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VENEZUELA: WORSE FOR BUSINESS

By Chronicle staff*

12.09.06 | Mexico, Peru and Guatemala were among the ten countries worldwide that implemented most reforms that make business easier. Mexico jumped a whopping 19 places on the global ranking of 175 countries, while Peru jumped by 13 places and Guatemala by 10 places. All in all, seven countries in Latin America made progress, while 12 fell on the global ranking. Chile kept its position as the region’s best place in terms of ease of doing business, while Venezuela cemented its last place.

In terms of key trade groups, the best and worst countries for ease of doing business are:

* Andean Community — Peru best, Bolivia worst
* CAFTA — El Salvador best, Guatemala worst
* Mercosur — Uruguay best, Brazil worst

In the key cetegory of starting a business, six Latin American countries made progress. They were El Salvador, Guatemala, Honduras, Mexico, Peru and Uruguay. Guatemala became the only Latin American nation that made progress in dealing with licences, while Argentina was the only country in the region making progress in employing workers. In terms of registering property, three countries ( El Salvador, Guatemala and Nicaragua ) made progress, while one (Venezuela) become worse. When it came to getting credit, seven Latin American countries ( Dominican Republic, El Salvador, Honduras, Nicaragua, Panama, Peru and Uruguay ) made progress, while only one (Venezuela again) deteriorated.

The reforms are not only benefiting companies, but also the local labor force, the World Bank points out. “In Bolivia 400,000 workers have formal jobs in the private sector—out of a population of 8.8 million, “ the bank says in its report. “Reform can change this, by making it easier for formal businesses to create more jobs. “

MEXICO MOVES AHEAD

Mexico ranks third worldwide in terms of reform progress (after Georgia and Romania), thanks to changes in regulations for business entry, protecting investors and paying taxes, the World Bank says.

“A new securities law defines for the first time the duties of company directors, combining an obligation to “take care of the business as if it were your own” with a list of activities that violate that duty, “ the bank points out. “The law also increases scrutiny of related-party transactions. It requires full disclosure before any deal benefiting a company insider can take place. “

Other reforms cut the time to start a business in Mexico City from 58 days to 27, by allowing notaries to issue a tax registration number on the spot and streamlining company registration. And the corporate income tax rate was cut from 33 percent in 2004 to 30 percent in 2005 and 29 percent in 2006, the bank notes.

VENEZUELA MOVES BACK

Venezuela managed to drop a whopping 20 places on the ranking, ending in 164th place of 175 countries worldwide. That means Venezuela is now a worse place for doing business than countries like Afghanistan and Burkina Faso, according to the World Bank.

Categories where Venezuela worsened its score were trading across borders (the only country worldwide to do so), registering property (one of four countries worldwide that did so) and getting credit (one of three countries worldwide).

SALVADOR BLITZ

The World Bank singles out El Salvador as one of the few countries worldwide that implemented the four key steps to successful reform:

* Start simple and consider administrative reforms that don’t need legislative changes.
* Cut unnecessary procedures, reducing the number of bureaucrats entrepreneurs interact with.
* Introduce standard application forms and publish as much regulatory information as possible.
* Improving how regulations are administered by using the Internet.

In two years El Salvador reduced the time to start a business from 115 days to 26—with no changes to the law. The reform started in 2003 in the company registry, which had set the goal of becoming the first registry in Latin America to earn an ISO certification. The staff developed time-and-motion studies of all transactions and cut unnecessary steps, the World Bank report says.

“Customer surveys ensured timely feedback (and) in 18 months start-up time dropped to 40 days, and the share of satisfied customers rose from 32 percent to 87 percent, “ the report says.

In a second round of reforms staff from the Ministries of Finance and Labor and the social security institute were transferred to the company registry, allowing entrepreneurs to register with all four agencies in a single visit, the World Bank points out.

STATES AND CITIES

The growing trend among cities and states in Latin America to compete through business reforms is also noted.

“Recent studies across 13 cities in Brazil and 12 in Mexico have created fierce competition to build the best business environment, “the bank report says. “The reason is simple: with identical federal regulations, mayors have difficulty explaining why it takes longer or costs more to start a business or register property in their city. There are no excuses.

Source Latin Business Chronicle



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