Country still struggles with making business easier

indexCosta Rica gets six low scores of the 10 used to compute the World Bank Doing Business index.

The 2013 Index evaluates 185 economies on 10 specific business activities. Costa Rica ranks the lowest at 169th place for protecting investors. The country also is in 128th place on starting a business, dealing with construction permits, enforcing contracts and resolving insolvencies.

The country scores highest, 45th position worldwide, in a firm being able to obtain electricity.

The country’s composite ranking is up 12 positions to 110th place, according to the report. Costa Rican officials have expressed pleasure at the upward trend of the rankings, particularly since several online systems have been put in place to do business activities.

The 2013 index ranking does not fully reflect these new systems because some are only in the metro area.

In addition to the overall index figures, the World Bank produced a 113-page online document that discusses in detail the ease or challenges of doing business in Costa Rica. There also are regional comparisons. For example, México is ranked 36th on the ease of obtaining a construction permit. Honduras is ranked 65th. Costa Rica is ranked 128, well below the regional average of Latin America and the Caribbean of  80.

For those who are considering undertaking construction in Costa Rica or any other country that is covered in the report, there are step-by-step procedures and estimated costs for a typical project. In Costa Rica, the World Bank estimates that to build an $885,000 warehouse in San José will cost $15,800 in fees not counting insurance.

Approvals will take 160 days for the project, a considerable decrease from the 228 days estimated in 2006 by the same index.

The score for protecting investors actually fell two places in the 2013 index, This category measures the rights of minor investors, usually those with less than 10 percent of the ownership of a firm. Or as the index summary says: The strength of minority shareholder protections against directors‘ use of corporate assets for personal gain — or self-dealing. The indicators distinguish three dimensions of investor protections: transparency of related-party transactions, liability for self-dealing and shareholders‘ ability to sue officers and directors for misconduct.

As far as the index category for enforcing contracts, the summary said that Costa Rica has improved contract enforcement with new modes of service delivery, and auction procedures were simplified by authorizing the publication of a single auction notice. The index outlines some 40 steps in a legal procedure to enforce a contract and collect money.

The estimated times is 852 days in a typical case, down just 25 days from 2006, according to the index. That puts the country in 128th place in the index, just below the 115 average for regional economies.

Costa Rica was in 125th place worldwide for the ease of paying taxes. On average, firms make 23 tax payments a year, spend 226 hours a year filing, preparing and paying taxes and pay total taxes amounting to 55.0 percent of profit, said the summary.

The report did note that some of the obligatory payments are now being done via the internet. The time required is down from 402 hours per year in 2006. The index did not address the issue that many firms duck their tax obligations.

The index notes that the estimated time for starting a business and obtaining all the permits and completing all the paperwork in Costa Rica would be about 60 days. The average for First World countries is 12 days with considerable less cost because Costa Rica requires work by lawyers to complete the job.

By comparison some U.S. states will register a corporation in a couple of minutes via the Internet and with the payment by a credit card.

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