LATAM Got Less Prosperous in a Decade; Chile Tops Regional Ranking

Chile was ranked, once more, as the most prosperous country in Latin America.

Chile was the best-performing Latin American country in the Legatum Institute’s latest Prosperity Index, ranking 36th in a list of 167 nations.

While the Prosperity Index takes a country’s wealth into consideration, it also measures aspects such as access to healthcare and education, environmental wellbeing, governance, investment and entrepreneurial environment, security and personal freedom. In that sense, in the words of the Legatum Institute, prosperity is “when all people have the opportunity and freedom to thrive.”

Chile got its highest marks in the “infrastructure & market access” and “personal freedom” categories, scoring its worst in “security and safety”.

A variety and wealth of trade agreements gave Chile its edge. The country has 31 such agreements covering 88% of its global GDP, and 92.5% of its US$68.3 billion in imports are free from tariff duties. These factors make Chile a leader in foreign trade liberalization, the report notes.

While not an economic powerhouse like Mexico and Brazil, Chile tends to be a top performer regionally in rankings that measure social and political progress, scientific research and personal freedom. This has allowed the country to build a reputation as a quiet but attractive corner in South America for foreign investors.

Chile was followed in the regional ranking by Uruguay (38th global), Costa Rica (39th), Panama (50th) and Trinidad & Tobago (56th).

Uruguay is usually a runner-up in lists of prosperity and social progress in Latin America. Costa Rica and Panama have over the years carved a very positive reputation among foreign investors hunting for accessible and reliable spots for nearshore investment. Trinidad & Tobago has also gained traction as one of the best sites for development and investment in the Caribbean.

Mexico and Brazil, the two largest economies in Latin America, ranked 9th and 11th, respectively, in the region. The US and Canada ranked 19th and 13th globally.

The top spots of the Prosperity Index were dominated  by European countries. The five most prosperous countries were, in the following order: Denmark, Sweden, Norway, Finland and Switzerland.

A 10-year fall

Despite the relatively good performance of Chile, Uruguay and Costa Rica, Latin American countries overall did not fare well on the Prosperity Index.

In its report, the Legatum Institute highlights that Latin America was the only region where prosperity declined over the past decade despite improvements in social capital, market access, infrastructure and education.

“Governments are becoming increasingly authoritarian, leading to the deterioration in personal freedom and worsening governance, consequently becoming less effective and more corrupt,” the report points out. “There is also deteriorating Economic Quality, with rising government debt, low growth, and rising unemployment.”

Brazil, for example, saw the largest drop in the “Governance” category and lost a lot of ground in its efforts to fight corruption since 2013.

Colombia’s poor performance in the “Safety & Security” category affected its overall prosperity ranking significantly. And Peru has been struggling over the past decade with a series of political crises and a polarized landscape. This hindered successive governments from building a strong state and effective civil service.

Haiti, the least prosperous country in the region, has been stuck at the bottom of that list for several years due to a disastrous mix of foreign interventions, debt, political instability and natural disasters. The country ranks near the bottom of the global list, at 156th.

The Dominican Republic was one of the few success stories in the region over the apst decade. The country was able to improve its prosperity significanly since 2013, cracking the regional top 10 in 2023.