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The Americas Lead World In Economic Freedom

by Mike Godfrey,, Washington

18 January 2007

The Western Hemisphere, led by the United States, boasts a higher than average degree of economic freedom than the rest of the world, although the Americas' historic march toward greater freedom largely stalled last year, according to the 2007 Index of Economic Freedom.

Using a new rating system in which economies are ranked on a 100-point scale, with a higher score representing greater freedom, the index, published annually by the Heritage Foundation and the Wall Street Journal, pegs the region's average level of economic freedom at 62.3, ahead of the world average 60.6.

The United States received the highest ranking in the region: 82.0, good enough for a 4th place finish worldwide. The US led the region in four of the 10 categories examined in the Index: investment freedom, financial freedom, labor freedom and protection of property rights.

Canada was the only other country from the region to rank in the top 10 globally. Canada led the region in three categories: free trade, ease of opening and closing businesses, and freedom from corruption. Its overall score of 78.7 was good for 10th place, worldwide.

However, index co-author Tim Kane notes that many of the region's smaller nations seem to be "stuck in poverty traps."

"The way to break out of those traps would be for nations to promote more economic freedom. But that's not what's happening," Kane observed.

"The recent rise of populists like Evo Morales (Bolivia) and Hugo Chavez (Venezuela) threatens to widen the freedom gap in the Americas even more," he added.

Nonetheless, the economic freedom is distributed in a more balanced fashion in the Americas than in any other region, the Index found. The US and Canada are far and away the leaders, while Cuba and Venezuela are the only countries ranked as economically "repressed." The other 25 economies are clustered in the middle of the scale.

Compared to a year earlier, 19 countries in the region received lower scores while 10 others received higher ratings for economic freedom. Only Chile dropped into a lower category, falling from "free" to "mostly free." Two climbed: Honduras from "mostly unfree" to "moderately free" and Haiti from a "repressed" to a "mostly unfree" rating of its economy.

As in previous years, the Index ratings reflect an analysis of dozens of economic variables, grouped into 10 categories, although this year those categories have been revised. The 10 freedoms measured are: business freedom, trade freedom, fiscal freedom, freedom from government, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. Ratings in each category are averaged to produce the overall Index score.

Worldwide, the average rating for economic freedom held essentially steady, with "much room for improvement," the Index editors write. Of the 157 countries ranked, only seven are classified as "free" (a score of 80 or higher). Another 23 are "mostly free" (70-79.9). The bulk of countries - 107 economies - are either "moderately free" (60-69.9) or "mostly unfree" (50- 59.9). Some 20 countries have "repressed" economies, with total freedom scores below 50%.

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