Cape Verde leads progress towards economic freedom in Portuguese-speaking countries

19 January 2009

Washington, USA, 19 Jan – Economic freedom increased in all Portuguese-speaking countries in 2008, though none at the vigorous pace showed by Cape Verde, according to the latest edition of the Index from the US Heritage Foundation and the Wall Street Journal.

The rise of Cape Verde, of 3.4 points, to 61.3 points (ranked 77th out of 179 countries) puts the archipelago amongst the best in the region and is due mainly to the greater trade freedom “thanks to a significant reduction in tariffs,” says the Index of Economic Freedom 2009.

The annual report looks at the labour market, corruption, property rights, the financial sector, investments, markets, government, fiscal, trade and business in terms of freedom of operation for economic agents.

This year the Portuguese-speaking archipelagos of Sao Tome and Principe and Timor Leste have been included for the first time, as well as Macau, China (21st position).

Of the countries with Portuguese as an official language, Portugal is the best ranked country (35th), followed by Cape Verde, Brazil (105th) and Mozambique (113th).

Mozambique’s score was practically unchanged from 2008 (up 0.2 points), “reflecting a worse score for the government category which cancelled out better scores for labour freedom.”Timor-Leste appears in 149th position; it is above the world average in terms of labour freedom, freedom from government and monetary freedom, though it has been penalized for episodes of violence and instability.

The Foundation emphasizes the “constraints in the business operating environment” and “widespread corruption” as well as the low investment freedom score, resulting from poor institutional and regulatory capacity and “overall volatility.”

“The general lack of institutional capacity has a particularly damaging effect on the protection of property rights,” says last week’s report.

In 162nd position lies Angola, which shows a slight improvement on last year, with “a moderate degree of economic freedom.”

“Relatively low rates of individual income tax and tax burden lead to a fairly high fiscal freedom score, and there has been noticeable progress in liberalizing the trade regime, although the presence of non-tariff barriers remains considerable,” say the Heritage Foundation and the Wall Street Journal.

On the other hand, the transparency of government accounts “needs to be strengthened,” inflation is high, regulation is severe, corruption is “endemic” and political influence mars the judicial system.

“Commercial regulations are a severe hindrance to opening and closing a business and inconsistent and confusing regulations make it costly and difficult for ordinary people to engage in more dynamic entrepreneurial activity,” they add.

Slightly below Angola in 165th place is Guinea Bissau, which achieved one of the most marked improvements on the previous year among the Portuguese-speaking contingent (1.1 points).

Near the bottom of the table, in 170th position, is Sao Tome and Principe, having a good level of fiscal freedom, though it is “well below” the world average in almost all other categories examined by the Heritage Foundation and the Wall Street Journal. (macauhub)