Weak bureaucratic capacity fundamentally challenges the stability of new democracies. Decentralization has placed greater importance on low capacity sub-national bureaucracies. When, why and from who do we see successful reform initiatives of these bureaucracies? I argue that sub-national politicians in new democracies do not have political will or resources to reform. Rather, impetus for reform comes from threats to their resources, especially federal transfers, from the national level. Accordingly, the success of reforms depends on the national government’s commitment and often derailed by short-time horizons and political expediency. These constraints on national leverage are shown in Argentina’s Fiscal Pact of 1993. Partisanship and sub-national capacity are shown to interact to both fuel and temper reform initiatives.
