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IDB report: Lack of trust remains big hinderance

A lack of trust remains the greatest hindrance to economic growth and innovation in the Caribbean, according to a recent Inter-American Development Bank (IDB) report.

The report, entitled “Trust: The Key to Social Cohesion and Growth in Latin America and the Caribbean”, found that the region was 13 percent less trustful than the Organisation for Economic Co-Operation and 

Development (OECD) standard of 42 percent. This was demonstrated in trust in governments, willingness to pay taxes, firm willingness to obey laws and regulations and contract enforcement, among other categories.

“According to the Integrated Values Survey, over the period 2010–2020, an average of fewer than three in 10 Latin American and Caribbean citizens trusted their government. Mistrust of government is a worldwide problem, but it is greatest in Latin America and the Caribbean, even if the differences are not as dramatic as with interpersonal trust,” the report states.

Based on various tax to gross domestic product (GDP) ratios, the region on average has a 21.8 percent willingness to pay taxes, compared to the 34.6 OECD average and is still more than the 17.2 percent average in the rest of the world.

“Ample evidence demonstrates that the bonds of citizenship are weak in Latin America and the Caribbean. Individuals are more likely to make choices in their own personal interest at the expense of the broader community. One natural metric of citizenship is the willingness to pay taxes, the most routine personal sacrifice that societies request of their members to support community activities. Individuals express their willingness to pay taxes by supporting larger tax payments to further community objectives and by paying, rather than evading, the agreed taxes once society, acting through government, sets tax rates. If the citizens of a country fail to do one or the other, the ratio of taxes paid to GDP is lower,” the report notes.

“The ratio in Latin America and the Caribbean is 22 percent (13 percentage points) lower than that of OECD countries. In an environment of generalized mistrust, individuals are more likely to free-ride on others’ contributions to the collective action of supporting government works. In fact, the willingness to pay taxes is strongly associated with generalized trust.”

As a result of its findings, the IDB, believing higher trust could accelerate the region’s recovery in the post-pandemic period, has recommended that governments in the region — when designing public policies — create incentives for public officials, economic agents and citizens to act in a trustworthy manner.

“Governments must reduce differences in the access of information by investing in high-quality regulatory bodies and educating and making more information available to citizens to empower them to detect and deter untrustworthy behavior,” the IDB report states.

“Governments must also reduce power asymmetries by increasing accountability and strengthening third-party enforcement institutions, so citizens and firms feel they can rely on these institutions when mistreated by governments, firms, or other citizens.”

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Paige McCartney

Paige joined The Nassau Guardian in 2010 as a television news reporter and anchor. She has covered countless political and social events that have impacted the lives of Bahamians and changed the trajectory of The Bahamas. Paige started working as a business reporter in August 2016. Education: Palm Beach Atlantic University in 2006 with a BA in Radio and Television News

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