ABSTRACT
This chapter proposes a theory that explains how a subnational state economy can undergo transformation despite limited embeddedness with the private sector and lacking qualified bureaucratic resources. The central argument relies on the notion of bureaucratic bypass, which comprises the informal delegation of tasks to external agents when the state apparatus lacks the capacity or intent to do them. Using the “process tracing” technique, this study demonstrates how, through a bypass of its public administration, the government of San Luis province in Argentina successfully transformed its economic landscape between 1982 and 1992 by locating a huge number of industries in its territory. The focus was on reconciling societal expectations with effective decision-making, which necessitated the creation of support coalitions whilst ensuring governability for development. The chapter demonstrates how bypassing traditional bureaucratic procedures facilitated the establishment of many industries in San Luis, notwithstanding the region's limited resources and restricted state autonomy. It underscores the pivotal role played by external actors in carrying out essential development functions, functioning as effective surrogates to overcome the information and capacity constraints faced by the government. Moreover, the chapter emphasizes the importance of informal institutions in economic growth and their potential to complement formal structures. It highlights the fundamental need to enhance state capacities to maintain continuous economic development endeavours. The investigation reveals the fragile equilibrium between accomplishing developmental objectives and adhering to procedural norms.
