Economics of Peru the Focus essay

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Capital (% of GNI per capita)

Source: The World Bank (2009)

The following table shows the procedures time and costs involved in construction of a warehouse, obtaining the licenses and permits necessary and completion of the required notifications and inspections as well as obtaining utility connections.

Procedures and Costs Involved in Warehouse Construction

Indicator

Peru

Region

OECD

Procedures (number)

Duration (days)

Cost (% of income per capita)

Source: The World Bank (2009)

Peru is stated to rank 149 among other countries in the 2009 ranking for 'Employing Workers' and rates 151 among other countries in the 2008 ranking for 'Employing Workers'. This shows a two spot advance for Peru in this category. Stated to be the difficulties employers face in hiring and firing workers are stated to be those shown in the following table. The index value assigned is between 0 and 100 with higher values in representation of regulations that are more rigid. The 'Rigidity of Employment Index' shown is the average of the three indices.

Rigidity of Employment Index

Indicator

Peru

Region

OECD

Difficulty of Hiring Index

Rigidity of Hours Index

Difficulty of Firing Index

Rigidity of Employment Index

Firing costs (weeks of salary)

Source: The World Bank (2009)

Peru is stated to be ranked 41 among other countries in regards to ease of registration of property for 2009 however; Peru was ranked 36 among other countries in 2008 for ease of registration of property. The ease afforded a business in securing property rights is stated to include the following procedures, or number of steps as well as the time involved and associated costs required for property registration.

Ease or Difficulty in Registering Property

Indicator

Peru

Region

OECD

Procedures (number)

Duration (days)

Cost (% of property value)

Source: The World Bank (2009)

Peru was rated 12th among other countries in getting credit for 2009 and in 2008 Peru was ranked 13th among other countries. The measures on credit information sharing and borrowers and lenders rights are stated in the following table. Ranges of the Legal Rights Index are 0 to 10 and higher scores indicate that the laws are specifically designed for expansion to accessing credit. The Credit Information index is a measure of the "scope, access, and quality of credit information available through public registries or private bureaus. The Range of the Credit Information index is 0-6 with higher values indicating that additional credit information can be obtained from a public registry or private bureau.

Ease or Difficulty of Accessing Business Credit

Indicator

Peru

Region

OECD

Legal Rights Index

Credit Information Index

Public registry coverage (% adults)

Private bureau coverage (% adults)

Source: The World Bank (2009)

Protection of Investors ranking for DB09 shows Peru ranking 18th for protecting investors which is a lower ranking that the previously assigned ranking of 15. The following table lists the indicators of:

1) Disclosure;

2) Director liability;

3) Shareholder suits; and 4) Investor protection. (the World Bank, 2009)

The indexes range between 0 and 10 with higher values providing an indication of higher levels of disclosure, higher level of liability of directors, and higher levels of powers of shareholders in challenging the transaction as well as higher levels of investor protection.

Indicator

Peru

Region

OECD

Disclosure Index

Director Liability Index

Shareholder Suits Index

Investor Protection Index

Source: The World Bank (2009)

The ranking of Peru in regards to business taxes being paid is stated at 85 in DB09 falling from the previous 81 in DB08 ranking. The table below labeled Figure 11 in this study illustrates the tax paid or withheld by a company that is mid-sized in a year's time in addition to the burden of administration taxes. Measures shown include the number of payments that must be made, the time in hours spent in preparation of the taxes, filing the taxes and finally, paying the taxes as well as the profit percentages that must be paid in taxes.

Indicator

Peru

Region

OECD

Payments (number)

Time (hours)

Profit tax (%)

Labor tax and contributions (%)

Other taxes (%)

Total tax rate (% profit)

Source: The World Bank (2009)

Peru ranked 93 in DB09 ranking for ease of trading across borders which is down from the ranking of 75 in the DB08 ranking in this category. The following table labeled Figure 12 in this study illustrates the 'costs and procedures involved in the importation and exportation of a standardized shipment of goods. Each official procedure is stated from the contract agreed upon between the two parties to the ultimate delivery of the goods.

Indicator

Peru

Region

OECD

Documents for export (number)

Time for export (days)

Cost to export (U.S.$ per container)

Documents for import (number)

Time for import (days)

Cost to import (U.S.$ per container)

Source: The World Bank (2009)

Peru was ranked 119 for both DB09 and DB08 for the ease or difficulty of commercial contract enforcement. This determination is made by tracking the history of a payment dispute and through specifically tracking the time, cost, and number of procedures required from the filing of the lawsuit through to the actual payment. These indicators for Peru, the Region and the OECD countries are shown in the following table labeled Figure 13 in this study.

Indicator

Peru

Region

OECD

Procedures (number)

Duration (days)

Cost (% of claim)

Source: The World Bank (2009)

The category which measures the time and costs associated with bankruptcy resolution is stated in the following table labeled Figure 14 in this study. Indentified are: (1) weaknesses in existing bankruptcy law; and (2) the main procedural and administration bottlenecks in the bankruptcy process. Finally, the recovery rate in cents on the dollar recovered by claimants from firms that are insolvent is listed as well.

Indicator

Peru

Region

OECD

Time (years)

Cost (% of estate)

Recovery rate (cents on the dollar)

Source: The World Bank (2009)

ECONOMIC ANALYSIS

The country of Peru claims a small share (under 15%) in all industry sectors with the largest share of the GDP claimed by Peru being in the following in a descending range:

1) Agriculture;

2) Mining; and 3) Food, Beverages and Tobacco.

The number of procedures require to launch a business in Peru are slightly higher for the region and almost double that of OECD countries and while the cost is only slightly higher than for other countries in the region the cost is more than three times higher in Peru than in OECD countries.

The country of Peru as compared to the Region and OECD countries is ranked as being much more difficult in which to hire workers. As well Peru ranks low in terms of the rigidity of hours index and the difficulty of firing index and the costs of firing a worker in terms of the 'weeks of salary that must be paid.

Noted as a positive aspect of doing business in Peru was that in relation to paying taxes since Peru only requires 9 payments as compared to 34.8 in the Region and 13.4 for OECD countries. However the time that it takes to prepare, file and pay taxes in Peru is stated as being nearly 100 more hours required in the Region and nearly double the time required in OECD countries.

Export costs for Peru are considerably less than the costs for export in the Region and in the OECD countries although the number of documents and time required are higher than for the Region and for OECD countries.

IMPLICATIONS/SUGGESTIONS

Because Peru fell in ranking from DB08 to DB09 in all but one category, it is indicated in this analysis that Peru should focus on making doing business in and with Peru a more profitable experience with greater levels of ease.

Peru should also focus on making it easier to hire and fire workers in the country in order to stimulate business growth and economic development. There should be a resolution of the rigidity of hours for workers as well as relaxing of the requirements on worker pay.

Taxes should be better aligned and coordinated so that the time required preparing, filing and paying taxes could be reduced. Additionally required is that Peru simplify the process in terms of the time and number…[continue]

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