Seven Latin American countries among the ten most complex in the 2023 Global Business Complexity Index; Cayman Islands is the simplest globally

LONDON, July 17, 2023 /PRNewswire/ -- TMF Group, a leading provider of compliance and administrative services, has launched the tenth edition of its Global Business Complexity Index (GBCI) in May 2023.

According to the report, Brazil is rated as the most complex Latin American jurisdiction in which to do business (3^rd in the global ranking), followed by Mexico (4^th), Colombia (5^th), Peru (7^th), Bolivia (9^th) and Argentina (10^th). The Dominican Republic and Paraguay are also among the top 20, which shows that the region accounts for 40% of the 20 most complex jurisdictions around the world.

The ranking among these Latin American countries is affected by the significant changes in their legislative and economic affairs. On top of the frequent tax regulation changes, the Brazilian tax system, which is made up of multiple layers, leads to a densely regulated environment. In Mexico, foreign businesses are blocked from investing in renewables and in Colombia, investors need a longer time to adapt to certain laws and regulations. Peru has faced some political unrest and inflationary issues linked to the war in Ukraine, while Bolivia's focus on localisation, including strict residency and workforce requirements, further drives up its ranking. In Argentina, businesses may find the incorporation process and frequent changes to rules and regulations difficult to handle.

Among the simpler jurisdictions globally, on the other hand, are the British Virgin Islands (BVI), Curaçao and Cayman Islands. The latter, ranked as the least complex jurisdiction, boasts simple entity incorporation procedures and accounting and tax standards that are highly attractive to investors. Elsewhere, Curaçao's tax authority has taken necessary steps to simplify processes while clearing Covid-19 backlogs and the BVI offers highly automated processes and prioritises alignment with global standards, to reduce business complexity.

Geopolitical and economic turbulence

Analysis in the report examines how geopolitical and economic challenges are negatively impacting businesses. In South America, respondents in only 40% of jurisdictions have confidence in their economic future. In part, this is the result of continued inflationary pressure in the region, with global economic turbulence further exacerbating this issue. In Argentina, inflation has recently reached 95%, requiring salaries to be increased several times per year in some sectors. Each time this is necessary, businesses need to make the relevant changes in terms of payroll updates and contract modifications, representing a significant administrative burden.

Global compliance challenges

The report also highlights how complexity is driven by global compliance requirements such as ultimate beneficial owners (UBO), know your customer (KYC) and anti-money laundering (AML). Clients in Mexico experienced a significant addition to their reporting burden when the government introduced UBO reporting requirements in early 2022, requiring extensive information gathering. Public notaries refusing to incorporate organisations could also be a result of unclear legislation during the introduction. In addition, KYC checks have become more in-depth and thorough in Curaçao when sanctions against Russian businesses and individuals were introduced.

Environmental, social and governance (ESG) considerations

Despite the rising importance of ESG, and an associated increase in reporting requirements, 50% of South America jurisdictions reported that clients are generally unprepared for new and expected ESG legislation. However, in jurisdictions such as Colombia, green financing initiatives are supported by the government with the implementation of green initiatives law and ESG-related investment incentive plan. In addition, only two jurisdictions (Venezuela and Uruguay) do not require companies to adhere to and/or report on any ESG requirements in their activities.

Monica Vera, Head of Latin America at TMF Group, states: "As in previous years, the 10^th edition of the Global Business Complexity Index ranks Latin America's biggest economies among the most difficult countries to do business in. The burden of complexity represented by frequent changes in legislation, together with different layers of authorities and regulations companies have to report to or comply with are seen as major obstacles. However, the region has so much to offer in terms of the availability of natural resources and a skilled workforce which, together with one of the biggest populations in the world, can serve to unlock many opportunities for companies seeking to invest and to expand".

Top and bottom ten (1= most complex, 78= least complex)

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