Chile is the only nation in Latin America to receive the lowest political risk rating from Aon Corporation, a Chicago-based organization offering risk management services for corporations looking to invest overseas. The only other nations to receive the lowest political risk ranking out of six possible levels were Japan, Australia, New Zealand, Canada, the United States and most of Western Europe.
For the last 18 years, Aon has published a Political Risk Map annually. This year’s map evaluates the political risk for investors in 211 countries based on seven factors: exchange transfer, war, strikes and civil commotion, sovereign non-payment, political interference, supply chain disruption and legal or regulatory risk. While other Low ranked nations were marked for the risk of civil commotion, as in the US and most of Western Europe, Chile was not marked for any of the seven risk factors, making it one of the world’s most stable destinations for investment.
Following the global financial slump, increased concerns over sovereign non-payment—when a national government defaults on loans—have led to an overall increase in political risk for investors overseas. Of the 211 nations evaluated by Aon this year, 19 received higher risk ratings this year than last, while only 11 saw decreases in political risk levels. The only Latin American nation to see an improvement in its rating this year was Panama, lowered to Medium-low risk.
The only other Latin American nations to reach a rating of Medium-low (the second lowest risk ranking) were Mexico, Colombia and Brazil. The highest risk nations in South America were Ecuador, Bolivia and Argentina with rankings of High, and Venezuela with a risk level of Very High.
Though this year’s map demonstrates the increased risks for investors in many foreign markets following the financial difficulties of 2009, the story told over 18 years of analysis leading to the annual map is quite different. According to associate director of Aon Risk Solutions’ Crisis Management Practice, Beverly Marsden, the last five years alone have seen a significant shift toward the medium rankings, with a 30 percent increase in the countries ranked in the Medium-low to Medium-high risk bracket.
“Globalization has been blamed for recent incidents of economic volatility, but it has also had a positive impact on global political and economic stability,” says Marsden in a news release from Aon Corporation that came alongside the publication of the risk map.
“Many countries previously designated as Medium High or High have taken advantage of global trade links and have seen political risk levels decrease. This trend is demonstrated in South America,” she continues, citing particularly Brazil and Colombia.
Sam Wilkin, associate director of Oxford Analytica consultancy firm, which worked with Aon on producing this year’s map, describes Chile “as a resource-rich country [that] stands out in a particularly strong light in comparison to its Latin American peers.”
For the last several years high levels of political, social and economic stability have led to incredible growth in foreign investment in Chile, which rose over 40 percent between 2009 and 2010 alone. It’s unique position in Latin America as both a dynamic and virtually risk-free destination for foreign investment will continue to place Chile at the forefront of development in Latin America.
This post is also available in Spanish