Country Strength Index: LATAM Under Review
Bottom Line: The most recent update of our Country Insights model places Uruguay as the leading performer in Latin America, according to the Country Strength Index (CSI). In contrast, Venezuela ranks at the bottom among its regional peers.
Source: Continuum Economics
The Country Strength Index weights the four pillars of our Country Insights model, which include external adjustment capacity, institutional robustness, medium-term growth potential, and social inclusion. In our latest update for the second quarter of 2023 (here), Uruguay, Mexico, and Ecuador emerge as the strongest countries in the region, while Haiti, Guyana, and Venezuela stand at the bottom of the ranking.
Uruguay ranks at the top of the list thanks to its strength in the external adjustment capacity and social inclusion pillars. The first of these two factors is mostly benefited from a strong reserve buffer; for instance, in May of 2023 the International Monetary Fund (IMF) classified Uruguay’s reserves as adequate and argued they could serve as insurance against external shocks. In terms of social inclusion, the South American nation has above-average levels of expected years of schooling (17) and life expectancy at birth (75) which contribute to the country’s high performance.
In contrast to Uruguay, Venezuela is the worst ranked of the region and stands at the 159th position of the 169 countries included in the index. The country is affected by a particularly poor performance in the institutional robustness and external adjustment capacity pillars. Weak monetary and fiscal policies, which are reflected in high levels of inflation (over 400% during Q2-2023) and high general government gross debt (158% of GDP by end-2022), complemented with a lack of trust in political institutions support the country’s low score.
Our latest insights on a comprehensive group of Latin American countries can be found (here), with an update expected by end of October.