International-Financial-Management---Bekaert-2e---Solutions---Ch14 (1)Word格式文档下载.doc
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Chapter 14
CountryandPoliticalRisk
QUESTIONS
1.Describethedifferencesbetweencountryriskandpoliticalrisk.Whatissovereignrisk?
Answer:
Politicalriskistheriskthatagovernmentactionwillnegativelyaffectacompany’scashflows.Inthemostextremeformofpoliticalrisk,governmentsseizepropertywithoutcompensatingtheownersinatotalexpropriation(ornationalization).
Countryriskisabroaderconceptthatencompassesboththepotentiallyadverseeffectsofacountry’spoliticalenvironmentanditseconomicandfinancialenvironment.Forexample,arecessioninacountrythatlowersitsaggregatedemandandreducestherevenuesofexporterstothatnationisarealizationofcountryrisk.Laborstrikesbyacountry’sdockworkers,truckers,andtransitworkersthatdisruptproductionanddistributionofproducts,thusloweringprofits,alsoqualifyascountryrisks.Clashesbetweenrivalethnicorreligiousgroupsthatpreventpeopleinacountryfromshoppingcanalsobeconsideredcountryrisks.Ininternationalbondmarkets,countryriskreferstoanyfactorrelatedtoacountrythatcancauseaborrowertodefaultonaloan.Whencountryriskistakeninanarrowsensetobetheriskassociatedwithagovernmentdefaultingonitsbondpayments,itiscalledsovereignrisk.
2.Whateconomicvariableswouldgivesomeindicationofthecountryriskpresentinaparticularcountry?
Tohelpinvestorsdiscriminatebetweenfinanciallyandeconomicallysoundandfinanciallyandeconomicallytroubledcountries,anumberofeconomicvariablesareused,includingthefollowing:
Theratioofacountry’sexternaldebttoitsGDP
Theratioofacountry’sdebtservicepaymentstoitsexports
Theratioofacountry’simportstoitsofficialinternationalreserves
Acountry’stermsoftrade(theratioofitsexporttoimportprices)
Acountry’scurrentaccountdeficit
Thesevariablesaredirectlyrelatedtotheabilityofthecountrytogenerateinflowsofforeignexchange.Factorssuchasinflationandrealeconomicgrowthareusefulaswell.
3.SupposeanMNCisconsideringinvestinginBolivia.WillanoverallassessmentofBolivia’scountryrisksufficetounderstandthepoliticalriskpresentintheinvestment?
First,ananalysisofcountryriskmaydefinitelybeinformativeaboutpoliticalriskinanarrowsense.Thebetteracountry’seconomicsituation,thelesslikelyitistofacepoliticalandsocialturmoilthatwillinevitablyharmforeignanddomesticcompanies.However,astheanswertoQuestion1notes,countryriskisbroaderthanpoliticalrisk.Consequently,theMNCshouldtrytofindmeasuresandanalysesthatfocusmorenarrowlyonpoliticalriskinBolivia(suchasthepoliticalriskratingsfromthePRSgroup).
Second,theindustryinwhichamultinationalcorporationoperatescanaffectitsexposuretopoliticalrisk.Calculatingacompany’sindustry-specificriskisnotasstraightforwardascalculatingmoregeneralpoliticalrisks.TheMNCshouldconsiderissuessuchaswhetherithasprimarilylocalcompetitors(moresubjecttopoliticalrisk)ratherthanprimarilyforeigncompetitors(lesssubjecttopoliticalrisk).Analogously,iftheMNCisthesourceofconsiderableforeignexchangeearningsforthehostcountryoristhevehicleforimportanttechnologytransfer,itmightbelesssubjecttogovernmentinterferencethanonewithoutsuchadvantages.TheMNCmustalsoaskwhethertheregioninwhichitoperateshasmoreorlesspoliticalriskthanBoliviaasawhole.Thisraisesquestionssuchas:
Howmuchpowerdothecountry’sregionalgovernmentshaveversusthenationalgovernment?
WhatistheattitudeoflocalcommunitiestotheMNC’sproposedprojects?
Arethereanyarmedoppositiongroupsinthearea,andhowdotheyviewthepresenceofaforeigncompany?
4.Whatarethreepoliticalriskfactors?
Politicalriskfactorsincludetheriskofexpropriation(seeQuestion1),contractrepudiation(whengovernmentrevokecontractswithoutcompensatingcompaniesfortheirexistinginvestmentsinprojectsorservices),currencycontrolsthatpreventtheconversionoflocalcurrenciestoforeigncurrencies,andlawsthatpreventMNCsfromtransferringtheirearningsoutofthehostcountry.Corruption,civilstrife,andwararealsofactors.
5.When,where,andwhydidtheDebtCrisisstart?
TheDebtCrisisstartedinMexicoonAugust12,1982whenMexicoannouncedthatitcouldnolongermakethescheduledpaymentsonitsforeigndebt.MexicorequestedloansfromforeigngovernmentsandtheIMF,anditstartednegotiatingwithitscommercialbankcreditors.ThisconstitutedthestartoftheDebtCrisis.Bytheendoftheyear,24othercountrieshadrequestedrestructuringontheircommercialbankdebts.
TheDebt
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