FIU Adam Smith Center and Atlas Network’s Center for Latin America explore the relationship between business and bureaucracy in new study

The Adam Smith Center for Economic Freedom at Florida International University and Atlas Network’s Center for Latin America announce the publication of an important study on the impact of administrative bureaucracies on small businesses and micro-enterprises in Latin America: The Index of Bureaucracy in Latin America 2022. The project quantifies the time that small businesses must devote to comply with a complex and growing network of rules, procedures, and permits to be allowed to work.
 
"When bureaucracies become excessive, they inhibit the flourishing of commercial activities, discourage investment and creative efforts, and take up material and human resources that would otherwise be allocated to production and innovation," said Carlos Díaz-Rosillo, Ph.D., founding director of the Adam Smith Center. The purpose of the index is to measure the “time-tax” that is involved in complying with all rules and regulations imposed by government bureaucracies on small and micro businesses across a sample of eleven different countries in the region. This study was conducted with the participation of the following partners:
 
·      Fundación Libertad (Argentina)
·      Instituto Liberal (Brazil)
·      Instituto de Ciencia Política Hernán Echavarría Olózaga (Colombia)
·      IDEAS LAB (Costa Rica)
·      Instituto Libertad y Desarrollo (Chile)
·      Instituto OMG (Dominican Republic)
·      Instituto Ecuatoriano de Economía Política (Ecuador)
·      México Evalúa (México)
·      Asociación de Contribuyentes del Perú (Peru)
·      Centro de Estudios para el Desarrollo (Uruguay)
·      Centro de Divulgación y Conocimiento Económico, Cedice-Libertad (Venezuela)
 
The study found that the weighted average of hours that small businesses and micro enterprises (in the countries surveyed) must allocate to bureaucratic compliance was 548 hours per year (with more than 1,000 hours in one case!).  That means that these small businesses and micro enterprises, which account for more than 3/4 of the total employment in these countries, need to dedicate between 25% and 40% of the annual working time of their employees to cope with a complex structure of bureaucratic procedures—simply to get the job done. This “time-tax” represents an exceedingly high opportunity cost, which also helps to explain why so many people in these countries continue to operate in the informal economy, outside the legal framework.
 
"While the index highlights the regulatory and bureaucratic areas that are not working well in the region —and the steps necessary to improve their regulatory frameworks— it also showcases successful public policies that remove barriers to productive commercial activity and allow citizens to prosper," added Díaz-Rosillo.
 
The formal launch of the Index of Bureaucracy in Latin America 2022 will take place at the MARC Pavillion at Florida International University on December 1st, 2022, at 4 PM EST.  This is both an in-person and live-streamed event, featuring the collaborators of the study and special remarks by H.E. Iván Duque Márquez, President of Colombia (2018-2022).
 
Please visit freedom.fiu.edu/events for the event registration.