In the past two decades, many Latin American countries incorporated direct‐democracy mechanisms (e.g. initiatives and referendums) into their constitutions. By expanding the room for citizens' political participation, direct democracy was meant to reduce the gap between citizens and government and create a more‐inclusive form of governing, but was it really the case? This article asks, to what extent can citizens use direct democracy to shape public policy in Latin America? It argues that constitutions in Latin America provide an ambiguous basis for the use of referendums and initiatives, which allows governments to shape and limit their use during the agenda‐setting stage. By specifying the limitations on the types of mechanisms used, the issues that cannot be decided via direct democracy, and the barriers to placing mechanisms on the ballot, governments can control the direct democracy process to a greater extent than has heretofore been acknowledged.

Direct democracy (DD) – including initiatives and referendums – is increasingly used by citizens and governments to establish new policies around the world. Although framed as a tool that benefits citizens, it is also common for government actors, including parties, to utilise DD in initiating and pushing through new policies. To explain this puzzling development, existing research examines the regulative design of DD. Going a step further, this article explains how the design of DD originates. Using process tracing methodology, I examine the case of Mexico – the most recent adopter of DD in 2014 – and illustrate how, when, and how DD can be used and modified. I argue that DD is endogenous: we cannot conceive of it independently of the political forces that generated it. Other prominent cases, such as Uruguay, suggest that DD was adopted to pursue party goals or to shape a particular government structure. Legislatures certainly provide the masses the option of engaging in DD but they do so on their own terms.