The results show that almost across the board Venezuela, Nicaragua, Ecuador and El Salvador saw declines in the quality of their Education, Health, Safety and Security, and their Business Environment. Clearly it is not the case that a lack of democracy is being traded for better social outcomes, but rather that it is associated with a worsening situation for ordinary citizens. For prosperity in Latin America and the Caribbean, ‘soft’ institutions and the norms they require to function are as important as formal institutions and participation. Without them, people lack the ability to make policy work for themselves – and what follows is a loss of prosperity.
What does this mean for the future? When faced with weakened institutions, there are two distinct routes which could be chosen: Venezuela’s, where the Government has doubled down with greater suppression and violence, which has drastically reduced prosperity; or Ecuador’s, where a new President has begun to take steps against corruption, which could lead the country to regaining its place in the regional top 10.
There is a wide regional warning, which should be heeded quickly: more prosperous countries such as Bolivia and Chile have also seen drops in their Governance score. If the experience of their neighbours is anything to go by, this may represent the start of a much larger threat to their longer-term prosperity.