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 Chapter 5 Sugar and the Province during the last quarter of the nineteenth century, the sugar industry became the most dynamic sector in Tucumán’s economy. The changes experienced by Tucumán’s productive structure had a significant impact on the province’s public finances. Between 1876 and 1916 the composition of Tucumán’s sources of revenue underwent dramatic changes as the province reduced its dependence on the financial assistance provided by the national authorities and increased its reliance on local sources of income.In response to the changes brought about by the sugar economy, Tucumán’s authorities carried out periodic tax revisions, which in turn increased provincial revenues and the ability to finance public expenditures.In 1893 a report made by Tucumán’s budget committee observed, “In the absence of public revenues it is necessary to create them, and the committee has the obligation to carry on this idea by imposing on our main industry [sugar] a minor contribution.... We must save the province’s honor by settling our financial obligations.”1 Four Decades of Tax Policies: The Old and the New Between 1876 and 1916, Tucumán relied on both national and provincial funds to meet its financial obligations. The participation of both sources of funds varied over time. Initially, the province depended largely on national resources that consisted of general subsidies allocated periodically to cover  chapter 5 for budget deficits and specific subventions for public education. The concession of general subsidies from the nation to the provinces was not new in Argentina. The practice was informally used by Juan Manuel de Rosas and Justo José de Urquiza as a means to assist provinces in need and maintain internal peace. During the 1860s subsidies became political tools that secured provincial support and loyalty to the nascent national state.2 Even though they provided an invaluable source of funding, subsidies had serious limitations, since they depended both on political alliances and on the health of the national economy. For example, the 1875 crisis affected subsidy disbursements to the provinces. For Tucumán, funds during this period were not distributed regularly and more often than not fell short of government ’s expectations, although they still represented an important contribution to provincial finances. This was true especially during the late 1860s and early 1870s, when general subsidies made up more than 15 percent of the total provincial public income.3 The importance of securing more stable sources of income did not escape the attention of the local authorities. In his 1877 annual message to the legislature, Tucumán’s governor, Tiburcio Padilla, highlighted the negative effect of budget cuts on the government’s ability to function properly and called for the establishment of new sources of public revenues to reduce the province’s dependence on the national authorities.4 Aside from general subsidies, the national authorities also contributed to provincial finances through a separate fund for public education. National subventions for education were established for the first time in 1857, as provided for by article 67 of the national constitution.5 Initially, the absence of clear disbursement mechanisms made the distribution of funds more dependent on political than educational concerns.6 During President Domingo Faustino Sarmiento’s administration (1868–74), Argentina became deeply committed to public education. Distribution mechanisms were improved and the national subvention for education quadrupled.7 Most important, in 1871 the national congress passed a law that established clear mechanisms for the distribution of funds to the provinces thus institutionalizing a method that facilitated and supervised their allocation. The law tied the subsidy to local spending; each province received from the nation an amount that ranged from one-fourth to three-fourths of the resources assigned by provincial budgets to education for each given year.8 To prevent fraud and guarantee responsible use of the allocations, the law established complex mechanisms to regulate the disbursement of funds. Each province was required to send  sugar and the province budget reports detailing their expenses and planned investments. Moreover, provincial governments were requested to supply evidence that local funds had already been deposited in a bank at the time of each disbursement,which was made four times a year. In spite of its efforts, the national government failed to deliver the funds with the expected regularity, leaving local authorities to make up the difference. In 1877, Governor Padilla complained that the national authorities had failed to supply the resources to many provinces and noted that in the...

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