Contents - Previous - Next

This is the old United Nations University website. Visit the new site at

Administration and finance

Urban administration

City management, service provision, and the coordination of public agencies are inevitably complex in an urban area the size of Mexico City. However, these tasks are further complicated by the fact that Mexico City has spilled across the political boundaries of the Federal District (DF) into the State of Mexico (figure 8.3). This process began in the early 1950s, when restrictions on residential and industrial expansion, rent control, rising land costs, and increasing congestion in the DF encouraged new households and businesses to locate just over the border. There, land-use regulations - including restrictions on sales of previously non-urban land - were less likely to be enforced, offering business opportunities for land developers and ejidatarios, as well as lower-priced land for impoverished families (Cymet, 1992; Garza and Schteingart, 1978).2 At the other end of the income spectrum, new developments in the hilly western parts of the city offered attractive sites for high-income residents fleeing the congestion and deterioration of the central area.

Newly arrived migrants to the city, as well as relocating residents, have tended to settle increasingly at the urban periphery, where housing densities are lower (Gilbert and Ward, 1982; Negrete-Salas et al., 1993). The metropolitan municipalities located in the State of Mexico now have nearly as many residents as the Federal District, and one-third of all formal-sector jobs. Despite this, these municipalities have enjoyed minimal official contact with the DF in terms of planning, regulation, and service provision.

Figure 8.3 Mexico City: Changing rates of population growth by rings of metropolitan development, 1950-1990 (Source: Negrete-Salas et al., 1993)

A number of difficulties are posed by the dual government jurisdictions. Mass transit rarely crosses boundaries between the DF and the State of Mexico, forcing mid-trip transfers for most passengers. Prices for basic services, including public transportation, water, and electric power, are also several times higher in the State of Mexico than in the DE (Damián, 1991). Worst of all, public-service levels and living standards are much lower in the State of Mexico; unemployment and fertility rates are higher while school attendance and literacy rates are lower (Rowland, 1993).

Part of the explanation for this differential lies in the very different governmental systems which operate within the two political jurisdictions. In the DF, government is headed by a mayor (regente), who is appointed by the national president and holds a cabinet post. Most city-wide planning tasks are undertaken by the Departamento del Distrito Federal (DDF), whose leaders are appointed by the mayor. For administrative purposes, the DF is divided into sixteen delegations, each of which is headed by a delegado, also appointed by the mayor in consultation with the national president. These delegados are in charge of most forms of local service provision, including street maintenance, water, and drainage. Community representation is formally provided by block representatives (jefes de manzana), who serve on a neighbourhood council ( junta de vecinos) and are directly elected by residents. The neighbourhood councils select a president to serve on a delegation-wide neighbourhood council, and these sixteen delegation-wide councils each send a representative to the DF's Consultative Council.

There are four major problems with this structure. First, the system produces elected bodies that have no executive powers; they serve only in an advisory role on matters selected by the mayor's team. The main purpose of this system, according to most analysts, is to control rather than to satisfy community demands. The second major criticism is that even these local elections are apparently manipulated by the delegados to ensure compliant delegation councils and consultative councils (Aguilar, 1988; Gilbert and Ward, 1985; Jiménez, 1989; Ward, 1990b). Third, the effectiveness of the block committees is undermined by other significant channels of community participation, including PRI organizations like the National Confederation of Popular Organizations (the official PRI channel for urban popular demands), urban ejido commissioners, and the National Coordination of the Urban Popular Movement (an umbrella organization of leftist, non-PRI, urban popular movements), all of which may circumvent the formal structure of community participation and deal directly with delegados or even the DDF. Finally, many of the most important community demands, for example for land regularization or electricity services, fall beyond the power of the juntas and delegados (Aguilar, 1988).

Municipalities in the State of Mexico benefit to some extent from metropolitan-wide activities undertaken by the DDF. For all other matters, they depend on the governor of the State of Mexico, the only formal link between them and between this part of the metropolitan area and the DF. The governor is elected by popular vote; municipal representatives are similarly elected to the State legislature. Each municipality elects a municipal president and council, but their roles are curtailed by their very limited funding.

Urban finance

Analysis of urban finance is complicated by the jurisdictional division between the DF and the State of Mexico and by the status of the Federal District as national capital. The jurisdictional division means that resources available for different parts of the city and different projects vary greatly. The DF benefits both from resources available through the DDF and from direct allocations from various federal ministries and programmes. The complexities of these arrangements are beyond the scope of this chapter, but it is clear that the DF does much better than the State of Mexico. For example, Rodríguez (1993: 138) discovered that of the 19 per cent of the 1987 federal budget allocated to regional development nationwide, more than half was spent on the DF. As a result, when compared with other cities in developing countries, the degree of dependence on federal grants in the DF is very high and its dependence on local taxes low (table 8.9). In addition, because the DF is the national capital, any financial mismanagement is more likely to be tolerated. In 1985, when the DDF managed to accumulate loan obligations amounting to nearly half of its budget, the federal government came to its aid with credits and subsidies (Villalpando, 1989).

Table 8.9 Financing of local public expenditure in selected LDC cities and Mexico City


Locally raised revenue (%)

Revenue from outside sources (%)

Local taxes Self financing services Other Grants and shared taxes Net borrowing
Median LDC cities, 1979-1986 39 18 8 22 7
Mexico City, 1987
DF 5 23 14 51 7
Non-DFa 30 11 22 37  

Sources: Bahl and Linn, 1992: 34-5, and derived from INEGI 1990: 92 9 and 149.
a. Conurbated municipalities of the State of Mexico only.

Table 8.10 Mexico City revenue and expenditure, 1987 (thousands of pesos per capita)

  Total revenue Federal revenue sharing Taxes Duties Products User fees
DF 229 125 12 14 21 56
Non-DFa 20 7 6 4 1 2
Total Mexico City 135 72 9 9 12 32


  Total expenditure Administrative costs Public works & promotion Transfers
DF 224 102 106 16
Non-DFa 14 11 3 1
Total Mexico City 130 61 60 9

Source: Derived from INEGI, 1990b: 92-9 and 149.

a. Conurbated municipalities of the State of Mexico only.

Does not include expenditures for debt service and interest on debt.
Data not available for State of Mexico municipalities of Tultepec and Melchor Ocampo.

In contrast, the amount of money available to the conurbated municipalities of the State of Mexico is much smaller than the DDF budget. The municipalities do benefit from spending by state and federal agencies, particularly for infrastructure and environmental projects, but total state spending in the municipalities is far less than the amount spent by federal agencies in the DF. The DDF is much more effective than its counterparts in the State of Mexico at collecting taxes, duties, and user fees (table 8.10). Part of the explanation lies in the greater number of corporate headquarters located within the DF, as well as the higher number of collection points for duties and user fees. Again, however, the importance of federal transfers to the DF is critical.

Although Mexico is structured on the principles of fiscal federalism, the pattern of transfers from the central government serves to limit the ability of the system both to respond efficiently to local needs and and to link services received to payments in the form of service fees and property taxes. The problem is exacerbated by the federal government's tendency to rely on parastatal agencies for much of its income (despite recent waves of privatization), and the lack of local accountability, stemming from weak levels of local political competition (Crane, 1990: 4). Thus, the system leaves little opportunity for local initiative or discretion.

Two major, but unsuccessful, attempts have been made to reform the system. The 1980-81 tax reform replaced most state and local revenue sources with a national value-added tax, to be allocated to the local authorities on a basis proportional to amounts collected. In 1982-83, another attempt at fiscal reform, Article 115 of the Constitution, ostensibly devolved power from the federal and state authorities to the local level. This gave local governments responsibility for many new local service functions, which they were to finance through their newly established monopoly over property taxes. Neither of these policies functioned as designed, because steps that were subsequently taken to make the reforms more palatable to state governors allowed them to maintain control over local government finance (Crane, 1990; Davis, 1991; Rodriguez, 1993).

A role for metropolitan government?

Many observers have suggested that a single metropolitan institutional structure would provide a simplification and clarity of purpose that is currently lacking in Mexico City's administration. The coordination of planning between the two jurisdictions would encourage greater compatibility in terms of goals, rules and regulations. Several attempts have been made to coordinate better the wide range of activities and regulations of the two jurisdictions, beginning in 1976 with the Commission of the Conurbation of the Centre of the Country, and followed in 1988 by the Council of the Metropolitan Area of the Federal District and the State of Mexico. These efforts were largely ineffective and short-lived, both suffering from a lack of executive power and a lack of will to cooperate among agencies (Cornelius and Craig, 1991; Rowland, 1993; Ward, 1990b; Wilk, 1992). A recent exception to this pattern is the creation of the Metropolitan Commission for the Prevention and Control of Environmental Pollution in the Valley of Mexico. Formed in 1992, the Commission consists of representatives from eight national ministries, three parastatal agencies, and the governments of the DF and the State of Mexico. It appears to have achieved some success in planning, monitoring, and enforcing air-quality programmes (Lacy, 1993; Wilk, 1992). Cooperation on a wider range of issues is more difficult, both administratively and politically. Combining finance and expenditure processes, for example, would require that the rules for such processes be more transparent and well-regulated than they are now. It might also run the political risk of increasing public pressure to do more for the poorer municipalities in the State of Mexico.

The ongoing shift in population and economic activity from the DF to the suburbs within the State of Mexico will have significant effects on both jurisdictions. Revenues, especially from taxes, are likely to decline in the DF as the deconcentration continues. Meanwhile, municipalities beyond the DF continue to grow, primarily owing to migration from older parts of the city, and will soon surpass the DF in population. This will put additional pressure on already strained municipal governments and may increase the demand for changes in the administrative system.

Contents - Previous - Next