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Political Party and Campaign Financing Update

July 31, 2007

Topics in this issue
The dust has settled from last year’s wave of elections throughout the Americas but campaigns are underway for presidential elections in Guatemala (September 9, 2007), Argentina (October 28, 2007) and in the United States (November 4, 2008). The AS/COA draws on recent research to provide a snapshot of campaign financing and media access rules across the hemisphere.
Money and politics

Democracy does not come for free. Across the democratic world, political parties and candidates need money to run competitive campaigns and to help convey policy proposals to voters and constituents. But how much should be spent and who should foot the bill?

Advocates of public financing argue that a certain degree of tax-payers’ money should be used to promote political pluralism. If the state provides an adequate level of resources, every political force will have a genuine chance to participate in competitive elections. Moreover, with public monies, the influence of private interests is controlled and constituents should be better able to hold the state accountable for election spending.

Besides Venezuela, all Latin American countries provide direct (money, bonds, and loans) and indirect (in-kind assistance such as services, free media, and tax exemptions) public financing. In Mexico, public funds account for more than 80 percent of total resources allocated to political parties. Enacted in 1996, this electoral provision responded to the need to promote greater equity after a long history of one-party domination. According to the Federal Electoral Institute (IFE), public financing for political parties increased from $7.3 million in 1989 to close to $400 million in 2006.

Arguably, private financing is desirable both for economic and democratic reasons. Citizen involvement in the monetary aspect of an election helps to solidify the essential link between politicians and constituents. Fundraising activities increase candidates’ legitimacy and create the grassroots support and opposition necessary to advance policy objectives. This is particularly true in the United States. From January to June 2007, Democrat and Republican candidates have raised more than $246 million dollars—online collections from small, first-time contributors are an important funding source.

A recent comparative study conducted by the Organization of American States and International IDEA (2005) concluded that private financing largely prevails over public funding in most of the hemisphere (see table 1). As a result, several countries have passed legislation to control the effect of private influence in the democratic process. In Brazil, contributions cannot exceed 10 percent of personal annual income, or in the case of corporations, two percent of annual gross sales. In Argentina and Colombia contribution limits reflect the difference between total campaign spending limits and public financing. In Bolivia, Costa Rica, Chile, Ecuador, Mexico, Peru, and Paraguay contribution limits are determined according to criteria such as minimum wages, tax units, percentage of public financing, and national budgets.

Source: Steven Griner and Daniel Zovatto, Funding of Political Parties and Election Campaigns in the Americas, 2005 

Fair media access

Media exposure does not necessarily win elections but it does play a significant role. According to the above study, television advertising represents an estimated 60 to 80 percent of total campaign expenditures in the region. This trend is particularity sharp in the United Sates, Mexico, and several Central and South American countries. But in Canada and the English-speaking Caribbean, the less candidate-centered parliamentary systems and the smaller size of microstates decreases media influence in political campaigns.

In total, 15 of the 18 Latin American countries have enacted some type of legislation to regulate media’s disproportionate leverage in campaigns. Brazil and Chile enforce the strictest mechanisms to curb spending while promoting fair media access. Electoral authorities provide free media to all registered parties but ban purchases of additional airtime. Despite state attempts to provide balanced access, ancillary costs such as information technology and political consultants continue to influence elections. Recent studies in Brazil estimate that the production costs for radio and TV spots represent at least 30 percent of total presidential campaign expenditures.

Mixed systems are another option. In Argentina, Bolivia, Colombia, Mexico, Paraguay, and Peru, the state provides a minimum amount of free TV and radio time, especially in public media; however, parties can generally buy additional advertising until they reach pre-established campaign spending limits. In other countries, for example, Costa Rica, Dominican Republic, El Salvador, Honduras, Nicaragua, Uruguay, and Venezuela, regulations are either more flexible or antiquated regulations are not fully enforced.

Despite difficulties in untangling the complex relationship between money, politics and the media, a new generation of reforms focused on transparency and political dialogue is starting to bear fruit. In Mexico, IFE attempts to ensure public disclosure of political financing have put in place controls among competing political forces. As a result, IFE fined the Institutional Revolutionary Party (PRI) $100 million for diverting funds from the 2000 presidential campaign to the union of the state oil company, PEMEX. One of its rivals, the National Action Party, was fined $50 million for failing to report private donations from the “Amigos de Fox,” a third party association. The National Electoral Court in Bolivia used a similar inter-party mechanism to suspend 17 TV spots in the 2005 election for constitutional assembly representatives.