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Reshaping Global Trade

Reshaping Global Trade

The rapid and continuing spread of novel coronavirus (Covid-19) continues to have a significant social impact as well as a profound hit to the global economy.  At the time of the World Health Organization’s (WHO) declaration of a global pandemic on March 11, 2020, the human toll of the disease stood at over 121,000 reported cases and 4,373 deaths spanning 110 countries.

These numbers are increasing, and the social and economic fallout continues.  Stock market declines in major economies reflect growing difficulty doing business and investor uncertainty about the near future.  Stock markets in the US fell nearly 10% on average on March 12 alone, with European stock markets falling well over 10% on the same day.

It is now obvious that no industry or economic sector will be spared by the impact of the virus.  Notable declines in tourism and airline industries are reverberating across supply chains.  Airline losses are estimated to be near $113 billion with governments mulling an economic stimulus for that industry.

Accordingly, trade flows are down, initially owing to the heavy toll of the virus on Chinese and other Asian manufacturing hubs, but also due to slowing consumer confidence and store closures worldwide.  Initial layoffs in the Port of Los Angeles, the first in the US directly owing to the crisis, have begun while both manufacturing and construction industries are trying to postpone difficult measures.

As businesses close, events are cancelled, and employees are told to stay at home in impacted countries, not only has the now pandemic cause a global downturn, but it’s unclear how long it will last and if it will lead to a recession.  Only recently, Goldman Sachs predicted that the US economy would grow only 0.9% in the first quarter and would not grow at all in the second quarter of 2020.

While the length and severity of the pandemic remains unknown, a fair follow-on consideration is how the global economy will prepare itself for the next crisis, and what the long-term impact will be on global trade flows.

The pandemic has shed a light on rising pre-crisis corporate debt.  Concerns for vulnerably indebted companies and sectors and helped to spur central banks around the world to drop interest rates recently.  Additionally, companies with too much supply chain exposure in China are likely to pursue efforts to diversify their supply chains, likely to other Asian locations or to North America.

As of March 3, 2020, Chinese companies had issued over 4,800 force majeure certificates, stating their inability to meet their contractual obligations with clients.

The need for companies to diversify their supply chain exposure and conduct systematic risk analysis is becoming more and more apparent.  Will there be a shift, and will it help US manufacturers and exporters? As always, the interconnectedness of the global economy makes it difficult to gauge.

While US importers may look to diversify away from China, US exporters to China will no doubt suffer.  Already, some analysts think that China will not be able to meet its obligations to increase purchases of US exports.  It’s possible that North American manufacturers, with a new free trade agreement in place, could present a viable competitor to overseas supply chains that look increasingly risky, post-coronavirus.

Risk is the operative word and what this unfolding pandemic has shown is that preparation and risk assessment are crucial for companies in today’s economy.  A major part of this effort should include proper insurance coverage for a wide range of contingencies.

Securitas Global Risk Solutions (“Securitas”) is an expert in helping companies develop trade credit and political risk transfer solutions that protect businesses from buyer non-payment and geo-political risks.  As a specialty independent brokerage, Securitas is focused on developing comprehensive solutions that meet the needs of their client.

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Is Global Trade in Quarantine?

Is Global Trade in Quarantine?

The outbreak and spread of the Coronavirus disease (COVID-19) has stoked global fear of a pandemic.  Disruptions to business in China and other affected countries are rising as are worldwide disruptions to travel and trade as countries scramble to put safeguards in place to stem the spread of the virus.

For companies with overseas operations and business, this latest public health crisis underscores the importance of planning for the unexpected, including an annual comprehensive assessment to properly mitigate the risk of doing business overseas where situations can change quite rapidly.

Like earlier epidemics such as SARS in 2002-2003 and the Ebola outbreak of 2014-2016, efforts to contain transmissions involve a range of decisions to quarantine the sick and minimize human-to-human contact.  This proves particularly difficult in a global economy in which the flow of goods and people are both commonplace and vital, even in areas of the world seen as remote or rural.  Outbreaks raise public concerns and even outright fear in both nearby countries and worldwide, and can lead to political decisions in non-crisis countries to suspend travel or block the transport of some or all goods.  These actions are often sudden and unforeseen, with reaching consequences for complex supply chains.

Stories of the economic impact of Coronavirus are developing.  At present, the disease remains mostly centered in China and that country is expected to see the most drastic economic impact.  Already analysts are predicting both a significant first-quarter economic slowdown and an overall GDP decline for 2020 as many businesses remain closed or people remain at home, especially in the auto-manufacturing hub of Wuhan at the center of the crisis.  With China’s economy already cooling, (GDP fell to 6.1% in 2019 from 6.6% in 2018) it remains to be seen what the impact will be on China’s export-driven growth, particularly electronics exports or its $280 billion per year textile exports.

Companies doing business in China are in a scramble to adjust their operations and specific industries are noting shocks.  American exporters of agricultural products and machinery are already feeling the effects of the slowdown, as China struggles to keep food supply chains open in the face of quarantines and declining consumption.  West Coast port traffic is already reporting a significant decline in traffic. Other notable examples include the cruise ship industry and tourism in general, beset by virus outbreaks on ships and growing travel restrictions. In addition, the luxury goods industry, which enjoys popularity among wealthier Chinese consumers and tourists, is projecting a $40 billion decline in sales in 2020.

The Coronavirus outbreak highlights the need for international companies to engage in a range of contingency planning to anticipate how to adapt business operations in the face of risks such as public health crises, natural disasters, energy shortages, slow or broken lines of communication and political risk.  An entire field of business continuity planning encourages companies to regularly assess operational and financial risk by actively planning and developing working contingency plans.  Proper insurance coverage, just one aspect of this, is crucial so that cash flows and financial obligations can be protected, even in the case of unforeseen breaks in trade.

Since 2004, Securitas Global Risk Solutions (“Securitas”) has helped clients across the United States develop trade credit and political risk transfer solutions that protect businesses from buyer non-payment and geo-political risks.  As a specialty independent brokerage, Securitas is focused on developing comprehensive solutions that meet the needs of their client.

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Officially Launched: U.S. International Development Finance Corporation (DFC)

Officially Launched: U.S. International Development Finance Corporation (DFC)

U.S. International Development Finance Corporation Launches

The end-of-the-year appropriations deal struck by Congress and the Trump Administration brought a number of policy changes offering significant opportunities for U.S. export and investment growth overseas.

A new agency, the U.S. International Development Finance Corporation (called the DFC) began operations on January 2, 2020.  Created by the BUILD Act of 2018, the DFC begins its first year in operation having secured a working $299 million budget for 2020.

Along with the recent seven-year reauthorization of the EXIM Bank, the DFC represents a significant step by the United States in asserting a larger and more capable role in international trade and investment.

What Is the DFC?

The International Development Finance Corporation is a merger of the former Overseas Private Investment Corporation (OPIC) and the Development Credit Authority, formerly housed in the U.S. Agency for International Development, the DFC represents an effort to streamline and bolster American support for private-sector projects in low and lower-to-middle-income countries.

In emerging markets, the role of state-run and multilateral Development Financial Institutions (DFIs) are growing, raising calls for the U.S. to adapt and expand its efforts, while also countering the increasing economic role of China.  While China puts billions into emerging market projects, mainly in infrastructure development, its private-sector development finance role is emerging.  

EXIM Shipping Containers Miami Port

The DFC Brings New Changes

The DFC significantly expands the capacity of the U.S. government to support private-sector-led development projects.  The DFC now has a $60 billion investment cap, up from OPIC’s $29 billion cap.  But unlike OPIC, the DFC has a more explicit mandate to focus on low- and middle-income countries (though waivers can be obtained for high and middle-income country projects that meet U.S. national interest, or that specifically focus on poor and vulnerable populations.)

In addition to adopting OPIC’s debt financing and political risk insurance portfolios, the DFC is now able to fund project feasibility studies and technical assistance grants and can lend in local currency to hedge against currency risk.  The most notable change, however, is the DFC’s new capacity to take an equity stake in investments (Congress approved $150 million for 2020) allowing it to play a stronger role in projects chosen for financing.

The DFC will be allowed to take up to 30% position in any project.  The DFC will also adhere to OPIC’s lending standards for social and environmental risk and impact.  While OPIC was formerly tasked to work with companies that were either U.S. based or included a U.S. partner, the DFC has only a mandate to prioritize U.S. companies. 

Concerns raised since the passage of the BUILD Act in 2018 about the amount allocated for DFC equity investments (considered low), accounting rules about the budgetary treatment of equity investments, and a prohibition on the DFC’s use fees to offset its operating expenses were not addressed in the time between the passage of the BUILD Act and launch of the DFC, but are expected to be raised in the future by congressional supporters of the new agency.

For more information about the DFC, see https://www.dfc.gov/

About Securitas Global Risk Solutions

Since 2004, Securitas Global Risk Solutions (“Securitas”) has helped clients across the United States develop solutions to mitigate credit and investment risk across the world.  As a specialty insurance broker focused on developing trade credit and political risk insurance programs, Securitas is focused on developing solutions that meet the needs their clients.  See our Website at https://www.securitasglobal.com/ for more information, or contact us at:

Telephone: 484-595-0100

Fax: 484-582-0111

 

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Guide to Political Risk Insurance

Guide to Political Risk Insurance

New and emerging markets offer incredible opportunities for investors and corporations – however, not without risk. Political and economic instability in these markets can pose a significant threat to businesses and can lead to catastrophic losses for investors and lenders.

What Is Political Risk?

Political Risk, also known as “geopolitical risk,” is the risk of loss of assets, income, or property suffered by corporations, lenders, or investors as a result of political changes or instability in a country.  Political risk is present with physical assets located in a host country and when trading with a foreign buyer or a sovereign owned enterprise. 

Political risks can drastically impact a company’s investment in a host country.  Foreign government intervention or political violence can render a company unable to operate or withdraw their capital from a host country.

What are the Common Types of Political Risk?

The most common types of political risk are government confiscation, expropriation, nationalization (CEN); currency inconvertibility (CI) and political violence (PV). 

1. Government Confiscation, Expropriation or Nationalization (CEN): Foreign government action involving seizure or confiscation of assets, forced divestiture or forced transfer of ownership of assets, or policies (such as regulatory requirements or tax laws) enacted to hinder a firm’s business operations in such a way as to have the effect of expropriation, all fall under this heading. Often done by governments to shore up domestic political popularity, increase government revenue, or exert control over a critical economic sector, expropriation usually contravenes international agreements and causes a firm to lose its ability to operate its overseas investments or assets.

2. Currency Inconvertibility: This includes the imposition of restrictions on conversion of local currency revenues to major currencies (such as US Dollars or Euros), or capital controls, which prevent remission of earnings from an affected country. Currency controls are enacted by foreign governments or their central banks often in response to a rapidly accelerating currency crisis or a sudden change in government or economic policy and have the effect of forcing a firm to limit or end its overseas operations.

3. Political Violence: Civil strife such as rioting, violent protests, terrorism, and war are all forms of politically-motivated violence that can either cause the physical destruction of a firm’s assets or the creation of a situation in which business operations are curtailed or impossible.

How to Protect Against Political Risk

Staying engaged and aware of political events and trends in a country or region is important when doing business internationally.  Working with trusted sources of information both domestically and internationally is important to assessing risk and developing strong procedures well before a crisis develops.  Professional risk analysts as well as local sources of information such as business partners can be valuable sources of information. 

Other suggestions to prepare for political risk include:

1. Understand Your Supply Chain: Supply chains are complex and a firm’s international operations and those of business suppliers can be impacted by political crises in nearby countries or even locations far beyond a specific place of business. Think about possible bottlenecks.  Having backup or contingency plans in the case of supply chain disruptions can help mitigate losses or disruptions due to unforeseen events.

2. Know the Decision-Makers: Having partners with a strong economic profile in host country of foreign operations and hiring local employees may reduce your exposure to political risk.  A relationship with local bank or an international or regional bank with local operations may help to hedge against political risk.  Local banking may facilitate foreign exchange conversions and transfers.  Additionally, local banks may be familiar with options to shield some of your assets in the case of a crisis or alert you to political trends in the financial sector that could impact your investment and business operations.

3. Understand Your Credit Risk: An important consideration is that a country’s political and economic difficulties may have implications on credit.  Often political crisis can cause spark a series of events leading to a steep and protracted currency devaluation which leads to buyer payment default. Having a credit risk contingency plan, including a trade credit insurance policy, is another aspect of overall political risk planning to consider.

4. Consider Political Risk Insurance: Political risk insurance is an important part of any risk protection strategy.  Protection against risks noted above such as expropriation, violent conflict, political unrest, and currency controls protects your business, investors, and other stakeholders and allows your company to more confidently conduct international business.  With a strong political risk policy in place, companies can be more focused on their growth strategies in specific countries and in the short-to-long term, particularly in emerging markets or developing economies. 

Protest on the Streets Aerial ViewPhoto by Oscar Chan from Pexels

What Does Political Risk Insurance Cover?

There are many political factors that are outside the control for a foreign investor which could cause a loss.  A political risk policy typically includes but is not limited to:

1. War and Political Violence or (“PV”)

2. Confiscation, Expropriation and Nationalization or (CEN)

3. Deprivation of Capital

4. Embargo

5. License Cancellations

6. Currency inconvertibility / Non-Transfer

7. Forced Divestiture

8. Contract Frustration / Non-Honoring

9. Unfair and Fair Calling of Bonds

Who Uses Political Risk Insurance?

Corporations, lenders, and investors with physical (fixed/mobile) assets, contracts, investments and international operations in emerging markets. Some typical clients include:

1. Corporations and corporate investors with ownership of overseas financial assets, or international business operations such as joint ventures or subsidiaries that are exposed to financial risk from government policies.

2. Corporations or investors that own overseas physical assets that are exposed to property damage from political violence.

3. Financial Institutions that finance trade transactions, international projects, or other international exposure that is potentially threatened by political risks.

4. Importers and Exporters that have agreements with either private companies, foreign governments, or state-owned enterprises and are exposed to risks to trade flows from political factors.

5. Contractors, developers, and other service providers that do business with foreign governments or state-owned enterprises.

6. Companies in sectors such as mining, engineering, construction, and other services, where both contractual obligations may be threatened by political risks or actual physical assets are at risk of being damaged, expropriated, or become inaccessible due to political factors

How Do I Get Political Risk Insurance?

A political risk insurance broker can assist in developing a policy that meets the specific needs of your business and addresses a country’s political risk in a comprehensive way.  A broker can assist in explaining many of the definitions and details of a political risk insurance policy and help you to identify areas of risk you may not have previously considered.

Why Use Securitas Global Risk Solutions?

Since 2004, Securitas Global Risk Solutions (“Securitas”) has helped clients across the United States develop credit and political risk transfer solutions that provides value on several levels.  As a specialty independent trade credit and political risk insurance broker, Securitas is focused on developing comprehensive solutions that meet the needs of their clients, ensures complete understanding of policy wording and delivers responsive excellent customer service.

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The Tax Break Exporters Need to Know About

The Tax Break Exporters Need to Know About

Utilizing An IC-DISC to Unlock Greater Export Revenue

Firms exporting overseas may be unaware of an incentive in the U.S. tax code that can noticeably reduce tax liability and free up more revenue.  An Interest Charge-Domestic International Sales Corporation (IC-DISC) is a provision that allows some or all of taxable income relative to export sales to be taxed at a lower rate.  Since the early 1970s, U.S. tax law has allowed DISCs to exist in some form as an incentive for U.S. companies export products overseas or expand their export operations. 

Our Guide to IC-DISC is a free resource that explains everything you need to know about using an IC-DISC to improve your cash flow.

How Does an IC-DISC Work?

An IC-DISC works by reducing an exporters tax liability by allowing some or all taxable export income to be taxed at a lower rate as a qualified dividend, rather than as ordinary income. 

While a company carries out all of its export operations as usual, an IC-DISC is an intermediary company    that serves as a sales commission agent for the exporter.  An IC-DISC is a separate legal entity, and firms seeking to create an IC-DISC must obtain approval from the IRS and must also maintain separate financial operations for the IC-DISC such as bank accounts, accounting structures, and tax reporting.

An IC-DISC is particularly attractive for small-to-medium sized U.S. based exporters, who struggle with tight margins and a highly competitive overseas environment.  The extra cash flow generated by an IC-DISC can be a valuable tool to increase profits and improve overall business operations.

Understanding the IC-DISC Infographic

Case Study: COMPANY X Easily Creates an IC-DISC to Improve Business

Company X, a small professional services firm delivering services both domestically and overseas, set up and IC-DISC in 2014.  Working with a certified public accountant, Company X determined which of its 2013 export revenues would qualify as export gross receipts under Internal Revenue Code 199.  

Structured with an S Corporation shareholder, Company X and its CPA confirmed its qualifications and its tax benefit calculations – which rest on the difference between the qualified dividend tax rate on the annual dividend versus the ordinary tax rate of the shareholder on the annual commission payment.       

Company X formed the new corporate entity in Delaware to act as its registered agent and the new company elected to be treated as an IC-DISC under IRS 4876-A (Election To Be Treated as an Interest Charge DISC.)  The new IC-DISC opened a bank account with $2,500 and established a legal Commissions Agreement between it and Company X.  Set-up costs incurred were under $1,500.

Annually, Company X determines which sales qualify as export sales and uses a simplified 4% method to calculate income.  The IC-DISC exists using journal entries with its own set of accounting records and files an annual federal tax return and a Delaware franchise tax return.  Annual costs incurred are under $1000.  Company X finds that the process to set up and maintain an IC-DISC are not complicated or burdensome for a small business.

What Are the Benefits of an IC-DISC?

For example, if an S corporation company similar to Company X above earns $2 million in net taxable international income and pays a commission of 50% or $1 million of that amount to an IC-DISC, it reduces its reported taxable income by that amount. 

The company’s shareholders report this income (now reduced to $1 million from $2 million) on their individual tax returns.  Assuming the shareholders are in the top tax bracket – and taxed at 29.6% (the top rate of 37% multiplied by 80%*) – the commission to the IC-DISC resulted in a total federal tax reduction of $296,000 for the shareholders.

The $1 million commission paid to the IC-DISC is taxed to the IC-DISC’s owners – when paid or deemed paid – as a qualified dividend at the 23.8% rate, resulting in a tax of $238,000.  The difference between paying ordinary income tax rate (29.6% noted above) on $1 million and the qualified dividend rate for the IC-DISC results in a tax savings of $58,000.

*This 80% assumes the full benefit for pass-through entities of the newly enacted 20% Qualified Business Income Tax deduction (see Internal Revenue Code Section 199A)

How to Start Using an IC-DISC

Nearly any firm that exports overseas may qualify for an IC-DISC.  Manufactured products as well as agricultural and horticultural products qualify.  Software and professional services such as engineering and architectural designs are also covered.  A firm that manufactures a good that is included in a product that is subsequently exported can also qualify.

As with any tax incentive, a number of legal details have to be considered.  Eligibility requirements mainly include (but are not limited to): companies must be privately owned; exported products must contain at least 50 percent U.S. content (based on total market value); and a company must directly or indirectly export more than $3 million annually. 

To determine if your company is eligible and for more details on utilizing an IC-DISC, a number of sources exist.  The EXIM Bank has resources such as briefing pages and Webinars, and can provide lists of experts than can help a company get the ball rolling on an IC-DISC strategy.  

Tax regulations and registration requirements are subject to change, so a consultation with a CPA or tax attorney with experience in IC-DISCs is strongly suggested.  Securitas works with business advisors such as the teams at Kreischer Miller and Baker Tilly, who can provide clients with more detailed information on IC-DISCs and their benefits.

In addition to offering comprehensive export credit insurance solutions, the team at Securitas can also put new clients in touch with current and former clients who have utilized an IC-DISC to their advantage. 

Cover to the Guide to IC-DISCGet Your Money-Saving Guide to the IC-Disc

Why Securitas?

As an insurance broker rather than an insurance agent, Securitas Global Risk Solutions is able to apply to multiple carriers to find the best contract, with the most coverage, for the least cost. A carrier’s agent can only advise you as to that carrier’s specific contract. We have a team of experts who are available to you 24/7 to answer any questions or concerns. Additionally, our service comes at no charge to you.

Top 5 Geopolitical Events Impacting Global Trade Credit and Cross-border Investments

Top 5 Geopolitical Events Impacting Global Trade Credit and Cross-border Investments

Top Five Areas of Geopolitical Risk

Assessing country or regional risk is a crucial part of a trade risk strategy and is necessary for conducting international trade.  Understanding laws, customs, and regulations of any country are paramount but it’s also prudent to anticipate how external factors such as your buyer’s creditworthiness, conflict, violence, or other political/economic uncertainty can impact trade or cross-border investments.

Risk insurance provides US exporters with protection against buyer non-payment as well as cross-border investments against political risk such as confiscation, expropriation, nationalization, forced abandonment or political violence. Trade credit and political risk insurance is a specialty risk transfer solution that helps US companies on many levels when trading and operating in the global economy.

For companies seeking to begin or expand their overseas operations, exporting remains a great opportunity to generate growth, but there are always risks.  Right now, here are five major risk areas/issues that impact global trade:

1. China

Vehicle on Street in Between High-rise Buildings With Stores on the Bottom

The ongoing trade dispute between the U.S. and China has garnered the attention of world markets and taken a sort of on-again, off-again nature.  After over a year of negotiations, a trade deal between the two countries seemed to be closer to reality after a meeting between President Trump and Chinese Premier Xi Jinping in December 2018 (in which a 90-day deadline for an agreement was agreed upon). While that deadline has come and gone, the trade war has again ratcheted up along with raised concerns of overall global trade risk.  The Trump Administration announced an intention to place a new set of tariffs on August 2, 2019 which again roiled global markets but also led to China retaliating by devaluing its currency on August 5.  In the most recent salvo, the U.S. has labeled China a currency manipulator.  It remains unclear whether this new round of back-and-forth will delay the anticipated trade agreement, which is likely to include language as well as specific targets for increased U.S. exports to China.

While a recent economic report appears to show that China is weathering the impact of the trade war, second quarter numbers from China showed that overall growth slowed, the slowest rate of growth since 1992.  While the trade war has notably hurt a number of U.S. exporters, such as soybean producers, slowing domestic demand in China also presents a concern for potential U.S. exporters.

Added uncertainty in China relates to growing protests in Hong Kong.  Initial protests over a bill to allow suspects in Hong Kong to be tried in courts in mainland China have now spiraled into their fourth month with protests growing larger, more aggressive, and taking on a more broadly pro-democracy tone.  While worries of a heavy-handed crackdown are present, it remains unclear how or when the protests  will end in what is a vital trade and business hub for the Chinese economy. 

2. Brexit

Blue and Yellow Round Star Print Textile

While the UK’s referendum on leaving the European Union was over three years ago, the details of translating the narrow victory of “Leave” voters into a workable political and economic agreement has been agonizing.  While new Prime Minister Boris Johnson has pledged that the UK will leave the EU “do or die” on the new deadline of October 31, 2019, his narrow one-vote majority in the British Commons leaves him, like his predecessor Theresa May, little room to maneuver.

Significant concerns over the economic and social impact of Brexit, as well as its impact on the hard-won peace in Northern Ireland has UK politics split 3-ways with no consensus – between those who want to an immediate or “hard” Brexit regardless of consequences, those who want to remain in the EU, and those who want a negotiated, gradual exit from the EU that avoids a hard border between Ireland and Northern Ireland.  These divisions internally divide both UK’s two main parties, Labour and Conservative, with only the smaller Liberal Democrats being fully committed to remaining in the EU.

U.S. and UK trade negotiators have met to discuss a possible post Brexit free trade agreement that could hold a number of opportunities and risks for U.S. exporters.

3. The Middle East

While hardening battle fronts and shifting alliances have the Syrian civil war in a current stalemate, the rivalry between Iran and Saudi Arabia is center stage, with the two in proxy conflict both in Syria and in the ongoing civil war in Yemen.  U.S. – Iran tensions have again raised tensions in the Persian Gulf with Iran taking a more aggressive stance toward U.S. and British economic interests.  The United States’ NATO ally Turkey adds another element to the overall regional turmoil, with the two countries at odds over Turkey’s purchase of military hardware from Russia and its antipathy to U.S.-backed Kurds in both Syria and Iraq.

In North Africa, Egypt’s economic growth is notable (5.6% annual GDP growth in July 2019).  The country enacted several IMF-backed economic reforms in recently years and labelled itself a “global investment destination” as part of the effort in 2018.  However, there is uncertainty as to the long-term sustainability of the reforms, with a recent report noting that poverty actually increased since 2015.  The country’s ability to help extend economic growth more broadly is key to reducing uncertainly among investors.

Tunisia, the lone success story of the Arab Spring, recently lost its 92-year-old President Beji Caid Essebsi after a long illness.  Caid Essebsi, elected president in 2014 after fall of the Ben Ali dictatorship, was the country’s first directly elected head of state.  His willingness to broker compromise played a central role in guiding Tunisia’s democratic transition and the country’s ability to democratically replace the deceased leader will again test the strength of its political institutions.  The long-time president of neighboring Algeria, Abdelaziz Bouteflika resigned on April 2, 2019 after a wave of protests.  While the country’s military has taken over the role of stewarding the country’s government, the end of Bouteflika’s notably corrupt 20 year rule has raised expectations among Algerians for possible political and economic reform.

4. Latin America

Africa Map Illustration

The issue of migration and its impact on relations between the United States, Mexico, and the countries of Central America has come to dominate political dialogue and rhetoric.  For the U.S. and Mexico, the border issues have somewhat obscured progress toward a new continental free trade agreement called the United States Mexico Canada Agreement or USMCA.  Mexico, which has become the United States’ largest trading partner, ratified the new deal in June 2019.  A more difficult ratification fight is expected in the United States Congress.  (For more information about the USMCA, see here.)

South America’s large economies, Brazil and Argentina continue to be mired in decline.  Brazil’s downturn, which began in 2016, has not improved under a new government.  Economists anticipate positive economic growth not until 2020 at the earliest.  In Argentina, a mid-2018 currency slide, economic recession and high inflation continues and is likely to result in the country electing a new, more populist government.  At stake are a number of difficult economic policies seen as necessary to pull Argentina out of “perennial volatility.”

Venezuela’s economy continues to bump along the bottom in a what one analyst calls a “perverse equilibrium,” with no resolution in sight for the country’s political impasse.  In the meantime, a growing humanitarian crisis has led to a boom in outward migration, as many Venezuelans seek to flee what appears to be an unending cycle of hardship.

5. Russia

Multicolored Church

U.S. – Russia relations are at a low point, with the two countries in protracted disagreement over Ukraine and Turkey (see Middle East above) to say nothing of proven Russia’s efforts to disrupt U.S. elections or both countries recent exit from the 1987 Intermediate-Range Nuclear Forces (INF) Treaty.  Sabre rattling and regular efforts at deflection from the Russia government draw attention away from the fact that Russia’s economy is stalled with 0.4% economic growth between 2014 and 2018.  Rising political protests in the country have drawn notice and speculation about the rising impact of economic stagnation on the seemingly air-tight political regime of Vladimir Putin.

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Why Securitas?

As an insurance broker rather than an insurance agent, Securitas Global Risk Solutions is able to apply to multiple carriers to find the best contract, with the most coverage, for the least cost. A carrier’s agent can only advise you as to that carrier’s specific contract. We have a team of experts who are available to you 24/7 to answer any questions or concerns. Additionally, our service comes at no charge to you.