Five Months to Open a Firm in Brazil. This Is Just the Start of the Red Tape

It takes about 5 months (152 days) to open a company in Brazil, more than twice the average time in all the other Latin-American countries, where you need in average 73.3 days to start your own business.

When compared to developed countries, where the average is 16.6 days, it takes almost 10 times longer to begin a firm in Brazil.

This information is part of a report by the World Bank in partnership with the International Finance Corporation called Doing Business 2007: How to Reform.

Bureaucracy is the number one villain when the matter is  opening a new business in Brazil. The whole process has several layers of red tape involving 17 stages against 6.2 in developed countries and 10.2 in other Latin American nations.

The cost, on the other hand, is much smaller than in other LatAm countries of the region: 9.9% of the per capita income, against 48.1% in the Latin-American neighbors.

Getting the title to a property is another task filled with bureaucracy. It’s true that one can register property rights, in Brazil in about 45 days (the average for the rest of Latin America is 77.4 days) but the red tape again can be grueling: there are 14 procedures to get the final document while in the rest of the region there are in average 6.6 stages.

The World Bank notes also how tough is to be an employer in Brazil if you want to follow all the regulations and pay all the taxes required by law.

While the difficulty index measured in a scale from 1 to 200 is 27 in developed countries and 34 in Latin America, in Brazil it is 67.  The hiring cost is also higher. While it costs 12.5% of a salary to hire an employee, in Brazil this cost is 37.3%.

Brazil, however, makes firing much easier. In this sector the country has the perfect score of zero. Employers have carte blanche to dismiss employees. The degree of difficulty to take the same action in developed countries is 27.4% very close to the 26.5% of Latin American nations. As for costs, firing in Brazil is cheaper: 36.8 weeks of salary instead of the 59 weeks required in the rest of Latin America.

Medium size companies also pay much more taxes than the world average. They represent 71.7% of  the income while in other LatAm nations this average is 49,1% and in developed countries, 47.8%.

Finally, the bureaucracy when it’s time to pay the taxes gets Brazil another medal for red tape: while it takes 202.9 hours to pay off tributes in developed countries and 430.5 in Latin America, in Brazil the businessman need 2600 hours.

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