Colombia remains reform leader in Latin America.

BY LATINVEX STAFF

Chile has replaced Mexico as the Latin American country that leads in ease of doing business, according to latest Doing Business report from The World Bank, which measures the business environment in 190 countries worldwide by looking at ten key factors, including starting a business, paying taxes, trading across borders, enforcing contracts, getting credit, getting electricity, registering a property, dealing with construction permits, protecting minority investors and resolving insolvency.

Meanwhile, Mexico and Argentina improved their score, while Brazil worsened. Colombia, Costa Rica and Peru joined Chile and Mexico as the top five countries, while Venezuela remains the laggard, along with Bolivia, Nicaragua, Honduras and Ecuador.

In fact, Venezuela ranks as the third-worst country worldwide, with only Somalia and Eritrea performing worse.

All in all, the region saw a slight overall improvement. 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, The World Bank says. 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 report says. “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, The World Bank points out. 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. And import paperwork was cut from 192 hours to 166.

“A number of Latin American countries stood out for performing well on some business climate indicators,” the report says.

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 percent of income per capita from 66 percent 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,” The World Bank says.

And 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 percent of income per capita to incorporate a new business, compared to 3 percent in high-income OECD economies or 20 percent globally. In order to enforce a contract in Colombia, it takes a company over three years and costs almost 46 percent 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 percent of Latin American economies. 

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