Center-state relations in India and Brazil: privatization of electricity and banking
This article asks: “When and why do state governments oppose (or support)
privatization programs initiated by the central government?” We examined national privatization
initiatives in the 1990s in India and Brazil in the areas of electricity and banking and
the different responses from state governments in each of the largest financial and industrial
centers in their countries, the states of Maharastra and São Paulo. Possible explanations
for states’ opposition to federal government initiatives such as Enron and Banespa include:
(1) ideological commitments by state leaders, (2) political or political coalition differences
between state and federal governments, and (3) an uneven distribution of costs and benefits from privatization between the state and federal governments. This article suggests that explanation
(3), conflict of interest, is the best explanation, although the nature of political
alliances (2) and political values may have an influence. This article concludes that seemingly
irreconcilable political spheres can often be improved and some distribution of benefits can
make the package more attractive to state leaders.
JEL Classification: H77; L33.
Keywords: Privatization intergovernmental relations federalism political economy