In this essay I will describe the main characteristics of the political and institutional context of Chile and its budget system, trying to identify some relations with the most important budget theories reviewed in the lectures. In the next place, I will recognise which of the institutional reforms advocated by Blöndal (2003) have been implemented in the country, and which have not. Finally, I will present some conclusions.
General context
Chile is a democratic presidential republic with a multi-party system that, in practice, is a two-party one due to the electoral arrangement. Binomial system –in which two candidates are elected per each district, causing an over representation of the second majority list- was adopted in order to foster political stability in the democratization process. These characteristics have had impact in the strategies that the government has adopted to develop the budget and the economy: after the end of the dictatorship the year 1990, Chile has been recognized inside the Latin-American context for maintaining a strong commitment to a responsible economic management, led by high level economic teams . The electoral system, added to the great centralization of the budget process that I will explain later, are strong reasons to follow a strict budget discipline compared with countries with minority governments or with many parties and no one close to another (Hallerberg, 2004). In this case, the economic performance of the government is also an important issue for the electorate, making the governing coalition to be cautious regarding the possibility of an electoral sanction if it fails in the management of economic policies.
To describe the Chilean budgeting system I will use as reference a report elabo...
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Blöndal Jón and Curristine Teresa (2004). Budgeting in Chile. OECD Journal on Budgeting – Volume 4 – No. 2.
Davis Otto, Dempster M. A. H. and Wildavsky Aaron (1966). A Theory of the Budgetary Process. The American Political Science Review, Vol. 60, No. 3, pp. 529-547.
Hallerberg Mark (2004). Domestic Budgets in a United Europe: fiscal governance from the end of Bretton Woods to EMU. Ithaca, Cornell University Press.
Jürgen von Hagen and Ian Harden (1995). Budget processes and commitment to fiscal discipline. European Economic Review, No.39, pp. 771-779.
Management Control Division of the Finance Ministry (2003). Systems of Management Control and Results-Based Budgeting. The Chilean Experience.
Schick Allen (2001). The Changing Role of the Central Budget Office.”OECD Journal on Budgeting. Volume 1 N°1. Organisation for Economic Co-Operation and Development (OECD).