How to Revive Central America

To succeed, it will have to break with the State Department’s conventional wisdom that underdevelopment is caused by a paucity of taxes and regulation. It will also have to climb down from its view that trade is a zero-sum game.

.. Failure to create jobs and grow, and the heavy concentration of businesses in the consumer sector, reflects the difficulty Guatemalan entrepreneurs have in getting credit. That’s not unusual in an economy in which more than 72% of businesses operate underground and therefore cannot access the formal banking system.

.. Guatemala ranks 88th out of 190 countries world-wide for ease of running an enterprise, but in key categories that make up the index it performs much worse.

.. The survey finds that it takes 256 hours to comply with the tax code. The total tax take is 35.2% of profits. It takes almost 20 days to start a legal enterprise and costs 24% of per capita income. To enforce a contract it takes more than 1,400 days and costs more than 26% of the claim.

.. at home the state is hostile to business and disrespectful of property rights. As a result, most new ventures see the cost of formality as outweighing the benefits.

 ..  A lower tax rate and a simpler code would give companies an incentive to operate legally, thereby broadening the base and improving access to credit.
.. Nor is Trump protectionism going to help Mr. Tillerson turn Central America around. Companies won’t want to manufacture in the region if they don’t have access to the U.S. market.