Mozambique offers “excellent opportunities” for foreign direct investment
The head of business strategy of Aon Consulting in Portugal has told Lusa that Mozambique’s risk worsened because of the debt crisis, which influenced other indicators and worsened the country’s rating.
“The debt crisis had a significant effect and contributed directly to this assessment,” João Mendonça said, noting that “in terms of political risk and general risk trends, Mozambique’s rating has deteriorated”, the country falling from a risk rating of 4 to 5 (on a scale of 1 to 6).
Commenting on the Mozambique section of the 2018 Political Risk Map prepared by political risk consultancy Aon in partnership with The Risk Advisory Group and Continuum Economics led by economist Nouriel Roubini, Mendonça added that there was also a deterioration in indicators “in terms of organised crime and political instability, which have shown episodes that lead us to believe that the economic and social reality has deteriorated”.
Mozambican public debt unsustainable since 2016 – General State Account
In addition, “megaprojects have slowed down and the country’s infrastructure is relatively weak, all contributing to a less favourable outlook”.
Asked about the main variations in Mozambique’s indicators, Aon’s head of business strategy in Portugal said that “the assessments are more structural than circumstantial” and pointed out that the variations were not very significant, although the majority shows a negative evolution.
Despite the overall negative outlook, there was one point of analysis in which the country had improved. “The vulnerability of the banking sector has changed for the better, so we have assigned a level of medium, when there was a time when it was high”.
Aon uses six main risk indicators, the first being political violence, which analyses the possibility of attacks, riots, sabotage, terrorism, war, civil war or a coup d’état, among others.
Currency transfer risk refers to the risk that the country will be unable to make payments in foreign currency due to the imposition of controls on the local currency.
Sovereign default has to do with the risk of a government, public company or a government entity failing to honour its financial obligations.
Political interference relates to government intervention in the economy or other policy areas that negatively affect outside interests, such as nationalisation or expropriation.
Disturbances to the distribution chain risk relates to disruption in the flow of goods or services to or from the country as a result of political, social, economic or environmental instability.
Lastly, Regulatory or Legal Risk is the risk of financial or reputational losses as a result of difficulties in complying with the laws, regulations or rules of a particular country.
Mozambique’s scores on the above indicators, where 1 is low and 6 is high, are:
General Country Risk …………………………………. 5
Risk of Political Violence ……………………………. 6
Currency Transfer Risk ………………………………. 5
Sovereign Default Risk ……………………………….. 6
Risk of Political Interference ……………………….. 5
Risk of Disturbance in the Distribution Chain… 6
Regulatory or Legal Risk ……………………………… 6
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