65219 Economy Profile: Argentina © 2012 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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ISBN: 978-0-8213-8833-4 E-ISBN: 978-0-8213-8834-1 DOI: 10.1596/978-0-8213-8833-4 ISSN: 1729-2638 Printed in the United States Doing Business 2012 Argentina 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 26 Getting electricity ....................................................................................................................... 39 Registering property .................................................................................................................. 46 Getting credit .............................................................................................................................. 56 Protecting investors ................................................................................................................... 63 Paying taxes ................................................................................................................................ 73 Trading across borders .............................................................................................................. 81 Enforcing contracts .................................................................................................................... 90 Resolving insolvency .................................................................................................................. 97 Data notes ................................................................................................................................. 103 Resources on the Doing Business website ............................................................................ 108 Doing Business 2012 Argentina 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is the paying taxes indicators, which cover the period for a local entrepreneur to open and run a small to January–December 2010). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 10 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts and transparency of government procurement, resolving insolvency. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 183 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 46 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 32 in Latin America and the Caribbean, comparisons and benchmarks are valid across 24 in East Asia and the Pacific, 24 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 18 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2012 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and indicators for Argentina. To allow useful comparison, it recommends regulatory reforms. The data, along with also provides data for other selected economies information on ordering Doing Business 2012, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2011 (except for http://www.doingbusiness.org. Doing Business 2012 Argentina 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to ECONOMY OVERVIEW start is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing Region: Latin America & Caribbean business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: Upper middle income medium-size businesses through their life cycle. Economies are ranked from 1 to 183 by the ease of Population: 40,665,732 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 8,450.00 percentile rankings on each of the 10 topics included in the index in Doing Business 2012: starting a business, DB2012 rank: 113 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2011 rank: 114 investors, paying taxes, trading across borders, Change in rank: 1 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the percentile rankings on its component indicators (see Note: See the data notes for sources and the data notes for more details). 1 definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. 1 Except for the ease of getting credit, for which the percentile rankings on its component indicators are weighted, the depth of credit information index at 37.5% and the strength of legal rights index at 62.5%. Doing Business 2012 Argentina 6 THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2012 Argentina 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy the regional average (figure 1.2). The economy’s stands in the aggregate ranking on the ease of doing rankings on the topics included in the ease of doing business is useful. Also useful is to know how it ranks business index provide another perspective (figure compared with other economies and compared with 1.3). Figure 1.2 How Argentina and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2012 Argentina 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Argentina ranks on Doing Business topics Source: Doing Business database. Doing Business 2012 Argentina 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing This measure shows the distance of each economy to business tells only part of the story, so do changes in the ―frontier,‖ a synthetic measure based on the most that ranking. Yearly movements in rankings can efficient practice or highest score observed for each provide some indication of changes in an economy’s Doing Business indicator across all economies and regulatory environment for firms, but they are always years included in the Doing Business sample since relative. An economy’s ranking might change because 2005. Nine areas of business regulation are covered. of developments in other economies. An economy that Comparing the measure for an economy at 2 points in implemented business regulation reforms may fail to time allows users to assess how much the economy’s rise in the rankings (or may even drop) if it is passed regulatory environment as measured by Doing by others whose business regulation reforms had a Business has changed over time—how far it has moved more significant impact as measured by Doing toward (or away from) the most efficient practices and Business. strongest regulations in areas covered by Doing Moreover, year-to-year changes in the overall rankings Business (figure 1.4). The results may show that the do not reflect how the business regulatory pace of change varies widely across the areas environment in an economy has changed over time— measured. They also may show that an economy is or how it has changed in different areas. To aid in relatively close to the frontier in some areas and assessing such changes, Doing Business 2012 relatively far from it in others. introduces the distance to frontier measure. Figure 1.4 How far has Argentina come in the areas measured by Doing Business? Distance to frontier, 2005 and 2011 Note: For economies added to the Doing Business sample after 2005, the starting point is the year in which they were added: 2006 for Montenegro; 2007 for Brunei Darussalam, Liberia and Luxembourg; 2008 for The Bahamas, Bahrain and Qatar; and 2009 for Cyprus and Kosovo. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2012 Argentina 10 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy’s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist— numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Argentina Best performer globally Venezuela, RB DB2012 Argentina DB2012 Argentina DB2011 Ecuador DB2012 Mexico DB2012 Indicator Bolivia DB2012 Brazil DB2012 Peru DB2012 DB2012 Starting a Business 146 143 169 120 164 75 55 147 New Zealand (1) (rank) Procedures (number) 14 14 15 13 13 6 5 17 Canada (1)* Time (days) 26 26 50 119 56 9 26 141 New Zealand (1) Cost (% of income per 11.9 14.2 90.4 5.4 28.8 11.2 11.9 26.1 Denmark (0.0)* capita) Paid-in Min. Capital (% 2.2 2.7 2.3 0.0 4.3 8.4 0.0 0.0 82 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 169 171 107 127 91 43 101 109 China (1) (rank) Procedures (number) 25 25 14 17 16 10 16 10 Denmark (5) Time (days) 365 365 249 469 128 81 188 381 Singapore (26)* Cost (% of income per 107.7 132.9 77.5 40.2 184.0 333.1 76.3 161.9 Qatar (1.1) capita) Doing Business 2012 Argentina 11 Best performer globally Venezuela, RB DB2012 Argentina DB2012 Argentina DB2011 Ecuador DB2012 Mexico DB2012 Indicator Bolivia DB2012 Brazil DB2012 Peru DB2012 DB2012 Getting Electricity (rank) 58 58 124 51 128 142 82 155 Iceland (1) Procedures (number) 6 6 8 6 6 7 5 6 Germany (3)* Time (days) 67 67 42 34 89 114 100 125 Germany (17) Cost (% of income per 20.4 25.2 1181.2 130.3 785.3 395.5 441.6 1341.1 Japan (0.0) capita) Registering Property 139 113 138 114 75 140 22 91 New Zealand (3) (rank) Procedures (number) 7 6 7 13 9 7 4 8 Portugal (1)* Time (days) 53 52 92 39 16 74 7 38 Portugal (1) Cost (% of property 7.0 7.0 4.8 2.3 2.1 5.3 3.3 2.5 Slovak Republic (0.0) value) Getting Credit (rank) 67 64 126 98 78 40 24 182 United Kingdom (1)* Strength of legal rights 4 4 1 3 3 6 7 1 New Zealand (10)* index (0-10) Depth of credit 6 6 6 5 6 6 6 0 Japan (6)* information index (0-6) Public registry coverage 35.9 30.8 11.8 36.1 0.0 0.0 28.5 0.0 Portugal (86.2) (% of adults) Private bureau coverage 100.0 100.0 35.9 61.5 57.9 98.1 36.0 0.0 New Zealand (100.0)* (% of adults) Protecting Investors 111 108 133 79 133 46 17 179 New Zealand (1) (rank) Extent of disclosure 6 6 1 6 1 8 8 3 France (10)* index (0-10) Doing Business 2012 Argentina 12 Best performer globally Venezuela, RB DB2012 Argentina DB2012 Argentina DB2011 Ecuador DB2012 Mexico DB2012 Indicator Bolivia DB2012 Brazil DB2012 Peru DB2012 DB2012 Extent of director 2 2 5 7 5 5 5 2 Singapore (9)* liability index (0-10) Ease of shareholder suits 6 6 6 3 6 5 8 2 New Zealand (10)* index (0-10) Strength of investor 4.7 4.7 4.0 5.3 4.0 6.0 7.0 2.3 New Zealand (9.7) protection index (0-10) Paying Taxes (rank) 144 143 179 150 88 109 85 183 Canada (8) Payments (number per 9 9 42 9 8 6 9 70 Norway (4) year) Time (hours per year) 415 453 1080 2600 654 347 309 864 Luxembourg (59) Trading Across Borders 102 104 126 121 123 59 56 166 Singapore (1) (rank) Documents to export 7 7 8 7 8 5 6 8 France (2) (number) Hong Kong SAR, Time to export (days) 13 13 19 13 20 12 12 49 China (5)* Cost to export (US$ per 1480 1480 1425 2215 1455 1450 860 2590 Malaysia (450) container) Documents to import 7 7 7 8 7 4 8 9 France (2) (number) Time to import (days) 16 16 23 17 25 12 17 71 Singapore (4) Cost to import (US$ per 1810 1810 1747 2275 1432 1780 880 2868 Malaysia (435) container) Enforcing Contracts 45 46 135 118 100 81 111 77 Luxembourg (1) (rank) Doing Business 2012 Argentina 13 Best performer globally Venezuela, RB DB2012 Argentina DB2012 Argentina DB2011 Ecuador DB2012 Mexico DB2012 Indicator Bolivia DB2012 Brazil DB2012 Peru DB2012 DB2012 Time (days) 590 590 591 731 588 415 428 510 Singapore (150) Cost (% of claim) 16.5 16.5 33.2 16.5 27.2 32.0 35.7 43.7 Bhutan (0.1) Procedures (number) 36 36 40 45 39 38 41 30 Ireland (21)* Resolving Insolvency 85 82 65 136 139 24 100 161 Japan (1) (rank) Time (years) 2.8 2.8 1.8 4.0 5.3 1.8 3.1 4.0 Ireland (0.4) Cost (% of estate) 12 12 15 12 18 18 7 38 Singapore (1)* Recovery rate (cents on 32.9 32.8 39.3 17.9 17.2 67.1 28.0 6.2 Japan (92.7) the dollar) Note: The methodology for the paying taxes indicators changed in Doing Business 2012; see the data notes for details. For these indicators, the best performer globally is the economy that has implemented the most efficient practices in its tax system and is not necessarily the one with the highest ranking. For more information on “no practice� marks, see the data notes for details. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2012 Argentina 14 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day business in an economy by recording all Procedure completed once final document is procedures that are officially required or commonly received done in practice by an entrepreneur to start up and formally operate an industrial or commercial No prior contact with officials business—as well as the time and cost required to Cost required to complete each procedure complete these procedures. It also records the (% of income per capita) paid-in minimum capital that companies must deposit before registration (or within 3 months). Official costs only, no bribes The ranking on the ease of starting a business is No professional fees unless services required the simple average of the percentile rankings on by law the 4 component indicators: procedures, time, cost and paid-in minimum capital requirement. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur  Has a start-up capital of 10 times income per and that there has been no prior contact with capita. officials. It also assumes that all government and nongovernment entities involved in the process  Has a turnover of at least 100 times income per capita. function without corruption. And it assumes that the business:  Does not qualify for any special benefits.  Is a limited liability company, located in the  Does not own real estate. largest business city.  Is 100% domestically owned.  Conducts general commercial or industrial activities. Doing Business 2012 Argentina 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Argentina? costs 11.9% of income per capita and requires paid-in According to data collected by Doing Business, starting minimum capital of 2.2% of income per capita (figure a business there requires 14 procedures, takes 26 days, 2.1). Figure 2.1 What it takes to start a business in Argentina Paid-in minimum capital (% of income per capita): 2.2 Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Argentina 16 STARTING A BUSINESS Globally, Argentina stands at 146 in the ranking of 183 regional average ranking provide other useful economies on the ease of starting a business (figure information for assessing how easy it is for an 2.2). The rankings for comparator economies and the entrepreneur in Argentina to start a business. Figure 2.2 How Argentina and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2012 Argentina 17 STARTING A BUSINESS What are the changes over time? While the most recent Doing Business data reflect how process have changed—and which have not (table 2.1). easy (or difficult) it is to start a business in Argentina That can help identify where the potential for today, data over time show which aspects of the improvement is greatest. Table 2.1 The ease of starting a business in Argentina over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 143 146 Procedures (number) 13 13 13 13 13 14 14 14 14 Time (days) 66 30 30 30 30 31 26 26 26 Cost (% of income per 12.4 14.7 12.5 11.6 9.7 9.0 11.0 14.2 11.9 capita) Paid-in Min. Capital (% 9.3 8.1 6.6 5.6 4.8 3.7 2.9 2.7 2.2 of income per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Argentina 18 STARTING A BUSINESS Equally helpful may be the benchmarks provided by Argentina on ways to improve the ease of starting a the economies that today have the best performance business. And changes in regional averages can show regionally or globally on the procedures, time, cost or where Argentina is keeping up—and where it is falling paid-in minimum capital required to start a business behind. (figure 2.3). These economies may provide a model for Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2012 Argentina 19 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In the case of paid-in minimum capital, 82 economies globally and 21 economies in Latin America & Caribbean have no paid-in minimum capital. Source: Doing Business database. Doing Business 2012 Argentina 20 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Argentina (table 2.2)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.2 How has Argentina made starting a business easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. Business start-up was eased with an expedited publication DB2010 process. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Argentina 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Argentina is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new City: Buenos Aires (Ciudad autonoma de) firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Sociedad de Responsabilidad Limitada (SRL) professionals and the study of laws, regulations and Start-up capital: 10 times GNI per capita publicly available information on business entry in that economy. Following is a detailed summary of Paid-in minimum capital (% of income per those procedures, along with the associated time capita): 2.2 and cost. These procedures are those that apply to a company matching the standard assumptions (the ―standardized company‖) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Summary of procedures for starting a business in Argentina—and the time and cost Time to No. Procedure Cost to complete complete The name of the company is verified by the Office of Corporations (Inspección General de Justicia) (IGJ) The corporate name must be reserved to incorporate any new company 1 or make any change to an existing name. A request must be submitted 1 day ARS 75 using the reservation of name form (reserva de nombre) for a cost of ARS 75. Such request expires in 30 days. The Inspección General de Justicia also provides online services for name verification http://www.jus.gov.ar/registros/IGJ/ Certify signatures of partners by a notary public The company is not obliged to notarize its bylaws, which can be formally constituted under a private document. However, the signatures of the founding partners have to be certified by a notary public. Each ARS 650 (cost of 5 2 signature certification costs about ARS 130. Signature of managers and 1 day notarized signatures) statutory auditors (if applicable) of the company must also be certified by a notary public. At the first meeting of partners, draft bylaws are approved and capital is fully subscribed and paid in, except in case of cash contributions were only 25% of the start up capital must be paid in at constitution and the balance has to be paid in within the next 2 years. Deposit initial capital in National Bank (Banco de la Nación Argentina) and obtain proof of payment 3 The company must deposit at least 25% of the subscribed capital, which 1 day ARS 30 must be no less than ARS 3,000, in the National Bank, and also obtain proof of payment. The deposit must be made at the central office of the Argentine National Bank (Banco de la Nación Argentina), or at the Doing Business 2012 Argentina 22 Time to No. Procedure Cost to complete complete branch corresponding to the company's domicile. It can be withdrawn once the company's bylaws are registered by the Office of Corporations. Publish the new company’s notice in the official paper (Boletín Oficial) According to Resolution No. 83/2010 of the Legal and Tecnical Secretary ("Secretaría Legal y Técnica), there are three (3) kinds of publication services : Ordinary Procedure (72 hours): For each line of text up to 70 spaces: AR$ 28,00. Total: AR$ 1,204.00 ; Semi-expeditous procedure (48 hours): For each line of text up to 70 ARS 2,035 (expedited spaces: AR$ 38,00. Total: AR$ 1,634.00; publication fee)+ ARS 4 1-3 days Expeditous procedure (24 hours). For each line of text up to 70 spaces 100 (legalization of AR$ 44,50. Total: AR$ 1,913.50. If the notice is signed by an attorney, to signature) the cost of publication it should be added the cost of legalizing of his/her signature (AR$ 36), while if it is signed by the manager of the company, the cost for the legalization of his/her signature is ARS 100. The publication fee ranges from AR$ 1,300 to AR$ 2,100, approximately; depending on the length of the notice and the kind of publication chosen. Payment of the incorporation fee 5 1 day ARS 30 Registration with the IGJ, entity operating the Public Registry of Commerce in the City of Buenos Aires. Companies located in the City of Buenos Aires must register their by- laws and other documents related to their incorporation with the ICG. The Company must file the proposed Articles of Association and By- laws, the publication in the Official Gazette, evidence of managers' and syndics' (the latter, if applicable) acceptance of position, evidence of the deposit of the cash contributions in the Banco de la Nación Argentina (or other applicable documentation if non-cash contributions are made), evidence of compliance with the managers' guarantee regime (filing of managers' performance bonds) and evidence of the 6 reservation of the corporate name, for approval with the Office of 5 days ARS 250 Corporations. Filing Time: - Regular filing: 5 to 20 days ( 10 days, if no objection). - Special and urgent filing: 1 to 5 days. According to Resolution 7/2005 (effective as of February 7, 2005), the company directors must put forth a guarantee. The guarantee to be furnished by Directors should be in an amount not less than AR$10,000. Such a guarantee may be created by direct funding into the S.R.L., or through public bonds, securities, sureties or bank bonds or the taking of liability insurance. 7 Buy special books 1 day fees included in Doing Business 2012 Argentina 23 Time to No. Procedure Cost to complete complete procedure 8 The books are purchased at commercial bookstores. Once purchased, they should be recorded at the Office of Corporations, as detailed in the following procedure. Get a form from the Public Notaries College and have a notary public submit the company books for rubrication by IGJ Once the IGJ registers the SRL, the company must obtain the rubric of at least a Book of Minutes of Partners' and Managers' Meetings and four accounting books (Buyers VAT Book, Sellers VAT Book, Inventory and Balance Book, and Journal). This procedure can only be started once the company is registered. A notary public has to request a form from the Notary Public's College 5 days ARS 760 8 and submit the rubric request of the company books to the IGJ. The form includes up to five books for their rubric. If the company needs to obtain the rubric for more than five books, another form of the same value has to be filed. The cost includes: (i) cost of 5 books (ARS 300) (ii) cost of the IGJ form (ARS 130) (ii) notary fees (about ARS 300) (iii) book registration fees (ARS 30) Corporate manager needs to obtain a Fiscal Code (Clave Fiscal) "Fiscal Codes" are required for individuals and companies to file affidavits and information with the National Tax Office (AFIP) through the online tax system. Pursuant to National Tax Regulations (AFIP) No.2239/2007, local companies shall make filings through the referred online tax system once their Tax Identification Number (Clave Unica de Identificación Tributaria or CUIT) is linked with the Fiscal Code of the manager appointed as sole legal representative or the manager 1 day no charge 9 appointed as "administrator" (if more than one manager have been appointed legal representative). The sole legal representative or the "administrator", to obtain his/her Fiscal Code, must file the AFIP form 3282/A, signed and certified by a notary public, with the corresponding AFIP agency, along with a copy of the company's bylaws certified by a notary public and evidence that he/she has first obtained his/her CUIT (as manager of local companies). The form includes information about the fiscal address where the individuals will render services as corporate managers -the corporate domicile of the company. Obtain a tax identification number (CUIT) from the National Tax Office (Administración Federal de Ingresos Públicos, AFIP) and register for social security Tax and social security registration can be done jointly at the National 10 Tax Office (Administración Federal de Ingresos Públicos, AFIP). For a 4 days no charge company to obtain its Tax Identification Number (Código de Identificación Tributaria, CUIT), all of the individuals that have been appointed as managers of such company need to have previously obtained their respective CUITs (as managers of local companies) and the sole legal representative or the "administrator" (if more than one Doing Business 2012 Argentina 24 Time to No. Procedure Cost to complete complete manager has been appointed legal representative) needs to have obtained his/her Fiscal Code (Clave Fiscal) (see procedure 9). Since 2007, pursuant to AFIP's General Resolution 2337/2007, the sole legal representative or the "administrator" with Fiscal Code must file AFIP form F. 420/J though the online tax system. If the form is correctly completed, an "approval certificate" will be issued by such online tax system. Upon that, the sole legal representative or the "administrator" will have to file with the corresponding agency of the AFIP: (a) the AFIP form F. 420/J ( listing the number of employees and the date of hire), as filed with the online tax system, signed by this individual before a notary public; (b) evidence of filing of such form with the online tax system; (c) the "approval certificate"; (d) a certified copy of the SRL's bylaws, duly registered with the Office of Corporations; (e) two documents evidencing the SRL's fiscal domicile (i.e. any service invoice, police's domicile certification, lease or commodatum agreement, etc.). Upon approval of the filed documentation, the AFIP will issue the SRL's CUIT. Afterwards, the sole legal representative or the "administrator" should link his/her personal Fiscal Code with the SRL's CUIT (by evidencing that he/she is the sole legal representative or the "administrator" at the SRL; in the latter case by filing with the AFIP the form detailed as Annex IV to AFIP's General Resolution 2239/2007, signed before a notary public). Once the company is registered with AFIP, registration for pension with the Argentine Retirement and Pensions' Integrated System is done automatically when. This joint registration is in force since 24/03/1993 (Official Gazette dated 25/03/1993) as a result of the issuance of Decree 507/93. Register turnover tax at local level at the Dirección General de Rentas (DGR) in the City of Buenos Aires Each of the 24 jurisdictions -23 Argentine Provinces and the City of Buenos Aires- impose a tax on turnover (sales) generated within its boundaries, regardless whether the beneficiary of such sales maintains a domicile or place of business in its jurisdiction. The related rates of tax, rules, and other assessment procedures are determinable solely by each jurisdiction's government authority. Main activities are included in the following items but there are many special rates depending on the activity. 1 day ARS 50 11 - Primary production: 1% - Production of woods: 3% (special activities: 4.9%) - Industrial production: 1% - Financial activities: between 5 and 5.50% The following documentation must be filed with the General Directory of Income (Dirección General de Rentas, DGR): (a) duly completed form FN 009/0024 (download: http://www.agip.gov.ar/web/impuestos/archivos/IB_F%20009- 0024(frente).pdf ) executed by the SRL's legal representative or partner, before a notary public or bank; (b) national identity card of the legal Doing Business 2012 Argentina 25 Time to No. Procedure Cost to complete complete representative or partner who signs the above form; (c) documentation evidencing the registration of the partner or legal representative as SRL's manager with the Office of Corporations; (d) power of attorney of the individual who carries out the filing, if applicable; (e) evidence of the SRL's CUIT; (f) SRL's by laws registered with the Office of Corporations; and (g) document evidencing SRL's commercial domicile (e.g. any public service invoice, police's commercial domicile certification or lease agreement). Register with the Unified System for Labor Registration (USLR) Once the employer files the registration of its employees before the AFIP, they are automatically registered in the Unified System for Labor Registration (USLR). To pay its social security contributions, the company has to fill out and submit electronically with its Fiscal Code the AFIP form 931 in order to obtain the registration. 1 day no charge 12 Employers must make social security withholdings and pay contributions to the USLR, calculated on the salaries paid to employees under labor relationship. This entity manages (a) the retirement pension fund, (b) the family allowances fund, (c) the social security fund, and (d) the unemployment fund. Contract an insurance for employees with a risk labor company (ART, Aseguradora de Riesgos del Trabajo) 13 1 day no charge Risk Labor Companies (Aseguradora de Riesgos del Trabajo, ART) are private companies. Rubricate books of wages in the Ministerio de Trabajo (Ministry of Labor) Every jurisdiction has its own rules regarding the cost of rubricating 14 books of wages in the Argentine Ministry of Labor. 1 day ARS 75 In the City of Buenos Aires, books of wages are registered with the Dirección General de Protección del Trabajo de la Ciudad de Buenos Aires (Labor Protection Agency of the City of Buenos Aires). * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Argentina 26 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Completing all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a fixed telephone line cost for a business to obtain all the necessary Registering the warehouse after its approvals to build a simple commercial warehouse completion (if required for use as collateral or in the economy’s largest business city, connect it to for transfer of the warehouse) basic utilities and register the property so that it Time required to complete each procedure can be used as collateral or transferred to another (calendar days) entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day percentile rankings on its component indicators: procedures, time and cost. Procedure completed once final document is received To make the data comparable across economies, Doing Business uses several assumptions about the No prior contact with officials business and the warehouse, including the utility Cost required to complete each procedure (% connections. of income per capita) The business: Official costs only, no bribes  Is a limited liability company operating in  Will be connected to water, sewerage the construction business and located in (sewage system, septic tank or their the largest business city. equivalent) and a fixed telephone line. The  Is domestically owned and operated. connection to each utility network will be 10 meters (32 feet, 10 inches) long.  Has 60 builders and other employees.  Will be used for general storage, such as of The warehouse: books or stationery (not for goods requiring  Is a new construction (there was no special conditions). previous construction on the land).  Will take 30 weeks to construct (excluding all  Has complete architectural and technical delays due to administrative and regulatory plans prepared by a licensed architect. requirements). Doing Business 2012 Argentina 27 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to permits there requires 25 procedures, takes 365 days build a warehouse in Argentina? According to data and costs 107.7% of income per capita (figure 3.1). collected by Doing Business, dealing with construction Figure 3.1 What it takes to comply with formalities to build a warehouse in Argentina Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Argentina 28 DEALING WITH CONSTRUCTION PERMITS Globally, Argentina stands at 169 in the ranking of 183 other useful information for assessing how easy it is for economies on the ease of dealing with construction an entrepreneur in Argentina to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How Argentina and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2012 Argentina 29 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? While the most recent Doing Business data reflect how of the process have changed—and which have not easy (or difficult) it is to deal with construction permits (table 3.1). That can help identify where the potential in Argentina today, data over time show which aspects for improvement is greatest. Table 3.1 The ease of dealing with construction permits in Argentina over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 171 169 Procedures (number) 25 25 25 25 25 25 25 Time (days) 367 367 367 365 365 365 365 Cost (% of income per 317.9 274.2 232.2 181.9 143.9 132.9 107.7 capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For more information on “no practice� marks, see the data notes for details. Source: Doing Business database. Doing Business 2012 Argentina 30 DEALING WITH CONSTRUCTION PERMITS Equally helpful may be the benchmarks provided by on ways to improve the ease of dealing with the economies that today have the best performance construction permits. And changes in regional regionally or globally on the procedures, time or cost averages can show where Argentina is keeping up— required to deal with construction permits (figure 3.3). and where it is falling behind. These economies may provide a model for Argentina Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2012 Argentina 31 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practice� mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Argentina 32 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Argentina (table 3.2)? Construction is one of them. In an effort to ensure Table 3.2 How has Argentina made dealing with construction permits easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Argentina 33 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Argentina are BUILDING A WAREHOUSE based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Buenos Aires (Ciudad information collected from experts in construction City : autonoma de) licensing, including architects, construction lawyers, construction firms, utility service providers Estimated and public officials who deal with building ARS 1,248,576 Warehouse Value : regulations. These procedures are those that apply to a company and structure matching the standard The procedures, along with the associated time and assumptions used by Doing Business in collecting cost, are summarized below. the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Argentina —and the time and cost Time to No. Procedure Cost to complete complete Cadastral Consultation with Authorities 1 Consultation is a prerequisite for clarifying subsequent procedures. The 1 day ARS 35 land ownership certificate, the plot surface area, and the terrain and cadastral measurements are confirmed. Proof is issued. Request and obtain Perimetral Measurements 2 2 days ARS 30 Request and obtain Land Title (nomenclatura parcelaria) from Cadastral System (Sistema Cadastrales Sociedad Anonima) 2 days ARS 30 3 Request and obtain Certificate of Level (la certificacion de nivel) According to the Decree on Fiscal Fees and Tariffs for 2007, the fee for the certificate of level is ARS 27 plus VAT (21%). The certificate is 4 required for areas that do not have definite leveling maps. Nonelevated 2 days ARS 33 industrial zones have updated, precise level outlines. Along with the land specifications (parcel nomenclature), the authority will require this certificate and will make a note in the ―certificate of line and dimensions of district‖ (Certificate de Línea y Dimensions de Manzana). Obtain Certificate of Line and Dimensions (Certificado de Linea y Dimensiones de Manzana) 2 days ARS 33 5 Obtain construction work use form (formulario Uso Conforme) 6 1 day ARS 33 Similar to a zoning certificate, the form is issued according to the Urban Planning Code. Doing Business 2012 Argentina 34 Time to No. Procedure Cost to complete complete Request and obtain Certificate of Project Drawings (Certificado de Encomienda) from College of Professional Architects 7 1 day ARS 480 Effective February 1, 2008, the fee for the certificate of project drawings is ARS 480 for areas between 1,000 sq. m and 2,500 sq. m. Present the designs and layouts to Cadastral System (Sistema Cadastrales Sociedad Anonima) 8 3 days ARS 3,447 The fee is ARS 2.65 per sq. m. On average, the time required is 48–72 hours. * Request and obtain a Form for construction works 9 1 day ARS 15 * Request and obtain a “Volante Ochava� form 10 1 day ARS 30 * Request and obtain Sanitary Installation Plans (Plano de Instalación Sanitaria) 45 days ARS 3,902 11 * Request and obtain Electricity Installation Plans (Plano de Instalación Eléctrica) 44 days ARS 3,902 12 * Request and obtain Delineation and Construction Rights (Derechos de delineación y construcción) 13 The fee for this procedure is ARS 3.31 per square meter plus VAT, which 1 day ARS 5,202 amounts to ARS 4.00 per sq. m. This fee base is provided for by the Classification of Tariff Law. After completing the form and paying the fee, the company representative receives an attestation. Request and obtain a new construction project permit (Permiso de Obra Nueva) The permit fee is ARS 4 per sq. m. In this case, the total fee would be about ARS 5,202.40. To request and obtain a new construction project permit, BuildCo must submit the following plans and documentation: - Affidavit for the construction project. - Particulars on the signatory. 14 - Building company details. 90 days ARS 5,202 - Certificate of use pursuant to the provisions contained in the Urban Planning Code. - Property titles and purchase agreement (boleto de compra de venta), which is proof of ownership of land for warehouse construction. - Project plans. -- Cadastral plan, delimiting the plot for warehouse construction. -- Fire station installation map. -- Sanitary installation plan. -- Electromechanical plans (elevators, pumps). -- Structure plan. Doing Business 2012 Argentina 35 Time to No. Procedure Cost to complete complete -- Land survey. -- Excavation record, if applicable. -- Land titles (certificados parcelarios) of construction work layout. After the application, the city of Buenos Aires (Gobierno de la Ciudad de Buenos Aires, GCBA) approves the company's project drawings (which determine the cost) and issues the project record number. If construction work has not yet started during a 3-year period (from the plan registration date to the granting of the respective permit), the permit and the respective record will expire. The construction fees and approved delineation will be forfeited. After the Accounting Department (Dirección de Fiscalización de Obras y Catastro) issues the relevant resolution (disposición), the expired record is sent to the general files for permanent and final storage. The developer must notify the Instituto de Estadistica y Registro de la Industria de la Constrccion (IERIC) once during its "existence," but it is compelled to notify each construction startup through the completion of an enclosed form. Before starting construction, the company posts the announcement of machinery works. * Request and obtain Environmental Impact Assessment Certificate Other documents needed include the following: - Environmental Assessment Impact form (Formulario Categorización Impacto Ambiental Tipo Ie). - DDJJ through Form Annex II Dcto 1352/02. - Formula Polinómica s/ Annex VIII de Resol. 873–SSMAMB/ 04. - Aide memoire (memoria descriptiva) with the signature of the main representative (firma del titular) s/ Annex Vd Decree 1352/02 that includes: -- Description of the activity, including materials and inputs, supply and storage processes, operation and location of the machinery used, logistics to deliver products and services, and the like. -- Further details or clarifications on emissions, solid waste, noise vibrations from machinery, and so forth (including results from the 60 days ARS 124 15 formula polinómica). -- Detailed information on cargo-handling logistics. -- Detailed information of construction projects designed to mitigate negative impacts. -- Detailed information on land usage. -- Fire prevention plan. -- Waste management plan. - Environmental impact map. - Registration number in the Registry for Consultants and Professionals (Reg. No. 344 Evaluac. Ambtal. 4/10/00). - Encomienda to the Professional Council. - Notarized copy of the property title. According to O.F. and T. 2007, the environmental assessment fee for a warehouse larger than 500 sq. m. is stipulated in the modifications to Law No. 123 through Resolution No. 873–SSMAMB/ 04. Doing Business 2012 Argentina 36 Time to No. Procedure Cost to complete complete If the report is complete, the certificate should be issued in 30 days. Receive construction startup inspection A record of inspection agents may be found at the city of Buenos Aires Web site (www.buenosaires.gov.ar). 1.2.1.3. Inspection Schedule (Building Code) All inspections must be completed within 24 hours of such request, no matter where the building is located, and according to construction industry schedules and working days, except for municipal schedules and holidays. After the application is submitted at the public works office counter, the 1 day ARS 12,486 16 inspection schedule will be fixed for the following day, depending on the radius within which the construction work is located. In practice, inspectors visit the location in 7–14 days. Suspension of construction is not required. There are four inspections for each type of work, but each one is processed through professional supervisors (Profesionales Verificadores de Obra, PVO). The inspection fee is paid, before registration, together with that for construction rights. The construction inspection fee is 1% of project value. The inspection fee is paid while applying for construction rights. The average wait time is 7–10 days. Notify the GCBA on completion of the construction work foundation and receive inspection 17 1 day no charge In practice, the inspectors visit the location in 7–14 days. Suspension of construction is not required. Notify the GCBA on completion of the construction work structure and receive inspection 18 1 day no charge In practice, the inspectors visit the location in 7–14 days. Suspension of construction is not required. Notify the GCBA on completion of the construction work masonry and receive inspection 19 1 day no charge In practice, the inspectors visit the location in 7–14 days. Suspension of construction is not required. Notify the GCBA on completion of construction work and receive inspection To receive a work completion notice, BuildCo must submit the following documents to the city of Buenos Aires: - A document from Directorate of Real Estate and Registry, proving the 1 day no charge 20 sworn declaration of completed work. That form is obtained in that directorate and displays the proprietor’s signature, in addition to a simple heliographic copy of the building plan. - Original plan of the work in fabric or film transparent polyester, which can be unified (architecture and structures) or displayed in two separated originals. Doing Business 2012 Argentina 37 Time to No. Procedure Cost to complete complete - Architecture plans (six heliographic copies) and structure plans (six heliographic copies). - Plans on fire protection (two copies). - Descriptive record with detail of materials and elements used in the completed work (original and copy). - Form of statistics. - Request of sworn declaration of completion (triplicate). - Plan showing medical facility. BuildCo must submit an affidavit on completion of the construction work. After that, the administrative authority has 60 working days to verify the affidavit’s accuracy and truthfulness. According to the Building Code, this action releases contractors involved in the construction from liability, leaving the owner as the sole liable party. Even so, neither the final approval nor the affidavit nor the final construction plans are required for municipal approval of the warehouse. In practice, the inspectors visit the location in 7–14 days. Suspension of construction is not required. The city of Bueno Aires verifies compliance of construction work with the approved plans and grants a fire inspection certificate (previously a fire department responsibility). Notarize the forms required for final authorization 21 A notary public draws up the authorization deed (escritura de 7 days ARS 500 habilitación). Although the average fee is ARS 500, the fee depends on the size of the work. Request and obtain final authorization (Habilitacion Municipal) According to applicable regulations, authorization may be granted provisionally (pending final authorization) for the construction of either (a) a new facility or any of its parts or (b) any extension or modification to an existing one. However, the use must coincide with that stated on the documents for the project approved for execution, provided that the relevant part has been completed pursuant to applicable regulations. Final authorization must be requested within 30 days of work completion. In practice, this takes 6 months after the authorization file is submitted. 173 days ARS 335 22 As required by the type of authorization procedure, the construction professional (architect, engineer, construction foreman, land surveyor) must prepare the documents. The following forms must be purchased from the corresponding professional board (consejo profesional): - Request for authorization. - Usage certificate (certificado de uso conforme). - Building design affidavit (declaración jurada de conformación del local). - Overload certificate (certificado de sobrecarga), if applicable. - Site layout, if applicable. - Plans or final certificate of fire, ventilation, and mechanical installation, if applicable. Doing Business 2012 Argentina 38 Time to No. Procedure Cost to complete complete - Certificate or supporting document attesting to the submittal of the environmental aptitude application (solicitud de aptitud ambiental) (Law 123, Law 452, and regulatory decrees). For this purpose, if requested, the construction professional must verify whether the site’s building conditions conforms to the pertinent zoning. If necessary, the professional must also consult with the Urban Planning Institute (Consultora Planificacion Urbana, CPU) before starting the procedure. The cost is ARS 1,635.60 (ARS 335 plus an honorarium for the participating independent professional of 1 ARS/ sq. m.). In this case, the professional can be part BuildCo. Register the building 23 1 day no charge The building must be registered at the Revenue Department (Dirección de Rentas) by submitting final approved plans. * Request and connect to telephone services 24 No additional requirements exist for obtaining telephone service. 30 days ARS 182 Within 10 working days of the phone request, an installation invoice is issued. The connection is made within 17 working days. * Request and connect to water services To obtain a connection to potable water service, the final construction work layout (with the relevant certificate issued by the municipal authorities) must be submitted at the commercial office in the zone 14 days ARS 662 25 where the construction site is located. On submittal, a provisional invoice will be issued according to the size of the construction site. Once the application for connection is filed, an inspector visits the construction site to verify the type of connection required. The connection is made within 72–92 hours of that determination. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Argentina 39 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy’s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is 150 meters long.  Is a new construction being connected to  Is to either the low-voltage or the medium- electricity for the first time. voltage distribution network and either overhead  Has 2 stories, both above ground, with a or underground, whichever is more common in total surface of about 1,300.6 square the economy and in the area where the meters (14,000 square feet), and is built on warehouse is located. The length of any a plot of 929 square meters (10,000 square connection in the customer’s private domain is feet). negligible. The electricity connection:  Involves installing one electricity meter. The monthly electricity consumption will be 0.07  Is a 3-phase, 4-wire Y, 140-kilovolt-ampere gigawatt-hour (GWh). The internal electrical (kVA) (subscribed capacity) connection. wiring has been completed. Doing Business 2012 Argentina 40 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 67 days and costs 20.4% of income connection in Argentina? According to data collected per capita (figure 4.1). by Doing Business, getting electricity there requires 6 Figure 4.1 What it takes to obtain an electricity connection in Argentina Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Argentina 41 GETTING ELECTRICITY Globally, Argentina stands at 58 in the ranking of 183 regional average ranking provide another perspective economies on the ease of getting electricity (figure in assessing how easy it is for an entrepreneur in 4.2). The rankings for comparator economies and the Argentina to connect a warehouse to electricity. Figure 4.2 How Argentina and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2012 Argentina 42 GETTING ELECTRICITY Even more helpful than rankings for other economies economies, the practices of their utilities may provide a may be the indicators underlying those rankings (table model for Argentina on ways to improve the ease of 4.1). If obtaining a new electricity connection requires getting electricity. Regional and global averages on fewer procedures, less time or less cost in other these indicators may provide useful benchmarks. Table 4.1 The ease of getting electricity in Argentina and comparator economies Latin America & Global average Venezuela, RB Caribbean Argentina Ecuador average Mexico Bolivia Brazil Peru Indicator Rank 58 124 51 128 142 82 155 72 .. Procedures (number) 6 8 6 6 7 5 6 5 5 Time (days) 67 42 34 89 114 100 125 65 111 Cost (% of income per capita) 20.4 1181.2 130.3 785.3 395.5 441.6 1341.1 593.7 1,942.3 Source: Doing Business database. Doing Business 2012 Argentina 43 GETTING ELECTRICITY What are the details? The indicators reported here for Argentina are based OBTAINING AN ELECTRICITY CONNECTION on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution Buenos Aires (Ciudad City: utility—identified by Doing Business. Data are collected autonoma de) from the distribution utility, then completed and verified by electricity regulatory agencies and Name of Utility: EDESUR independent professionals such as electrical engineers, The procedures are those that apply to a warehouse electrical contractors and construction companies. The and electricity connection matching the standard electricity distribution utility surveyed is the one assumptions used by Doing Business in collecting the serving the area (or areas) in which warehouses are data (see the section in this chapter on what the located. If there is a choice of distribution utilities, the indicators cover). The procedures, along with the one serving the largest number of customers is associated time and cost, are summarized below. selected. Summary of procedures for getting electricity in Argentina—and the time and cost Time to No. Procedure Cost to complete complete Obtain approval of electrical plans from relevant Municipality ("Habilitacion Municipal del plano electromecánico and del plano de la instalación eléctrica") The customer has to submit together with his application for a service connection a receipt of his application to the Municipality for approval of the electrical plans ("Habilitacion Municipal del plano electromecánico and del plano de la instalación eléctrica"). The two sets of electrical plans 45 calendar days ARS 1,100.0 1 detail respectively: a) the location of the machines and their respective electricity needs and b) the design of the internal wiring installation. The customer has to present the approved municipal clearance at the end of the connection process. But a receipt attesting that the procedure has been initiated already has to be submitted at the time of the application. The municipal clearance is required for all new industrial constructions. This procedure happens after the building permit which only covers the civil works of the building. * Customer submits service application to EDESUR and awaits estimate of the connection costs The application for the service connection can be submitted online, in person, by mail or fax. The following documents are required with the application: 14 calendar days no charge 2 • Letterhead indicating the name and coordinates of the authorized applying customer • Details on the required electricity load and the simultaneity factor (this factor specifies how much electrical equipment will be consuming electricity at the same time). • Sketch of the geographic location of the construction Doing Business 2012 Argentina 44 Time to No. Procedure Cost to complete complete • document clarifying the ownership of the building • Municipal approval of electrical plans ("habilitación municipal electromecánica") (if the building is still under construction the approved building plans are also required). • Identification document for the owner of the building • A valid document indicating the directors of the company • document certifying the customer is authorized to submit applicatio and copy of his national identity document (Documento Nacional de Identidad -DNI) • Proof of registration with the Federal Tax Authority (Administración Federal de Ingresos Públicos - AFIP) • DCI -an internal wiring certificate (DCI - Declaración de conformidad Res. ENRE 207/95) issued by an electrician registered with the Association for the Promotion of Electrical Safety ("Asociación para la Promoción de la Seguridad Eléctrica -A.P.S.E."). It is not compulsary. • If the customer is not the owner of the building a security deposit is required equivalent to two months of future consumption. * Receive external inspection from EDESUR Edesur carries out an external inspection to prepare the technical report and to prepare an estimate of the connection costs. It is preferable that a representative of the customer is present at the time of the inspection. 11 calendar days no charge 3 The inspector will establish the connection point and, if necessary, the best location for the chamber for the distribution transformer. On the basis of the information a technical project detailing the required works will be elaborated. The project will also indicate which part of the works will have to be done by the customer or his sub-contractor. * Customer hires an electrician registered with the Association for the Promotion of Electrical Safety ("Asociación para la Promoción de la Seguridad Eléctrica -A.P.S.E.") to obtain an internal wiring certification for the building In the waiting of the approval from the municipality, a customer presents an internal wiring certificate DCI (DCI - Declaración de conformidad) in order to continue the procedures with Edesur. The DCI is issued by an 4 electrician registered with the Association for the Promotion of Electrical 7 calendar days ARS 4,750.0 Safety ("Asociación para la Promoción de la Seguridad Eléctrica - A.P.S.E."). The internal wiring of the building is the responsibility of the user/owner of the building. Not all electricians in Buenos Aires are registered with the Association for the Promotion of Electrical Safety ("Asociación para la Promoción de la Seguridad Eléctrica -A.P.S.E."). The customer signs the supply contract with EDESUR, pays for the connection and awaits an inspection by EDESUR of the works done by the customer's subcontractor 5 1 calendar day no charge The signed supply contract is a prerequisite for EDESUR to start its part of the connection works. By means of the supply contract the client commits to paying the electricity that will be consumed and to not lower Doing Business 2012 Argentina 45 Time to No. Procedure Cost to complete complete the initial load estimate on which the connection works are based. In this moment, the client also has to present the electrical plans approved by the relevant Municipality ("Habilitacion Municipal del plano electromecánico and del plano de la instalación eléctrica"). After the supply contract has been signed, EDESUR inspects the part of the connection works that was carried out by the electrical constractor of the customer. EDESUR will only start its part of the works once the civil works for the connection have been finalized by the electrical contractor of the customer. EDESUR finalizes the connection works and installs the meter EDESUR approves the works that the electrical contractor of the customer did, obtains the relevant approvals from the municipality to do 6 the excavation works in public spaces and finalizes the rest of the 21 calendar days ARS 1,100.0 connection works. The installation of the meter happens on the same day that the connection works are carried out and the electricity starts flowing right away. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Argentina 46 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer’s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day time and cost. Procedure completed once final document is received To make the data comparable across economies, several assumptions about the parties to the No prior contact with officials transaction, the property and the procedures are Cost required to complete each procedure used. (% of property value) The parties (buyer and seller): Official costs only, no bribes  Are limited liability companies, 100% No value added or capital gains taxes included domestically and privately owned.  Are located in the periurban area of the economy’s largest business city.  Has no mortgages attached and has been under the same ownership for the past 10  Have 50 employees each, all of whom are years. nationals.  Consists of 557.4 square meters (6,000 square  Perform general commercial activities. feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value. condition and complies with all safety standards, building codes and legal  Is registered in the land registry or requirements. The property will be transferred cadastre, or both, and is free of title in its entirety. disputes.  Is located in a periurban commercial zone, and no rezoning is required. Doing Business 2012 Argentina 47 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 53 days and costs 7.0% of the Argentina? According to data collected by Doing property value (figure 5.1). Business, registering property there requires 7 Figure 5.1 What it takes to register property in Argentina Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Argentina 48 REGISTERING PROPERTY Globally, Argentina stands at 139 in the ranking of 183 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Argentina to transfer property. Figure 5.2 How Argentina and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2012 Argentina 49 REGISTERING PROPERTY What are the changes over time? While the most recent Doing Business data reflect how process have changed—and which have not (table 5.1). easy (or difficult) it is to register property in Argentina That can help identify where the potential for today, data over time show which aspects of the improvement is greatest. Table 5.1 The ease of registering property in Argentina over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. 113 139 Procedures (number) 5 5 5 5 5 6 6 7 Time (days) 51 51 51 51 51 52 52 53 Cost (% of property value) 8.0 8.0 7.8 7.0 7.0 7.0 7.0 7.0 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For more information on “no practice� marks, see the data notes for details. Source: Doing Business database. Doing Business 2012 Argentina 50 REGISTERING PROPERTY Equally helpful may be the benchmarks provided by on ways to improve the ease of registering property. the economies that today have the best performance And changes in regional averages can show where regionally or globally on the procedures, time or cost Argentina is keeping up—and where it is falling required to complete a property transfer (figure 5.3). behind. These economies may provide a model for Argentina Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2012 Argentina 51 REGISTERING PROPERTY Cost (% of property value) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practice� mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Argentina 52 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Argentina (table 5.2)? Table 5.2 How has Argentina made registering property easier—or not? By Doing Business report year DB Year Reform Argentina made transferring property more difficult by DB2012 adding a requirement that the notary obtain the tax agency’s reference value for property before notarizing the sale deed. DB2011 No reform. Registering property was made more difficult by requiring DB2010 declarations for all transactions over AR$300,000. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Argentina 53 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business Buenos Aires through information collected from local property City: (Ciudad autonoma lawyers, notaries and property registries. These de) procedures are those that apply to a transaction Property Value: 1,701,641.3 matching the standard assumptions used by Doing The procedures, along with the associated time and Business in collecting the data (see the section in cost, are summarized below. this chapter on what the indicators cover). Summary of procedures for registering property in Argentina—and the time and cost Time to No. Procedure Cost to complete complete * Seller must obtain a certificate of ownership ("dominio") and a certificate of good standing ("inhibiciones") from the Real Property Registry The certificate of ownership ("Certificado de dominio") proves that the property is free and clear of liens and or encumbrances. According to Executive Order No. 2080/80, article 8, it is mandatory to obtain the non- encumbrance certificate.The certificate of good standing ("Certificado de 7 days (regular Domain Certificate: inhibiciones") proves that there is no judicial order restraining the seller procedure for ARS 143 (urgent) or from encumbering or disposing of his assets. domain certificate ARS 75 (regular) and personal Personal Annotation The domain certificate and a personal annotation are valid for 15 days, annotation Certificate: ARS 131 1 and they are both requested with a unified form. certificate), 1 day (urgent) or ARS 68 When a notary from the Capital Federal requests a domain certificate, (urgent procedure) (regular) the property is ―reserved‖ for 60 days. If a new Domain certificate is (simultaneous with Certificate of Good requested during this period, it will state that a transaction is in process. procedures 2, 3 and Standing: ARS 46 Pursuant to Technical Resolution N°5/2008 of the Registry of Property 4) dated September 5, 2008, the certificate of good standing can be obtained online at the Registry website www.dnrpi.jus.gov.ar, with a cost of AR$ 46. Only interested parties pursuant to sections 6,7 and 22, Law No. 17,801 can obtain the certificate online, and they also need to be registered users of the website (notaries, accountants, lawyers,...). * Obtain a Real Estate Reference Value (Valor Inmobiliario de Referencia) 1 day (online) (simultaneous with 2 Property transfers in the City of Buenos Aires and some parts of the no cost procedures 1, 3 and Province of Buenos Aires require a ―Valor Inmobiliario de Referencia 4) (VIR)‖ (Real Estate Reference Value‖). The VIR was introduced by Resolutión Nº 67-AGIP-10 of February 10, 2010. A VIR is assigned to Doing Business 2012 Argentina 54 Time to No. Procedure Cost to complete complete every property by the revenue agency and it sets a minimum base to calculate the stamp tax. The VIR aims to prevent the undervaluation of properties done to pay less stamp duty on property transfers. The notary has the responsibility to check the VIR, since the stamp duty will be calculated on the VIR. The procedure is free and it can be obtained online by the notary through the revenue agency website www.agip.gob.ar. However, not all the properties in the City of Buenos Aires have been assigned a VIR yet. In these cases the notary must obtain a certificate stating that there is nno VIR for the property. * Obtain a cadastral certificate ("certificado catastral") The notary requests the cadastral certificate (with measures, boundaries and fiscal valuation) at the Cadastral office (―Oficina catastral‖). The 1 day (simultaneous 3 certificate is valid for one year. In the Capital Federal, there is no need for with procedures 1, ARS 55 a surveyor to measure the property. 2 and 4) Note: for some type of properties, it is possible to obtain the certificate on-line in the Province of Buenos Aires. * Obtain a certificate stating that no local taxes related to the property are due (ABL) This certificate ("Certificado de libre deuda de impuestos municipales- ABL") is obtained at the Notaries’ association ("Colegio de Escribanos"). 1 day (simultaneous 4 Local taxes related to the property being sold are known as ABL with procedures 1, ARS 55 (―alumbrado, barrido y limpieza‖, street light and cleaning). The 2 and 3) certificate is valid for 30 days (or the current month), according to the 2009 ―Código Fiscal‖ of the city of Buenos Aires, which shortened the original 1 year validity. Obtain "Code of Offer of Transfer of a Property" (COTI) at tax agency AFIP Sellers have to declare property transfers of over ARS 600.000 to the tax authorities in the City (AFIP). The declaration shall include the names of the buyer and seller, the property being transferred and the value of the transaction. Once the transaction is declared, the seller will obtain a "Code of Offer of Transfer of a Property" (COTI) from AFIP. The COTI has a validity of 24 months (extendable 12 months if a construction is to be made). 1 day no cost 5 The "Code of Offer of Transfer of a Property" (COTI) may be obtained: - online: through www.afip.gov.ar, accessing to the system with a tax code; or -on the phone (0800-999-2347), in which case it will be necessary to print a certificate afterwards from www.afip.gov.ar (access to the system is with a tax code); or - via sms, texting 2347: the user will receive a reply with the number of procedure and will be contacted later by the Information Call Center to continue with the procedure. Doing Business 2012 Argentina 55 Time to No. Procedure Cost to complete complete The COTI was implemented to fight tax evasion on March 1, 2008, through the Resolución General N° 2371 Año 2007 from 14/12/2007. The public deed is executed by the parties with the intervention of a notary public The public deed is the only document which is mandatory by law to Notary public fees: transfer a property's ownership. 1-1.5% of the Transactions subject to Capital Gains Tax are not subject to Transfer Tax purchase price (this is the case when companies are parties to the transaction). Capital (usually paid by Gains Tax is paid by the seller. However, this tax is not applicable if the buyer) money collected by seller for the transfer of property is used to buy Stamp Tax: 2.5 % of 6 another property within a year of the sale or for the construction of a 14-28 days the purchase price new property. In this last case, for the tax waiver to apply, the (usually paid jointly) construction has to start a year after or a year before the transaction and Transfer Tax: 3% of it has to be completed 4 years after the date of the transaction. The notary will retain the 1.5% for the transfer tax, but if the transaction the purchase price is subject to Capital Gains Tax (CGT), he will use this amount to pay the (paid by seller) CGT. If the transaction has been arranged through a broker, his fees will be about 3% of the purchase price. The notary public files the property transfer for registration with the Real Property Register ARS 113.5 (regular) Upon registration, the buyer will have perfect and complete title to the or ARS 251.5 property, opposable to third parties. The registration fees are usually 28 days (urgent) + 0.2% 7 paid by the buyer. The notary has 45 days to register the property property price transfer. At this stage, the property title can be used as collateral for a additional stamp tax loan, or the property can be resold. The majority of registyrations are made following the regular procedure. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Argentina 56 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and the legal rights of borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view a Strength of legal rights index (0–10) potential borrower’s financial history (positive or Protection of rights of borrowers and lenders negative)—valuable information to consider when through collateral laws assessing risk. And they permit borrowers to Protection of secured creditors’ rights through establish a good credit history that will allow easier bankruptcy laws access to credit. Sound collateral laws enable businesses to use their assets, especially movable Depth of credit information index (0–6) property, as security to generate capital—while Scope and accessibility of credit information strong creditors’ rights have been associated with distributed by public credit registries and higher ratios of private sector credit to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. Doing Business uses case scenarios to determine  Has 100 employees. the scope of the secured transactions system,  Is 100% domestically owned, as is the lender. involving a secured borrower and a secured lender and examining legal restrictions on the use of The ranking on the ease of getting credit is based on movable collateral. These scenarios assume that the the percentile rankings on its component indicators: borrower: the depth of credit information index (weighted at 37.5%) and the strength of legal rights index  Is a private, limited liability company. (weighted at 62.5%).  Has its headquarters and only base of operations in the largest business city. Doing Business 2012 Argentina 57 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Argentina stands at 67 in the ranking of 183 collateral and bankruptcy laws in Argentina facilitate economies on the ease of getting credit (figure 6.1). access to credit? The economy has a score of 6 on the The rankings for comparator economies and the depth of credit information index and a score of 4 on regional average ranking provide other useful the strength of legal rights index (see the summary of information for assessing how well regulations and scoring at the end of this chapter for details). Higher institutions in Argentina support lending and scores indicate more credit information and stronger borrowing. legal rights for borrowers and lenders. Figure 6.1 How Argentina and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2012 Argentina 58 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how institutions and regulations have been strengthened— well the credit information system and collateral and and where they have not (table 6.1). That can help bankruptcy laws in Argentina support lending and identify where the potential for improvement is borrowing today, data over time can help show where greatest. Table 6.1 The ease of getting credit in Argentina over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. 64 67 Strength of legal rights 4 4 4 4 4 4 4 4 index (0-10) Depth of credit 6 6 6 6 6 6 6 6 information index (0-6) Public registry coverage 20.1 22.1 25.4 25.5 31.2 34.3 30.8 35.9 (% of adults) Private bureau 73.3 95.0 100.0 100.0 100.0 100.0 100.0 100.0 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Argentina 59 GETTING CREDIT One way to put an economy’s getting credit indicators index for Argentina in 2011 and shows the number of into context is to see where the economy stands in the other economies having the same score in 2011. distribution of scores across other economies. Figure Figure 6.3 shows the same thing for the depth of credit 6.2 highlights the score on the strength of legal rights information index. Figure 6.2 Have legal rights for borrowers and lenders Figure 6.3 Have the coverage and accessibility of credit become stronger? information grown? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2011 information index (0–6), 2011 Source: Doing Business database. Source: Doing Business database. Doing Business 2012 Argentina 60 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Argentina (table 6.2)? Table 6.2 How has Argentina made getting credit easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Argentina 61 GETTING CREDIT What are the details? The getting credit indicators reported here for The data on the legal rights of borrowers and lenders Argentina are based on detailed information collected are gathered through a survey of financial lawyers and in that economy. The data on credit information verified through analysis of laws and regulations as sharing are collected through a survey of a public well as public sources of information on collateral and credit registry or private credit bureau (if one exists). bankruptcy laws. For the strength of legal rights index, To construct the depth of credit information index, a a score of 1 is assigned for each of 8 aspects related to score of 1 is assigned for each of 6 features of the legal rights in collateral law and 2 aspects in public credit registry or private credit bureau (see bankruptcy law. summary of scoring below). Summary of scoring for the getting credit indicators in Argentina Latin America & Indicator Argentina OECD high income Caribbean Strength of legal rights index (0-10) 4 6 7 Depth of credit information index (0-6) 6 3 5 Public registry coverage (% of adults) 35.9 10.1 9.5 Private bureau coverage (% of adults) 100.0 34.2 63.9 Strength of legal rights index (0–10) Index score: 4 Can any business use movable assets as collateral while keeping possession of the assets; Yes and any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of No movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of No its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend No automatically to the products, proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an No electronic database indexed by debtor's names? Are secured creditors paid first (i.e. before general tax claims and employee claims) when a Yes debtor defaults outside an insolvency procedure? Doing Business 2012 Argentina 62 Strength of legal rights index (0–10) Index score: 4 Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No business is liquidated? Are secured creditors either not subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure, or the law Yes provides secured creditors with grounds for relief from an automatic stay or Does the law allow parties to agree in a collateral agreement that the lender may enforce its No security right out of court, at the time a security interest is created? Private credit Public credit Depth of credit information index (0–6) Index score: 6 bureau registry Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative data distributed? Yes Yes 1 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as Yes No 1 financial institutions? Are more than 2 years of historical credit information Yes No 1 distributed? Is data on all loans below 1% of income per capita Yes Yes 1 distributed? Is it guaranteed by law that borrowers can inspect Yes Yes 1 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Coverage Private credit bureau Public credit registry Number of firms .. 118,534 Number of individuals .. 9,296,419 Source: Doing Business database. Doing Business 2012 Argentina 63 PROTECTING INVESTORS Investor protections matter for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not provide such protections, investors may be reluctant to invest unless they become the controlling Extent of disclosure index (0–10) shareholders. Strong regulations clearly define Who can approve related-party transactions related-party transactions, promote clear and efficient Disclosure requirements in case of related- disclosure requirements, require shareholder party transactions participation in major decisions of the company and set clear standards of accountability for company Extent of director liability index (0–10) insiders. Ability of shareholders to hold interested What do the indicators cover? parties and members of the approving body liable in case of related-party transactions Doing Business measures the strength of minority Available legal remedies (damages, repayment shareholder protections against directors’ use of of profits, fines, imprisonment and rescission corporate assets for personal gain—or self-dealing. of the transaction) The indicators distinguish 3 dimensions of investor protections: transparency of related-party Ability of shareholders to sue directly or transactions (extent of disclosure index), liability for derivatively self-dealing (extent of director liability index) and Ease of shareholder suits index (0–10) shareholders’ ability to sue officers and directors for Access to internal corporate documents misconduct (ease of shareholder suits index). The (directly or through a government inspector) ranking on the strength of investor protection index is the simple average of the percentile rankings on Documents and information available during these 3 indices. To make the data comparable across trial economies, a case study uses several assumptions Strength of investor protection index (0–10) about the business and the transaction. Simple average of the extent of disclosure, The business (Buyer): extent of director liability and ease of shareholder suits indices  Is a publicly traded corporation listed on the economy’s most important stock exchange (or at least a large private company with multiple the company purchase used trucks from another shareholders). company he owns.  Has a board of directors and a chief executive  The price is higher than the going price for used officer (CEO) who may legally act on behalf of trucks, but the transaction goes forward. Buyer where permitted, even if this is not specifically required by law.  All required approvals are obtained, and all required disclosures made, though the transaction The transaction involves the following details: is prejudicial to Buyer.  Mr. James, a director and the majority  Shareholders sue the interested parties and the shareholder of the company, proposes that members of the board of directors. Doing Business 2012 Argentina 64 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections in Argentina? The index (figure 7.1). While the indicator does not economy has a score of 4.7 on the strength of investor measure all aspects related to the protection of protection index, with a higher score indicating minority investors, a higher ranking does indicate that stronger protections (see the summary of scoring at an economy’s regulations offer stronger investor the end of this chapter for details). protections against self-dealing in the areas measured. Globally, Argentina stands at 111 in the ranking of 183 economies on the strength of investor protection Figure 7.1 How Argentina and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2012 Argentina 65 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how ranking on the strength of investor protection index well regulations in Argentina protect minority investors over time shows whether the economy is slipping today, data over time show whether the protections behind other economies in investor protections—or have been strengthened (table 7.1). And the global surpassing them. Table 7.1 The strength of investor protections in Argentina over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 108 111 Extent of disclosure 6 6 6 6 6 6 6 index (0-10) Extent of director 2 2 2 2 2 2 2 liability index (0-10) Ease of shareholder 6 6 6 6 6 6 6 suits index (0-10) Strength of investor 4.7 4.7 4.7 4.7 4.7 4.7 4.7 protection index (0-10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Argentina 66 PROTECTING INVESTORS But the overall ranking on the strength of investor and ease of shareholder suits indices may also be protection index tells only part of the story. Economies revealing (figure 7.2). Equally interesting may be the may offer strong protections in some areas but not changes over time in the regional average scores for others. So the scores recorded over time for Argentina those indices. on the extent of disclosure, extent of director liability Figure 7.2 Have investor protections become stronger? Strength of investor protection index (0-10) Extent of disclosure index (0-10) Doing Business 2012 Argentina 67 PROTECTING INVESTORS Extent of director liability index (0-10) Ease of shareholder suits index (0-10) Note: The higher the score, the stronger the investor protections. The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Argentina 68 PROTECTING INVESTORS Economies with the strongest protections of minority time. So reforms to strengthen investor protections investors from self-dealing require more disclosure may move ahead on different fronts—such as through and define clear duties for directors. They also have new or amended company laws or civil procedure well-functioning courts and up-to-date procedural rules. What investor protection reforms has Doing rules that give minority investors the means to prove Business recorded in Argentina (table 7.2)? their case and obtain a judgment within a reasonable Table 7.2 How has Argentina strengthened investor protections—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Argentina 69 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for shareholder suits indices, a score is assigned for each Argentina are based on detailed information collected of a range of conditions relating to disclosure, director through a survey of corporate and securities lawyers liability and shareholder suits in a standard case study and are based on securities regulations, company laws transaction (see the notes at the end of this chapter). and court rules of evidence. To construct the extent of The summary below shows the details underlying the disclosure, extent of director liability and ease of scores for Argentina. Summary of scoring for the protecting investors indicators in Argentina Latin America & Indicator Argentina OECD high income Caribbean Extent of disclosure index (0-10) 6 4 6 Extent of director liability index (0-10) 2 5 5 Ease of shareholder suits index (0-10) 6 6 7 Strength of investor protection index (0-10) 4.7 5.1 6.0 Score Extent of disclosure index (0-10) 6 What corporate body provides legally sufficient approval for the transaction? 2 Whether disclosure of the conflict of interest by Mr. James to the board of directors is 2 required? Whether immediate disclosure of the transaction to the public and/or shareholders is 2 required? Whether disclosure of the transaction in published periodic filings (annual reports) is 0 required? Whether an external body must review the terms of the transaction before it takes place? 0 Extent of director liability index (0-10) 2 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller 1 transaction causes to the company? Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller 0 transaction causes to the company? Whether shareholders can hold members of the approving body liable for the damage that 0 the Buyer-Seller transaction causes to the company? Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 0 Doing Business 2012 Argentina 70 Score Whether Mr. James pays damages for the harm caused to the company upon a successful 1 claim by the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 shareholder plaintiff? Whether fines and imprisonment can be applied against Mr. James? 0 Ease of shareholder suits index (0-10) 6 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction 0 documents before filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to 1 investigate the transaction? Whether the plaintiff can obtain any documents from the defendant and witnesses during 4 trial? Whether the plaintiff can request categories of documents from the defendant without 1 identifying specific ones? Whether the plaintiff can directly question the defendant and witnesses during trial? 0 Whether the level of proof required for civil suits is lower than that of criminal cases? 0 Strength of investor protection index (0-10) 4.7 Source: Doing Business database. Notes: Extent of disclosure index (0–10) Scoring for the extent of disclosure index is based on 5 components: Which corporate body can provide legally sufficient approval for the transaction 0 = CEO or managing director alone; 1 = shareholders or board of directors vote and Mr. James can vote; 2 = board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote. Whether disclosure of the conflict of interest by Mr. James to the board of directors is required 0 = no disclosure; 1 = disclosure of the existence of a conflict without any specifics; 2 = full disclosure of all material facts. Whether immediate disclosure of the transaction to the public, the regulator or the shareholders is required 0 = no disclosure; 1 = disclosure on the transaction only; 2 = disclosure on the transaction and Mr. James’s conflict of interest. Whether disclosure of the transaction in the annual report is required 0 = no disclosure; 1 = disclosure on the transaction only; 2 = disclosure on the transaction and Mr. James’s conflict of interest. Doing Business 2012 Argentina 71 Whether it is required that an external body (for example, an external auditor) review the transaction before it takes place 0 = no; 1 = yes. Extent of director liability index (0–10) Scoring for the extent of director liability index is based on 7 components: Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company 0 = suits are unavailable or available only for shareholders holding more than 10% of the company’s share capital; 1 = direct or derivative suits available for shareholders holding 10% of share capital or less. Whether shareholders can hold Mr. James liable for the damage that the transaction causes to the company 0 = Mr. James is not liable or is liable only if he acted fraudulently or in bad faith; 1 = Mr. James is liable if he influenced the approval or was negligent; 2 = Mr. James is liable if the transaction is unfair or prejudicial to the other shareholders. Whether shareholders can hold the approving body (the CEO or members of the board of directors) liable for the damage that the transaction causes to the company 0 = members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1 = liable for negligence in the approval of the transaction; 2 = liable if the transaction is unfair or prejudicial to the other shareholders. Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0 = rescission is unavailable or available only in case of Seller’s fraud or bad faith; 1 = rescission is available when the transaction is oppressive or prejudicial to the other shareholders; 2 = rescission is available when the transaction is unfair or entails a conflict of interest. Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff 0 = no; 1 = yes. Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff 0 = no; 1 = yes. Whether both fines and imprisonment can be applied against Mr. James 0 = no; 1 = yes. Ease of shareholder suits index (0–10) Scoring for the ease of shareholder suits index is based on 6 components: What range of documents is available to the plaintiff from the defendant and witnesses during trial Score of 1 for each of the following: information that the defendant has indicated he intends to rely on for his defense; information that directly proves specific facts in the plaintiff’s claim; any information relevant to the subject matter of the claim; and any information that may lead to the discovery of relevant information. Doing Business 2012 Argentina 72 Whether the plaintiff can directly examine the defendant and witnesses during trial 0 = no; 1 = yes, with prior approval by the court of the questions posed; 2 = yes, without prior approval. Whether the plaintiff can obtain categories of relevant documents from the defendant without identifying each document specifically 0 = no; 1 = yes. Whether shareholders owning 10% or less of the company’s share capital can request that a government inspector investigate the transaction without filing suit in court 0 = no; 1 = yes. Whether shareholders owning 10% or less of the company’s share capital have the right to inspect the transaction documents before filing suit 0 = no; 1 = yes. Whether the standard of proof for civil suits is lower than that for a criminal case 0 = no; 1 = yes. Strength of investor protection index (0–10) Simple average of the extent of disclosure, extent of director liability and ease of shareholder suits indices. Doing Business 2012 Argentina 73 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless complexity in tax rules avoided. According to Tax payments for a manufacturing company Doing Business data, in economies where it is more in 2010 (number per year adjusted for difficult and costly to pay taxes, larger shares of electronic or joint filing and payment) economic activity end up in the informal sector— Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures the taxes and mandatory contributions that a Time required to comply with 3 major taxes medium-size company must pay in a given year as (hours per year) well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and payments as well as time taken to comply with tax Arranging payment or withholding laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 2 being applied to the total tax rate. To make the Profit or corporate income tax data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2009. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded.  Taxes and mandatory contributions include  Taxes and mandatory contributions are corporate income tax, turnover tax and all measured at all levels of government. labor taxes and contributions paid by the company.  A range of standard deductions and exemptions are also recorded. 2 The threshold is defined as the highest total tax rate among the top 30% of economies in the ranking on the total tax rate. It will be calculated and adjusted on a yearly basis. The threshold is not based on any underlying theory. Instead, it is intended to mitigate the effect of very low tax rates on the ranking on the ease of paying taxes. Doing Business 2012 Argentina 74 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Argentina stands at 144 in the ranking of 183 taxes in Argentina—and how much do firms pay in economies on the ease of paying taxes (figure 8.1). The taxes? On average, firms make 9 tax payments a year, rankings for comparator economies and the regional spend 415 hours a year filing, preparing and paying average ranking provide other useful information for taxes and pay total taxes amounting to 2.8% of profit assessing the tax compliance burden for businesses in (see the summary at the end of this chapter for Argentina. details). Figure 8.1 How Argentina and comparator economies rank on the ease of paying taxes Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Argentina 75 PAYING TAXES What are the changes over time? While the most recent Doing Business data reflect how the process have changed — and which have not easy (or difficult) it is to comply with tax rules in (table 8.1). That can help identify where the potential Argentina today, data over time show which aspects of for easing tax compliance is greatest. Table 8.1 The ease of paying taxes in Argentina over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 143 144 Payments (number per 62 19 19 9 9 9 9 year) Time (hours per year) 453 453 453 453 453 453 415 Total tax rate (% profit) 108.1 108.1 108.1 108.1 108.1 108.2 108.2 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the rank on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Argentina 76 PAYING TAXES Equally helpful may be the benchmarks provided by on ways to ease the administrative burden of tax the economies that today have the best performance compliance. And changes in regional averages can regionally or globally on the number of payments or show where Argentina is keeping up—and where it is the time required to prepare and file taxes (figure 8.2). falling behind. These economies may provide a model for Argentina Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2012 Argentina 77 PAYING TAXES Total tax rate (% of profit) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. The best performer globally on an indicator has implemented the most efficient practices in its tax system but is not necessarily the one with the highest ranking on the indicator. In some cases 2 or more economies share the top regional ranking on an indicator. DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Argentina 78 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Argentina (table 8.2)? Many have lowered tax rates. Changes have brought Table 8.2 How has Argentina made paying taxes easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Argentina 79 PAYING TAXES What are the details? The indicators reported here for Argentina are based that the company completed during the year. on a standard set of taxes and contributions that Respondents are asked how much in taxes and would be paid by the case study company used by mandatory contributions the business must pay and Doing Business in collecting the data (see the section in what the process is for doing so. The taxes and this chapter on what the indicators cover). Tax contributions paid are listed in the summary below, practitioners are asked to review standard financial along with the associated number of payments, time statements as well as a standard list of transactions and tax rate. Summary of tax rates and administrative burden in Argentina Latin America & Indicator Argentina OECD high income Caribbean Payments (number per year) 9 32 13 Time (hours per year) 415 382 186 Profit tax (%) 2.8 19.9 15.4 Labor tax and contributions (%) 29.4 14.6 24.0 Other taxes (%) 76.1 13.2 3.2 Total tax rate (% profit) 108.2 47.7 42.7 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate time spent on Turnover tax by City of this is 1 online filing 0 3.0% turnover 53 Buenos Aires included in VAT Social security gross 1 online filing 70 23% 25.9 contributions salaries any amount debited or Tax on financial (check) 1 0 0.60% credited to 17.6 transactions bank accounts varies fiscal value (0,582% + Property tax 1 online filing 0 of building 3.6 ARS 14,364 and land ) Doing Business 2012 Argentina 80 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate 3% (+ ARS 0.6 per gross Labor Risk Insurance 0 paid jointly 0 3.4 employee salaries per month) taxable Corporate income tax 1 online filing 105 35% 2.8 profit liter ARS Fuel tax 1 0 consumptio 0.9 0.795/liter n Stamp tax on sale of a real 50% of 1 0 sale price 0.8 estate 2.5% fiscal value Vehicle tax 1 0 2.30% 0.3 of vehicle vehicle tax included in Subway tax 0 paid jointly 0 10.00% 0 paid other taxes Value added tax (VAT) 1 online filing 240 21% value added 0 not included Totals 9 415 108.2 Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Argentina 81 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining all the documents (excluding tariffs) associated with exporting and Inland transport and handling importing a standard shipment of goods by ocean transport, and the number of documents necessary Customs clearance and inspections to complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation requirements and procedures at customs and other Does not include ocean transport time regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business:  Is of medium size and employs 60 people.  Do not require refrigeration or any other  Is located in the periurban area of the special environment. economy’s largest business city.  Do not require any special phytosanitary or  Is a private, limited liability company, environmental safety standards other than domestically owned, formally registered accepted international standards. and operating under commercial laws and regulations of the economy.  Are one of the economy’s leading export or import products. The traded goods:  Are transported in a dry-cargo, 20-foot full  Are not hazardous nor do they include container load. military items. Doing Business 2012 Argentina 82 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Argentina? Globally, Argentina stands at 102 in the ranking of 183 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 7 (figure 9.1). The rankings for comparator economies documents, takes 13 days and costs $1480. Importing and the regional average ranking provide other useful the same container of goods requires 7 documents, information for assessing how easy it is for a business takes 16 days and costs $1810 (see the summary of in Argentina to export and import goods. procedures and documents at the end of this chapter for details). Figure 9.1 How Argentina and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2012 Argentina 83 TRADING ACROSS BORDERS What are the changes over time? While the most recent Doing Business data reflect how process have changed—and which have not (table 9.1). easy (or difficult) it is to export or import in Argentina That can help identify where the potential for today, data over time show which aspects of the improvement is greatest. Table 9.1 The ease of trading across borders in Argentina over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 104 102 Documents to export 7 7 7 7 7 7 7 (number) Time to export (days) 16 16 16 13 13 13 13 Cost to export (US$ per 1,325 1,325 1,325 1,480 1,480 1,480 1,480 container) Documents to import 7 7 7 7 7 7 7 (number) Time to import (days) 20 20 20 18 16 16 16 Cost to import (US$ per 1,825 1,825 1,825 1,810 1,810 1,810 1,810 container) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Equally helpful may be the benchmarks provided by ways to improve the ease of trading across borders. the economies that today have the best performance And changes in regional averages can show where regionally or globally on the documents, time or cost Argentina is keeping up—and where it is falling required to export or import (figure 9.2). These behind. economies may provide a model for Argentina on Doing Business 2012 Argentina 84 TRADING ACROSS BORDERS Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2012 Argentina 85 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2012 Argentina 86 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Argentina 87 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Argentina (table 9.2)? risk-based inspections and electronic data interchange Table 9.2 How has Argentina made trading across borders easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Argentina 88 TRADING ACROSS BORDERS What are the details? The indicators reported here for Argentina are based freight forwarders, shipping lines, customs brokers, on a set of specific procedural requirements for port officials and banks. The procedural requirements, trading a standard shipment of goods by ocean and the associated time and cost, for exporting and transport (see the section in this chapter on what the importing a standard shipment of goods are listed in indicators cover). Information on the procedures as the summary below, along with the required well as the required documents and the time and cost documents. to complete each procedure is collected from local Summary of procedures and documents for trading across borders in Argentina Latin America & Indicator Argentina OECD high income Caribbean Documents to export (number) 7 6 4 Time to export (days) 13 18 10 Cost to export (US$ per container) 1480 1,257 1,032 Documents to import (number) 7 7 5 Time to import (days) 16 20 11 Cost to import (US$ per container) 1810 1,546 1,085 Procedures to export Time (days) Cost (US$) Documents preparation 6 450 Customs clearance and technical control 2 120 Ports and terminal handling 2 500 Inland transportation and handling 3 410 Totals 13 1480 Procedures to import Time (days) Cost (US$) Documents preparation 8 610 Customs clearance and technical control 3 150 Ports and terminal handling 3 700 Inland transportation and handling 2 350 Totals 16 1810 Doing Business 2012 Argentina 89 TRADING ACROSS BORDERS Documents to export Documents to import Bill of Lading Bill of lading Customs export declaration Certificate of origin Commercial Invoice Commercial invoice Certificate of Origin Customs import declaration Packing List Packing list Tax certificate Technical standard/health certificate Terminal handling receipts Terminal handling receipts Doing Business 2012 Argentina 90 ENFORCING CONTRACTS Well-functioning courts help businesses expand WHAT THE ENFORCING CONTRACTS their network and markets. Without effective INDICATORS MEASURE contract enforcement, people might well do business only with family, friends and others with whom they have established relationships. Where Procedures to enforce a contract through contract enforcement is efficient, firms are more the courts (number) likely to engage with new borrowers or customers, Any interaction between the parties in a and they have greater access to credit. commercial dispute, or between them and the judge or court officer What do the indicators cover? Steps to file and serve the case Doing Business measures the efficiency of the judicial system in resolving a commercial dispute Steps for trial and judgment before local courts. Following the step-by-step Steps to enforce the judgment evolution of a standardized case study, it collects data relating to the time, cost and procedural Time required to complete procedures complexity of resolving a commercial lawsuit. The (calendar days) ranking on the ease of enforcing contracts is the Time to file and serve the case simple average of the percentile rankings on its Time for trial and obtaining judgment component indicators: procedures, time and cost. Time to enforce the judgment The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. Cost required to complete procedures (% of The case study assumes that the court hears an claim) expert on the quality of the goods in dispute. This No bribes distinguishes the case from simple debt Average attorney fees enforcement. To make the data comparable across economies, Doing Business uses several Court costs, including expert fees assumptions about the case: Enforcement costs  The seller and buyer are located in the economy’s largest business city.  The buyer orders custom-made goods,  The dispute on the quality of the goods then fails to pay. requires an expert opinion.  The seller sues the buyer before a  The judge decides in favor of the seller; there competent court. is no appeal.  The value of the claim is 200% of income  The seller enforces the judgment through a per capita. public sale of the buyer’s movable assets.  The seller requests a pretrial attachment to secure the claim. Doing Business 2012 Argentina 91 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Argentina stands at 45 in the ranking of 183 dispute through the courts in Argentina? According to economies on the ease of enforcing contracts (figure data collected by Doing Business, enforcing a contract 10.1). The rankings for comparator economies and the requires 36 procedures, takes 590 days and costs regional average ranking provide other useful 16.5% of the value of the claim (see the summary at benchmarks for assessing the efficiency of contract the end of this chapter for details). enforcement in Argentina. Figure 10.1 How Argentina and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2012 Argentina 92 ENFORCING CONTRACTS What are the changes over time? While the most recent Doing Business data reflect how identify which areas have changed and where the easy (or difficult) it is to enforce a contract in Argentina potential for improvement is greatest (table 10.1). today, data on the underlying indicators over time help Table 10.1 The ease of enforcing contracts in Argentina over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 46 45 Time (days) 590 590 590 590 590 590 590 590 590 Cost (% of claim) 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 Procedures (number) 36 36 36 36 36 36 36 36 36 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Argentina 93 ENFORCING CONTRACTS Equally helpful may be the benchmarks provided by for Argentina on ways to improve the efficiency of the economies that today have the best performance contract enforcement. And changes in regional regionally or globally on the number of steps, time or averages can show where Argentina is keeping up— cost required to enforce a contract through the courts and where it is falling behind. (figure 10.2). These economies may provide a model Figure 10.2 Has enforcing contracts become easier over time? Procedures (number) Time (days) Doing Business 2012 Argentina 94 ENFORCING CONTRACTS Cost (% of claim) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Argentina 95 ENFORCING CONTRACTS Economies in all regions have improved contract often work on reducing backlogs by introducing enforcement in recent years. A judiciary can be periodic reviews to clear inactive cases from the docket improved in different ways. Higher-income economies and by making procedures faster. What reforms tend to look for ways to enhance efficiency by making it easier (or more difficult) to enforce contracts introducing new technology. Lower-income economies has Doing Business recorded in Argentina (table 10.2)? Table 10.2 How has Argentina made enforcing contracts easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Argentina 96 ENFORCING CONTRACTS What are the details? The indicators reported here for Argentina are based regulations, as well as through surveys completed by on a set of specific procedural steps required to local litigation lawyers (and, in a quarter of the resolve a standardized commercial dispute through economies covered by Doing Business, by judges as the courts (see the section in this chapter on what the well). The procedures for resolving a commercial indicators cover). These procedures, and the time and lawsuit, and the associated time and cost, are listed in cost of completing them, are identified through study the summary below. of the codes of civil procedure and other court Summary of procedures for enforcing a contract in Argentina—and the time and cost Latin America & Indicator Argentina OECD high income Caribbean Time (days) 590 707.78 518.03 Filing and service 150 Trial and judgment 320 Enforcement of judgment 120 Cost (% of claim) 16.5 31.21 19.71 Attorney cost (% of claim) 11 Court cost (% of claim) 4.5 Enforcement Cost (% of claim) 1 Procedures (number) 36 40.03 31.42 Source: Doing Business database. Doing Business 2012 Argentina 97 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Recovery rate for creditors (cents on the well as public information on bankruptcy systems. dollar) The ranking on the ease of resolving insolvency is Measures the cents on the dollar recovered based on the recovery rate, which is recorded as by creditors cents on the dollar recouped by creditors through Present value of debt recovered reorganization, liquidation or debt enforcement (foreclosure) proceedings. The recovery rate is a Official costs of the insolvency proceedings are deducted function of time, cost and other factors, such as lending rate and the likelihood of the company Depreciation of furniture is taken into continuing to operate. account To make the data comparable across economies, Outcome for the business (survival or not) Doing Business uses several assumptions about the affects the maximum value that can be business and the case. It assumes that the recovered company:  Is a domestically owned, limited liability company operating a hotel.  Has 201 employees, 1 main secured creditor  Operates in the economy’s largest business and 50 unsecured creditors. city.  Has a higher value as a going concern—and the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2012 Argentina 98 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses Globally, Argentina stands at 85 in the ranking of 183 characterize the top-performing economies. How economies on the ease of resolving insolvency (figure efficient are insolvency proceedings in Argentina? 11.1). The rankings for comparator economies and the According to data collected by Doing Business, regional average ranking provide other useful resolving insolvency takes 2.8 years on average and benchmarks for assessing the efficiency of insolvency costs 12% of the debtor’s estate. The average recovery proceedings in Argentina. rate is 32.9 cents on the dollar. Figure 11.1 How Argentina and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2012 Argentina 99 RESOLVING INSOLVENCY What are the changes over time? While the most recent Doing Business data reflect the changed—and where it has not (table 11.1). That can efficiency of insolvency proceedings in Argentina help identify where the potential for improvement is today, data over time show where the efficiency has greatest. Table 11.1 The ease of resolving insolvency in Argentina over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 82 85 Time (years) 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 Cost (% of estate) 15 15 12 12 12 12 12 12 12 Recovery rate (cents on 21.4 25.8 36.9 36.2 34.4 29.8 29.8 32.8 32.9 the dollar) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. ―No practice‖ indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for ―no practice‖ economies is 0. Source: Doing Business database. Doing Business 2012 Argentina 100 RESOLVING INSOLVENCY Equally helpful may be the benchmarks provided by on ways to improve the efficiency of insolvency the economies that today have the best performance proceedings. And changes in regional averages can regionally or globally on the time or cost of insolvency show where Argentina is keeping up—and where it is proceedings or on the recovery rate (figure 11.2). falling behind. These economies may provide a model for Argentina Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2012 Argentina 101 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practice� mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Argentina 102 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Argentina (table 11.2)? even viable businesses are liquidated. This is starting to Table 11.2 How has Argentina made resolving insolvency easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Argentina 103 DATA NOTES The indicators presented and analyzed in Doing Business measure business regulation and the ECONOMY CHARACTERISTICS protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of Gross national income (GNI) per capita regulation, such as the number of procedures to start a business or to register and transfer commercial Doing Business 2012 reports 2010 income per capita property. Second, they gauge the time and cost of as published in the World Bank’s World Development achieving a regulatory goal or complying with Indicators 2011. Income is calculated using the Atlas method (current US$). For cost indicators expressed regulation, such as the time and cost to enforce a as a percentage of income per capita, 2010 GNI in contract, go through bankruptcy or trade across U.S. dollars is used as the denominator. Data were borders. Third, they measure the extent of legal not available from the World Bank for Afghanistan; protections of property, for example, the protections Australia; The Bahamas; Bahrain; Brunei Darussalam; of investors against looting by company directors or Canada; Cyprus; Djibouti; the Islamic Republic of the range of assets that can be used as collateral Iran; Kuwait; New Zealand; Oman; Puerto Rico according to secured transactions laws. Fourth, a set of (territory of the United States); Qatar; Saudi Arabia; indicators documents the tax burden on businesses. Suriname; Taiwan, China; the United Arab Emirates; Finally, a set of data covers different aspects of West Bank and Gaza; and the Republic of Yemen. In employment regulation. these cases GDP or GNP per capita data and growth rates from the International Monetary Fund’s World The data for all sets of indicators in Doing Business Economic Outlook database and the Economist 3 2012 are for June 2011. Intelligence Unit were used. Region and income group Methodology Doing Business uses the World Bank regional and income group classifications, available at The Doing Business data are collected in a http://www.worldbank.org/data/countryclass. The standardized way. To start, the Doing Business team, World Bank does not assign regional classifications with academic advisers, designs a questionnaire. The to high-income economies. For the purpose of the questionnaire uses a simple business case to ensure Doing Business report, high-income OECD comparability across economies and over time—with economies are assigned the ―regional‖ classification assumptions about the legal form of the business, its OECD high income. Figures and tables presenting size, its location and the nature of its operations. regional averages include economies from all Questionnaires are administered through more than income groups (low, lower middle, upper middle 9,028 local experts, including lawyers, business and high income). consultants, accountants, freight forwarders, Population government officials and other professionals routinely administering or advising on legal and regulatory Doing Business 2012 reports midyear 2010 population statistics as published in World requirements. These experts have several rounds of Development Indicators 2011. interaction with the Doing Business team, involving conference calls, written correspondence and visits by the team. For Doing Business 2012 team members The Doing Business methodology offers several visited 40 economies to verify data and recruit advantages. It is transparent, using factual information respondents. The data from questionnaires are about what laws and regulations say and allowing subjected to numerous rounds of verification, leading multiple interactions with local respondents to clarify to revisions or expansions of the information collected. potential misinterpretations of questions. Having representative samples of respondents is not an issue; 3 The data for paying taxes refer to January – December 2010. Doing Business 2012 Argentina 104 Doing Business is not a statistical survey, and the texts entrepreneurs reported in the World Bank Enterprise of the relevant laws and regulations are collected and Surveys or other perception surveys. answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be collected in a large sample of economies. Because Subnational Doing Business indicators standard assumptions are used in the data collection, This year Doing Business published a subnational study comparisons and benchmarks are valid across for the Philippines and a regional report for Southeast economies. Finally, the data not only highlight the Europe covering 7 economies (Albania, Bosnia and extent of specific regulatory obstacles to business but Herzegovina, Kosovo, the former Yugoslav Republic of also identify their source and point to what might be Macedonia, Moldova, Montenegro and Serbia) and 22 reformed. cities. It also published a city profile for Juba, in the Information on the methodology for each Doing Republic of South Sudan. Business topic can be found on the Doing Business The subnational studies point to differences in website at http://www.doingbusiness.org/methodology/. business regulation and its implementation—as well as in the pace of regulatory reform—across cities in the same economy. For several economies subnational Limits to what is measured studies are now periodically updated to measure The Doing Business methodology has 5 limitations that change over time or to expand geographic coverage should be considered when interpreting the data. First, to additional cities. This year that is the case for the the collected data refer to businesses in the economy’s subnational studies in the Philippines; the regional largest business city and may not be representative of report in Southeast Europe; the ongoing studies in regulation in other parts of the economy. To address Italy, Kenya and the United Arab Emirates; and the this limitation, subnational Doing Business indicators projects implemented jointly with local think tanks in were created (see the section on subnational Doing Indonesia, Mexico and the Russian Federation. Business indicators). Second, the data often focus on a Besides the subnational Doing Business indicators, specific business form—generally a limited liability Doing Business conducted a pilot study this year on company (or its legal equivalent) of a specified size— the second largest city in 3 large economies to assess and may not be representative of the regulation on within-country variations. The study collected data for other businesses, for example, sole proprietorships. Rio de Janeiro in addition to São Paulo in Brazil, for Third, transactions described in a standardized case Beijing in addition to Shanghai in China and for St. scenario refer to a specific set of issues and may not Petersburg in addition to Moscow in Russia. represent the full set of issues a business encounters. Fourth, the measures of time involve an element of judgment by the expert respondents. When sources Changes in what is measured indicate different estimates, the time indicators reported in Doing Business represent the median The methodology for 3 of the Doing Business topics values of several responses given under the was updated this year—getting credit, dealing with assumptions of the standardized case. construction permits and paying taxes. Finally, the methodology assumes that a business has First, for getting credit, the scoring of one of the 10 full information on what is required and does not components of the strength of legal rights index was waste time when completing procedures. In practice, amended to recognize additional protections of completing a procedure may take longer if the secured creditors and borrowers. Previously the business lacks information or is unable to follow up highest score of 1 was assigned if secured creditors promptly. Alternatively, the business may choose to were not subject to an automatic stay or moratorium disregard some burdensome procedures. For both on enforcement procedures when a debtor entered a reasons the time delays reported in Doing Business court-supervised reorganization procedure. Now the 2012 would differ from the recollection of highest score of 1 is also assigned if the law provides secured creditors with grounds for relief from an Doing Business 2012 Argentina 105 automatic stay or moratorium (for example, if the regulatory environment for local entrepreneurs in each movable property is in danger) or sets a time limit for economy has changed over time. the automatic stay. Ease of doing business Second, because the ease of doing business index now The ease of doing business index ranks economies includes the getting electricity indicators, procedures, from 1 to 183. For each economy the ranking is time and cost related to obtaining an electricity calculated as the simple average of the percentile connection were removed from the dealing with rankings on each of the 10 topics included in the index construction permits indicators. in Doing Business 2012: starting a business, dealing Third, a threshold has been introduced for the total tax with construction permits, registering property, getting rate for the purpose of calculating the ranking on the credit, protecting investors, paying taxes, trading ease of paying taxes. All economies with a total tax across borders, enforcing contracts, resolving rate below the threshold (which will be calculated and insolvency and, new this year, getting electricity. The adjusted on a yearly basis) will now receive the same employing workers indicators are not included in this ranking on the total tax rate indicator. The threshold is year’s aggregate ease of doing business ranking. In not based on any underlying theory. Instead, it is addition to this year’s ranking, Doing Business presents meant to emphasize the purpose of the indicator: to a comparable ranking for the previous year, adjusted highlight economies where the tax burden on business for any changes in methodology as well as additions of 4 is high relative to the tax burden in other economies. economies or topics. Giving the same ranking to all economies whose total Construction of the ease of doing business index tax rate is below the threshold avoids awarding economies in the scoring for having an unusually low Here is one example of how the ease of doing business total tax rate, often for reasons unrelated to index is constructed. In the Republic of Korea it takes 5 government policies toward enterprises. For example, procedures, 7 days and 14.6% of annual income per economies that are very small or that are rich in capita in fees to open a business. There is no minimum natural resources do not need to levy broad-based capital required. On these 4 indicators Korea ranks in th th rd taxes. the 18 , 14 , 53 and 0 percentiles. So on average st Korea ranks in the 21 percentile on the ease of th starting a business. It ranks in the 12 percentile on Data challenges and revisions th getting credit, 25 percentile on paying taxes, 8 th th percentile on enforcing contracts, 7 percentile on Most laws and regulations underlying the Doing resolving insolvency and so on. Higher rankings Business data are available on the Doing Business indicate simpler regulation and stronger protection of website at http://www.doingbusiness.org. All the property rights. The simple average of Korea’s sample questionnaires and the details underlying the st percentile rankings on all topics is 21 . When all indicators are also published on the website. Questions economies are ordered by their average percentile on the methodology and challenges to data can be rankings, Korea stands at 8 in the aggregate ranking submitted through the website’s ―Ask a Question‖ on the ease of doing business. function at http://www.doingbusiness.org. More complex aggregation methods—such as principal components and unobserved components— Ease of doing business and distance to frontier 4 In case of revisions to the methodology or corrections to the underlying data, the data are back-calculated to provide a This year’s report presents results for 2 aggregate comparable time series since the year the relevant economy or topic measures: the aggregate ranking on the ease of doing was first included in the data set. The time series is available on the business and a new measure, the ―distance to frontier.‖ Doing Business website (http://www.doingbusiness.org). The Doing While the ease of doing business ranking compares Business report publishes yearly rankings for the year of publication as well as the previous year to shed light on year-to-year economies with one another at a point in time, the developments. Six topics and more than 50 economies have been distance to frontier measure shows how much the added since the inception of the project. Earlier rankings on the ease of doing business are therefore not comparable. Doing Business 2012 Argentina 106 yield a ranking nearly identical to the simple average Consider the example of Canada. It stands at 12 in the 5 used by Doing Business. Thus, Doing Business uses aggregate ranking on the ease of doing business. Its the simplest method: weighting all topics equally and, ranking is 3 on both starting a business and resolving within each topic, giving equal weight to each of the insolvency, and 5 on protecting investors. But its 6 topic components. ranking is only 59 on enforcing contracts, 42 on trading across borders and 156 on getting electricity. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a Variation in performance across the indicator sets is ―no practice‖ mark. Similarly, an economy receives a not at all unusual. It reflects differences in the degree ―no practice‖ or ―not possible‖ mark if regulation exists of priority that government authorities give to but is never used in practice or if a competing particular areas of business regulation reform and the regulation prohibits such practice. Either way, a ―no ability of different government agencies to deliver practice‖ mark puts the economy at the bottom of the tangible results in their area of responsibility. ranking on the relevant indicator. Economies that improved the most across 3 or more The ease of doing business index is limited in scope. It Doing Business topics in 2010/11 does not account for an economy’s proximity to large Doing Business 2012 uses a simple method to calculate markets, the quality of its infrastructure services (other which economies improved the most in the ease of than services related to trading across borders and doing business. First, it selects the economies that in getting electricity), the strength of its financial system, 2010/11 implemented regulatory reforms making it the security of property from theft and looting, its easier to do business in 3 or more of the 10 topics macroeconomic conditions or the strength of 7 included in this year’s ease of doing business ranking. underlying institutions. Thirty economies meet this criterion: Armenia, Burkina Variability of economies’ rankings across topics Faso, Burundi, Cape Verde, the Central African Republic, Chile, Colombia, the Democratic Republic of Each indicator set measures a different aspect of the Congo, Côte d'Ivoire, The Gambia, Georgia, Korea, business regulatory environment. The rankings of an Latvia, Liberia, FYR Macedonia, Mexico, Moldova, economy can vary, sometimes significantly, across Montenegro, Morocco, Nicaragua, Oman, Peru, Russia, indicator sets. The average correlation coefficient São Tomé and Príncipe, Senegal, Sierra Leone, between the 10 indicator sets included in the Slovenia, the Solomon Islands, South Africa and aggregate ranking is 0.36, and the coefficients Ukraine. Second, Doing Business ranks these between any 2 sets of indicators range from 0.17 economies on the increase in their ranking on the ease (between protecting investors and getting electricity) of doing business from the previous year using to 0.57 (between starting a business and protecting comparable rankings. investors). These correlations suggest that economies rarely score universally well or universally badly on the Selecting the economies that implemented regulatory indicators. reforms in at least 3 topics and improved the most in the aggregate ranking is intended to highlight economies with ongoing, broad-based reform programs. 5 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, ―Doing Business Indicators: Why Aggregate, and How to Distance to frontier measure Do It‖ (World Bank, Washington, DC, 2005). Principal components This year’s report introduces a new measure to and unobserved components methods yield a ranking nearly identical to that from the simple average method because both illustrate how the regulatory environment for local these methods assign roughly equal weights to the topics, since the businesses in each economy has changed over time. pairwise correlations among indicators do not differ much. An The distance to frontier measure illustrates the alternative to the simple average method is to give different weights distance of an economy to the ―frontier‖ and shows to the topics, depending on which are considered of more or less importance in the context of a specific economy. 6 7 A technical note on the different aggregation and weighting Doing Business reforms making it more difficult to do business are methods is available on the Doing Business website subtracted from the total number of those making it easier to do (http://www.doingbusiness.org). business. Doing Business 2012 Argentina 107 the extent to which the economy has closed this gap The difference between an economy’s distance to over time. The frontier is a score derived from the most frontier score in 2005 and its score in 2011 illustrates efficient practice or highest score achieved on each of the extent to which the economy has closed the gap to the component indicators in 9 Doing Business indicator the frontier over time. sets (excluding the employing workers and getting The maximum (max) and minimum (min) observed electricity indicators) by any economy since 2005. In values are computed for the 174 economies included starting a business, for example, New Zealand has in the Doing Business sample since 2005 and for all achieved the highest performance on the time (1 day), years (from 2005 to 2011). The year 2005 was chosen Canada and New Zealand on the number of as the baseline for the economy sample because it was procedures required (1), Denmark and Slovenia on the the first year in which data were available for the cost (0% of income per capita) and Australia on the majority of economies (a total of 174) and for all 9 paid-in minimum capital requirement (0% of income indicator sets included in the measure. To mitigate the per capita). effects of extreme outliers in the distributions of the Calculating the distance to frontier for each economy rescaled data (very few economies need 694 days to involves 2 main steps. First, individual indicator scores complete the procedures to start a business, but many th are normalized to a common unit. To do so, each of need 9 days), the maximum (max) is defined as the 95 the 32 component indicators y is rescaled to (y − percentile of the pooled data for all economies and all min)/(max − min), with the minimum value (min) years for each indicator. representing the frontier—the highest performance on Take Colombia, which has a score of 0.21 on the that indicator across all economies since 2005. Second, distance to frontier measure for 2011. This score for each economy the scores obtained for individual indicates that the economy is 21 percentage points indicators are aggregated through simple averaging away from the frontier constructed from the best into one distance to frontier score. An economy’s performances across all economies and all years. distance to the frontier is indicated on a scale from 0 Colombia was further from the frontier in 2005, with a to 100, where 0 represents the frontier and 100 the score of 0.43. The difference between the scores shows lowest performance. an improvement over time. Doing Business 2012 Argentina 108 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2012 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 183 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Reports http://www.doingbusiness.org/custom-query/ Access to Doing Business reports as well as subnational and regional reports, reform case Law library studies and customized economy and regional Online collection of business laws and profiles regulations relating to business and gender http://www.doingbusiness.org/reports/ issues http://www.doingbusiness.org/law-library/ Methodology http://wbl.worldbank.org/ The methodologies and research papers underlying Doing Business Contributors http://www.doingbusiness.org/methodology/ More than 9,000 specialists in 183 economies who participate in Doing Business Research http://www.doingbusiness.org/contributors/doing- Abstracts of papers on Doing Business topics business/ and related policy issues http://www.doingbusiness.org/research/ Doing Business 2012 Argentina 109