Appendix A: Country Rating Services

PROVIDER: BANK OF AMERICA WORLD INFORMATION SERVICES

a. Products

Country Outlooks: Summary of business, financial and economic environment. Includes key economic historical and projected indicators.

Country Data Forecast: Country-specific forecasts of commonly used economic, financial and demographic variables.

Country Risk Monitor: Business risk ranking based upon economic and financial ratios.

b. Risk measurement components

I. Financial/Economic

Information Type: Quantitative

Data Source: Published Sources

Components:

Debt Service/Exports

External Debt/Exports

External Debt/GDP

External Debt/Reserves

Reserves/Imports

Import Coverage

Exports/GDP

Current Account/GDP

Budget Deficit/GDP

GDP per Capita/G-7 Average

ii. Summary Format

Risk Index Briefing (Country Outlook) Economic/Financial Indicators

iii. Risk Index

Type: Ordinal

Components: Above Financial/Economic indicators, rank ordered, averaged.

PROVIDER: BUSINESS ENVIRONMENT RISK INTELLIGENCE (BERI) S.A.

a. Products

FORCE Country Reports: Qualitative analysis of socio-political, economic and financial forecasts. Scenario basis.

Political, operations and remittance/repatriation risk indices. Profit opportunity recommendation (POR) is a composite of the individual risk indices.

b. Risk measurement components

I. Political

Information Type: Qualitative

Data Source: Expert Panel

Components:

Political Factionalization

Linguistic/Ethnic/Religious Tension

Coercive Measures to maintain Regime

Mentality: Nationalism, Corruption, nepotism

Social Conditions: population, income distribution

Radical Left Strength

Dependence on outside major power

Regional Political Forces

Social Conflict

History of Regime Instability

ii. Operations

Information Type: Quantitative Qualitative

Data Source: Expert Panel

Components:

Policy Continuity

Attitudes towards foreign investors

Nationalization

Monetary Inflation

Balance of Payments

Bureaucratic Delays

Economic Growth

Currency Convertibility

Enforceability of Contracts

Labor Cost/Productivity

Professional Services and Contractors

Communications and Transport

Local Management and Partners

Short-term Credit

Long-Term Loans

iii. Remittances and repatriation of capital

Information Type: Quantitative Qualitative

Data Source: Expert Panel, Published Data

Components:

Legal Framework

Foreign Exchange

International Reserves

Foreign Debt

iv. Quantitative Index

Components:

Foreign Exchange

Foreign Debt

International Reserves

Budget Performance

v. Qualitative Index

Components:

Resolve towards honoring international obligations

Foreign loan structure and terms

Technocratic competence

Corruption

Concessionary loans and grants

vi. Summary Format

Briefing Risk Index

vii. Risk Index

Type: Ordinal Scalar

Components:

Weighted average of above components

PROVIDER: CONTROL RISKS INFORMATION SERVICES (CRIS)

a. Products

On-line country information services

Travel security guide

Security Risk ratings and security forecasts

b. Risk Index

Type: Ordinal (1-4)

Components:

Staff analysis (Methodology is not explained)

Government Survival

Likely Policy Continuity

Political Pressure on Economic Decisions

Criminal or terrorist threat

PROVIDER: Economist Intelligence Unit (EIU)

a. Products

Repayment risk measure

Regional and Country Reports

b. Risk measurement components

I. Political and Policy Risk

Information Type: Qualitative

Data Source: Staff Analysis

Components:

Economic Policy Factors:

Fiscal, Monetary and Export Policy

Attitude towards foreign investment

Ease of Structural and Policy Change

Size/Performance of public sector

Policy Consistency

Political and Strategic Factors:

Ability to implement economic policy

Operation of political system

New Regime policy continuity

Enfranchisement

Regional Context

ii. Medium-Term Lending Risk

Information Type: Qualitative

Data Source: Published Sources

Components:

External Debt

Debt Service

Current Account

Savings Rate

Export Concentration

iii. Short-Term Trade Risk

Information Type: Quantitative

Data Source: Published Sources

Components:

Foreign Exchange variables:

Import Cover Ratio

History of Foreign Exchange Transfers

iv. Summary Format

Briefing Risk Index Economic, payment, debt and trade indicators

v. Risk Index

Type: Ordinal Scalar

Components:

Weighted average of above components

PROVIDER: EUROMONEY

a. Products

Risk Assessment Index

b. Risk measurement components

I. Political

Information Type: Qualitative

Data Source: Survey of Experts

Components:

ii. Economic

Information Type: Quantitative

Data Source: Euromoney global economic projections

iii. Financial

Information Type: Primarily Quantitative

Data Source: Published Sources

Debt indicators

Debt in default or rescheduled

Credit Ratings (Moody's and Standard and Poor's)

Access to bank finance

Access to short-term finance

Access to international bond and syndicated loan markets

Access to and discount on forfeiting

iv. Summary Format

Risk Index (No briefing mentioned)

v. Risk Index

Type: Ordinal Scalar

Components:

Weighted average of above components

PROVIDER: INSTITUTIONAL INVESTOR

a. Products

Country Credit Rating Index

b. Risk measurement components

I. Political, Economic and Financial Variables

Information Type: Qualitative

Data Source: Weighted Survey of International Bankers

Components:

Economic Outlook

Debt Service

Financial Reserves/Current Account

Fiscal Policy

Political Outlook

Access to Capital Markets

Trade Balance

Inflow of Portfolio Investment

Foreign Direct Investment

ii. Summary Format

Credit Rating (No briefing indicated)

iii. Risk Index

Type: Ordinal Scalar

Components:

Weighted average of above components

PROVIDER: STANDARD AND POOR'S RATINGS GROUP

a. Products

Sovereign Credit Ratings

Local and foreign currency obligation ratings

Regional and local government obligation ratings

Sovereign-supported obligation ratings

Multilateral lending institution obligation ratings

International structured financing ratings

b. Risk measurement components (Only Sovereign Credit Ratings reviewed)

I. Political

Information Type: Quantitative Qualitative

Data Source: Published Data, Staff Analysis

Components:

Political System:

Stability

Orderliness of succession

System flexibility

Public participation

Characteristics of major political parties

Social Environment:

Living standards

Wealth and income distribution

Labor market conditions

Union politicization

Cultural/demographic characteristics

Literacy levels

Urbanization trends

Regional, racial, religious and other cultural differences

International Relations:

Integration with multilateral trade and international financial systems

Relations with neighboring countries

National security

ii. Economic

Information Type: Quantitative, Qualitative

Data Source: Published Data, Staff Analysis

Components:

External Financial Position:

Balance of Payments

International reserves

External debt

GDP

Exports

Economic structure and growth

Economic development

Natural resources

Rate and composition of growth

Economic Management

Budgetary performance

Social security system

Local government

Fiscal flexibility

Tax structure

Current and capital accounts

Wage behavior incentives

Exchange rate policy

Long-term economic efficiency

Economic Prospects

iii. Summary Format

Risk Index (No Briefing mentioned)

iv. Risk Index

Type: Ordinal

Components:

Composite of above factors.

PROVIDER: POLITICAL RISK SERVICES: ICRG

a. Products

Country Risk Ratings

b. Risk measurement components

I. Political

Information Type: Qualitative

Data Source: Staff Analysis

Components:

Economic Expectations

Economic Planning Failures

Political Leadership

External Conflict

Corruption

Military in Politics

Organized Religion in Politics

Law and Order Tradition

Racial and Nationality Tensions

Political Terrorism

Civil War

Political Party Development

Quality of the Bureaucracy

ii. Financial

Information Type: Quantitative, Qualitative

Data Source: Published Data, Staff Analysis

Components:

Loan Default/Unfavorable Restructuring

Delayed Payment of Suppliers Credits

Repudiation of Contracts by Governments

Losses from Exchange Controls

Expropriation of Private Investments

iii. Economic

Information Typel: Quantitative

Data Source: Published Data

Components:

Inflation

Debt Service

International Liquidity Ratios

Foreign Trade Collection Experience

Current Account Balance

Parallel Foreign Exchange indicators

iv. Summary Format

Briefing Risk Index

v. Risk Index

Type: Ordinal Scalar

Components:

Weighted Average of above components

PROVIDER: POLITICAL RISK SERVICES-COPLIN-O'LEARY RATING SYSTEM

a. Products

Country Risk Ratings: International Business Climate Index (IBC)

Various other indices are calculated from sub-components of the IBC index:

Financial Transfer Risk

Direct Investment Risk

Export Market Risk

b. Risk measurement components

I. Export Market

Information Type: Quantitative Qualitative

Data Source: Staff Analysis Expert Panel

ii. Financial Transfer

Information Type: Quantitative Qualitative

Data Source: Staff Analysis Expert Panel

iii. Direct Investment

Information Type: Quantitative Qualitative

Data Source: Staff Analysis Expert Panel

iv. Components: (The three above indices use an overlapping mixture of the following)

Turmoil

Restrictions on Equity

Restrictions on local operations

Taxation Discrimination

Repatriation Restrictions

Exchange Controls

Tariff Barriers

Nontarrif Barriers

Payment Delays

Expansionary Economic Policies

Labor Costs

Foreign Debt

Investment Restrictions

Restrictions on Foreign Trade

Domestic economic Problems

International Economic Problems

v. Summary Format: Briefing Risk Index

vi. Risk Index: Ordinal Scalar

PROVIDER: MOODY'S INVESTOR SERVICES

a. Products

Sovereign Foreign-Currency Debt Ratings

Credit Opinions for Governmental Bodies

b. Risk measurement components

I. Political Dynamics and Social Interaction

Information Type: Qualitative

Data Source: Staff Analysis

Components:

Potential for radical shift in leadership

Legal framework

Effective political structure

Income distribution

Religious, ethnic and linguistic differences

Single issue political movements

Social welfare policies

Organized protest/armed resistance

Political intrusiveness on cultivation of wealth

Depth and experience of government bureaucrats

Political intrusiveness on economic management

Political links with foreign partners

Past behavior under stress

Regime legitimacy

ii. Financial

Information Type: Quantitative

Components: Published Sources

Illiquidity

Debt burden

Balance of payments

Subnational governments

iii. Economic

Information Type: Quantitative Qualitative

Components: Published Sources, Staff Analysis

Policy environment

Infrastructure

Structure of production

Independent monetary authority

Labor market mobility

Interest rates

Foreign exchange

Quality of economic management

Dependency on export/import sectors

International capital flows

Ability to implement austerity programs

iv. Summary Format

Credit Opinion Summaries Debt Ratings

v. Risk Index

Type: Ordinal