TAILIEUCHUNG - Starting a business (quickly) in El Salvador

On 24 January 2006 President Antonio Saca announced the launch of the new one-stop shop at the Commercial Registry, combining 8 startup procedures into 1. Starting a business, which took 115 days before reform, now took only 26. The next day the vice president cut the ribbon at the business registry site. Things were going well, thanks to a 4-year effort. “Everything can be done in 1 place now,” says Felix Safie, director of the National Central Registry. | Starting a business (quickly) in El Salvador James Newton, Sylvia Solf, and Adriana Vicentini On 24 January 2006 President Antonio Saca announced the launch of the new one-stop shop at the Commercial Registry, combining 8 startup procedures into 1. Starting a business, which took 115 days before reform, now took only 26. The next day the vice president cut the ribbon at the business registry site. Things were going well, thanks to a 4-year effort. “Everything can be done in 1 place now,” says Felix Safie, director of the National Central Registry. Starting a business, often the first contact between the entrepreneur and the government, was intimidating before the reforms. It took a lot of time and money—115 days and more than $2,700 in fees, plus $2,850 that had to be paid upfront as minimum capital. This, for a country with average income per capita of $2,145. It was not uncommon for a senior manager to spend 10 hours a day dealing with administrative formalities. Not surprisingly, 38% of entrepreneurs simply started their business informally, never registering or paying taxes. This meant less revenue for the government, less protection for consumers, and no social security benefits for employees. It also meant that companies usually stayed small. Investing in new machinery or a bigger office building was difficult without access to bank loans. And then there was the constant worry of being discovered by the authorities. Pressure started rising after several studies highlighted the issue. In addition, the complex startup procedures prevented El Salvador from qualifying for funding from the . Millennium Challenge Account. Funds went only to countries that demonstrated above-average performance on several policy and economic indica- tors, including the time and cost to start a business. Something had to be done. Safie decided to act. Since he had been called by the president to head the Central Registry in 1999, he had already reformed the property registry. .

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