In recent decades, international donors promoted decentralization policies as vehicles to achieve economic growth, state reform and human development. Although these policies improved national and local governments’ responsiveness, it is not sufficiently clear whether they actually led to poverty reduction, social cohesion and conflict resolution, especially in countries’ ongoing peace and reconciliation processes. This article analyses decentralization in the context of post-conflict reconstruction in Central America. It argues that the mechanisms that transferred responsibilities and resources to local governments to ensure accountability and transparency generally led to increased local participation in social programmes. However, the weak capacity of the state to reduce social inequalities, as well as the absence of national governments to supervise policy implementation, generated unforeseen consequences. Given the challenges associated with the impacts of severe weather and increased violence, this absence is becoming critical and could lead to further insecurity in the region.