Gustavo Vélez, CRECE

Economist Gustavo Vélez discusses benefits of free trade in forum in the Dominican Republic. >Courtesy/CRECE

The economist Gustavo Vélez, in representation of the Center for Economic Renewal, Growth and Excellence (CRECE), presented an analysis on trade in Latin America during the Economic Freedom Forum held in Santo Domingo, Dominican Republic.

The activity was organized by the Atlas Network and the Regional Center of Sustainable Economic Strategies, and co-sponsored by the OMG Institute.

Vélez explained during his presentation how the economies with the highest level of free trade are the ones that project greater economic performance.

“We used the reports by the Heritage Foundation on economic freedom and reports by the World Bank to perform a correlation analysis that allowed us to validate that free trade has been beneficial to the economies of Latin America,” he spoke on behalf of CRECE.

The Puerto Rican economist and consultant informed that, as an economic bloc, Latin America represents the fourth largest region, following the United States, China, and Europe.

The presentation, titled ‘Analysis of Trade Freedom in Latin America,’ stated that the economies with the highest level of free trade in 2018, as measured by the Heritage Foundation, were Chile (88.7), Mexico (88), Guatemala (87.2), and Peru (87.1).

Puerto Rico took the eleventh spot with an index of 80, trailing behind Uruguay (80.4). Economies with an index between 100 and 80 are considered “free.”

In contrast, Cuba and Venezuela, with more authoritarian governments had indexes of 64.7 and 58.7 respectively in the economic freedom report of 2018.

“The information provided by the World Bank and the Heritage Foundation suggests that there is a close correlation between commercial freedom indexes and economic performance measured by gross domestic product (GDP),” Vélez stressed.

For example, he mentioned that Chile has seen an average growth of 2.2 percent within the last five years, while Mexico has seen 2.5 percent growth. Moreover, Guatemala and Peru experienced a 3.6 percent economic growth, and El Salvador—with the fifth best index—had an annual average growth of 2.1 percent in the past five years.

As part of his presentation, the economist explained that the enactment of several trade agreements in Latin America—such as Mercosur (1991), CAFTA (2006), and the Andino Pact (1969)—have helped these countries reduce their tariff barriers to increase trade and support the growth of the participating economies.

The aforementioned agreements combined generate a global trade of $72.3 billion.

“We believe that, within the current global trade conjuncture, Latin America with a GDP of $5.6 trillion could have an important role to position itself as a commercial bloc. The countries of the region should strengthen their collaborations by promoting market-opening economic policies and encouraging exports in order to achieve stability and regional growth,” Vélez affirmed.

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