Analysis of the fiscal dependency of sixth category municipalities in Boyacá, during the period 1996 to 2012


Análisis de la dependencia fiscal de los municipios de sexta categoría del departamento de Boyacá, durante el periodo 1996-2012


Análise da dependência fiscal dos municípios de sexta categoria do Boyaca,

durante o período 1996-2012



Siervo Tulio Delgado Ruiz*

Luis Enrique Acero Jiménez**


Research article  



Date of reception: 12  mar 2015

Date of  aprovval: 25 jun 2015





The Constitution of 1991 deepened fiscal decentralization by augmenting the number of transfers from the central government towards the local level and also redefined the functions of the different levels of government, increasing the responsibilities of local governments. Nevertheless, the tax revenues which generate greater income are still monopolized by the central government, leaving few possibilities for local governments, which are financed almost exclusively by monies transferred from the central government, to impose new taxes. This causes high financial dependency of municipalities on the central government, especially those which have a nearly inexistent capacity to generate their own revenues.  Consequently, it is important to analyze the level of dependency of the municipalities in Boyacá, of which 94.3% are classified as sixth category, and to determine the causal relationship that this produces. Hence, this article addresses this situation, supporting the analysis with an econometric estimation.


Keywords: fiscal dependency, transfers, fiscal effort, decentralization, municipal autonomy.


JEL: H70, H72, H75, H76, H77.




La Constitución de 1991 profundizó la descentralización fiscal al aumentar el volumen de transferencias del Gobierno central hacia el nivel territorial y redefinió las funciones de los distintos niveles de Gobierno, incrementando las responsabilidades de los gobiernos locales. Sin embargo, la tributación que genera mayor recaudo está monopolizada por el Gobierno nacional, quedando pocas posibilidades de imposición de nuevos gravámenes a los gobiernos locales, los cuales se financian casi exclusivamente con los dineros transferidos por el nivel central de Gobierno.  Ello origina una alta dependencia financiera de los municipios, en especial de aquellos cuya capacidad de generación de rentas propias es casi nula. Por lo anterior, resulta oportuno analizar el nivel de dependencia de los municipios de Boyacá, de los cuales el 94.3 % se clasifica en sexta categoría, y establecer la  relación de causalidad que la origina. En ese sentido, el presente artículo aborda esta circunstancia, apoyando el análisis en una estimación econométrica.


Palabras clave: dependencia fiscal, transferencias, esfuerzo fiscal, descentralización, autonomía municipal.




A Constituição de 1991 aprofundou a descentralização fiscal; para aumentar o volume de transferências do governo central para o nível regional e redefiniu os papéis dos diferentes níveis de governo, aumentando as suas responsabilidades. Tributação gera maior coleção é monopolizado pelo governo nacional, deixando pouca chance de novos impostos para os governos locais, que são financiadas quase exclusivamente através de transferências, provocando uma alta dependência financeira, especialmente aqueles cuja capacidade de gerar sua própria renda é quase nula. Portanto, é apropriado para analisar o nível de dependência dos municípios de sexta categoria de Boyacá e estabelecer causalidade que origina, com base em uma estimativa econométrica.


Palavras-chave: dependência fiscal, transferências, esforço fiscal, descentralização, autonomia municipal.





The process of political, administrative and fiscal decentralization experienced in Colombia since the end of the 80s, has been transferring permanently the responsibilities and powers that the central government previously held to local bodies, as well as giving them participation in the main revenues, especially those stemming from the taxation of consumption, without the latter being linked with the countless commitments that local administrations should now assume. The adoption of this model since the eighties complies with “(…) a negotiation with the political class, which ended in the redistribution of resources and powers in which the nation ceded responsibilities over everything in social expenditure, but did not cede tax bases, in such a way that the national government was committed to sending resources through transfers” (Giraldo, 2009, p. 144). In this context, expenditure was decentralized while the central national government kept the revenue, as a way to secure the fulfillment of the financial commitments derived from the national public debt.


This process has been marked by various reforms that, with the objective of securing the use of resources in the financing of basic services such as health and education, have directed the specific destination of these resources, which secures their investment but at the same time generates inflexibility in their allocation. Also, due to the fact that indirect taxation is the greatest generator of funds, but is monopolized by the national government (VAT, surcharge on fuel, 4x1000, etc.), there are few possibilities left for local governments to impose new taxes, which base their financing almost exclusively on funds transferred from the central government.


In this scenario high levels of financial dependence are generated in municipalities, whose capacity to generate their own income is almost zero, except for the scarce resources stemming from property tax, sustained on some out of date tax valuations, and from industry and commerce, applied to the few commercial activities and nearly inexistent industrial activities that are developed in each municipality.

This low taxation capacity of municipalities for dealing with expenditure commitments means that local governments, thanks to the prevailing financial liberalization model, have to resort to greater debt, pledging the scarce resources that they can generate, thus limiting the future possibilities of social expenditure (Giraldo, 2009, p.146)


This restriction on the availability of resources gives a minimum margin for maneuver to local governments, whose management is limited to the use of resources transferred in legally assigned allocations. 


Because of the above, it is appropriate to carry out a study on the level of dependence of the municipalities of Boyaca, of which the majority are classified as sixth category, in accordance with the parameters established by Law 617 of 2000, and to establish the possible causal relationship that results from such dependency. In this sense, this article addresses this situation so as to analyze the fiscal dependency of municipalities of the sixth category of the department of Boyacá, with the aim of establishing its determinants, during the period 1996 to 2012.


Initially a theoretical- conceptual review is conducted of the current focus of fiscal policy and public finances applied in Colombia, followed by a short description of the background of decentralization in the country. Afterwards the results of an econometric estimation exercise are shown to determine the causal relationship of the fiscal dependency of the municipalities studied, using the panel data methodology, and it finishes with the conclusions of the study




First of all, it is important to understand what the process of decentralization implies, although it’s true that it promotes involvement in decision making at a local level, it is also true that it brings serious implications, especially with respect to the limitations of local governments in obtaining the resources necessary for financing their expenditure responsibilities. Also, decentralization is not an isolated process, but rather it forms part of an economic model that has been applied in Latin America, of which Colombia is no exception, and that covers various fields within economic activity.


It is for this reason that the structure of the public finances in Colombia, nowadays, complies with the application of the adjustment programs and structural reforms that have been implemented since the eighties by the International Monetary Fund (IMF), the World Bank (WB) and the Inter-American Development Bank (IDB), under the premises of the supremacy of the market and the dismantling of state interventionism. This leads to the much sought after fiscal balance, which is reached thanks to the increase in taxes, and the price of public goods (tariffs), accompanied by cuts in government expenditure (Giraldo, 2009).


Such programs arise as a response to the policies implemented since the fifties, which were inefficient and generated income to the benefit of certain sectors, derived from the application of the importations substitution model, a situation that led to the economic crisis in the eighties, reflected in the debt crisis.


At this point of history the interventionist model reached a breaking point, it became fiscaly unsustainable and inefficient in the fulfillment of its functions, which is why the ideas of Keynes stopped being functional in the new context of the world economy and this justified a change of paradigm (Giraldo, 2009). In this respect, authors such as James Buchanan (1993), affirmed that Keynesian ideas regarding the intrinsic instability of the economy had favored, on one side, activism and the discretional management of fiscal policy and, on the other, the abandonment of the belief in the need to maintain the budget in balance and achieving a reduction in debt.


In this respect, the introduced reforms have two dimensions: One oriented towards diminishing the intervention of the state in order to give greater freedom to the market, and when this intervention is necessary, it should be carried out with the criteria and instruments closest to those of the market, and, the other, which aims that state reforms are complemented by reforms in the markets, reducing the distortions derived from state control and interference, achieving the so called “(…) flexibilization, that is expressed in the market of goods with commercial openness, in the capital market with financial deregulation and in the labor market with the flexibilization of the wage ratio”. (Giraldo 2009, p. 27)


From this perspective, there isn’t any incompatibility between the adequate management of the flaws in the market on the part of the state and the role of maintaining competition. “Practically any role of the state is compatible with competition or with conditions analogous to competition. […] What exists is the state and the private sector with competition or without it” (Wiesner, 1997, p. 12).


In accordance with this, Wiesner (1997), from the neo-institutionalist view, suggests that the state is conceived as the result of a “contract” between civil society, constituted of economic and political agents, and the public sector, which should fulfill the role of “neutral arbitrator” in the processes of production, distribution and consumption of wealth, income and opportunities. As a matter of fact, in this contract civil society acts as “the head” that commissions the “agent”, or in other words, the state, with the task of assuring the functioning and fulfillment of a set of rules.


In this context, public finances constitute a redistribution of the allocation that the market makes of a society’s resources, but as this redistribution is considered to be a distortion of the economy, the action of the state should be governed by principals of efficiency and objectivity (typical of the market) in order to make this allocation of resources.


The application of the neoclassic approach supposes the reorientation of public policies, in the sense of achieving certain objectives, such as, “(…) fiscal and financial discipline, targeting of expenditure and orientation of demand subsidies, fixing of neutral taxes, privatization and fiscal decentralization (Giraldo, 2009, p. 35).” Regarding this last criterion, it is understood as decentralization from the perspective of the market “(…) in the measure that it is conceived as a mechanism for introducing market competition between regions and localities, and allows a closer relationship between institutions that offer a service and the user (Giraldo, 2009, p. 36).


In Colombia, this neoclassic view of the state was adapted by economists who are followers of the so-called neo-institutionalist school, who were behind the structural reform implemented in the state, on a national and local level, introduced in the constitution of 1991. According to Wiesner (1997, p. 18), one of the leading exponents of this group, “[…] there is much in common between the Neo-instituionalist School and the Chicago School. This conceptual and operational kinship has to be taken into account so as to not identify the Neo-instituionalist School as the antithesis of the Classic or Neoclassic models, nor as the negation of the postulates of the so-called Chicago School”.


In this way, the principal of efficiency, as a guide for all economic agents, including the state, is manifested in the use of a resource in order to finance and certain expenditure, being efficient not only because of its destination but also because of it’s origin and nature. Thus, when a resource comes from the markets, or from conditions similar to this, “[…] it can be anticipated that it will have greater efficiency than when, for example, the financing comes from taxes, revenues for a specific purpose or automatic transfers and without greater conditionality” (Wiesner, 1997, p. 14).



Based on these criteria, Wiesner (1997, p. 14) considered that in Colombia, during recent years, the proportion of public expenditure financed by tax revenues has been falling, in relative terms, in all levels of the public sector, but with greater intensity on the local level, as there transfers are financing a growing proportion of public expenditure.


Due to this situation, the theoretical model proposed for Colombia, based on a decentralizing process, considers that the actions of public expenditure are framed within the processes of “public choice”, but are applied to the territorial context.


In terms of public choices, as rational election for resolving flaws in the market, there are the so-called “local public choices” in contrast to national ones. For Wiesner (1997), the latter refer to the allocation of public resources so as to generate national public goods, whilst the former refer to local public goods and to regional or municipal policies. In this last case, given the proximity between the local consumer and local public provider (municipal government), it is argued that there will be greater economic efficiency and political transparency (p. 92).


It is supposed that the revelation of preferences for public goods and local policies, for being more direct, will be more precise than on a national level. For its part, the response from the side of the public offering it should be quite efficient. Local public choice is more exposed to competition that national public choice, given that, particularly, consumers can “vote with their feet”, and force the supply to compete with efficiency and equity so as to not lose citizens or consumers. (Tiebout, 1956, p. 24)



This argument serves as a justification for the process of the decentralization of public revenues and expenditures and of the decisions related to that expenditure and local public management, cornerstones of the relationship between the different levels of government and the economic agents in the territorial body.


To ensure the potential advantage of local decision-making over national, a condition of an institutional and fiscal nature  is necessary, which consists of  “(…) a large  part of the financing of local public expenditure coming from local citizens” (Wiesner, 1997, p. 92), as, if the financing is supported by transfers, wiith few restrictions of use, it will be unreasonable to suppose that local contributors would be interested in overseeing the quality of expenditure that is financed by taxes paid by others. For this reason, one of the main demands of the local public choice model is ensuring that a large part of the financing for the local budget originates from internal own tax revenues.


The importance of self-financing is difficult to exaggerate. Its significance lies not only in providing additional resources but also in providing the externalities that make it possible to satisfy other basic conditions. These are:  institutional strengthening, improvement of information, transparency in political and fiscal processes, and the ability to make real evaluations of government administration. (Wiesner, p. 93.)



Thus, the principle of subsidiarity is followed, which means that the service will be supplied by a lower level of government that can provide it and finance it in such a way that the goods and services provided to institutions (schools, hospitals, public services companies, etc.) by the national level are transferred to the municipal level. And if the institutions are financed in the market, through the sale of goods and services, state intervention is unnecessary, it being preferable that such activities remain completely in the private sector account.


From the above principles it can be deduced that targeting, demand subsidies and decentralization are policies that, most of the time, are closely linked. Subsidizing demand implies orienting resources directly to the poor, including the poorest through targeting systems, directing economic aid to such people without the intervention of regional administrations, which provide goods and social services, but for that they should be self-financed.


Now, from the Neoclassic Theory, three typres of decentralization are distinguished:


Administrative decentralization, which occurs when functions are transferred and may take place in two cases: when they pass from the central national level to the decentralized (public entities, for example), or when they are transferred from a national to a regional level. However, such transfer of functions (expenditure) should have fiscal implications (revenue)


Political decentralization, which has a vertical nature in transferring certain political responsibilities to regional bodies; responsibilities that also entail resources moving towards subnational levels, reaching their maximum advance with the popular and direct election of local governance.


And fiscal decentralization, which indicates the transfer of a percentage of the resources collected by the national government from regional bodies, in order to finance the functions that were transferred by political and administrative decentralization.


Decentralization is also manifested through the fostering of citizen participation, empowering communities to take part in determining some policies at a regional level as well as demanding of their governor’s accountability as regards their mandate. With this, according to the World Bank, the barriers to social mobility and economic activity imposed by the state and social institutions are broken (Giraldo, 2009, p. 37), aiming for equality before the law and the general participation of individuals with apparent equitable treatment by the state.


Another element that comes with the model is the search for fiscal balance thanks to the reduction of expenditure obligations, coupled with efficient taxation, plus the elimination of state monopolies (another distortion). This generates a favorable environment in the macro as well as the micro, for “efficient” economic activity, in the best neo-classic sense of the term.


With the constitution of 1991, Colombia introduced various fiscal reforms aimed at deconcentrating national expenditure and improving the coverage and efficiency of the provision of public goods, redefining the expenditure responsibilities of all the levels of government and modifying the system of transfers from the central to the regional level, despite the fact that this new system, by elevating the levels of expenditure, also incremented the fiscal imbalances in both levels.


As was mentioned at the beginning of the article, the decentralizing model was introduced in Colombia in the mid-eighties and was expanded with the Constitution of 1991, where it was more thoroughly developed with the aim of introducing market criteria to the provision of public goods.  Thus, when agents choose where to locate they express their preferences by comparing what the locality offers them against the price in taxes of such benefits, as it is in the market of private goods (Wiesner, 1992, p. 52); so that “(…) less competitive cities will repel productive resources and competitive ones will attract them” (Giraldo, 2009, p. 139).



For this reason, as was noted above, a criterion that justifies decentralization is subsidiarity, the manner in which the closest proximity between the supply and demand of public goods, plus the movement of the factors of production, leads to an optimum allocation of resources, at the same time as generating competition between the regions by offering better conditions to private agents, who will want greater levels of public expenditure with lower costs in taxes. In consequence, municipalities prefer tax reductions or extensions to economic activity, so as to not drive away private investment, as the IMF indicated (2001, p. 96) “[…] some tax systems are so complicated and inefficient that they do not allow sufficient fiscal revenue to be obtained, and also they distort the incentives to work and save, with disastrous consequences for economic growth”.


This logic shows that “(…) the decentralization of revenues involves two types of reforms: regional autonomy for the creation of local taxes and better distribution of the set of existing taxes between regional entities and the central government” (Restrepo, 2004, p. 88). Nevertheless, in Colombia the emphasis on the search for economic and social development has relied more “(…) on the quantity of resources and their distribution or repartation than in the quality of global policies, and much less in the role of institutions and the capacity of the restrictions of economic policy to distort the wealth creation process and the distribution of opportunities” (Wiesner, 1997, p. 18).


Upon reviewing decentralization in Colombia historically, according to Giraldo (2009, p. 144), two phases are identified: that of the eighties, when its application began, during which responsibilities, powers and resources were handed over to local governments, above all in social areas, maintaining tax collection in the central level and transferring a part of that to the regions. The other phase, which is the current one, constitutes a recentralization, given that “(…) on one hand they have recentralized financial instruments through controls on regional debt and the allocation of transfers to subnational governments and, on the other hand, social expenditure has been recentralized through administrative programs by the national executive”.


According to this logic, the municipality is the expression of the state closest to the region and has, from the Constitution and legal mandates, great responsibilities in education, health, and drinking water, among others, beginning in Colombia discourse and legislation in favor of decentralization as of 1986. This has constituted a central element in the democratizing bid of Colombian society. Nonetheless, given that of the total of the municipalities in the country, 995 are classified as sixth category (in accordance with the Law 617 of 2000), which implies serious budget restrictions, “(…) today it is clear that not all municipalities have been in the condition to fulfill their functions and contribute to realizing the social state under the rule of law” (Caballero, Galvis & García, 2012, p. 3).


In this way local governments, faced with the responsibility of ever rising expenditure and  almost inflexible tax collection, as the most efficient taxes from the revenue are of a national type (income, VAT, financial transactions, wealth), are left with a poor ability to generate their own resources, before which debt arises as the most convenient means of obtaining resources, making the financial sector the new financier of local government, with the implications that that brings for regional autonomy. With this logic, the Ministry of Finance doesn’t send the resources that regional bodies need, but it does give them the guarantee so that they can turn to financial entities, generally private, looking for credit resources.





It was the state, through the legislative, that established the characterization of local authorities, based on two criteria: population and current unallocated revenues. Thus, the Law 617 of 2000, in article 2 (which modified article 6 of the Law 136 of 1994) set the six categories for classifying districts and municipalities, designating the sixth category as “All of those districts and municipalities with a population of ten thousand or less inhabitants and with annual unallocated revenues of not more than fifteen thousand minimum monthly salaries”. Nevertheless, in paragraph 1 of the mentioned article it is established that “The districts or municipalities that according to their population should be classified in one category but whose annual revenues are different from those indicated in this article, are classified in the category corresponding to their annual unallocated revenues”.


Current unallocated revenues are understood to be current revenues other than appropriated funds (Herrera, 2003), and the Law 617 of 2000 seeks that they finance the functional costs of territorial entities. The main source of these current revenues is tax revenues, corresdonding to taxes of a municipal nature; that is to say, “pecuniary obligations that the state imposes on associates and gives to municipalities, without direct or personal consideration, which can be direct, when they tax rent or assets, or indirect, when they tax spending or consumption.”


The budgetary restriction on smaller local authorities (understood to be category six) in generating their own resources increases their degree of dependence on transfers from the central government, at the same time as it reduces their freedom in using those resources. This was confirmed by the National Planning Department (DNP by its acronym in Spanish) in their report on fiscal development in departments and municipalities (DNP, 2011, p. 24).


It can be corroborated that internal revenues (tributary or non-tributary) do not have much weight in municipalities and departments with smaller populations and revenues, while those of special categories, first and second, in contrast, have expenditure financing that is determined by exogenous sources such as those of transfers (investment and functioning) and royalties.


This scheme means that the central government should concentrate national finances on expenditure that is considered inflexible, giving priority to the payment of debt, internal and external, for which expenditures should be decentralized but not revenues, as these should be remain on a central level so that financial commitments can be fulfilled. In consequence, the requirements of local communities do not manage to be covered by the transfers made by the nation and, “(…) there is a división between local needs and local resources, in such a way that the public election process is not transparent given that local decisions do not reflect the cost of adopting them.” (DNP, 2011, p.145).


For this reason, authors such as Wiesner (2006) and Clavijo, Vera and Vera (2013), suggest that Colombia has a high level of expenditure inflexability, caused by the commitments assumed constitutionally as well as legally, especially the compromises specified by the national government in the Constitution of 1991 and the activist interpretation that has been given  by the courts in its sentences, in particular the Constitutional, to the reponsibilities that the state should assume.


The traditional theory maintains that the public goods that benefit certain groups of the population should be provided by local governments. In this way a direct relationship between the costs and benefits of these goods would be guaranteed. In contrast, public goods of a national scope, such as the law and national defense, as well as economic stabilization policies and the redistribution of revenue, correspond to the list of central government functions. Also, it is suggested that, “(…) when the tax base responds to a tariff differencial, local governments should impose taxes that reflect the cost of the social good.” (Iregui, Ramos & Saavedra, 2001, p. 5). Therefore, if what Rincón, Ramos and Lozano (2004) stated is taken into consideration, on any state level (national or local), within the total revenues, tax revenues are those that allow the determination of the intertemporal capacity of the government to finance expenditure, and ultimately, that to maintain or augment this expenditure permenant tax revenues should be generated, first and foremost.


In this context, Neoclassicism, inspired by rationality, envisages decentralization as part of the process of globalization, with the aim of favoring the free movement of international capital and promoting social demands, especially those directed towards local governments, which, not having their own available resources, have to resort to a greedy financial market to locate resources at high rates of interest, which are secured by local tax revenues, which upon being pledged, limit public action in terms of the future. When regulation disappears and there is absolute freedom in financial markets, debt allows speculative profiting from public revenues.


Within this framework, decentralization is constrained by the contractionary policies of the Banco de la Republica, with a view to controlling inflation and the commitment of the government to reducing the tax deficit, making the increase in tranfers difficult. To this end the argument for institutionalism was embraced which led to the constitutional adoption of the principal of balanced budgets and the issuance of a norm of adjustment (Law 1473 of 2011) that allowed a balaced Budget to be maintained within the tax year, as well as establishing the action to be taken in case the goal was not achieved  (Buchanan, 1993). The purpose was to eliminate the ability of politicians to manipulate the tax system and economy for their own benefit, re-establishing the limits within which legislators should act, based on criteria of “rationality”.


Thus, public choices reflect more the “rational” interests of those who make public decisions than of those who are supposed to benefit from these decisions. That is why “(…) the theory of “public choice” can be defined as the application of the model of “rational choice” to political science and political processes:“it is the application of the neoclassical model of economic theory to politics” (Wiesner, 1997, p. 19).


Nevertheless, in Colombia, the structure of social, economic and political organization has been constructed more on the basis of abstract normativity than of empirical reality regarding the real conduct of economic agents and politicians. Here “rational choice” is not the determining principal of human conduct (Wiesner, p. 17).


Paradoxically, the implementation of the decentralization process since the eighties, buried the policies of regional development in exchange for the interest in the territorial program of public social expenditure (Restrepo, 2004, p. 88).  In this framework the role that tranfers have played has been crucial.






During nearly the whole of the XX century Colombia was characterized by having a centralized tax system, in which the national government was the main tax collector and provider of public goods and services. While this process was begun with the consolidation of the nation-state, enshrined in the constitution of 1886, it’s re-enforcement only occurred after the Second World War, a time in which the central government channelled the most important tax revenues to its advantage and assumed the majority of expenditure (Iregui, Ramos & Saavedra, 2001, p. 4).


The first attempt to reassign functions among the different levels of government was the legislative act project introduced by the López administration in 1976, with which they attempted to establish regional finances through the strengthening of independent revenues and the redefinition of the powers of the departments and municipalities. Although this Project did not succeed, the basis had been laid for later reforms such as the Law 14 of 1983 and the Law 12 of 1986(Iregui, Ramos & Saavedra, 2001, p. 4).


The Turbay government again recognized the problem of excessive centralization and the lack of regional autonomy, which is why in its development plan it indicated that decentralization was one of the objectives of economic policy and an instrument for favoring the autonomy of regional entities, which is why


It sought to reassign and redefine powers between the central and regional levels, avoiding that the financing of departments and municipalities would depend exclusively on national transfers. In this way, it hoped that the regions would take greater advantage of their tax potential by means of greater fiscal effort, which would result in less dependence on national contributions n(Iregui, Ramos & Saavedra, 2001, p. 8).


It was the Betancur administration that really pushed the first important reforms as regards decentralization, through the Law 12 of 1983, which had the objective of elevating the level of local collections by means of the simplification and rationalization of the municipal and departmental tax system. This reform was adopted just at the moment in which a serious deterioration in the national central governments finances was revealed, caused by significant growth in current expenditure, while Latin America was suffering from the external debt crisis.


Law 12 of 1986, also issued under this same government, established the progressive increase in the participation of municipalities in the collection of value added tax (VAT). Although this law increased the volume of resources transferred to municipalities, local autonomy over their management was questionable (Iregui, Ramos & Saavedra, 2001, p. 9). The law explicitly defined the activities that these resources should be used for and to a large degree conditioned the transfers to the fiscal effort observed in the collection of property tax.


In summary, the fiscal reforms of the eighties had two fundamental objectives: one, the interest of the government in relieving its budget of some of the regional expenditure responsibilities in it’s moment of crisis and the deterioration of the national finances; and the other, the desire of the national government to increase the coverage and improve the quality and efficiency of public expenditure (Iregui, Ramos & Saavedra, 2001, p. 9).



Although during the eighties the were no significant changes as regards fiscal decentralization, in the political terrain there were important advances which led to the popular election of mayors in 1986. This reform gave citizens more participation in the making of decisions of municipal interest. In theory, it aimed to “(…) reduce the distance between citizens and their government with the aim of strengthening the link to local political responsibility and inducing the efficient use of resources” (Wiesner, 1997, p.103).


Countries can adopt two fiscal models; a fiscal system in which local governments have full autonomy as regards expenditure and revenue, where local taxes finance local public goods and the central government is in charge of national defense and the redistribution of revenue. In the other model, a centralized fiscal system is designed in which the national government is the principal tax collector and provider of local and national public goods and services. Against these, despite the implemented the decentralization process, the Colombian tax system is closer to the centralized model, as departmental and municipal governments do not have the autonomy to establish taxes, although it is true that the congress has ceded some of the national taxes to local governments, the establishment of tax brackets and tariff ranges has corresponded exlusively to the legislative body (Iregui, Ramos & Saavedra, 2001, p. 9).



Additionally, “(…) the transfer of taxes has been dependent on that the resources should be used for expenditure headings determined by law. A large percentage of local expenditure is not the result of autonomous decisions, because a good part of this is financed by resources stemming from assigned transfers from the national central government.” (Iregui, Ramos & Saavedra, 2001, p. 10).


As regards fiscal decentralization, the constitution of 1991 and its regulatory norms increased the volume of transfers from the central government to the local level and redefined the functions of the different levels of government, augmenting the responsibilities of local governments.  Thus, article 356 defined the destination of resources of fiscal origin and set the guidelines for the distribution of these resources among the departmental governments and special districts. As well, this article established that “(…) responsibilities could not be decentralized without the previous allocation of sufficient fiscal resources to deal with them.” Although the article indicated that municipal “participation” is destined for social investment, it did not define the specific programs that are to be financed by these resources (Iregui, Ramos & Saavedra, 2001, p. 11). Law 60 of 1993 concretely defined the functions of departments and municipalities, the territorial distribution of the revenue-sharing system and of the participation and the criteria that the territorial entities should follow when assigning the resources transferred by the nation, a distribution structure that was later modified by the Law 715 of 2001, a previous constitutional reform that allowed it, and today governs the so-called General Participation System (SGP by it’s acronym in Spanish).


In the case of the revenue-sharing system, Law 60 again points out that 15% of tranfers are to be distributed in equal parts among the departments and special districts, and the remaining 85% is to be assigned according to a formula that has five criteria of, “(…) fiscal and administrative efficiency, the current and potential demand of the services of health and education on the part of the population.”


In the case of transfers to municipalities, Law 60 of 1993 established that their assignation should be made based on the number of inhabitants with unsatisfied basic needs, the degree of relative poverty of the municipalities and indicators of fiscal and administrative efficiency. Nevertheless, due to the unclear management that took place before its issuance, the Law 715 of 2001 set the distribution percentages and specific destination of the resources assigned to each municipality, leaving territorial entitities with a low margin of manoeuvre as regards their use, except for a small percentage of general purpose resources, which in the majority of cases ends up financing running costs.


From the fiscal point of view, the changes that came with the new constitution were basically modifications of the transfer system. These reforms, “(…) did not introduce changes that permitted subnational governments to exercise different fiscal management. In particular, it maintained the same regional tax system and the same national interfence in the assignation of expenditure financed by resources from transfers and with resources stemming from some local taxes.” (Iregui, Ramos & Saavedra, 2001, p. 13).


On the other hand, the legislation assigned a specific destination to some local taxes, which caused more inflexibility in the use of tax revenues. The aforementioned problems are added the fact that the local taxation norms were written without taking into account the economic and geographic diversity of the different regions of the country. As a consequence of this, there were cases in which some of the established taxes did not, in practice, apply, and regardless, could not be substituted for a new tax. An example is motor tax, which cannot generate significant revenue in those localities were the main mode of transport is not motor vehicles, or where the lack of roads does not allow for them.


The fact that the reforms of the nineties did not consider changes to the regional tax system is inconsistant with the new territorial framework of powers. For this reason, Iregui, Ramos and Saavedra (2001, p. 11) affirm that:



Subnational governments should assume new responsibilities without having the possibility of generating fiscal resources other than transfers and those that the system before the reforms provided. The impossibility of generating new revenues is much more serious when it is recognised that the taxes that these governments collect are the least dynamic and flexible.


The lack of flexibility to generate internal revenues means that regional governments depend on transfers from the national government. Indeed, these type of national transfers constitute the most important revenue source for the majority of the departments and municipalities in the country, a circumstance from which the department of Boyaca does not escape, as 94.3% of its municipalities are classified, according to the Law 617 of 2000, in category six, with high dependence on the resources transferred from the central government and with little possibility of generating its’ own resources.






Territorial transfers are the mechanism through which decentralization in Colombia has been financed, as the government transfers not only powers and responsibilities to the territorial entities, it also sends resources for their financing. This scheme has been maintained since the mid-eighties, and thanks to the new constitutional framework, it has been strengthened.


The beginning of  fiscal decentralization was made through the the revenue-sharing system, created in 1968, as a mechanism for transfers from the central govenment to the departments, the national territories and the Special District of Bogota, where the amount of the transferred resources would correspond to a percentage of the ordinary revenues of the nation (not including non-tax revenues) and were destined to cover the expeditures of education and health on a local level  (Iregui, Ramos, & Saavedra, 2001).


Later, with the Constitution of 1991 and the Law 60 of 1993, two classes of transfers were set: the revenue-sharing system directed to departments and districts, and the participation of municipalities in the revenues of the nation. To these should be added the complementary transfers to the revenue-sharing system for education, which strengthened the process of fiscal decentralization. This can be seen in the increase of the participation of territorial entities in national tax collection, which went from 13% in 1991 to 50% in 2011  (Rincón, Ramos, & Lozano, 2004).


This increase in the level of participation of transfers is also observed in expenditure, given that, as Rincón, Ramos and Lozano (2004) affirm, transfers represented 25% of the total increase in expenditure between 1990 and 2001, equivalent to going from 2.4% to 5.7% of the GDP.


The growing participation of transfers in government expenditure and the inefficient use of these on the part of the territorial governments, led to the issuing of the legislative act 001 of 2001 and the Law 715 of the same year, norms that modified the amount, assignation criteria and destinations of the transferred resources. The constitutional reform unified the transfers in what is known as the general participation system (SGP, by its acronym in Spanish, and referred to in this way from now on) and bound their behaviour to the current revenues of the nation according to the real average growth of the previous four years. Also, the departments, districts, municipalities, and indigenous reservations were included in the SGP, in contrast to the revenue-sharing system which considered only departments and districts.


In accordance with Law 715 of 2001 (article 2), the resources of the SGP give priority to the financing of the provision of educational and health services, corresponding to 58.5% to education and 24.5% to health, while 17% is set aside for general purposes (drinking wáter and basic sanitation, social housing, sport and culture, among others, but without specific allocation) and the remaining 4% is reserved for the National Pension Fund of Territorial Entities (FONPET by its acronym in Spanish), indigenous reservations, the municipalities bordering the Magdelena River as well as schools meals(Clavijo, Vera & Vera, 2013).


This reform to the transfer system allowed the reduction in participation of the SGP in the nation’s current revenue, going from 40.7% to 28.9% between the years 2002 and 2008 (Clavijo, Vera, & Vera, 2013, p. 30).  But as the Legislative Act 001 of 2001 stipulated that in the year 2009, transfers would again be bound to the average growth of the current revenues of the nation in the previous four years, the central government considered that this would push expenditure upwards, which is why a new reform was negotiated, enacted through the Legislative Act 004 of 2007, which extended the transition period until 2006, so as to ensure that the growth of transfers would stabilize at 4% (Clavijo, Vera, & Vera, 2013), regardless of the fact that expenditure commitments of the territorial entities could grow to above this value, given the social needs that they needed to cover.


In this sense, upon revising the government initiatives aimed at reducing the levels of poverty, examples can be found, such as the National Rehabilitation Plan, Plan Colombia, the Social Solidarity Network, Social Action and the Department for Social Prosperity, with their programs “(…) of which have all been random, circumstancial actions, dependent on the Republic’s President; they do not follow a “state policy”, but rather the social policy of  the acting president” (Restrepo, 2004, p. 88).



As has been previously mentioned, the decentralized matters are all in the area of social policy, in particular, in accordance with the Statute 715 of 2001, most of the resources are absorbed by two sectors: education and health. However, three concerns color these developments: efficiency, equity and the sustainability of such efforts (Restrepo, 2004, p. 88), without evaluating the quality of these services, the resources of which have been captured by the private sector.



The growing expenditure levels of the state in the face ofthe efficiency and evolution of the sources of financing meant that one of the the conclusions reached by the Commission for the Rationalization of Expenditure and Public Finances (Rosas, 1996, p. 25) is that the causes of the fiscal imbalance of the public sector follows the rapid expansion of expenditure overtaking the efficiency and sustainability of revenues, the rigidities of the budgetary process, especially as regards the transfers derived from decentralization, the lack of institutional coverage and the flaws in the information and the strong political pressure caused by growing public expenditure, which generally works to the benefit of small groups of individuals (the so-called “rent seekers”) and not the majority of citizens.


Despite this, from the neo-institutionist perspective, the existence of rent-seekers is justified, as Wiesner (1997, p. 123) affirms:


 (…) rent seekers should not be disqualified as stateless people without social sensitivity, moved only by their greed. They are, simply, economic agents making use of their rational choice so as to maximize profits. It’s pointless to call for them to be generous and self-sacrificing citizens. If the conditions exist for them to seize profits, they will do so.


In contrast, for some analysts, such as Restrepo (2004), decentralization brings with it benefits beyond the eminently financial, as three fundamental features of the state and of the Colombian political regime, centralism, presidentialism and bipartisanism, had suffered a serious decline in the last 15 years, as a result of decentralization.


Despite the fact that the decentralization model has reduced the presence of the state, a current economist like Piketty (2014) suggests that the present crisis has led to a “return to the state”, where the presence and action of the state is more active than ever and in this sense, taxation is not a technical question. It is above all a political and philisophical problem, perhaps the most important of all political questions. This has always been so. At the heart of every important political upheaval lies a fiscal revolution.





The department of Boyacá is made up of 123 municipalities, which have been classified according to what is stipulated in Article 2 of Statute 617 of 200, leaving 116 of them in category six. That is to say that the municipalities with a population equal to or less than ten thousand inhabitants or with annual unallocated current revenues of no more than fifteen thousand minimum monthly salaries (approximately COP$9.24 billion for the year 2014), or both situations at the same time, taking into account the budgetary conditions that prevail at the time of making the classification. The above indicates that 94.3% of the municipalities of Boyacá are placed in the lowest territorial category, due to their population and above all, their poor ability to generate unallocated revenues.


Thus, some of the financial management indicators established by the DNP[1] were used to complete the estimation. These were calculated for each of the 116 reference municipalities, using the budgetary information reported by the DNP as input, figures that correspond to the period of 1996 to 2012 and that were deflated, being expressed in constant pesos of the year 2008. Additionally, once the indicators were individually calculated for each year, the average of the indicator for the 116 territorial entities was determined.


The econometric method used is that of panel data, which allowed for a more complete study of the data as it permits the capture, in one sole analysis, of the temporal and individual (also known as transversal) aspect of the information. In this way, the panel data managed to increase the efficiency of the estimations carried out, given that they increase the amount of simple data that is used in the analysis. This allows quantification in a more exact manner than studies that only use temporal or transversal analysis to estimate the impact of some variables on another (Wooldridge, 2010).


For the above, the estimation of the econometric model that allows for establishing the behaviour of fical dependency of municipalities of category six in Boyacá was carried out with a panel data model and using fixed and temporal effects. Thus, the sixth category municipalities make up the units of the cross-section and the years the time series variable.


In accordance with the approaches outlined in the previous subheading, as well as the empirical evidence of the behaviour of the financial management indicators, the variables that succeeded in significantly explaining the variability of fiscal dependency, correspond, mainly, to factors of taxation  and total revenues, operational costs in relation to unallocated revenues and the ability to self-finance investment; for it’s part, the population variable allows for the control of the municipalities by size.


Given the significant influence of politics on the definition of local and national budgets, political variables have been included that aim to reflect this influence on fiscal dependency, such as the years of presidencial and mayoral elections. Also, a normative variable is included that describes the change in the transfer regulations that occurred in 2001 (Statute 715701), and the Unsatisfied Basic Needs (UBN) Index as an indicator of the degree of social advance of each municipality.


Due to the structure of the panel data, it is necessary to include temporal effects so as to isolate the influence of temporal variables, such as political cycles, normative changes, and the evolution of the economy, which have effects on the degree of fiscal dependency of category six municipalities. Additionally, fixed effects are collected for each of the municipalities though binary variables, among which can be established those differential factors for each of the entities that affect dependency but that do not change over time.


Also, the model was estimated using robust standard errors, so as to correct the possible presence of heteroscedasticity. Based on the above, the specification of the model is the following:



Level of fiscal dependencyit = b0 + b1Fiscal effortit + b2Tax.Rev./Total. Revit +

b3Oper Expen./Unallocated.Curr.Revit + b4Self-finance. Investmentit + b5Populationit

b6 Presidential Politicsit + b7Mayoral Politicsit + b8Change SGPit + b9UBN(2005) it 


          FEi + TEt + eit


Where  i corresponds to the catyegory six municipality and  t to the year.


In Table 1 the variables used, their measurement and the sources of information are shown.


Table 1. Variables of the fiscal dependency model





Level of fiscal dependency

Percentage contribution of transfers (SGP) to total municipal revenue

Budgetary implementation for municipalities (DNP)

Fiscal effort

Yearly variation in tax collect against total municipal revenue

Budgetary implementation for municipalities (DNP)

Tax. Rev/ Total rev.

Percentage contribution of tax revenues to total municipal revenue

Budgetary implementation for municipalities (DNP)

Oper. Expend./Unallocated. Curr.Rev

Contribution of operational expenditure to unallocated current municipal revenue

Budgetary implementation for municipalities (DNP)


The relation between current savings and investment expenditure by the municipality

Budgetary implementation for municipalities (DNP)


Number of inhabitants of the municipality according to the results of the DANE (National Administrative Department of Statistics) Census 2005


Presidential politics

Binary variable equal to 1 for years of presidential election(1994, 1998, 2002, 2006 and 2010) and 0 for other years

National Civil Registry

Mayoral politics

Binary variable equal to 1 for years of mayoral election(1994, 1997, 2000, 2003, 2007 and 2011) and 0 for other years

National Civil Registry

SGP Change

Binary variable equal to 1 for years after 2001 (when Statute 715701 was issued) and 0 for previous years


UBN (2005)

Level of unsatisfied basic needs of the municipality according to the DANE Census 2005


FE (Fixed effect)

Binary variable for each municipality


TE (Temporal effect)

Binary variable for every year, from 1996 to 2012



Source: the author


Below, in Table 2, the results of the estimations for the level of fiscal dependency of category six municipalities of Boyacá are registered, under the panel data methodology and ordinary least squares (OLS), calculated with robust standard errors so as to avoid the presence of heteroscedasticity.



Table 2. Model of fiscal dependence for category six municipalities of Boyacá





Number of obs





F(136, 1766)





Prob > F










Adj R-squared





Root MSE











Robust Std. Err.



[95% Conf.









Fiscal Effort







Tax. Rev./ Total Rev.














Self-financ. Investment




























Change SGP







UBN (2005)







Source: calculations by the author base don previously referred to information


The results of the estimation indicate that the selected exogenous variables have a significant effect on the fiscal dependency of category six municipalities in Boyacá, which corroborates various behavioural relationships of these variables, analysed in the previous section. It is observed that the level of fiscal dependency is positively impacted by the relationship between operational costs and unallocated revenue, the UBN index of each locality and the change in the transfer regulations established by Statute 715 of 2001, which the general participation system (SGP) was created. This positive effect indicates that to the dgree the municipalities increase the proportion that operational costs represent against unallocated revenues, this would indicate that operational costs are increasing, which limits the possibilities of the municipal administration to make resources available for other uses, or that revenue generation is declining, or both situations at the same time. This would indicate flaws in administrative efficiency and increase the fiscal dependency of the territorial entity (the coefficient has a value of 0.02638).


The coefficient of the impact of the UBN of the 2006 Census on the endogenous is equal to 0.17414, which indicates that the higher the level of UBN of the municipalies, the higher the fiscal dependency will be, as this poverty index is one of the criteria used by the national government to establish the allocation of SGP resources transferred to the territorial entities, in such a way that the greater the level of poverty, the more resources will be transferred.


The variable of SGP change shows a positive coefficient (2.81777), which is explained by the impact on fiscal dependency caused by the change in transfer regulations implemented by Statute 715 of 2001. This is demonstrated by comparing the average level of fiscal dependency, which went from 59.6 for the period 1996-2001 to 62.6 for the years 2002-2012. Even if it is true that the SGP increased the transferred resources and ensured their use, in the same way the levels of fiscal dependency grew, especially in the smallest territorial entities, such as the sixth category municipalities in the study.


The model also estimated a negative relationship between the level of fiscal dependency and variables such as fiscal effort (-0.00406), the difference between tax revenues and total municipal revenues (-0.30630), the degree of self-financing of investment (-0.00060), and the population of the municipalities (-0.00020). Of these variables, the importance of the taxation capacity of the municipalities to generate their own revenues should be highlighted as a mitigating factor regarding fiscal dependency. To the degree in which municipalities manage to improve their levels of collection, prior to the update of their urban and rural taxes, as well as their commercial and industrial census (where these activities are carried out) they will be able to increase their tax revenues and gain some autonomy in the use of resources. However, taking into account that municipal taxes in small localities will not increase enough with these actions, the central government would be required to transfer other funds to the territiorial entities, not under the transfer scheme, but rather as direct levies.


Fiscal effort is linked to this behaviour (see figures 5, 7 and 11). If the tax collection capacity is limited, the variation of the same would not see substancial changes between one year and another; from there comes the low value of the coefficient, the behaviour of which is captured in part by the fixed effect. A similar analysis can be made in the case of the low impact of self-financing of investment (-0.0006) and population (-0.0002). Their marginal yearly changes are captured by the fixed effect, as on the one hand, collection does not improve and the variation is marginal, and, on the other, population changes are moderate, and considerable effects on the level of fiscal dependency are not expected from these variables


Finally, the model incorporates two dummy variables that capture the posible impact that political cycles can have on the behaviour of the level of fiscal dependency. In the first case the presidential poolitics variable is introduced, to indicate the effect that the electoral campaign to elect the national president has on fiscal dependency in a given year, given that, as a means of capturing votes, the national government increases the budgetary allocations to the regions, through investments or social programs. These expenditures are made by the central government, which means that in the composition of the budget these headings increase at the cost of reducing the rate of transfer growth, especially those directed to small municipalities with low numbers of voters. These actions temporarily reduce the fiscal dependency of the localities, but this changes the following year. For this, the coefficient of the impact of presidential elections has a negative sign, despitethe fact that it drops from -2.2 to -0.4 and it becomes less significant when the fixed effect is introduced in the model, which means that there a national political effect that is captured by the fixed component, which could be the political preferences, the captive vote and the political culture of each municipality.


The political impact on the local level is captured in the mayoral politics variable, to demonstrate the negative impact (-7.78) that the local electoral process has on fiscal dependency. In years of political campaigns to elect local authorities, two pheneomena can be generated; one is an increase in resources directed by the central government to the departments, managed thanks to the connection between the political class on a national scale (ministers) and their political bases in the localities, where one   manges resources in order to politically favor the other, in an effort to influence the election results; in this way the practice augments capital inflows and thus total revenues, reducing fiscal dependency. The other phenomenon occurs when, at the end of a period of government, during the electoral period for the next, the municipal leaders get the municipal councils to approve loans for making investments, especially in infrastructure, which increases capital inflows and total revenues and reduces, at least temporarily, the level of fiscal dependency.


Together, the variables and impacts previously described contribute to explaining the behavior and evolution of the level of fiscal dependency of category six municipalities in Boyacá, which although it is true that it depends in part on said explanatory variables, it is also clear that a good part of the fiscal dependency is caused by structural circumstances such as the implemented decentralization scheme, the size of the municipalities, the value of the tax census, the level of economic activity, the bad management of local administrations and the political culture of the citizens, elements which are all included in the value of the constant of the model (51.29). Lastly, the results indicate that the processes of local public choice, which are touted by the designers of the fiscal model that has guided Colombia during the study period (described in chapter 2), are not evident in sixth category municipalities in Boyacá, where the high level of dependency indicates that this choice depends more on the decisions of the central government and on the political logic that intertwine local and central governments.


Finally, so as to have a view of the historic evolution of the dependency level of the municipalities of Boyacá, below appear various maps that show the level of fiscal dependency in five moments during the study period, from which it is deduced that around 86 municipalities have levels of fiscal dependency above 55%, such as, Chita, Mongua, Panqueba, Paya, Socotá, Tipacoque and Tunugnuá, among others, where the level of fiscal dependency is above 80%. Thus, in general terms, it is observed that fiscal dependency increases for the years 2000, 2004 and 2008, while for the year 2012 the situation improves a little, which does not indicate so much an advance, as a reduction of the problem.


Map 1. Level of fiscal dependence of category six municipalities of Boyacá

Source: the author.





The political, administrative and fiscal decentralization process implemented in Colombia has been permenantly transferring powers and responsibilities from the state to the territiorial entities as well as involving them with the main revenues without taking into consideration the countless committments that local administrations now must take on. For this reason, decentralization meant that the nation ceded responsibilities to the territorial entities, but without giving them the tax revenues, which is why a transfer system was established, so as to involve the territorial entities in the revenues that the central government collects. That is to say that they decentralized the expenditures while the national government kept the revenues. Thus, decentralization made the municipalities dependent on transfers that come from the central government, given the poor capacity they have to generate internal revenues.


The municipalities studied show a low contribution to tax revenues in comparison to the total revenue, which is in accordance with the low value generated by the following taxes: tax valuations (property tax), the amount of sales or gross revenues from industrial and comercial activities (comercial and industry tax) and the value of fuel sales (petrol tax) within the jurisdiction of the municipalities studied.


Against this backdrop transfers make up the main source of financing for municipalities, even more after the implementation of the SGP in the year 2001. This causes a disparity between the contribution of tax revenues and transfers to the total revenues of municipalities that is demonstrated by the following information: while the first have, on average, a contribution of 7.8%, the others, on average, reach 62.9% during the study period.


The econometric estimation indicates that the fiscal dependency of category six municipalities in Boyacá is determined by variables that have a positive impact such as the relationship between operational costs and unallocated revenues (0.026), the UBN index of each locality (0.1741) and the change in the transfer regulations established by statute 715 of 2001, for which the SGP was created (2.8177), while the other set of variables such as fiscal effort (-0.00406), the difference between tax revenue and total revenues of the municipalities (-0.30630), the degree of self-financing of investment (-0.00060), and the population of the municipalities (-0.00020), have a negative impact on the level of fiscal dependency. Also, there are political factors such as the presidential and local election processes, which negatively influence fiscal dependency, as in election years political interests generate assets that reduce this dependency, they are short term effects that disappear in other years, since the public expenditure is managed by the governments in the months prior to the elections with a political rational, rather than an economic one, serving specific political interests.


In summary, it can be affirmed that the previously mentioned factors contribute to explaining the behaviour and evolution of the level of fiscal dependency of sixth category municipalities in Boyacá, which while it is true, depends in part on said explanatory variables. It is also clear that a good part of the fiscal dependency is caused by structural circumstances such as the implemented decentralization scheme, the size of the municipalities, the value of the tax census, the level of economic activity, the bad management of local administrations and the political culture of the citizens, elements which are all included in the value of the constant of the model (51.29). For this reason, the processes of local public choice, which are touted by the designers of the fiscal model that has guided Colombia during the study period (described in chapter 2), are not evident in category six municipalities in Boyacá, where the high level of dependency indicates that this choice depends more on the decisions of the central government and on the political logic that intertwine local and central governments. In such a way, the purported financial autonomy, which decentralization was proclaimed to bring with it, has not appeared. Rather, on the contrary, municipalities, especially the smallest in terms of budget, have remained subject to the resources and the allocation of the same provided by the central government, a situation that perpetuates their low levels of local development.





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*Professor, School of Economics Universidad Pedagógica y Tecnológica de Colombia.

** Economic Studies Analyst, Banco de la República, Tunja branch.

[1] To this end the Technical Manual for the Analysis of the Financial Management of Territorial Entities was followed, a document of the National Planning Department- DNP-(2008).