Government decentralization has fundamentally restructured the Character of democracy in Latin America. The transfer of powers from central to state and local governments over the last decade constitutes a break from Latin America’s centralist tradition. Despite an extensive literature on decentralization in policy and academic circles, there is little theoretical analysis on the political determinants of decentralization. Using Brazil as a case study, my research will treat decentralization as a political bargain between levels of government. Two sets of variables explain the relative bargaining strength between central and subnational politicians: the inter-governmental organization of the public sector and incentives generated from the electoral system. Using Brazil as a case study, my research will examine how both sets of institutions served as mechanisms of control under Brazil’s period of military rule to inadvertently strengthen subnational governments at the expense of the center once direct elections for governors and mayors were re-instated with the transition to democracy.