Join the Central and South American Privatization Debate

The Cato Institute today asks whether the increasingly private industry-loving El Salvador is the new Central American Tiger. Is it possible that capitalism works great in some places but not others?

According to a new paper by Juan Carlos Hidalgo, project coordinator for Latin America at the Cato Institute’s Center for Global Liberty and Prosperity, El Salvador is becoming an economic success story in Central America.

“Since the end of the civil conflict in 1992, which left the country in ruins, El Salvador has transformed its economy by implementing a far-reaching liberalization process undertaken by democratic governments, which has included the privatization of state enterprises, deregulation, trade and financial liberalization, privatization of the pension system, and the adoption of the U.S. dollar as its official currency. According to the Fraser Institute’s Economic Freedom of the World Report, El Salvador ranks among the top 25 freest economies in the world,” writes Hidalgo.

While the percentage of households below the poverty line fell from 60 percent to 34.6 percent between 1991 and 2007—and the average per capita growth rate since 1992 has been approximately 5.2 percent per year—high crime rates and lack of security still represents “the greatest threat to sustained growth and liberal policies,” according to Cato.

As the American free enterprise system fractures at its core, El Salvador, argues Cato, illustrates how “economic freedom can pave the way for development and how globalization offers great opportunities for developing countries that are willing to implement a coherent set of mutually supportive market reforms.” What do you think? Should we look to El Salvador as the new model for prosperity in Central American? Send or upload your ideas today.