The decline in co-participation worries governors and complicates matters for provinces.

Argentine provinces face a new threat to their public finances. According to data from the Ministry of Economy , in May there was a real drop of 23.8% in revenue from revenue sharing compared to the same month last year. The decline was even greater in key districts such as Córdoba , Santa Fe , Entre Ríos , and the City of Buenos Aires , where it exceeded 25%.

The blow wasn't only felt year-over-year. If we compare the data for May with those for April of this year, the drop reaches 50%, placing the provinces at income levels even lower than those recorded during the pandemic. This creates a situation of great concern among provincial leaders, who must meet their commitments with increasingly scarce resources.

One explanation for the sharp drop lies in a non-recurring inflow that occurred in May 2024. At that time, banks settled an extraordinary profit payment of $2.5 million, resulting from the December 2023 devaluation of their dollarized portfolios. This one-time injection distorts the comparison, but it falls far short of explaining the overall deterioration in co-participation.

At a meeting of the Federal Investment Council (CFI) , several governors expressed their displeasure with what they consider a "negative bias" in the national government 's tax policies. Among the measures impacting provincial coffers, they highlighted the modification of the income tax, changes in the calculation of corporate advances, the deferral of the fuel tax update, and the reduction or elimination of internal taxes on imported electronic products.

Added to this is a slow recovery in consumption, which directly impacts VAT revenue. According to official data, this tax showed a real decline of 1.9% in April, despite the economy growing at around 5%, according to official estimates. "The outlook is bleak between now and the end of the year," a governor suggested during the meeting at the CFI .

The Federal Tax Commission 's reports project a 4.2% real drop in shared resources during 2025. Compared to 2023, the decrease would reach 11.7%. Measured against GDP , this represents a loss of 0.3 percentage points compared to 2024 and 0.8 percentage points compared to 2023.

The automatic distribution of funds established by the 1988 revenue sharing law is vital for the provinces. While some jurisdictions, such as Buenos Aires and Córdoba , rely less on these transfers, others, such as La Rioja , Formosa , and Catamarca, receive more than 80% of their annual resources through this channel.

Furthermore, the governors question the fact that the nation has withdrawn from several functions it previously shared with the provinces. The most significant are the halting of public works, the cuts to teaching funding, and the elimination of transportation subsidies. This forces provincial governments to cover rising expenses with declining revenues.

The situation is aggravated by structural differences between provinces. Some have countercyclical funds that give them some leeway. Others, however, suffer from chronic deficits and high debt levels. In this context, the decline in revenue sharing represents a serious threat to governability and the functioning of basic services.