World Business (A Special Report) --- Report Card: Rating Risk in the Hot Countries --- How Two Firms Gauge Investment Safety
How risky are investments in developing countries?</br></br>There is, of course, no easy answer. Political instability, limited track records, poor statistics -- they all make gauging risk a risky business.</br></br>But several companies try. What follows is a look at how two outfits evaluate the risk in some of the countries that are receiving the most attention from foreign investors.</br></br>The two risk-raters:</br></br>-- Economist Intelligence Unit, a New York-based subsidiary of The Economist Group, London. A rating of A, or 0-20 points, is the least risky. That's followed by B, 25-40 points; C, 45-55 points; D, 60-75 points; and E, 80-100 points. The ratings break down into three categories: medium-term lending risk, covering such factors as external debt and trends in the current account, with a maximum score of 45 points; political and policy risk, including factors such as the consistency of government policy and the quality of economic management, with a maximum score of 40 points; and short-term trade risk, including foreign-exchange reserves, with a cap of 15 points.