Country Risk and Governance: Strange Bedfellows?

Abstract

Enron, Worldcom, Vivendi and Parmalat, among many other examples, cast light on a lack of transparency and accountability, namely, bad corporate governance. Likewise, Cameroon, Turkmenistan, Argentina, Nigeria or Burma all constitute examples of dreadful sovereign governance. The combination of public awareness and better information has placed the issue of governance and government efficiency at centre-stage in political risk assessment. Country risk cannot be captured any longer by scrutinizing liquidity and solvency indicators or by overrefining sensitivity analysis in balance of payments projections. Although governance emerged as a research issue in the academic community in the mid-1960s, it moved onto the front burner of the policy-making debates only 30 years later. Corruption was brought into the picture when scholars started to question the quality of the economic decision-making process and the allocation of the growth benefits. Issues of capital flight and economic inefficiencies were raised to assess the scope of ‘Dutch disease’ in countries where too much and too fast wealth is managed unwisely.¹

After an international banking career at BNP, the World Bank and the Washington-based Institute of International Finance. Mr Bouchet was founder and CEO of Owen Stanley Financial, a specialized advisory firm dealing with debt restructuring strategy for country governments that became a subsidiary of ING Barings. He is Scientific Director of the MScIF programme at CERAM where he teaches International Finance and Country risk assessment. Graduated from the University of Paris in Economics and from IEP-Paris. Holds MA/PhD degrees in International Relations from USC. After working with Total-Senegal, Dr Groslambert joined Paris-based FP Consult, an emerging market investment management company with a US$250 million portfolio. He was equity fund manager specializing in Latin America stock markets. Dr Groslambert teaches International Finance Strategy and International Risk Management at CERAM. Graduated from CERAM, he holds a Doctorate in Economics from Aix-Marseille University. His areas of expertise include emerging markets and international economics. Bouchet and Groslambert are the authors with E. Clark of Country Risk Assessment (Wiley, 2003).