No single Brazilian location leads in all good practices to encourage business activity – World Bank

RIO DE JANEIRO, BRAZIL –  The results of the report “Subnational Doing Business in Brazil 2021” show that currently, no single location leads in all good practices to encourage and simplify business activity. There is, in fact, a strong variation in the business environment among the 26 states and the Federal District. Even those that stand out on one front ultimately show deficiencies in others.

This is the case of São Paulo, which secured the best overall performance in ease of doing business. Despite ranking 1st in registering real estate transfers, the state is placed 14th in opening companies, 15th in securing building permits, and 19th in paying taxes.

Espírito Santo, which leads in the ease of paying taxes, came in second to last in the overall ranking because it performed below other states in the remaining aspects assessed. It ranks 5th in property registration, 9th in starting a business, 22nd in building permits, and last in executing contracts.

The World Bank also shows comparisons between states to illustrate disparities. The costs of starting a business, for one, are almost ten times higher in Mato Grosso than in Ceará, mainly due to the costs of municipal permits. Opening a business takes 9.5 days in Minas Gerais and 24.5 days in the Federal District.

Moreover, companies that need to settle a commercial dispute will find that this proceeding is cheaper and almost 3 times faster in Sergipe than in Espírito Santo. In Roraima, on the other hand, it takes one-third of the time observed in Pernambuco for a company to secure permits for building a warehouse.

States were assessed through their capital cities. For the multilateral organization, the disparity of results shows that in all locations there is opportunity for “exchange of experiences” to improve the environment. “There are examples of good practices in states of all regions, income levels, and sizes,” says the World Bank.

World Bank private sector development specialist Laura Diniz says that even leaders in certain criteria still fall below the Organization for Economic Cooperation and Development (OECD) countries average. “Even if they replicated all of Pará’s best practices (for starting a business), Brazil would still underperform the OECD,” she says.

According to her, business complexity and bureaucracy are challenges in all states. “In Brazil, on average, it takes 11 procedures to open a business.” In the World Bank’s assessment, the main causes of bureaucratic complexity include lack of coordination between agencies involved in the processes and uneven and fragmented implementation of reform programs.

The overall performance in the 5 areas shows that doing business is easiest in São Paulo, Minas Gerais and Roraima. This means that these 3 states tend to have more efficient business regulations, where companies are able to operate with faster, simpler, and less costly processes than the national average.

The report was commissioned by the Brazilian government, through the General Secretariat of the Presidency, and financed by the National Confederation of Trade in Goods, Services, and Tourism (CNC), the Brazilian Federation of Banks (FEBRABAN), and the Brazilian Support Service for Micro and Small Businesses (SEBRAE).

Minister of the General Secretariat Onyx Lorenzoni said that the government aims to create conditions for Brazil to reach the top 50 among countries with the best business environment in the world. In the global ranking, with 190 countries, Brazil currently ranks 124th in terms of business environment.

FEBRABAN’s president Isaac Sidney said that the states’ situation diagnosis is the “first step” to advance in the reform agenda and improve the business environment. “Brazil needs this kind of intelligence and precise evaluation. With tax and administrative reforms and a healthy business environment, with new production prospects, generating income and jobs, we have a more favorable perspective regarding our future,” he said.

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