Consultative Group for the Reconstruction and Transformation of Central America

"reconstruction must not be at the expense of transformation"

Decentralization and Strengthening Of Local Government
A Conference Room Paper presented by
The International Labour Organization, in collaboration with UNDP and HABITAT
Dr. Ian Chambers
Director, ILO Office for Central America, Panama and the Dominican Republic

Stockholm, Sweden  25-28 May 1999

Concepts, Definitions and Assumptions

Why has so much of Central America remained so poor, so backward and so under-developed? Why have so many development policies and programmes, both national and international, been swallowed up by its fertile soil without apparent trace or product? Why do efforts to improve these problems, and the present Conference is no exception, so often and so quickly degenerate into a welter of antagonism and contradiction? If valid, credible and acceptable answers to these fundamental questions cannot be found, internalized and applied, scarce national and international resources will continue to be wasted. It is the purpose of the present paper to examine these issues in the light of the experience gained so far in relation to Hurricane Mitch and other critical situations which the region has experienced and to propose a radically different paradigm, based on the principle that while it is both permissible and pardonable to make mistakes once within a framework of trial and error, it is unforgivable to persist when the error becomes evident and to refuse to learn from such mistakes.

By development we mean, as was stated clearly by the Comity of Nations at the Copenhagen Summit in 1995, the creation and maintenance of conditions under which human beings can live their lives in dignity and security, realizing their potential to the fullest extent possible. Many of the facets of these criteria of dignity and security are clearly defined in international and regional instruments on human rights and one of the basic challenges for the emerging "international system" is how to translate these rights into realities. 

The "international system" just referred to was based, for many centuries, on the concept of an association of sovereign nation-states at whose borders the criteria of international polity stopped and whose responsibility it was to determine the extent to which these would be applied within its territory. This corresponded – and in some significant measure still corresponds – to a great variety of formulae for the division and distribution of power, resources and responsibility within the state itself, in many cases resulting from differing historical processes. In Europe, for example, many states emerged from a gradual (and not always peaceful) fusion of cities and towns which maintained considerable autonomy and a tradition of local management of their affairs. In Central America the process was quite the opposite, as the single political unit of Spanish colonial administration gradually fragmented into ever smaller parts. Local authorities, therefore, were the incarnations of colonial or national authority at the local level, not necessarily the reflection of the will of the community vis-à-vis the nation state and certainly not the source of that state’s power and legitimacy.

These points are important in order to understand what decentralization entails in a Central American context. It is, in political, social and even economic terms, a fairly new phenomenon , involving the transfer of authority and responsibility to entities which have never previously exercised these and are, therefore, unprepared to do so. It cannot be assumed that they have either the experience, capacity or resources to operate in such a new framework.

The present paper proposes that the previous lack of significant decentralization in Central American development efforts may go quite some way to answering the questions posed at the beginning of this section. It will adduce examples of national and international efforts within decentralized schemes to show that these can, indeed, function in Central America, although often with important adjustments. The terrible impact of Hurricane Mitch and subsequent rehabilitation programmes have highlighted both problems and possibilities. This paper will propose both solutions to the problems and measures to concretize the possibilities, both in the short-term aftermath of reconstruction and the longer-term framework of sustainable development, by designing and executing a coherent, participative and equitable programme to enhance the security and dignity of Central Americans so that future disasters, natural or man-made, will not erase current development initiatives. Finally, it will make some recommendations as to how the UN System in particular, and the international community in general, may best support such a programme. Whereas the previous papers on transparency and vulnerability have rightly concentrated on substantive objectives, the present document will concern itself chiefly with mechanisms for achieving these at the local level.

Prior Experience with Decentralization and Local Development in Central America

In spite of what was said in paragraph 4 above, there have, particularly in the last decade, been a number of experiments in both decentralization and local development in Central America which we need to consider from two perspectives. In the first place, these demonstrate the important point that such initiatives can work and that it is not unrealistic to extrapolate from these experiences that there is significant potential for development at the local level. Secondly, there are valuable lessons to be learned with respect to future action, especially in terms of sustainability. The fact that the programmes worked during their lifetime did not necessarily ensure that the achievements were sustained afterwards. The examples set out below will be analysed from both of these points of view.

PRODERE, the Programme for Displaced Persons, Refugees and the Repatriated, and its successor programme, PROGRESS, ran from 1990 to 1998. PRODERE was designed to contribute to the development of Central American countries emerging from civil war (El Salvador, Nicaragua and Guatemala) and those countries affected by the consequences of their neighbours’ conflicts (Belize, Costa Rica and Honduras).It was coordinated by UNDP and implemented by what has now become the United Nations Office for Project Services (UNOPS) in cooperation with three "associated agencies": UNHCR, WHO and ILO. Its purpose was to facilitate the integration or re-integration of displaced persons within local communities by promoting and supporting development initiatives by, for and with the local populations. The innovative and salient traits of this programme were the linkages of economic and social development with criteria of human rights and a willingness to provide support to initiatives and priorities defined by the communities themselves and not pre-ordained by the agencies, the state or the donors in the project document. It focussed on consensus-building and empowerment and sought to articulate local and national development objectives. PROGRESS/PDHSL (Programme for Sustainable Human Development at the Local Level) (1996-1998) built on the achievements of PRODERE, shifting the emphasis from the reintegration of the displaced to a broader set of aims deriving from the Copenhagen Summit on Social Development: poverty reduction, the consolidation of peace and democracy and sustainable development within the framework of ALIDES (the Alliance for Sustainable Development, established by agreement of the Central American Presidents in 1994).

The stated objective of PROGRESS/PDHSL was "to combat poverty, consolidate peace, strengthen democracy, facilitate sustainable economic development and improve income distribution". The central concept was that of "sustainable human development", understood as a process to increase people’s options by providing greater opportunities for education, health care, food security, employment and income generation within broader frameworks of a decent environment and political and economic human rights. The basic strategy was local level development seen as a process to promote social change and poverty reduction involving local actors and responsive to specific local realities.

The lasting impact of these programmes, now that they have come to an end, is to be seen particularly in the continued existence and activities of the Local Economic Development Agencies (LEDAs) which they established. There are fourteen LEDA’s currently operating in all of the countries affected by "Mitch" (except Belize). All of them, though to differing degrees, have been able to generate employment and promote small enterprise initiatives within their respective departments/provinces/cantons and continue to do so.

By no means, however, have all experiments in decentralization been prompted by the United Nations System or other outside agents. Many have arisen from an internal dynamic of development. A good example was a project which was implemented in Costa Rica between 1990 and 1998, called Líderes Comunales Generando Desarrollo ["Community Leaders for Development"]. The main focus of this initiative was environmental improvement and construction of housing by the residents themselves, under the coordination of FUPROVI [Foundation for the Promotion of Housing] and an NGO called the Association for Popular Development (ADEPO). The project’s purpose was "to educate and train leaders and environmental advocates to be able to disseminate information and raise awareness within their communities on sustainable development, as well aas to promote various types of income-generating activities for participating families and individuals".

The communities involved demonstrated substantial improvements in environmental conditions with the establishment and maintenance of "green zones" and waste management systems, for example. The small and micro-enterprises set up under the programme became financially self-sufficient and community environmental awareness advanced considerably. This constitutes a good example of the success potential of locally based initiatives.

An interesting instance involving this time the decentralization of centrally managed state services is the project implemented in Honduras by the SNAA [National Water and Sewage Corporation] called Empowering of Poor Communities in Tegucigalpa – Administration of the Water Supply. This represents an innovative alternative to the usual type of national utility company based on the formation of local "water supply associations" in the marginalized suburbs of the Honduran capital. The associations install autonomous water supply systems which provide water at much lower prices than that which is piped in from elsewhere. The local population contributes its labour and local materials, while the capital investment costs are subsidized by UNICEF, the Government of Sweden and the SNAA. A Local Water Authority manages and finances the service after construction. Local citizens do not only participate in the project, they manage it entirely.

Some lessons to be drawn

The common element in the various experiences mentioned above is perhaps best summed up in the words of the paper before the present Conference entitled, Civil Society: Participation and Transparency in Central America:

"Civil participation is essential, since no one knows better than those involved what the needs are. Citizens must participate in setting the priorities of the agenda in the design and distribution of aid, as well as in the evaluation of the results. If the priorities of the development agenda can be set in a participatory manner and if mechanisms for transparency and accountability can be established, authentic participation will be achieved."

While participation is therefore the critical factor, external aid, whether national or international, is also essential, in order to provide the technical and financial inputs for sustainability and more widespread replication. There are simply insufficient resources at the local level in most cases to be able to mount and sustain such efforts on their own.

Time is also a key factor. As a Mayan leader succinctly put it, when told during the Guatemalan peace process that there was not time for further consultations with his community, "What is more important, time or a lasting result?". Time is a prerequisite for participatory change because unless the local population both accepts the need for change and understands the benefits it will bring, it will neither appropriate nor assume "ownership" of such change. The agents of change will remain external to the community and when they leave, the community will resume its previous patterns. For this reason, participation must be seen as an objective in itself and not merely a means to some other end.

The generation of local resources is also a vital aspect of decentralization. Unless communities can establish a solid economic and financial base, they will continue to find themselves in a condition of dependency which will deny them the possibility, and ultimately the will, to proceed with local initiatives.

Central American communities, particularly rural ones, like their counterparts in the rest of the world have developed strong and lasting value systems, with their own standards, cultures and beliefs. We are well placed at the end of the twentieth century to draw the lesson that "development" cannot be achieved through the imposition of alien ideologies from above. Once the means to enforce these disappear (as they inevitably do) the communities go back to their old ways, even if these are ultimately self-destructive – witness "ethnic cleansing" in Europe. Foreign, or even central national, "experts" have a quite limited role to play as agents of change. Sustainable development, in the sense defined in paragraph 2 above, can only be achieved through participatory decision-making processes at the local level because that is the level which most affects how people live their daily lives. At best, external agents can "promote", "facilitate" and "mobilize" but unless they act consistently on the basis of an absolute respect for principle that the local population alone is master of its present and future, they will not only fail to achieve sustainable results, they will be undermining the very principles of democracy and human rights that should constitute their raison d’être.

"Development projects" typically focus on what they "should do". The time has come to pay much greater attention also to what they "should not do". A good fundamental principle in this regard is that they should do nothing which can be better done by the local population itself through its own authorities and associations. And if the latter are unable to "do" what is necessary at the beginning of the project, the prime objective of the project should be ensure that by its end they can. If this is not achieved, the project must be classed a failure and not rewarded by an extension or second phase to do what it failed to achieve during the first. Any continuation must be based on a radically new design derived from an understanding of the flaws in the earlier effort. Every project or programme must include from the outset an "exit strategy" which defines the moment when external support should cease and complete "ownership" should pass to the community.

Prerequisites for decentralization and local sustainable human development

Processes of decentralization and local development are taking place in all Central American countries with the assumption of new roles and responsibilities by local governments and other bodies, either as a result of these being transferred from central authorities or on the basis of an emerging local consciousness of the need to take a more active part in shaping their own destinies. There have been some impressive advances as a result of these efforts but also mistakes which inevitably arise in processos of fundamental administrative, political and legal transformation.

For greater clarity of analysis of these factors, it will be helpful to divide them into four categories, namely:

  • Management and technical capacity of local bodies;
  • Political capacity and legitimacy in decision making;
  • Availability of resources (financial, technical and human);
  • The legal framework.

Management and technical capacity of local bodies

As in the case of national governmental management, local level authorities suffer from dispersal and dilution of skills throughout the administrative hierarchy, resulting in superfluous jobs and overlapping responsibilities which get in the way of the efficient delivery of progammes, projects and social services. Somewhat paradoxically, this tends to be more prevalent in communities with the most limited resources. Local governments, the supposed catalysts of local development, encounter administrative and institutional weaknesses which hinder their capability to fulfill their obligations to the community, giving rise to the mistrust and rejection documented in the paper on Civil Society: Participation and Transparency in Central America.

There is also an observable weakness in planning structures and procedures both at the district and local levels. Local government planning processes are not very participatory with the result that local development actors do not consider themselves involved and their creativity and will to cooperate are thus lost. Since they are not involved in the development process, these potential participants become either opponents or mere onlookers. This seriously hampers the capacity of local government to manage development. Although this problem has been clearly identified and widely discussed, precious little has been done to bring about the necessary changes to overcome it. It is therefore essential that local bodies, and particularly municipal governments, acquire the planning capacity to adapt national and regional development programmes to their local needs on the basis of the interests and priorities of the community. This means that local government planning units must be considerably strengthened so as to be able to cope with the challenges of continuous and long-term planning processes, involving negotiation and consensus building with a variety of local actors so as to define mutually acceptable objectives and strategies, promote participatory machinery for needs assessment and define, execute and evaluate national programmes for local development. One way of achieving this might be (as in Guatemala) the establishment of Local Development Councils which bring together local government and civil society to define the guidelines for local action, financial, political and social. Care must be taken, however, not to undermine in any way the legitimacy of locally elected bodies. Such Development Councils have an important advisory and supervisory role, which can and should also enhance transparency and accountability in local government, but they should not displace or duplicate the decision making power which rightly vests in democratically elected organs of local government.

Political capacity and legitimacy in decision making

As regards the question of political legitimacy, there are relatively few local governments with the capacity and commitment to assume the role of "catalysts", "facilitators" and "coordinators" of local development processes which involve everyone from neighborhood committees to private enterprise within the jurisdiction. A close inspection reveals that many local governments have failed to articulate adequately political objectives with technical ones. The result is that much local government activity is short-term and party controlled, in the sense that it favours the interests and priorities of the group formed of the political party in power in the Municipal Council and not necessarily those of the community at large.

Similarly, studies on local development and local government highlight a frequent lack of leadership, not only political but also managerial and administrative. In many cases mayors are ill-suited to leading development processes as they come by their jobs because they are political party activists and often lack any relevant skills for municipal management. Not unnaturally, they respond more readily to national party leadership (who draw up the ballot papers) rather than local community actors. This fact has inevitable and far-reaching repercussions on the orientation and quality of local government management.

For the same reasons, the so-called "local representatives" are not entirely worthy of the name. Nomination systems within the political parties are frequently not very participatory and the local election procedures offer little scope for public debate on local development issues which would enable citizens to determine who would best represent their interests.

To achieve the indispensable levels of capacity and legitimacy which would enable local government to lead and manage community development, significant reforms are needed in the manner in which they are elected. As stated in the paper on civil society, "A participatory society is the principal safeguard of effective and legitimate democracy".

Availability of Resources

Even in cases where a degree of authority and responsibility has been decentralized, this is not the case for the resources necessary to carry these out. In Honduras, for example, the law provides for the return to the locality of 5% of the taxes collected. In reality, the amount of such transfers seldom exceeds 1.5%. In Nicaragua there is no legally stipulated percentage. Decentralization of resources depends on negotiations between local and central government, negotiations in which political factors are frequently of central importance.

Obviously, the matter of redistribution of national wealth through decentralization is a complex issue which must be tackled as soon as possible. It will, however, require lengthy and careful reflection and political compromise. In the short-term, considerable progress can be achieved by designing post-Mitch reconstruction programmes in such a way as to maximize the amount of investment which remains within the local community. An effective means to this end is labour-intensive construction projects which make the greatest use of local manpower, materials and services. Studies carried out by the ILO show that capital goods intensive construction methods typically ensure that about 12% of the overall investment remains in the community. Labour intensive techniques can raise this percentage to as much as 65%. The difference can be critical for the economic reactivation and development of the locality.

There is a variety of programmes for municipal level capacity building, particularly in Nicaragua, where GTZ, USAID, SIDA, DANIDA and the World Bank are all running projects (each with its distinct methodology). To try to overcome the discrepancies (and even contradictions) between these different programmes, it has been proposed that a national Municipal/Local Development Institute be established, under the leadership of the Nicaraguan Institute for Municipal Development (INIFOM) and the Nicaraguan Association of Municipalities (AMUNIC).

It is important to note in this age of "shrinking" government, that increase of local government technical capacity does not necessarily entail great expansion of municipal payrolls. Many skills and services are available in the private and NGO sectors and can be contracted on an "as needed" basis. In this connection, programmes to improve resource management capacity are fundamental. The municipal authority does not necessarily have to have the capacity to supervise many types of reconstruction activities, for example, but does need the skill to determine when specialists need to be called in and what kind of specialists are needed.

The legal framework

The acquisition of the resources and capacity described above as indispensable for successful local-level sustainable human development will necessarily involve changes in the present laws constituting and regulating local government. There is a need both for greater clarity in the division of powers between the various levels of government and for increased autonomy in decision making and resource raising at the local level.

In particular, revised legislation needs to be based on a radical change of the political theory on which the relations between central and local authorities are currently founded. When municipalities were simply the political and administrative arms of an authoritarian central government, it was logical that the latter would wish to circumscribe, supervise and control their activities. If, however, as should now be the case, local governments are considered as the product of democratic and participatory processes, whose legitimacy derives from the will of the community to which it is primarily responsible, the basic aim of legislation governing municipalities should be to provide them with the means to carry out their mandate.

Post-Mitch strategies

By definition, all of the havoc wrought by Hurricane Mitch took place at the local level, all of the victims were members of local communities, all reconstruction will be carried out at the local level (even if it is managed at some other level) and all development efforts, if they are to have any relevance and sustainability at all, will have to produce their main effects locally. The options are, therefore, to despair of local government and ignore local participation, designing and imposing national level programmes, which experience shows are most unlikely to produce lasting and satisfactory results, or to embrace the truth that all development is local development (in the sense that it is only validated by positive results at the local level) and concentrate on the design and implementation of measures to ensure that:

  1. all reconstruction and rehabilitation is carried out with the greatest possible participation of representatives (both governmental and non-governmental of the local community;
  2. the priorities in reconstruction and rehabilitation shall be their priorities and no one else’s;
  3. the greatest amount possible of the investment in reconstruction remains within the community by using local goods, services and manpower when available;
  4. where the capacity for management of reconstruction and development does not exist at the local level, the main objective will be to ensure that it is created;
  5. systems are put in place to monitor compliance with these criteria as a pre-condition for continued financial and technical support from both the national and international levels.

It is suggested also that in addition to the measures just mentioned, priority should be given to the following strategic areas:

Environment and natural risk reduction: local authorities and participants in consultative and decision-making processes on reconstruction and development shall be requested and, where necessary, further informed and trained to understand the need for giving due importance to environmental sustainability and natural risk reduction and mitigation in their definition and implementation of local building and development programmes. They must have, or have access to, the means to measure and evaluate the long-term impact of their decisions.

Local economic development: local bodies, both governmental and non-governmental must be able to establish programmes for local economic development, under which members of the local community perceive and receive benefit in the form of more employment opportunities, improved incomes and a better quality of life in general. This will involve, inter alia, the promotion of sustainable economic growth, stimulating both public and private investment and local savings, generating opportunities for productive employment, strengthening local entrepreneurial capacity, promoting organizations of small and medium-sized enterprises, with particular attention to facilitating the greater inclusion of women in the local economy, and achieving a balance in local fiscal policy which will encourage economic development and spread its benefits through appropriate measures of redistribution. In this connection, the establishment of local level "clusters" is an important strategy, which generates relations and interactions that strengthen the local economy and promote the changes in the productive and business processes which increase competitivity, the accumulation of capital, technological advances, domestic savings and, above all, investment in the improvement of productive skills in the community.

Local social development: the fundamental objective of local development must be to improve substantially the services which local government, decentralized public bodies and other local agents provide to the members of the community, in particular in the fields of health, water, education, housing, electricity, telecommunications, credit and financial services, personal security and equality before the law. Such improvements must be carried out with the clear and stated purpose of helping to reduce poverty and marginalization and to ensure that every citizen has access to basic services and equality of opportunity and can live in dignity and security.

Gender equality: in most Central American communities women (and, indeed, other groups such as the indigenous and the disabled) live in de facto situations of inferiority and political, economic and social marginalization. Their incomes are typically significantly lower and they have reduced access to education, employment and basic services, not to mention very little weight and influence in local level decision making. Concerted, focussed and pro-active measures must be included in local-level reconstruction, rehabilitation and development processes to redress this situation.

Some proposals for innovative reconstruction and development strategies

              Figure 1
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Figure 1 above may serve as a schematic representation of a matrix for participatory local development in the post-Mitch reconstruction phase. The base consists of a series of actions which are both environmentally sustainable and conducive to the reduction of vulnerability to future natural disasters, while at the same time promoting local economic development. Both of these objectives, in turn, form the basis for the principal objective, at the apex, which is improvement of social conditions and services within the community. Priority should be given to programmes which fall within the triangle, i.e., which bear a positive relationship (although obviously in different degrees) to the objectives defined by the three corners. Thus projects for construction of housing, for example, are clearly conducive to social betterment but should also ensure natural risk reduction and help to generate local employment and incomes. Agricultural rehabilitation projects will help ensure economic development, but should also be environmentally sustainable and will thus be more likely to produce durable social improvements. Programmes to maintain and improve the environment should also be conceived so as to derive maximum economic and social advantages (sustainable employment creation, for example, and a better and healthier water supply). It is suggested that this matrix may be useful for the prioritization of assistance, all based, as mentioned previously, on the fullest participation of local actors and authorities.

With respect to the urgent need to increase local technical and management capacity, the UN System has sought and received generous offers from many European municipalities to share the skills of their officials. The ILO, the International Decade for Natural Disaster Reduction and UNOPS have developed a programme, corresponding to the matrix in Figure 1 above, for support to Central American local authorities by European municipal engineers and urban planners. Their salaries and social benefits would continue to be paid by their employers for periods of six weeks or longer. The agencies mentioned will brief them on both risk-reducing and labour-intensive construction techniques and seek financing for their travel to, and local costs in, Central America, where they will both advise clusters of local communities on the application of these techniques in their reconstruction programmes and help them to design such projects. The programme could be expanded to cover social services (e.g., in public health) and economic and administrative management.

A bolder and longer-term proposal which is being elaborated (again, within the matrix described above) and would require much more extensive financial support is CAPDI (the Central American Programme for Disaster Insurance). The scheme, which would be administered at the Central American Regional level, would enable municipalities and other local authorities to insure their assets against natural disaster risks. (At a later stage this facility could be extended also to private citizens.) Insurance premiums would be calculated on a sliding scale, giving lower premiums to municipalities which can demonstrate that they have carried out construction or reconstruction according to criteria of natural risk reduction, environmental sustainability and social improvement (equality of opportunity, local employment and income generation, use of local enterprises, etc.). The actuarial assessment of risk would require the training of persons with technical skills on risk reduction, disaster mitigation and the other criteria being applied to calculate the premiums, thus providing for the region as a whole much needed expertise in such matters. CAPDI could even recuperate some of its operating costs by providing expert advisory services. Initial capitalization of the programme would come from external donors who would thus reduce their own "exposure" in the case of future disasters, since they would already have helped to put in place mechanisms to reduce significantly the economic impact involved. Once the scheme was sufficiently capitalized it would, like any insurance company, invest part of the capital. This could permit access to credit by municipalities looking for investment funds and, once again, the interest rates could be varied according to the observance of the social and economic criteria mentioned above. Given the regional character of the programme, it would provide a powerful impetus to regional integration by placing local authorities in direct relationship to the Central American Integration System, thus demonstrating concretely its relevance and benefits directly to local communities.


It is intended that the points and perspectives set out above will stimulate reflection and discussion on new, and in particular more sustainable and productive, ways of lending much needed support to reconstruction and development in Central America. It is to be hoped that future generations will remember Hurricane Mitch not only as the region’s worst natural disaster of the twentieth century but also as the starting point in the twenty-first of the region’s transformation from one of poverty and backwardness to one in which all its residents have the opportunity to live in dignity, security and prosperity.

For more information on the workshop, contact
Mr. Lionel Nicol (
Inter-American Development Bank
(202) 623-1079


Nicaragua, May 2000   -   Honduras, February 2000   -   Stockholm, May 1999

Inter-American Development Bank