Lima leads in first assessment of business climate in 12 Peruvian cities, with opportunities for all to improve

Lima: It is easiest to do business in Lima on average among 12 cities in Peru, reflecting the efficiency of procedures and the quality of systems and processes in the country’s business center, according to the Doing Business in Peru report released today.

Across all cities, the report reveals a range of strengths and weaknesses in the four areas measured: Huaraz has good performance in two areas—starting a business and enforcing contracts. In addition to Lima, Arequipa does well on the ease of starting a business, but does poorly on registering property. Trujillo leads the way in facilitating obtaining a construction permit, but lags on business startup and contract enforcement. Resolving disputes at the local courts is easiest in Huancayo; however, there is ample room for the city to improve in the three remaining areas.

“Our analysis highlights opportunities for cities to learn from each other as they seek to make the business environment in Peru more competitive,” said Marianne Fay, World Bank Country Director for Peru. “In light of the COVID-19 (coronavirus) pandemic, continued reform efforts to reduce bureaucracy and improve the efficiency of public services will be essential to rebuild the private sector and assist the country’s recovery.”

The report provides a comparative analysis of business regulations and their application from the perspective of small- and medium-size enterprises (SMEs), measured across four areas: starting a business, dealing with construction permits, registering property and enforcing contracts, current as of May 2019. The analysis does not cover policies, institutions and other aspects of the business environment.

It is the first subnational Doing Business study in Peru covering 12 cities – Arequipa, Callao, Chachapoyas, Chiclayo, Cusco, Huancayo, Huaraz, Ica, Lima, Piura, Tarapoto and Trujillo. The results point to local and international good practices that can guide reform initiatives as Peru moves forward with the priority goals it has laid out in its National Competitiveness and Productivity Plan.

“The new normal due to COVID-19 presents us with great challenges and forces us to be more competitive. The results of the Subnational Doing Business report will allow us to add measures that complement and strengthen those developed in the National Plan for Competitiveness and Productivity, helping to generate a competitive business climate that fosters formality. It also requires us to strengthen our joint work strategy between the different levels of government in order to improve processes, implement good practices and reduce time and costs,” said María Antonieta Alva, Minister of Economy and Finance, Peru.

While all cities follow the same regulatory framework with no major differences in the number of procedures, the response time among local authorities varies substantially, according to the report. For example, Lima and Arequipa meet the regulatory requirement to issue a municipal operating license to start a business within 10 business days, but in Chiclayo, Tarapoto and Trujillo, the same procedure takes about four times longer. The gaps in performance are widest for starting a business and enforcing contracts, and narrowest for dealing with construction permits and registering property.

Going forward, the results of this assessment will enable cities in Peru to compare their performances with each other and with other economies around the world. Analyzing the results will also make it possible to identify gaps, obstacles and opportunities for improvement.

“Switzerland is firmly committed for Peru’s growth to be sustainable and regionally-balanced. Within this framework, the Swiss Cooperation — SECO — has supported and financed this important study, whose results and recommendations enrich the knowledge base available to generate business climate reforms at the sub-national level in order to benefit formal entrepreneurship, business growth and competitiveness in Peru,” highlighted Markus-Alexander Antonietti, Swiss Ambassador to Peru.

Cross cutting areas for reforms include better use of online procedures, and follow-up to ensure effective implementation taking capacity and resources into account. Aside from improvements that depend on revising existing laws or issuing new ones, the adoption of local good practices can also be achieved by improving the way procedures are handled administratively.

Local initiative, combined with the leadership of the national government to support reforms that stimulate private investment, will be important to strengthen diversity in the various regions of Peru and achieve economic growth for the country more broadly.

Doing Business in Peru was produced by the World Bank Group in collaboration with the National Council of Competitiveness and Formalization (CNCF) of the Ministry of Economy and Finance of Peru. The work is based on the same methodology as the global Doing Business report published annually, in which Peru is represented by the city of Lima. The study was supported and funded by the Swiss State Secretariat for Economic Affairs (SECO), as part of the program to support private sector growth in the country.