Endless procedures, unnecessary burdens and uncertainty about which regulations apply to their business activities and how to comply with them. These are the answers from many businessmen when they are asked about the barriers to conduct business.
In Mexico, only in 2016, businesses reported having 76.5 million administrative procedures with the government, according to official data. The average per business was 20 procedures per year. The bigger the business, the higher this number, reaching levels of up to 67 transactions per year.
according to data from the National Commission of Better Regulation (CONAMER). This figure only reflects federal regulation. When subnational regulation from states and municipalities is accounted for, the economic cost from regulation in Mexico is much higher. On average, the regulatory burden in states represent 1.3% of their GDP. For municipalities, this number is 3.4% of their local economy.
This is why it is also important to adopt a better regulation policy at the subnational level, even more in COVID-19 times, for a faster recovery from the economic crisis through growth, investment and job creation led by the private sector.
Source: National Commission of Better Regulation, CONAMER.
But, what does better regulation implies?
Better regulation requires governments to adopt a public policy, ideally backed-up by a legal mandate, which defines the institutions, principles, tools and guidelines that the government should follow when producing new regulations or reviewing current ones.
The German politician, Otto von Bismarck said that “laws are like sausages, it's is best not to see them being made.” What better regulation does is to adapt rules to keep up with current technological progress, and to bring transparency, predictability, public participation and use of evidence to the regulatory process, so it inspires trust and give certainty to businesses, investors and citizens.
Better regulation in Mexico
In 2018, Mexico passed a General Law of Better Regulation with the objective of establishing principles, foundations, and requirements for it to be adopted at the three levels of government: federal, state and municipal. The law put Mexico at the forefront in this field. Its guidelines represent international good practice, even among OECD countries.
The law requires the national and subnational governments to apply tools that improve the planning, design and development, implementation, and evaluation of regulation in the country.
On this regard, CONAMER, with the technical assistance of the World Bank and financial support from the United Kingdom’s Foreign, Commonwealth & Development Office (FCDO), is developing a National System of Regulatory Governance (SINAGER). As an electronic platform,
Through SINAGER, states and municipalities will be able to implement tools such as the regulatory agenda or forward planning; ex ante Regulatory Impact Analysis (RIA); administrative simplification programs; ex post Regulatory Impact Analysis (ex post RIA); and public consultation with businesses and citizens in each of these phases.
A long way to go
Even when there are many states and municipalities with important progress since the General Law was approved in 2018, only a few have stared their journey to improve their regulations.
, while states and municipalities advanced by 51% and 29%, respectively.
Regarding the implementation of better regulation tools, like those that are part of SINAGER, results are more limited: states have had progress of 36%, while municipalities only 18%.
Source: National Observatory of Better Regulation (ONMR), with data of 2019.
* Progress is measured in three pillars. Policy: regulatory framework that backs-up the better regulation policy. Institutions: institutional strength of authorities and government bodies responsible to implement the policy. Tools: Offering of instruments and/or services o the public to comply with administrative procedures and improve regulation in the most optimal way.
There is a long way to go at the state and municipal level.and make it more favorable to business productivity and competitiveness, and more attractive to investors and entrepreneurs.
A poor regulatory environment is one of those limitations that governments should leave behind if they aim for a faster and sustainable economic recovery.
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