Wednesday, September 27, 2006


Global Competitiveness

The World Economic Forum ranked Uruguay 73rd (out of 125 countries) in their 2006 Global Competitiveness Report, released today. For comparison: Mexico ranked 58, Argentina 69, the Dominican Republic 83, and Venezuela 88. Uruguay was 70th in last year's report.

Chile, 27th, is the highest ranked Latin American country. They said:
Chile’s position reflects not only solid institutions – already operating at levels of transparency and openness above those of the EU on average – but also the presence of efficient markets that are relatively free of distortions. The state has played a supportive role in the creation of a credible, stable regulatory regime. Extremely competent macroeconomic management has been a critical element in creating the conditions for rapid growth and sustained efforts to reduce poverty. The resources generated by Chile’s virtuous fiscal policy have gone to finance investment in infrastructure and, increasingly, education and public health. Given Chile’s strong competitive position, the authorities will have to focus attention on upgrading the capacity of the labour force with a view to rapidly narrowing the skills gap with respect to Finland, Ireland and New Zealand, the relevant comparator group for Chile.

The text of the report doesn't discuss Uruguay. There is a substantial discussion of "Argentina's unfulfilled potential" (Box 6) that characterizes Argentina's growth performance as one of high volatility, sharp oscillation, with a clear pattern of boom and bust. The whiplash of its larger neighbor has had major economic effects on Uruguay.

Uruguay had a relatively high rank on Institutions (42) (this category includes property rights, security, ethics, government), and on Education and Infrastructure measures (55-59). Uruguay scored relatively poorly on Macroeconomics (109) and on Market Efficiency (116)(a category that includes subsidies, degree of competition, and trade barriers.)

Other Latin American countries scored substantially lower.
A lack of sound and credible institutions remains a significant stumbling block in many Latin American countries. Bolivia (97), Ecuador (90), Guyana (111), Honduras (93), Nicaragua (95) and Paraguay (106) achieve low rankings overall and, in particular, are among the worst performers for basic elements of good governance, including reasonably transparent and open institutions. These countries all suffer from poorly defined property rights, undue influence, inefficient government operations, as well as unstable business environments. Perceived favouritism in government decision-making, an insufficiently independent judiciary, and security costs associated with high levels of crime and corruption make it difficult for the business community to compete effectively.

Global Competitiveness Report 2006-2007

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