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Reform Champion The time to start a business in Rio de Janeiro (photo) and Sao Paulo has been reduced from 82 days to 20 days. (Photo: Brazil Government)  
Harvard Business Reviews' Best-Performing CEOs Carlos Brito, AB InBev; Oscar Gonzalez,  Southern Copper and Paolo Rocca, Tenaris. (Latinvex collage)
Wednesday, November 28, 2018
Trade Talk

Doing Business: Brazil Jumps


Seven Latin Americans make Harvard Business Review CEO ranking.

BY LATINVEX STAFF

Brazil, Latin America’s largest economy, improved its business climate significantly on the latest Doing Business report from The World Bank, which measures the business environment in 190 countries worldwide by looking at ten key factors, including starting a business, paying taxes, trading across borders, enforcing contracts, getting credit, getting electricity, registering a property, dealing with construction permits, protecting minority investors and resolving insolvency.

“Brazil led the reform agenda, with four reforms, a record in a single year for the country,” The World Bank said.

ONLINE SYSTEMS

The reforms in Brazil included making starting a business easier with the introduction of online systems for company registration, licensing and employment notifications. The reform, which applies to both Rio de Janeiro and São Paulo, the two cities covered in the Doing Business report, reduced the time for starting a business to 20 days, from 82 days. Access to credit and Trading Across Borders were also made easier in both cities. In addition, São Paulo improved the reliability of electricity by modernizing its grid network and introducing new software programs allowing better outage management and distribution planning. However, Registering Property became more expensive in Rio de Janeiro with an increase in property transfer tax.

Meanwhile, Peru, El Salvador and Paraguay, carried out two reforms each. Peru introduced measures to strengthened construction quality control and also facilitated the process of starting a new business for entrepreneurs. In El Salvador, construction permitting and cross-border trade were made easier, while Paraguay also made it easier to trade across borders and made Getting

Another area which saw reforms by several economies was Starting a Business. In addition to Brazil and Peru, Argentina, Bolivia, and Guatemala also improved their business registration processes.

“It is encouraging to see the steady implementation of reforms in Latin America and the Caribbean, although many economies could benefit from an acceleration in the pace of the reform agenda,” said Santiago Croci Downes, Program Manager of the Doing Business Unit“Continued and sustained progress is key to improving the domestic business climate and enabling private enterprise.”  

The region’s economies perform best in the areas of Getting Electricity and Getting Credit. Obtaining an electricity connection in the region takes on average only 66 days, which is faster than 77-day average in OECD high-income economies. However, the cost to connect to the electricity grid in the region remains high, with an average of 946 percent of the income per capita, compared to 64 percent income per capita in OECD economies. In the area of Getting Credit, Mexico and Colombia are among the top 10 economies in the world, and a third of the region’s economies perform well on access to credit measures.

BIGGEST CHALLENGES

The biggest challenges for the region are in the areas of Paying Taxes, Registering Property and Protecting Minority Investors. For example, 27 payments are required on average for a medium sized company in the region to comply with tax obligations, compared to 11 procedures among OECD high-income economies.

Since Doing Business began in 2003, Starting a Business has seen the most reforms in Latin America and the Caribbean. As a result, the average time to start a business in the region has been halved to 32 days, from 78 days in 2003, and the cost has been significantly reduced to 49 percent of income per capita, from 75 percent income per capita in 2003.  

And, despite the challenges that continue, Paying Taxes has also been an area of many reforms in the region. However, the time needed for a company to prepare, file and pay taxes remains high at an average of 330 hours, which is more than double the 159-hour in OECD high-income economies.

Mexico remains the best place to do business, the ranking says. However, there is now widespread concern that that may change after Andres Manuel Lopez Obrador becomes president on December 1. He has scared investors after cancelling Mexico City’s long-planned, $13 billion international airport, which was already a third finished. (See Mexico Airport: Default, Investor Confidence Loss). 

 

 

Doing Business: Best & Worst

LRK

Ch

GRK

Country

Score

Ch

1

54

Mexico

72.09

-0.18

2

56

Chile

71.81

0.59

3

1

65

Colombia

69.24

-0.17

4

1

67

Costa Rica

68.89

-0.24

5

-2

68

Peru

68.83

-0.62

6

1

79

Panama

66.12

0.85

7

-1

85

El Salvador

65.41

-1.01

8

95

Uruguay

62.6

0.61

9

98

Guatemala

62.17

0.99

10

102

Dom. Rep.

61.12

0.19

11

4

109

Brazil

60.01

3.56

12

-1

113

Paraguay

59.4

0.22

13

119

Argentina

58.8

0.69

14

-2

121

Honduras

58.22

-0.24

15

-1

123

Ecuador

57.94

0.11

16

132

Nicaragua

55.64

0.25

17

156

Bolivia

50.32

0.14

18

188

Venezuela

30.61

-0.26

LAC Average

58.97

0.31

 

 

Sources: The World Bank's Doing Business 2016; Latinvex (rank, changes)

Note: LRK=Latin America rank; GRK=Global rank; Latin America/Caribbean average includes countries not listed here.

 

LATIN AMERICANS MAKES HARVARD BUSINESS REVIEW LIST

Seven Latin Americans have been included in the latest ranking from Harvard Business Review of the world’s 100 best-performing CEOs.

Paolo Rocca, the head of Argentina steel company Tenaris, is ranked highest, at 23rd place, just behind Jamie Dimon of JP Morgan Chase and ahead of the CEOs of companies like Disney, Fedex, MasterCard and Lockheed Martin.

AB InBev CEO Carlos Brito, a native of Brazil, was ranked in 33rd place ahead of CEOs from companies like Microsoft, BlackRock, Airbus and Accenture.

Daniel Hajj Aboumrad, the head of Mexico-based telecom giant America Movil, was ranked 51st, ahead if CEOs of companies like SoftBank, Brookfield and Humana.

Meanwhile Oscar Gonzalez, the head of Southern Copper, shared a 68th place with Amazon CEO Jeff Bezos, while German Larrea (head of Grupo Mexico) ranked in 70th place. Gonzalez and Larrea rank head of the CEOs of companies like Netflix and Marriott.

Renato Alvez Vale, who was head of Brazilian road management company CCR until July, ranks in 92nd place, while Chilean Enrique Cueto, the head of LATAM Airlines, ranks in 100th place.

 

TALENT RETENTION: LATAM STRUGGLES

Latin America struggles when it comes to retaining talent, according to the World Talent Ranking 2018 from Swiss business school IMD.

The ranking of 63 economies worldwide evaluates the capability in developing, attracting and retaining talent. The assessment is based on three factors: Investment and Development, Appeal, and Readiness. These factors include indicators that capture the resources invested in developing local talent, the extent to which a country attracts and retains talent, and the quality of skills available in the talent pool.

“At the bottom of the ranking are several Latin American countries,” IMD says. “These economies are struggling to develop and retain talent.”

Venezuela (63rd), Mexico (61st), Colombia (60th) and Brazil (58th) all share issues related to brain drain, matched by a relatively low level of investment in education.

 


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