Country Risk : Social and Political Dynamics

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[...] Country Risk: Social and Political Dynamics Social and Political Risks: Context and Definition Despite their effects on growth and macroeconomic equilibria, social and political crises have been introduced only recently into country risk analysis. Recent crises (Syria, Arab springs, Sahel civil war) put forward those issues and highlighted the gaps in current methods. Definition: the analysis of social and political risk aims to assess, based on structural elements, the probability of occurrence of social and political unrest, and their consequences for economic agents. [...]

[...] There is no standard a priori definition of social and political unrest: Social and political unrest are situations where diverging group interests are revealed leading to the destabilization of the country. They can take various forms: social or armed conflicts; civil or international conflicts. The various types of unrest may be classified according to their intensity, war being the strongest one. Unrest may be geographically delimited, or generalized to the whole country Conflicts may be more or less violent (death and wounded toll) and/or devastating (infrastructure). Explaining Unrest What are structural vulnerabilities? [...]

[...] Measuring a Society's Vulnerability Which indicators to use? How often did the government change? (Too often and too little are a worrying signal.) Where ethnic and religious fractionalization is high, conflicts occur more easily Where poverty and inequality are high, conflicts occur more likely Poverty indicators: Absolute poverty (lack of one or more basic needs over a period long enough that it endangers life) Relative poverty (covers vital and biological needs such as food, water, clothing, basic housing, and a minimum of sanitation) Poverty headcount (proportion of the population that is poor, it does not indicate how poor the poor are) Poverty gap (ratio of average shortfall of the population from the poverty line, the minimum level of income required to secure the basic necessities for survival = $1.90 per day) Income inequality is a useful indicator to provide a picture of how income is distributed in a country. [...]

[...] Persisting economic, political and social characteristics encouraging the emergence of social-political unrest. Three types of structural vulnerabilities: political; social/economic and demographic; historical and geographical Triggering factors: Recent economic, political or social events or evolution are more or less hard to forecast; they may change the underlying tensions into socio-political unrest. These factors can trigger a break in the "social compromise", or a reshuffle in power relations which maintained a `seemingly stable' system. Cyber attacks, social media events are likely to make societies more prone to shock amplification A few of these triggering factors may be anticipated (such as elections, economic or constitutional reforms), but most cannot (murders, coups, symbolic events, economic shocks) Example: On Dec 26-year-old university graduate Mohamed Bouazizi committed suicide by setting fire to himself in Sidi Bouzid. [...]