Mexico and the Economic Freedom of the World 2007 Annual Report

Earlier this month, the Fraser Institute (http://www.fraserinstitute.ca/) published the Economic Freedom of the World: 2007 Annual Report. The report can be downloaded at http://www.freetheworld.com/.

This annual peer-reviewed report uses 42 different measures to create an index ranking countries around the world based on policies that encourage economic freedom. Research has shown that individuals living in countries with high levels of economic freedom also enjoy higher levels of prosperity. Hong Kong tops the ranking (8.9 out of 10 points), with Singapore in second (8.8) and New Zealand in third place (8.5).

With respect to Mexico, Espacio Contraintuitivo highlights the following:

• Mexico ranks 44th in the world (7.1 out of 10). In the 2006 report Mexico was 60th overall (6.6).
• In the latest report (2007), the best marks are for Access to Sound Money (8.1) and Size of Government (7.9).
• Mexico got a 7.2 (out of 10) on Freedom to Trade Internationally. Personally, I found this surprising given that Mexico has one of the largest free trade agreements network in the world. A closer look at this category shows that the worst grade comes from the ‘standard deviation of tariff rates’. This suggests that despite the trade agreements, the government still has plenty of room to impose ‘trade sanctions’ to other countries. Regulatory trade barriers are also high.
• Mexico does very poorly on two categories: Regulation of credit, labor, and business (6.7 out of 10) and Legal structure and security of property rights (5.7). With respect to the regulation, the worst results are for mandated cost of hiring (2.8 out of 10) and mandated cost of worker dismissal (3.1). Mexico also gets a poor grade on the impartiality of the court system (3.8 out of 10).