WASHINGTON—According to a key economic-political index, Chile has outpaced all Latin American countries and is even holding its own against the United States and Canada in the Americas.
As of mid-May, Chile ranked first among Latin American countries with an overall rating of 80, more than 12 points higher than its 2007 rating, on the Heritage Foundation and Dow Jones & Co. 2008 Index of Economic Freedom.
"Chile is a regional economic power and scores higher than average in all 10 areas of economic freedom, especially investment freedom, property rights, and freedom from corruption. Foreign investment is a cornerstone of Chile's strong growth, and allowing easy repatriation is an attraction to inbound capital. Overall, the rule of law is remarkably transparent and impartial," said the Foundation.
The index measures ten economic freedom factors, including trade, business, investment, financial and labor freedoms, as well as freedom from corruption.
Business freedom was judged by the ease a business could be formed, trade concerns and impediments, ability to access local and foreign capital, labor freedom and corruption.
Chile also ranked first among Latin American countries—followed by Mexico and Costa Rica on the Global Competitiveness Index of 131 countries, published in "The Global Competitiveness Report 2007-2008" by the World Economic Forum (WEF), a not-for-profit independent global power broker between business and government leaders.
Additionally, Chile leads Latin America on the WEF's Global Information Technology Report with a score of 4.35, followed by Puerto Rico with a score of 4.25. Factors in the ranking included Internet access, communication technologies and the cost of telephone connections.
International Scale
The 2008 Index of Economic Freedom suggests that a free society greatly influences economic welfare.
"Studies in previous editions of the index confirm the tangible benefits of living in freer societies. Not only is a higher level of economic freedom clearly associated with a higher level of per capita gross domestic product (GDP), but GDP growth rates also increase as a country's economic freedom score improves," according to the Foundation Web Site.
Chile is recognized as a world class economy and ranked third among 29 countries polled in the Americas, with the United States achieving first place with a ranking of 80.56, down more than 12 points over 2007; and Canada in second with 80.18 points, representing a 17 percent loss over 2007.
Among 162 countries, Chile was still among the top ten, with Hong Kong in first place with a score of 90.25 and the People's Republic of China was ranked 126. Even in the Asia-Pacific region, China ranked only 23 out of 30 countries.
China scored low because it "severely restricts many areas of its economy and consequently scores lower than average in 7 of the 10 economic freedoms. Investment freedom, financial freedom, and property rights are very weak. Foreign investment is highly controlled and regulated, and the judicial system is highly politicized. The state maintains tight control of the financial sector and directly or indirectly owns all banks," according to the report.
Chilean Trade in the News
According to Chile Central Bank's trade statistics, Chile continued to have an $8 billion trade surplus during the first quarter of 2008, with exports of $26 billion and imports of $18 billion.
Chile exports copper, pulp, wine, mussels, cheese, salmon, and cod-liver oil, according to a Chile Chamber of Commerce press release. In 2007, exports to Asia increased by 2 percent, while exports to North America declined by 4 percent.
In 2007, China replaced the U.S. as Chile's largest export partner, with 15.5 percent of Chile's total exports going to China. China imports 20 percent of all its copper and almost 50 percent of its wine and grape needs from Chile, according to a Brookings Institution discussion on "China's Expansion into the Western Hemisphere: Implications for Latin America and the United States."
Business Climate
Chile has one of the most business-friendly environments among Latin American countries, especially with respect to the transparent regulatory environment, stable legal environment and absence of bureaucratic maneuvering, according to a series of Latin America studies published by the McKinsey Quarterly, the publishing arm of the New York-based McKinsey & Co.
"We found that Chile's risk profile, which is better than both China and India, is the most attractive among all of the Latin American countries we studied. Chile scores especially well on regulatory risk: the regulatory framework is transparent, with little bureaucracy, and the legal environment is stable," suggest McKinsey.
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