Friday, September 15, 2006


Doing Business

Greg Mankiw points to a recent report from the World Bank, Doing Business.

Uruguay ranked 64th out of 175 countries in the ease of doing business. A few comparative rankings: Mexico 43rd, Dominican Republic 117th, Argentina 101st, Venezuela 164th. The top three countries were Singapore, New Zealand, and the United States. The bottom three Guinea-Bissau, East Timor, and the Democratic Republic of the Congo.

Here's an excerpt from the report on Uruguay

Region: Latin America & Caribbean
Income category: Upper middle income
Population: 3,463,197
GNI per capita (US$): 4,360.00

Ease of... 2006 rank
Doing Business 64
Starting a Business 134
Dealing with Licenses 56
Employing Workers 58
Registering Property 138
Getting Credit 33
Protecting Investors 83
Paying Taxes 76
Trading Across Borders 59
Enforcing Contracts 119
Closing a Business 37

The data behind the rankings are interesting. It takes, on average, 43 days to start a business in Uruguay. The tax rate on gross profits is 27.6%. The cost of firing a worker is 31 weeks of wages. (Comparable figures for the US are 5 days, 46%, and 0 weeks of wages.) An interesting aside on taxes-- 9 countries, including Argentina, are reported to tax profits at over 100%.

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A little disconcerting, but better then where I am now. Why is it that Latin American Countries think that red tape is so important? Or is it just another form of taxation? As an Economist, I was wondering what things you look to besides the numbers and reports. Are you doing any research in Uruguay or is this year a break from work? Have you seen many Squeegee men, Homeless people, or help wanted signs in windows?
While the red tape works like an indirect tax on individual businesses, it doesn't raise much revenue for governments. Some economists explain it as bureaucrats protecting their own jobs and power.

I'm not doing any research specific to Uruguay but my wife is. She does a lot of statistical analysis.

There are squeegee men, flower vendors, or jugglers at many major intersections. That wasn't true here when we visited in 1998. The economic crisis has had lasting effects. But it's not like what I remember in Santo Domingo. Uruguay continues to have a large middle class, but I think they have been really squeezed financially over the last several years
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