Heritage Foundation's ratings for economic freedom based on broad array of institutional factors

Stabroek News
August 26, 2001

Dear Editor,

Letters have appeared in your column recently about the Heritage Foundation's Index of Economic Freedom. The Heritage Foundation, a conservative think tank in Washington, gives Guyana an overall ranking of 97 for the year 2001 in its examination of the economic policies of 161 countries.

Over the years many analysts have questioned the Heritage Foundation's rating on the grounds that the data and information used for some countries, especially poor developing countries, are not always up to date, thus making comparisons and setting ratings somewhat unfair.

The Index of Economic Freedom claims that it includes the broadest array of institutional factors determining economic freedom. These factors are:

1. Corruption in the judiciary, customs service, and government bureaucracy;

2. Non?tariff barriers to trade, such as import bans and quotas as well as strict labelling and licensing requirements;

3. The fiscal burden of government, which encompasses income tax rates, corporate tax rates, and government expenditures as a percent of output;

4. The rule of law, efficiency within the judiciary, and the ability to enforce contracts;

5. Regulatory burdens on business, including health, safety, and environmental regulation;

6. Restrictions on banks regarding financial services, such as selling securities and insurance;

7. Labour market regulations, such as established work weeks and mandatory separation pay; and

8. Black market activities, including smuggling, piracy of intellectual property rights, and the underground provision of labour and other services.

In terms of the rankings, ten areas are examined, and ratings are given from 1 to 5, with 5 being the least free economy and 1 being the freest. When a comparison is done with the countries of the Americas, Guyana has not done too badly. Let us look at these areas.

Trade: Guyana is ranked 5, and this is the same ranking given to The Bahamas, Barbados, Belize, Suriname and Cuba.

Fiscal Burden: Guyana is ranked 4.5, which is the poorest ranking. However, Canada has been given the same ranking.

Government Intervention: Guyana scores 2 and equals Uruguay, Bolivia, Jamaica, Trinidad and Tobago, Nicaragua, Belize, United States, Canada and Mexico. Those scoring worse are Costa Rica, Argentina, Colombia, Paraguay, Honduras, Panama, Brazil, Ecuador, Venezuela, Haiti, The Bahamas, and Suriname.

Foreign Investment: Guyana is ranked 3 and ties with Guatemala, Honduras, Dominican Republic, Brazil, Venezuela, The Bahamas, Belize, Suriname and Canada. Only Cuba and Haiti did worse with a score of 4.

Banking and Finance Policies: Guyana is ranked 3, and equals Chile, Paraguay, Honduras, Dominican Republic, Brazil, Nicaragua, Venezuela, Belize and Mexico. Those with poorer scores are Jamaica, Ecuador, Haiti, Suriname, and Cuba.

Monetary Policy: Guyana is ranked 3 and others with the same ranking are Uruguay, Guatemala, Jamaica, Paraguay, and Haiti. Poorer rankings are scored by Colombia, Brazil, Ecuador, Nicaragua, Venezuela, Suriname, Cuba and Mexico.

Wages/Prices: Guyana is ranked 2 and equals Uruguay, El Salvador, Chile, Costa Rica, Peru, Jamaica, Colombia, Trinidad and Tobago, Panama, Dominican Republic, Brazil, The Bahamas, Barbados, Belize, United States, Canada and Mexico. Those with poorer scores are Guatemala, Paraguay, Honduras, Haiti, Nicaragua, Venezuela, Suriname, and Cuba.

Property Rights: Guyana is ranked 3. This is the same as El Salvador, Bolivia, Costa Rica, Argentina, Peru, Guatemala, Jamaica, Colombia, Panama, Brazil, Suriname, and Mexico. Poorer scores are given to Paraguay, Ecuador, Nicaragua, Venezuela, Haiti, and Cuba.

Regulation: Guyana is ranked 4. A similar ranking is given to Bolivia, Guatemala, Paraguay, Honduras, Dominican Republic, Brazil, Ecuador, Nicaragua, Venezuela, Haiti, Suriname and Mexico. Only Cuba with 5 is ranked worse.

Black Market: Guyana is ranked 4 and ties with Bolivia, Peru, Honduras, Dominican Republic and Ecuador. Those with a poorer ranking (5) are Colombia, Paraguay, Brazil, Nicaragua, Venezuela, Haiti, Suriname and Cuba.

In the overall ranking Honduras (97) ties with Guyana. Countries which have lower rankings are Venezuela (104), Ecuador (106), Nicaragua (106), Suriname (133), Haiti (137) and Cuba (152).

Brazil does slightly better than Guyana with a rank of 93.

It is obvious that foreign investors will look at these overall ratings, but they will surely examine the ten rating areas in more detail before they make their final assessment regarding plans for investing in Guyana or any other country. At the same time they will examine other indices such as the Cato Institute's Economic Freedom of the World, which has given Guyana a rating in the 60s.

It will be useful if your newspaper prints the Heritage Foundation's comparison ratings so that readers can do their own analysis. The information is found on the Heritage Foundation's website at: http://www.heritage.org/index/2001/

Yours faithfully,

Odeen Ishmael