Benchmarking in Latin America

Analyzing the best and worst countries in Latin America in business, entrepreneur, labor and tax environments and education, globalization, infrastructure, security, technology and tourism levels.

Titanium Tower in the financial district in Santiago, Chile

Investors looking to enter a new Latin American market or expand into another often are faced with only limited information restricted to a specific country. Meanwhile, international rankings typically cover only a select group of countries in Latin America.
To make life a bit easier for investors, Latin Business Chronicle – the digital sister publication of Latin Trade magazine – has developed 10 unique benchmarking indexes that enable executives to compare key conditions in 18 or more countries in Latin America.
The indexes cover the business, entrepreneur, labor and tax environments and education, globalization, infrastructure, security, technology and tourism levels.

WINNERS & LOSERS
In general, two countries shine on the indexes. They are Chile and Panama. Chile tops four of the indexes (business, entrepreneur, labor and tax) and comes in second on two others (infrastructure and security).
Panama tops three indexes (globalization, infrastructure and technology) while coming in second in two (business and entrepreneur).
Meanwhile, Venezuela is the clear loser. It ranks last on two indexes (business and entrepreneur) and second-to-last on two others (globalization and security).

BUSINESS ENVIRONMENT
The Latin Business Index, which spans 28 components and 18 countries, is the most extensive index measuring the business environment in Latin America.

The five key categories and their components in the latest index are:
• Macro environment: Percent GDP growth in 2009, 2010, estimated 2011 and forecast 2012, and percent inflation for those years.
• Corporate environment: taxes, labor environment, access to capital for entrepreneurs, ease of doing business and economic freedom.
• Globalization and competitiveness: globalization, competitiveness, tariffs and security.
• Infrastructure level: transport, technology penetration, access to water and quality of electricity supply.
• Political environment: political freedom, political stability, political outlook, judicial independence, business policies of government, transparency and intellectual property rights.
Chile tops the index, followed by Panama, Peru, Uruguay and Mexico. The worst countries? Venezuela, followed by Bolivia.

EDUCATION LEVEL
The Latin Education Index, which covers 19 countries, is based on the following five criteria using data from the United Nations Educational, Scientific and Cultural Organization and the World Economic Forum:

• Quality of primary education.
• Mean years of schooling.
• Expected years of schooling.
• Combined gross enrollment ratio in education.
• Adult literacy rate.
A common standard for comparing education internationally – the Program for International Student Assessment (PISA) from the OECD – has not been included as it only encompases eight Latin American countries.
Uruguay leads the way, followed by Argentina. The worst country? Haiti, followed by Guatemala.

ENTREPRENEUR ENVIRONMENT
The Latin Entrepreneur Index, which spans 18 countries, looks at five key factors that affect entrepreneurs:

• Number of procedures for starting a business.
• Time to start a business (number of days).
• Cost to start a business as a percent of income per capita (including all official and legal fees).
• Access to loans (ease of access to obtain a bank loan with only a good business plan and no collateral).
• Venture capital availability (for entrepreneurs with innovative, risky projects).

The index, which uses data from the World Bank and the World Economic Forum, shows Chile as the best country, followed by Panama. Worst for entrepreneurs? Venezuela, followed by Nicaragua.

GLOBALIZATION LEVEL
The Latin Globalization Index of 18 countries looks at six factors that measure a country’s links with the outside world:

• Exports of goods and services as a percent of GDP.
• Imports of goods and services as a percent of GDP.
• Foreign direct investment as a percent of GDP.
• Tourism receipts as a percent of GDP.
• Remittances as a percent of GDP.
• Internet penetration.

The index uses data from the World Bank, the United Nations Economic Commission for Latin America and the Caribbean, the International Monetary Fund, the International Telecommunications Union and the Santiago Chamber of Commerce.
The most globalized country in Latin America? Panama. The least globalized? Brazil, followed by Venezuela.

INFRASTRUCTURE LEVEL
The Latin Infrastructure Index, which spans 18 nations, provides rankings in four key categories and 24 subcategories, using data from the World Bank, the World Economic Forum, the International Telecommunications Union and Computer Industry Almanac.
The index’s four key categories are transport, technology, electricity and water. Transport covers 16 subcategories, such as the cost, time and documents required to export and import containers; the quality of seaports, airports, roads and railway and overall logistics performance – which, in turn, includes factors such as customs efficiency, ease of arranging competitively priced shipments, competence and quality of logistical services, ability to track and trade consignments, and timeliness of shipments in reaching a destination within the scheduled or expected delivery time.
Panama has the best overall infrastructure, followed by Chile. The worst? Nicaragua.

LABOR ENVIRONMENT
This index looks at 18 factors that determine overall labor conditions in 18 countries in Latin America. They include:

• Fixed-term contract flexibility.
• Minimum wage.
• Payments and restrictions for night and holiday work.
• Paid annual leave.
• Regulations and payments for redundancy.
• Flexibility of wage determination.
• Cooperation in labor-employer relations.
• Brain drain.
It also includes education (mean and expected years of schooling) and a health factor, such as life expectancy at birth.
Chile has the best labor environment in Latin America, followed by Mexico. The worst? Honduras, followed by Bolivia – two poor countries that desperately need more jobs.

SECURITY LEVEL
The Latin Security Index takes into account how each country in Latin America is doing related to public insecurity, with a special focus on the business community.
The index of 19 countries was developed by FTI Consulting, which polls its own multinational clients and also analyzes public crime data from police and NGOs.
Costa Rica is the safest country for multinational executives, followed by Chile. The most dangerous country is Haiti, followed by Venezuela.

TAX ENVIRONMENT
The Latin Tax Index uses four factors – corporate tax rates, tax rates as a percentage of profits, the number of payments involved and the time required to comply – to compare both the level of taxes and the ease or difficulty of payment across 18 countries.
Chile has the best tax environment, while Brazil has the worst. At 17 percent, Chile’s corporate tax rate is the second-lowest in the region, after Paraguay (10 percent).
Brazil, meanwhile, is one of the three countries with the highest rate in Latin America (34 percent). Even worse: It has set a world record in number of hours necessary to comply with tax regulations (2,600 hours, or 3.6 months), the index shows.

TECHNOLOGY LEVEL
The Latin Technology Index provides a unique comparison of the technology level of 19 Latin American countries by looking at the penetration rates of the Internet, broadband Internet, personal computers (PCs), wireless subscribers and fixed telephone lines. It uses 2010 technology data from the International Telecommunications Union, Computer Industry Almanac and the Santiago Chamber of Commerce and population data from the International Monetary Fund and the Population Reference Bureau.
Panama has the highest technology level in Latin America, followed by Uruguay. The lowest level is found in Cuba, followed by Nicaragua.
Thanks to continued strong growth in wireless penetration as well as a recent spurt in Internet and broadband penetration and a doubling in PC users, Panama managed to lead the index for the first time.
Cuba has Latin America’s lowest wireless penetration rate: 8.9 percent, which is 10 times lower than the regional average of 101 percent. Cuba also has the lowest broadband rate (0.03 percent). That compares with the regional average of 4.7 percent.
Meanwhile, Cuba also can “boast” the fifth-lowest PC penetration (9.8 percent) and Internet penetration (15.1 percent). By comparison, the Latin American average PC penetration is 16.3 percent, and the region’s average Internet penetration rate is 29.3 percent.

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TOURISM LEVEL
The Latin Tourism Index measures the impact tourism has on a country. It looks at international tourist arrivals (as a percent of population) and international tourism receipts (as a percent of GDP).
Uruguay tops the index, followed by Costa Rica. Brazil is at the bottom.
No country hosted a greater share of international tourists than Uruguay. Its 2.3 million arrivals equaled 70 percent of Uruguay’s population.

editorial@latintrade.com