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  • The 2012 Index of Economic Freedom: Latin America’s Underperformers

    Today, the 2012 Index of Economic Freedom launches. For 17 years, The Heritage Foundation and The Wall Street Journal have reported on the status of economic freedom around the world, measuring 184 nations across the globe according to rule of law, limited government, regulatory efficiency, and open markets.

    Globally, the 2012 Index noted a general decline in economic freedom across the board, with nations throughout the world unsuccessfully trying to “spend their way out of recession.” The United States itself dropped from ninth to 10th, continuing a slide that last year knocked the U.S. out of the category of “free” nations for the first time since the Index’s inception. But how did the rest of the Western Hemisphere fare?

    When it comes to Latin America, most of the rankings won’t come as much of a surprise. Of the 29 nations in South and Central America and the Caribbean, Chile held strong at the top, jumping up to become the world’s seventh-freest economy with its overall score increasing by 0.9. Likewise, the region’s bottom-dwellers also remained much the same, with the anti-America, pro-Chavez nations of Ecuador, Argentina, Cuba, and Venezuela coming in at the bottom as some of the world’s most economically repressed nations.

    What might raise questions, however, is the whereabouts of Mexico and Brazil. In 2010, Mexico’s economic growth rate hit a 10-year high, growing at a rate of 5.5 percent. Topping that figure, in Brazil, the economy grew 7.5 percent, its fastest pace in 24 years. Yet despite these growth figures, Mexico and Brazil are underperforming. In terms of economic freedom, the two nations ranked 54th and 99th, respectively, in the world.

    In Mexico, rule of law has been undercut by the violence and crime associated with the country’s war on the drug cartels. At the same time, rampant corruption, weak protection of property rights, a rigid labor market, and troublesome non-tariff barriers have also stunted economic growth. Likewise, in Brazil, while the real (the Brazilian currency) is stable and the middle class is growing, corruption and weak property rights remain a problem, and significant government intervention in the economy undermines prosperity.

    The economic building blocks may well exist in Mexico and Brazil, but unless they work to further free market and labor reform, both nations will remain unlikely to meet their full potential.

     

    Posted in International [slideshow_deploy]

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