Brazil: An Evolving Federation, by José Roberto R. Afonso and Luiz de Mello, November, 2000

Brazil is a highly decentralized federation. The 27 states (including the Federal District) and 5,559 municipalities together account for over one-third of total government spending and revenue collection. States and municipalities also account for almost 40 percent of the public sector’s net debt stock. Revenue mobilization capacity is concentrated in the more prosperoud states and municipalities of the South and Southeast, and some equalization of expenditure capacity has been pursued through mandated revenue sharing. Political and administrative decentralization are also sizable. Each subnational jurisdiction has its own directly-elected legislature and executive branches, as well as an independent judiciary. The federal government has limited control over subnational tax administration; budget formulation, execution, and oversight; and wage and investment policies.