Colombia is regional frontrunner with 37 reforms since 2005
WASHINGTON, October 24, 2019 – In 21 of the 32 economies of Latin America and the Caribbean, at least one regulatory reform was made over the past year to improve the ease of doing business for domestic small and medium-sized enterprises, according to the World Bank Group’s Doing Business 2020 study released today.
Chile has the highest ranking in the region on the ease of doing business, with a rank of 59, followed by Mexico (60), Puerto Rico (U.S) (65), Colombia (67) and Jamaica (71). The countries in the region implemented a total of 35 reforms over the period, with a number of countries making significant steps to improve.
Colombia has implemented a total of 37 reforms since 2005 and continues to be a leader in the region. The country initiated three major reforms over the 12-month period to May. It made starting a business easier and faster by simplifying requirements for incorporating a new company. Authorities facilitated trading across borders by simplifying export documentation requirements, cutting document prep time by 12 hours. Further, Colombia eased the process of resolving insolvency by advancing participation of creditors in insolvency proceedings.
Similarly, Argentina introduced three major reforms this year. Dealing with construction permits became easier thanks to an electronic platform for building permit applications. The country facilitated the enforcement of contracts by introducing electronic court payment fees. Authorities also reduced the time required for export and import documentary compliance by rolling out electronic certificates of origin and improving the import monitoring system. Import paperwork was cut from 192 hours to 166.
Brazil, the region’s largest economy, introduced two major regulatory improvements. The country made business registration faster and decreased the cost of digital certificates, trimming the time required to start a company by three days. The country also made property registration easier by introducing online systems and improving land administration.
A number of Latin American countries stood out for performing well on some business climate indicators. Costa Rica has a reliable electricity supply and transparent tariffs and ranks 25th on that metric globally – outpacing New Zealand and the United Kingdom. Similarly, Mexico, Costa Rica, Guatemala and Colombia are among the top 15 economies in the world for getting credit due to their robust collateral and bankruptcy laws. The region also performs well in the time and cost it takes to start a business: average start time has been halved to 34 days from 74 days since 2003, and costs has been slashed to 36% of income per capita from 66% in 2003. Even so, despite these improvements, the region continues to have the highest average time and number of procedures in the world required to incorporate a company.
Despite the positive reforms, the Latin America and Caribbean Region as a whole lagged behind other regions in the world which took more steps to improve the business environment. No Latin American economy ranks among the top 50 best places globally to do business.
“Economies across Latin America are often still burdened by inefficient and cumbersome business regulations.” said Santiago Croci Downes, Program Manager of the Doing Business Unit. “In order to further develop their private sector and encourage new business creation, Latin American countries need urgently to improve.”
Latin American economies continue to underperform in the areas of resolving insolvency, protecting minority investors and paying taxes. These are domains where regulations burden entrepreneurs and drain resources from productive investments. Latin America has the most cumbersome tax compliance processes in the world. In Brazil, for example, it takes a small company over 1,500 hours a year to comply with fiscal obligations, compared to less than 159 hours in high-income OECD economies. In Paraguay, it costs 52% of income per capita to incorporate a new business, compared to 3% in high-income OECD economies or 20% globally. In order to enforce a contract in Colombia, it takes a company over three years and costs almost 46% of the total claim, more than twice the average among high-income OECD economies. Furthermore, in bankruptcy proceedings, a viable business would cease operating and be sold piecemeal instead of undergoing a successful reorganization in 75% of Latin American economies.
The full study and its datasets are available at www.doingbusiness.org
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