ABSTRACT

This chapter draws attention to the critical need for a more metropolitan-sensitive approach to public finances, whose availability, allocation and management determine the urban potential for achieving development objectives. It discusses alternative approaches to metropolitan public finances, explains the frameworks that define local public budgets in Mexico and presents an empirical analysis of metropolitan areas in this country with a focus on the macroevolution and structure of public budgets, their performance and inter-metropolitan disparities. Like several less-developed countries, Mexico lacks fiscal and transfer systems that are adequate for metropolitan areas. The data on local public finances indicate that despite clear differences between metropolitan and non-metropolitan municipalities, mainly in the composition of revenue and spending and the dynamism of their different items, metropolitan areas are increasingly dependent on federal transfers and are collecting less own revenues. There are, however, fiscal disparities across metropolitan areas. Indicators of financial dependence, financial capacity and financial leverage are used to establish a typology of their financial performance, and fewer than half are found to fall into the categories of ‘financial health’ and ‘stable’, demonstrating the problematic financial situation of the rest of Mexico’s metropolitan areas.