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### Viewing cable 07TEGUCIGALPA1154, A CAFTA-DR SUCCESS STORY: TIME TO START A BUSINESS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07TEGUCIGALPA1154 | 2007-06-29 14:02 | 2011-03-02 16:04 | UNCLASSIFIED | Embassy Tegucigalpa
Appears in these articles: http://www.nacion.com/2011-03-02/Investigacion.aspx

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    VZCZCXRO9807
    RR RUEHLMC
    DE RUEHTG #1154/01 1801408
    ZNR UUUUU ZZH
    R 291408Z JUN 07
    FM AMEMBASSY TEGUCIGALPA
    TO RUEHC/SECSTATE WASHDC 6283
    RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
    RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC 0669
    RUCPDOC/DEPT OF COMMERCE WASHDC

` `

    UNCLAS SECTION 01 OF 02 TEGUCIGALPA 001154

    SIPDIS

    SIPDIS

    STATE FOR WHA/CEN ELIA TELLO AND WHA/EPSC LISA MARTILOTTA
    COMMERCE FOR ITA DESK OFFICER MARK SIEGELMAN

    E.O.12958: N/A
    TAGS: ECIN ECON EIND PGOV DR GT CS HO
    SUBJECT: A CAFTA-DR SUCCESS STORY: TIME TO START A BUSINESS
    DRAMATICALLY REDUCED; COSTA RICA LAGS

    1.(U) SUMMARY. Since CAFTA-DR has been implemented, the number of
    days required to register and open a business has been reduced
    dramatically -- and the process made less complex -- throughout the
    region. The treaty was a motivating or sustaining factor for change
    in most of the countries, making the simplification of registering
    and opening a business a CAFTA-DR success story. The only country
    without reform is Costa Rica, where the treaty has not yet been
    ratified. A closer look at some of the stories around the region
    reveals the positive impact a treaty like CAFTA-DR can have on the
    business climate, and provides a strong reason for the Costa Ricans
    to ratify the treaty. This cable was coordinated with the Econ
    Sections of Guatemala City, Santo Domingo, and San Jose. END
    SUMMARY.

    GUATEMALA: 1 DAY TO OPEN BUSINESS (DOWN FROM 30 DAYS)

    2.(U) According to the 2007 World Bank Doing Business Index (WBDBI),
    which measures statistics from April 2006, Guatemalan business used
    to need 30 days to register and begin operations. Efforts to reduce
    this number actually preceded CAFTA-DR, but the upcoming treaty
    provided an additional reason for completing the reforms as quickly
    as possible. According to Emmanuel Seidner, who serves on the
    Guatemalan Presidential Commission on Competitiveness, the country
    has reduced the complexity of the process with a new one-stop window
    ("ventanilla unica") for the registry and opening of a business.
    This uses a single form and a single bank payment to diminish the
    time needed to register a business and pay associated costs.
    Initiated in May 2006 by the Economy Ministry, the system allows
    payments to be made either in a bank or on-line at
    http://www.mineco.gob.gt/ventanillaagil/index .html. Per the American
    Chamber of Commerce in Guatemala, every complete registration is now
    accepted and a company can begin operations within 24 hours, which
    has reduced waiting time for beginning business operations by 97
    percent.

    ¶3. (U) According to FUNDES, a small and medium enterprise business
    association, it used to take about 17 working days to comply with
    all 191 steps needed just to register a business with the Business
    Registry, the Tax Administration Superintendent, the Guatemalan
    Institute of Social Security, the book and machine registration
    authorities, and the official record book authorities, among others.
    Now it takes one step not only to register the business, but also to
    begin operations. According to the 2007 WBDBI it takes an average of
    73 days to register a business in Latin America overall, so
    simplifying the process and reducing the number of days to register
    and start a business to just one puts them at the head of the pack.
    From June 2006 when the system started through December 2006, 21,450
    businesses have registered, representing a 22.1 percent increase
    over the June-December 2005 period.

    HONDURAS: 9 DAYS TO OPEN BUSINESS (DOWN FROM 44 DAYS)

    4.(U) According to Amilcar Bulnes, the head of the Tegucigalpa
    Chamber of Commerce (TCC), there is no doubt that CAFTA was an
    integral factor in Honduras's decision to simplify the business
    registration process. "CAFTA-DR is the difference between whether or
    not an investor chooses to come to Honduras," he stated to EconOff
    in June 2007. But he indicated that taking advantage of CAFTA seemed
    doubtful after a 2004 PriceWaterhouseCoopers study identified a six
    month delay to register a business through a "less than transparent"
    process.

    ¶5. (U) In preparation for ratification of the treaty in April 2006,
    the previous administration of President Ricardo Maduro created the
    Technical Secretariat of the Committee for the Simplification of
    Business Administration (CSAE) to administer a new National
    Competitiveness Program in February 2005. At the time, the Supreme
    Court had responsibility for the National Business Registry, which
    unnecessarily complicated the process. With executive branch
    support, the Supreme Court voted to hand responsibility for the
    Registry to the TCC and 23 Property Institutes located throughout
    the country. Bulnes notes that the TCC is just the fourth Chamber of
    Commerce in Latin America to be given this important responsibility
    from the government.

    ¶6. (U) According to FIDE, a Honduran business organization, the time
    needed to register a business has dropped 96 per cent, from 25 days
    in early 2005 to just one-two days in early 2007. Although the TCC
    still registers businesses by hand, within two months a delegation
    from the Bogota Chamber of Commerce is arriving to implement
    software the Colombians have developed to automate the system. This
    is expected to result in even greater improvements. While
    registering a business still forms just one of nine steps needed to
    actually open a business, the WBDBI noted that the time to complete
    the process was reduced by 29 percent (from 62 to 44 days) from
    2005-2006, the greatest progress of any Central American country.
    CSAE and FIDE expect that this year's report will show that the time

    TEGUCIGALP 00001154  002 OF 002

    has been reduced even further, from 44 to just nine days, due to
    further reductions in waiting time for operating permits.

    DR: 20 DAYS TO OPEN BUSINESS (DOWN FROM 73 DAYS)

    7.(U) In November 2004 USAID, with its contracting partner Chemonics
    International, initiated a study measuring the cost and time
    required for opening a business in the Dominican Republic. The
    conclusions, presented in March of 2005, revealed weaknesses
    concerning the lack of communication between institutions and a
    generally convoluted process to register a business. In response,
    the National Competitiveness Council (CNC) launched an initiative to
    reduce the number of days it takes to start a business in the
    country and to eliminate bureaucratic inefficiencies.

    ¶8. (U) The results have been impressive. The 2007 WBDBI reported
    that it took 73 days to start a business in the Dominican Republic
    in 2006. Laura del Castillo, the Business Climate Improvement
    Specialist at the CNC, says that the number of days has been reduced
    to 20 and the number of steps required has been reduced from 10 to
    seven. She indicated that the success was due to the concerted
    efforts and reforms of three institutions: the National Office of
    Industrial Property (ONAPI), the Internal Revenue Service (DGII),
    and the local chambers of commerce (in particular, the Santo Domingo
    Chamber of Commerce). These institutions used primarily
    technological solutions to implement reforms, with the most
    significant reduction achieved by ONAPI. It reduced the number of
    days to obtain a name registry certificate from 45 to five.

    ¶9. (U) In June 2006 -- with implementation of CAFTA-DR only nine
    months away -- President Leonel Fernndez issued a presidential
    decree creating a committee to integrate the multiple institutions
    that work with the establishment of businesses. This committee
    proposed a pilot plan program known, as in Guatemala, as the
    "ventanilla unica virtual." This would secure, simplify and
    centralize the documents and processes required for the creation and
    formalization of a business. This "ventanilla" should further reduce
    the time it takes to start a business by allowing the processes at
    the three institutions mentioned above to be done simultaneously via
    an integrated web-based registration system. The pilot program will
    launch in August 2007 for the Santo Domingo region and should be
    expanded to other major commercial centers within six months.

    COSTA RICA: 77 DAYS TO OPEN BUSINESS (NO CHANGE)

    10.(U) The story in Costa Rica, the only Central American country
    yet to have ratified CAFTA-DR, is very different. The Costa Rica
    business climate has not improved for several years. In fact, Costa
    Rica was one of only four countries in Latin America whose ranking
    worsened in the WBDBI between 2005 and 2006, dropping to 22 out of
    33 countries in the Americas. While expectations remain that the new
    laws and regulations associated with entering CAFTA-DR into force in
    Costa Rica could significantly improve the investment climate, the
    current reality is that according to the WBDBI it takes an average
    of 77 days to start a business after completing 11 different
    procedures. This number has not changed in the last three years.

    11.(U) COMMENT. The efforts in the Dominican Republic, Guatemala,
    and Honduras to reduce business registration and opening time
    clearly show that it is possible to make improvements if the right
    incentives are in place. The impending launches of CAFTA-DR gave
    countries not only a reason to try to become more competitive, or to
    sustain planned reforms, but also -- as the surveys carried out in
    the Dominican Republic and Honduras show -- to seek out detailed
    information about where their weaknesses were located. The result is
    that these countries have used the reform of the business opening
    process to their advantage and continue to do so, while Costa Rica
    has remained stagnant and fallen in the WBDBI ratings. Ratifying
    CAFTA-DR may represent a strong motivation for them to catch up with their neighbors. END COMMENT.

    FORD

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