The decentralization game in Bolivia hasbeen altered quite significantly with the presence of newbargainers at the departmental level. Two, opposing groupshave emerged and which follow intricate strategies toenforce their claims. The highland departments are stronglyaligned to the Movimiento al Socialismo (MAS) party and thecharismatic leadership of the country's firstindigenous leader Evo Morales. The Media Luna departments inthe lowlands demand autonomy and seek a greater share of thenational pool of hydrocarbon revenue. The paper discusseshow a fiscal pact can be forged to bring agreement aroundthe most pressing issues. It considers several bargainingpackages which could be crafted and analyzes the extent towhich decentralization principles need to be sacrificed inorder to achieve agreement among competing actors. It islikely that these agreements may eliminate someinefficiency, but also create others. An important insightis that the fiscal pact should be renegotiated at certainpre-defined times, in order to provide flexibility andadjust to the constraints of actors to engage ininter-temporal commitments. Explicit exit options wouldenhance the possibilities for agreement.
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