The effects of economic liberalization are yet under academic debate. There are still conflicting findings about the consequences of less state control and more economic freedom on strategic decisions and profitability of firms. In this study, we use Vector Autoregression and Impulse Response Functions with data of 1,248 publicly-listed companies operating in the seven largest Latin American, between 1998 and 2016, and approximately 22,000 firm-year observations countries to investigate the impact of the level of economic freedom on firm profitability, administrative and selling expenses and level of debt. We ran panel analysis on countries separately and pooled. Findings suggest a positive relationship between pro-market reforms (operationalized as the level of economic freedom) and corporate debt and interest expenses, and a negative relationship with administrative and selling expenses, as expected. However, results were not statistically significant in regard to the relationship between pro-market reforms and firm profitability. Our findings are in general consistent with the transaction cost and agency theories.