Political Risk Chapter Sixteen Eitman, Stonehill, &Moffett December 26, 20151Chapter 17 - Political Risk

Political risk  change in rules which lead to reallocation of resources tax rules ownership rules/capital controls  restrictions of foreign ownership exchange controls  change in political structure which portends reallocation of resources December 26, 20152Chapter 17 - Political Risk

Macro risks  expropriation government seizure of property valuation  book?? Market??  exchange rates?? time value of money  civil strife investment in Yugoslavia, Russia??  antagonistic governments for US Iran, Cuba ?? December 26, 20153Chapter 17 - Political Risk

Micro risks - Government Policy Goals  employment policies  resource reallocation taxes transfers  trade policies protectionism balance of payments exchange rate policy  economic development December 26, 20154Chapter 17 - Political Risk

Barriers  limitations to trade quotas, embargoes, licensing, domestic content  administrative restrictions fees, tariffs, deposit requirements, tax adjustments  non-economic discrimination quality standards, environmental, health  direct government interference procurement, export subsidies, domestic subsidies December 26, 20155Chapter 17 - Political Risk

Non-economic goal conflicts  economic emperialism African economies  national security concerns U.S. concern  corruption & nepotism South, Central America, Africa, Asia  xenophobia Asian economies December 26, 20156Chapter 17 - Political Risk

Assessing Political risk  political stability probability of change direction change would take  firm specific negotiating terms operating strategies to mitigate risk December 26, 20157Chapter 17 - Political Risk