Running a business in Europe is like the “Tale of Two Cities” by author Charles Dickens. It can be the best or the worst time.
It all depends on where you install the tent. And that’s something investors should keep in mind when investing money in companies abroad.
Denmark, the Scandinavian country crushed between Germany and Sweden, is ranked as the easiest place to do business in the world, according to the recently published Global Business Complexity Index 2021. The report explains:
- “In Denmark, you can start a business in one day, due to the fact that there is a single point of entry for all registrations, and all necessary bodies and organizations are automatically notified.”
France ranked second in the worst of the 77 ranked countries.
- “France’s place as the second most complex jurisdiction is driven by complexities in accounting and tax processes, and highly employee-focused human resource regulations,” the report states.
Brazil was the most difficult place to do business. The 77 countries that represent 92% of world GDP, say the authors of the report.
The survey measured the complexity of accounting and taxes, creating and maintaining a corporation or other business entity, as well as human resources and payroll rules.
The report finds that the ease of doing business does not necessarily go hand in hand with the size of the market:
- “An ongoing observation, from our eight years of complexity reporting, is that some of the most attractive markets to operate in are both the most complex and the most punitive for doing the wrong thing.”
Stricter regulations emerge for the employment of people
The rules regarding employees are getting annoying almost no matter where you locate your business.
During 2020 it became more difficult to lay off employees without giving a reason. And the Argentine government now says it is against the law to fire workers, “for any reason,” the report says.
Things are getting worse, the report continues:
- “Our experts predict that employers will continue to see the increase in pro-employee legislation, which at the same time encourages companies to act responsibly in their local communities and increases the level of complexity they must navigate.”
Should investors care
Investors should consider the trade-off between investing in a country with a challenging business environment and the potential returns that can be made in that country.
For example, the US is still among the top countries with the least complicated business environment and is by far the richest country in the world.
In other words, the United States is still a good bet and Argentina is not.