Improving Business Registration Procedures at the Sub-National Level : The Case of Lima, Peru

Abstract

Obtaining an operating license used to be the most bureaucratic procedure when starting a business in Peru, accounting for 62 percent of the total time. In January 2006, with assistance from the International Finance Corporation (IFC) Latin America and Caribbean (LAC) technical assistance (TA) facility, the metropolitan municipality of Lima launched a new process that reduced the total time needed from 60 to 3 days! In addition, the number of inspections was reduced from five to just one multipurpose inspection; average visits by business owners to the municipality were slashed from 11 to 2; and costs fell by over 50 percent for small firms. In the nine months since the reform was introduced, the municipality registered over 8,314 firms, more than in the last 7 years combined. Here are four key lessons the authors learned along the way: 1) to promote reforms at the sub-national level, it is necessary to get the support of the local media to build awareness of the importance of reducing bureaucratic barriers; 2) when collecting information for the diagnostic, you must work jointly with municipal officers to create a shared understanding of the problem and motivation for change; 3) to implement the new procedures, municipal personnel have to be not only technically trained but also highly motivated and committed; and 4) to avoid the reappearance of the old bottlenecks in the procedure, it is critical that the private sector become a sustainability watchdog.