Through the process of redemocratization, Brazil has become a highly decentralized nation. The results of this transformation are visible in the federal arena, where financial problems have been encountered and presidents have run into trouble forming coalitions that allow them to implement public policies. Within the realm of the states, however, decentralization has brought mixed results due to regional inequalities. The paper analyzes the rifts and tensions now affecting Brazil?s federative system. It is argued that Brazil?s experience with decentralization has contributed towards democratic consolidation and has forced the federal government to negotiate public policy implementation with state and local government. At the same time, this experience reveals the limits of decentralization in nations displaying marked regional differences.