Latin America progresses in economic freedom, study says

Better than five out of every six countries in South and Central America and the Caribbean made steady progress toward economic freedom last year, according to the 2011 Index of Economic Freedom, released Thursday by The Heritage Foundation and The Wall Street Journal.

Only Chile ranks among the world’s 20 freest economies, coming in 11th overall with a score of 77.4 on the Index’s 1-100 scale. But Colombia ranks among the world’s most-improved countries – its score rose by 2.5 points over the previous year – and the region as a whole ranks a half-point better than the overall world average of 59.7. Only three countries in the region – Ecuador, El Salvador and the Dominican Republic – actually lost ground in the quest for economic freedom.

“With more than half the region’s economies implementing some form of business reform over the past year,” the Index editors write, “regulatory systems are becoming more transparent and modern, and the overall climate for entrepreneurship is improving.”

Costa Rica was in 49th place, with 67.3, up 1.4 points from the previous year. The country was ranked mostly free. Nicaragua was 98th at 58.8, a half point increase over the previous year. The ranking put it in the mostly unfree category.

The index, compiled as a joint project of The Heritage Foundation and The Wall Street Journal, ranks countries on a 1-100 scale on the basis of 10 measures that evaluate openness, the rule of law and competitiveness. The 10 scores are averaged to produce the overall score.

Countries that score well demonstrate a commitment to individual empowerment, non-discrimination and the promotion of competition. Their economies tend to perform better, and their populations tend to enjoy more prosperity, better health and more positive measures on a
variety of quality-of-life indices. A score of 80 or higher merits the designation of “free economy.” Those who score in the 70s are considered “mostly free,” those in the 60s “moderately free,” those in the 50s “mostly unfree” and those that score less than 50 “repressed.”

Chile easily maintains its perch atop the region with scores of at least 67 in all 10 categories. Saint Lucia, averaging 70.8, and Uruguay, at 70, are the only other countries in the region to score in the “mostly free” category. At the other end of the scale, four countries – Guyana, Ecuador, Venezuela and Cuba – scored below 50 points, putting them in the category of “repressed” economies. On the bottom rung in the 29-state region is Cuba. Its 27.7 point rating is the third worst in the world. Only Zimbabwe and North Korea allow less economic freedom.

Colombia continues to show dramatic progress and has become, in the words of the editors, “one of South America’s most stable economies.” Its score improved thanks to upgrades in its entrepreneurial environment, facilitated by openness to trade and investment.

Recent reforms in regulation and fostering a strong private sector also contributed to its improvement.

The region overall ranks above the world average on just four of the 10 Index categories. Its biggest problems remain corruption and a lack of property-rights protection. Only eight countries in the region scored better than 50 in the corruption index, and only seven exceeded a score of 50 on property rights.

“These reflect longstanding issues of poor governance and weak rule of law,” the editors wrote.

The 2011 Index was edited by Ambassador Terry Miller, director of Heritage’s Center for International Trade and Economics, and Kim Holmes, Heritage’s vice president for foreign affairs. A complete online version of the Index is available free at

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