Mexico Among the Top Improvers in Business Regulation since 2005
October 28, 2013
Washington, D.C., October 29, 2013. A new World Bank Group report finds that Mexico is among the top 50 economies in the world improving business regulation the most since 2005. It also found that Mexico is among the top four Latin American and Caribbean economies that implemented more than three regulatory reforms in 2012, making it easier for local entrepreneurs to do business.
"The reform momentum in the region—and especially in Mexico—is very encouraging,” said Hasan Tuluy, World Bank Vice-President for Latin America and the Caribbean. He emphasized that “Mexico has implemented reforms in at least two areas of business regulation for the past three years”. However, he explained that "some recent major reforms implemented in late 2012 and early 2013, which are also highly beneficial for the business climate such as those in the labor and insurance areas have not been captured in this report since it does not track such specific areas".
According to Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises, Mexico undertook regulatory improvements in three areas tracked by the report:
- Getting electricity became easier by increasing the efficiency of the utility’s internal processes and streamlining the procedures for obtaining a new connection.
- Trading across borders became easier by implementing an electronic single-window system.
- Strengthened contract enforcement system by creating small claims courts, with oral proceedings which can hear both civil and commercial cases.
The report generally seeks to cover the period running from early June 2012 to end May 2013 for 189 countries; however, in the case of Mexico, it reflects only reforms approved up to 2012—given its strong focus on a set of specific indicators used for the analysis, which do not capture the Structural Reform Agenda that the country started in 2013 in key areas such as finance, energy, education and the tax system.
Doing Business 2014 identified that more than half of Latin American and Caribbean economies implemented reforms in the past year aimed at facilitating business activity by local entrepreneurs. The most common of those reforms made it easier to start a new company, pay taxes and protect investors.
Mexico was one of them, as it implemented electronic systems to file and pay taxes over the past 5 years. Moreover, the country advanced to the top 30 economies protecting investors by defining clear duties for firms' Board of Directors. Also, Mexico made it easier to start a business by removing completely any minimum capital requirements and aligned with top best practices of Doing Business globally.
In fact, reforms making it easier to start a formal business are associated with increases in the number of newly registered firms and sustained gains in economic performance—including improvements in employment and productivity. Among the summary findings of research using Doing Business indicators and methodology, the report found that in Mexican municipalities with high constraints to formal entrepreneurship, business registration reform encouraged 14.9 percent of informal business owners with characteristics similar to those of formal business owners to shift to the formal economy. Similarly, simplified entry regulations led 5 percent of informal firms to shift to the formal economy in Mexico.
The results and lessons learnt are encouraging indeed; moreover, the boost to the reform agenda started with the new administration is expected to further make doing business easier in Mexico in the coming years.
The report’s global annual ranking on the ease of doing business puts Singapore in the top slot. Joining it on the list of the top 10 economies with the most business-friendly regulations are Hong Kong SAR, China; New Zealand; the United States; Denmark; Malaysia; the Republic of Korea; Georgia; Norway; and the United Kingdom.
A new feature in Doing Business 2014 is the use of a simple method to calculate which economies improved the most in the ease of doing business by identifying which of them implemented regulatory reforms in 2012/13 making it easier to do business in 3 or more of the 10 topics, and then sorting them by the distance to what is considered the global excellence or frontier in regulatory framework for doing business with respect to previous years. This allows measuring absolute improvement of each economy instead of relative improvement. Under this criterion, Mexico advanced to the top 50 economies worldwide that narrowed the distance to frontier best practices the most since 2005 and made it easier for entrepreneurs to do business.
At the subnational level, reports have covered 355 cities in 55 economies since 2005 including Brazil, China, India, Kenya, Morocco, Pakistan and the Philippines. In Mexico, studies are ongoing in 31 States and its Federal District.
About the Doing Business report series
The joint World Bank and IFC flagship Doing Business report analyzes a specific and limited number of regulations that apply to an economy’s businesses during their life cycle, including start-up and operations, trading across borders, paying taxes, and resolving insolvency. The aggregate ease of doing business rankings are based on 10 indicators and cover 189 economies. Doing Business does not measure all aspects of the business environment that matter to firms and investors. For example, it does not measure the quality of fiscal management, other aspects of macroeconomic stability, the level of skills in the labor force, or the resilience of financial systems. Its findings have stimulated policy debates worldwide and enabled a growing body of research on how firm-level regulation relates to economic outcomes across economies. This year’s report marks the 11th edition of the global Doing Business report series and covers 189 economies. As a result of these debates and the caveats in the analysis and data, the methodology will be revamped in the next edition of the report. For more information about the Doing Business reports, please visit doingbusiness.org and join us on doingbusiness.org/Facebook.
About the World Bank Group
The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org.