• Risk iStock_000016809464SmallArgentina – more exchange controls and more misleading official data;
  • Costa Rica – a Left-leaning President?
  • Morocco – FX liberalization to lure funds from abroad.

BRAZIL:  President Rousseff, at Davos, worked hard to regain investor confidence in Brazil, which has been shaken by deteriorating external accounts, accelerating inflation and slowing growth. Interest rates will have to be increased further as inflation keeps overshooting official expectations.

COLOMBIA: The peso has not been unaffected by the exodus of investors from emerging markets, but the authorities are quite happy about its exchange-market descent and the CB is still buying rather than selling dollars. Having failed to meet target dates in the peace negotiations with the FARC, the government intends to push ahead.

GERMANY: While economic growth probably slowed in the final quarter of last year, Germany kept driving the Eurozone’s recovery and the country remains in good shape. Chancellor Merkel began her third term in office in a strong position, but she still has some work to do to get order into her unruly coalition. Not too much should be read into promises of a more robust foreign and security policy.

GHANA: The authorities have responded aggressively to the cedi’s exchange market tumble. As they are struggling to contain the country’s twin deficits, however, the currency will remain vulnerable on the downside. In fact, there is a risk that the newly imposed exchange controls make matters worse by frightening investors.

ISRAEL:  The Central Bank is still struggling to contain the strength of the shekel, with the calls for more official action getting louder. Behind the day-to-day concerns, policy makers have reason to contemplate the economic consequences if the latest round of US-sponsored peace talks with the Palestinians fails.

KOREA (SOUTH):  The Bank of Korea has had an easier time dealing with the fallout of the US Fed’s tapering decisions than the Central Banks of many other emerging markets, largely because the Korean economy is doing well. There are longer-term problems building up, however, that are not being ignored by the authorities.

NIGERIA:  To strengthen his hand ahead of elections now scheduled for February next year, President Jonathan has shaken up the leadership of the military as well as that of his party. This has not done much to ease his political troubles, however, and the economic outlook, though relatively strong, is not overly favorable.

THAILAND:  National elections have failed to resolve the political crisis. There are now several ways in which the situation could develop, with none of them particularly confidence-inspiring. Tourism will be hurt even more than it already has. The rice problem will be an extra burden.

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