Mexico: The World Bank’s Best Place to Do Business in Latin America

While Singapore remains the best country across the globe to conduct business, according to the World Bank's Doing Business index, Mexico and Chile top all Latin American countries.
While Singapore is still the best country across the globe to conduct business, according to the World Bank’s Doing Business index, Mexico and Chile top all Latin American countries. (Cosas de Emprendedor)

EspañolOf all the countries in Latin America, Mexico is the best place for entrepreneurs, according to the World Bank Group’s Doing Business 2016 index, released on Wednesday, October 28. At the opposite end of the spectrum lands Venezuela, which the report ranks 186 out of 189 countries in the entire world.

The index measures regulations in each country that “enhance business activity and those that constrain it.” The report analyzes the way these regulations affect various aspects of the life of a business, including starting a new business, requesting construction permits, getting credit, protecting minority investors, and paying taxes.

For the ninth consecutive year, Singapore tops the World Bank Group’s (WBG) list as the best country in the world for doing business.

While Mexico comes in at 38 out of 189 countries, it earns the highest rank in Latin America. Venezuela, on the other hand, is ranked just three spots from the bottom of the list, and has a business environment that is even worse than war-torn Syria (175), according to the report.

The United States and Canada earned the best ratings in the region, ranking seventh and 14th in the index, respectively. Among Latin American and Caribbean countries, Mexico is followed on the list by Chile (48), Peru (50), Colombia (54), and Puerto Rico (57).

According to the report, Latin America has been slow to implement reforms to streamline the process of starting a new business. Globally, 122 countries adopted 231 measures to facilitate business, while in Latin America, only 16 countries implemented 24 measures.

Mexico, for instance, introduced two reforms in 2014 that improved its ranking in the Getting Credit and Tax Compliance categories, making it the WBG’s top economy for investments in the region.

“Mexico initiated an important financial reform in 2013 with the aim of increasing the availability of credit for businesses and encouraging economic growth. This effort culminated in the Financial Reform Act of 2014,” the report states.

“Some of the changes targeted the country’s Insolvency Law. Adopted in 2000, this law had been part of a series of measures aimed at modernizing Mexico’s insolvency framework — which had been in place for more than half a century — and promoting business rescue in the wake of the 1994 peso crisis.”

Meanwhile, Costa Rica showed the most notable improvement in the Americas after implementing a number of reforms to create a friendlier business environment over the previous year. The WBG ranks the country among the top 10 improvers in the Getting Credit and Getting Electricity categories.

The report also highlights an overall improvement across the globe in minimizing the regulatory hurdles to start a business. In 2015, it takes an average of 20 days worldwide to start a new business, while in 2003 — when the Doing Business report was first published — the global average was 51 days.

On Opposite Ends

The report shows that Mexico made significant gains in the Getting Electricity category, jumping from 76th in the ranking in 2014 to 72nd this year. The country also showed similar progress in the Getting Credit category, climbing seven spots from 12th last year to 5th place. The country’s tax-compliance ranking also improved from 103rd to 92nd.

Meanwhile, Venezuela continues to be the worst country in Latin America to do business, according to the World Bank Group.

The South American country earned a worse ranking in five categories compared to the previous year, including Starting a Business, Getting Electricity, Getting Credit, and Protecting Minority Investors.

By comparison, starting a business in Venezuela takes 144 days, while in Mexico, it takes less than one week.

Chile on the Comeback Trail

According to the WBG, Chile made a comeback this year by displacing Peru as the second-best Latin American country to do business. The survey highlights Chile’s 2014 Insolvency Law, which created bankruptcy courts in the country. “The new law streamlined all provisions related to reorganization and liquidation proceedings, emphasizing the reorganization of viable businesses as a preferred alternative to liquidation,” the report notes.

The study also mentions Chile’s new Superintendency of Insolvency and Reinvestment, which is in charge of managing the judicial proceedings of bankrupt companies. Chile improved 14 points in the Resolving Insolvency category thanks to these reforms, according to the report.

Translated by Adam Dubove.

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