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Lima Cuts Red Tape for Doing Business with IFC Support


In Lima
Paul Melton

Phone: +51 1 611 2510

E-mail:
pmelton@ifc.org


Lima, Peru.  October 21, 2005 — Opening a new business in Lima, Peru, will soon be matter of days rather than months, thanks to reforms recently completed by the Metropolitan Municipality of Lima with support from the International Finance Corporation.  The reforms, which have greatly simplified the procedures for obtaining operating licenses and construction permits, aim to improve the business environment and promote economic formalization.

According to Doing Business 2006, a World Bank Group study that measures the ease of doing business in 155 countries, starting a business in Peru takes over 100 days and obtaining a construction permit takes over 200 days, largely due to municipal regulations.  Several studies, including Doing Business, have noted that such burdensome regulation adversely affects growth by encouraging informality and, thus, limiting private sector development.  In Peru, for example, the informal sector is estimated to produce as much as 60% of the GNP.

IFC and the municipal government began working on this project in December 2004 by mapping out the selected procedures in order to identify bottlenecks and opportunities for streamlining.  Based on the results and consultations with private sector representatives, the team worked with the municipal government to simplify the procedures, train civil servants, and upgrade the systems used to process licensing requests.  After an initial trial period of three months to test and refine the new procedures, time for obtaining these licenses is expected to decrease by over 70%.  Currently, IFC is also working with the World Bank Group’s Foreign Investment Advisory Service to simplify the procedures for construction licenses, a project slated for completion by January 2006.

“Engaging public and private sector representatives in active dialogue has been a pivotal part of this project—and is a critical factor for success in improving the business environment.  As this project demonstrates, a better business environment is in everyone’s best interest,” affirmed Atul Mehta, IFC Director for Latin America and the Caribbean.

The IFC-Metropolitan Municipality of Lima project is one of several municipal reform initiatives currently undertaken in Peru.  IFC and the Metropolitan Municipality of Lima have been actively coordinating their efforts with other organizations and municipalities in order to develop a national plan for municipal business reforms.  The plan will be officially presented in November in Lima.

ABOUT IFC

The International Finance Corporation, the private sector arm of the World Bank Group, promotes sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. Its 178 member countries provide its share capital and collectively determine its policies.

From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications.  For more information, visit
www.ifc.org.

The IFC Technical Assistance Facility for Latin America and the Caribbean (IFC Plus) is a multilateral initiative backed by core IFC funds and program-specific funds from various donors (including Canada, Netherlands, Norway, and Switzerland). The facility's work program is focused on improving the business environment, enhancing local benefits from IFC investments, and broadening access to finance for and strengthening the competitiveness of small and medium enterprises. Based in Lima, the facility is operating in six countries (Bolivia, Brazil, Colombia, Honduras, Nicaragua, and Peru) and is exploring opportunities in other countries of the region.  For more information, visit
www.ifc.org/lac/ifcplus.