Friday, October 31, 2014

It is easier to do business in Latin America than in India

The Indians should not complain about difficulties of doing business with Latin America as the Americans and Europeans do. Because, the Latin American countries, except Bolivia and Venezuela, rank way ahead of India's 142nd position in the 2015 World Bank survey on the Ease of Doing Business released on 29 October 2014. The average score of Latin America is 60.51 as against India's score of 53.97. Colombia's score is an impressive 72.29 while the world's highest score is 88.27 of Singapore. The scores of Pacific Alliance members Colombia, Chile, Peru and Mexico are better than those of some European countries such as Belgium, Italy and Luxembourg,

Colombia is the easiest place to do business in Latin America with global rank of 34. It is followed by Peru with 35th rank, Mexico-39th and Chile- 41st. Chile was the best in the region in last year's survey at 34th position while Colombia was 43rd. In general, the Pacific Alliance members have been leading in the region for the ease of doing business with global rankings between 33 and 56 in the last five years. Their ranking could become better in the coming years in view of the commitment of the governments to continue reforms and liberalization and promote domestic and foreign investment. These four countries have signed the maximum number of Free Trade Agreements. In contrast, the Mercosur members Brazil, Argentina and Venezuela have been lagging with global ranks above 120. The three markets are relatively closed and protected with restrictive policies.

Venezuela is the most difficult country in the region with a rank of 182 out of the 189 countries. This is not a surprise given the fact that the Venezuelan political and economic situation is in a mess for the last several years with the unpredictable, non-transparent and anti-business policies of the government. The country could get even worse in the future.

Argentina too could see some deterioration in the coming months due to the foreign exchange shortage and the default situation on the servicing of its external debt.  But there is hope for improvement after the October 2015 elections when a more liberal government is expected to come to power. 

Bolivia has scope for improving its ranking given the business and investment friendly statements given by President Evo Morales after his reelection for the third term in the elections held on 12 October. He has managed the economy pragmatically and prudently since he came to power in 2006. More on this

Central America too inspires optimism since the governments in the region are pursuing more reforms and liberalization to attract investment. Among the central American countries Panama stands out the best with global ranking of 52.

Brazil stands with a rank of 120 improving from its 129th rank in 2010 but still better than India's ranking in the last five years. India's ranking should improve under the pro-business and reformist administration of Prime Minister Modi who has the advantage of a majority party in the parliament. Brazil may not show much progress given the reelection of President Dilma Rouseff who is known for interventionist economic management. She will find it difficult to bring about major reforms since she has to work with a number of parties in the Congress which is even more fragmented with 28 parties, increasing from 22 after the 2010 elections. She could get inspiration from President Enrique Penha Nieto of Mexico who has brought about the most reforms in the region in the last twenty months by reaching consensus with the other major parties under the"Mexico Pact", as seen in the article

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