Synthesis documents

The Case for Business Registration Reform in Latin America, Jansson & Chalmers, 2002

    The informal sector constitutes a significant segment of most Latin American economies. The millions of micro and small entrepreneurs in the region often perceive that the costs of entering the formal economy and operating in it outweigh the benefits. The barriers to entry include opaque and tedious start-up requirements, as well as expensive ongoing obligations - all of which influence entrepreneurs in their decision as to whether to become and remain formal. These types of regulatory costs are particularly important to small and microenterprises, which generally lack administrative resources to deal with cumbersome and time-consuming requirements.

    This paper proposes a conceptual framework for understanding and analyzing how business regulations affect small and microenterprises. In doing so, it also makes a case for why particular attention should be paid to the process of initial registration of businesses and why this is a promising area for improvement and reform. To show what has been done and what can be done in this area, the paper explores the experiences of various countries around the world that have made efforts to streamline this often lengthy and complicated process. Drawing from these experiences, the paper outlines a number of concrete guidelines for how to go about such an undertaking. Finally, the paper brings the topic down to the operational level by describing a recently approved IDB project in Costa Rica. The effort will create a self-sustainable one-stop-shop for business registration by involving the private sector and employing widely available technology in a new way.

    Business regulation is a very broad topic and there are literally hundreds of different aspects that could be addressed by policymakers and project managers. Business registration is only one of these areas and streamlining this process may not radically alter the overall regulatory context for private enterprise in a country. However, it does constitute a reasonable and rational first step in any serious reform effort.