Intergovernmental fiscal transfers and performance grants in Brazil

Over the decades, Brazil has undergone several cycles of centralization and decentralization. The choice of a federal design can be traced to the need to mitigate centrifugal forces and threats to territorial integrity that have been present since colonial times. Alternating civil and military governments changed the distribution of authority across levels of government, but states have always played a strong role in the provision of all basic services and collecting their own revenues. Brazil’s large and complex structure of government, combined with a highly fragmented political system, has generated a complex system of tax sharing and fiscal transfers. This chapter provides an overview of Brazil’s system of intergovernmental transfers and three cases of performance-based transfers: the Bolsa Fam'lia programme, which provides cash payments directly to beneficiaries for social protection programmes with the support of municipalities, and the performance-based transfers from the Ceará and Rio de Janeiro states to municipalities in the education and health sector respectively.