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Reducing Red Tape in Costa Rica

January 31, 2012

Country takes active steps to improve its business environment

Supported by investment climate teams of the World Bank Group, the government of Costa Rica recently announced a plan to facilitate the conditions for private sector growth. The country aims to create a more competitive and diversified economy by implementing throughout investment climate reforms. 

In October 2011, the Ministry of Economy, Industry and Commerce of Costa Rica and representatives of the Investment Climate Advisory Services of the World Bank Group signed an agreement to deliver technical assistance. Among others, Costa Rica will reduce regulations in the areas of starting a business, obtaining construction permits, paying taxes, resolving insolvency, and trading across borders.  

"It is crucial to improve the business climate, and thus contribute to the economic reactivation and social development of the country." said Mayi Antillón, Minister of Economy, Industry and Commerce. 

In the Doing Business 2012 report, Costa Rica ranks 121st out of 183 economies on the ease of doing business. Since the last report, the country has not changed the classification signaling that other countries are implementing reforms more quickly in the areas measured by the report. Among the 32 economies that make up the region of Latin America and the Caribbean, Costa Rica is ranked 25th. 

The overall performance of Costa Rica in the Doing Business indicators is uneven—the country ranks 46th in registering property and 65th in obtaining credit but 122nd in opening a business and 166th in protecting investors. Especially the process of starting a business is very lengthy and cumbersome. The report also highlights the burden of red tape and outdated regulations on firms in Costa Rica. Overall, there are opportunities for improvement in each of the areas covered by the Doing Business indicators. 

"We will apply international best practices to make the necessary changes for the reduction of red tape in Costa Rica. We expect to see first results a year from now," says Marialisa Mota, Co-Director, Investment Climate Department of the World Bank Group. 

In 2010, the World Bank Group started working with the Government of Costa Rica to adopt first measures to improve regulations in the country—property transfer procedures have been simplified and the number of tax payments for companies has been reduced. 

As part of the reform initiative in Costa Rica, investment climate teams of the World Bank Group delivered a workshop for technical officials governing areas affecting the country's business environment. The team discussed challenges to private sector development and main regulatory bottlenecks in Costa Rica with leading business organizations. The development of an online business start-up system has also been started. Laura Chinchilla, president of Costa Rica agreed to chair follow-up sessions to monitor the impact of the reforms and identify areas of success and areas where more effort is required. "This demonstrates the need to integrate various players in this complex process and this Government is determined to lead it."