Economic Freedom: Mexico Declines

Mexico and Brazil on opposite ends of economic freedom in Latin America.  

BY LATINVEX STAFF

Mexico’s economic freedom fell the most in Latin America, according to a Latinvex analysis of the 2016 Index of Economic Freedom from The Wall Street Journal and the Heritage Foundation.

“Mexico saw its index score decline for the third straight year,” the index editors say. “Though the index editors credit its “moderate degree of resilience” in a difficult global economy, Mexico’s judicial system remains vulnerable to political interference, and property rights are not strongly protected. Its long-term commercial competitiveness is further undermined by corruption.”

Meanwhile, a recent labor reform bill was watered down to protect unions, it points out.

As a result, Mexico’s economy is 65.2 percent free. That ranks it among the six freest economies in Latin America and head of Brazil, which ranks among the six least-free economies.

Overall, Latin America’s economic freedom remained the same. While nine countries improved, nine others deteriorated and one (the Dominican Republic) remained unchanged.

 “The stark common reality across the region is that the foundations of well-functioning free-market democracy remain fragile,” the editors of the index write. “With widespread corruption and the weak protection of property rights aggravating systemic shortcomings such as regulatory inefficiency and monetary instability caused by various market distortions, the region as a whole has become increasingly vulnerable to deceptive models of populist governance.”

Only two economies – those of Chile and Colombia – are classified as “Mostly Free,” while nine economies were “Moderately Free,” three are “Mostly Unfree” and five are “Repressed.”

“Chile remains the regional leader, but several policies threaten its well-established tradition of economic freedom,” the index editors warn. “Along with the introduction of redistributive tax measures, the corporate tax rate has been raised and is slated to rise further in coming years. Ongoing labor reforms have focused on increasing the minimum wage and strengthening union bargaining.”

Countries listed as having “Moderately Free” economies include Costa Rica, the Dominican Republic, El Salvador, Guatemala, Panama, Paraguay, Peru and Uruguay.

In the “Mostly Unfree” category are countries like Brazil, Nicaragua and Honduras, while “Repressed” countries include Cuba, Venezuela, Argentina, Bolivia and Ecuador.

“Argentina—hampered by what the editors call a “blatant disregard for the basic foundations of the rule of law and limited government”—recorded its lowest Index score ever [while] in Venezuela, President Nicolás Maduro has pushed government spending to the brink, resulting in harmful increases in inflation and public debt,” the index editors say.

Argentina is expected to dramatically improve its economic freedom this year as the new government of President Mauricio Macri implements market-friendly reforms, experts predict. (See Argentina Changes Course).

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