El Salvador Eclipses Panama In Economic Freedoms

Those of us who have been battling with Panama’s “economic dragons” for the last five (or so) years will not be surprised by these news.

Setting up and operating business in Panama (especially as “foreigners” or “Gringos”) has not been as smooth and as easy as the Panamanian government advertised (or at least would like to admit publicly).

The Panamanian business and entrepreneur environment is “oligopoly-friendly” (meaning favoring heavily well established and politically influential and powerful family owned business).

If the Panamanian government (outgoing as well as new) does not wake up and smell the roses soon, such rankings will continue dropping and the business environment rapidly deteriorating in favor of the very few.

Financial freedom means healthy competition and healthy competition means better prices, better services and a more robust consumer activity, much needed in these trying times.

Here is the article from today’s La Prensa:

El Salvador is one of the countries that enjoys the greatest economic freedom in Latin America, even superior to that experienced in Panama.

Those were the findings of two recent global rankings, one conducted by the Fraser and Cato Institutes in September, and the other published by The Heritage Foundation and Wall Street Journal newspaper last month.

According to the Fraser and Cato index where countries were given a number between 1 and 10, with 10 indicating the highest economic freedom, El Salvador received 7.51 points and ranked 25 in Latin America. Panama followed some positions behind at 30, with an assessment of 7.41 points.

In similar studies done prior to 2000, Panama had eclipsed El Salvador in terms of economic brio and openness, but that changed as that country adopted sweeping structural reforms, liberated trade and investment and amended tax models. The new millennium also brought with it a movement toward privatizing many of the state-owned companies and utilities.

Panama made progress in many of the same aspects during that period, though in a more moderate form.

“The index does not place a great difference between the two countries,” said Juan Carlos Hidalgo, Project Director for Latin America at the Cato Institute. “Panama has always stood out among the leaders in the region, but it has had its setbacks.”

Among the weaknesses diagnosed include Panama’s remaining trade barriers and other restrictions on fair competition that allows the existence of oligopolies. “If there were more competition, consumer would see prices decline,” postulated Hidalgo.

James Roberts, a researcher at the Heritage Foundation, explained that the institute’s decision to drop Panama by five positions had to do with the country’s escalated problems with corruption and the rigidity of the labor and tax codes.

That assessment received support from the Panamanian Association of Business Executives, which released a statement that decried those same issues. “Those [elements] affect the cost of doing business in the country,” it concluded.