By Daniel P. Erikson and Gabriella Ippolito
Latin America’s tumultuous political year has produced a new generation of leaders in countries as diverse as Brazil, Mexico, Colombia, Costa Rica and Paraguay. Several have vowed to make their countries more business-friendly as a result. The most recent edition of the World Bank’s flagship “Doing Business” Report shows how much work they have to do.
The latest report, “Doing Business 2019: Training for Reform” was released on October 31, 2018. The World Bank has been performing this study annually since 2002, and it currently ranks 190 countries on the ease of doing business, based on criteria including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protections for minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The World Bank formulates the scores on a series of questionnaires on these topics and assesses which countries pass reforms in these sectors and have legal regimes that are already considered “best practices” globally.
As usual, the top five spots on the list went to New Zealand, Singapore, Denmark, Hong Kong, and South Korea, respectively. The United States ranked at number 8, and Canada at 22. No country in Latin America and the Caribbean ranked in the top 30, or top 40, or top 50. The highest ranked country in the region is Mexico at 54, where its high ranking for the ease with which businesses can apply for and receive credit was mitigated by poor rankings on paying taxes. The next best ranked countries in the region are Chile (56), Colombia (65), Costa Rica (67) and Peru (68). With the exception of Costa Rica, which is seeking to become a member of the Pacific Alliance trade bloc, all of these nations are Pacific Alliance members and all have free trade agreements (FTAs) with the United States. These nations are generally perceived as having strong protections for foreign investors and as being business friendly.
After this initial business-friendly cluster a few Central American countries follow with Panama (79), El Salvador (85), and Guatemala (98). Much of the Caribbean is then clustered in the low 100s and is led off by the Dominican Republic (102), Dominica (103) and Trinidad and Tobago (105).
Afterwards, some of the region’s largest countries Brazil (109) and Argentina (119) follow. In both countries starting a new business takes a lot of time and getting construction permits is extremely difficult. Brazil’s low ranking is actually a significant improvement over the prior year, due to a series of reforms that the government undertook in the past year, which the World Bank took into account. Still, as the World Bank makes clear, the old adage “Brazil is not for beginners” still rings true in terms of business
Venezuela is ranked at 188, surpassing only Eritrea and Somalia. Venezuela is ranked last for the ease of starting a business (190) and almost ranked last for trading across borders (189). Venezuela’s score has been lowered annually as basic activities like ensuring electricity to a business have become increasingly difficult during its economic crisis. Meanwhile, Cuba is not listed at all – presumably due to lack of data.
Although the Doing Business Report is just one tool for foreign investors to consider when examining a particular country, over the past fifteen years it has become increasingly influential and governments are regularly inspired by the report to implement needed reforms which hopefully will create a better business environment globally and create jobs in their countries.
Will new pro-business leaders like Jair Bolsonaro in Brazil, Ivan Duque in Colombia, and Maurcio Macri in Argentina have any success in making their countries more business-friendly? Latin America’s economic future may depend on it.
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