Bloomberg News

Brazil Trails Swaziland in World Bank Competitiveness Study

October 20, 2011

(Updates with comments from the report´s author in the final paragraph.)

Oct. 20 (Bloomberg) -- Brazil slipped six places in the World Bank’s annual competitiveness study, as the world’s seventh-largest economy fell behind countries including Swaziland and Nicaragua for the ease of setting up a business.

Brazil slipped to 126th place among 183 economies ranked in the World Bank’s Doing Business survey published yesterday. The decline comes even as Brazil’s central bank expects record foreign direct investment this year of $60 billion and the country invests in roads, ports and stadiums ahead of its hosting the 2014 World Cup and 2016 Olympics.

In Brazil it takes 119 days to start a business, compared with 14 days in Colombia, which was among the 12 countries that most improved its business climate last year, according to the study. The Andean nation jumped five spots to 42nd in the world. Chile rose two places to 39th, taking back from Peru, which fell two spots to 41st, the title of Latin America’s most business- friendly economy.

Foreign companies have long complained that Brazil’s excessive red tape, what’s known as the “Brazil Cost,” discourages business. The country’s investment rate, which stands at 17.8 percent of gross domestic product, is the lowest among major Latin American economies. It’s also less than a 40 percent investment rate in China, which was ranked 91st in the study.

Overall, 17 of 32 countries in Latin America and the Caribbean changed regulations in the past year making it easier to conduct business, the report said.

Nicaragua Jumps

In addition to Colombia, countries in the region that made at least three improvements to business regulations were Chile, Mexico and Peru.

Nicaragua, where former Sandinista guerrilla Daniel Ortega is seeking re-election as president next month, also made three improvements that allowed the Central American nation to surpass Brazil in the overall ranking, going from 122nd to 118th.

The most common regulatory improvements in the region included making it easier to start a business, boosting access to credit and facilitating tax payment, according to the report.

While Brazil ranked below most of its Latin American peers overall, the study cited a 2005 bankruptcy law that helped increase credit levels 39 percent and reduce the cost of debt 22 percent. Enforcing contracts can take up to 731 days in Brazil, while importing goods and merchandise requires 17 days, the study found.

Though Argentina made it more difficult to transfer property, the nation rose one place to 113th. Venezuela fell two spots to 177th, the lowest in Latin America.

The report focuses on regulations and institutions that impact small and medium businesses, Sylvia Solf, the study’s lead author, said in a telephone interview yesterday. Solf said the World Bank has seen a trend in the region to create a business environment that will encourage companies that operate illegally to work within the law and pay taxes.

--Editor: Robert Jameson, Joshua Goodman

To contact the reporter on this story: Randall Woods in Santiago at rwoods13@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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