Presidents and economic policy-making : the politics of tax reform in Bolivia and Ecuador
This comparative study of Ecuador and Bolivia analyses the political dynamics of economic reforms in the last two decades. The question guiding this work is: under which conditions are presidents able to introduce the reforms they propose. and the focus is put on the political processes behind the tax reforms that were implemented and those that failed. The theoretical framework employs an institutionalist approach and focuses on how variations in institutional structures have shaped policy-making processes. Since most authors limit their analysis to institutional aspects, the thesis aims to make a contribution to this approach by analysing the influence of particular institutional aspects on the introduction of reforms. Other variables, such as the influence of private sector groups or popular protest, are included in the analysis to explore to what extent they challenge or complement the argument. The tax reforms of the last two decades are used as a case study to account for dynamics of economic policy-making in the two countries more generally. The study resulted in three main findings. Firstly, the institutional analysis proposed provides a coherent explanation as to why Bolivia was able to implement wide-ranging tax reforms during the 1980s and 1990s while presidents in Ecuador usually failed to introduce similar changes. Bolivia's particular form of presidentialism - featuring a parliamentary element of electing the president in Congress in the second round of elections - has produced coalition governments after 1985, which allowed presidents to introduce wide- ranging tax reforms. In Ecuador, on the other hand, tax reforms often failed due to the lack of institutional incentives for overcoming the political deadlock of a fragmented Congress. A second finding contributes to the economic crisis approach as hyperinflation proved to have an impact on the policy-making process (Bolivia after 1985), which has not necessarily been the case when countries experienced other types of economic crises (e.g. Ecuador in 1999). Thirdly, the change in the pattern of policy-making within Bolivia is examined. It is argued that the extra-institutional processes Bolivia experienced during the recent years have been caused by the same institutional mechanism that had brought political stability during the 1980s and 1990s as coalition politics was dependent on patronage payments and the political parties lost more and more support. This thesis, in short, fills a gap by connecting institutional analysis to actual economic reforms; it establishes a link between political structures and their effect on policy-making as regards the case of tax reform.