Ease in Doing Business – Once More

By Hugo Maul R.

It might sound repetitive, and perhaps it is, but the need to improve the country’s competitiveness and remove the obstacles to doing business bears repeating. The problems of insufficient investment, lack of formal employment and poverty faced by Guatemala cannot be solved with a stagnant economy, a production infrastructure that is deficient and in poor condition and the difficulties for investing, starting a new business, innovating and improving productivity in the country. In this regard, one of the main macroeconomic problems besetting the country is the climate of generalized uncertainty that looms over the productive environment. Political stability and legal certainty are two essential factors for entrepreneurial growth and development. Both factors help make business functions more predictable and temper the risks among which companies operate. Constant policy and regulatory changes are among the most common complaints among business people. Business owners’ perception that “things change every time the authorities change” is a constant complaint. Ultimately, this problem slows down entrepreneurial activity and affects the country’s long-term growth possibilities.

The absence of a relatively affordable and effective justice system affects business growth and expansion. A significant proportion of business owners, especially smaller and less productive ones, would rather miss potential businesses or resources whenever there is a breach of contract than resort to the justice system to solve the problem. This is mainly due to the fact that business owners feel that the cost of hiring a lawyer and litigating in court can be higher than the losses caused by the breach of contract or any other legal problem. There is also the perception that problems are not solved easily or fairly. Added to this is the extreme precariousness of property rights to the means of production. This precariousness, combined with social conflict, constitute powerful factors against investment, business expansion and the creation of new entrepreneurial opportunities.

If we add the significant degree of regulatory discretion in certain areas of public administration, as well as the disrepute of public officials, it comes as no surprise that many entrepreneurs would rather miss business opportunities than be the victims of excess regulation. The perception that formalities are drawn out and cumbersome and often lack a practical purpose, as well as the absence of up-to-date and centralized information regarding the different formalities required to operate a business, is still deeply ingrained among the population. This situation raises operating costs and can make it impossible to close specific business deals. As if this were not enough, one of the main limitations of competitiveness in the country is the inadequate production infrastructure. There are two main problems in this connection: the lack of a public infrastructure that supports the production process and the absence of a well-defined, long-range infrastructure policy on this issue.

It is important to realize that in this regard the development of Guatemala depends very little on an honest and capable President or on well-trained and honest parliamentarians and judges. The problems outlined above require the participation of every Guatemalan, but especially a deep conviction that change is possible and that in economic matters change comes about through economic growth, increased productivity, innovation and expanded business opportunities.

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