Country risk measures the payment capacity of a State.
Country risk is a notion that is linked to the payment capacity of a nation state . This index measures the risk that exists in international operations that involve a country, understanding risk as the possibility of non-payment .
It should be noted that the contiguity, proximity or imminence of possible damage is called risk . It is about the possibility of damage being generated. Country , for its part, is a term that can refer to a State, a nation or a region.
Importance of country risk
Entities that grant credit to countries usually analyze country risk: the greater the country risk, the greater the possibility that the country in question will not pay its debts. The indicator , therefore, is very important for the nations themselves since they usually need international credit to promote the development of their economies .
Country risk measures the economic situation of the country, but also takes into account social, political and legal issues. This means that a country whose government faces a period of instability or is suffering a civil war will have a high country risk, since these circumstances can also affect its payment capacity .
Your measurement
There are agencies that specialize in rating these risks and developing different ratings. Moody's , Standard & Poor's and Fitch are some of the best known and the main references when studying the solvency of a State .
As a general rule, it is considered that these entities when establishing results, something they do periodically, usually present ratings in both the short and medium or long term.
Among the nations that have been classified as having the highest country risk are, according to data from the Euromoney agency in recent decades, Indonesia , Greece, Malaysia, Russia, Ireland, Argentina, Thailand, South Korea, Spain and Portugal .
As country risk increases, the chances of a nation defaulting on its financial obligations increase.
Country risk and the COFACE Group
Due to what has been said regarding the importance of obtaining international financing, the economy of a country - and, therefore, the well-being of its citizens - depends in part on the work of these agencies that measure country risk.
Country risk is so important worldwide that there are many events and appointments that have been held around it. Thus, for example, in recent years several meetings have been held in this regard.
The COFACE Group , a global credit insurance company, organized meetings in Spanish cities such as Barcelona , Madrid , San Sebastián and Valencia . In these talks, specialists in the field usually give their view on the global situation of country risk, present the latest news in this regard and analyze economic trends throughout the planet.
In January 2016 , to mention a specific event, a conference of this type was held in Paris , attended by more than 1,000 people and in which questions such as what hope there was then with respect to Latin American economies were answered. , how oil prices would evolve and what future awaited the European Community .