Andres Oppenheimer: Red tape increases corruption in Venezuela
There’s a good reason why Venezuela and several other Latin American countries rank very high in world corruption rankings: These nations have so much red tape that people grow up knowing that they have to grease a lot of palms to get almost anything done.
That was the first thing I thought when I read a new World Bank report showing that Latin America is, in many ways, the world’s most bureaucratic region.
The report, titled “Doing Business 2018,” examines the number of legal procedures people around the world have to complete to do simple things such as starting a business, obtaining a building permit or registering a property. Its results are staggering.
To start a domestically owned new business, whether it’s a big factory or a small store, Latin American and Caribbean countries require an average of 8.4 legal procedures, more than in any other world region.
By comparison, in sub-Saharan Africa, the average is 7.6 procedures, and in the United States and high-income European countries, it’s 4.9 procedures.
But the numbers are more amazing when you compare countries. In Venezuela, you need to go through 20 legal procedures to start a business. In Argentina it is 13 procedures, in Brazil it’s 11 and in Mexico it’s eight. Canada requires only two procedures; New Zealand, only one.
The legal steps to start a new business in Venezuela take 230 days. In Brazil it’s 79 days, in Argentina it’s 25, and in Mexico, it’s 17. But it’s easier in Chile, where it takes seven days, and in Canada, with 1.5 days. In New Zealand, it takes just a half-day.
Red tape is one of the big reasons, according to Transparency International’s annual corruption ranking, that several Latin American countries are among the world’s most corrupt. Since few people have the time to go through the required government paperwork, they either bribe a government employee to speed up the paperwork or simply skip acquiring government permits.
Construction done without permits is one of the reasons so many buildings and houses collapsed during the recent earthquake in Mexico, and in the 2010 earthquake in Haiti. A lot of construction didn’t follow safety rules because of hard-to-meet legal requirements.
Why is Latin America a world champion of bureaucracy? Among other reasons, it’s because populist governments have given public jobs to millions of people for political reasons, and needed to find something for them to do. So they created new bureaucratic requirements, and appointed inspectors and office workers to enforce them.
And when responsible governments won elections, they were reluctant to fire needless public employees because that would have triggered protests. So years went by, and bureaucracies grew to ridiculous levels.
Asked what can be done to reduce red tape and corruption in Latin America, Maria Amparo Casar, president of the Mexicans United Against Corruption and Impunity advocacy group, told me: “Three things: technology, technology and technology.”
I totally agree. Doing much of the paperwork online — at least for the estimated 62 percent of Latin Americans who have access to the internet — would help save time, eliminate the need to bribe public employees and get millions of people out of the shadow economy. It’s a political problem that can largely be solved with technology.
Andres Oppenheimer is a Latin America correspondent for the Miami Herald.