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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
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