Chile ranks number 1 in Latin America as the country with the greatest potential to attract foreign investors, according to the Milken Institute’s Global Opportunities Index 2021. The annual evaluation uses 96 variables, including macroeconomic prospects, potential for future innovation and development, access to financial services and compliance with international standards to offer a prospective analysis of the potential of foreign investment in 145 countries. In addition to Chile, the other countries that make up the top 5 of the Latin American ranking are Uruguay, Costa Rica, Mexico and Panama.
Key areas for the region
This year the report focuses on Latin America, a region ripe for investment in which an influx of capital could complement domestic savings, help create jobs and foster innovation. Latin America performs well compared to other emerging and developing economies in two key areas: 1) having a highly skilled and diverse workforce, and 2) the breadth and depth of the region’s financial systems.
“The Global Opportunity Index measures the attractiveness of a country to foreign investors based on five broad categories that give investors the tools to determine their own appetite for risk,” said Claude López, PhD, author of the report and head of the Milken Institute Research Department. “These factors include, for example, understanding whether existing institutions promote entrepreneurship, the strength of their macroeconomic frameworks, the reliability of their courts, and the degree of transparency in their institutions.”
The main findings of the Global Opportunity Index 2021 include:
· Sweden is ranked No. 1 overall as the country with the most potential to attract foreign investment, followed by the UK at No. 2 and the United States at No. 3 (one place higher than last year). High-income countries have historically performed well on the global Opportunity Index, underscoring their overall resilience, strength in economic institutions, and rule of law.
· Chile ranks first in Latin America. Chile received the highest ranking in the region due to its strong performance in all measured categories, particularly how friendly its institutions are to foreign investors. Uruguay, Costa Rica, Mexico, and Panama, in that order, completed the top five Latin American countries that occupy the top tiers.
· Starting this year, the Global Opportunity Index added seven variables that capture the movement toward the digital economy, including the percentage of households with Internet access. These new variables offer a vision of which countries are most willing to benefit from the digitization of the world economy, a positive for future investors.
· The Global Opportunities Index assesses the strengths and challenges of each country based on how favorable its institutions and policies are to foreign investment. Although a region may perform well on average in a specific category, there can be drastic differences in performance within a region. In Latin America, this is especially evident when comparing how countries conform to international standards and how they integrate within the international community.
“By placing at the top of the index, these countries indicate the resilience of their institutions,” added López. “This indicates a level of confidence in their ability to recover from the post-pandemic, making them a potentially safer bet for investors at a time of global uncertainty.”
How are countries evaluated?
To create the index, the Milken Institute evaluated the global investment opportunity through 96 variables organized into five categories and 14 subcategories. The five main categories included: Business Perception, Financial Services, International Standards and Policies, Economic Fundamentals, and Institutional Framework. Variables within these categories measured all angles of a country’s investment potential, including economic openness and performance, transparency, and talent and workforce diversity. Data sources include the World Bank, the International Monetary Fund, and the World Health Data Exchange.