The 2020 Doing Business report has just been published by the World Bank Group. This latest report compares data from 190 economies and key cities across the world on the topic of business regulation and its implementation. It focuses on domestic small and medium-size companies and measures regulations that apply throughout their life cycle.
The report provides a snapshot on vital topics crucial to the ease of doing business around the world. The exercise includes getting permits, paying taxes, getting electricity, investor protection, contract enforcement, property registry, trading, issues of insolvency and labor laws. In short, it gives investors a clear picture on what they need to know in order to open and operate a small to medium sized business within a particular economy.
Unfortunately, this is not welcoming news for Puerto Rico. Since 2007, the island has gone from a ranking of 27 on ease of doing business, to an abysmal 65. This is essential information because Puerto Rico’s small business sector represents 99.7 percent of all businesses on the island. In other words, the report tells us that in the last 13 years, the ease of creating, investing and/or operating all existing businesses on the island has worsened by a margin of almost three.
While regions like the Middle East and North Africa have seen dramatic improvements during the last decade, either reducing or eliminating barriers to entry, Puerto Rico has done the opposite. In the last decade, we have endured several permit reforms that have taken us from a spot as 135 to a subpar 143, surprisingly, during a time when permit submittals has been reduced tenfold. Most damaging are the upsetting results in crucial areas like ease of paying taxes and opening new businesses, which were significantly downgraded from 39 in 2007, to 163 in 2020, and from 7 thirteen years ago to its current place at 59.
There is no excuse.
Many of the countries that have improved in the rankings have done so during harsh economic times by just simplifying systems and reducing bureaucracy. While regulation is essential, the excessive rules and subsequent legislation transformations in Puerto Rico have suffocated most of the formal economic growth and pushed many businesses into the darkness of the informal sector or out of the island. While the ones who follow the rules are being suffocated, stay behind and pay the price of stagnation.
This is unacceptable.
As part of the 99.7 percent of small business owners in Puerto Rico, and after having owned a business for almost 20 years, I am disheartened by this precipitous fall. These oppressive rules have decimated the local entrepreneur’s ability to be nimble and agile while adapting to the current global economy.
We must continue to reject the excessive bureaucracy that prevents economic activity and not allow ourselves to languish into small mindedness. We are living in a global economy. In order to compete in the world, we must acquire a business mindset. That is the only option available to us if we want to succeed at globally.