Nearshore Americas

World Bank’s Doing Business Report Applauds Latin America for Improved Climate

Latin America again has demonstrated why it is a region to be reckoned with. The 2013 World Bank’s ‘Doing Business’ report, released last night, shows that meaningful political and economic reforms have made a remarkable difference in how well the countries are positioned to attract investments. A total of five countries rose in the ranking, with particular praise going toward Colombia, Costa Rica and Chile.

Chile led the region by placing 37th on the list, followed by Peru (43), Colombia (45), Mexico (48) and Panama (61).

The report lauds Costa Rica for its speedy reform programs, saying that the Latin American country was one of the ten economies in the world that have significantly improved the business climate over the past 12 months, implementing reforms in four of the ten areas covered by the analysis.

Costa Rica: The Rising Star

Costa Rica has improved its position in many categories, such as building permits (up 11 places), getting credit (improved 14 positions), paying taxes ( improved 10 places) and cross-border trade (up 11 positions).

“It introduced a risk-based approach for granting sanitary approvals for business start-ups and established online approval systems for the construction permitting process. Costa Rica also guaranteed borrowers’ right to inspect their personal data and made paying taxes easier for local companies by implementing electronic payments for municipal taxes,” the report highlighted.

“We are pleased by the progress made by Costa Rica, where authorities have showed that they can make a difference in the business environment, even within a relatively short period, “said the director of the Department of Global Indicators and Analysis of the World Bank Group, Augusto Lopez-Claros, in a statement.

The World Bank has carried out an exclusive case study on Colombia, highlighting reforms implemented by the Colombian government over the past seven years. Colombia’s most notable regulatory improvements have been in the areas of starting a business, paying taxes, protecting investors and resolving insolvency.

As a result, Colombia’s ranking on the ease of doing business rose to 45 from 79 in 2006.

Other economies that the report lauded for having improved the business climate are Guatemala, Peru, Mexico, Uruguay and the Dominican Republic.  In the last year, Peru strengthened the protection of investors and eliminated several requirements for obtaining building permits. When it comes to business climate, Peru outshines Israel, which is often seen as a innovation hub, according to the report.

Progress made by Chile, Peru, Colombia and Mexico suggests that the rest of the region also can carry out regulatory reforms, Claros added.

Colombia Sets  Benchmark For Others

Every country in the region is watching the outside world. The report says that Colombia’s experience is having “spillover” effects on the Latin American region.

“Bolivia has shown an interest in learning more about Colombia’s experience with business entry. Paraguay has sought to learn from Colombia’s innovations in construction permitting. And both Costa Rica and El Salvador intend to learn from Colombia’s trade logistics reforms,” the report noted.

More than 50 big companies registered in Chile months after the government there announced reforms, the report said.

Mexico saw a 5 percent increase in the number of registered businesses and a 2.2% increase in employment after it simplified laws related to obtaining license from municipal authorities.

In Colombia, introduction of ‘one-stop-shops’ for business registration resulted in 5.2% increase in new firm registrations, the report noted.

There are also some countries which have ignored the need to improve the business climate. While Colombia implemented 25 institutional and regulatory reforms in the past 8 years, Suriname did nothing.

Between 2006 and 2009 Colombia focused mostly on improving the efficiency of regulatory processes, with an emphasis on business registration and tax administration. But in 2010, it began reforming legal institutions, such as by strengthening the protection of minority shareholders and by improving the insolvency regime.

Brazil Disappoints

While Argentina is ranked 124th in the report, Brazil, the largest economy in the region, came in at the 130th position.

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The ranking is based on a set of indicators that measure and benchmark regulations affecting 10 of those areas: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

Countries that are more obstacles to doing business in Latin America are Argentina (124), Honduras (125), Bolivia (155) and Venezuela (180).

Venezuela slipped three places from last year and is now sixth from last. It underperformed other Latin American countries in areas such as the time it takes to start a business, ease of paying taxes, and legal protections for borrowers and lenders.

Under Hugo Chavez, the country’s long-serving socialist president, Venezuela has implemented a raft of nationalizations and is increasingly reliant on its vast oil reserves, according to Reuters.

“I wouldn’t want to be a businessman in Venezuela,” Lopez-Claros said.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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