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PricewaterhouseCoopers
defines the O-Factor as the “lack of clear, accurate,
formal, easily discernible, and widely accepted practices”
in a country’s legal system, government macroeconomic
and fiscal policies, accounting standards and practices which
includes corporate governance and information release, and
regulatory regime. It also includes the level of perceived
corruption. The survey rates a total of 35 countries throughout
the world.
| Country |
Opacity
Factor |
More
Opacity
Less Opacity |
| Ecuador |
68 |
| Guatemala |
65 |
| Venezuela |
63 |
| Argentina |
61 |
| Brazil |
61 |
| Colombia |
60 |
| Peru |
58 |
| Uruguay |
53 |
| Mexico |
48 |
| Chile |
36 |
*O-Factor
is the score of a country based on the survey responses. High
numbers indicate a high degree of opacity and low numbers
indicate a low degree of opacity. Therefore, the higher the
O-Factor, the less transparent the country and the higher
the cost to investors.
| Country |
Increased
Taxes Faced by Citizens/Businesses due to Corruption* |
Higher
Taxes
Lower Taxes |
| Ecuador |
31% |
| Guatemala |
28% |
| Venezuela |
27% |
| Argentina |
25% |
| Brazil |
25% |
| Colombia |
25% |
| Peru |
23% |
| Uruguay |
19% |
| Mexico |
15% |
| Chile |
5% |
* This
Table shows the effect of opacity when viewed as if it imposes
a hidden tax. For example, the number 31 indicates that opacity
in that country is equivalent to levying an additional 31-percent
income tax.
| Country |
Increased
Cost of Borrowing Faced by Countries Due to Corruption* |
Greater
Interest on Sovereign Debt
Less Interest on Sovereign Debt |
| Ecuador |
8.26% |
| Guatemala |
7.49% |
| Venezuela |
7.12% |
| Brazil |
6.45% |
| Argentina |
6.39% |
| Colombia |
6.32% |
| Peru |
5.63% |
| Uruguay |
4.52% |
| Mexico |
3.08% |
| Chile |
3% |
*This
Table indicates the increased cost of borrowing faced by countries
due to opacity. On average, countries with more opacity tend
to have to pay a higher interest rate on the debt they issue.
For example, a score of 8.26% would indicate that countries
need to pay international investors an additional 8.26 percent
on their sovereign debt due to opacity.
Costs
of Opacity: Deterred Foreign Direct Investment
On April
24, 2001, PwC issued a new study that estimates the percentage
of foreign direct investment (FDI) deterred—that is,
never invested or invested elsewhere—owing to the opacity
of a country’s overall economic environment and capital
markets. According to this study, countries rated most opaque
by its recent Opacity Index (see illustrative list of Latin
American countries above) have lost several billion dollars
in foreign direct investment due to capital flight to countries
with greater transparency. A complete version of this report
and of the initial presentation of the Opacity Index can be
found at http://www.opacityindex.com.
PwC estimates
deterred FDI in two steps. First, it establishes a low opacity
benchmark score for four countries with the lowest opacity
score in the sample: these include Singapore, the United States
of America, Chile and the United Kingdom. Second it estimates
how much more FDI the country would attract if it succeeded
in reducing opacity to the benchmark level. For a complete
discussion of methodology, see the full report available on
http://www.opacityindex.com.
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