength and

the approaches used to provoke changes have been variable. The most remarkable

outcomes belong to President Menem period, because a deep state reform wasperformed and public management was redefined to keep the pace to that reform. But

the attempt made during President De la Rua deserves a special consideration as an

authentic paradox: his project was formally perfect and his administration was a

paradigm of ineffectiveness, administrative weaknesses and indecision. Why such a

divorce between normative and facts? Politics explain just a part of it, the rest remains in

the personal standpoint.

Was the state reform in Argentina successful? Yes and not. The answer depends on the

perspective adopted for evaluation. It was very ambitious and outcomes were not all

achieved. State has definitively changed, but the controversial way in which it wasmanaged ensured the current discussions about their costs and effectiveness. The work

done to put it on regime was radical and might be well intentioned, but autocracy and

precipitation conspired against both its public image and outcomes. The maintenance of

policies throughout different administrations is not common: public policies are

unpredictable and unstable, they mainly respond to opportunity. The practice is to

change everything the predecessor has made: our times are always foundation ones. It

also has to be admitted that as long as the changes are made following paradigms,

ignoring criticisms and in a very fast way, there is no room to make corrections in the

direction adopted. Another real problem is that State has not the capacity to enforce its

legislated policies and this fact conspires against its credibility and success. One thing is

what is written (acts, decrees, rules) and a very different one what is performed.

In order to characterize the reforms, these are some conclusions.

Society accompanied the state reform process and the idea of success was present.

Political and economic stability were strongly appreciated outcomes. A certain kind

of governance was assured, despite all the mess, and it was proved in January 2002.

The policy choices adopted, more reliant on market forces, respond to political needs

and fiscal reality, and the lack of different ideas to overcome the severe crisis. They

followed the world successful tendencies, framed in the Washington Consensus.

Privatization was inevitable. Publicly owned enterprises will no longer survivewithout important capital injections and managerial updates. A broken State was not

in conditions to offer the services needed.

A regulatory frame was established by the 1994 Constitutional reform.

The favorable conditions that the state reform produced drove to an undeniable fast

countrys modernization and also to unbalanced social growth.

Among the most criticized features are those associated with lack of transparency and

corruption suspicions over the privatization process. Other strong criticisms are

addressed to the lack of social support to those affected by the reform process.

Political interest drove many of the stages of the process and technocrats negotiate

political support with a blind eye on administrative mismanagement performed bypolitical and high administrative levels.


24/29

24

The reform episodes began with a strong political need and the outcomes attained

depended strongly on the implementation process, due to the divorce between facts

and proposed rules.

Structural weaknesses were never confronted.

The public management policies adopted comprised expenditure planning process

and financial management, civil service and labor relations, procurement,organization and methods and audit and evaluation.

It is a before and after time in Financial Management aspects: Central

Administration will not be the same due to technological changes and the systems

implemented, and also due to the important human capital loss.

The expenditure planning process, despite formal aspects, is still far from being a real

allocation of resources and results.

Procurement processes were enhanced at the beginning, but late modifications

intended to emphasize transparency and control contributed only to their

bureaucratization.

Audit issues were addressed in a modern way, but they are far from being what isneeded to improve performance and getting results. Evaluation is still a pendent

matter.

Regulatory authorities constituted new organizations that follow many administrative

aspects of private sector, such as the labor relations regime. They were conducted in

many cases by the same persons who had run the privatization process; mainly no

regulation was really performed.

Public administration is characterized in Ricardo Gutirrez40 own words as deficient in

its capacity to design public policies and to manage effectively and efficiently. Among

the principal critical points he pointed the following may be mentioned:

lack of definition at national, estate and local responsibilities levels on social issues

and services;

institutional weakness in policy-making areas;

lack of coordination, at ministerial level, of similar activities;

poor efficiency in public management, specially in social programs and those

dedicated to improve work generation;

lack of political will and appropriate mechanisms to adopt programming and

management control;

persistence of bureaucratic behaviors that provoke inefficiencies and facilitatecorruption;

administrative structures and budget programs that duplicate or overlap functions;

unmotivated and bureaucratized personnel;

poor IT development;

lack of transparency in procurement processes.

Years later, facing unwanted results (unemployment, industrial weaknesses, very heavy

public debt in default) mainly derived from the inadequate fiscal management among

other political conditions, the state reform is severely questioned by many sectors of

society, that had earlier enthusiastically supported. The privatized services that provide

improved basic services are today questioned both about its price as its quality. Many


25/29

25

ideological interest are going around these issues but the real fact is that trust between

government and citizens is almost extinguished.

Then, what had failed? There are many factors to mention. The processes that create

policies are central at the time of explaining the failure. Spiller and Tommasi in an

exhaustive analysis41 on the topic argue that the characteristics of public policies inArgentina are the outcome of a non-cooperative behavior in the policy making game as

product of institutional instability and institutional rules that negatively affect the

expectations and horizons of the actors involved in the policy process.... All of this

leaves an under-institutionalized national policy making arena populated by transient

political actors who tend to behave myopically, and who do not build long term policy

agreements.

From a more restricted, operational and biased own point of view, another factors have

to be pointed out. A cultural one: the superficiality with which reforms (as other

policies) were faced: for many people a mere statement seems to be enough to getresults and managerial aspects are usually subordinated to partisan conditions. State

reform was adopted as a political tool to let aside political and economic instability, but

once the risk disappeared things try to return to the well known paths.

A cultural and managerial aspect should be mentioned: improvisation as strategic

approach. To the emergency issues common to the crisis that provokes the reform, a

national style of behavior (or misconduct) based on improvisation rather than rational

programming leads the processes.

Among the managerial aspects: people are a key aspect to be considered in any social

process. If you treat human resources just like numbers and forget to take into account

their experience, skills, profiles, motivation, management, values, no success is possible.

It is people who made the difference and its professional management was an absent

issue (despite what has been instructed).

The withdrawal of State was made in an unorganized and precipitated way. Maybe it

was our only possible way. The reform process results in a weaker, a little smaller but

not less expensive State and impoverished in its human capital and values. Many of the

functions to be performed as those related to regulatory aspects were mismanaged. For

those belonging to the political arena involved in the policy making process the idea of a

stronger, powerful State is commonly associated with a bigger one, not with one moreefficient and effective. These two words are associated to the 90s (a bad word at this

moment). It must also be pointed out the ignorance of political authorities and its teams

on the matters they have to rule, their subordination to particular or partisan interests

and their lack of commitment with effectiveness.

What happens with institutional control? Enacting of the Fiscal Responsibility Act

costs to Central Government $A 108 millions given as debt forgiveness to provinces

reluctant to sign. Congress is now discussing the approval of full powers (called super

powers by the press) to Cabinet Chief to manage the entire allocation of 2005 Public

Budget. The present administration had issued the largest amount of emergency decreesin history, and they have a favorable Congress. The strong presidencialism is endemic


26/29

26

and all Presidents play this game. Control was not, is not and will be not an issue of real

interest. It is a forgotten matter, strange to our social and political habits.

Internal control matters followed the changes produced in political authorities in charge

of it and the human capital management policies applied didnt contribute to its

enhancing. As long as bureaucracy is so firmly tighten to continuous political changes,the probabilities to strength the conceptual frame and its applications are remote. The

role of internal control was never firmly rooted as Act 24156 states and it becomes a

hollow voice. There was not a firm strategy to its enforcement: in the first times it was

due to the necessity of adapting to new context and then, to the forever changing

political scenario. Technical and organizational aspects are subordinated to political

ones: a Body that has to be essentially a technical and independent reference adapts

itself to what is supposedly a political point of view.

The main reforms to be faced in order to accomplish the goal of a modern and effective

State, serving its citizens, must be addressed to: strengthening of institutions;

strengthening the policy making, programming and control capabilities;

strengthening the civil society role;

increasing transparency in government operations;

enhancing public accountability;

modernizing public management practices, with special emphasis on human

resources, procurement and control enhancement;

improving the quality of public expenditure;

redesigning the Executive Branch organizational structure, rationalizing it to functions

to be really and full performed.

In Argentina major state reforms were legislated and to a great extent performed. They

havent brought all the renovation and benefits foreseen but in a contra factual exercise,

it is an unpleasant idea to think of Argentina without those reforms. They were

desperately necessary and many advances were made. Public management conditions

didnt give full support to the process. The reasons of failures are deeply rooted in us.

We were for many years under the umbrella of a welfare state. Change always generates

resistance and nostalgia. This is worsened when a severe crisis is present and those who

need assistance just found attributive blames. The reform momentum seems missed but

it will always be room for a magical appeal: we are responsive to them. How long and

proper the reforms will continue is an aspect this paper is not able to appraise.

1 Garca, M. E.1999a. The Recent Experience on the Search of the New Public Administration in

Argentina- IIAS Conference, Sunningdale, UK and Garca, M. E. 1999b Trying to Root a New Model of

Internal Control in Argentina: The Role of a Training and Professional Developing Center- International

Association of Schools and Institutes of Administration- Birmingham, UK.

2 In De la Rua administration just 120 days.


27/29

27

3 At this time (September 2004) that condition is putting in doubt after replacing President and Directors

by professionals with no experience in the monetary field

4 September 2003

5 National Reorganization Process

6 Heymann, D. and Navajas F. 1989 - Conflicto distributivo y dficit fiscal. Notas sobre la experiencia

argentina, 1970-1987. Desarrollo Econmico, 115:309-329

7 In 1989 the Consumer Prices Index variation was 4.923.3%

8 ODonnell, G. 1989 - Argentina, de nuevo - Working Paper #152, Kellogg Institute

9 Beltrn, G.- Justificacin e inicio del proceso de reformas estructurales de los aos 90- Epoca, Revista

Argentina de Economa Poltica. Ao 1, Diciembre 1999. Available at http://www.epoca.step.net.ar/

10 Garca, M. E. 2001- Unmasking Facts: Modernization, New Contractual Responses and Human

Capital in the Argentine Public Sector - IIAS Conference, Athens

11 ODonnell, G. - Delegative democracies? - WP# 172, Kellogg Institute Available at

www.nd.edu/~kellogg/WPS/172.pdf

12 State Reform Act (Law 23696)

13 Reflexiones sobre la experiencia argentina in Proceedings of the XXIII International Seminar on Public

Budget, Buenos Aires 1996 (ASAP)

14 Central Bank rediscounts to provincial banks had enabled the provinces to run up large deficits in the

past.

15 The media reflects this opinion: It was only during the first steps of recovering democracy,

characterized by civic euphoria, that the political parties, their leaders and the Congress counted with high

esteem; La Nacin, Buenos Aires (March 7,1999 Section 7 page 5)

16 Laws 23696 and 23697/ 1989

17 Law 24629/1996

18 Garca, M. E. 2001- op.cit.

19 Gregorio Badeni mentioning Prof. Linares Quintana in La Prensa (p.19) , August 22 ,2004.

20 Under a system dating from 1853, while the central government collects taxes, the provinces were

guaranteed an automatic share of the revenues. That gave them no incentive to spend more efficiently.

21 Fondo de Reconversin Laboral del Sector Pblico Nacional


28/29

28

22 Increased inequality in income distribution, questioned independence of judicial system and quality of

public expenditure were the issues on discussion.

23 VI CLAD Congress, Buenos Aires, November 2001

24 Internal Control Authority25 Makn, M. 2000 - Un nuevo marco de gestin para incrementar la calidad del gasto- Revista del XIV

Seminario Nacional de Presupuesto Pblico - Asociacin Argentina de Presupuesto y Administracin

Pblica (155-174)

26 The quality and seriousness of this discussion is still undetermined, according the actual situation.

27 July 15th., 2001

28 Evaluation Report on the Role of the IMF in Argentina IEO, 1991-2001 press briefing July 29, 2004

Washington, D.C. available at www.imf.org

29 Nicols Fernndez, President of the Energy and Fuels Committee , La Nacin, August 12, 2004

30 This paper limits its scope on control, addressing internal control issues.In this section will be followed

arguments introduced in Garcia, M. E., 1999 a,b op.cit

31 Ley de Administracin Financiera y de los Sistemas de Control del Sector Pblico Nacional (Ley

24156). Texto y reglamentacin compilada por SIGEN. Buenos Aires,1997

32

Ley de Administracin Financiera, op.cit

33 Petrei, H. 1997- Presupuesto y control - Pautas de reforma para Amrica Latina- Interamerican

Development Bank p. 248

34 Normas Generales de Control Interno, 1998. Sindicatura General de la Nacin, Buenos Aires.

35Internal Control Integrated Framework,1992. Committee of Sponsoring Organizations of the

Treadway Commission (COSO)-AICPA

36

Agustini, H. L., 1997 -Fundamentos del nuevo modelo de control interno en Argentina, III Encuentro

Nacional de Control Interno, Manizales (Colombia)

37 SIGENs Vision, Mission and Objectives - Version 30-07-97

38 Act 25233/1999

39 Ley 24156- Ley de Administracin Financiera y de los Sistemas de Control del Sector Pblico Nacional

- ttulo IV Del Sistema de Control Interno Texto institucional anotado, comentado y concordado.

SIGEN, Abril 2003


29/29

40 Treasury Secretary during Dr. Cavallo first period in office as Economy Minister. Excerpt from : La

Reforma del Estado Nacional. Agosto 1999- Publicacin n 1- Fundacin para el Desarrollo de Polticas

Pblicas

41 Spiller, P. T. and Tommasi, M. September 2003, Policy Making in Argentina available at

http://www.udesa.edu.ar/departamentos/economia/mariano_tommasi/papers/public%20policy.PDF

argentina: many failed attempts on the way to state reform

Documents