The world is doing well. Euromoney's rankings show that the risk score of the average country has climbed rapidily: from 43.56 in March 1993 to 50.72 in March 1996. Of all our subdivisions, only North America (which excludes Mexico) has gone down.
The big winner is transition Europe ; its average has jumped from 25.27to 41.48 in the past three years. Much of this can be put down to increased reporting to the IMF and World Bank, but the developing world also looks like it's having an extremely good run.
As the charts on page 116 show, there is a close correlation between Euromoney's ratings and capital flows. The IMF recently concluded that "country credit ratings... have influenced both the flow of capital to developing countries and the risk premiums associated with the flows". As private lending and investment to developing countries increase, country credit worthiness will play a larger part in determining capital flows. The IMF paper, published in January 1996, goes as far as suggesting that developing countries adopt policies that help to restore their credit ratings as part of their economic stabilization programmes.
The best improvements in Euromoney's country risk rankings in the past three years have been in central and eastern Europe, which account for 12 of the top 20 climbers. The big name here is Russia. In March 1993 Russia ranked at 149, with a score of 18.13; below Uganda, Bosnia-Herzegovina and Libya. In March 1996 Russia ranked at 100, with a score of 40.60. Although it still ranks below Burkina Faso, Russia is obviously moving towards becoming a major economic player.
The other large country in the top 20 climbers is India. Its gain of 19points and 10 places in three years puts it just five places behind China,which gained 10 points and two places.
Lebanon is the most improved country in the past three years. It gained63 places and 29 points. Vietnam and Estonia follow closely behind. Other high performers are Sudan and Uganda, giving the lie to those who dismiss sub-Saharan Africa. The region as a whole averages an improvement of 6.12 points, just one point behind the world average.
The big surprise is the resilience of Latin America, which seems barely tainted by 1994's peso crisis. There was something of a correction in 1995, but overall the region is second only to eastern Europe. The outstanding performer is Peru, which jumps 25 points and 49 places over the three years.By far Latin America's strongest economy is Chile, ranked 29 overall in March 1996; ahead of Greece, United Arab Emirates and Israel.
Where there are winners, there have to be losers. Western Europe struggles to stand still. Without Luxembourg's rise to the top from 11th place, and Portugal's gain of 3.5 points, Western Europe would not have risen at all over three years. Japan falls from the top to rank at four, having ranked as low as at six in September 1995. The USA drops from second to fifth place.France drops from fourth to tenth, and Saudi Arabia loses six points and11 places. Canada's rating falls from 97.77 to 91.54, taking it from nine to 15. This is the ninth-largest fall in the world. Even Rwanda did better.
Magazine scores include:
Source: Euromoney Research
Overall risk scores: by region
Source: Euromoney Research
Capital flows to Latin America
Source: IMF
Capital flows to heavily-indebted countries
Source: IMF
Methodology
The Euromoney country risk methodology uses nine indicators:
* Economic performance and political risk are based on a poll of economists and political analysts.
* Debt indicators, debt in default or rescheduled and access to bank finance are based on figures taken from the World Bank's Debt Tables.
* Access to short-term finance is based on OECD consensus groups and coverage from US Exim Bank and NCM UK.
* Access to international bond and syndicated loan markets is scored by Euromoney.
* Access to discount on for faiting is calculated from market data.
* Credit ratings are based on ratings given by S&P, Moody's and Ibca.
For Euromoney's full country risk methodology see the March 1996issue (page 165). Please note the following corrections. In the explanation of Debt indicators it states "that the lower the score the better".Here the "score" refers to the underlying data: countries with the lowest score gain the highest rating out of 10. Also, in the Debt in default category it states that "Zero equals no non-payments: 10, all in default or rescheduled". This is incorrect. A score of ten indicates no non-payments: 0, all in default or rescheduled.
Please note that the scores used in charts showing political risk and economic performance are not weighted. They show underlying data used in Euromoney's twice yearly country risk surveys.
Asia (excluding South East Asia)
Asia: overall risk scores
Asia: political risk scores
Asia: economic performance
South East Asia
South East Asia: overall risk scores
South East Asia: political risk
South East Asia: economic performance
Transition Europe
Transition Europe: overall scores
Transition Europe: political risk
Transition Europe: economic performance
Southern Europe
Southern Europe: overall scores
Southern Europe: political risk
Southern Europe: economic performance
Middle East (including North Africa)
Middle East: overall scores
Middle East: political risk
Middle East: economic performance
Sub-Saharan Africa
Sub-Saharan Africa: overall scores
Sub-Saharan Africa: political risk
Sub-Saharan Africa: economic performance
Latin America
Latin America: overall scores
Latin America: political risk
Latin America: economic performance
