SACE : 2016 Risk Map: risk returns to emerging markets

SACE has published its 2016 Risk Map presenting the status of risks for exporters and investors in 'Focus On 2016 Risk Map: The Old Normal Is Back in a Less-level World'.

The picture painted by the 2016 Risk Map is one of a more volatile, risky world, characterized by lower commodity prices, rising debt in the emerging countries, and growing political violence: these three factors have a particular impact on the emerging markets, widening the gap with the advanced economies for the first time since the global crisis.

A new era for global risk | The emerging markets no longer an 'Eldorado'

The level of risk in the advanced countries improved slightly in the past year (SACE index: -1 point), opposed to a significant increase in the major emerging countries (+ 4 points), with marked peaks in some of Italy's key trading partners such as Brazil (+10), Russia (+9) and, to a lesser extent, Turkey (+3).

'2016 will mark the end of the BRICS era and the concept of emerging economies as an Eldorado,' explains Roberta Marracino, manager the SACE Research and Communication Area -. 'The world will be less level, with significant differences within the individual geographical areas and a return to the market context pre-2007 but with greater complexity and volatility: we have named this the 'New Old Normal''.

Increasing Risk | Three trends to monitor

According to SACE, there are three trends that will influence risk and opportunity in 2016.

Low commodity prices. All commodities lost value in 2015 (42 out of 46 reached their lowest values in the past 30 years): this is a transverse phenomenon that can hardly be sustained medium/long-term for those commodity-dependent emerging markets with little diversification. Examples are Algeria (+12), Angola (+10) and Venezuela (+7).

The impact of commodity prices on risk: the countries most exposed

Countries	Depedence on commodities (share of total exports 2012-13)	SACE 2016 credit risk index	Change (vs 2015)
1. Algeria	100%	59	+12
2. Angola	99%	75	+10
3. Mongolia	97%	88	+9
4. Venezuela	85%	91	+7
5. Zambia	85%	69	-1

Rising debt. The debt position in the emerging countries has worsened, with an increase in both public debt (from 150% of GDP in 2009 to 195% today) and corporate debt (increased fivefold in ten years, due to the favorable conditions in the international capital markets). Redeeming this debt has become more onerous with a risk to sustainability because of the decline in commodity prices, the increase in Fed rates, and the depreciation of local currencies, affecting even the more solid markets like Turkey (+3) and Malaysia (+1).

The impact of increasing debt on risk: the countries most exposed

Countries	Foreign debt/GDP	2016 SACE credit risk index	Change (vs 2015)
1. Mongolia	120%	88	+9
2. Ghana	52%	71	+7
3. Turkey	55%	55	+3
4. Malaysia	63%	32	+1
5. Qatar	88%	26	0

Growing political violence. 2015 brought a rising role of terrorism as a source of geopolitical instability and not just individual events of risk ('tail risk'). The repercussions of terrorism have a net cost for the global economy of 4 billion dollars, according to estimates of the Institute For Economics & Peace, and are compromising operations in several countries, such as Yemen (+12), Libya (+12) and Syria (+5). The case of Brazil is different: from much lower risk levels, it has undergone a rapid deterioration (+6) in a context of serious economic and political problems.

The impact of risk of political violence, expropriation and currency transfer: the worst performers

Countries	2016 SACE political risk index	Change (vs 2015)
1. Yemen	96	+12
2. Libya	93	+12
3. Nigeria	75	+6
4. Brazil	47	+6
5. Syria	98	+5

Exporting in a more volatile world | Costs and opportunities

According to SACE estimates, this increased risk resulted in a € 5 billion loss of exports last year, but € 31 billion could be recovered in the next four by focusing strategically on a basket of high-potential markets: Algeria, Chile, China, United Arab Emirates, Philippines, India, Iran, Kenya, Malaysia, Morocco, Mexico, Peru, Poland, Spain and Turkey.

No longer a short-list of Eldorados but a large set of countries with major opportunities but with some risks, which may be successfully and profitably approached utilizing accurate information, specific coverage, and a strategic approach.

'Rather than thinking in terms of categories, companies will have to highly discerning to seize markets of opportunity,' Roberta Marracino concluded.. 'In a world where zero-risk no longer exists, the ability to select opportunities and protect against the related risks with appropriate instruments and coverage is no longer an option.'

Discover the 2016 Risk Map >>

Download the new SACE app that will give you instant access to a simple, interactive world map indicating the risks and best export opportunities for our companies.