Check out the new Latin Business Index published by the Latin Business Chronicle. The results are intriguing.
If there is one country that embodies the ideal business climate, it is Chile. The country managed to top all but one of the five main categories. It came ahead of Mexico in macro environment, ahead of El Salvador in business environment, ahead of Costa Rica in technology level and ahead of Uruguay in political environment.
The high score is partly due to free-market reforms implemented in the 1970s and 1980s, but also the return to a vibrant democracy in 1990. Three subsequent, democratic governments have continued the free-market policies first initiated by former dictator Augusto Pinochet, while also respecting political freedom. Chile is only one of three countries in Latin America with perfect scores in political rights and civil liberties, according to Freedom House.
and bottom dwellers
While the gas nationalization in Bolivia last week affected the country’s score in terms of political outlook and business policies of the government, it came on top of a wide range of negative factors that propelled the country to the second-last position in the index. Bolivia has the lowest score in Latin America in terms of globalization & competitiveness, the fourth-lowest in macro environment and technology level and the fifth-lowest in business environment.
And Bolivia, the poorest country in South America, is expected to worsen the business climate further over the next 12 months, thanks to increasing anti-market policies by president Evo Morales, who assumed office in January.
Haiti comes in last on the index as well as on each of the five subcategories. While the political strife has played a key role in setting Haiti back, it doesn’t explain how the country has managed to remain so far back from its neighbors. Colombia, for example, has also been hard hit by internal violence, yet the country managed to capture a ninth place on the Latin Business Index. The low rank for Haiti also contrasts with neighbouring Dominican Republic, which came in tenth place on the index.
Chile on top? Do you think Chicago Boys are celebrating? (The video might take a bit to load if you are on a slow connection, but its worth it!) Worthy of noting is the major idea by Milton Friedman advanced at the time that sooner or later free markets would undermine political control – in other words, free economic system can’t exist under an opressive government. “Building free market institutions as a way to open up societies?” I’ll buy the argument if you make it circular by adding “…and fostering open, transparent governments to build free market institutions.”
Side note – Milton Friedman is on my “top 5 economists of all time” list. Others: Adam Smith, Douglass North, F.A. Hayek, and James Buchanan. Also, check out Walter Williams.
Published Date: May 08, 2006