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Financial News

Jan 2006 Financial News

Barbados the highest ranked economically free Caribbean nation:

Jan 10, 2006

Barbados is the most economically free nation in the Caribbean, according to the Heritage Foundation and the Wall Street Journal's 2006 Economic Freedom Index.

The index, which ranked countries in ten categories of economic freedom, including trade policy, monetary policy, and government intervention in the economy, placed Barbados at number 26. The only countries in the Americas ranked higher than Barbados on the index are the United States at number 9, Canada at number 12, and Chile at number 14. The Bahamas is the second highest ranked Caribbean nation at number 27, with Trinidad and Tobago next at number 42, Jamaica at number 54 and Guyana at number 85.

In terms of its trade policy, the index ranks Barbados at 'stable', with a high level of protectionism. The index further notes that Barbados still has high tax rates on income and corporate taxation, and a moderate level of government intervention in the economy. The index also noted Barbados' stable monetary policy, and low levels of inflation particularly in the period 1994-2003, when the island's weighted average annual rate of inflation was 1.40 per cent.

The most economically free nation in the world according to the index is Hong Kong, followed by Singapore, Ireland, Luxembourg, Iceland and the United Kingdom.

The index also noted that there are moderate barriers to capital flows and foreign investment in Barbados, and 100 per cent foreign ownership of enterprises is permitted. The index further said that performance requirements and expectations are central to the administration of certain foreign direct investments in Barbados. Local officials will more likely approve licenses if they believe the investment will create jobs, increase exports and foreign exchange earnings, and increase economic activity in Barbados. It also states that foreign investors must finance their investments from external sources or from income that the investment generates.

Barbados also has a low level of restrictions in the area of banking and finance, according to the index, with government affecting the allocation of credit. The Government has intervened in recent years in the local credit market to raise or lower interest rates, limit the volumes of funds available for borrowing, and borrow on the local market. The study makes the point that financing using domes-tically generated funds is generally available only to Barbadians or permanent residents of Barbados.

Terence Murrel
The Barbados Advocate
Monday, 9th January, 2006.