Political vs. Credit Risk in Latin America and the Caribbean. Data source: International Monetary Fund and Standard & Poor’s, 12/2012.

Journal of Political Risk, Vol. 1, No. 2, June 2013.

Evodio Kaltenecker
BBS Business School

The latest events in Latin America and the Caribbean provide good examples of the current political and economic tone in the region. On one hand, small and mid-sized economies such as Peru, Colombia, Chile and Mexico are working towards the advancement of the Pacific Alliance – an economic group whose agenda includes free trade and economic integration. On the other hand, a group of not-so-small economies still linger with populist recipes for government intervention, nationalization of companies, and manipulation of published government economic data. Continue reading →

Journal of Political Risk, Vol. 1, No. 1, May 2013.

IPCA Rate of Inflation. Data source: Banco Central do Brasil.

James R. Hunter
BBS Business School

Brazil has been the hot investment ticket internationally for six to eight years. The common wisdom is that it has outgrown its “country of the future” label and has become a country of the post-2008 financial crisis. Investors now expect Brazil to grow into a first-world economy. Not so fast. While annual growth between 2005 and 2010 was consistently above 5%, it has stagnated since mid-2011. In 2012, its GDP grew a paltry 0.9% — the weakest of the five BRICS countries. It is time to take a cold look at whether the political factors promoting growth in Brazil between 2005 and 2010 are still operational. Continue reading →

Journal of Political Risk, Vol. 1, No. 1, May 2013.

Asia Foreign Direct Investment, 2003-2012.

Priscilla Tacujan, Ph.D.
Independent Consultant

With the investment-grade credit rating granted by Fitch Ratings in March, an improved international business reputation, and sound fiscal management, the Philippines is poised to become the next foreign direct investment (FDI) destination of Asia.  Other conditions for a robust investment climate are in place: a large market, skilled human capital, youthful population, and strategic location that connects population centers across Asia. Also, the Philippines is increasingly open to international trade. By 2015, Southeast Asia will have the advantage of a single market through the Association of Southeast Asian Nations Economic Community (ASEAN).  According to data provided in the World Economic Forum’s Global Enabling Trade Report 2012, the country’s macroeconomic fundamentals are strong, making it attractive to at least a fraction of the foreign investors concerned over the Euro crisis.

Despite the improvement in the Philippine investment climate, the Philippine Constitution (1987) still has an antiquated article that supports laws restricting foreign ownership of property to 40% (Article XII), with minor adjustments and deviations by subsequent legislation. Removing the clause, and improving access and protections of foreign-owned business, would lead to a quantum leap in FDI and Philippine economic growth. Small changes to legislation are not enough. The Constitution needs to be changed in order to fully welcome foreign investors to the Philippines. Continue reading →

Russian naval vessel in Sevastopol. May 2009. Credit: Pavel Parmenov.

Journal of Political Risk, Vol. 1, No. 1, May 2013.

Anders Corr, Ph.D.
Publisher

Russia has deployed at least a dozen warships near the coast of Syria in the past few months, the largest Russian naval deployment since the end of the Cold War. Yesterday, Russia delivered sophisticated radar-guided Yakhont anti-ship cruise missiles to Assad’s Syrian forces. The Russian actions are strategically offensive to the United States, as well its European and Israeli allies. They are meant to dissuade Israel, the US, and Europe from increased involvement. The anti-ship weapons, in particular, are offensive weapons that could be used by Assad’s Syrian forces to attack NATO naval platforms necessary for intervention in Syria  (WSJ, NYT).

Russian actions with respect to Syria complicate the war from a primarily internal issue, to one over international influence between aspirant global and regional hegemons. Because the weapons delivery could be seen to counter Western military actions in the region, they have already increased US congressional criticism of Russia. Such criticism will likely increase in future, especially if the weapons are used against Western assets. This strategic offense to Western military commanders will lead them to more strongly support military options. Ironically, the Russian action increases pressure on Western political leaders to order intervention. Continue reading →