Panama has replaced Chile as the Latin American country with the best business climate with Brazil coming in seventh place, according to the fifth annual Latin Business Index.
The index of 19 countries from the Latin Business Chronicle is the broadest measure of business climate in Latin America and examines five key categories covering macro environment, corporate issues, globalisation and competitiveness, technology and politics.
Brazil comes down the list because of its low score in terms of globalisation and competitiveness where it ranks among the five worst in Latin America although it did improve from being the second worst to third worst.
Mexico, the region’s second largest economy, fell one spot to ninth place despite an increase in its score. Mexico is still among the leaders in the category for corporate environment, but is now ranked as the third best versus second best a year earlier.
Panama is the only country that is among the top five in all five main categories. By comparison, Chile is in four, Uruguay in three, while Peru, Costa Rica and the Dominican Republic are in two each.
Much of Panama’s recent growth and expected future growth is centered on real estate and construction. The $5.2 billion expansion of the Panama Canal, along with a fast growing shipping sector, is already earning it the title of the Singapore of the Americas. Multinationals like Procter & Gamble, Dell and DHL all have regional hubs or headquarters in Panama. Panama can also boast being host of the world’s top shipping registry, the world’s second-largest free zone after Hong Kong, and the largest international banking centre in Latin America.
Chile did see an improvement in its score but it was not enough to lose the number one spot to Panama. Chile remains the best country in corporate environment and political environment and second best in technology. It improved in globalisation and competitiveness, moving up from third best last year to second best this year. That improvement was due to higher scores in competitiveness, tariffs, human development and globalization.
Uruguay replaced Peru as the third best country in Latin America and has seen a strong improvement in its macro environment due to both strong GDP growth and a lower inflation rate. The appointment of former finance minister Danilo Astori as head of economic policy has assured investors.
Peru fell from third to fourth place as its macro environment worsened and the political situation is judged more unstable due to a major cabinet reshuffle, several changes of ministers and a growing corruption scandal involving members of the ruling APRA party of President Alan Garcia.
Venezuela kept its rank as the worst country in Latin America, below Haiti. Venezuela’s GDP fell by 3.3% last year and is estimated to fall by another 2.6% this year and 0.4% next year. Political stability has also worsened due to both President Hugo Chavez’ growing attacks against local and international opponents as well as growing discontent among his own traditional allies.
The report suggests that investors should consider all the countries with a score of 14 or higher on the Latin Business Index, which this year includes Panama, Chile, Uruguay, Peru, Dominican Republic, Colombia, Brazil, Costa Rica and Mexico.
