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The Determinants of Presidential Spending in Latin America (1970-2009)


Balancing public sector budgets has long been considered an essential element for implementing effective economic strategies. Economic policy analysts across several schools of thought have thus focused on identifying the factors which increase the likelihood that politicians will reign in spending that grossly exceeds annual revenues. Some analysts assume that legislators have stronger incentives to spend than do presidents, because chief executives represent more encompassing interests. As a solution to this dilemma, they recommend the adoption of budgetary rules that increase presidential powers at the expense of legislators. Contrary to the predictions in this literature, I argue that, while executives are motivated to build strong economies, Latin American presidents' respond first to retaining power, which often implies amassing enough capital to preserve their political influence long after leaving office. This dissertation uses a mixed method approach to support my contention. Through case studies, I analyze two countries with similar, centralized presidential controls over budgets: Argentina and Nicaragua, and show that empowering the president backfires when excess spending reinforces and supports narrow political interests. My research also shows that chief executives are often quite cunning in circumventing legal constraints and altering institutions that limit their powers. This is not to say that institutions are inconsequential. In fact, I show that term limits do, on average, increase presidents' incentives to increase spending. The empirical chapter of this project shows that Latin American presidents, contrary to conclusions drawn from earlier research, do not "buy" elections by increasing budgetary expenditures. Nor do left-wing presidents spend more, as most observers have assumed. Instead, over the last thirty years, excess spending has been the work of termed-out presidents, primarily right-wing chief executives. The differences among administrations throughout this project demonstrate that incentives vary and fiscal outcomes are ultimately dependent on the president's motives when political institutions grant great discretion to executives. Thus, the conditions questioned in this dissertation challenge numerous claims advanced in much of the accepted fiscal policy literature on Latin America.

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