Uruguay is the second best country in Latin America to invest in, according to Milken Institute

The Milken Institute's Global Opportunity Index, which analyzes the potential of countries to attract foreign investors, issued its 2021 edition. In this evaluation, Chile ranked first among Latin American countries, while Uruguay ranked second.

Costa Rica, Mexico and Panama followed in the top five. At the other end of the list, the last three places are occupied by Belize, Suriname and Venezuela, in descending order.

Globally, the countries with the best positions were Sweden, the United Kingdom, the United States, the Netherlands and Switzerland.

The annual assessment uses 96 variables, including macroeconomic prospects, potential for future innovation and development, access to financial services and compliance with international standards to provide a forward-looking analysis of foreign investment potential in 145 countries.

New this year, the accompanying report focuses on Latin America, a region that is ripe for investment and where an influx of capital could supplement domestic savings, help create jobs and foster innovation.

Latin America performs well in two key areas compared to other developing and emerging economies: 1) the region's diverse and highly skilled workforce and 2) the breadth and depth of the region's financial systems.

"The Global Opportunity Index measures a country's attractiveness to foreign investors based on five broad categories that provide investors with the tools to determine their own risk tolerance," said Claude Lopez, PhD, author of the report and head of the Research department at the Milken Institute.

"These factors include, for example, understanding whether existing institutions promote entrepreneurial activity, the strength of their macroeconomic frameworks, the reliability of their courts and the degree of transparency in their institutions," he added.

Historically, high-income countries have performed well in the Global Opportunity Index, highlighting their overall resilience, the strength of their economic institutions and the rule of law.

With respect to Chile, this country received the highest ranking in the region, due to its high performance in all categories measured, particularly with respect to the friendliness of its institutions to foreign investors. Uruguay, Costa Rica, Mexico and Panama rounded out the top five Latin American countries, in that order.

New this year, the Global Opportunity Index added seven variables that capture progress toward the digital economy, including the percentage of households with Internet access. These new variables provide information on which countries are most ready to benefit from the digitization of the global economy, a positive for future investors.

The Global Opportunity Index also assesses each country's strengths and challenges based on how supportive its institutions and policies are of foreign investment. A region can perform well in a specific category, however, there can be drastic differences in performance within a region. In Latin America, this is evident when comparing countries as they adapt to international standards and integrate into the international community.

"By ranking at the top of the index, these countries signal the resilience of their institutions," added Lopez. "This indicates a level of confidence in their ability to recover after the pandemic, making them a potentially safer bet for investors at a time of global uncertainty."

How countries are assessed
To create the index, the Milken Institute evaluated the overall investment opportunity across 96 variables organized into 5 categories and 14 subcategories.

The five main categories included the following: 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 openness of the economy and performance, transparency, and talent and diversity of the workforce.

Data sources include the World Bank, the International Monetary Fund, and the Global Health Data Exchange.

Source: El País