Want to start a business in Costa Rica? Gird your loins.
Your tour of the Costa Rican bureaucracy will take you to at least eight different agencies and government entities, and it will cost you more than $1,000 and two months of effort, according to the latest Doing Business study by the World Bank.
And that’s only if you’re lucky.
“I think (the length) is underestimated,” said Emmanuel Hess, the director of investment support services for the Costa Rican Investment Promotion Agency (CINDE).
The World Bank ranks Costa Rica 113th out of 178 countries in the ease of opening a business. It’s only one of the country’s more infamous trámites – a term that technically means “procedure” but in Costa Rica means something closer to “red tape.”
That rank is a slip from the 106th place it held in the last Doing Business ranking (TT, Sept. 22, 2006).
Now private groups and the government itself say the cumbersome trámites are cutting into Costa Rica’s competitiveness, and it’s time to do something about it.
“Other countries have advanced much faster,” Geovanny Castillo, coordinator of the trámites simplification program at non-governmental organization FUNDES, told The Tico Times.
“Before, not changing was an advantage because it meant you weren’t getting worse,” Castillo said.
Times, however, have changed, and today Costa Rica lags behind reforming neighbors such as Panama, Nicaragua, El Salvador and Guatemala, Castillo said.
Oscar Arias’ administration has taken action by forming a new ministry headed up by former Economy Vice Minister Jorge Woodbridge. Known as the “Competitiveness Minister,”Woodbridge heads a small office that will lead the charge to speed up the country’s sluggish trámites (see separate interview).
“The trámites are excessively slow,” Arias said at a press conference announcing the results of the State of the Nation report.
The trámite to open a business is one of the more egregious, and one that groups like FUNDES particularly would like to see change because the existing system puts a heavy burden on small and medium businesses.
The problem, Castillo said, is often one of repetition. Multiple regulatory agencies require multiple forms, multiple fees and multiple visits to various offices.
Sometimes a site must be visited for a physical inspection by as many as four separate entities.
“No one owns the process, and that’s what makes it so complicated,” Castillo said.
That, presumably, is where Woodbridge would come in – as a central figure who could use his authority to coordinate all the other parts of the bureaucracy to find ways to speed up the process.
Other Central American countries have sped up theirs and lowered costs after cutting down on redundancy by, for example, requiring a single application form.
Other important reforms that cut down the length of tramites include having a single entry point for beginning the process, as well as more “good faith” practices that don’t require so much paperwork and so many individual inspections.
“That’s the bible that all countries follow,” Hess said. “We don’t have to invent it.”
While the trámite to open a business may be the toughest for small and medium businesses, Hess points to others that are more difficult for CINDE’s large, multinational clients.
The process to bring foreign workers into the country is now a major headache for foreign companies since the passage of an immigration reform bill last year.
Also, any company looking to build something is likely to be hung up with the National Technical Secretariat of the Environment Ministry (SETENA) for a long time – whether for good reason or due to lack of staff and funding at the Secretariat.