He Peru has many opportunities to grow; However, the environment for doing business needs to be improved and unblocking the projects that can drive development. Director of the World Bank’s Global Indicators Group, Norman Loayza, explains what needs to be done.
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In Peru we have million-dollar projects, but they are not carried out. What is happening?
Peru is not ready for the right environment to do business, as they say in English, it is not “business ready.” This is because the regulatory framework is barely 70% adequate, public services are only 60% adequate, and the efficiency in the application of regulations and these services is only 56%. If we make an international comparison, we find that, in terms of operational efficiency, especially Peru is towards the bottom in the international environment, and it worries us. Why don’t these projects come to light? Opportunities exist, but the business environment is not favorable for them to materialize.
What should be done?
The richness of this project (shown emblematic report that evaluates the business climate) called Business Ready, or simply Be Ready, is such that it presents 1,200 indicators for each economy, with reform guides, so that the State, step by step , in its regulatory framework, in its public service and in its application, can see what can be improved. We present scores for the regulatory framework, public services and operational efficiency. But, in addition, we offer scores for 10 topics that follow the life cycle of the company, from business registration to business liquidation or insolvency. What we noticed is that in these 10 topics, in terms of financial services, Peru is well positioned, but not in terms of international trade, taxes or business registrations.
Could you give us some examples?
For example, in terms of international trade, clearing customs for importation takes 30 days and costs 44% of the imported value in Peru; while in the most efficient economies the cost is only 2% and takes less than a day to do. Regarding taxes, reporting, declaring and paying in Peru takes a company 480 hours; while for the most efficient economies it takes 12 hours. Regarding business registration, registering with all the licenses corresponding to a company takes 75 days in Peru; in the fastest, most efficient companies, only three days. In the time of Hernando de Soto, when he wrote The Other Path, the number of days was 289 days. In other words, in 40 years it has become four times more efficient, but if we compare internationally there is still an efficiency gap that is truly enormous.
How important is infrastructure so that private investment can be contributed?
Infrastructure is essential. The new Port of Chancay is progress, and as a Peruvian I am happy. Now, the question I want to ask is what other public services are needed for that public infrastructure to be efficient. We already see that it is not only about having the building well positioned, but also about having customs services that are fast and convenient, a series of links that allow easy communication. For example, what would happen if the port is very good, but there are no good roads to connect to the productive sites? It is about creating not only an infrastructure point, but an ecosystem of public services, and a large part of those public services has to do with the way in which the State is organized.
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And how important is growth for people’s well-being?
It is essential. Economic growth is a necessary condition for development. It is true that it is not a sufficient condition, there are other essential elements, such as social mobility. But, without sustained and high-level growth, there are no opportunities, particularly investment and employment opportunities, especially for young people, for those people who can do business and make Peru more productive and bigger.
At what rates do we need to grow?
At least 5% of gross domestic product per capita, but with 7% we could reach the levels of an advanced economy in a few years, perhaps converging with the economies that we see so much as a luminary, which are the economies European and United States.
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