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Economic reforms stalled in the Caribbean

Heritage Foundation’s Economic Freedom Index finds it world’s only region without net gain in 2001 .

  © By John Collins  

 [Chapter 2 On the Economic Freedom Index: "Too Many Promises"]

The Index of Economic Freedom, just released by the Heritage Foundation, gives bad grades to half of the countries in Latin America and the Caribbean

and notes that “it is the only region in the world that did not experience a net gain in economic freedom this year.”

The findings of the study are described as “straightforward.” Countries with the most economic freedom also have higher rates of long-term economic growth. “Economically free countries exhibit greater tolerance and civility than economically repressed ones, where hopelessness and isolation foment fanaticism and terrorism,” it observes.

For the purposes of the survey Heritage analyzed the following areas of each country’s economy: trade, fiscal burden, government intervention, monetary policy, foreign investment, banking/finance, wages/prices and property rights. Information is obtained from various sources including the World Bank, the International Monetary Fund and the Inter-American Development Bank.

Of the countries in the world included in the study (155), 14 are grade “free,” while the next 57 are classified “mostly free.” The balance includes 72 in the “mostly unfree” category and the remaining 13 are described as “repressed.”

Describing Latin America and the Caribbean as “suffering from stalled reforms,” the study finds that of the 26 countries (out of a total of 36) in the region graded this year, 11 “have improved in overall economic freedom and 11 are worse.”

Chile (9)  is for the first time classified as a “:free” country. El Salvador (18), which was ranked as the freest country in the region last year, has been downgraded to “mostly free” because of its “expanded fiscal burden and black market.”

At the top of the list in the region, after Chile, is Canada (15) and then the Bahamas (17), in the “mostly free” category. Regional countries in the same class are Barbados (26), Trinidad & Tobago (37), Costa Rica (43), Belize (46), Panama (51), Guatemala (56), Colombia (58), Jamaica (62) and Mexico 64).

Economic situation in D.R. deteriorating

Topping the list in the “mostly unfree” category is the Dominican Republic (72). A Heritage spokesperson indicated that the D.R. dropped from 59 in the “mostly free” category the previous year. Cited were several reasons for the adjustments in the D.R.’s grade. While the spokesperson indicated the black market situation in the country actually improved slightly, he said there was an increase in both wages and prices which contributed to a rise in the inflation rate to 7.1% in 2001 from 5.8% in 1995. The country’s monetary policy was given as another reason for the contraction.

The “mostly unfree” category also includes Honduras (90), Nicaragua (92), Guyana (94), Venezuela (130), Haiti (136) and Suriname (143). The only region country in the “repressed” category is Cuba (153).

Among some other countries in the Caribbean the grades for both Barbados and Trinidad & Tobago improved (from 35 and 39, respectively, the year before); while Jamaica dropped (from 60 the year before).

Ranked first in the world in the survey, interestingly enough, is Hong Kong even though it has reverted to the Peoples Republic of China which still ranks low at 121. Of the next ten countries in descending order, besides Singapore (2) and the U.S. (4),  five are in Europe: Estonia, Ireland, Luxembourg, the Netherlands  (all also 4); two in the Pacific:  New Zealand (3) and Australia (9); and Chile (also tied for 9).

December 31, 2001

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