Doing Business: Mexico Best in Latin America

Venezuela has world’s 4^th-worst business environment.

BY LATINVEX STAFF

Mexico is the best Latin American country to do business, while Brazil ranks among the six worst countries, according to the latest Doing Business report from The World Bank. Meanwhile, Venezuela now has the world’s fourth-worst business environment, according to a Latinvex analysis of the new data. Only Eritrea, Libya and South Sudan are worse.

The World Bank changed its methodology compared with last year’s report. With the new methodology, Mexico would have been the top country last year as well, not Colombia, as announced last year.

Overall, Latin America improved its doing business score slightly, according to our analysis.

MEXICO AND BRAZIL

Thanks to two reforms aimed at making business easier, Mexico’s score improved 1.6 points to 73.72, confirming its top spot in Latin America. Globally, it moved up four spots and now ranks in 38^th place, ahead of countries like Belgium and Italy in terms of ease of doing business.

Mexico improved access to credit by implementing a decree allowing a general description of assets granted as collateral. This reform applies to both Mexico City and Monterrey.

It also made paying taxes easier for companies by abolishing the business flat tax—though it also made paying taxes more costly by allowing only a portion of salaries to be deductible. These changes apply to both Mexico City and Monterrey. In addition, the payroll tax rate paid by employers was increased for Mexico City.

Brazil also saw a slight improvement in its score thanks to reducing the time for documentary and border compliance for exporting by implementing the electronic SISCOMEX Portal system. This reform applies to both Rio de Janeiro and São Paulo. On the negative side, Brazil made transferring property in São Paulo more expensive by increasing the property transfer tax.

As a result, Brazil kept its rank as the sixth-worst country in Latin America in ease of doing business. Globally, it fell five spots to 116^th place, which puts it behind countries like Ghana and Jordan in ease of doing business.

CHILE AND PERU

Chile implemented one reform. It made resolving insolvency easier by clarifying and simplifying provisions on liquidation and reorganization, introducing provisions to facilitate the continuation of the debtor’s business during insolvency, establishing a public office responsible for the general administration of insolvency proceedings and creating specialized insolvency courts.

However, on the negative side, it made paying taxes more costly for companies by increasing the corporate income tax rate.

Nevertheless, Chile overall moved up one spot in Latin America, ranking second only to Mexico in ease of doing business.  Globally, its 48^th place remained unchanged.

Peru implemented two reforms. It improved its credit information system by implementing a new law on personal data protection and it made paying taxes easier for companies by creating an advanced online registry with up-to-date information on employees.

Despite those reforms, Peru fell in Latin America by one spot (from second to third) and globally (from 45 to 50).

COLOMBIA AND COSTA RICA

Colombia implemented one reform. It made paying taxes less costly for companies by reducing the payroll tax rate and introducing exemptions for health care contributions paid by employers.

As a result, it kept its fourth place in Latin America, but globally it fell two spots.

Costa Rica implemented three reforms, more than any other country in Latin America. As a result, it moved up one spot in Latin America to fifth place. But globally the change was even more impressive, with the Central American nation jumping up 21 spots to 58^th place.

“Costa Rica is the world’s top improver, i.e. an economy that implemented at least three reforms and moved up on the global rankings scale," The World Bank said in a statement.

The utility in Costa Rica made getting electricity easier by reducing the time required for preparing the design of the external connection works and for installing the meter and initiating the electricity supply.

Costa Rica improved access to credit by adopting a new secured transactions law that establishes a functional secured transactions system and a modern, centralized, notice-based collateral registry. The law broadens the range of assets that can be used as collateral, allows a general description of assets granted as collateral and allows out-of-court enforcement of collateral.

Costa Rica made paying taxes easier for companies by promoting the use of its electronic filing and payment system for corporate income tax and general sales tax.

VENEZUELA

Venezuela made starting a business more difficult by increasing incorporation costs. As a result, its score worsened once again.  Globally, it now ranks in 186^th place out of 189 nations, which makes it the fourth-worst country in the world in terms of ease of doing business.

That means that Venezuela is worse than countries like the Central African Republic, the Democratic Republic of Congo and Chad.

Other laggards include Bolivia, Nicaragua, Argentina and Ecuador. Ecuador’s score is only slightly better than Iran, while Argentina is worse.

© Copyright Latinvex

Sources: The World Bank's Doing Business 2016; Latinvex (rank, changes, average score)