Unleashing the entrepreneurial spirit in Latin America

By Latin Business Chronicle Tuesday, 27 June 2006

Most of Latin America's poor believe that starting a business is their best hope to get out of poverty. Yet, aspiring Latin American entrepreneurs face disproportionate difficulties to set up a business compared to their counterparts in other parts of the world.

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On average, entrepreneurs need to tackle 11 separate legal procedures, taking about 63 days. According to the World Bank's Doing Business in 2006, Brazil and Argentina top the league of entrepreneurial red tape with 17 and 15 steps respectively required to set up a business. Compare that with nine in Malaysia, five in the US, and two in Australia and New Zealand.

These burdens not only stifle business creativity and sabotage the government’s chance to generate tax revenues, they also bring significant costs to bureaucracy.

Similarly, lack of mobility and flexibility in the labour market represent a major hurdle for entrepreneurs. In the World Bank inflexibility index – which measures the ability of private businesses to hire and fire employees – Latin America ranks as one of the most inflexible regions in the world. It is three times more difficult to hire a new worker in Mexico than in New Zealand or China, and six times more difficult in Brazil.

This prohibits business development and contributes to the growth of an informal economy.

After a busy election year, new governments in Latin America should work harder on promoting an environment more favourable to entrepreneurs, and eventually, a way out of poverty.

Source: Entrepreneurial Challenge
Susan Seagal
Latin Business Chronicles, June 26 2006

Review by Emilie Filou