Global Risk Service

• Capital Gains Taxes: a 10-percentage-point increase in the rate of capital gains tax for foreign-owned businesses.
• Corporate Taxes: a 10-percentage-point increase in the rate of corporate income tax.
• Export Taxes: a 5-percentage-point increase in the average rate of export taxes.
• Import Taxes: a 10-percentage-point increase in the average rate of import taxes/tariffs.
• Labor Taxes: a 5-percentage-point increase in the rate of labor tax (social security, etc.).
• Sales Taxes: a 5-percentage-point increase in the average rate of sales taxes.
• Withholding Taxes: a 5-percentage-point increase in the average rate of withholding taxes.

• Enforceability of Government Contracts: a one-point decline on a scale from "0" to "10" in the enforceability of contracts.
• Enforceability of Private Contracts: a one-point decline on a scale from "0" to "10" in the legal enforceability of contracts.
• Ownership of Business by Non-Residents: a one-point increase on a scale from "0" to "10" in legal restrictions on ownership of business by non-residents.
• Ownership of Equities by Non-Residents: a one-point increase on a scale from "0" to "10" in legal restrictions on ownership of equities by non-residents.
• Regulations—Environmental: an increase in environmental regulations that reduces total aggregate investment growth, in real LCU terms, by 5 percentage points.
• Regulations—Exports: a 2% reduction in export volume as a result of a worsening in export regulations or restrictions (such as export limits).
• Regulations—Imports: a 2% reduction in import volume as a result of a worsening in import regulations or restrictions (such as import quotas).
• Regulations—Other Business: an increase in other regulatory burdens that reduces total aggregate investment growth, in real LCU terms, by 10 percentage points.
• Transferability of Funds: a one-point increase on a scale from "0" to "10" in restrictions on non-resident outward transfer of funds.

• Real Currency Depreciation (vs. US$): a 25% decline in the inflation-adjusted exchange rate (vs. US$).
• Equity Prices (in real LCU): a 25% decline in equity prices (in real LCU terms).
• Currency Appreciation: a 15% increase in the inflation-adjusted exchange rate (vs. US$).
• Factor Costs—Commercial Real Estate Costs: a 10% increase in the rental cost of commercial real estate in real LCU terms.
• Factor Costs—Construction Materials Prices: a 10% increase of the broadest available domestic construction materials price index (in real LCU terms).
• Factor Costs—Power and Energy Prices: a 20% increase in average domestic energy prices in real LCU terms.
• Factor Costs—Wages: a 10% increase in the broadest available wage index in real LCU terms.

• Default/Restructuring by Banks: a 10% reduction in the present value of U.S. dollar-denominated loans to private-sector domestic banks as a result of future changes in payment terms (in real LCU terms).
• Default/Restructuring on Govt. US$ loans: a 10% reduction in the present value of U.S. dollar-denominated loans to the domestic public sector as a result of future changes in payment terms (in real LCU terms).
• Domestic Demand: a decline of 5 percentage points below the projected growth path in domestic demand.
• Export Disruption (Sanctions/trade conflict): a decline of 2 percentage points below the projected growth path in aggregate national export volume, as measured by the broadest available index, as a result of sanctions or trade conflict.
• Import Disruption (Sanctions/trade conflict): a decline of 2 percentage points below the projected growth path in aggregate national import volume, as measured by the broadest available index as a result of sanctions or trade conflict.
• Infrastructure Disruption or Shortage: a decline of 2 percentage points below the projected growth path of domestic output as measured by GDP in real LCU terms as a result of a disruption in infrastructure services.
• Losses and Costs of Corruption: a one-point increase on a scale from "0" to "10" in corruption with respect to the level at the time of the assessment.
• Losses and Costs of Crime: a one-point increase on a scale from "0" to "10" in crime with respect to the level at the time of the assessment.
• Losses and Costs of Physical Hazards: a 3% loss in the capital stock of the overall economy due to physical destruction (related to war, natural disaster, etc.).
• Skilled-Labor Shortages: a decline of 2 percentage points below the projected growth path of domestic output as measured by GDP in real LCU terms as a result of skilled labor shortages.

• Military Coup Risk: a military coup d'etat (or a series of such events) that reduces the GDP growth rate by 2 percentage points.
• Major Insurgency/Rebellion: an increase in scope or intensity of one or more insurgencies/rebellions that reduces the GDP growth rate by 3 percentage points.
• Political Terrorism: an increase in scope or intensity of terrorism that reduces the GDP growth rate by 1 percentage point.
• Political Assassination: a political assassination (or a series of such events) that reduces the GDP growth rate by 1 percentage point.
• Civil War: an increase in scope or intensity of one or more civil wars that reduces the GDP growth rate by 4 percentage points.
• Major Urban Riot: an increase in scope, intensity, or frequency of rioting that reduces the GDP growth rate by 1 percentage point.
• Labor Strike and Unrest: an increase in scope, intensity, or frequency of labor strikes/turmoil that reduces the GDP growth rate by 1 percentage point.
• Kidnapping of Foreigners: an increase in scope, intensity, or frequency of kidnapping of foreigners that reduces the GDP growth rate by 1 percentage point.
• Government Instability: an increase in government personnel turnover rate at senior levels that reduces the GDP growth rate by 2 percentage points.
• Government Ineffectiveness: a decline in government personnel quality at any level that reduces the GDP growth rate by 1 percentage point.
• Institutional Failure: a deterioration of government capacity to cope with national problems as a result of institutional rigidity or gridlock that reduces the GDP growth rate by 1 percentage point.

• Economic Sanction Risk: an increase in scope or intensity of economic sanctions that reduces the GDP growth rate by 2 percentage points.
• Trade Conflict Risk: an increase in scope or intensity of a trade conflict that reduces the GDP growth rate by 2 percentage points.
• Military Mobilization/Small Inter-State War: an increase in scope or intensity of an inter-state military conflict that reduces the GDP growth rate by 2-5 percentage points.
• Major Inter-State War: an increase in scope or intensity of a military conflict that reduces the GDP growth rate by more than 5 percentage points.

• Interest Rate (Real increase): an increase of 5 percentage points in the real short-term interest rate.
• Consumer Price Inflation: an increase of 5 percentage points in the consumer-price inflation.
• Real Estate Price Decline (Commercial): a 25% decline in the real rental or sale price of commercial real estate.

• Financial Risk is calculated as the average of the overall risk scores for the three financial investments: U.S. dollar loans to sovereign borrowers, U.S. dollar loans to banks, and domestic equities.
• Business Risk is the average of the overall risk scores for the nine business investments: Manufacturing (for Domestic Market), Manufacturing (for Export), Oil & Gas Upstream, Mining, Power Generation, Franchiser/Local Retailer, Exporter and Distributor, Shipping Services, and Foreign Office.
• Political Risk is the weighted average of domestic and external political risks as calculated in the Political Risk Scores worksheet. Riskiness is calibrated in terms of impact of 15 sources of political risk on real GDP measured in U.S. dollars. These risks are then aggregated geometrically, and re-scaled to range from zero to 100. In this analysis, a source of political risk that has no expected impact on GDP growth would register a zero probability, even though its likelihood of occurrence might be high. This approach was chosen to avoid high risk scores in situations where political events have minimal impact on the economy.
• Overall Country Risk is calculated as the average of the other three summary risk scores.