Puerto Rico is the best place in Latin America and the Caribbean to start a business and gain access to credit and is outranked only by Chile in the overall ease of doing business, according to the “Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises” report released Tuesday by the IFC and World Bank.
However, not all is rosy, as the report’s findings offered a mixed bag of good and bad grades for Puerto Rico. In terms of global ranking, the island slid down three notches to the 41st position on the list, from the 38th position it held in 2012.
The annual report studies 185 world economies and ranks them in 10 areas of business regulation, such as starting a business, resolving insolvency and trading across borders.
Upon closer look at Puerto Rico’s performance in the 10 categories, the report shows that the island improved in only two areas: paying taxes (up four notches to 104) and trading across borders (up one notch to 96.)
“Puerto Rico (territory of the United States) made paying taxes easier and less costly for companies by introducing a new Internal Revenue Code and tax codification and by reducing the effective corporate income tax rate,” the report said, referring to the government’s sweeping tax reform that affected both companies and individuals.
On the flip side, Puerto Rico did not fare as well in the area of dealing with construction permits, where it slipped five notches to 156 in the current ranking from 151 in 2012. The year-over-year deterioration placed Puerto Rico as the region’s lowest performer behind St. Vincent and the Grenadines, which did the best.
The report noted that it takes an average of 156 days and 18 procedures to land construction permits to build projects in Puerto Rico. Still, the “Doing Business 2013” report noted that last year Puerto Rico “made dealing with construction permits easier by creating the Office of Permits Management to streamline procedures.”
And although Puerto Rico compared favorably with other countries in the region in terms of starting a business and gaining access to credit, when inserted into the global ranking, the island slipped one notch in each category.
Another key area where the island backpedalled since last year is in access to electricity. Getting power takes an average of 32 days, five procedures, and close to $70,000 for a new company looking to enter the Puerto Rico business circuit, the report stated.
P.R. vs. the world
The five other economies in Latin America and the Caribbean recognized for improving their regulatory environment the most since 2005 are Guatemala, Peru, Mexico, Uruguay, and the Dominican Republic.
In the past year, Peru strengthened investor protections and dropped requirements for several pre-construction approvals, the report noted.
“We are very encouraged by the progress in Costa Rica, where the authorities showed that focused efforts can make a difference in the business climate, even within a relatively short period,” said Augusto López-Claros, director of Global Indicators and Analysis at the World Bank Group.
“Furthermore, the strides made in recent years in Chile, Peru, Colombia, and Mexico — with performance in some of the indicators tracked by ‘Doing Business’ already at levels seen in rich industrial economies — suggest that the rest of the region can also narrow the regulatory gap,” he said.
Meanwhile, Singapore tops the global ranking on the ease of doing business for the seventh consecutive year. Joining it on the list of the 10 economies with the most business-friendly regulation are Hong Kong SAR, China; New Zealand; the United States; Denmark; Norway; the United Kingdom; the Republic of Korea; Georgia; and Australia.
Topping the list of economies that registered the biggest improvements in the ease of doing business over the last year were Poland, Sri Lanka, Ukraine, Uzbekistan, Burundi, Costa Rica, Mongolia, Greece, Serbia, and Kazakhstan.