Mexico gets high ranking on regulatory reforms
Updated: 2014-11-03 04:50
By PAUL WELITZKIN in New York(China Daily Latin America)
Mexico is among the top five business-friendly regulatory environments in Latin America, while Brazil suffers from a complex and time-consuming process for essential business tasks, according to a World Bank Group study.
The annual World Bank Group report released on Oct 29 analyzes regulations that apply to an economy's businesses in 10 categories including trading across borders, paying taxes and resolving insolvency. This year's report analyzed 189 economies in the world.
The report, Doing Business 2015: Going Beyond Efficiency, found that governments around the world are improving the regulatory environment for small and medium-sized enterprises. According to Rita Ramalho, lead author of the report, Mexico has made improving its regulatory environment for business a priority which led to the country's 39th ranking.
"Mexico didn't always have such a good ranking," Ramalho told China Daily in an interview. "The government has been consistently working on improving the process for business and legal requirements. "
Mexico has joined Colombia in the top five on the ease of doing business in Latin America along with Peru, Chile, and Puerto Rico (a US territory), according to the report.
Ramalho said Mexico implemented a new financial law that made resolving insolvency easier by shortening the time extensions allowed during reorganization, facilitating the electronic submission of documents, and improving the legal rights of creditors and other parties involved in bankruptcy procedures.
"This has helped to improve access to credit by creating a level of certainty for entrepreneurs, lenders, and creditors especially in an insolvency. Creditors and lenders have more confidence in the system," she said.
Kevin Gallagher, co-director of the Global Economic Governance Initiative at the Frederick S. Pardee School of Global Studies at Boston University, said Mexico needs a business friendly approach.
"Mexico has been struggling with growth so they have really turned up the incentives to get more foreign direct investment by offering businesses 10 years with no taxes, " he told China Daily in an interview.
The report ranked Brazil 120th and said it is plagued by an inefficient bureaucracy that adds time and complexity to certain business tasks.
Ramalho said companies must get tax numbers on the local, state and national levels in Brazil. "Although this isn't expensive this cumbersome process adds to costs and requires more labor," she said.
Gallagher said Brazil faces more serious challenges. "They have been counting on rising commodity prices and now commodity prices are going down. Brazil must improve its competitiveness," he said.
When combined with Hong Kong, the Chinese mainland's economy earns a top-five ranking. However, the mainland places in the middle of the report's global rankings due in part to inefficiencies in obtaining construction permits when ranked separately.
The mainland/Hong Kong Special Administrative Region placed third in the overall rankings behind New Zealand at No 2 and first-place Singapore. The US placed seventh.
Noting that the mainland's ranking falls from third to 90 when it is separated from Hong Kong,AliciaGarcia-Herrero, chief economist for emerging markets research at Banco Bilbao Vizcaya Argentaria (BBVA), a multinational Spanish banking group, noted that China scores below average in the sub-indexes relating to its legal environment.
"Better protection for property rights, which is one of the key functions of a legal system, can effectively foster entrepreneurship and boost innovation. Technological innovation in mainland (measured as patent registration per every million people) is relatively low compared to that of other regional competitors (like South Korea and Japan)," she wrote in an email to China Daily.
"A more conducive legal environment would play a key role in enhancing China's need to boost its productivity to offset the adverse impacts of demographic factors on economic growth."