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GBCI 2022: Business Complexity In South America – Corporate and Company Law

GBCI 2022: Business Complexity In South America – Corporate and Company Law

TMF Group’s Global Business Complexity Index 2022
(GBCI) explores 292 different indicators relating to business
complexity, to provide in-depth analysis of the global and local
challenges that impact on the ease of doing business across the

Insights from the GBCI can help investors pick and manage their
target markets with greater confidence. Those jurisdictions that
are perceived to be the most complex are often among the most
attractive for talent and customer opportunities. Local knowledge
will help when it comes to navigating this complexity, allowing you
to managing exposure to compliance risk and find your path to

In this article, we take a deep dive into the South America
region, to examine the drivers of business complexity in each
jurisdiction, or conversely, what makes them simpler environments
for investment or setting up operations.

1. Brazil

Brazil once again tops the ranking as the most complex
jurisdiction after being at number one in 2021. The key drivers of
complexity in Brazil are the volume of regulatory changes each
year, as well as the three layers of tax regimes to comply with -
federal, state and municipality.

Last year Brazil’s complexity was driven by short-term
changes made in response to the Covid-19 pandemic. This included
temporary government incentives to help businesses reduce their
payroll costs, and tax reductions to help companies retain their
workforce. These adaptive changes came with a heavy administrative
burden. Now, in this year’s GBCI, the cessation of these
incentives comes with a similar administrative workload as
businesses revert to normality.

On the plus side, Covid-19 accelerated Brazil’s already high
levels of digitalisation. For example, prior to the pandemic, all
notarial services required a physical presence, and the
face-to-face signing of documents. This has been replaced by
solutions such as digital formatting and video calls, and these
changes look set to stay.

One of the most complex processes in Brazil remains the
incorporation of new companies, taking a very long 45 days as
businesses deal with three layers of regulation. At the federal
level, businesses must set up a tax ID, and select their tax code
based on the specific sector of their company. Companies pay VAT
and service tax at the state level, and revenue tax at the
municipal level. Revenue taxes vary from city to city. While this
lengthy process is now mostly digital, companies must have an
appointed locally residing representative. Foreign shareholders
must appoint a resident legal representative and the local entity
must have a locally residing officer.

Our experts in Brazil anticipate the year ahead to be
‘business as usual’. They predict that no major reforms
will occur in advance of the presidential elections in October
2022. From 2023 onwards, tax reform and simplification will likely
become an active discussion on the political agenda.

While regulations in Brazil are complex, the jurisdiction
presents opportunity, with a large consumer market of 213 million
inhabitants. Assets under administration in Brazil are at an
all-time high, with growth in the energy, infrastructure, and
services sectors.

“The dynamic of doing business in Brazil is one where
you need to actively monitor for regulatory updates. Brazil is one
of the jurisdictions with the highest number of legal or tax
changes each year.”

Rodrigo Zambon, Sub-Regional Director, TMF Brazil

Dive into the data for Brazil on the Complexity
Insights dashboard.

3. Peru

Complexity increased significantly in Peru since 2021, moving up
from 24th to 3rd position in the ranking. This follows political
unrest over the past six years, with corruption leading to
caretaker governments. The inauguration of new president Pedro
Castillo is contributing to uncertainty due to a perceived lack of
political experience.

The process of incorporation is another key driver of complexity
for both foreign and local business. It takes around 20 days, with
the need for in-person signatures and meetings with notaries
contributing to this extended period.

Another complexity factor is the monthly tax reporting
requirements introduced in 2021. These require any business with
monthly accounts of 10,000 soles (?2,540) or more to submit tax
reports, with a view to reducing tax evasion. While this can be
cumbersome for businesses, it does appear to support the drive for

Peru remains a highly attractive jurisdiction thanks to its rich
natural resources such as zinc, copper, iron, and lead. In order to
protect these resources and drive sustainability, Peru has laws and
legislation related to the treatment of land. For example, the
jurisdiction mandates public consultations that can take up to a
year to explore the environmental impact of businesses seeking to
profit from natural resources. Although this does increase
complexity, it boosts the jurisdiction’s environmental
credentials, making it more attractive to organisations and
individuals driven by sustainability.

“I think one of the big things that needs to change to
make Peru simpler for businesses is the introduction of
e-signatures. At the moment, there is a need for in-person
signatures, and visits to notaries. This can slow things down and
make things more complex.”

Geraldo Arosemena, General Manager, TMF Peru

Dive into the data for Peru on the Complexity
Insights dashboard.

5. Colombia

Colombia has experienced many legislative changes over the last
ten years. Taxes are very complex, having to be filed at national,
regional and local level. The presence of more than 1,200
municipalities is one of the key drivers of complexity for
businesses in the jurisdiction.

During election years the country is at a standstill,
apprehensive until the outcome of the election is clear, and this
has become more severe over the last two elections in which a
viable centre-left candidate emerged.

Colombia has become a recent adopter of ESG legislation. A new
law in December 2021 aims to create and preserve forests and other
natural areas throughout Colombia, and the government has set out
an agenda in line with the Paris Agreement to be carbon neutral by
2050. The government also introduced a new kind of employment law,
whereby companies can receive incentives for hiring young people
and/or women.

“This is a very important year for Colombia. Although
the elections are creating some uncertainty about future government
policies towards companies and investments, the country has
positively managed the pandemic and, after fully recovering its
2020 losses, is expected to grow more than 5{e421c4d081ed1e1efd2d9b9e397159b409f6f1af1639f2363bfecd2822ec732a} in 2022 according to
the OECD.”

Jose Melendez, Accounting & Tax Market Head, TMF North

Dive into the data for Colombia on the Complexity
Insights dashboard.

9. Bolivia

Local requirements are a key reason for Bolivia’s top 10
position, such as the need for a Bolivian national or locally
resident legal representative, and foreign workers must not exceed
15{e421c4d081ed1e1efd2d9b9e397159b409f6f1af1639f2363bfecd2822ec732a} of a company’s total employees. Furthermore, the accounting
system needs to be in Spanish and the local currency, managed by a
certified accountant within Bolivian territory. These factors drive
complexity for foreign businesses that are used to a more
globalised approach.

The onus on paper filings also makes things more complicated.
Companies have a legal obligation to keep paper records of activity
for three to eight years, depending on the government entity that
supervises it. This ranges from its constitution and meeting
minutes to accounting records. Despite this ‘old fashioned’
approach the jurisdiction is gradually becoming more digitalised
with declarations of management taxes, pension funds and salary now
being conducted via web portals.

Bolivia is progressive when it comes to sustainability
legislation. For instance, at the beginning of commercial activity
every company must obtain an environmental licence to be able to
operate and stay valid, with commitments depending on their line of
activity. This is attractive to businesses and investors seeking to
operate in a more sustainable manner. However, failure to comply
with this licence can be subject to fines.

Although businesses can face complexity in Bolivia, it is still
an attractive jurisdiction thanks to its wealth of natural
resources. With a commitment to sustainable practices, there is
hope that this attractiveness will continue, and complexity will

“The digital declaration through web portals of
management taxes, declarations before the Pension Fund
Administrators (AFPs) and salary lists for the Ministry of Labour
do help to make things simpler for businesses in

Luis González, Country Leader, TMF Bolivia

Dive into the data for Bolivia on the Complexity
Insights dashboard.

12. Argentina

Ranking 12th in our GBCI 2022, Argentina remains one of the most
complex jurisdictions. However, it has become gradually simpler in
recent years, in part driven by a move towards more digital
processes. For example, there are some options to run payroll
services in a digital way, such as digital payslips, hires and
labour books.

However, challenges include the different levels at which laws,
legislation and taxes are levied – state, provincial and municipal
– creating complexity for businesses.

Constant regulatory changes generate uncertainty about the legal
system and requirements that need to be complied with, particularly
for foreign companies. There are lots of changes at the three
different levels to contend with as well. A further factor is high
taxation rates. For instance, debit and credit tax levied on
transactions to and from bank accounts.

However, despite certain complexities that businesses can face,
Argentina does remain a highly attractive jurisdiction for foreign
direct investment due to its rich natural resources and high-yield
investment opportunities.

“Argentina can be a complex place to conduct business,
mainly because of taxation, exchange regulations, labour
regulations and legal instability. Constant regulatory changes also
generate great uncertainty about the applicable legal system and
the requirements to be complied with, in particular those regarding
foreign companies.”

Claudio Cirocco, Managing Director, TMF Argentina, Uruguay
and Paraguay

Dive into the data for Argentina on the Complexity
Insights dashboard.

15. Chile

Chile has become more complex in recent years. In 2020 it was
one of the simpler jurisdictions, ranked 64th, therefore it has
seen a significant rise in complexity.

A key driver of this shift is linked to the economic and
political situation in the jurisdiction. Widespread protests began
in 2019, known as the estallido social (social outburst). The
protests were related to widespread dissatisfaction with the
inequality, corruption, and the cost of living sparked by a rise in
the Santiago metro fare.

In 2021, Chile elected a new president, Gabriel Boric. It’s
hoped his presidency will bring more stability into the country, as
well as a focus on creating a more equal society. For example,
Boric announced that he will implement a majority female cabinet as
part of his wider equality aims.

The jurisdiction has also seen tax reforms over the past few
years that aim to drive a moral approach to taxation, as often seen
in Europe, by taxing wealthier individuals more to create a more
equitable society. Due to such a focus in the jurisdiction on
driving equality and stability in the future, Chile is set to
become simpler in the years to come.

“Chile has clear regulations and modern information web
portals that mean obtaining and uploading information is easy and
quick. However, the initial process of setting up a new entity and
starting a business in Chile can be somewhat slow compared to other
jurisdictions, and needs the support of local

Marcelo Aguilar, Senior Manager, TMF Chile

Dive into the data for Chile on the Complexity
Insights dashboard.

19. Paraguay

Paraguay has become more complex in recent years, with one
driver being the need to have a Paraguayan ID or local
representative in order to invest.

Incorporating a business in Paraguay is relatively
straightforward. However, there are certain steps to the process,
such as initially drafting company bylaws, that can create
complexity. This requires organisations to declare the subscribed
capital, legal representative, and the company address before
beginning to trade. This can be a slow process, taking up to 12

Further challenges come from long waiting times for public
bodies to act and limited communication with them. This can make
certain procedures more cumbersome for organisations seeking to
operate in Paraguay.

Despite these complexities, Paraguay remains a highly attractive
jurisdiction due to its geographical position in the centre of
South America. It has also seen an increase in foreign direct
investment alongside this growth.

“Operating in Paraguay requires a Paraguayan ID or
someone native to represent the business. Seeking advice from the
right people or entities about local regulations helps to ease
doing business.”

Letizia Amarilla, TMF Paraguay expert

Dive into the data for Paraguay on the Complexity
Insights dashboard.

21. Venezuela

Venezuela has increased in complexity over recent years. Key
drivers are the reliance on manual processes and face-to-face
interactions, as well as the recent political and economic
situation in the jurisdiction.

In 2021, Juan Guaidó took over the presidency from
Nicolás Maduro, following a long period of widespread
dissatisfaction, and only two weeks into Maduro’s new six-year
term as president. It’s a complex situation as certain
organisations, such as the military, have sustained their
allegiance to Maduro. The presidency of Venezuela is still unclear,
with Guaidó and Maduro both holding certain levels of power
within the country. Understandably, this ongoing situation has led
to huge uncertainty, which impacts the ease of doing business in

As far as the over reliance on manual processes is concerned,
there are no centralised records for entities and for almost every
change in bylaws an annual general meeting (AGM) must be
registered. This places an administrative burden on companies.

Covid-19 added complexity to operating a business in Venezuela.
Legal filing still needed to be submitted in person, even though
registries and notaries we closed almost all of the time. No
systems or digital solutions were put into place to ease the

“The complexity of Venezuela is driven by the fact that
there are so many processes that must be done manually, especially
from the legal perspective. Adding the economic and political
situation in the country, the difficulty increases as well as the
times invested for getting things done.”

Armida Otaño, Head of Legal, TMF Colombia

Dive into the data for Venezuela on the Complexity
Insights dashboard.

27. Uruguay

Uruguay is considered to be open to business and a flexible
market in which to enter as a foreign company. It has historically
been a stable jurisdiction, with transparent regulations and a
flexible attitude to the transfers of funds in and out of the

When setting up in Uruguay, companies have the possibility to
purchase a ‘shelf company’ which is already constituted
with the authorities, thereby reducing complexity. Additionally,
company bank accounts can be opened in Uruguayan pesos, US dollars
or euros. Salaries can also be paid in any of these currencies,
demonstrating the country’s desire to attract foreign
companies. However, it is worth noting that taxes must still be
paid to the government in Uruguayan pesos.

The country uses IFRS as its accounting standard to align to
international standards and attract foreign investment. This does
make operating more complex for local small companies, but it is a
strong advantage for foreign businesses. Stakeholders can read the
financial statements and consolidate them easily across the

The major likely source of complexity in the future is the
growing reporting obligations on companies, which are designed to
prevent fraud and money laundering. Uruguay is not alone in this as
there is a global push to reduce these harmful activities.

“Uruguay is a very good country to do business in. Once
a company is registered, which can take around two months,
operating is quite simple because Uruguay is a stable country with
clear rules that rarely change.”

Eduardo Torres, Country Leader, TMF Uruguay

Dive into the data for Uruguay on the Complexity
Insights dashboard.

40. Ecuador

A large amount of the complexity of doing business in Ecuador
stems from constant changes to the political environment.

Businesses in Ecuador also face frequent changes to local tax
regulation, and in January 2022, new national tax legislation came
into force. This involved important changes to personal income tax,
capital gains tax and corporate income tax. In addition, it altered
the taxation of small businesses, with new regulation requiring
fewer tax filings.

Employment law is also complex, and all entities operating in
Ecuador are obliged to follow a 15{e421c4d081ed1e1efd2d9b9e397159b409f6f1af1639f2363bfecd2822ec732a} profit sharing scheme, which
must be paid to employees. This is in addition to the ’13th and
14th month’ salaries being paid to all employees.

New labour legislation is expected to come into force sometime
this year. While this may, at least initially, bring about some
additional challenges, it is expected to introduce more flexible
rules in the hiring and termination of employees.

The incorporation of technology is helping to simplify business
operations in Ecuador. Over the past couple of years, filling
requests has been made easier, due to the implementation of
electronic processes and the validity of the electronic

“In our region, the constant political changes are an
aspect that make it complex to do business.”

TMF Ecuador expert

Dive into the data for Ecuador on the Complexity
Insights dashboard.

The Global Business Complexity Index

The GBCI 2022 provides an authoritative overview of the
complexity of establishing and operating businesses around the
world. It explores factors driving the success or failure of
international business, with a focus on operating in foreign
markets, and outlines key themes emerging globally as well as local
intricacies across 77 jurisdictions.

Explore the GBCI rankings, analysis and global trends to help
you find your path to growth, amid the complexity of corporate

To download and read the report in full, visit theGlobal Business Complexity Hubtoday.

To find out more about the drivers of business complexity in the
jurisdictions that matter to you, why not explore ourComplexity Insights Dashboard?

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.