Andres Oppenheimer: World Bank-IFC Rankings for Endless Litigation Andres Oppenheimer - Miami Herald
go to original November 2, 2013

There are many reasons why potentially-rich Latin American nations are growing at a slower pace than their Asian counterparts but one of the least noticed factors — and one in need of urgent attention — is that a Latin American may grow old before being able to enforce a business contract in many countries of the region.

A new study by the World Bank and the International Financial Corporation, entitled Doing Business 2014, provides a ranking of the world’s countries with the most cumbersome litigation systems. It shows that it’s easier to enforce a contract between two domestic private businesses in Communist China or corruption-ridden Russia than in Brazil, Mexico, Colombia, Argentina and virtually any other Latin American country.

And judging from what its authors told me last week, that’s one of the key reasons why many Latin Americans refrain from doing business, or why they choose to do business in the underground economy. Court proceedings in commercial disputes are so lengthy, complicated and costly, that they discourage business, they said.

Consider some of the findings hidden in the back pages of the study, which compares business conditions in 189 countries around the world:

•  When it comes to ease of enforcing contracts, the survey ranks Russia as number 10, China 19, Argentina 57, Chile 64, Mexico 71, Venezuela 92, Ecuador 99, Peru and Uruguay 105, Panama 127, Brazil 121, Colombia 155 and Honduras 182.

•  The average time it takes to enforce a contract is 270 days in Russia, 406 days in China, 426 days in Peru, 480 days in Chile, 590 days in Argentina, 610 days in Venezuela, 725 days in Uruguay, 731 days in Brazil, 1,288 days in Colombia, and 1,402 days in Guatemala. The exception to the rule is Mexico, where it takes 400 days, it says.

•  The average legal fees to enforce a contract amount to 11 percent of the contract’s total value in China, 13 percent in Russia, 16 percent in Brazil, 20 percent in Argentina, 29 percent in Chile, 31 percent in Mexico, 36 percent in Peru, 44 percent in Venezuela, 48 percent in Colombia, and 50 percent in Panama.

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