Doing Businessin Brazil
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2006 The International Bank for Reconstruction and Development / The World Bank1818 H Street NWWashington, D.C. 20433Telephone 202-473-1000Internet www.worldbank.orgE-mail feedback@worldbank.orgAll rights reserved.1 2 3 4 08 07 06 05A publication of the International Finance Corporation.The findings, interpretations, and conclusions expressed here are those of the authors and do notnecessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent.The World Bank cannot guarantee the accuracy of the data included in this work. The boundaries,colors, denominations, and other information shown on any map in this work do not imply onthe part of the World Bank any judgment of the legal status of any territory or the endorsement oracceptance of such boundaries.Rights and PermissionsThe material in this work is copyrighted. No part of this work may be reproduced or transmittedin any form or by any means, electronic or mechanical, including photocopying, recording, orinclusion in any information storage and retrieval system, without the prior written permission ofthe World Bank. The World Bank encourages dissemination of its work and will normally grantpermission promptly.For permission to photocopy or reprint, please send a request with complete information to theCopyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone978-750-8400, fax 978-750-4470, www.copyright.com.All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street NW, Washington, D.C. 20433, fax 202-522-2422,e-mail pubrights@worldbank.org.Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth, andDoing Business in 2004: Understanding Regulation may be purchased at http://www.worldbank.org/publicationsTo preserve endangered forests and natural resources, Doing Business in Brazil is printed on 100%post-consumer recycled fiber paper, processed chlorine free.
ContentsDoing Business in Brazil is the second state-level reportof the Doing Business series in Latin America. Thefirst sub-national study to stimulate internal competition was launched in Mexico in 2005. Doing Businessinvestigates the scope and manner of regulations thatenhance business activity and those that constrainit. In this project quantitative indicators on businessregulations and their enforcement were created for12 municipalities and states. These can now comparethemselves to São Paulo or any of the 12 cities andstates benchmarked in Mexico, as well as to over 150countries around the world. The report covers fivetopics: starting a business, registering property, gettingcredit, paying taxes and enforcing contracts. The 12states and cities are: Amazonas, Manaus; Bahia, Salvador; Ceará, Fortaleza; Federal District, Brasília; Maranhão, São Luís; Mato Grosso, Cuiabá; Mato Grossodo Sul, Campo Grande; Minas Gerais, Belo Horizonte;Rio de Janeiro, Rio de Janeiro; Rio Grande do Sul,Porto Alegre; Rondônia, Porto Velho; and Santa Catarina, Florianópolis. Comparisons with São Paulo andother countries are based on the indicators in DoingBusiness in 2006: Creating Jobs. Comparisons with the12 cities and states of Mexico are based on Doing Business in Mexico.This report is the result of a request by the Ministryof Finance to FIAS, a multidonor service of the WorldBank and the International Finance Corporation andwas done with the assistance of Movimento BrasilCompetitivo (MBC) and the co-financing of USAID.OverviewStarting a businessRegistering propertyGetting creditPaying taxesEnforcing contracts1468911Data notesDoing business indicatorsState tablesCase studiesStarting a businessRegistering property1321242943Acknowledgments49
1OverviewStarting a businessRegistering propertyGetting creditPaying taxesEnforcing contractsStarting a business is a leap of faith even in the best ofcircumstances. Governments should encourage the daring. And many do. In 2004, 99 countries—two thirds ofthe global Doing Business in 2006 sample—introduced185 various regulatory reforms to make it easier to dobusiness. In 2005, another 203 improvements in the environment for doing business took place in 93 countries.In Brazil, the need for reducing the heavy burdenon businesses is long recognized. “To my friends—everything; to my enemies—the law,” this Brazilian sayingcaptures the attitude towards current business regulations. The start up procedures, for example, are confusing, time consuming and expensive. What is worse, theyare so scattered that none of the involved agencies haveoversight over all the necessary steps and costs. In Amazonas, the procedures to start a business involve 9 different municipal, state and federal authorities. Realizingthe complexity of the start-up procedures, the authoriTABLE 1.1Top 30 economies on the ease of doing business12345678910New ZealandSingaporeUnited StatesCanadaNorwayAustraliaHong Kong, ChinaDenmarkUnited Thailand21222324252627282930MalaysiaPuerto RicoMauritiusNetherlandsChileLatviaKoreaSouth AfricaIsraelSpainNote: The rankings for all economies are benchmarked to January 2005. The ease of doingbusiness averages country rankings across the 10 topics covered in Doing Business in 2006.Source: Doing Business database.ties assigned one person to answer the Doing Businessquestionnaires. Still, there were gaps. No wonder thatmany businesses decide to remain informal.Fifteen European and six East Asian economiesrank in the top 30 on the ease of doing business (table1.1). Only one Latin American country, Chile, makesthe top-30 list. Brazil, represented by São Paulo as thelargest business center, ranks 119 out of 155. This is behind other major emerging markets. For example, SouthAfrica ranks 29, Mexico 73, Russia 79, and India 116. InLatin America, only Venezuela and Haiti regulate business more heavily than Brazil.Reforms in Brazilian statesReforms in Brazil have concentrated on the proceduresto start a business. Studies like Doing Business illustratethe complexity of entry regulations. As a result, officialsat the federal and subnational governments are takingmeasures to unify procedures, share information amongagencies and introduce online procedures. The federaltax authority and 18 of the 26 state boards of trademerged registration of the company’s statutes with taxregistration. In Rio Grande do Sul, agreements betweenthe board of trade, the federal tax authority and the municipality will cut the time to obtain registrations withthe three bodies to ten days. A draft law in the Congressincludes provisions to simplify business registration bystandardizing registration requirements across Braziland making it possible for businesses to register electronically with the boards of trade.The higher the income, the easier it is to do businessin the 12 states and the Federal District. The best per-
2DOING BUSINESS IN BRAZILReforms can raise performance, reduce informalityFIGURE 1.1Greater ease of doing business is possible at low incomesGDP per capita (US , thousands)8Federal District64Rio de JaneiroRio Grande do SulAmazonasMinas GeraisRondônia2São PauloSanta CatarinaMatoGrossoMatoGrossodo SulBahiaCearáMaranhão0LeastdifficultStates ranked by ease of doing businessMostdifficult X [LN# -XRWP \RWN\\ database.former on the ease of doing business, the Federal District,is also the wealthiest. Ceará, the second poorest state inour sample, ranks worst (figure 1.1). Nevertheless, lowincome does not need to be a barrier to good regulation.Poor states can outperform others, if they introduce reforms. Maranhão, which has the lowest income per capitaof the evaluated states, ranks number 5 out of 13 in theease of doing business. This good performance is due tothe fact that Maranhão uses technological advances in different areas. The registries (cartórios) have digitalized theirrecords—a reform which reduces the time to 27 days andmakes Maranhão the state where it takes the least time toregister property.Maranhão also introduced reforms to facilitatebusiness start ups. Information on new applications isnow shared between the board of trade, the state taxauthority and the municipality, which evaluate andprovide preliminary approvals. This reduces the risk ofbusinesses starting the process of formalization at theboard of trade, but not completing it with other agencies. Once the company is cleared for approval, the startup process is faster. Still, bottlenecks and delays oftenemerge in the pre-approval phase.TABLE 1.2Doing business in Brazil: where is it easiest?1234567Federal District (Easiest)AmazonasMinas GeraisRondôniaMaranhãoRio Grande do SulMato Grosso do SulSource: Doing Business database.8910111213Rio de JaneiroSanta CatarinaBahiaSão PauloMato GrossoCeará (Most difficult)São Paulo and the 12 states vary dramatically on DoingBusiness indicators, with the Federal District outperforming the rest (table 1.2). But a big gap remainsbetween Brazil’s best and the ease of doing businessin Bangkok or Johannesburg. Reform is sorely needed.States should look for best practices within Brazil—forexample, by digitalizing property registry records likeMaranhão—while also aiming for the pace of reforms incountries like Chile, Vietnam or Slovakia.When ranked internationally on the time to start abusiness, Brazilian states vary significantly, dependingon local requirements. In Mexico, opening a business inthe worst performing state takes twice as long as in thebest performing state. In Brazil, the gap between the bestand worst performers is eight-fold—from 19 days inMinas Gerais to 152 days in São Paulo. São Paulo ranks149 out of 155 economies on the time to start a business.Minas Gerais, the state with the shortest time to start abusiness in Brazil (figure 1.2), ranks 30th worldwide.Municipal requirements are the most time consuming.Some municipalities, such as Porto Alegre, have reducedthe procedures necessary to obtain the municipal license(alvará), thereby shortening the total start-up time.The easiest state in which to enforce a contract is SãoPaulo, where enforcing contracts takes 18 months. Thisis still 3 times slower than the fastest state in Mexico andlonger than Buenos Aires, Bogotá, or Shanghai. Contractenforcement in Rio Grande do Sul takes 4 years—longerthan Guatemala, the country with most delays worldwide (figure 1.3). The average time to enforce a contractacross the 12 states and the Federal District is 2.5 years,longer than Venezuela.FIGURE 1.2Starting a business in Minas GeraisTime (days)Cost (% of GDP per capita)2010168126Time84Cost4021 X [LN# -XRWP \RWN\\ database.Procedures100
3OVERVIEWFIGURE 1.3Time to open a business and time to enforce contracts in Brazil: comparison with Mexican statesand other selected economiesTime to enforce a contract (days)Time to start up (days)Australia2TunisiaUnited States5AustraliaChileChina27ArgentinaSouth Africa32South s29184586717X]N# Comparative country data are based on the largest business city of that economy. X [LN# -XRWP \RWN\\ database.The high cost of doing business fosters informality,a serious problem in Brazil. It is estimated to have accounted for 42% of Brazil’s output in 2002–03, comparedwith 33% of Mexico’s, 16% of China’s and 26% of India’s.1Why is informality a problem? Besides the forgone taxincome, informal companies find it harder to get creditor have good access to utility services. These companiesalso tend to be less productive than formal competitors.Improving Brazil’s Doing Business indicators to the levelof the top 30 countries is associated with a 9 percentagepoint drop in the share of GDP accounted for by informalactivity (figure 1.4). In other words, reform expands thereach of regulation by bringing businesses and employeesinto the formal sector. Jobs will be in the formal economybecause the benefits outweigh the costs (like taxes).Women, who now make up three quarters of workers inthe informal sector, will be big beneficiaries. So will youngand inexperienced workers looking for their first job.Benchmarks for the time and cost to performeveryday business transactions—like the benchmarkspresented here—allow reformers to focus on the mainconstraints to economic growth. Competition acrosscountries to fare better on the Doing Business rankingshas already led to numerous improvements, for examplein Colombia and El Salvador. The pressure to reform iseven larger if comparisons are made within a country, as itcontrasts how different localities implement identical, national-level regulations. Studies in countries like Mexico,China and India have shown the benefits of state—andcity—benchmarking. Much of the inefficiency is in localadministrative procedures or the implementation of federal regulations, which can be changed by a governor ora mayor. And as the news about reforms spreads, there isincreased interest to replicate success stories.FIGURE 1.4Greater ease of doing business is associated with less informalityInformal sector (share of GDP)Implied cut in the informal sector from improvingto the top on ease of doing businessHigher40%Implied cut30%Implied shareafter cut20%10%LowerLeast difficultMost difficultCountries ranked by ease of doing business, quintiles7X]N# Relationships are significant at 1% level and remain significant when controlling for income per capita. X [LN# -XRWP \RWN\\ database, Schneider (2005), WEF (2004).Least difficultMost difficult
4DOING BUSINESS IN BRAZILStarting a businessFIGURE 1.5Five months to start a business in São PauloWhen an entrepreneur draws up a business plan andtries to get underway, the first hurdles to be overcomeare the procedures required to register the new firm.Countries differ significantly in the way they regulate theentry of new businesses. In some, the process is straightforward and affordable. In others, the procedures are soburdensome that entrepreneurs either bribe officials tospeed up the process or run their business informally.The data on starting a business are based on a survey of the required procedures for a small-medium sizedcompany dedicated to general commercial activitiesand services. The steps include obtaining all necessarypermits and licenses (e.g. alvará de funcionamento) andcompleting all the inscriptions, verifications and notifications with the authorities—local, state and federal–toenable the company to start operations. The survey calculates the cost and time necessary for completing eachprocedure under normal circumstances.Within Brazil, starting a business is easiest in thestates of Minas Gerais and Rio Grande do Sul. It is mostdifficult in São Paulo, Ceará, and Maranhão (table 1.3).The time to start a business varies widely across states—from 19 days in Minas Gerais to 152 days in São Paulo(figure 1.5). It takes 19 different steps to start a businessin Ceará, and 18 in Maranhão and Santa Catarina.In Minas Gerais, the introduction of a one-stop shopreduced the number of procedures to 10. The entrepreneur no longer has to visit multiple agencies; they are alllocated under one roof. Yet, the company still needs toget approvals from state, federal and municipal agencies,which sometimes causes delays. And the one-stop shopdoes not cover all federal procedures. In addition, eachprocedure requires multiple documents and completinglong forms, further complicating the process to such anextent that applications are often rejected. For example,in Minas Gerais 76% of initial requests are turned down.DaysMinas Gerais19Bahia25Rondônia30Rio Grande do Sul35Mato Grosso do Sul41Mato Grosso41Santa Catarina44Ceará44Maranhão47Federal District49Amazonas68Rio de Janeiro68São Paulo152 X [LN# -XRWP \RWN\\ database.Cost ranges from 4.9% of income per capita in theFederal District, to 49% in Maranhão (figure 1.6). Butcosts in several states are similar to São Paulo—between10 and 13% of income per capita. There is no minimumcapital required to start a business in Brazil, which reduces the cost for the entrepreneur in comparison toMexico. The largest determinants of total cost are theprinting of receipts for tax purposes, the municipallicense, and the registration fees. Registration with theboard of trade is required in all states, but fees are determined locally. These start-up costs compare to 0% inDenmark (best case) or 1,442% of income per capita inZimbabwe (worst case).Municipal requirements are the most onerous—bothin terms of cost and delays. The municipal license (alvará)takes the most time in all states and often involves obtaining the fire brigade license first (Brasília, Manaus, PortoVelho, São Luís, São Paulo and Florianópolis). ObtainingFIGURE 1.6Start-up cost—high in MaranhãoCost (% of GDP per capita)Federal DistrictRio Grande do Sul4.96.1TABLE 1.3São PauloWhere is it easy to start a business—and where not?Amazonas10.2Santa Catarina10.21134566Minas Gerais (Easiest)Rio Grande do Sul (Easiest)Federal DistrictMato GrossoAmazonasMato Grosso do SulRio de Janeiro8910111213RondôniaBahiaSanta CatarinaSão PauloCearáMaranhão (Most difficult)Note: The ease of business start-up is a simple average of the ranking of the number ofprocedures and the associated time and cost.Source: Doing Business database.10.1Minas Gerais10.5Rio de Janeiro10.9Mato Grosso do Sul11.1Mato GrossoRondôniaCearáBahiaMaranhão X [LN# -XRWP \RWN\\ database.12.420.531.032.749.0
OVERVIEWthe municipal license often requires at least one inspection. When several municipal approvals are required,the time to start a business lengthens. For example, inManaus, municipal procedures include separate approvals from the finance department, from urban planning,environmental permits for many businesses and thefire brigade inspection. In Porto Alegre, the operationallicense can now be obtained in most cases in one day.Compare that with the 120 days it takes in São Paulo,where the fire brigade license is required. Also, mostmunicipalities charge an annual tax for the operatinglicense, which increases the costs.What to reform?Issue provisional licenses and eliminate inspectionsbefore the business is opened This would requirechanges of the relevant regulations at the municipal levelfor licenses and inspections. Countries around the worldwith the fastest and cheapest procedures do not requirelicenses and inspections for new businesses before theystart operations. Rather they require licenses only forsector specific activities (e.g. liquor store) once thebusiness has started. Some municipalities in Brazil havealready cut the procedures to obtain the license. Anotheroption is to issue a provisional license that allows theentrepreneur to start operations immediately, as is thecase in Rio de Janeiro and Cuiabá.Unify start up procedures In Brazil there are too manyseparate procedures that make business registration long,complicated, and often duplicative. For example, a company selling goods and services must separately registerfor federal, municipal and state taxes. All these requirements make it difficult for an individual entrepreneur toopen a business without resorting to professional advice,which increases the cost. Due to agreements between thefederal tax authority and the boards of trade in moststates it is now possible to obtain the federal tax numberwith the registration of the company’s statutes at theboard of trade. In Bahia and Rondônia it is also possibleto register for state taxes at the board of trade. And RioGrande do Sul has just introduced a system that links theboard of trade with the municipal taxpayer’s registry, re-5ducing the time to start a business by 15 days. Yet, theseref
Doing business indicators 21 State tables 24 Case studies Starting a business 29 Registering property 43 Acknowledgments 49 Contents Doing Business in Brazil is the second state-level report of the Doing Business series in Latin America. The fi rst sub-national study to stimulate internal co
Additional copies of Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations may be purchased at www.doingbusiness.org.
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Introduction to Quantum Field Theory John Cardy Michaelmas Term 2010 { Version 13/9/10 Abstract These notes are intendedtosupplementthe lecturecourse ‘Introduction toQuan-tum Field Theory’ and are not intended for wider distribution. Any errors or obvious omissions should be communicated to me at j.cardy1@physics.ox.ac.uk. Contents 1 A Brief History of Quantum Field Theory 2 2 The Feynman .
