Economic Audits

Ranking the business climate competitiveness of Argentina's provinces

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The Argentinian think-tank Fundación Libertad recently released Índice Provincial de Desempeño Empresarial 2018 (IPDE, “Provincial Index of Business Climate”) — a study measuring the regulations that favor or hinder business activity in each of the 23 provinces of Argentina and the autonomous city of Buenos Aires. The IPDE is composed of five quantitative indicators: Starting a Business, Dealing with Construction Permits, Getting Electricity, Registering Property and Fiscal Aspects. With the IPDE report taking into account different dimensions of the regulatory environment of each province, the result of the indicators can be used not only to compare the Argentine jurisdictions among themselves, but also to analyze the regulatory framework and the economic performance of each of them, and to identify the reforms that have worked (or not).

“IPDE Ranking 2018 is obtained by ordering, from highest to lowest, the scores obtained when calculating the distance to frontier for the different Argentine jurisdictions,” said Ayelén Scapuzzi Serra, economist and project coordinator of the IPDE. “For this calculation, the scores for each individual component for each economy are added through a simple average, first for each indicator, and then for all them together: Starting a Business, Dealing with Construction Permits, Getting Electricity, Registering Property and Fiscal Aspects. A high ranking in the IPDE Ranking indicates a favorable regulatory environment for opening and operating a local company.”

The study was conducted as a response to the concerns of entrepreneurs and businessmen and women in Argentina about how government intervention was hurting their businesses, and by extension the economy. The IPDE facilitates comparisons of economic growth and government regulations between each of the twenty-three provinces of Argentina as well as comparisons between Argentina and other countries.

“We believe that economic activity benefits from clear and coherent rules and regulations,” continued Scapuzzi Serra. “If these rules are efficient, transparent, simple to implement, accessible, and have reasonable costs, they are much more effective in shaping the incentives of economic agents in a way that promotes economic growth, entrepreneurship and innovation.”

The IPDE presents hard data and analysis to support the case that a freer economy is a stronger economy, and that a few simple and transparent regulations facilitate the best environment for business owners.

“Promoting regulatory reforms that empower the private sector is essential for creating more jobs, attracting investments and creating more opportunities for subnational economies to prosper,” continued Scapuzzi Serra. “This report provides objective data to analyze, understand and improve the rules that regulate business activity, classifies the provinces and recommends reforms to improve the results of each of the indicators.”

The IPDE has been well received by prominent news outlets, businessmen and government officials. La Nación — one of the largest newspapers in the country — interviewed Scapuzzi Serra on their digital channel for a full segment to discuss the report. The report was also covered by Infobae and many local media outlets from the various provinces studied such as Santa Fe and Córdoba.

The Minister of Economy of Santa Fe (one of the provinces studied) has used the IPDE in presentations and interviews to demonstrate what Santa Fe is doing well and to highlight emerging challenges on the horizon. Additionally, the project will be presented to the Argentine Senate in September. Perhaps the greatest impact of the study came when it was presented at the 30th annual dinner of Fundación Libertad, held in Buenos Aires. The dinner was attended by more than 1,500 key players in business and government including Nobel Laureate Mario Vargas Llosa, and Argentinian President Mauricio Macri.

Argentina has begun adopting policies that are more supportive of free-markets over the last two and a half years. Initiatives like the National Entrepreneurs Act have helped eliminate bureaucracy and simplify regulations. However, Argentina still has much work to do towards lessening restrictions.

“In the Global Competitiveness Report 2017-2018 conducted by the World Economic Forum, inefficient government bureaucracy is among the most problematic factors for doing business in Argentina,” continued Scapuzzi Serra. “In the Doing Business report for 2018 — which takes data up to June 2017 — Argentina is ranked 117th out of 190 economies, which indicates that there is a lot of room for improvement.”

Improving business environments is a critical component to alleviating poverty. Atlas Network commissioned research that found empirical support for the association between poverty reduction and business-friendly regulation.

“Atlas Network’s research demonstrates that local solutions aimed at transforming the institutional environment in favor of market growth, mainly through the guarantee of economic rights for the poor, represent the best opportunity to reduce poverty throughout the world,” Scapuzzi Serra concluded. “This should not be surprising: bureaucracy is one of the main barriers to the flourishing of businesses.”

Atlas Network works with more than 480 free-market organizations in over 90 countries working to remove the barriers to opportunity and prosperity all over the world. The IPDE, will continue to assist Fundación Libertad in its campaign for a freer, more prosperous Argentina.

Fundación Libertad is a long-time grantee of Atlas Network.