The Economic Openness Index of the English think tank Legatum affirms that the country improved 12 places in its index; but has a bad grade in the environment for entrepreneurs
According to the Economic Opening Index of the Legatum Institute, based in London, between 2017 and 2018, Argentina improved 12 places in its world ranking of opening countries, a figure that is reflected in the 2018 and 2019 measurements of the organization, respectively. The country reached the 86th place out of 157 countries, standing in the middle of the table, but improving from the previous edition, where it was at the number 98. The improvement, good news for the country in a year of economic setbacks, was mainly justified by the improvement of the functioning of government institutions and transparency (in a criterion known as “governance”). Another contribution in the improvement of the rating that Legatum gives to the country is explained in the improvement in access to markets and infrastructure to trade. On the other hand, according to Legatum, within the overall rating, better than in 2019, where the country had the worst rating was in the environment and the conditions to start a business.
“Argentina had an improvement in the four pillars of the index: Governance, Access to Markets and Infrastructure, Environment to Invest and Conditions to Undertake. In Governance, more significantly, where it went from place 98 in 2009 to 55 in 2019. The government of Mauricio Macri has made efforts to increase transparency, and the prosecution of executives and former governors led to a “de facto” rise in the restrictions and limits to the power and the rulers”, said Legatum.
The notes of other indices
The Global Index of Economic Openness of Legatum, made with the support of the Templeton Foundation, measures the economic openness of 157 countries, including the environment that favors or not the conditions to trade internally and internationally in each country. It should be remembered that in the two most widespread indices of economic freedom in the world, those of Heritage and Fraser Institute, the country had been making bad grades. In Heritage 2019, Argentina ranks 148th in the group of “mostly non-free” countries, down 4 places compared to the previous edition. Interestingly, in the 2019 survey, despite the country’s poor rating, Heritage reported an improvement in the country in Legal Security and Regulatory Efficiency, and a fall in terms of State Size and Open Markets. As for the Fraser Institute, whose Index 2018 reflects what happened in 2016, the country was ranked 160. It should be noted that because of the lag in this measurement, probably in the 2018 Index, the effects of the disclosure of fees were seen, and the release of prices and stocks. “Although the 2016 measures themselves were going in the right direction, perhaps they had a negative impact on the Fraser 2018 index. Undoubtedly 2016 was a year of progress in the economic freedom of the country, that is recognized here and abroad, but in the way the index is designed, inflation has a strong weight, and had a notable increase of one year to another for the aforementioned sincerity”, said Manuel Solanet, director of Libertad y Progreso, regarding Fraser’s bad grade.
Argentine entrepreneurs, in a hostile environment
The poor performance of Argentina in the sub-index “Environment to undertake”, of the Letagum Index, in sharp contrast to the good note in economic and commercial openness in general, was investigated by Libertad y Progreso in the Desregular for Entrepreneurs project, carried out together with Atlas Network “Argentine entrepreneurs have a hand brake when it comes to growing or maintaining their projects over time, and that is due to the lack of institutional quality.” What does a concept as far away as institutional quality mean for an entrepreneur in a poor neighborhood? That the contracts are fulfilled, for example that they do not violate the rental contract, stability in the rules of the game, for example, that they do not permanently raise taxes and fees, respect for property rights, that is to say that another family does not occupy the land or the house where he works, all this would help entrepreneurs of all strata and return to Argentina competitive again, generating the basis for sustained growth”, said economist Ivan Cachanosky, head of the research that analyzed cases in situ of 222 entrepreneurs from 5 low-income neighborhoods of the city and the province of BsAs, with surveys and in-depth interviews in each neighborhood. The research took as its starting point the Doing Business Index of the World Bank, where the country occupies the 128th position out of 190 countries.
According to Legatum, at the global level, there is much to celebrate in advance of economic opening in the last 30 years. “The economic opening has boosted and generated prosperity and approximately one billion people since 1990”, said Legatum. “However, our research also reveals a deterioration in the quality of governance in both developing and developed countries, and this represents a brake on openness. The lack of implementation of an effective competition policy gave rise to the oligarchs of the former Soviet Union and the capitalism of friends of Latin America. In addition, after the global financial crisis, progress in the opening has stalled”, said the institution.
The Index of Legatum analyzes the items Access to Markets and Infrastructure to Trade; Environment for Investment (which includes access to financing); Environment for Entrepreneurship (which guarantees that markets are free of excessive regulations) and Governance (influenced by Legal Security, Integrity and Government Efficiency). Index 2019 drew four main conclusions: that the economic opening is at its highest level in 30 years, that the countries with the best score in economic opening are more productive, that the economic opening can be improved based on certain public policies and that Governance is key, and that the quality of governance can be a brake on the opening of the economy.
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