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Mapped: Investment Risk, by Country

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Mapped: Which Countries Have the Highest Investment Risk?

Mapped: Investment Risk, by Country

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What is the risk of investing in another country?

Given the rapid growth of emerging economies, and the opportunities this may present to investors, it raises the question: does investment exposure abroad come with risk, and how can that risk be analyzed?

To help answer this question, this graphic shows country risk around the world, based on analysis from Aswath Damodaran at New York Universityโ€™s Stern School of Business.

The Methodology

For many reasons, there are variations in risk across different countries. These can be influenced by geopolitical factors, such as political risk, whether they are in a stage of early growth, or have stable property rights.

To get a clearer picture of country risk, Damodaran analyzed the following broad factors:

  • Political risk: Type of regime, corruption, level of conflict
  • Legal risk: Property rights protections, contract rights
  • Economic risk: Diversification of economy

In addition, a nationโ€™s default risk was analyzed, which is a common measure used in financial markets. When a nation defaults on its debt, it often leads to market turbulence, and other negative effects that can last for many years.

Together, these factors, along with others, estimate a country risk premium, which is the extra risk in a given market. The U.S. served as baseline for measuring the extra risk of each country.

Investment Risk in 2023

Below, we show country risk around the world, from highest to lowest risk as of July, 2023:

CountryCountry Risk Premium
๐Ÿ‡ง๐Ÿ‡พ Belarus24.8%
๐Ÿ‡ฑ๐Ÿ‡ง Lebanon24.8%
๐Ÿ‡ป๐Ÿ‡ช Venezuela24.8%
๐Ÿ‡ธ๐Ÿ‡ฉ Sudan24.8%
๐Ÿ‡ธ๐Ÿ‡พ Syria24.8%
๐Ÿ‡ฆ๐Ÿ‡ท Argentina18.2%
๐Ÿ‡จ๐Ÿ‡บ Cuba18.2%
๐Ÿ‡ฌ๐Ÿ‡ญ Ghana18.2%
๐Ÿ‡ท๐Ÿ‡บ Russia18.2%
๐Ÿ‡ฑ๐Ÿ‡ฐ Sri Lanka18.2%
๐Ÿ‡บ๐Ÿ‡ฆ Ukraine18.2%
๐Ÿ‡ฟ๐Ÿ‡ฒ Zambia18.2%
๐Ÿ‡ญ๐Ÿ‡น Haiti18.2%
๐Ÿ‡ฐ๐Ÿ‡ต North Korea18.2%
๐Ÿ‡ฒ๐Ÿ‡ผ Malawi18.2%
๐Ÿ‡ธ๐Ÿ‡ฑ Sierra Leone18.2%
๐Ÿ‡ธ๐Ÿ‡ด Somalia18.2%
๐Ÿ‡ช๐Ÿ‡จ Ecuador15.2%
๐Ÿ‡ธ๐Ÿ‡ป El Salvador15.2%
๐Ÿ‡ฑ๐Ÿ‡ฆ Laos15.2%
๐Ÿ‡ต๐Ÿ‡ฐ Pakistan15.2%
๐Ÿ‡ธ๐Ÿ‡ท Suriname15.2%
๐Ÿ‡ฑ๐Ÿ‡ท Liberia15.2%
๐Ÿ‡ฒ๐Ÿ‡ฒ Myanmar15.2%
๐Ÿ‡พ๐Ÿ‡ช Yemen15.2%
๐Ÿ‡ง๐Ÿ‡ฟ Belize13.7%
๐Ÿ‡จ๐Ÿ‡ฌ Congo (Republic of)13.7%
๐Ÿ‡ช๐Ÿ‡น Ethiopia13.7%
๐Ÿ‡ฒ๐Ÿ‡ฑ Mali13.7%
๐Ÿ‡ฒ๐Ÿ‡ฟ Mozambique13.7%
๐Ÿ‡น๐Ÿ‡ณ Tunisia13.7%
๐Ÿ‡ฌ๐Ÿ‡ณ Guinea13.7%
๐Ÿ‡ง๐Ÿ‡ง Barbados11.4%
๐Ÿ‡ง๐Ÿ‡ด Bolivia11.4%
๐Ÿ‡ง๐Ÿ‡ซ Burkina Faso11.4%
๐Ÿ‡ฌ๐Ÿ‡ฆ Gabon11.4%
๐Ÿ‡ฎ๐Ÿ‡ถ Iraq11.4%
๐Ÿ‡ฒ๐Ÿ‡ป Maldives11.4%
๐Ÿ‡ณ๐Ÿ‡ฌ Nigeria11.4%
๐Ÿ‡ธ๐Ÿ‡ง Solomon Islands11.4%
๐Ÿ‡ฟ๐Ÿ‡ผ Zimbabwe11.4%
๐Ÿ‡ฆ๐Ÿ‡ด Angola9.9%
๐Ÿ‡ง๐Ÿ‡ฆ Bosnia and Herzegovina9.9%
๐Ÿ‡จ๐Ÿ‡ป Cape Verde9.9%
๐Ÿ‡จ๐Ÿ‡ฉ Congo (Democratic Republic of)9.9%
๐Ÿ‡ช๐Ÿ‡ฌ Egypt9.9%
๐Ÿ‡ฐ๐Ÿ‡ช Kenya9.9%
๐Ÿ‡ฐ๐Ÿ‡ฌ Kyrgyzstan9.9%
๐Ÿ‡ฒ๐Ÿ‡ฉ Moldova9.9%
๐Ÿ‡ฒ๐Ÿ‡ณ Mongolia9.9%
๐Ÿ‡ณ๐Ÿ‡ฎ Nicaragua9.9%
๐Ÿ‡ณ๐Ÿ‡ช Niger9.9%
๐Ÿ‡ป๐Ÿ‡จ St. Vincent & the Grenadines9.9%
๐Ÿ‡ธ๐Ÿ‡ฟ Swaziland9.9%
๐Ÿ‡น๐Ÿ‡ฏ Tajikistan9.9%
๐Ÿ‡น๐Ÿ‡ฌ Togo9.9%
๐Ÿ‡น๐Ÿ‡ท Turkey9.9%
๐Ÿ‡ฎ๐Ÿ‡ท Iran9.9%
๐Ÿ‡ฒ๐Ÿ‡ฌ Madagascar9.9%
๐Ÿ‡ง๐Ÿ‡ญ Bahrain8.4%
๐Ÿ‡ฐ๐Ÿ‡ญ Cambodia8.4%
๐Ÿ‡จ๐Ÿ‡ฒ Cameroon8.4%
๐Ÿ‡จ๐Ÿ‡ฐ Cook Islands8.4%
๐Ÿ‡จ๐Ÿ‡ท Costa Rica8.4%
๐Ÿ‡ฏ๐Ÿ‡ฒ Jamaica8.4%
๐Ÿ‡ต๐Ÿ‡ฌ Papua New Guinea8.4%
๐Ÿ‡ท๐Ÿ‡ผ Rwanda8.4%
๐Ÿ‡น๐Ÿ‡ฟ Tanzania8.4%
๐Ÿ‡บ๐Ÿ‡ฌ Uganda8.4%
๐Ÿ‡ฌ๐Ÿ‡ฒ Gambia8.4%
๐Ÿ‡ฌ๐Ÿ‡ผ Guinea-Bissau8.4%
๐Ÿ‡ฆ๐Ÿ‡ฑ Albania6.8%
๐Ÿ‡ง๐Ÿ‡ธ Bahamas6.8%
๐Ÿ‡ง๐Ÿ‡ฉ Bangladesh6.8%
๐Ÿ‡ง๐Ÿ‡ฏ Benin6.8%
๐Ÿ‡ซ๐Ÿ‡ฏ Fiji6.8%
๐Ÿ‡ญ๐Ÿ‡ณ Honduras6.8%
๐Ÿ‡ฏ๐Ÿ‡ด Jordan6.8%
๐Ÿ‡ฒ๐Ÿ‡ช Montenegro6.8%
๐Ÿ‡ณ๐Ÿ‡ฆ Namibia6.8%
๐Ÿ‡ฆ๐Ÿ‡ฒ Armenia5.5%
๐Ÿ‡จ๐Ÿ‡ฎ Cรดte d'Ivoire5.5%
๐Ÿ‡ฉ๐Ÿ‡ด Dominican Republic5.5%
๐Ÿ‡ฌ๐Ÿ‡ท Greece5.5%
๐Ÿ‡ฒ๐Ÿ‡ฐ Macedonia5.5%
๐Ÿ‡ธ๐Ÿ‡ณ Senegal5.5%
๐Ÿ‡บ๐Ÿ‡ฟ Uzbekistan5.5%
๐Ÿ‡ฉ๐Ÿ‡ฟ Algeria5.5%
๐Ÿ‡ง๐Ÿ‡ท Brazil4.6%
๐Ÿ‡ฌ๐Ÿ‡ช Georgia4.6%
๐Ÿ‡ด๐Ÿ‡ฒ Oman4.6%
๐Ÿ‡ท๐Ÿ‡ธ Serbia4.6%
๐Ÿ‡ฟ๐Ÿ‡ฆ South Africa4.6%
๐Ÿ‡ธ๐Ÿ‡ฝ St. Maarten4.6%
๐Ÿ‡น๐Ÿ‡น Trinidad and Tobago4.6%
๐Ÿ‡ป๐Ÿ‡ณ Vietnam4.6%
๐Ÿ‡ฆ๐Ÿ‡ฟ Azerbaijan3.8%
๐Ÿ‡จ๐Ÿ‡พ Cyprus3.8%
๐Ÿ‡ฌ๐Ÿ‡น Guatemala3.8%
๐Ÿ‡ฒ๐Ÿ‡ฆ Morocco3.8%
๐Ÿ‡ต๐Ÿ‡พ Paraguay3.8%
๐Ÿ‡ธ๐Ÿ‡ญ Sharjah3.8%
๐Ÿ‡ฎ๐Ÿ‡ณ India3.3%
๐Ÿ‡ฎ๐Ÿ‡น Italy3.3%
๐Ÿ‡ฒ๐Ÿ‡บ Mauritius3.3%
๐Ÿ‡ฒ๐Ÿ‡ธ Montserrat3.3%
๐Ÿ‡ท๐Ÿ‡ด Romania3.3%
๐Ÿ‡ฆ๐Ÿ‡ฉ Andorra2.9%
๐Ÿ‡ฆ๐Ÿ‡ผ Aruba2.9%
๐Ÿ‡จ๐Ÿ‡ด Colombia2.9%
๐Ÿ‡ญ๐Ÿ‡ท Croatia2.9%
๐Ÿ‡จ๐Ÿ‡ผ Curacao2.9%
๐Ÿ‡ญ๐Ÿ‡บ Hungary2.9%
๐Ÿ‡ฎ๐Ÿ‡ฉ Indonesia2.9%
๐Ÿ‡ฐ๐Ÿ‡ฟ Kazakhstan2.9%
๐Ÿ‡ฒ๐Ÿ‡ฝ Mexico2.9%
๐Ÿ‡ต๐Ÿ‡ฆ Panama2.9%
๐Ÿ‡ต๐Ÿ‡ญ Philippines2.9%
๐Ÿ‡ต๐Ÿ‡น Portugal2.9%
๐Ÿ‡บ๐Ÿ‡พ Uruguay2.9%
๐Ÿ‡ฑ๐Ÿ‡พ Libya2.9%
๐Ÿ‡ง๐Ÿ‡ฌ Bulgaria2.4%
๐Ÿ‡ต๐Ÿ‡ช Peru2.4%
๐Ÿ‡ช๐Ÿ‡ธ Spain2.4%
๐Ÿ‡น๐Ÿ‡ญ Thailand2.4%
๐Ÿ‡น๐Ÿ‡จ Turks and Caicos2.4%
๐Ÿ‡ฌ๐Ÿ‡พ Guyana2.4%
๐Ÿ‡ง๐Ÿ‡ผ Botswana1.8%
๐Ÿ‡ฑ๐Ÿ‡ป Latvia1.8%
๐Ÿ‡ฒ๐Ÿ‡พ Malaysia1.8%
๐Ÿ‡ธ๐Ÿ‡ฎ Slovenia1.8%
๐Ÿ‡ง๐Ÿ‡ฒ Bermuda1.3%
๐Ÿ‡จ๐Ÿ‡ฑ Chile1.3%
๐Ÿ‡ฎ๐Ÿ‡ธ Iceland1.3%
๐Ÿ‡ฑ๐Ÿ‡น Lithuania1.3%
๐Ÿ‡ฒ๐Ÿ‡น Malta1.3%
๐Ÿ‡ต๐Ÿ‡ฑ Poland1.3%
๐Ÿ‡ธ๐Ÿ‡ฐ Slovakia1.3%
๐Ÿ‡จ๐Ÿ‡ณ China1.1%
๐Ÿ‡ช๐Ÿ‡ช Estonia1.1%
๐Ÿ‡ฎ๐Ÿ‡ฑ Israel1.1%
๐Ÿ‡ฏ๐Ÿ‡ต Japan1.1%
๐Ÿ‡ฐ๐Ÿ‡ผ Kuwait1.1%
๐Ÿ‡ธ๐Ÿ‡ฆ Saudi Arabia1.1%
๐Ÿ‡ง๐Ÿ‡ช Belgium0.9%
๐Ÿ‡ฐ๐Ÿ‡พ Cayman Islands0.9%
๐Ÿ‡จ๐Ÿ‡ฟ Czech Republic0.9%
๐Ÿ‡ญ๐Ÿ‡ฐ Hong Kong0.9%
๐Ÿ‡ฎ๐Ÿ‡ช Ireland0.9%
๐Ÿ‡ฎ๐Ÿ‡ฒ Isle of Man0.9%
๐Ÿ‡ฏ๐Ÿ‡ช Jersey0.9%
๐Ÿ‡ฒ๐Ÿ‡ด Macao0.9%
๐Ÿ‡ถ๐Ÿ‡ฆ Qatar0.9%
๐Ÿ‡น๐Ÿ‡ผ Taiwan0.9%
๐Ÿ‡ฌ๐Ÿ‡ง UK0.9%
๐Ÿ‡ง๐Ÿ‡ณ Brunei0.9%
๐Ÿ‡ฆ๐Ÿ‡ช Abu Dhabi0.8%
๐Ÿ‡ซ๐Ÿ‡ท France0.8%
๐Ÿ‡ฌ๐Ÿ‡ฌ Guernsey0.8%
๐Ÿ‡ฐ๐Ÿ‡ท Korea0.8%
๐Ÿ‡ฆ๐Ÿ‡ช U.A.E.0.8%
๐Ÿ‡ฆ๐Ÿ‡น Austria0.6%
๐Ÿ‡ซ๐Ÿ‡ฎ Finland0.6%
๐Ÿ‡ฆ๐Ÿ‡บ Australia0.0%
๐Ÿ‡จ๐Ÿ‡ฆ Canada0.0%
๐Ÿ‡ฉ๐Ÿ‡ฐ Denmark0.0%
๐Ÿ‡ฉ๐Ÿ‡ช Germany0.0%
๐Ÿ‡ฑ๐Ÿ‡ฎ Liechtenstein0.0%
๐Ÿ‡ฑ๐Ÿ‡บ Luxembourg0.0%
๐Ÿ‡ณ๐Ÿ‡ฑ Netherlands0.0%
๐Ÿ‡ณ๐Ÿ‡ฟ New Zealand0.0%
๐Ÿ‡ณ๐Ÿ‡ด Norway0.0%
๐Ÿ‡ธ๐Ÿ‡ฌ Singapore0.0%
๐Ÿ‡ธ๐Ÿ‡ช Sweden0.0%
๐Ÿ‡จ๐Ÿ‡ญ Switzerland0.0%
๐Ÿ‡บ๐Ÿ‡ธ U.S.0.0%

As the table above shows, five countries share the highest risk: Belarus, Lebanon, Venezuela, Sudan, and Syria. In Belarus, Russian military forces continue to operate. Venezuela has faced hyperinflation and endemic corruption for many years.

On the other hand, 13 countries had the lowest risk, including several European nations, Singapore, and New Zealand. This is due to factors such as their AAA-rated government bonds, low corruption, and strong property right protections.

What Does This Mean for Investors?

The growth of emerging economies presents opportunities for investors, shaped by demographic influences, rising GDP, and technological advancements seen globally.

Adding to this, diversification across sectors, assets, and geographies may stand to benefit investors more generally.

With this in mind, investments in other countries are exposed to country risks that go beyond, but ultimately influence the long-term performance of stocks, bonds, and other financial assets. Considering these factors, the reward of investing in international companies may come with macroeconomic and country-specific risks.

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Visualizing the Rise of the U.S. Dollar Since the 19th Century

This animated graphic shows the U.S. dollar, the world’s primary reserve currency, as a share of foreign reserves since 1900.

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Visualizing the Rise and Fall) of the U.S. Dollar

Visualizing the Rise of the U.S. Dollar Since the 19th Century

As the world’s reserve currency, the U.S. dollar made up 58.4% of foreign reserves held by central banks in 2022, falling near 25-year lows.

Today, emerging countries are slowly decoupling from the greenback, with foreign reserves shifting to currencies like the Chinese yuan.

At the same time, the steep appreciation of the U.S. dollar is leading countries to sell their U.S. foreign reserves to help prop up their currencies, in turn buying currencies such as the Australian and Canadian dollars to help generate higher yields.

The above animated graphic from James Eagle shows the rapid ascent of the U.S. dollar over the last century, and its gradual decline in recent years.

Dollar Dominance: A Brief History

In 1944, the U.S. dollar became the worldโ€™s reserve currency under the Bretton Woods Agreement. Over the first half of the century, the U.S. ran budget surpluses while increasing trade and economic ties with war-torn countries, expanding its influence as the worldโ€™s store of value.

Later through the 1960s, the U.S. dollar share of global foreign reserves rapidly increased as political allies stockpiled the dollar.

By 2000, dollar dominance hit a peak of 71% of global reserves. With the creation of the European Union a year earlier, countries such as China began increasing the share of euros in reserves. Between 2000 and 2005, the share of the dollar in Chinaโ€™s foreign exchange reserves fell by an estimated 15 percentage points.

The dollar began a long rally after the global financial crisis, which drove central banks to cut their dollar reserves to help bolster their currencies.

Fast-forward to today, and dollar reserves have fallen roughly 13 percentage points from their historical peak.

The State of the World’s Reserve Currency

In 2022, 16% of Russiaโ€™s export transactions were in yuan, up from almost nothing before the war. Brazil and Argentina have also begun adopting the Chinese currency for trade or reserve purposes. Still, the U.S. dollar makes up 80% of Brazilโ€™s reserves.

Yet while the U.S. dollar has decreased in share of foreign reserves, it still has an immense influence in the world economy.

The majority of trade is invoiced in the U.S. dollar globally, a trend that has stayed fairly consistent over many decades. Between 1999-2019, 74% of trade in Asia was invoiced in dollars and in the Americas, it made up 96% of all invoicing.

Furthermore, almost 90% of foreign exchange transactions involve the U.S. dollar thanks to its liquidity.

However, countries are increasingly finding alternative options than the dollar. Today, Western businesses have begun settling trade with China in renminbi. Looking further ahead, digital currencies could provide options that donโ€™t include the U.S. dollar.

Even more so, if the U.S. share of global GDP continues to shrink, the shift to a multipolar system could progress over this century.

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