Red Tape In Latin America Is Taxing On Workers, SMEs New Study Finds

News Americas, Arlington, VA, Fri. Dec. 2, 2022: A new study from Atlas Network’s Center for Latin America and the Adam Smith Center for Economic Freedom at Florida International University, (FIU) has found that workers in Latin America can spend between 180 and over 1,000+ hours per year or between 25 and 40 percent of employees’ annual working time to cope with Latin American government red tape.

The 2022 edition of the Index once again studied the impact of the expansion of administrative bureaucracies on small businesses and micro enterprises in the region, quantifying the time that such entities must devote to comply with a complex and growing network of rules, procedures, and permits simply to work and get ahead.

The Index measures the “time-tax” that is involved in complying with rules and regulations imposed by government bureaucracies on small and micro businesses across a sample of eleven different countries in the region.

The 2022 Index of Bureaucracy in Latin America found the time it takes in the 11 countries are as follows:

BRAZIL: 180 hours

COSTA RICA: 297 hours

ECUADOR: 395 hours

URUGUAY: 406 hours

CHILE: 470 hours

COLOMBIA: 477 hours

MEXICO: 506 hours

PERU: 591 hours

DOMINICAN REPUBLIC: 745 hours

ARGENTINA: 900 hours

VENEZUELA: 1,062 hours

In other words, small and micro enterprises – which account for more than three-quarters of total employment in Latin America – need to dedicate between 25 and 40 percent of the annual working time of employees to cope with bureaucratic procedures. This “time-tax” represents an exceedingly high opportunity cost for Latin America’s business community, making regulatory reform a top policy priority.

“To unleash human ingenuity and bring about rising living standards, governments must reduce the hurdles that stand before working citizens,” said Atlas Network CEO Brad Lips. “Of course, not all regulations are misguided, but we must be clear-eyed in recognizing that the expansion of the administrative state has created a predatory dynamic that punishes regular people.”

“This important initiative, now presented as a joint partnership between the Adam Smith Center for Economic Freedom and Atlas Network, emphasizes the bureaucratic burdens that small enterprises must confront for their daily efforts to get ahead,” said Carlos Díaz-Rosillo, founder and director of FIU’s Adam Smith Center for Economic Freedom. “The key findings of this study will become a useful instrument to secure one of the key objectives that motivate the work of the Adam Smith Center: The relationship between thinking and doing, and the need for a sound diagnostic of our problems as well as the required transformations.”

This year’s edition has extended the universe of countries in Latin America from the original six in 2021.