Monday, January 09, 2006

Economic freedom in El Salvador

The Heritage Foundation, a conservative US think tank, recently released its 2006 Index of Economic Freedom. El Salvador ranks 34th in the world for economic freedom in this index. Among Latin American countries, only Chile ranked higher at 14th. Some of the Heritage Foundation's comments about El Salvador:

Despite ongoing security problems caused by gang activity, transnational crime, and kidnappings, El Salvador continues to enjoy stable democratic government, modest economic growth, and declining poverty rates. Like previous governments, the administration of President Elias Antonio Saca views increased trade and private investment, both domestic and foreign, as essential to economic growth. With one of Latin America's most open trade and investment environments, comparing favorably to Chile and Mexico, El Salvador stands to gain considerably under DR-CAFTA: not only assured access to U.S. markets, but also liberalized trade among Central American countries, among which El Salvador is an industrial leader. Low average levels of education in the labor force and an inefficient judicial system are checks on economic growth. As industries begin to supplant agriculture, workers will need to be more literate; and if Salvadoran leaders want to continue attracting foreign investment, the justice system will have to make headway against crime and support commercial arbitration.

The rankings reflect the conservative, pro-free trade, pro-business leanings of the Heritage Foundation and should be read in conjunction with the United Nations Development Program's Human Development Report, where El Salvador ranked 104th. The free enterprise policies of the ARENA government, which are praised by the Heritage Foundation, have done little to boost economic growth in El Salvador which remains among the lowest in Latin America.

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