Changing the City Hall – The Story of La Paz

Mr. Abaroa, before we go into some detailed questions about anti-corruption and local governance, we would like to ask you the following – if you were to give only one piece of advice to the anti-corruption community, what would that be?

Corruption is a symptom, not a cause. Trying to fight corruption is like chasing your own shadow. You have to fight the causes behind it.

Much of the efforts, unfortunately, are concentrated in laws that are not obeyed, prosecution, force, order, and control. You cannot control corruption. You have to shape institutions in which opportunities for corruption don’t exist or are small.

The problem is not corrupt individuals. It’s corrupt systems.

When dealing with corruption on the level of local administrations, are there any particular areas one needs to focus on?

Traditionally governments tend to centralize and do everything, and in poor countries they get too thinly spread out. They pay bad salaries and don’t necessarily attract the most qualified and experienced people.

In the case of La Paz, written about in the Harvard chronicles, we had a number of serious problems – hyperinflation, salary erosion, overregulation, a plethora of taxes and evasion schemes, self-enrichment through theft, etc. Essentially, people converted the city hall into a private institution and were making money through bribes, procurement fraud, stealing, and selling. In order to turn this around, I initiated a reform process aiming to change the system and philosophy of the city hall.

The first thing we did was to implement institutional adjustment. One of the reasons why corruption was so persistent is due to the fact that there wasn’t enough money to pay salaries. In addition, the city hall employees were excluded and disempowered. We empowered them by involving them in the diagnosis of the problems, improving working conditions, and starting to pay decent salaries. I also had to dismiss 2,000 civil servants from the city hall – who had been brought in by a previous mayor to help him win the election – to clean up the institution and regain trust and confidence.

The second thing we did was breaking the monopoly within the administration. As you are perhaps aware, Professor Robert Klitgaard developed a very simple formula to define corruption (Corruption = Monopoly + Discretion – Accountability). If you come to think about it, this is the formula of authoritarian governments. They enjoy a monopoly over decision-making, have all discretionary power and virtually no accountability. I also think that many institutions in developing countries fit this formula well. Fortunately, the formula helps us diagnose and treat the problem. You have to break these monopolies, limit the discretionary powers, and increase accountability. That means reshaping the institution and its staff.

It is often said that La Paz became an “island of effectiveness and integrity” during your four terms as mayor. Could you give us an example of a municipal government service that improved during this period?

Let me give you an example that I hope gives a good idea of how we turned things around in La Paz. For construction works, one needed a permit from the city hall but there was only one person issuing permits and they only made 100 USD a month. In order to avoid the solicitation of bribes, I came up with the following:

Inspired by the Certified Public Accountants (CPA) in the United States, I opened up a competition, defined and published the applicable rules, and certified a number of architects to issue permits. As a result, we broke the monopoly and created a market with independent professionals under licence from the government to grant permits.

So instead of having one individual issuing permits and a thousand people in line waiting for a permit and having to pay for it, we had 200 certified professionals. Before this reform, not much construction was going on in the city and soon after it you could see a revival of development and cranes all around constructing buildings.

Coming back to the formula C=M+D-A, what else other than breaking the monopoly can you do to combat corruption? What about discretion and accountability?

As I said, the formula (Corruption = Monopoly + Discretion – Accountability) really synthesizes the situation and serves as a diagnostic tool.

Did you know that in Spanish there is no literal word for accountability? It doesn’t exist. And it doesn’t exist in many languages because it is a Western concept. When the King of Spain ruled Latin America, he had auditors (oidores) who came without any authority, just to listen and report back to the King. When we got rid of the King we got rid of the oidores, so no more accountability.

But coming back to your question, you need to have checks and balances, which means independent review mechanisms that have the power to intervene in a process and cannot be overturned by discretionary decision-making.

In your scholarly work, you often argue that decentralization is essential for fighting corruption on the local level. Could you elaborate on this?

Decentralization is a necessary condition but not sufficient. I was inaugurated as mayor of La Paz in 1985 with a brand new law of autonomy for municipalities. In Bolivia, once you are elected you have your own budget and the central government cannot really interfere as long as you comply with the law.

But in most cases the situation is not like this. Mayors are dependent on the Ministry of Finance for money, they cannot hire or fire people, they have to give out wages preset on the national scale, and so they are much more restricted. In order to prevent corruption you need strong institutions and in many countries those institutions are weaker due to their dependence on a higher level of government.

Interestingly, the decentralization that was done in Bolivia at the municipal level created a level of government (gobierno municipal) with autonomy and with its own laws. This allowed me to do many things to which my students say “Yes, those were great ideas, but when we go back to our countries we cannot do that because we depend on the central government”.

So would you say that decentralization means breaking the link of dependence on the federal government, or is it the enhancement of local ownership of the institutions?

Both. You have to have institutions but laws have to be in place because you should not have complete discretion to do whatever you want to do. A lot of corruption at the municipal level arises because there are plenty of opportunities. You are dealing with resources after all. If you want to reform and reshape an institution, you need space to do that.

It is often asserted that mistrusted local authorities only fuel corruption as citizens become more inclined to use informal ways for acquiring public goods. How do you deal with deeply mistrusted local institutions?

Local authorities are mistrusted for a reason, because they are not providing the services or because they are providing them for too high a price. Let’s put it the other way – in many countries you have a sick child, you take it to a public hospital, you offer the doctor an envelope with money, and you beg him to save your child. He is not demanding the bribe, but he is earning so little money that you want him to really focus on your child as he has a thousand children to see. This is a market failure.

In Cuba, for example, a doctor makes 26 USD per month. How can you expect him not to charge you to give you a service? So people are often happy to pay. And you have to readdress that – people have to be paid relatively well so that they can perform their duties without asking for a bribe.

Some states are spread thin and often attempt to cover everything with very little resources. The difference between the public and the private sector is that in the private sector you use resources to build one thing and in the public sector for a lot of things. So you have to be aware of your impact with limited resources.

How can you build trust in an institution?

You have to deserve it. When we changed La Paz, I was reelected four times. That means that the people trusted me. But first I had to do something. Trust is not an abstract thing. It’s the result of everyday actions.

Could you tell us a few words about the “therapeutic approach to a sick institution” that has been replicated in more than 20 local governments across Central, Eastern, and Southeastern Europe? Are there any particular success stories that stand out?

I’ve been working with Ana Vasilache from the Partners Foundation for Local Development in Romania for ten years. The methodology we developed is based on corrupt institutions and not individuals. Craiova in Romania and Martin in Slovakia are two cities that received the United Nations prize for the best anti-corruption programme (see article on page 14).

How has your experience at IACA been? What did you take away from the sessions with the students here in Laxenburg?

It is fantastic to have an institution devoted to providing anti-corruption capacity-building worldwide. We have to diversify the experience. At the beginning, anti-corruption work was too focused on laws and control, on investigation and prosecution, on criminalizing corruption. But corruption is also a development problem, as much as a transgression of the laws. Laws cannot address symptoms, and you have to find the real causes of widespread corruption. I think we bring that perspective to IACA.

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