Simeon Djankov

1
How to Make Brazil the Country of the Present

• Simeon Djankov
• World Bank Group
• August 2004

2
Doing Business Indicators
2005
2004
2006

• Taxation
• Trade Infrastructure
• Transport
• Customs
• Standards
• Protection of Property
• Law and Order

• Bureaucratic Hassle
• Business licenses
• Inspections
• Corporate Governance
• Property titling

• Regulation of Entry
• Labor Regulations
• Contract Enforcement
• Credit Markets
• Credit information
• Collateral
• Bankruptcy

Avaialble at rru.worldbank.org/doingbusiness
3
How Does Brazil Compare?

• Ranked 142 (of 145 economies) on Firing Costs.
• Ranked 141 on the length of time to start a
  business.
• Ranked 138 on Recovery Rate in Bankruptcy.
• Ranked 134 on the Rigidity of Employment Index.
• Ranked 125 on the length of time to enforce
  contracts.

4

• Ranked 142 (of 145 economies) on Firing Costs
  it takes the equivalent of 165 weeks wages in
  notice, severance pay, and penalties for
  dismissal. Only Sierra Leone, Lao PDR and
  Guatemala impose more costs on the business in
  dismissing a redundant worker.

5
Firing Cost (weeks)
6

• Ranked 141 on the length of time to start a
  business 151 days in Sao Paulo. Only Haiti, Lao
  PDR, Congo Dem Rep. and Mozambique take longer.

7
Time to Start a Business (days)
8
Regional variations in start-up days
Days to obtain alvara (the municipal operational
license) in white
9

• Ranked 138 on Recovery Rate in Bankruptcy
  creditors recover less than 1 cent on the dollar.
  Ahead of only Madagascar, Central African Rep.,
  Chad, Rwanda, Cambodia, Bhutan and Lao PDR.

10
Recovery Rate in Bankruptcy(cents on the dollar)
11

• Ranked 134 on the Rigidity of Employment Index
  a score of 72. Eleven African countries have
  employment regulation that imposes higher
  rigidities.

12
Rigidity of Employment Index
Index varies from 0 (most rigid regulation) to
100 (least rigid)
13

• Ranked 125 on the length of time to enforce
  contracts 566 days to resolve a simple
  commercial dispute in the courts. In Latin
  America, only Bolivia, Guatemala and Uruguay take
  longer.

14
Time to Enforce a Contract (days)
15
The Good News

• The private credit bureau (SEBRASA) is among the
  best in the region and compares well with the
  bureaus in some OECD countries.
• Disclosure of ownership and financial information
  of publicly-listed companies is the best in Latin
  America and among the best in emerging markets.
• Reforms in the property registry have reduced
  delays.
• Proposed bankruptcy legislation will increase
  recovery rates considerably.

16
Private Bureau Coverage
17
Disclosure Index
18
Time to Register Property (days)
19
Registering Property in Brazil
20
The benefits of easing start-up
Additional growth from lower barriers to entry,

• A hypothetical improvement from current
  regulations on business start-up to the average
  in the top quartile of countries suggest that
  Brazil could gain an additional 0.45 percentage
  points in annual growth.

The hypothetical reform involves moving from
the 75th percentile to the 25th percentile on the
ease of entry, ie, from Paraguay to Sri Lanka
21
Ease of Doing Business is Associated with Higher
Growth
A hypothetical improvement on the Ease of Doing
Business indicator to reach the level of the top
quartile of countries would add 2.2 percentage
points annual growth
Implied Additional Growth
Actual Growth
Most difficult
Least difficult
Ease of Doing Business indicator