Seven considerations when setting up shop in Bolivia Seven considerations when setting up shop in Bolivia

Seven considerations when setting up shop in Bolivia
04 Oct 2018

Bolivia’s economy has experienced growth rates of more than 4% over the last 10 years, which is faster than any other South American country. The economy and spending power of its middle class has grown as a result.

Investors are attracted to Bolivia’s large reserves of natural resources, such as tin, silver, lithium and iron ore, a wide range of semi-precious stones and forests with fine and exotic woods. It also has the second largest natural gas reserves in South America.

As a result, it will come as no surprise that the country’s key industries include mining, manufacturing and petroleum. But Bolivia’s agriculture sector is also set to grow over the next 10 years and the government is considering whether to introduce genetically-modified crops to increase production.

While Santa Cruz may not be the official capital city of Bolivia, it is its economic, productive and industrial centre. The city has a population of almost three million, which is expected to double over the next 15 years, and it contributes almost 30% of the country’s gross domestic product. Santa Cruz also produces 70% of the food consumed in Bolivia and boasts the highest regional growth in construction terms at an annual rate of 8%.

The Bolivian government is currently focused on promoting foreign direct investment as it understands how key it is to maintaining growth. But setting up and maintaining a business in the country remains a challenge - so much so, in fact, that the World Bank’s Ease of Doing Business survey ranks it only 152nd out of 190, mainly due to the bureaucracy that exists around starting a business and paying taxes.

Starting a business

Bolivia is not the most straightforward place to open a company, with the World Bank’s Ease of Doing Business survey ranking it 179th out of a total of 190 countries. For example, it takes an average of 45 days and 14 separate activities to get things up and running.

What takes the most time though is obtaining a municipal business license and municipal registration card (Padrón Municipal) in the area in which the business is located, which takes about 12 days. Registering for national health insurance and short-term disability coverage takes another 15 days. The remaining activities do not take a long time but are numerous. 

Dealing with construction permits and registering property

Applying for construction permits and registering property are equally lengthy processes. Obtaining a construction permit takes around 322 days and involves 13 steps, while registering a property takes about 90 days and involves seven steps.

Particularly bureaucratic examples of such activity include obtaining a land registry certificate, which takes on average 90 days; having water and sewage connected, which takes up to 45 days, and getting an architect to inspect the property, which takes between 45 and 75 days.

Having electricity connected

Establishing an electricity supply can take up to 42 days, 14 of which can be spent simply informing national utilities provider Delapaz  and waiting for an estimate of connection costs – which will be expensive.

Paying taxes

In the World Bank’s Ease of Doing Business survey, Bolivia is ranked 186th out of 190 for its taxation process - it is necessary to make a huge 42 payments, which take around 1,025 hours per year to file and pay. Moreover, the sums involved amount to 83.7% of total profit, while VAT stands at 12%.

Enforcing contracts and resolving insolvency

Enforcing contracts takes patience and dedication in Bolivia, with the process lasting an estimated 590 days - going through the trial and waiting for the judgement takes about 400 days alone. But the process is much swifter than in other Latin America and Caribbean countries, where the average is 767 days. To go down this route, it costs around 25% of the claim value.

Resolving insolvency claims generally returns around 40 cents to the dollar and takes around 1.8 years - which again is much quicker than elsewhere in the region, where it takes on average 2.9 years.

Trading across borders

When importing and exporting to and from Bolivia, it takes time to ensure compliance and that all of the required documentation is in place. For example, when exporting, compliance with border requirements takes an estimated 192 hours and necessitates nine separate documents.

Cultural barriers

Spanish, which is the national and official language, is spoken in the main cities. In the rural highlands, the languages are Quechua (the Incan lingua franca) and Aymara, while in the southeast, it is Guaraní that is most commonly spoken.

Social interaction is formal and based on respect, particularly for age, status and people of a higher class. Generosity and reciprocity are valued when sharing food and alcoholic beverages.

Culturally, it is normal to stand very close to the person with whom you are interacting, while gazing and looking directly into their eyes. Physical greetings vary, but a firm handshake is always acceptable.

Luis Maria Gonzalez

Luis María Gonzalez is director of client services at TMF Bolivia. He has 18 years’ experience in general and crisis management, having held leadership positions in companies such as Cellular of the Millicom Group, Aerocon Airlines Ltda and La Prensa Newspaper of La Paz. Luis has a degree in Political Science and two Masters, one in Strategy and Marketing and the other in Business Administration, with a third one pending in Finance. 

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Bolivia’s economy has experienced growth rates of more than 4% over the last 10 years, which is faster than any other South American country. The economy and spending power of its middle class has grown as a result.

Investors are attracted to Bolivia’s large reserves of natural resources, such as tin, silver, lithium and iron ore, a wide range of semi-precious stones and forests with fine and exotic woods. It also has the second largest natural gas reserves in South America.

As a result, it will come as no surprise that the country’s key industries include mining, manufacturing and petroleum. But Bolivia’s agriculture sector is also set to grow over the next 10 years and the government is considering whether to introduce genetically-modified crops to increase production.

While Santa Cruz may not be the official capital city of Bolivia, it is its economic, productive and industrial centre. The city has a population of almost three million, which is expected to double over the next 15 years, and it contributes almost 30% of the country’s gross domestic product. Santa Cruz also produces 70% of the food consumed in Bolivia and boasts the highest regional growth in construction terms at an annual rate of 8%.

The Bolivian government is currently focused on promoting foreign direct investment as it understands how key it is to maintaining growth. But setting up and maintaining a business in the country remains a challenge - so much so, in fact, that the World Bank’s Ease of Doing Business survey ranks it only 152nd out of 190, mainly due to the bureaucracy that exists around starting a business and paying taxes.

Starting a business

Bolivia is not the most straightforward place to open a company, with the World Bank’s Ease of Doing Business survey ranking it 179th out of a total of 190 countries. For example, it takes an average of 45 days and 14 separate activities to get things up and running.

What takes the most time though is obtaining a municipal business license and municipal registration card (Padrón Municipal) in the area in which the business is located, which takes about 12 days. Registering for national health insurance and short-term disability coverage takes another 15 days. The remaining activities do not take a long time but are numerous. 

Dealing with construction permits and registering property

Applying for construction permits and registering property are equally lengthy processes. Obtaining a construction permit takes around 322 days and involves 13 steps, while registering a property takes about 90 days and involves seven steps.

Particularly bureaucratic examples of such activity include obtaining a land registry certificate, which takes on average 90 days; having water and sewage connected, which takes up to 45 days, and getting an architect to inspect the property, which takes between 45 and 75 days.

Having electricity connected

Establishing an electricity supply can take up to 42 days, 14 of which can be spent simply informing national utilities provider Delapaz  and waiting for an estimate of connection costs – which will be expensive.

Paying taxes

In the World Bank’s Ease of Doing Business survey, Bolivia is ranked 186th out of 190 for its taxation process - it is necessary to make a huge 42 payments, which take around 1,025 hours per year to file and pay. Moreover, the sums involved amount to 83.7% of total profit, while VAT stands at 12%.

Enforcing contracts and resolving insolvency

Enforcing contracts takes patience and dedication in Bolivia, with the process lasting an estimated 590 days - going through the trial and waiting for the judgement takes about 400 days alone. But the process is much swifter than in other Latin America and Caribbean countries, where the average is 767 days. To go down this route, it costs around 25% of the claim value.

Resolving insolvency claims generally returns around 40 cents to the dollar and takes around 1.8 years - which again is much quicker than elsewhere in the region, where it takes on average 2.9 years.

Trading across borders

When importing and exporting to and from Bolivia, it takes time to ensure compliance and that all of the required documentation is in place. For example, when exporting, compliance with border requirements takes an estimated 192 hours and necessitates nine separate documents.

Cultural barriers

Spanish, which is the national and official language, is spoken in the main cities. In the rural highlands, the languages are Quechua (the Incan lingua franca) and Aymara, while in the southeast, it is Guaraní that is most commonly spoken.

Social interaction is formal and based on respect, particularly for age, status and people of a higher class. Generosity and reciprocity are valued when sharing food and alcoholic beverages.

Culturally, it is normal to stand very close to the person with whom you are interacting, while gazing and looking directly into their eyes. Physical greetings vary, but a firm handshake is always acceptable.

Luis Maria Gonzalez

Luis María Gonzalez is director of client services at TMF Bolivia. He has 18 years’ experience in general and crisis management, having held leadership positions in companies such as Cellular of the Millicom Group, Aerocon Airlines Ltda and La Prensa Newspaper of La Paz. Luis has a degree in Political Science and two Masters, one in Strategy and Marketing and the other in Business Administration, with a third one pending in Finance. 

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