Responding to fiscal stress: Fiscal institutions and fiscal adjustment in four Brazilian states

Despite similar external shocks and pressures, Brazilian state leaders varied in the timing and the manner in which they adjusted to fiscal stress. Some state leaders rapidly switched to market-oriented strategies that cut public intervention in the economy. Other state leaders delayed adjustment, and when they finally put their accounts in order it was through market-governing strategies that preserved government activism. In part, these different fiscal policy regimes were products of the decision-making process in which chief executives operated. In states where budgeting obeyed a more open and democratic pattern, chief executives lacked autonomy and were forced to build coalitions to adjust. This meant that they adjusted more slowly and their adjustment strategies included appeals to broad interests, including those seeking protection from market pressures. In states where budgeting was more autocratic, chief executives could act quickly and without building a coalition. The current project uses structured comparison to contrast adjustment patterns in two democratic-budgeting states and two autocratic-budgeting states. The link between budget institutions and adjustment strategy appears to hold regardless of the socioeconomic condition of the states and the political hue of the state leaders.