Chile, Costa Rica and Uruguay, Institutional Quality Champions in Latin America

According to the 2018 Institutional Quality Index of the Libertad y Progreso Foundation carried out with the support of the Naumann Foundation and RELIAL and presented yesterday, Chile, Costa Rica and Uruguay remain as the Latin American champions of the institutional quality. Meanwhile, in the region, the country that had the most recovered positions with respect to 2017 is Argentina, which climbed 19 positions, after the monumental fall of 94 positions between 1996 and 2016.

“There are no major changes in the first positions. Chile, Costa Rica and Uruguay quietly occupy the top positions in the ranking among Latin American countries”, said Martin Krause, the economist and academic who makes the Index. “From the results of 2018, it can also be observed that the small Caribbean countries show better institutional quality than the Latin Americans. This might be because they inherited the British legal system from common law in many cases and also because being small countries are compelled to maintain open economies and that subject them to greater inter-jurisdictional competition that can be felt by large countries such as Brazil, Argentina or Venezuela, which can be closed to the world to a greater extent (although not with better results)”, explained the expert.

Regarding the local case, Krause highlighted the improvement of 19 places in Argentina, which adds to the four places won last year. “Argentina is the country that performed best in all of Latin America, improving 19 positions. Given the lag of the indicators considered, this result reflects the changes that occurred with the new government during 2016. But it is still in position 119, out of 191 countries. The quality of the political institutions (which obtained a score of 0.5337) is still higher than that of the market institutions (with a score of 0.2490), having improved almost 0.10 points with respect to the previous year in the first ones, but only 0.06 in the second. The main improvement has been in the rule of law (Rule of Law) index, with 0.18, and the best score among the selected indicators are obtained by the measurement of Voice and Accountability, an indicator that evaluates the performance of the democratic system, followed by Freedom of the Press,” explained Krause. “The gradualism in economic policy does not yet allow to observe important improvements in the quality of market institutions”, he said.

Venezuela is another of the countries to be highlighted in the region, although not for the most desirable reasons. “The case of Venezuela is the most pressing in the entire region. The situation, in terms of quality of life, is almost untenable for the vast majority of the population of that country and the regime is directed to manipulate elections that are an institutional farce that does not hide in the least the true intention of continuing an authoritarian and dictatorial regime that violates the most basic human rights. Some countries in the region have reacted against this attempt and threaten to ignore the process, but this serves little for the moment to Venezuelan citizens who are subject”, said Krause.

The Index of Institutional Quality, which was presented yesterday live by, by Krause, Agustín Etchebarne, the director of Libertad y Progreso, Fernando Sánchez, the Secretary of Institutional Strengthening, and the journalist Ricardo Bindi, is elaborated since 2007 and covers up to 1996. This measurement registers in a comparative way the quality of the institutions of the countries, a factor of vital interest for investors. The index It is elaborated by computing in turn eight other renowned indicators that measure Legal Security (Rule of Law), Voice and Accountability, Freedom of the Press, Perception of Corruption (of Transparency International), Global Competitiveness, Economic Freedom (Heritage indices and Fraser) and Ease of Doing Business (Doing Business of the World Bank).

Regarding the region, Krause reflected that seeing the changes since 2007 or since 1996, one can observe the institutional havoc caused by the advance of the Bolivarian project or “socialism of the 21st century”. “This one tried to present itself as a new and different version of the recently failed socialism, but it has only confirmed all the vices of the previous one and does not present any overcoming initiative. In its most intense version, that of Venezuela, it is even closer to the version of “dictatorship of the proletariat” or indeed of the one-party dictatorship. In those cases in which it was not able to impose that model and the opportunity for change was given, the change occurred, both in the case of Argentina with the rise of a government opposed to the model and in Ecuador, where a supposed “dolphin” has decided to follow its own path and somewhat away from Chavez principles”, said the economist of the UBA.

Positions of the region

The positions of the Latin and Caribbean countries in the table are: Chile (position 25), Costa Rica (35), Saint Lucia (40), Uruguay (41), Dominica (46), Jamaica (49), Bahamas (50) , San Vicente (51), Panama (54), Barbados (60), Peru (63), Antigua and Barbuda (68), Saint Kitts (76), Trinidad and Tobago (83), Colombia (85), Granada (89), Mexico (91), El Salvador (93), Dominican Republic ( 97), Belize (100), Guyana (101), Guatemala (107), Suriname (111), Brazil (113), Argentina (119), Paraguay (122), Nicaragua (130), Honduras (132), Ecuador ( 142), Bolivia (154), Haiti (160), Cuba (171), Venezuela (183).

Global picture

According to Krause and Etchebarne, Institutional Quality is not a nice slogan: good institutions translate into better quality of life and wages for the inhabitants of a nation and that is measurable. “There is a clear link between Institutional Quality and quality of life (measured according to the UN Human Development Index), Institutional Quality and income level (measured as GDP per capita), investments, innovation and even environmental quality and Institutional Quality. In all cases it can be seen that the countries with the worst institutional quality are also those that provide the worst opportunities to their citizens and have the worst performance in terms of poverty, education, health or the indicator that wants to look at themselves, “they said.

As for the best players of Institutional Quality, at Index 2018, the first places were for New Zealand, Switzerland, Denmark, Sweden, Norway and Finland, countries that occupy the podium of the quality of institutions for some years. Of this superleague of serious countries, Sweden and Norway stand out having gone from 13 and 14 to the first five places. The rest of the club members from the countries with the best institutions and ergo, most attractive when deciding an investment, are the Netherlands, Canada, the United Kingdom, Australia, Ireland, the United States, Germany, Estonia, Luxembourg and Austria.

On the side of the worst students of institutional quality, North Korea repeats the last place, like last year, accompanied by Somalia, Eritrea, Syria, Turkmenistan, South Sudan and, just a little above, one of the black sheep of the continent, Venezuela. The case of Venezuela is the most pressing in the entire region.

Finally, reviewing the entire history of the Index, Estonia is perhaps the best example of a great rise in the table. After having separated from the Soviet Union and put aside the communist regime, he improved 25 positions to reach the 14th place at the moment. Other stories of positive changes are the Czech Republic (ranked 23, growing 16 places), Costa Rica (35th, up 19), Poland (36th, up 24), Georgia (38th, grew 87), Slovakia (39th, grew 27), Romania (43th, rose 60), Bulgaria (48th, grew 47).