Promoting Institutional Reforms in Latin America University of Sao Paulo. December 13, 2003

1
Promoting Institutional Reforms in Latin
AmericaUniversity of Sao Paulo.December 13,
2003
2

• "A government could print a good edition of
  Shakespeare's works, but it could not get them
  written the genius belongs to free enterprise.
• Alfred Marshall,1907

3
Normative Obstacles
4
Bureaucracy Related Obstacles
5
A Reform Agenda How to begin?

• Identifying key economic sectors
• Modern mentality
• Adequate sectoral representation
• Good proxy for broader problems
• Export business
• In need of urgent changes
• Capable of leading the wave

6
Central America Current Policies and Business
Priorities
7
Why it is so difficult?

• Absence of a long-term vision
• Lack of coherence of public policy
• Limited steering capacity
• CAFTA and FTAA
• Polarized and fragmented societies
• Absence of democratic mechanisms
• To promote dialogue
• To promote cooperation

8
In order to improve Guatemalas competitiveness,
how important is
9
Mobilizing business community towards reform

• Reach a minimum consensus on
• Broad objective
• Rules of the game
• setting the limits
• Create communication channels
• Between private and public sector
• Within private sector
• Get a broad based support for the reform

10
Reaching consensus Should Trade Policy be
focused on improving competitiveness?
11
A Reform Agenda

• Objective Becoming competitive
• Principles
• Free market oriented
• Advancing democratic principles
• Leadership of the private sector
• Challenges
• Overcoming traditional practices
• Avoiding the Unholly alliance
• Removing obstacles for doing business

12
National Business Agenda

• Democratic mechanism for
• Consulting the business community
• about obstacles affecting business
• Priorities about their removal
• Solutions to overcome them
• Influencing public policy
• Verification of the advances of the reform

13
Methodology

• Making business associations to listen
• Regular business people
• Not only the rich and famous
• Focus Groups, Interviews and Surveys
• To get in contact with the experts
• 10 Business Associations in Gua-Hon-Nic
• Broad participation
• Legitimization of business people needs

14
Other obstacles for doing business in Guatemala
15

• Limited access to credit due to the high costs of
  forcing payment of loans through the judicial
  system.
• Housing construction is costly due to the lack of
  homogeneity on muncipal regulations.
• Inadequate public security raises the
  transportation costs for the firms.

16

• Contrabando and the black market of stolen
  property result on unfair competition to honest
  firms
• Labor regulation imposes too many costs to the
  firms and hampers their productivity.
• The amount of the taxes paid by the small and
  medium firms is not the problem, but the costs
  associated with all the paperwork related to
  taxes.
• Tax policy is uncertain and highly discretional

17
Lessons we have learned

• Consensus about the need of the reform
• Speaking the same language
• Competitiveness
• Let the most advanced sector to lead
• Exporters first
• A few good men
• Business leaders
• Government Officials
• Think Tanks

18
Lessons we have learned

• The organizing voice of business people is like
  glue
• Manufacturers, Farmers, etc
• Spreading the word will pay
• Political Parties
• Civil Society
• Democratic principles legitimize private sector
  proposals

19
Lessons we have learned

• Grassroot support is helpful to exorcise the
  unholly alliance
• Transparency
• Sound proposals
• make international institutions to cooperate
• force compromise by politicians
• A prioritized list of obstacles facilitates to
  measure the status of the reform

20
Lessons we have learned

• Grassroot support is helpful to exorcise the
  unholly alliance
• Transparency
• Sound proposals
• make international institutions to cooperate
• force compromise by politicians
• A prioritized list of obstacles facilitates to
  measure the status of the reform