Published by Economist Intelligence Unit

Event

Venezuela ranked 182nd in the World Bank's 2015 Doing Business report, which measured the ease of doing business in 189 countries.

Analysis

The Doing Business report ranks countries on ten different business-related criteria: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. At 182nd out of 189 countries, Venezuela is the lowest-ranked Latin American country and also falls behind Iraq (156th) and Syria (175th). It narrowly beats Afghanistan (183rd), South Sudan (186th) and Eritrea (189th), which comes bottom of the list. Singapore (1st) tops the list, with the US (7th) and UK (8th) also making the top ten. Venezuela made it more difficult to start a business in 2014 by increasing incorporation costs.

It has become increasingly difficult to do business in Venezuela since the former president, Hugo Chávez (1999-2013), came to power. Currency controls were enacted in 2003 to curb capital flight, but have largely failed to do so. During his 14-year tenure, Mr Chávez nationalised assets across the country's mining and energy sectors. His successor, Nicolás Maduro, has heavily increased government control of the economy. Since Mr Chávez's death last year, Mr Maduro has stepped up enforcement of "fair prices" and shut down shops that authorities deem to be charging excessive amounts for goods. Many industries struggle to get hold of hard currency for import from the government under the strict currency controls. Companies in these industries are, therefore, forced to go without or to go to the black market to obtain US dollars; the latter option can cost 16 times the government's strongest official exchange rate. As Mr Maduro's popularity continues to fall, it appears increasingly unlikely that pragmatic reforms will be made.

Other Latin American countries rank significantly higher than Venezuela. Neighbouring Colombia (34th) tops the regional ranking, while Peru, Mexico and Chile are also high on the list. In this year's ranking, the only category in which Venezuela came in the top 100 (79th) was enforcing contracts.

Impact on forecast

We will maintain our forecast that the business environment will remain extremely difficult in Venezuela, to the detriment of private-sector competitiveness and overall economic growth.