Brazil has been ranked the second most complex country in the world for international corporations to do business, according to TMF Group’s Global Benchmark Complexity Index.
Latin America is the most difficult region for companies to operate in; Argentina tops the table for the second year running
The far-reaching annual study by TMF Group, a leading provider of global business and compliance services, has ranked 81 jurisdictions across Europe, the Middle East, Africa, Asia-Pacific and the Americas according to how complex they are to do business in from a regulatory and compliance perspective. The full report can be seen here www.tmf-group.com/complexityindex2014.
According to the index, Brazil has risen 15 places from last year’s rankings, replacing Bolivia which fell one place to third. With Argentina topping the rankings for the second year running, the top three places are all accounted for by Latin American countries, which also represent half of the Index’s top 20.
"Brazil has been one of the most exciting growth stories of the past decade, and the football World Cup and upcoming Olympics will only strengthen the country’s position on the map as a prominent global investment destination," explains Ricardo Aquino, Managing Director of TMF Group Brazil.
"However, reforms of its laws and regulations for opening and running a business have not adapted at the rate with which the economy has grown, presenting many hurdles to overseas corporations."
TMF Group’s research identified local legal systems as a key driver in the complexity of regulatory environments. Those countries that operated a civil law framework, including many Latin American countries, were typically ranked higher than those where common law is employed.
For example, in Brazil, the highly regulated environment and red tape means companies face a significant challenge in dealing with corporate compliance. It can take, on average, 13 procedures and 119 days of work to start a business in Brazil and construction permits demand on average 17 procedures and 469 days to finally get authorised, in case any additional specific permits are required by regulated agencies.
Brazil is, however, undertaking measures aimed at improving its regulated environment. Of particular note is Law 12.973, which came into effect in January 2015, and which is seen as one of the broadest and deepest reforms of the country’s corporate income tax system for over 30 years. Amongst its benefits include the simplification of tax and accounting records, removing the requirement under Brazil’s previous "Transitory Tax Regime" for companies to keep two sets of statutory accounts which caused many issues and differences in interpretation.
"Although there are many complexities associated with doing business in the Brazil it shouldn’t discourage businesses from setting up here," adds Mr. Aquino. "These findings highlight how important it is for companies setting up for the first time in Brazil or indeed the wider Latin American region to have right level of local knowledge and support to help them to ease the administrative burden so they can focus on what they do best."
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