Decentralization Reforms in Mexico: The Intersection of Neoliberalization and Democratization Processes Aylin Topal Since the 1980s, most international donors and developmental agencies have been significantly investing in and funding decentralization processes in Latin America. They assumed that by bringing political decisions closer to the citizenry, decentralization would naturally lead to more participatory subnational governments and empowered local communities. To test this optimistic assumption, this article examines decentralization reforms in Mexico vis-à-vis neoliberalization and democratization processes. Based on interviews with key actors, local and national newspapers and related primary and secondary sources, this article concludes that in Mexico, decentralization policies are the intersection set of neoliberalization and democratization processes. The part played by neoliberalization in decentralization processes ensures that the latter would not lead either directly or unproblematically to democratization. In 1983, Institutional Revolutionary Party (PRI), faced with a deep hegemony crisis, responded to two sets of demands. Threatened by the bank nationalization in 1983, certain sections of the capitalist classes have increased the pressure for a smaller state, while workers, peasants and indigenous groups have demanded democratization and more participation. PRI chose to implement decentralization policies with the intention of receiving consent from these various social groups while at the same time strengthening the local organization of the party with new political, administrative and financial faculties. The multifaceted nature of these decentralization reforms explains the varying impacts of these policies at the local level. This article shows that in the Northern regions, where the local capitalist groups are organized, the party of the political right, the National Action Party (PAN), came to power. However, there are hints that decentralization policies may empower other local parties. Parties ideologically closer the workers, peasants and indigenous groups, like Democratic Revolutionary Party (PRD), can organize at the local level and with this support can present a viable alternative in 2006 presidential elections.