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  • United States of America: A Country Risk Analysis

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    Joju Johny
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    This document analyzes the country risk of investing in the United States. It identifies the main components of country risk as economic, financial, political, cultural, legal, and regional risks. It then assesses the United States as having a stable and predictable macroeconomic policy, an effective government, a large and growing market, minimal regulations, strong property rights protections, and good infrastructure. The document also notes low political and economic risks in the US, some legal risks around local content requirements, and inflation and currency exchange rate fluctuations as potential economic risks. It provides GDP and unemployment data comparing the US, China, India, Japan and European countries.

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    Country Risk

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    This document analyzes the country risk of investing in the United States. It identifies the main components of country risk as economic, financial, political, cultural, legal, and regional risks. It then assesses the United States as having a stable and predictable macroeconomic policy, an effective government, a large and growing market, minimal regulations, strong property rights protections, and good infrastructure. The document also notes low political and economic risks in the US, some legal risks around local content requirements, and inflation and currency exchange rate fluctuations as potential economic risks. It provides GDP and unemployment data comparing the US, China, India, Japan and European countries.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
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    Download as ppt, pdf, or txt
    12 views14 pages

    United States of America: A Country Risk Analysis

    Uploaded by

    Joju Johny
    This document analyzes the country risk of investing in the United States. It identifies the main components of country risk as economic, financial, political, cultural, legal, and regional risks. It then assesses the United States as having a stable and predictable macroeconomic policy, an effective government, a large and growing market, minimal regulations, strong property rights protections, and good infrastructure. The document also notes low political and economic risks in the US, some legal risks around local content requirements, and inflation and currency exchange rate fluctuations as potential economic risks. It provides GDP and unemployment data comparing the US, China, India, Japan and European countries.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as ppt, pdf, or txt
    of 14

    United States of America: A Country Risk Analysis

    Main components of country risk

    Economic risk Financial risk Foreign exchange risk

    Quantifiable but ultimately judgmental Insurable and diversifiable Qualitative assessment

    Political risk Cultural environnement risk Legal and contractual risk (repudiation, confiscation, bribes) Regional contamination risk (spill-over effect) Systemic risk (global crisis)

    Selection criteria
    Economy-Stable, predictable macro economic policy Political-An effective and honest government Market-large & fast growing market-Mobile Freedom of activity in market Minimum government regulation Property right & protection Infrastructure Strong local currency Favorable tax climate Availability of all factor of production Land labour capital & organization

    Investment decision
    Contractual Entry Modes
    Licensing Franchising Technical agreements, service contracts

    Investment Entry Modes


    New start-ups or acquisition Joint venture

    Political Risk
    NO major political risk involved Restrictions on Cross-Border Transfer of Resources Stable government Operating Restrictions

    Legal Risk
    Security/personnel safety is a serious concern for the project team. The local government has high expectations for the team to maximize local content. The local content requirements are difficult to achieve. Visa complications

    Economic Risk
    Rate of inflation 2.5% Fluctuation in currency exchange rates High investment cost GDP : 3.5% Foreign exchange reserve of $69.19 billion Complete privatization process

    USA & world share of world GDP


    US 20.8 China 13.1 Japan 6.8 India-5.9 Germany 4.3 UK -3.1 France-3.1

    Outlook for Global Economies


    GDP Growth Rate 2006 2007f Unemployment Rate

    China India U.S. U.K. Euro Area Germany Japan

    10.5% 8.3% 3.4% 2.7% 2.7% 2.6% 2.1%

    9.4% 7.4% 2.5% 2.3% 2.0% 1.7% 1.9%

    9.8% 7.6% 4.6% 5.5% 7.5% 9.5% 4.1%

    Competitive Risks
    Difficult market to entry
    Some industries already consolidated Customers loyal to strong local brands Local players adapt quickly to improve product selection, service Market leaders already own prime distributors and/or real estate locations

    Socio-Cultural Risk
    scarce and expensive labor and high competition for specialized resources.

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