By Taxpayers Association
In the midst of institutional deterioration, the increase in corruption and the uncertainty due to political instability, doing or starting a business in Peru is increasingly difficult, because it is a long, expensive and cumbersome process. The time it takes to establish a company in the country is one to two months, depending on its specific characteristics, while the total cost of the procedures is around 355 dollars, while in Chile it takes one day and costs 16 dollars on average, according to an analysis by the Taxpayers Association.
This is directly related to the fact that businessmen and formal workers in Peru do not exceed 20% of the economy in all its sectors. In addition, poverty is linked to informalitydue to low wages and the absence of employment benefits.
Peru ranks 76th out of 190 countries for ease of doing business, according to the Doing Business 2020. So far, it does not seem that we are doing so badly, but if we look carefully at the variables that are evaluated, there is one that is ‘starting a business’, and here the question becomes serious because in this criterion we occupy position 113 out of 190. In previous years, we did not do well either. In 2019 we were ranked 125th out of 190 and in 2018 we were 114th out of 190.
If we analyze this data, we see that the problem lies in the number of processes, deadlines and money involved in starting a business (see infographic). This includes not only the paperwork for the constitution of the company, but also other required procedures for the start of activities, such as the municipal operating license, sectoral authorizations or labor registration, among others.
Added to this is that the crisis caused by the pandemic hit entrepreneurs the hardest. In 2020, some 3.1 million mypes (micro and small businesses) were registered throughout the country, 48.8% less than in 2019. According to figures from the National Household Survey (Enaho), mypes employed 4.5 million people in 2020, 48.6% less than the previous year.
Even so, according to the INEI, in the year of the pandemic, 235,000 new business units were created, most of them single-person and dedicated to retail sales, in response to the loss of 2.2 million jobs due to the economic crisis. “Entrepreneurship is the way in which many Peruvians seek to develop and grow, but to do it in the best way, the State needs to pave the way to formality, with simple procedures, lower costs and time, and greater guidance and support,” he says. Inés Marrache, from the Taxpayers Association.
How to promote formality and growth?
As we have seen, bureaucracy is what puts obstacles to formal businessmen, who are the ones who generate wealth and work in the country, not to mention that these barriers are often a source and breeding ground for corruption, for which changes are needed. that promote greater formality and economic growth.
There are several ways to achieve this. For example, reduce the complexity and costs associated with starting a new business. The World Bank suggests simplifying registration formalities, such as notarial procedures; reduce the steps and entities to go to, through a single portal that generates predictability and simplicity for anyone to start a business, as is the case in Chile or Colombia, where it is less cumbersome to undertake. Finally, it is important that the State guide citizens so that they know what this process is like, in order to make the formalization of companies in Peru more attractive and accessible.
Other simplification experiences
Reviewing and evaluating what other countries are doing well to simplify the company formation process can be useful to adapt some measures to our reality. In 2013, Chile passed a law that shortened this procedure to just one day, and the results have been evident. Today it leads the Doing Business ranking in the region. In 2015, Colombia began a similar process and in 2017 the Single Business Window began to function, in which it takes 4 days and 8 procedures to start up a formal business.
