Economic Freedom is Declining in Colombia According to Heritage Foundation

Within a year, according to the Heritage Foundation, an influential American conservative think tank, economic freedom in Colombia has diminished. The think tank points out state policies and increasing regulatory measures by Gustavo Petro’s government as the main factors behind this trend.

This publication coincides with the release of unemployment figures in Colombia. As of January 2024, the nation’s unemployment rate is at 12.7 percent, equating to 3.1 million individuals.

The Economic Freedom Index

In its 2024 Economic Freedom Index, which ranks 184 countries according to their level of economic freedom, Colombia fell from the 62^nd to the 84^th place compared with the previous classification. According to the think tank’s criteria, Colombia transitioned from being a “moderately free” country to “mostly unfree”, in terms of economic freedom. As such, Colombia now ranks in 19^th position out of 32 American countries, ahead of Brazil, Argentina and Venezuela, but behind Mexico, Uruguay and Chile.

Heritage Foundation’s index is based on four main criteria. First the Rule of Law, which include property rights, judicial effectiveness and government integrity. Secondly, Government Size, which takes into account taxes, government spending and fiscal health. The index also evaluates Regulatory Efficiency, namely, business, labor and monetary freedom. Finally, Market Openness, which encompasses trade, investment and financial freedom.

A negative impact on investments in Colombia?

In its analysis on Colombia, the think tank points out the collusion between political and judiciary spheres, corruption, fiscal policy, the informal labor market and excessive business regulations as the main obstacles to economic growth in the country.

Indeed, this ranking has not gone unnoticed by Colombian business figures. Maria Claudia Lacouture, president of the Colombian American Chamber of Commerce, has drawn attention to the impact of such rankings on the market and investor confidence. Former Colombian Minister of Finance, José Manuel Restrepo, also pointed out the effects of acute state intervention on business innovation and development.