ABSTRACT
The high regional inequality in Latin American countries can be explained, in part, by the geographical concentration of natural resources, which creates challenges for their allocation and distribution among different levels of government. An updated account of this problem is presented against the backdrop of the global process of decarbonization and the future impact on the drop in revenues of hydrocarbon origin, and of digitalization, which is accompanied by a rising cost of certain minerals. This chapter argues that the combined effect of these two phenomena will significantly impact fiscal revenues and infrastructure spending, which requires a disaggregated analysis of these effects and a rethinking of the current fiscal institutional framework. To this end, this chapter examines the characteristics of the fiscal policy instruments used to appropriate rents generated by mining and hydrocarbons. It also analyzes how fiscal revenues are allocated, distributed, and used across different levels of government and between producing and non-producing jurisdictions. At the same time, it offers policy recommendations aimed at reshaping these regimes to make them compatible with the processes of decarbonization and digitalization, steering them towards post-pandemic recovery and sustainable development.
