According to a report from the General Audit Office (AGN, for its acronym in Spanish), every province - except the City Capital and Buenos Aires- rely heavily on funds that distributes the Federal Government to cover their costs, since, on average, only 27% of the revenue generated came from their own taxes.

This data appears in one of the first investigations approved in 2015 by the Watchdog, which analyzed the debts that the provinces have with the National Government -counting from 2008 to 2011-; in addition to measuring the financial sustainability of these commitments and the possible impacts that could result in the coffers of the Nation.

The result of this work was a special report The Auditor.info divided into two parts, whose first installment was published last week.

Ability to Re-Pay the Provincial Debt

The Audit explains that "the provincial jurisdictions with ability to cancel their liabilities will be those who have their own current income and / or sufficient transfers to cover their debt services of the fiscal year without increasing its total debtor balance."

In this regard it is noted that "in shaping of provincial resources are crucial tax revenues." So much so that, on average, the share of taxes in the mass of available funds jurisdictions reaches 75%.

However, the AGN noted that much of that money is not generated by the provinces but to a greater extent, come from what deals the Central Administration with contributions from the National Treasury and Transfer Partnership, as the Federal Solidarity Fund or soy funds (see the deal).

This impacts almost all territories, except for the City of Buenos Aires and the province of Buenos Aires, that "stand out for having the highest ratios of own tax revenues, which indicates the degree of autonomy in tax administration," says the Audit.

The report also details the degree of financial autonomy of the courts, that is, the "ability to generate its own resources in relation to total revenue, in order to deal with solvency of any chosen debt strategy."

As already reported last week, the City of Buenos Aires is who heads the ranking since, according to the Watchdog, it iss "the only one who has total financial autonomy."

Next in the list, with average range, the provinces of Buenos Aires, Santa Fe, Córdoba, Chubut, Mendoza, Neuquén and Santa Cruz.

Finally appear Tucuman, Tierra del Fuego, Rio Negro, La Pampa, Entre Rios, Misiones, San Luis, Salta, San Juan, Chaco, Corrientes, Jujuy, Catamarca, Santiago del Estero, La Rioja and Formosa, which, according to their numbers, have a low financial autonomy.

The Distribution of the Soybean Fund

While the Audit maintains that "it is expected that a progressive distribution of Federal Solidarity Fund is made to those provinces with less financial autonomy and therefore most in need of contributions to maintain their capital investments", the same report notes that jurisdictions that receive the largest portion of these resources are Buenos Aires and Cordoba, which already have financial autonomy.

The Provincial Imbalances

As a general conclusion, the AGN ruled, first, that "the imbalances identified in the provinces are explained in the majority of cases, the low participation of local resources (tax revenue and royalties) in financing activities, which makes it indispensable the assistance of the Nation in the form of automatic and discretionary funds."

This dependence comes to the point that the body stated that "the evolution of the provincial public accounts depends largely on the resources they receive from the Nation."

However, relying on the central government cannot always have the expected results: According to the Audit, the factors that create imbalances in the regions have "negative pension balances", i.e. red in the pension system, which in turn "explained the financial deficit of the provinces."

This situation was observed precisely in those jurisdictions that decided to "harmonize" its social security system with the Federal Government.

Finally, the research also found that in current expenditures of the provinces a "high percentage of social spending" appears and payment of salaries to personnel.

As for revenues, the audit noted "a certain rigidity (which) is given by the low financial autonomy and the low percentage the soy funds represent in the Real fixed investment" in the provinces.

"For all the above, it becomes clear that a change of results appear to be more linked to a genuine restructuring of provincial finances that successive restructuring of liabilities with the Nation" completed the inspection body.