Municipal Viability in Bolivia

This paper develops an updated diagnostic framework to assess municipal viability in Bolivia and identifies the main territorial constraints that limit it. The analysis retains a six-dimensional conception of viability—fiscal, administrative, demographic, economic, service, and human-capital conditions—while refining key criteria to improve analytical precision and policy relevance. In particular, the administrative criterion is strengthened by incorporating the operations and maintenance (O&M) share, and the demographic criterion is reformulated to combine scale or compactness with demographic dynamism. Results show that only a minority of municipalities meet the minimum viability conditions, while an even smaller group meets the enhanced viability conditions. Fiscal viability emerges as the most severe bottleneck, followed by human capital, basic services, and demographic viability. A central finding is that demographic dynamism, rather than size alone, emerges as the more restrictive condition for territorial viability. The paper also integrates this individual municipal diagnosis with a companion system-level perspective developed elsewhere, showing that the same phenomenon can be understood both as a territorial distribution of constraints and as a developmental mechanism linking fiscal effort, services, and outcomes. Taken together, both perspectives suggest that decentralization policy in Bolivia requires differentiated interventions: system-level incentive reforms and targeted support tailored to municipalities' specific deficits. The framework is intended both as a diagnostic tool and a basis for future policy design.