Red Tape hampers Latin American B2B development

Red tape and a weak regional capital market are still major obstacles to the development of business-to-business Internet exchanges in Latin America, said the speakers at a roundtable at the Second Forum of Maintenance and Industry, hosted by Computec Sistemas S.A. and held in Buenos Aires this week.

Business-to-business exchanges, like other new companies in the region, suffer from Latin America’s legal-system instability dependency on international financing, unstable democracies and the lack of a real capital market, said Omar Vigetti, president and CEO of the investment consulting company TheLatinGate LLC.

Red tape is also a major source of difficulties and hampers many business initiatives, speakers said. For example, it’s common in Latin America for governments to require that all purchase orders and invoices be sent on paper, either hand-delivered or by traditional mail, in order for the transactions to be legal and binding, they said.

For instance, in order to open a small pasta factory in an Argentine city, with a capital investment of only US$25,000 the applicants have to prepare 34 filings, pay an average of $1,500 in separate fees to different state and federal organizations at nine different banks, and wait a minimum of 150 days before getting all the necessary permits, said Alfredo Leuco, a well-known Argentine broadcast journalist who acted as a moderator to the panel.

These bureaucratic meanders obviously foster corruption, “as there are always ‘well-intentioned souls’ who offer to push things along the line … for a price”, said Leuco.

Vigetti, of TheLatinGate, said that Latin America commanded only 1 per cent of the global venture capital investment during 1999, while North America received 73 per cent. However, there is a huge mass of money that could be invested in Latin America, as soon as some of the problems that still plague the region are resolved, he added.

“Venture capitalists need to see there is a capital market in the region” and that by backing companies that eventually launch IPOs they will be able to profit from their investments. He added that investors are very interested in new developments in the wireless, ASP, and broadband markets. “Dot-coms are no more,” said Vigetti. What investors look for are companies that can turn profits within a reasonable amount of time.

The forum was hosted by Computec Sistemas to promote that launch of the Argentinian version of iProcure, a division of Datastream Systems Inc. that runs a business-to-business exchange for industrial equipment. Versions of this exchange are also being launched for M