Chile falls for second consecutive year in World Competitiveness Ranking

RIO DE JANEIRO, BRAZIL – It is no longer just the pandemic. Increased inflationary pressures and the Russian military operation in Ukraine add to the concerns faced by governments and companies, which seem to be taking their toll on the competitiveness of several countries.

Chile is not left out of this group, and this year it suffered a new setback, according to the Global Competitiveness Ranking 2022, prepared by the Institute for Management Development (IMD) of Switzerland and the Faculty of Economics and Business (FEN) of the University of Chile.

In this new edition, Chile fell for the second consecutive year. Although the decline was only one step, it reached 45th place among the 63 economies included in the exercise, which led it to reach a new historic low in terms of competitiveness, according to records dating back to 2002.

This drop comes after the country’s economy surprisingly plummeted six places in the 2021 version, after climbing four places in the first year of the pandemic.

In 2005 the country reached 19th place, its best performance since records have been kept, but since 2012 there has been a more or less sustained deterioration, except for some years in which there have been occasional upturns.

The competitiveness of each country is measured based on four areas: economic performance, government efficiency, business efficiency, and infrastructure, and each has sub-factors that help determine a score.

All this is calculated using 255 indicators, of which 163 are statistical data provided by global, regional, and local institutions, and 92 are qualitative variables obtained from an annual survey applied to national and international executives and experts.

In the 2022 version, Chile improved its score only in economic performance – its lowest pillar of the four measures – by moving up four steps, from 50th to 53rd.

Domestic economy, employment, and prices contributed positively to the total, offset by declines in international trade and investment.

Government efficiency showed the sharpest drop, falling from 22nd place last year to 30th in this edition. It was the result of red numbers in all the sub-factors. In addition, business efficiency fell, but only by one place to 41st, dragged down by the contractions in attitudes, values, and finance.

In infrastructure, the country also fell from 45th to 47th place in response to declines in basic infrastructure, scientific infrastructure, and health and environment.

HOW TO IMPROVE?

The country-specific note lists a series of key challenges for Chile to improve its competitiveness.

Firstly, it highlights the importance of ensuring that fiscal and monetary policy contributes to reducing inflation towards the target range.

Reference is also made to the need to reduce institutional uncertainty, improve public safety and ensure the rule of law together with reforming the social security system to provide better pensions “based on individual and collective efforts and with a broad social agreement”, something already referred to last year.

The document again recommends implementing a tax reform that increases tax collection, improves the provision of public goods, and fosters competitiveness, along with increasing investment in Research and Development (R&D) and innovation, promoting joint projects between universities and the public and private sectors.

LEADER IN THE REGION

Despite its new fall, Chile remained the leader among the Latin American countries measured in the survey in the 2022 version. This year Peru improved four places to 54th place, one above Mexico, which remained unchanged.

Further down is Colombia, in 57th place, followed by Brazil, in 59th place, both reporting declines. And, as in the previous analysis, Argentina and Venezuela are at the bottom of the ranking, in 62nd and 63rd places, respectively.

In the global analysis, Denmark managed to win the crown of the most competitive country in the world by climbing two places in the ranking. This displaced Switzerland, which fell one place.

The third place went to Singapore, which moved up two places, while Sweden followed but dropped two places in one year. Hong Kong also moved up in the index, climbing to fifth place.

The Netherlands, Taiwan, Finland, Norway, and the United States are the countries that complete the top 10.

With information from Diario Financiero