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Can Politicians Control Bureaucrats? Applying Theories of Political Control to
Argentina's Democracy
Author(s): Kent Eaton
Source:
Latin American Politics and Society
, Winter, 2003, Vol. 45, No. 4 (Winter,
2003), pp. 33-62
Published by: Distributed by Cambridge University Press on behalf of the Center for
Latin American Studies at the University of Miami
Stable URL: https://www.jstor.org/stable/3177130
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Can Politicians Control Bureaucrats?
Applying Theories of Political Control
to Argentina's Democracy
Kent Eaton
ABSTRACT
In the United States, an important literature shows that legislators
use interest groups, courts, and budgets to assert political control
over bureaucrats. Similar theories can be applied to study the scores
of new democracies that have emerged in recent decades. In
Argentina, politicians in the first administration of Carlos Menem
(1989-95) rewrote administrative procedures and relied on both
"police patrol" and "fire alarm" oversight to realign the behavior of
tax bureaucrats in conformance with their own policy preferences.
Whereas U.S. legislators generally prefer complex administrative
procedures, different electoral incentives led their Argentine coun-
terparts to support reforms that significantly streamlined those pro-
cedures. This finding challenges theories that attribute legislators'
bureaucratic preferences to the separation or fusion of powers
between the executive and legislative branches.
o politicians control bureaucrats? This simple question has given rise
to a significant theoretical and empirical literature in the advanced
industrial economies, particularly in the United States (Lupia and McCub-
bins 1994; Spiller and Urbiztondo 1994; Weingast and Moran 1983). Some
participants in this debate emphasize the extent to which bureaucrats
effectively escape from political control in complex economies because
they are privy to more information than the politicians who seek to mon-
itor them (Sundquist 1981). Others endorse the belief that politicians have
the ability to make sure that bureaucrats do as they are bid. According to
these scholars, politicians can rely on individual constituents and interest
groups to produce the types of information that allow them to monitor
bureaucratic performance (McCubbins et al. 1987).
Although this theoretical literature has yet to be applied systemati-
cally to Latin American bureaucracies, the relationship between politi-
cians and bureaucrats has received considerable attention in the politi-
cal science literature on Latin America. For analytic purposes, one can
reformulate much of this literature as a debate between scholars who
emphasize the freedom of bureaucrats relative to politicians, and those
who find evidence of politicians controlling bureaucrats. In a sense, this
differing assessment of which actor dominates, the politician or the
bureaucrat, mirrors the split in the U.S. literature on political control.
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LATIN AMERICAN POLITICS AND SOCIETY
Perhaps the most straightforward example of how bureaucrats can
confound politicians' attempts to control them is Peter Cleaves's
Bureaucratic Politics and Administration in Chile (1974). Cleaves found
that Chilean bureaucrats in several key ministries were able to stymie
attempts by four successive governments to change the status quo,
regardless of the ideological direction in which these governments
sought to take policy. But one could also place Guillermo O'Donnell's
classic work on bureaucratic authoritarianism in this category, in the
sense that he attributed democratic collapse to coalitions of civilian and
military bureaucrats who joined forces in a successful attempt to con-
strain the activities of politicians (O'Donnell 1973).
The work of other scholars, however, leads to very different con-
clusions. For example, Ben Ross Schneider shows how Brazilian presi-
dents managed to use their vast appointment powers to achieve their
industrializing goals, even in the absence of an institutionalized bureau-
cracy (Schneider 1991). Although Miguel Centeno emphasizes the
autonomy of the bureaucracy in Mexico, he also shows how such dis-
parate politicians as Luis Echeverria and Carlos Salinas were able to
achieve their policy goals by reshaping and manipulating the bureau-
cracy (Centeno 1994). Perhaps not surprisingly, the view that policy-
makers do control policy implementers may find more support in Latin
America's authoritarian periods. In Schneider's and Centeno's work on
predemocratic Brazil and Mexico, for example, bureaucrats were mostly
unable to play politicians in the executive and legislative branches off
one another in the attempt to maximize their own independence.
For all its limitations and imperfections, the wave of democratization
the region experienced at the end of the twentieth century means that
models of political control developed in other democracies have become
relevant for this literature on Latin American bureaucracies. There are,
however, good reasons to question whether these models are fully appli-
cable. For example, the ability of politicians in the United States to
depend on interest groups for information about bureaucrats may
depend on the particular way these groups are organized. One does not
need to subscribe to a naive version of pluralism to believe that interests
have an easier time playing these roles in the United States than else-
where, for a host of reasons ranging from political culture to federalism.
Despite the political and structural biases in the United States that
influence which groups get organized and how (Bachrach and Baratz
1970), the corporatist heritage in Latin America has placed far greater
limits on interest group arrangements (Collier and Collier 1977; Malloy
1977). For all the well-documented variety in corporatist Latin America,
state leaders, in most cases, organized interests in ways that put interest
group leaders in dialogue with top officials in the executive branch, and
that mostly excluded politicians in national legislatures and subnational
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EATON: POLITICAL CONTROL IN ARGENTINA
offices from the policy loop. As a result, interest groups in Latin Amer-
ica have traditionally privileged the executive branch over Congress in
their attempt to be heard and to influence policy. Though marketization
has undermined corporatism and democratization has increased the rel-
evance of legislatures, one can conclude that the legacy of corporatism
and authoritarianism for interest groups is mostly problematic for politi-
cians who are seeking information about bureaucrats. Despite these
caveats, democratization and the dismantling of corporatism do indicate
the potential relevance of models developed to explain the U.S. case.
While it is worthwhile as a theoretical exercise, there are also empir-
ical reasons to highlight the relationship between politicians and
bureaucrats because of its direct bearing on the two big challenges
facing Latin America: consolidating democratic rule and achieving eco-
nomic development. In the study of democratic consolidation, it is the
relationship between voters and politicians that has received a great
deal of scholarly attention.
A central concern for many scholars is whether elections in new
democracies serve as effective mechanisms through which voters can
hold politicians accountable and ensure that they represent voters' inter-
ests (Schedler et al. 1999). As Manin et al. argue, "Representation is an
issue because politicians have goals, interests, and values of their own,
and they know things and undertake actions that citizens cannot
observe or can monitor only at a cost" (1999, 29). It is not enough, how-
ever, for voters to control politicians; politicians must also be able to
control the bureaucrats who, in any relatively complex economy, will
enjoy discretionary authority in implementing the policies that politi-
cians adopt. Democracy demands that politicians hold these bureaucrats
accountable, but we know relatively little about how legislators in Latin
America are tackling this critical task.
The nature of the relationship between politicians and bureaucrats
can also provide analytical leverage on economic development out-
comes. In recent decades, students of economic development have
focused a great deal on policy adoption, applying a variety of theoreti-
cal approaches in an attempt to understand the causal forces at work in
policy reform (Bates and Krueger 1993; Haggard and Kaufman 1992).
Despite differences in the causal weight placed on different actors, the
degree of consensus about the importance of the policy environment
makes for a striking contrast with earlier scholarship, which paid far less
attention to policy choice than to structural factors and external con-
straints (Haggard 1990).
While this focus on policymaking is welcome, it is equally impor-
tant to ask how bureaucrats implement the new policies that politicians
adopt. In the event that bureaucrats routinely escape political control by
politicians, we should expect slippage between the market-oriented
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LATIN AMERICAN POLITICS AND SOCIETY
policies that legislators pass and the content of the policies that bureau-
crats actually administer. According to this perspective, cross-national
variation in political control over bureaucrats can help account for cross-
national variation in economic performance.
In an attempt to contribute to an understanding of the important
and complex ties that bind politicians and bureaucrats, this article
employs a simple method. It looks in depth at the strategies Argentine
politicians used in the first half of the 1990s to assert control over
bureaucrats in one critical agency, the Direcci6n General Impositiva
(DGI, General Tax Board). Tax bureaucrats' resistance successfully
tabled some of those reform efforts. Politicians in the governing Pero-
nist Party backed away from reform during President Carlos Menem's
second administration (1995-99), with negative implications for the
maintenance of fiscal stability later in the decade. Nevertheless, the
record suggests that during President Menem's first administration
(1989-95), when the party moved aggressively to stabilize the nation's
fiscal accounts, the reformist impulse encouraged policymakers to
change the relationship that bound tax bureaucrats to them. That few of
these changes succeeded in the sense of constructing an effective tax
bureaucracy should not detract from the usefulness of this earlier period
as one in which politicians tried to alter bureaucratic performance by
rewriting administrative procedures.
Because the executive branch dominated the reforms implemented
in the 1990s in Argentina, this case represents an unlikely place to look
for support for a theory of legislative motivation in the design of
bureaucracies. For example, some of the reforms discussed in this arti-
cle, including the redrawing of organizational charts, required no par-
ticipation from the legislative branch.1 Other administrative reforms,
however, did involve the legislature's participation, with significant and
politically charged debates. Despite the president's unmistakable lead
in the design stage, legislators endorsed those reforms; and their sup-
port cannot be understood without reference to the incentive structure
they faced.
In particular, candidate selection procedures encouraged legislators
to privilege the concerns of party leaders, even if this meant sacrificing
constituents who did not want to see the tax bureaucracy strengthened.
Because of these procedures, what was good for the party was good for
individual legislators; and the leaders of the Peronist Party in the early
1990s clearly believed that the party's electoral chances were closely
tied to fiscal stability and tax reform. Although a majority of legislators
(for example, the Peronists) were strongly motivated to improve the tax
collection agency, party discipline and Menem's status as Peronist Party
leader made it unnecessary for these legislators to exert independent
political control over bureaucrats relative to the executive branch.
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EATON: POLITICAL CONTROL IN ARGENTINA
In the U.S. case, more particularistic electoral incentives motivate
legislators to protect their bureaucratic influence relative to the execu-
tive branch, even when the president is a member of their party.
Although the Argentine executive is much more integrated into the leg-
islative process of the assembly than in the United States (Cox and Mor-
genstern 2002, 458), it is still appropriate to consider legislative motiva-
tion in the redesign of bureaucracies.
The argument proceeds with a review of key aspects of the theoret-
ical literature on the political control of the bureaucracy and the appli-
cability of these theories to new democracies. Then it explains in greater
detail the nature of the bureaucratic problem that faced governing-party
policymakers in Argentina at the onset of the reform period in the early
1990s. It evaluates the various mechanisms through which these policy-
makers sought to alter bureaucratic behavior. Finally, this study assesses
the broader applicability of the findings beyond the realm of tax collec-
tion. To put this Argentine case into comparative perspective, it also dis-
cusses political control activities in other Latin American countries.
CAN POLITICIANS CONTROL BUREAUCRATS?
With the U.S. case as their main empirical reference, scholars working
within the principal-agent framework have identified a number of obsta-
cles that politicians must overcome in order to control bureaucrats. The
early public administration literature failed to problematize the relation-
ship, asserting that bureaucrats simply implemented the policies that
politicians adopted. Subsequently, however, scholars increasingly
focused on the amount of actual discretion bureaucrats enjoyed (Allison
1971; Niskanen 1975; Schick 1976).
One of the chief problems politicians face is that it is costly to
acquire information about how bureaucrats are doing their jobs. The
information, moreover, is asymmetrical: bureaucrats are more likely to
be experts in their policy areas than the politicians with whom they
engage, and they always have private information about their own per-
formance that they will not share with politicians (McCubbins 1985).
How to detect shirking by bureaucrats, then, is the chief control prob-
lem facing politicians.
The first question to ask in assessing the applicability of political
control theories to new democracies is whether the same obstacles are
present in this larger set of countries. In general, the acquisition of infor-
mation by politicians in new democracies would seem just as difficult.
Rational self-interest encourages bureaucrats to guard private informa-
tion about their own performance in new and more established democ-
racies alike. Acquiring a sufficient amount of information on bureaucrats
might be easier where they are fewer in number, but most of the devel-
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LATIN AMERICAN POLITICS AND SOCIETY
oping countries that have become democratic in recent decades have
large public sector bureaucracies (Geddes 1994).
Despite similar informational problems, some factors present in
newer democracies might exacerbate attempts at political control. For
example, to the extent that legislators in new democracies have shorter
time horizons, either because reelection rates are lower (Morgenstern
2002) or because of perceived instability in the democratic regime itself
(Ames 1987), acquiring information about bureaucrats might be more
difficult for individual politicians and less important relative to other
goals. Whereas incumbency advantage in the United States has facili-
tated the information role played by interest groups, repeated interrup-
tions in democratic rule in countries like Argentina have impeded the
development of ties between interest groups and legislators.
In addition to regime instability, legislators have had to contend
with corporatism's executive branch bias. In many new democracies,
the problem for information-hungry legislators may extend beyond
interest groups to include the way civil society is organized (or fails to
organize). For example, politicians in many contexts cannot depend on
a robust and independent press to produce information they might find
relevant in their political control efforts, an ironic situation considering
the hostility of politicians to press freedoms in many of these countries,
including Argentina.
At the same time, other factors might attenuate informational prob-
lems in new democracies. For example, many of these countries in
recent decades have experienced some stunning policy swings between
radically opposed development models. When current policies differ rad-
ically and not marginally from previous policies, sufficient information
about bureaucratic implementation should be easier for legislators to
acquire, in comparison with politicians who attempt to monitor incre-
mental policy change. Given the dismal performance of the DGI in the
1980s, for example, when Argentine politicians subsequently sought to
improve tax collection, their monitoring efforts were facilitated by easy-
to-acquire information on the number of corporations filing tax forms
and the number and size of businesses shut down for tax violations.
On balance, it seems relatively safe to assume that information
acquisition remains a problem for politicians in new democracies. If so,
how do legislators overcome this disadvantage? Once again in the U.S.
literature, scholars have identified a number of strategies that politicians
use to overcome obstacles to political control, though these scholars are
divided over the ultimate success of these strategies (Lupia and McCub-
bins 1994). According to McCubbins et al. 1987, there are two general
types of controls at politicians' disposal: oversight activities (monitoring,
rewarding, and punishing bureaucrats) and the passage of administra-
tive procedures that govern bureaucratic behavior.
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EATON: POLITICAL CONTROL IN ARGENTINA
With respect to oversight, politicians can either attempt to monitor
bureaucrats directly and actively through hearings, referred to as "police
patrol" activities; or they can engage in "fire alarm" oversight, according
to which they rely on signals from third parties "who have an interest
in and information about bureaucratic activity" (McCubbins and
Schwartz 1984). According to McCubbins and Schwartz, when both a
fire alarm oversight system and a police patrol system are equally
informative, legislators will prefer the former because it enables them to
avoid paying the costs associated with police patrol. Fire alarm over-
sight, however, depends on the ability and willingness of interest groups
to produce the information that politicians need. When politicians can
depend on this type of information, they can then use their budgetary
control over authorizations and appropriations to punish or reward
bureaucrats for neglecting or respecting their preferences (Weingast and
Moran 1983).
Legislative design of administrative procedures is the second gen-
eral type of control mechanism. According to McCubbins et al., "proce-
dures can be used to mitigate informational disadvantages faced by
politicians in dealing with agencies [and they] can be used to enfran-
chise important constituents in agency decisionmaking processes"
(1987, 244). More specifically, U.S. legislators routinely use cumbersome
administrative procedures to stack the deck in favor of well-organized
and well-financed interests. According to this model, then, interest
groups play a dominant role not just in politicians' oversight activities
but also in the procedures they write.
Procedures, however, are effective mechanisms for political control
only if they are enforced by the courts (McCubbins et al. 1987). Courts
must adjudicate conflicts that may arise over whether bureaucrats' deci-
sions fall within the law. Thus, in the U.S. model, interest groups and
budgets, administrative procedures and courts are the most important
tools that politicians use to retain political control over bureaucrats.
How useful are these tools in new democracies like Argentina? There
are important reasons to doubt that interest groups play the same infor-
mation-producing role in countries where individual legislators do not
face strong electoral incentives to respond to these groups. In Argentina,
the use of closed and blocked candidate lists composed by party leaders
encourages legislators to privilege the concerns of party leaders, as
opposed to those of particular constituents or groups (Jones 1997). Given
this incentive structure, these constituents and groups should not be
expected to produce the type of free information on which individual
legislators in the United States routinely rely. Interest groups in Argentina
that are unhappy about bureaucratic actions and that wish to bring this
information to the attention of politicians who can act on it should con-
centrate their efforts on party leaders. If electoral success drives party
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LATIN AMERICAN POLITICS AND SOCIETY
leaders in Argentina, then they should solicit input from interest groups
every bit as aggressively as individual legislators in the United States do.
According to this view, Argentina would differ from the United States not
so much in the amount of information produced by groups but in the
centralized nature of the production of information.2
This study argues, however, that important differences do derive from
the limited number of party leaders-and not all backbenchers-who are
the key politicians that groups need to target in Argentina. Because they
seek to promote the party's collective interests, party leaders are likely to
be more discriminating and cautious in their relations with interest groups
than backbenchers can afford to be. Scholars have shown, for example,
that when party leaders control backbenchers, parties can privilege dif-
fuse and latent interests over narrow but well-organized ones (Shugart
and Carey 1992; Cox and McCubbins 2001).
Putting it simply, party leaders can afford to ignore interests whose
demands are incompatible with overall party goals; and over time, party
leaders' limited receptivity limits the amount of information that groups
send their way. The limited entry for interest groups in legislatures like
Argentina's can be contrasted with the decentralized structure of the U.S.
Congress, in which affected groups can seek to engage individual leg-
islators at multiple entry points (Shepsle and Weingast 1994; Weingast
and Marshall 1988). All else being equal, interest group-generated
information about bureaucratic performance should be scarcer in
Argentina, and as a result, legislators there should have to rely more
extensively on "police patrols" rather than "fire alarms" in attempting to
control politicians. Because police patrols are more expensive, we
should expect more bureaucratic slack in Argentina.
As mechanisms that could help Argentine legislators assert control
over bureaucrats, budgets and courts have been of limited use histori-
cally. In the pre-1990s era of chronic inflation in Argentina, the budget
was no tool legislators could use to reward or punish bureaucrats
because budgets were rarely approved on time and were subject to sig-
nificant revision by presidents after passage (Jones 2001).3 The achieve-
ment of macroeconomic stability in 1991, however, transformed the
budget into a potentially meaningful instrument of political control. As
Jones shows, although legislators do not greatly alter the budget on the
floor of the assembly, they influence budgeting in the earlier and criti-
cal design stage by intervening with the relevant ministries (Jones 2001).
The profound economic crisis experienced in Argentina beginning in
1999 and the return of inflation in 2002 rendered budgetary control once
again less than effective as a tool for political control of bureaucrats.
With respect to the judicial system, courts in Argentina apparently
have not participated in the sounding of fire alarms in the way posited
by the U.S. model. In the U.S. model, courts are understood as a neu-
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EATON: POLITICAL CONTROL IN ARGENTINA
tral arbiter that enables aggrieved parties to prosecute bureaucrats for
procedural lapses and to hold them to the law. The judiciary's lack of
independence from politicians in Argentina, combined with its extensive
corruption (Verbitsky 1993), means that courts generally do not play this
role there. Although the extent of judicial independence remains ques-
tionable, it may be changing with the recent establishment of new pro-
cedures for the selection of judges that reduce the influence of the exec-
utive branch (Tommasi and Spiller 2000, 199). A recent empirical study
shows that courts do not always support the position of the executive
branch in legal disputes (Molinelli et al. 1999, 716).4 For taxation in par-
ticular, the courts operated as an important check on the shared prefer-
ences of Peronist legislators and the Peronist president for more aggres-
sive tax collection.
WHAT TYPES OF BUREAUCRACIES
Do POLmCIANS WANT?
The different role interest groups play in Argentina has implications not
just for how politicians try to control bureaucrats but also for the very
type of bureaucracies that politicians want to establish. Not all legisla-
tors want to ensure that bureaucrats respond to narrowly defined inter-
est groups. In extending the politician control model to new cases,
therefore, it is good to keep in mind that political control takes on dif-
ferent substantive meanings in different institutional contexts.
The existing literature acknowledges that politicians in different
contexts will prefer different types of bureaucracies, but it interprets this
difference as resulting largely from the choice between presidential and
parliamentary government. In parliamentary systems, the ultimate
dependence of the executive on the confidence of the assembly is said
to reduce legislators' concerns that the executive might use the bureau-
cracy in ways that challenge legislators' own interests. As a result,
according to Moe and Caldwell, parliamentarism gives rise to
public agencies that are less encumbered by externally imposed
rules, regulations, [and] timetables . . . and a bureaucratic system
that is centrally controlled by political leaders and, taken as a
whole, more closely resembles a simple, coherent, rationally
designed hierarchy of administration. (Moe and Caldwell 1994, 178)
In presidential systems, by contrast, the reality that the executive
branch does not depend on the assembly's confidence means that leg-
islators have greater cause to worry that presidents will try to use
bureaucrats in ways that challenge their interests. As a result, legislators
systematically saddle the bureaucracy with complex administrative pro-
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LATIN AMERICAN POLITICS AND SOCIETY
cedures (Moe and Caldwell 1994). Many empirical studies in a range of
policy areas concur with this finding about the streamlined bureaucra-
cies generated by parliamentary systems and the more procedurally
complex bureaucracies produced by presidentialism (Feigenbaum et al.
1993; Noll and Rosenbluth 1997; Vogel 1986).
The problem with this model is that it masks the significant institu-
tional variation that exists among presidential systems, variation that in
itself might lead legislators in these systems to prefer different bureau-
cratic arrangements (Shugart and Carey 1992; Eaton 2000). As Spiller
and Urbiztondo argue, electoral rules, the timing of presidential and leg-
islative elections, and the strength of regional legislative representation
are all factors that might shape the struggle between presidents and leg-
islators over political appointees and career civil servants (Spiller and
Urbiztondo 1994, 468). The assumption that underlies the U.S. literature
is that legislators value a bureaucracy that can satisfy the demands of
important interest groups, which is why they demand the complex
administrative procedures that stack the deck in favor of those groups.
If not all politicians in presidential democracies care to be responsive to
narrowly defined interest groups, we should not expect them to
demand cumbersome administrative procedures or, more generally, the
type of bureaucracies that facilitate personalized constituency service by
legislators. Legislators in presidential systems may, indeed, have cause
to prefer streamlined administrative procedures and bureaucracies that
are relatively indifferent to the complaints of specific interest groups,
their own separate election from the president notwithstanding.
In assessing the potential for conflict between the bureaucratic pref-
erences of legislators and presidents, two factors emerge as especially
relevant. First, understanding the types of bureaucracies legislators want
requires understanding something about how legislators seek to
advance their careers. In the United States, reelection is the dominant
goal, and electoral rules encourage legislators to privilege the concerns
of interest groups in striving toward this goal. In many of Latin Amer-
ica's presidential systems, however, reelection is less often the goal, and
party leaders displace interest groups as the actors legislators must
please to further their careers (Morgenstern and Nacif 2002).
The second factor is whether party control of the executive and leg-
islative branches is unified or divided. Although legislators in some pres-
idential systems may be relatively indifferent to the demands of nar-
rowly defined interest groups, when the executive branch is controlled
by another party, they may still prefer administrative complexity in the
attempt to check the president. For example, under divided government
in Argentina, the legislature should seek greater regulatory specificity
and complexity, as in the United States, despite the important differ-
ences between U.S. and Argentine electoral laws. Under unified gov-
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EATON: POLITICAL CONTROL IN ARGENTINA
ernment, however, which Argentina had for eight of Menem's ten years
in power (1989-97), party discipline assuages the concerns of legislative
majorities about how the president may use the bureaucracy, facilitating
reform efforts that are designed to streamline that bureaucracy.
BUREAUCRATIC REFORM IN ARGENTINA
In the early 1980s, Argentina experienced a transition to democracy that
replaced policymakers in the previous de facto government with dem-
ocratically elected politicians as the principals to whom bureaucratic
agents were formally responsible. Beginning in the late 1980s and con-
tinuing through the 1990s, the new policymakers abandoned the statist
policies that had held sway for most of the postwar period and adopted
in their place a series of policies that placed greater emphasis on the
use of market mechanisms. Putting this transformation into practice,
however, involved not just rewriting the policies but getting bureaucrats
to implement them faithfully.
For a variety of reasons, reforming tax administration proved to be
particularly important for the Peronist government elected in 1989.
Before Argentina's experience with hyperinflation in the late 1980s and
early 1990s, the country's tax collecting agency, the DGI, represented
one of the more prosaic parts of the federal bureaucracy. In that earlier
period, marked by easy commercial finance and the widespread toler-
ance of inflation, chronic underperformance by tax collectors repre-
sented a less-than-serious problem for politicians. Lackluster tax collec-
tion surely increased the size of budget deficits, but these could be
financed by inflation and loans from abroad. When the external situa-
tion tightened for developing countries after 1982, however, and when
hyperinflation eroded citizens' tolerance after 1989, Argentine politicians
could no longer afford to be indifferent to the tax bureaucracy. By pre-
venting the government from printing money to cover budget deficits,
moreover, the convertibility regime adopted in 1991 dramatically
increased the political salience of tax collection.
In order to defend macroeconomic stability in this post-inflation
period, it was not enough for politicians to pass new taxes; they also
needed to figure out how to force bureaucrats to collect the new taxes.
In this sense, bureaucratic reform in the area of taxation posed greater
challenges than in other policy areas. For example, deregulation in the
first half of the 1990s significantly reduced bureaucrats' discretionary
authority but did not demand that bureaucrats perform additional tasks.
Trade reforms that phased out quantitative import restrictions and
replaced them with tariffs likewise automatically reduced the range of
decisions in which bureaucrats were involved. In these policy areas, it
was enough for politicians to rewrite laws in order to effect the types of
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LATIN AMERICAN POLITICS AND SOCIETY
changes they sought; for the most part, they did not need to contem-
plate serious changes in bureaucratic behavior to accompany the
reforms. Although simply getting policymakers to agree to new policies
was far from painless, reforms that required not just statute changes but
actual changes in bureaucratic behavior were particularly difficult to
achieve. In many cases, bureaucrats emerged as important obstacles to
reforms that would force them to surrender acquired privileges. The
DGI is a case in point.
The advantage of hindsight, however, shows that bureaucratic
resistance was not the only obstacle to the creation of an effective tax-
collecting operation in Argentina. Although the Peronists undeniably
and aggressively sought to improve the tax bureaucracy in the first half
of the 1990s, their interest would prove to be only temporary. After
1995, Peronist legislators refused to support additional and much-
needed reforms in the tax bureaucracy, largely because the sources of
their earlier support for bureaucratic reform disappeared. On the polit-
ical side, Menem's reelection in May 1995 immediately compromised his
status as party leader, and the previous harmony of interest between the
president and his copartisans in Congress began to dissipate. Rifts over
taxation developed between Menem and the legislature over the course
of his second term, though this phenomenon also characterized inter-
branch relations beyond the realm of fiscal policy.
The Peronists' subsequent defeat in the 1997 elections showed that
fiscal stability would no longer guarantee electoral victories for the
party. On the economic side, the difficult economic times that erupted
in 1995 and 1996 and returned and worsened later in the decade seri-
ously challenged the "zero tolerance" policies toward tax evasion that
politicians had earlier encouraged bureaucrats to adopt. In hindsight,
the buoyant economy of the early 1990s appears to be no less signifi-
cant a factor in facilitating efforts to crack down on tax evasion than
were party incentives and unified government.
The Problem: Inferior Tax Collection
When the Peronists took control of the executive and legislative
branches in 1989 and began attempting to stabilize the economy, they
quickly identified the weakness of the tax bureaucracy as an important
problem (Cuello 1996b). Reducing inflation, which would prove to be
the Peronists' most critical achievement in the 1990s and the key to its
electoral successes in that decade, required a more efficient and aggres-
sive tax-collecting agency.
According to one study conducted in the late 1980s, the Argentine
tax-collecting agency compared unfavorably with similar agencies in
other countries on nearly every measure. For example, as a percentage
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EATON: POLITICAL CONTROL IN ARGENTINA
of the total tax revenues it produced, the DGI's budget in 1988 was
nearly twice the comparable figure in Chile and four times that of the
United States. One in 70 Argentines filed income tax forms, compared
with 1 in 14 Chileans and 1 in 5 Spaniards. Argentina also ranked poorly
in terms of the percentage of DGI employees who were inspectors and
in the number of inhabitants per inspector (FIEL 1991, 306-8).
Much of the problem can be traced to the institutional instability
that has had such important and wide-ranging consequences in
Argentina (Tommasi and Spiller 2000). As governments with very dif-
ferent ideological orientations and political support bases alternated in
power through relatively short cycles of coups and elections, the poli-
cies that tax bureaucrats were asked to implement remained highly
volatile. As in other parts of the bureaucracy, regime instability led to
much turnover in the director-general position, normally the only polit-
ical appointment in the DGI (Cuello 1996a, 66). In the first two years of
the Raul Alfonsin administration (1983-89), for example, four different
directors-general were appointed. Between 1965 and 1989, only one
director-general served more than two years (World Bank 1990, 53).
Endemic political instability also increased the need to appoint people
who could bring political support to the administration, whether or not
they could bring the appropriate technical background to the position.
Because the DGI director is empowered to interpret the legal system
through general resolutions, furthermore, short tenure in the top posi-
tion exacerbated the problem of broader policy swings.
Institutional instability, however, was not the only reason that tax
bureaucrats were less than diligent. So long as the political cost of infla-
tion did not exceed the political cost of enforcing strict tax collection,
policymakers in democratic and nondemocratic periods alike may have
actually preferred lackluster tax collection. This preference is reflected
in the adoption of administrative procedures for tax collection that were
extremely lenient toward the taxpayer. As the World Bank argued,
"Argentina's procedural rules foresee events such as deadline extensions
or ad hoc changes in tax returns whose definition is at the will of the
taxpayers; they also often allow the dilution of a case at no cost to the
taxpayer" (World Bank 1990, 41).
Although the World Bank study concludes that legislators granted
the tax administration excessive regulatory delegation, these procedures
accurately reflected the substance of legislative preferences in the pre-
reform period. Furthermore, a great amount of discretion in this period
is compatible with research on the U.S. case showing that the amount
of discretion bureaucrats receive varies indirectly with the controversial
nature of what they do (McCubbins 1985). Before the 1980s, what tax
collectors did was not perceived as particularly important in Argentina,
and their failure to produce revenue was not a matter of controversy.
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LATIN AMERICAN POLITICS AND SOCIETY
Against this background, and considering the Peronists' urgent need to
increase and stabilize tax revenues in the early 1990s, their support for
a revision of administration procedures is unsurprising.
Although the Peronists were frequently aggressive and sometimes
creative in attempting to ensure bureaucratic compliance with their new
policy preferences, the reform of the DGI itself was an uphill struggle.
Two constraints proved particularly important. Job security provisions
made it impossible to fire incompetent or corrupt tax bureaucrats, and
a rigid civil service code made it impossible to reward tax bureaucrats
through a steeper compensation curve (World Bank 1990, 60). Over the
course of the 1990s, the Association of Employees of the DGI (AEDGI)
steadfastly resisted attempts to create greater flexibility. Conflict with the
AEDGI union over the negotiation of a new collective work agreement
that would improve productivity involved the DGI management in
lengthy court cases and appeals (World Bank 1993, 64). DGI employ-
ees' opposition to bureaucratic streamlining, which can be seen as part
of the broader resistance of government employees to state reform
efforts, encouraged politicians to explore a variety of other means in the
attempt to assert political control.
Redrawing Organizational Charts
One of the first reforms adopted by the Peronists in 1989 involved
redesigning the chain of command that linked tax bureaucrats to govern-
ing-party politicians. As shown in figure 1, President Menem revised the
status of revenue production activities in the economic bureaucracy rela-
tive to the expenditure side. Before this reform, the secretary of finance
held authority over the Subsecretariats of Expenditures and Revenues.
According to the head of the tax reform commission Menem appointed
in 1989, this organizational configuration compromised tax collection
activities because the finance secretary tended to focus on the expendi-
ture side of fiscal policy to the neglect of tax collection (Cuello 1996b).
The intensely political process of imposing an annual budget on the
various ministries tended to overshadow the less dramatic revenue side. It
was officials on the expenditure side of the bureaucracy, furthermore, who
historically exerted pressures on top policymakers to grant tax amnesties
of the sort that greatly undermined tax compliance in Argentina. Consid-
ering this history, the commission recommended separating responsibility
for revenues and expenditures into two different secretariats. According to
Cuello, elevating the DGI within the overall bureaucracy also served sym-
bolic ends, indicating the end of the era of political acceptance of inferior
tax administration. After this organizational change, the secretary of public
revenues reported directly to the economic minister. During the most
important period of tax reform (1991-96), the Economic Ministry was led
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EATON: POLITICAL CONTROL IN ARGENTINA
Figure 1. Argentina's Public Finance Bureaucracy:
Organizational Chart
Before Reform
Ministry of Economics
Secretariat of Finance
Subsecretariat of Subsecretariat of
Public Expenditures Public Revenues
General Tax Directorate
(DGI)
After Reform
Ministry of Economics
/ \
Secretariat of Finance Secretariat of
Public Revenues
I
General Tax Directorate
(DGI)
by Domingo Cavallo, who repeatedly identified tax collection as the
achilles' heel of his economic reform plan for Argentina. This episode can
be understood as a case of asserting political control by redrawing hierar-
chical lines within the bureaucracy.
Appointing the Top Tax Bureaucrats
In addition to changing the organizational structure of the economic
bureaucracy, President Menem used his sweeping appointment powers
to select high-level officials with very public commitments to ending tax
evasion, no matter the cost. In Argentina, the president has exclusive
powers to appoint and remove cabinet ministers and secretaries with-
out congressional approval.5 In late 1990, Menem named Carlos Taachi
as the new secretary of public revenues. Nicknamed the "tax nazi"
because of his near-fanatical obsession with rooting out tax evaders,
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LATIN AMERICAN POLITICS AND SOCIETY
Taachi moved quickly to instill among Argentines an awareness that the
government would no longer tolerate their evasion of taxes. Just as Cav-
allo in the Economics Ministry was pronouncing the end of inflation in
Argentina, Taachi was promising to eliminate tax evasion. In the opin-
ion of a broad cross-section of politicians, academics, and public finance
experts, Taachi was not only the most visible tax collector ever but also
one of the highest-profile government officials in Menem's first term.6
In 1989, shortly after the bureaucratic reorganization, Menem
appointed Ricardo Cossio as head of the DGI. According to one of the
DGI's administrative judges, Cossio shared Taachi's approach to tax
evasion by encouraging his underlings to tomarlos presos-get
tough-in their dealings with tax evaders (Alegria 1996). As the sole
individual empowered to interpret tax laws through bureaucratic reso-
lutions, Cossio favored a much more limited view than his predeces-
sors of the constitutional guarantees that protected individuals from
arbitrary treatment by tax collectors. Under Cossio, many businesses
were subject to search (allanamiento) for suspicion of evasion before
thorough investigations had been conducted, a practice that in many
cases later enabled evaders to overturn their convictions in court
(Gonzalez 1996). While many tax bureaucrats expressed frustration
with such guarantees, Menem picked as his top tax collectors officials
who were willing actually to compromise a degree of legality for the
sake of efficacy (Lisicki 1996). Many opposition legislators attributed
what they considered the "totalitarian" tendencies of Cossio and his
bosses, Taachi and Cavallo, to their service as bureaucrats in the former
military government (Alegria 1996).
Facing a bureaucracy that was reluctant to change, Menem made
great use of appointment powers by picking individuals like Taachi and
Cossio. In contrast to the United States, the Argentine president's exclu-
sive right to appoint top bureaucrats means that opposition parties have
much less chance to influence those appointments. The president's
more extensive appointment powers are an important tool for the gov-
erning party in its attempt to control bureaucrats, one that may partly
compensate for interest groups and courts that are less useful as politi-
cal control tools than they are in the United States.
Unleashing the Untouchables
In addition to organizational and personnel changes at the highest
levels, the Peronists also looked inside the DGI for potential reforms
that might improve tax collection. Below the appointed director-general,
the DGI leadership is divided among six division heads, career bureau-
crats, not all of whom are responsive to the president, let alone mem-
bers of the president's party (Montoya 1996; Clarin 1996b).
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EATON: POLITICAL CONTROL IN ARGENTINA
To deal with entrenched and relatively high-level bureaucrats who,
for various reasons, resisted the shift away from lax tax collection, the
Peronists' response was to create an "island of competence" within the
DGI in the form of a new Subdirectory of Fiscal Audits and to pit it
against the others (Geddes 1994). Within this audit division, in turn, a
special force of tax inspectors emerged in the early 1990s that came to
be known in the press as "the Untouchables" (los intocables) for their
ability to resist attempts by tax evaders to buy their complicity. Headed
by veteran tax inspector Luis Maria Pefia, the new Fiscal Audits Subdi-
rectory hired almost 1,000 employees from among the existing pool of
DGI employees, including 400 accountants, 35 lawyers, 25 engineers, 10
system analysts, and 300 university students to work beside the inspec-
tors (Santoro 1996, 89). Using a special World Bank loan of US$28 mil-
lion, the inspectors began their work. In 1993 alone, they conducted
1,900 inspections, detecting invasion of more than US$1 billion and
bringing to the justice system more than 780 companies accused of eva-
sion (Santoro 1996, 92).
The Untouchables were not only an attempt to pick up the slack
from other divisions of the DGI; they can also be understood as a type
of police patrol that top bureaucrats (for example, Cavallo and Taachi)
used to discipline the rest of the agency. Although their chief purpose
was to instill fear among tax evaders, the Untouchables also produced
valuable information for policymakers about bureaucratic performance.
That they disciplined their colleagues in the DGI, and not just tax
evaders, was demonstrated in 1996, when they uncovered the attempt
by IBM to bribe DGI officials over a computerization contract. Accord-
ing to Cuello, the Untouchables randomly turned up evidence of this
scandal when investigating, at the behest of Economy Minister Cavallo,
the tax returns of his political nemesis, the postal executive Alfredo
Yabran (Cuello 1996b). The Untouchables can be understood as a cre-
ative attempt at political control by politicians who were seeking rapid
behavioral change in the tax bureaucracy.
Modifying Administrative Procedures
for Tax Collectors
Having created a special force of tax inspectors they hoped would be
"untouchable," politicians subsequently rewrote the procedures govern-
ing tax collection to make it easier for those inspectors to do their work.
The rationale behind most of these changes was to help tax inspectors
temporarily close businesses that were suspected of evading taxes. One
of the central ways proposed to do this was to restrict the role of the
judicial system in those closures, a move that opposition party legisla-
tors steadfastly resisted.
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LATIN AMERICAN POLITICS AND SOCIETY
Over the first few years of Menem's government, in a series of differ-
ent actions, legislators delegated to bureaucrats the authority to use a
broader set of carrots and sticks with taxpayers. As an example of the
former, when legislators expanded the VAT to include services in 1991,
they also enabled the DGI to establish special incentives for taxpayers to
demand receipts when they purchased goods (Art. 11.7, Law 23,871). This
legislative change fostered the creation of a popular lottery called LoterIVA,
in which taxpayers could participate by submitting their VAT receipts
(World Bank 1993, 62). A year later, legislators delegated to the DGI the
right to grant bonuses for early payment of taxes (Art. 19, Law 23,905).
An example of the sticks that the DGI could use against taxpayers
is the special procedures legislators approved to facilitate the collection
of taxes from businesses operating partly in the black market. In partic-
ular, Peronist legislators authorized the DGI to use a set of presumptive
indicators, such as a business's energy consumption, salary payments,
and acquisition of raw materials, to determine the accuracy of its
reported tax obligations (Camara de Diputados 1992, 6051-55). At the
same time, in recognition of the DGI's limited computer technology, leg-
islators gave the agency the right to demand information from taxpay-
ers about the software they used to prepare their taxes (Art. 41, Law
24,073). Finally, as part of the broader process of social security reform,
in April 1993 legislators delegated to the DGI the authority to collect
social security taxes in addition to all other taxes, enabling the agency
to take advantage of important cross-checking capabilities in monitoring
compliance (Taachi 1995). Peronist legislators also gave the executive
branch the right to require of individuals proof of tax payment (acred-
itacion de cumplimientofiscal) in order to conduct certain activities.
More controversially, Peronist legislators voted in the early 1990s to
redesign administrative procedures to make it easier for inspectors to close
businesses suspected of evading taxes (Law 23,905). First, they extended
the period for which businesses could be closed and determined that the
closing of businesses was an appropriate punishment for much less seri-
ous infractions (Camara de Diputados 1991, 4620). In particular, businesses
would be closed for failing to print receipts and for not registering with
the DGI under the new VAT system when they were required by law to
do so. By adopting a very blunt set of criteria to close businesses, legisla-
tors increased the public's perception that closures would become more
routine and widespread (Camara de Diputados 1991, 4555). When oppo-
sition legislators criticized closing businesses for what they considered
minor infractions, such as the failure to print receipts, Peronist legislators
responded that correctly printing receipts was vitally important for the suc-
cess of the entire VAT system (Camara de Diputados 1991, 4620).
Second, Peronist legislators enabled inspectors to close down busi-
nesses in a timelier manner by limiting the courts' participation in the
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EATON: POLITICAL CONTROL IN ARGENTINA
process. If the business in question appealed the closure, judges would
have only 24 hours to decide whether to suspend the action, a difficult
deadline for a seriously backlogged judicial system. In response to con-
cerns that too many judges were suspending business closures, Peronist
legislators in April 1992 voted further reductions in their role. As Pero-
nist Deputy Marcelo L6pez Arias argued, restricting the role of the judi-
cial system was necessary because judges had refused to respect lawful
closures for formal infractions like failing to print receipts (Camara de
Diputados 1991, 4583). Legislators from opposition parties opposed
these measures. Deputy H6ctor Siracusano used the phrase "juridical
barbarism" (barbarismo juridico) to characterize Peronist proposals that
would close businesses for 30 days for simple infractions (Camara de
Diputados 1991, 4583).
According to this reform of administrative procedures, if the DGI
had evidence that a business had failed to print receipts on two sepa-
rate occasions, it could close down that business, and regular judges
could not suspend the closure (Art. 44, Law 11,683). Tax inspectors
would simply need to acquire the approval of an "administrative judge."
According to the administrative procedures approved by Congress,
moreover, the director-general could delegate this title to any DGI
employee (Art. 10, Law 11,683). Thus, a director-general with a strong
interest in closing businesses should choose as his "administrative
judges" officials who were willing to apply a lower standard in the clos-
ing of businesses.
Opposition legislators argued that administrative judges were a fic-
tion because they were employees of the executive branch and not real
judges. For this reason, opposition legislators steadfastly opposed that
bill as undermining an individual's constitutional right to protection by
the judicial system against arbitrary actions by the executive branch
(Camara de Senadores 1992, 5967). In 1996, Peronist legislators further
broadened the DGI's ability to close businesses immediately on learn-
ing of alleged cases of evasion (Clarfn 1996c).
As a result of these changes in administrative procedures, many busi-
nesses were closed for failing to comply with the tax system in Argentina.
As Table 1 shows, the number of closures per year exploded in the early
1990s. Armed with the new tools given them by governing-party legisla-
tors, tax inspectors presented to the judicial system eight hundred large
cases of evasion between 1991 and 1996 (Santoro 1996, 18).
Restricting the role of the courts undoubtedly made it possible for
Peronists to produce this spike in the number of businesses closed for
evading taxes in the first half of the 1990s. Furthermore, the closing of
so many businesses in such a spectacular fashion probably increased tax
compliance overall, particularly in the high-growth years 1991 to 1994.
Despite the efforts of governing-party legislators, however, the judicial
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LATIN AMERICAN POLITICS AND SOCIETY
Table 1. Number of Businesses Suspected of Tax Evasion Closed by
DGI Inspectors, 1989-1995
1989 0
1990 751
1991 8,157
1992 17,739
1993 15,253
1994 10,965
1995 8,988
Source: Republica Argentina 1996, 60.
system continued to play a role in these closures after they took effect.
In their zeal to perform in ways that would please top bureaucrats, tax
inspectors committed a number of irregularities in closing businesses
that later led judges to throw out many of the cases against alleged tax
evaders (Alegria 1996; Gonzalez 1996).
The judicial system also played a role in ending the aggressive
model of business closures led by the Untouchables. In late 1995, when
Argentina was suffering through the recessionary effects of the Mexican
peso crisis, attempts by these inspectors to close businesses in towns
and cities in the interior triggered widespread riots. Siding with the riot-
ers against the inspectors, the courts dealt a serious public relations
blow to the DGI's "fear model" of tax collection (Clarfn 1996a).
When the recession continued through 1996, the DGI subsequently
downplayed its efforts to close businesses for tax evasion. Thus, despite
the sensational packing of the Supreme Court by President Menem, at a
lower level the judicial system continued to operate as a constraint on
the ability of the president and governing-party legislators to use the
bureaucracy however they pleased. Whereas courts enhance political
control in the U.S. model, in this Argentine case the courts actually com-
plicated politicians' efforts to control and reform bureaucratic behavior.
Acquiring Information on Bureaucratic
Performance
According to theories of political control of the bureaucracy, con-
stituents and interest groups routinely share with politicians the type of
information about bureaucratic performance that would be costly for
politicians to acquire on their own. This mechanism depends on con-
stituents and interest groups to complain when government bureaucrats'
provision of goods and services fails to please them, which typically
occurs when these groups get too little of the goods or services in ques-
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EATON: POLITICAL CONTROL IN ARGENTINA
Table 2. Number of Written Denunciations Received by the DGI,
1989-1995
1989 549
1990 786
1991 2,004
1992 2,301
1993 3,248
1994 3,596
1995 3,510
Source: Republica Argentina 1996, 61.
tion. The bureaucratic collection of taxes does not lend itself to the
pulling of these "fire alarms," however. While citizens are likely to com-
plain to politicians about inadequate schools, roads, or health care, they
are unlikely to complain about tax bureaucrats who fail to collect their
taxes. Politicians accordingly are denied an important source of infor-
mation about performance in this part of the bureaucracy. While a latent
and sizable group of taxpayers who oppose the tax evasion of well-con-
nected firms does exist, the costs of mobilizing and organizing such a
group are usually prohibitive.
Peronist legislators responded to such informational disadvantages
in two significant ways. First, they relaxed the principle of "fiscal
secrecy" that had long been enshrined in the law governing administra-
tive procedures. Thanks to this change, the DGI could share informa-
tion about taxpayers' tax declarations with designated third parties (Art.
101, Law 11,683). Second, legislators delegated to the executive branch
the authority to publish lists specifying the names of individuals and
firms and the amounts they paid in income, asset, and wealth taxes
(Law 23,905). Publication of these lists gave unwanted publicity to some
of the country's wealthiest businesses that were not paying their share
of taxes, and served to encourage businesses to complain about com-
petitors whose names did not appear (Santoro 1996, 142).
Table 2 suggests that this list had a positive effect on the number
of denunciations (that is, "fire alarms") received by the DGI. According
to the economy minister, who went to Congress to advocate this
change, the purpose of this "honor roll of taxpayers" was to get com-
petitors in the market to denounce cases of evasion and thereby level
the playing field (Camara de Senadores 1991, 5370). In addition to
being a cheap way of producing information, a published list of who
actually paid taxes in Argentina would serve as a very public record of
the performance of tax bureaucrats, which politicians could use as an
information source.
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LATIN AMERICAN POLITICS AND SOCIETY
Inviting the participation of third parties was not without risks, how-
ever; some legislators feared that informants would inaccurately
denounce competitors simply to make trouble for them. As Lupia and
McCubbins note, the drawback is that
once a legislator provides an informed third party an opportunity to
report on bureaucratic activity, the legislator also provides that
person an opportunity to pursue his possibly distinct self-interest by
misrepresenting bureaucratic actions in an attempt to mislead the
legislator. (Lupia and McCubbins 1994, 93)
Nevertheless, publishing lists of taxpayers was a creative attempt by leg-
islators to deal with the special informational problems in the area of tax
collection.
Having identified private citizens as possible informers who could
provide valuable information about evaders and about the performance
of the DGI itself, legislators also reworked the relationship between the
DGI and other government actors. In February 1991, legislators author-
ized the DGI to sign agreements with provincial and municipal govern-
ments and with various official banks at the national, provincial, and
municipal levels. In particular, legislators approved compensation mech-
anisms that would essentially give these actors a share of any tax rev-
enues they could produce for the national treasury (Art. 19, Law 23,905).
This allowed legislators to bypass the internal DGI conflict that pre-
vented management from using such compensation packages as an
incentive to improve collection. Thanks to this legislative change, the
political appointee at the head of the DGI could shift collection tasks
onto other actors with preferences more similar to his own, and thereby
undermine the bargaining position of his opponents in the agency.
Increasing Funds for the Tax-collection Agency
Peronist legislators' support for improved tax collection is also reflected
in their behavior regarding the budget. During the long years of chronic
inflation and economic chaos, budgets were often finalized in the last
months of a fiscal year and infrequently had much direct impact on
actual expenditures. The achievement of fiscal stability in the early
1990s made it possible for presidents to submit budgets in a timely
manner, and therefore to begin to use the budget as a more effective
mechanism of political control.
In a time of fiscal austerity and budget cuts for government min-
istries, it is significant that the legislature agreed to sizable increases in
the DGI's budget. Table 3 documents the increase in budgeted amounts
in inflation-adjusted figures. In just two years, between 1990 and 1992,
the budget for the tax-collecting agency more than doubled. This
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EATON: POLITICAL CONTROL IN ARGENTINA
Table 3. DGI Budget Approved by the Legislature, 1990-1995
(in December 1995 pesos)
1990 $358,757,000
1991 539,824,000
1992 737,077,000
1993 751,909,000
1994 870,640,000
1995 954,102,000
Source: Republica Argentina 1996, 50.
increase occurred in the same years that the government imposed
important expenditure cuts in the areas of education, public enterprises,
and the military (Hunter 1997, 163; World Bank 1993, xxi). These
increases made possible the purchase of sophisticated information sys-
tems to improve the monitoring of taxpayers (Berman 1996). Further-
more, during the first Menem administration, the number of employees
in the tax-collecting agency increased from 9,814 in 1990 to 17,305 by
1995 (DGI 1996, 47).
This 76 percent increase occurred at a time when the Peronist gov-
ernment was cutting the number of employees throughout the federal
bureaucracy. Between 1990 and 1993, for example, total federal gov-
ernment employment experienced a 53 percent reduction, from
1,128,258 employees in April 1990 to 528,495 in January 1993 (World
Bank 1993, 299). One can conclude from these figures that, as in the
U.S. model, politicians' ability to appropriate monies for the bureaucracy
represented an important tool for political control.
CONCLUSIONS AND COMPARISONS
The two central findings of this article are relevant to the broader study
of how legislators assert political control over bureaucrats. First, in con-
trast to their counterparts in the United States, who consistently insist on
complexity and specificity in the administrative procedures they write,
the behavior of Argentine legislators reveals clear preferences for a
streamlined bureaucracy. In the 1990s, governing-party legislators
endorsed a variety of changes in administrative procedures, all of which
sought to free tax bureaucrats from the constraints that previously hin-
dered their efforts.
With these changes, for example, legislators made it possible for
bureaucrats to share information about taxpayers with third parties, and
they made it much easier for bureaucrats to close businesses temporar-
ily for tax evasion. According to the World Bank, these new tools helped
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LATIN AMERICAN POLITICS AND SOCIETY
the DGI substantially to increase the government's tax effort in the crit-
ical years of the early 1990s (World Bank 1993, 55). Whereas legislators
in the United States depend on the courts in their struggles with bureau-
cratic agents, furthermore, in Argentina the overriding goal of govern-
ing-party legislators to improve tax collection through the streamlining
of administrative procedures encouraged them to restrict the participa-
tion of the courts in those procedures.
Legislators' aggressive support for bureaucratic streamlining is of
interest because it challenges theories that attribute legislators' bureau-
cratic preferences to the separation or fusion of powers between the
executive and legislative branches. The Argentine case suggests that not
all legislators in presidential systems need complex administrative proce-
dures to protect their political interests, for the simple reason that not all
legislators in presidential systems are equally beholden to interest groups.
Extending theories of political control to cases outside the United
States shows that legislators' bureaucratic preferences in presidential
systems are not homogeneous. In the United States, even when the
same party controls the legislative and executive branches, electoral
incentives encourage legislators to intervene in the bureaucracy on
behalf of constituents in their home districts and narrowly focused inter-
est groups. These incentives have led to a notoriously porous bureau-
cracy. In Argentina, the absence of particularistic incentives freed gov-
erning-party legislators from the need to use the bureaucracy in this
way. Thus, understanding the type of bureaucracies that legislators want
to establish requires shifting the focus from the form of government (for
example, presidential or parliamentary) to lower-level institutions (for
example, electoral rules and party structure).
Although the absence of particularistic incentives had positive impli-
cations for improvements in tax collection during Menem's first admin-
istration, this same incentive structure had negative implications outside
the tax bureaucracy. The same harmony of political interests between
President Menern and the Peronist majority that facilitated streamlining
reforms in the DGI led to anemic oversight by the legislature of execu-
tive branch activities (Ferreira and Goretti 1998; Vidal 1995). Although
opposition legislators repeatedly called for investigations into executive
branch wrongdoing over the course of the 1990s, Menem's political con-
trol over Peronist legislators prevented serious inquiries.
The absence of effective oversight activities is particularly striking
given the corruption Argentina experienced in the 1990s. Although
Menem was ultimately placed under house arrest for his role in illegal
arms sales to Croatia and Ecuador, it was the judicial system, not leg-
islative oversight, that produced information about his actions. Pervasive
corruption is itself a major disincentive to the activating of fire alarms,
in two senses: it convinces constituents that it would be useless to
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EATON: POLITICAL CONTROL IN ARGENTINA
sound those alarms, and it gives corrupt politicians financial cause not
to respond to the alarms that are sounded.7 The absence of particular-
istic electoral incentives thus limits the use of fire alarms in Argentina,
and corruption renders less effective the limited alarms that do exist.
Corruption in the DGI itself has had devastating implications for
politicians who wanted to transform that agency to signal a new era of
limited tolerance for tax evasion. Although he sponsored the crackdown
on evasion as head of the DGI, Cossio was himself implicated in the
DGI-IBM corruption scandal and forced to resign in late 1995. His suc-
cessor, Hugo Gaggero, was also forced to resign over a similar scandal
between IBM and the Banco de la Naci6n, which Gaggero headed
before becoming DGI director-general.
What does the experience of other countries say about the types of
bureaucracies legislators prefer? For example, if the absence of particu-
laristic incentives led Argentine legislators to prefer a streamlined tax
bureaucracy, do similar incentives lead to similar outcomes elsewhere?
One can find this general dynamic at play in the Venezuelan case.
According to Crisp, tight party discipline and the frequency of legisla-
tive majorities for the president's party led to significant delegations of
governing authority from Congress to the executive branch (Crisp 1998).
The sweeping nature of delegation in Venezuela reflects legislators' dis-
interest in complex administrative procedures and the absence of insti-
tutional jealousy between the executive and legislative branches over
control of the bureaucracy.
In Brazil, very different electoral incentives have generated pre-
dictable differences in the types of bureaucracies that legislators seek to
build. Because of the profound credit-claiming imperative in Brazil
(Ames 1995; Samuels 2002), legislators prefer administrative complexity
for the simple reason that complex procedures provide them with entry
points into the bureaucracy.
Rinne emphasizes electoral rules and the lack of party discipline in
his explanation of legislative opposition to attempts by Presidents Collor
and Cardoso to streamline the bureaucracy in the 1990s (Rinne 2001,
165-68). For instance, in response to proposals that would weaken job
stability in the public sector, Brazilian legislators successfully inserted a
series of procedural steps that the government would have to take in
order to fire bureaucrats (Rinne 2001, 198). In the area of taxation,
Brazilian legislators opposed reforms that would lift the banking secrecy
laws that hamstrung tax collectors.
In Chile, although legislators seek to perform intervention services
for their constituents and therefore have cause to prefer a more porous
bureaucracy, Siavelis's research raises questions about the relevance of
these preferences in the postauthoritarian period, given the limits on
Congress's role imposed by the 1980 Constitution (Siavelis 2000).
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LATIN AMERICAN POLITICS AND SOCIETY
Apart from the question of the type of bureaucracies legislators
prefer, this study has also addressed the question of whether legislators
actually get what they want. If scholars are divided over whether
bureaucrats escape the control of legislators in the United States, where
legislators are more powerful as policymakers than their counterparts in
most presidential systems, then we would expect little effective political
control in countries where legislators are much weaker. In new democ-
racies, it often seems that legislators are barely able to shape policy
adoption, let alone the more difficult task of controlling how bureau-
crats implement policy.
The Argentine case study presented here offers a slightly more opti-
mistic assessment. Not completely unlike legislators in the United States,
Peronist legislators depended on a mix of fire alarm and police patrol
oversight in their attempts to force bureaucrats to align their behavior
with legislative preferences. Research into the different nature of these
two types of oversight in the United States helps explain why legislators
in Argentina came to depend so heavily on police patrol in the case of
taxation: constituents simply do not complain when bureaucrats fail to
collect taxes from them. In this respect, authorizing the publication of
lists of taxpayers in order to expose the firms that were absent can be
understood as an attempt by politicians to compensate for the relative
silence of their constituents in the area of tax administration.
Although Argentine legislators are disadvantaged relative to their
U.S. counterparts in a number of ways, in at least one important sense
the obstacles to political control for them were less serious. The Pero-
nist majority in the legislature in the 1990s needed to figure out how to
bring about a speedy improvement in tax collection, but it did not need
sinmultaneously to check the president's influence in the bureaucracy rel-
ative to that of Congress. During Menem's first administration, there was
much greater overlap between the political interests of the president
and a majority of legislators than is common in the United States, even
in periods of unified government.
The return of high rates of tax evasion in the second half of the
1990s, together with the persistent weakness of the tax-collecting
agency, indicate that it would be a serious mistake to overstate the suc-
cess of the politicians' earlier efforts to improve tax collection. Instead,
the first Menem administration should be thought of as an important
window of opportunity for the establishment of a more effective tax
bureaucracy. Incentives and motivations aligned in this period in ways
that were highly advantageous for reform: a Peronist majority in Con-
gress shared with the president the view that improving tax collection
was critical in the party's attempt to defend fiscal stability and win elec-
tions. After 1995, the window of opportunity closed with the growing
rift between Menem and his own copartisans in Congress, and with evi-
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EATON: POLITICAL CONTROL IN ARGENTINA
dence that campaigning on a record of fiscal stability was not enough
to win elections indefinitely.
Despite the redrawing of organizational charts and the unleashing
of the Untouchables, in the end there were serious limits to how much
legislators could alter the work environment of tax bureaucrats. As Tom-
masi and Spiller argue, reforms of the labor code in Argentina lagged far
behind reforms in virtually every other policy area (Tommasi and Spiller
2000, 132). With Argentina's rigid labor code, as Economy Minister
Roque Fernandez complained, more than one hundred DGI officials
who had been indicted for corruption continued to work in the agency
as of 1998. A civil service code that made it impossible to reward and
punish individual bureaucrats for their performance seriously limited
how much legislators could transform the tax administration, even in the
brief but important period when they actually sought to do so.
NOTES
1. Even though they are not strictly germane to the evaluation of theories of
legislative motivation, this article includes unilateral actions taken by the executive
branch in order to give a more complete account of attempts to control bureau-
crats by politicians as a class of actor (for example, politicians in both branches).
2. I am grateful to an anonymous reviewer for raising this question about
the likely informational imperatives of party leaders.
3. In contrast to the U.S. Congress, which can use the regular reports of the
General Accounting Office for information about how bureaucratic agents use
public funds (Lupia and McCubbins 1994, 110), the Argentine Congress's over-
sight capabilities are quite limited.
4. According to that study, the state lost 36 percent of the trials in which it
was a party between 1996 and 1998.
5. Senate approval is required only for ambassadorial appointments. 1853
Constitution, Article 86, Inc. 10.
6. Much of Taachi's impact can be traced to his effective use of the news
media, including the memorable appearance on a television talk show in which
he used graphic language to describe how he would deal with evaders.
7. I am grateful to an anonymous reviewer for the point that corruption can
disable alarms.
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