VI Sixth Annual Latin America and Caribbean Regulatory Improvement Forum

VI Sixth Annual Latin America and Caribbean Regulatory Improvement Forum
Ambassador Jean Manes
Wednesday, April 25, 2018 10:00 A.M., Barceló Hotel

Remarks by Ambassador Jean Manes at the VI Sixth Annual Latin America and Caribbean Regulatory Improvement Forum

 

* This is a courtesy translation. Only the original Spanish language text should be considered authoritative. 

April 25, 2018

This morning we are accompanied by representatives from 13 countries that demonstrate the importance of regulatory improvement offices, not only for the functioning of a government, but also for the future development of a country.

In El Salvador, the OMR has been in charge of categorizing, documenting, evaluating and improving the processes and procedures in the different entities that make up the El Salvador government. In other words, it has the delicate task of rationalizing bureaucracy. It has the main goal of making democracy work, of making it effective.

The consequences of an unregulated bureaucracy can be extensive. When we talk about regulations we always have to start with the question: what problem are we trying to solve? If we have people from our Embassy here, what comes to mind when we think of something that does not work in our country? Renewing ones driver’s license for example. But I know we have other examples, such as the two different agencies that are responsible for regulating the price of salmon depending on whether the salmon is fresh or salty water. Or in Philadelphia where to have a blog it is necessary to apply for a business permit, or in South Carolina where it is illegal to dance on Sundays.

By listening to these examples, many of you probably thought of your own examples of your governments and institutions. Obviously, we have work to do.

But these examples reveal the need for constant regulatory improvement and also to have clear goals. For example, it is not a goal to simply collect funds. A few months ago I received a call about a ministry that was going to create a new procedure. When we started to investigate this matter at the end of the day, what was the idea of ​​this ministry? To collect more money. They were trying to create another way to get more funds, that is not a goal, it is not enough to create a new procedure. Why? Because as you already know there are unanticipated consequences. There are consequences for this kind of decision where one simply thinks about one owns ministry that needs more funds. There are consequences that are damaging the industry by creating a new procedure, which may end in a trial by CAFTA, because it does not comply with the international rules of an agreement that is already signed.

There are all these unanticipated consequences when you start to create rules without clear goals that do not serve society. And that is your job, to make clear the purpose, to make the idea clear.

But I also have a basic philosophy about the rules: if it’s not broken, don’t to fix it. If it is not broken, do not change it. That is a basic philosophy about the rules.

What worked well 15 years ago may not work well in this market. And when we look for economic growth, we do not have the luxury of depending on processes and regulations that were written in a very different context.

In the same way that societies are fluid and constantly changing, laws and regulations must be equally adaptable, flexible and relevant to the needs of the public they serve.

This is a challenge that governments need to face constantly, clear and efficient rules, because if not, what is the perception of the people? The first thought of a citizen is that there is fraud, that there is corruption. And that is so damaging for a country when people do not have confidence in the institutions of their country, because of unclear and inefficient rules. And that is the work of a government. And the benefits that each citizen receives depends to a large extent on the efficiency, precision and reliability of these mechanisms. And the most important thing is to earn and deserve the trust of our citizens.

Complicated regulations have a disproportionate impact on smaller businesses or those that reach multiple facets of the company. For example, let’s see the case of a small business owner, let’s call her María Elena.

The small business that Maria Elena owns sells shoes and accessories in San Miguel, and she manages it with her sister and daughter. Being a person who wants to do things the right way and as required by law, she annually renews herr Trade Registration. For this, she needs the solvency of the General Directorate of Statistics and Censuses, DIGESTYC.

María Elena is faced with the task of having to fill out a 6-page document by hand with detailed information from the address of her business to the data of her financial reports. This information is complicated, and the form can’t be sent in with errors. María Elena then hires an accountant to support her in this work and take the documents to the office where she must present them.

This office is unique in the country, it exists only in San Salvador, and the accountant makes the trip from San Miguel to San Salvador to present the form.This form requires additionally the NIT and the financial statements duly audited: balance sheet, annexes to the balance sheet, statement of income and annexes to the income statement. If all goes well, the accountant can return the same day to San Miguel with the solvency of the DIGESTYC. 

A bit exhausting this process, right? 

But this is only for solvency, she still need to go and present it to the National Records Center where this process continues. She must submit an application with all the details of the owner of the company, the original balance sheet, the certificate issued by the DIGESTYC in original and the original receipt of registration rights. 

I remind you that this is an annual process and does not really meet the needs of María Elena. It is these moments that denote the importance of the work of the OMR. It has to make it easier to do the right thing. 

Thanks to the suggested reforms, the process is much simpler now. María Elena no longer has to fill out a 6-page form, it’s now half the length. She can fill it out online, send in digitally and process the payment online and now she receives her solvency electronically. This means that María Elena does not need an accountant who has to go to San Salvador, and can instead go directly to the National Records Center in San Miguel. 

Don’t you think that this process is now much more suited to María Elena’s reality? 

The work that the OMR and many of you are doing is invisible. It is often not seen and recognized even less, but by listening to stories like these, one can see that the impact is enormous. And when these mechanisms do not work well, the cost, in the same way, is enormous. 

The cost of bureaucracy is visible in the high percentage of companies that work in the informal sector. Here in El Salvador it’s 70%. Currently it is estimated that the cost of setting up a small business here in El Salvador is $ 1,600, a prohibitive amount for many, and yet 99% of the private sector in El Salvador are small and medium enterprises. They are the engine of the economy, not only here but globally, and the role of governments is to facilitate the work of this sector. 

But for these changes to have the impact they are seeking, it is crucial to reform the legislation related to them, and I can imagine that in all of your countries there are processes and laws that need to be polished in a similar way as here. 

The Law of Administrative Procedures in El Salvador is a tool through which the government can create a more favorable environment for the creation of new companies and the formalization of companies in the informal sector, generating more employment opportunities as well as expanding the essential resources for public services such as education and health. 

Establishing best practices and promoting process equity in the region helps ensure the global competitiveness of El Salvador and other neighboring countries, because foreign investors often look at countries in blocks and shared practices facilitate and expedite investment. 

Trust comes from equality under the law and predictable regulations and, of course, a bureaucracy designed to meet the needs of citizens. Having clear, equally applied and easy-to-follow regulations helps build a more stable and balanced economic climate that in turn attracts domestic and foreign investment and motivates the informal sector to formalize its business. 

We always have to remember that the small ones of today are the medium and big ones of tomorrow and if we are not creating an easy way to incorporate these small companies in the same way there will be no medium and large companies tomorrow. This is what it means when we say that regulations must seek to correspond to the needs of citizens. 

I encourage all of you to continue working on this task that I know is not easy. You can be sure that your dedication opens opportunities for all the citizens of your countries. You can be sure that your work is transforming lives. The road ahead is long, but it is one that deserves all its effort and the United States will continue to support them in this mission. 

You have to make it easier to do the right thing. 

* This is a courtesy translation. Only the original Spanish language text should be considered authoritative.