World Investment and Political Risk 2012

The World Investment and Political Risk report examines the overall trends in political risk perceptions, foreign investment intentions, and longer-term demand for political risk insurance (PRI), especially in emerging economies.

The research conducted for the report includes an Economist Intelligence Unit survey of multinational investors that addresses their risk perceptions for developing countries in the short and medium term. It addresses foreign direct investment (FDI) in the Middle East and North Africa in light of the Arab Spring, as well as the reaction of multinational enterprises to those developments.

The 2012 edition of the report looks at the risk of sovereign defaults, typically caused by adverse economic shocks, and how it relates to expropriation. Both the risks of sovereign default and expropriation remain significant issues for foreign investors amid the global economic slowdown and continued political instability.

The report also examines PRI trends and the role of PRI in promoting investment into developing countries. As of the first half of 2012, PRI issuance was still growing strongly, with another record level forecast for 2012. The main drivers of the increased demand have been the events in the Middle East and North Africa; recent expropriations in Latin America; contract renegotiations in resource-rich economies; and capital constraints and increased regulation for financial institutions, which make financing with PRI an attractive option.