The difficult art of entrepreneurship
Author: Cristiano Romero
Source: Valor Econômico, 10/10/2007
It seems a lie, but Brazil is known abroad as an entrepreneurial country. The latest survey by the “Global Entrepreneurship Monitor” ranked the Brazilian economy in 10th place, in a list of 42 nations, in the item Total Entrepreneurial Activity Rate. As the business environment here is hostile, thanks to the excess of bureaucracy and costs for starting a company, it is a wonder that someone overcomes the obstacles and is willing to invest. Not to mention the ingrained national culture of repulsion to profit, a feeling that, in the State, translates into the imposition of barriers to private entrepreneurship.
The “Doing Business” report, prepared by the World Bank (Bird) at the request of the Ministry of Finance, confirmed long-standing suspicions. In a list of 155 countries, Brazil appears as one of the most complicated to do business with - 119th place, ahead, in Latin America, only of Venezuela and Haiti. In comparison with its main competitors in the international market, it loses to almost everyone - South Africa (29th place), Mexico (73rd), Russia (79th) and India (116th).
In the Bird survey, Brazil was represented by the State of São Paulo, the richest and, therefore, the most entrepreneurial. Interestingly, at the time of the report's release (2006), São Paulo was also the one that imposed the longest average time for opening a project in the country - 152 days.
Commanded by Joaquim Levy, the Rio de Janeiro State Finance Department decided to investigate the problem to find out what can be done to improve the business environment. Rio, which has been experiencing a process of economic depletion since the 80s, is the second richest state in the country. Bureaucracy also prevails there, although the government of Sérgio Cabral has already started to act to improve the lives of businessmen.
In a work signed by three technicians from the Secretariat for Economic Studies of the Finance Secretariat - João Pedro Azevedo, Letícia Guilhon and Rafael Rosa -, the Rio de Janeiro government analyzed the time that 35.829 companies, opened between January 2005 and July 2007, took to start to work. The findings are telling. With slight variations for other states, the numbers show that the culture prevailing in the country is little or not friendly to those interested in investing their capital in generating jobs, income and profits.
Studies show that, on average, those companies in Rio took 161 days (more than five months) to complete the opening of their businesses in the period analyzed. As there is great dispersion, with the existence of exceptional cases that distort the general result, the technicians decided to consider the median. With that, they concluded that half of the companies managed to open their doors in up to 88 days. It is not possible to assume that even this period is reasonable.
Rio decreases time of opening companies
In Australia, according to “Doing Business”, it takes two days to start a company. In the United States, only five. Chileans take 27 days to set up a business, while Argentines take 32 days. In South Africa, the average time spent is 38 days, while in China, an economy heavily marked by state interventionism and bureaucracy, is 48 days. Even in Portugal, where Brazil is said to have inherited its accursed notary vocation, it takes less time to start an enterprise - 54 days.
In Rio, the ordeal that new entrepreneurs are submitted to is more or less the following: first, the entrepreneur must go to the city hall to make a prior consultation of the place and, thus, try to obtain the business license. It is up to the city hall to say whether the chosen activity is compatible with the city's zoning law. Then, the entrepreneur must go to the Commercial Registry, responsible for granting the Nire (Company Identification and Registration Number). Once Nire is obtained, the next step is to request registration with the CNPJ (National Council of Legal Entities), issued by the Federal Revenue Service.
That done, the future entrepreneur needs to register his firm in the General Taxpayer Register of the Treasury Department, which requires the presentation of eight documents, including the negative debt certificate issued by the same secretary. Other licenses are necessary, such as the license license of the Fire Department and the license and operation of the city hall. In general, the bodies where the entrepreneur obtains these documents are located in different locations. Depending on the chosen economic activity, licenses are also required from the health, environmental, health and other departments.
After this stage, the entrepreneur must return to the Finance Department to request the Authorization for the Printing of Tax Documents, which will allow the issuance of invoice. Martyrdom is not over yet. The future entrepreneur needs to register with the INSS and the Employer's Union for the category of his business, without forgetting to pay the anachronistic union contribution.
When analyzing each stage of this via-crucis, the technicians found that the time spent at the Board of Trade and the Treasury Department represents less than 20% of the total. In the stage classified as “taxpayer” (between the date of approval of Nire and the date of transmission of the application for state registration), 35% of the time is spent. In the “municipality and taxpayer” stage, that is, between the state registration and the first payment of the ICMS-30 days, the largest slice of time is consumed (45%).
Part of the problem identified, in August the Finance Secretariat closed a partnership with the Commercial Registry, synchronizing its registrations, facilitating the Registry's access to the Finance database and reducing the number of documents required from the entrepreneurs. The result was immediate: the time spent creating a company was reduced by 37 days. Additional changes now depend on city hall decisions.
The experience, although simple in the face of the cipoal that is to open a company in Brazil, has shown that reducing bureaucracy and improving the business environment is possible. Just want.
Cristiano Romero is a special reporter and writes on Wednesdays.
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