Source:
IFIs Latin America Monitor
Mon Oct 03 2005
Latin American and Caribbean economies are increasing the pace of reform to help small and medium businesses generate more jobs, but most countries in the region continue to face heavy legal burdens on business, according to a new report from the World Bank Group.
The report Doing Business in 2006, a production of the International Finance Corporation (private sector arm of the World Bank) was launched on the eve of IMF-World Bank annual meetings. As key message this year the IFC states that countries with simple regulations create more jobs than those with complicated regulations.
The report surveyed 155 economies according to a set of regulatory indicators related to business startup, operation, trade, payment of taxes, and closure by measuring the time and cost associated with various government requirements. It does not track variables such as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.
According to this report, New Zealand, Singapore, the United States, Canada and Norway are at the top of the list of countries that make it easier to set up a business. By contrast, the poorest countries, particularly in Africa, impose the heaviest burdens on investment due to high taxes and complex regulations. In Latin America, Puerto Rico was considered as the most business-friendly nation, followed by Chile ranked at 25, while Colombia, Mexico, Argentina and Brazil were ranked far below.
In Latin America and the Caribbean, three-quarters of countries implemented reforms and most improvements to the business environment took place in Jamaica, Brazil, Ecuador, and El Salvador.
The report reinforces the need for liberalization reforms. It considered the following as extremely positive: Brazil’s new bankruptcy law; Colombia’s changes in terms of labour laws and regulations for setting up businesses; the elimination of certain property registration taxes and the reduction in time to start a business in Ecuador; and the reduction of corporate taxes in Mexico. Likewise, it highlights the importance of reforming the administrative costs of trading in order to remove obstacles to exporting and importing.
To sum up, the report concludes that “when regulations are costly and burdensome, businesses often operate in the informal economy and remain small, creating few jobs".
Related Information:
Official press release - Latin America and Caribbean (pdf format)
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