If you haven’t done so already, check out this latest report published by the World Bank and the International Finance Corporation (IFC) entitled, “Doing Business in a More Transparent World”. The study looks at the regulatory environments of 183 countries and ranks them across ten areas of business regulation, including the time it takes to register a business, dealing with construction permits, getting electricity, registering property, and paying taxes. But before you get too upset about Mexico losing to Colombia, Chile and Peru, let’s read between the lines and see where some of these economies have excelled, and where they need to improve.
First, a word on the IFC rankings: They’re directed more toward the local policymaker, but could also be valuable to third-party outsourcing vendors looking at new markets in which to build out a new delivery center, and to buyers looking for that ideal strategic global partner in the Americas. And since we care so much about enabling innovation and agility these days, the IFC report also shines a ground-level light on the operating environment in some of the more obscure markets. With that in mind, let’s take a look at Mexico and see how it compares to the world and to the rest of Latin America.
Ranking 53rd out 183 countries, Mexico blew Brazil, Costa Rica, and Argentina out of the water on overall ease of doing business – but fared worse than places like Oman, Kazakhstan, Tunisia, and Rwanda (yes, Tunisia just weathered a political overthrow and revolution, but apparently trading across borders is not a problem there). When reading between the lines, it’s also worth taking a look at how countries scored on individual categories.
This is where Mexico scored higher than its overall “ease of doing business” rank: Dealing with construction permits, getting credit, protecting investors, and resolving insolvency. Here is where Mexico scored lower than its overall ranking: Getting electricity, registering property, and paying taxes. Here is how Mexico fared against her Latin American neighbors (out of 183):
Chile - 39
Peru - 41
Colombia - 42
Mexico - 53
Panama - 61
Uruguay - 90
Argentina - 113
Nicaragua - 118
Costa Rica - 121
Brazil - 123
Not bad Mexico, particularly when compared to Brazil and Costa Rica where even Ortega’s Nicaragua managed to beat both of these international superstars on the IFC rankings. So what’s making Brazil such a harsh environment for local businesses? According to the World Bank, dealing with construction permits is a painful process, paying taxes is a headache, enforcing contracts can be difficult, and trading across borders can be an obstacle to ambitious local businesses. All of these components are relevant to both the buy and sell-side of the global sourcing equation; practitioners might be smart to look at the IFC rankings when doing their due diligence.
When it comes to regulation, Mexico’s business community also has it easier than entities in India and the Philippines. Taking the 136th spot on overall rankings, India was practically dead last in dealing with construction permits and enforcing contracts. In India, obtaining a new building permit can take up to nine months and 34 unique procedures. In the Philippines, it can take 15 procedures and 35 days to incorporate your business, and up to 6 years to resolve a bankruptcy.
Despite these obstacles, the IFC report reminds us that it’s getting easier and easier to do business in the developing world. Globally since 2004, the World Bank has recorded a total of 1,750 “improvements” made to the way businesses are regulated. That’s good news to the local business community, and also for global business services that need solid rules in establishing property rights and reducing the cost of dispute resolution, incorporation, and paying tax obligations.
