Please Send More Money.(Argentina)

Ricardo Colombi, governor of the sleepy Argentine province of Corrientes, can't be feeling very comfortable these days. More than half the 1 million people in Corrientes live below the poverty line ($135 a month for a family of three). The jobless rate is more than 40 percent. The biggest employer in the province is the local government, which in turn is almost totally dependent on the central government, which provides 90 percent of the province's income. But the Feds have cut their subsidies to Corrientes, which is located in the northeastern corner of Argentina, and now the province is behind with wage payments. In addition, a local power broker, Rodolfo Martinez Llano, who represents Corrientes in the national Congress, is mad at Colombi because he believes the governor hasn't shared enough power with him. The last time Martinez Llano had a beef with the governor, in 1999, he helped organize demonstrations in Corrientes that turned violent. Two people were killed and 50 wounded. As a result of that flare-up and other woes, the national government took over the administration of the province for the next two years.

Ask experts why Argentina is in disarray, and many will point a finger at the nation's antiquated and corrupt provincial system. Despite regional differences, nearly all have the same problems as Corrientes-- an impoverished population, padded state payrolls, financial mismanagement and political cronyism. The 24 provinces account for 3 percent of Argentina's economic output but suck up half of all federal spending. While the nation is struggling to recover from a debilitating depression, the provinces have run up a collective $2 billion budget deficit. Ten of them finance their deficits by printing their own money--a practice the IMF frowns upon, to say the least.

But although weak economically, the provinces control valuable votes in Congress--and local party machines can swing enough voters to help decide a presidential contest. For such services, political fixers like Martinez Llano have been able to demand--and win--costly federal largesse for their constituents. It's pork-barrel politics at its most extreme--and most economists agree that until that nexus is broken, struggling Argentina is unlikely to solve its recurring economic woes. (The IMF has made provincial reform one of its priorities in bailout talks with President Eduardo Duhalde's government.) "A lot of provinces are simply not viable, politically or economically," says Buenos Aires- based political scientist Matteo Goretti. "It is impossible to resolve the country's problems without resolving the problems of federalism."

That won't be easy, for Argentina's patronage-dominated provincial system dates to the 19th century--and hasn't changed a whole lot since. After Argentina formally declared independence from Spain in 1816, the new government spent decades locked in a civil war with powerful feudal landowners, or caudillos, who brutally resisted any challenge to their authority. That is still the case today; many provincial leaders are large, influential landowners. As a result, Argentina's best-laid economic plans have consistently been wrecked by what Goretti calls this "ancient political reality."

In Corrientes, as in other provinces, the patronage system revolves around the local government. Though the bloated bureaucracy is inefficient and indebted, efforts to cut back on it have proved fruitless. Since 1983, the province's payroll has tripled to about 45,000 workers, while total debt has soared from $6 million to $565 million. Three quarters of the budget is devoted to government-worker wages rather than social programs. The Education Department is even worse off: teacher salaries swallow a whopping 95 percent of all education spending. And yet teachers are currently working only three days out of five because the government is two months behind ...