Some Latin Nations Lead World in Red Tape

Once upon a time, it used to be that communist countries like China had more business-phobic bureaucracies, more red tape and a worse business environment than capitalist ones. Not anymore.

According to Doing Business in 2010, a new World Bank study published, China -- and, increasingly, Vietnam -- offer better conditions to local and foreign business people than most Latin American countries.

The study, conducted for the seventh consecutive year, measures various concrete examples of how easy it is to conduct business in 183 countries. Among its conclusions:

- To open a new business, regardless of whether it's a hotdog stand or a factory, you need to fulfill three legal procedures in Hong Kong, and 14 in mainland China. By comparison, you need to fulfill 15 legal procedures in Argentina and Bolivia, and 16 in Brazil and Venezuela.

- Measured in number of days taken by the legal procedures necessary to open a legal business, it takes six days in Hong Kong, and 37 days in mainland China. Comparatively, it takes 41 days in Peru, 50 days in Bolivia, 60 days in Costa Rica, 64 days in Ecuador, 65 days in Uruguay, 120 days in Brazil, and 141 days in Venezuela.

- The cost of going through the legal steps to start a business is equivalent to, respectively, 5 percent of the country's per capita income in China, 7 percent in Chile, 11 percent in Argentina, 12 percent in Mexico, 13 percent in Colombia, 20 percent in Costa Rica, 24 percent in Peru, 38 percent in Ecuador, 99 percent in Bolivia and 111 percent in Nicaragua.

FIRING HURDLES

- Once you have your factory going, if you want to fire a low-performing worker, you have to pay 10 weeks of salary in Hong Kong, and 91 weeks of salary in mainland China. Comparatively, you have to pay 95 weeks of salary in Argentina and Honduras, 99 weeks in Paraguay, and 135 in Ecuador.

In Venezuela and Bolivia, it's forbidden for a business owner to fire an employee -- no matter if the latter spends the day sleeping on the job. Venezuela and Bolivia are the world champions of employment rigidity, according to the study.

- If you want to export your products, you have to fill out four documents in Hong Kong, and seven in mainland China. In Latin America, it's eight documents in Brazil, El Salvador, Bolivia, and Paraguay, nine documents in Argentina and Ecuador, and 10 documents in Guatemala and Uruguay.

- To import goods, you need to fill out five documents in mainland China, seven in Argentina, Brazil, and Chile, eight in Colombia and Peru, nine in Venezuela, and 10 in Guatemala, Honduras, Paraguay and Uruguay.

'MOSTLY TIMID'

You get the picture. Overall, an aggregate ranking of the 10 categories in the World Bank study shows that China puts up fewer regulatory hurdles to business people than Argentina, Brazil, Venezuela and most other Latin American countries. Among the few nations that do better than China in that ranking are Colombia, Chile and Mexico.

Sylvia Solf, one of the authors of the study, told me that some Latin American countries have taken important steps to cut red tape last year.

''Colombia and Peru have done a lot of reforms, but in the rest of the region the reforms have been mostly timid,'' she said.

Citing a ''snowball effect'' of measures to ease business regulations in Eastern Europe, the Middle East and North Africa, she added, ''There is positive news in Latin America, but there is more positive news in other parts of the world.''

NOT A COINCIDENCE

My opinion: It's no coincidence that Asian countries have grown faster and reduced poverty much more rapidly than Latin America in recent years. In Asia, they have not only created a more business-friendly climate for foreign investors, but have also made it much easier for their own people to become capitalists, and to create wealth.

If Latin American leaders are serious about reducing poverty, they should start by copying much more aggressively what has been done in other parts of the world -- including in communist countries.

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Some Latin Nations Lead World in Red Tape | Latin America