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Celebrating reforms
El Salvador: Starting a business (quickly)
Authors: James Newton, Sylvia Solf, and Adriana Vicentini
Publication: Celebrating Reforms 2007
Overview

Starting a business, often the first contact between an entrepreneur and the government, was intimidating in El Salvador before its recent reforms. As a result, 38% of entrepreneurs simply started their businesses informally, never registering or paying taxes. Something had to be done.

This case study tracks El Salvador’s steps to startup reform. By focusing on the needs of clients (entrepreneurs), El Salvador created a better commercial registry service. By becoming ISO-certified in the process—i.e., complying with a series of standards for quality assurance in client service—reformers set specific targets and could measure results. By launching a one-stop shop at the registry in 2006, 8 startup steps were rolled into 1. Business startups were faster and easier as a result.

Main Findings

  • Starting a business in El Salvador, which used to take 115 days, took only 26 days after fixing a bottleneck in processing business licenses (by 2005) and then launching its one-stop shop at the Commercial Registry in January 2006.
  • In March 2005, El Salvador’s registry became the first to be ISO-certified in Latin America.
  • A new quality control unit confirmed that the registry’s original goal of 85% customer satisfaction was exceeded.
  • Work remains. Startup costs remain high, with 75.6% of income per capita in official fees and 119.7% of income per capita paid before registering.