Control Risks' RiskMap Report 2014 explores global risks

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RISKMAP REPORT
2014
Control Risks is delighted to launch RiskMap 2014, our
authoritative guide to business risk in the year ahead. Drawing
upon expertise from across our organisation worldwide, we
forecast the major challenges and opportunities of doing
business in the world’s most complex environments next year.
Any publication entitled ‘RiskMap’ is inevitably going to focus
on risk, and as we look ahead we see no shortage of traps to
snare the unwary. But we also see an abundance of opportunity
delivered in part by the most extraordinary advances in living
standards and public health. With the media headlines as ever
dominated by risk and peril, that is well worth remembering.
– Richard Fenning, CEO, Control Risks

The rising expectations
of a growing consumer
class will challenge
governments and bring
new risks to business.
Page 19
Changing economic
realities in 2014 will
expose the divide
between financially
needy countries and
their more pragmatic
counterparts.
Page 37
01
AFRICA
02
AMERICAS
A prime location
and sizeable
natural gas
reserves will drive
growing investor
interest in 2014.
Page 31
An end to the
civil conflict will
shape an election
year that will spell
continuity for
business.
Page 47
SPOTLIGHT ON:
TANZANIA
SPOTLIGHT ON:
COLOMBIA
The ever more complex
structures of global
businesses are facing
increasingly localised risks,
bringing new challenges and
vulnerabilities.
Page 1
As the hangover from the
global financial crisis fades,
risk will seem more attractive
than ever.
Page 7
THE MOUSE THAT
ROARS
HOW LOCAL ISSUES
ACCELERATE INTO
MAJOR PROBLEMS
THE CHANGING GLOBAL
ORDER: THE WORLD
IN 2014

Cooling growth
will elicit varying
responses: some
governments will
rise to the challenge,
others will not.
Page 51
After a difficult 2013 for
Europe’s economies,
2014 will see, at best,
a fragile recovery.
Page 67
Transition states face
a busy election year,
while a breakthrough
on Iran remains unlikely.
Page 81
03
ASIA-PACIFIC
04
EUROPE
The messy
outcome of the
2014 elections
will dash investor
hopes of a return
to high growth.
Page 63
Events in 2014
will show
whether Turkey
is on the path to
modernisation or
is slipping towards
authoritarianism.
Page 77
The successful
reworking of
Dubai’s economic
model will lay
the foundations
for sustainable
growth in 2014.
Page 93
SPOTLIGHT ON:
INDIA
SPOTLIGHT ON:
TURKEY
SPOTLIGHT ON:
UNITED ARAB
EMIRATES
MIDDLE EAST AND
NORTH AFRICA
05
RISK RATING
FORECAST 2014
Page 105
KIDNAP
OVERVIEW
Page 103
PIRACY
OVERVIEW
Page 101
TERRORISM
OUTLOOK
Page 99

Photographs taken by
Control Risks’ employees

RiskMap Report 2014
THE MOUSE THAT ROARS
2
When 32 heavily armed terrorists entered the remote In Amenas
gas plant in Algeria in the early hours of 16 January 2013, more than
130 foreign workers from nearly 30 countries were on site, representing
a multitude of operators, contractors and sub-contractors drawn from
nearly 50 companies based around the world.
As events unfolded, my colleagues
assisted companies on four
continents and speaking six
languages, helping to co-ordinate a
multinational response to the crisis.
The attack was also vividly and at
times tragically recorded through
social media as hundreds of workers
hiding in the plant were able to relay
events direct to their families and
loved ones around the world in real
time. Despite its remoteness, the In
Amenas attack was inherently a
global incident, affecting people,
organisations, markets and
perceptions worldwide.
The number of different nationalities
caught up in the In Amenas attack
surprised many. But the geographic
diversity of the workforce and its
employment by companies ranging
from major multinationals to small
suppliers were not unusual in our
globalised world. The oil and gas
industry, often in the vanguard of
international operations, has long
embodied a complex kaleidoscope of
inter-connecting contractual
relationships. Major oil and gas
projects bundle their skills and
technologies like Rubik’s Cubes,
forming and re-forming into
bewildering combinations to suit the
specific needs of individual projects.
Other sectors have adapted this flexible
model and – as we mentioned in last
year’s RiskMap – hardly any countries
are now off-limits to shape-shifting
multinational companies.
Companies increasingly need to
pursue elaborate, interlocking
operational structures to grasp the
opportunities on offer in a near-global
marketplace. For instance, I am writing
this having just left a meeting with a
senior executive of a Japanese
conglomerate that has a major stake
in a US-listed Latin American mining
company, which is investing billions of
dollars in southern Africa with Russian
and Indian co-investors to sell to
Chinese customers. And this is a
relatively straightforward proposition
compared with some of the byzantine
structures we encounter.
BY RICHARD FENNING
CHIEF EXECUTIVE OFFICER
CONTROL RISKS
HOW LOCAL ISSUES ACCELERATE INTO MAJOR PROBLEMS
Companies increasingly
need to pursue
elaborate, interlocking
operational structures to
grasp the opportunities
on offer in a near-global
marketplace.

RiskMap Report 2014
3
Organisations clearly cannot take
advantage of such opportunities on
their own. But new interdependencies
create new vulnerabilities, from the
liabilities of local partner organisations
to the often harsh realities of novel
operating climates. As organisations
leverage their global reach into ever
more convoluted combinations, they
leave an ever greater digital footprint
– with the attendant risks of a breach
of their cyber security. For those
mapping growth strategies at
multinational and global HQs, this
presents a daunting risk management
challenge: as business has become
global, political, security and integrity
risk have become more local. This is
one of the key themes we explore in
this year’s RiskMap.
The competing gravities of localised
politics and globalised economics
generate friction that plays out in
unexpected ways and places. As we
saw in the In Amenas attack, the
complex local dynamics of terrorism
and criminality in the Sahara – amplified
by post-Gadhafi anarchy leaching
over the border from Libya – have
reverberated globally through energy
markets, international relations and
corporate strategy.
This is not just an issue in unstable
post-revolutionary contexts. In the
US, a grassroots political crusade
against ‘big government’ has repeatedly
threatened to crash the global economy
by forcing an unprecedented sovereign
default; it seems bent on more of the
same in 2014. Growing US
isolationism after a decade of
entanglement in Middle Eastern wars,
meanwhile, has compromised global
security management, leaving – for
example – no coherent strategy to
contain and curtail the Syria conflict.
Across the Atlantic, localised (often
fringe) political positions have
obtained national prominence in the
wake of the financial, sovereign and
austerity crises, strengthening
centrifugal forces that for the last few
years have threatened to blow the
European project off course.
As challenging as this period has
been for industrialised nations, the
year ahead may prove particularly
challenging in the emerging world.
Even though the timing remains at
issue, 2014 will probably bring to an
end the era of quantitative easing
that has sent capital flooding into
BRICs, MISTs and other economies
still in search of an acronym to join.
The ensuing reversal of capital flows
– previewed in late summer 2013,
when emerging-market currencies
dropped precipitously against the US
dollar on rumours of US Federal
TOP: World national flags.
BOTTOM: Petrochemical plant.
The competing gravities
of localised politics and
globalised economics
generate friction that
plays out in unexpected
ways and places.

RiskMap Report 2014
4
Reserve ‘tapering’ – will put
enormous strain on economies that
failed to make the most of the salad
years. Inefficiencies masked by
abundant capital may stoke popular
unrest and will almost certainly
undercut the lifestyles to which many
have grown accustomed, especially
new graduates to the burgeoning
global middle class. A spike in
corruption and extortion risk seems
likely to result.
Not even the largest emerging-market
economies will prove immune. In
China, the government is attempting
far-reaching changes to the economy
by tackling some of the vested
political interests that dominate
certain industrial sectors. Already, the
risk of being caught up inadvertently
in an anti-corruption campaign or an
attempt to influence pricing models
has substantially increased. The
complexities of local politics, hard to
read even at close quarters and in
good times, will grow more opaque
and often distorted when viewed
from foreign HQs.
China’s challenges will play out
against the backdrop of lower, but still
robust, GDP growth (the IMF
currently projects 7.25% in 2014,
down from consistent double-digit
performance in recent decades).
Other large emerging economies face
even rougher seas. The tapering
mini-panic hit India, Turkey and Brazil
particularly hard; the latter two
suffered significant unrest, largely
driven by discontented urban middle
classes. Among recent high-fliers,
only Mexico appears better placed
for solid growth next year, and even
there the war between drug cartels
and the state continues to
disproportionately colour the
country’s reputation.
Then, of course, there are outright
conflict zones. The list is led by the
civil war in Syria, with Iran and Russia
backing President Bashar al-Assad’s
regime, and the Gulf Arab
monarchies, Turkey and a lukewarm
West backing the rebels. Syria’s local
political trends present no cause for
optimism. A stalemate has developed
whereby the rebels lack the firepower
and unity to overthrow the regime,
while the regime has demonstrated it
has genuine grassroots appeal within
the minority Alawite and Christian
communities, and enough outside
support from Iran and Hizbullah to
hold on for the time being. The
US-Russia agreement to mount an
international effort to remove the
Assad regime’s chemical weapons
may be a universal good, but its
practical effect is to forestall any
decision by the US or other powers to
intervene on humanitarian grounds.
This will encourage both sides in
Syria to dig in and perpetuate the
risks stalking neighbouring countries
harbouring millions of refugees and
being drawn, voluntarily or not, into
the conflict. As usual, the risks are
particularly acute in Lebanon, where
Christian and Sunni factions strongly
support the rebels, while the
country’s most powerful faction,

RiskMap Report 2014
5
Hizbullah, is deeply engaged on
behalf of Assad.
Egypt, meanwhile, has taken a step
back from democracy. The
re-imposition of military rule once
again tested companies doing
business in the Middle East’s largest
economy, raising anew complex
issues of business continuity, market
resilience and, at the most basic level,
the safety of local staff. 2014 will not
see the return to normality that
investors crave.
In the Sahel and Yemen, al-Qaida,
whose demise was only recently
being talked of as a given in some
Western capitals, has proved resilient.
Indeed, if lawless areas of Iraq, Syria,
Pakistan, Somalia and Afghanistan
are included, al-Qaida-aligned groups
are spread over as much territory as
ever before. The centralised entity
that perpetrated the 9/11 attack may
be in terminal decline thanks to
relentless drone strikes, but a shift
in the centre of institutional gravity to
al-Qaida in the Arabian Peninsula
(AQAP), al-Qaida in the Islamic
Maghreb (AQIM) and al-Qaida in Iraq
(AQI) – among other affiliates – will
preserve the network’s lethal
ambitions for the foreseeable future.
One potential bright spot: progress in
mid-late 2013 in talks between the
US and Iran over the latter’s nuclear
ambitions holds out some hope that
the diplomatic logjam may shift. The
chances are slim, and these moves
may turn out to be no more than a
change of tactics rather than strategy
on Tehran’s part. As an ancillary boon
to the global economy and major
importers, progress in these
negotiations could pare the
geopolitical risk premium underlying
oil prices, combining with bumper
unconventional production to bring
prices down below the $100 per
barrel threshold.
Outside the Middle East, elections in
Indonesia, India and Brazil will
command significant attention. In
Brazil, slowing growth rates have
forced new burdens on the
government of President Dilma
Rousseff. Although the country will
put on a good show hosting the
2014 World Cup and 2016 Olympics,
doing business may grow even more
complex as the government pushes
for more state intervention to boost
the economy and the rising costs of
doing business continue to erode
profit margins – and Brazil’s
attractiveness more broadly.
In India and Indonesia, corruption and
lowered growth expectations will
dominate political debate, providing
openings for a change in government
in Indonesia after a decade of
relatively consistent rule by one party.
2014 will not see the
return to normality that
investors crave.

RiskMap Report 2014
6
In both countries, business risk could
emanate from the disruption to
vested interests that political change
can precipitate. In India, elections will
result in another weak central
government, portending continued
glacial progress on reforms that
would revive growth and improve the
operating environment.
For investors, shifting power – both
economic and political – needs to be
monitored closely to avoid unwanted
entanglement. RiskMap explores how
this phenomenon of spikes in risk
triggered by changes in the
distribution of economic power is
repeated in many different markets.
As growth slows in many of the
recent high-growth economies,
political legitimacy is tested and
unwary investors may find themselves
in suddenly unfamiliar territory.
On one level, this is nothing new:
globally ambitious companies have
always risked becoming embroiled in
other people’s problems a long way
from home. But what is new is the
scale with which this is now
happening. RiskMap highlights how
many of the drivers of growth –
urbanisation, the growth of the middle
classes, improvements in public
health, increased access to natural
resources – transcend national
boundaries and encourage investors
to enter new markets. In 2014, this
tension between opportunity and risk
will become more acute as the era of
high-growth emerging markets
fuelling global GDP growth comes to
a close and the complexities of local
political tensions impinge more
assertively on global operations.
Any publication entitled ‘RiskMap’ is
inevitably going to focus on risk, and
as we look ahead we see no
shortage of traps to snare the
unwary. But we also see an
abundance of opportunity delivered
in part by the most extraordinary
advances in living standards and
public health. With the media
headlines as ever dominated by risk
and peril, that is well worth
remembering.
TOP: Protester in Istanbul, Turkey,
September 2013.
BOTTOM: Hundreds of protesters
clashed with police in
Rio de Janeiro, Brazil,
October 2013.

Kabul, Afghanistan
by Edward Smith
Control Risks

RiskMap Report 2014
THE CHANGING GLOBAL ORDER
8
All good forecasts, particularly in the complex realm of global political
and security risk, have a solid historical foundation and learn from past
outcomes. In building our RiskMap 2014 outlook, we have drawn on a
decade of risk analysis to identify underlying trends and assess how they
are likely to evolve.
LOOKING BACK: 2003-13
The ten years from 2003 to 2013
were bracketed by the invasion of
Iraq and US withdrawal from
Afghanistan, enlargement of the EU
and the eurozone crisis, SARS in East
Asia and a similar outbreak in the
Middle East, the relinquishment of
chemical weapons by Libya and their
use in Syria, and the decision to build
a nuclear bomb in North Korea and
renewed negotiations to preclude the
possibility in Iran. Along the way, the
subprime mortgage collapse nearly
destroyed global finance, the Arab
spring upended decades of political
stagnation in North Africa, BRIC
became the watchword of the global
economy, the urban population
exceeded the rural population for the
first time in history, fracking
transformed energy geopolitics, and
social media technologies
revolutionised global communications
and laid bare the secret workings of
the West’s intelligence agencies.
It was a decade of unprecedented
opportunity and historic shifts of
capital from the advanced to the
developing world, tempered by
rapidly evolving threats, a new
emphasis on transparency and
accountability, and rising concern
about the sustainability of the post-war
liberal democratic world order. With
these shifts introducing
unprecedented complexity and
uncertainty into global affairs,
managing security and political risks
became more directly relevant to how
companies do business.
Developments in the Middle East and
North Africa dominated global
THE CHANGING GLOBAL ORDER: THE WORLD IN 2014
JONATHAN WOOD
ASSOCIATE DIRECTOR,
GLOBAL RISK ANALYSIS
CONTROL RISKS
Figure 1: Timeline of key events driving changes in global security and political risk
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20142003
Arab
spring
Eurozone
crisis
EU
enlargement
NATO
withdrawal
Arab
spring
Iraq
war
SECURITY
RISK
POLITICAL
RISK
KEY
INCREASING RISK DECREASING RISK

RiskMap Report 2014
9
security risk over the last ten years.
The launch of the Iraq war in 2003
spawned increased security risks
throughout the Gulf region,
influencing evolving terrorist threats in
Algeria, Iraq, Saudi Arabia and
beyond. The gradual increase in
tensions over Iran’s nuclear
programme after 2009 added a new
layer of strategic security risk – most
strongly felt in global oil markets – while
the Arab spring revolutions in early
2011 radically altered security
environments in North Africa and the
Levant, with regional and global spillover
impacts. Nuclear sabre-rattling in
North Korea, by contrast, had no
sustained impact on global security
risk, though it remained a sporadic
source of regional crisis.
The Iraq war and Arab spring also
strongly affected global political
risk, but resurgent leftism in Latin
America, lingering state fragility
across Central and West Africa, and
the fallout from the global financial
crisis – especially in Europe – were
equally important. An underlying
driver of each of these was the
onset of the so-called ‘commodities
super-cycle’ in 2003, driven by both
increased security threats to oil
supply and voracious Chinese
demand, which fuelled populism in
key energy and mineral exporters
and economic stress and
occasional unrest in importers.
Meanwhile, the political benefits of
EU enlargement in 2004 (following
the adoption of the euro currency in
2002) were swiftly belied by the
acute sovereign risks that emerged
during the financial crisis.
Despite the fluid security and political
environment of the last ten years,
business thrived as opportunities
appeared in fast-growing emerging
and developing economies. Since
2003, emerging and developing
countries’ share of nominal global
output has doubled, from 20% to
40%. Nominal output in emerging
Asia alone, powered by China, has
increased by 700%, surpassing that
of the eurozone in 2012. As a result,
by 2013, the proportion of global
output generated by countries that
Control Risks rates at medium or high
political and security risk had more
than doubled (Figures 2 and 3). Our
data also suggest that this is largely
because of faster growth in medium-
and high-risk countries, rather than
increased risk in key economies
(Figures 4 and 5). These trends are
likely to persist in 2014.
Correspondingly, risk appetite –
renewed after the emerging market
crises of the late 1990s – steadily
pushed foreign investment up the
political and security risk scale. The
global carry trade, fuelled by falling
interest rates (which hit historic lows
in 2003 and again in 2009) and
quantitative easing in the US and
Europe, poured capital into higher
interest currencies, triggering both
inflation and capital controls in key
emerging markets. As a result, by
2012, the first year in which more FDI
flowed to emerging and developing

RiskMap Report 2014
10
Figure 2: Global political risk ratings 2004-14, GDP weighted
KEY
INSIGNIFICANT LOW MEDIUM HIGH EXTREME
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Figure 3: Global security risk ratings 2004-14, GDP weighted
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Figure 4: Average political risk rating vs average annual GDP
14%
12%
10%
8%
6%
4%
2%
0%
-2%
Low HighInsignificant Medium Extreme
14%
12%
10%
8%
6%
4%
2%
0%
-2%
Low HighInsignificant Medium Extreme
Figure 5: Average security risk rating vs average annual GDP
growth, 2004-14growth, 2004-14
Figure 6: Global political risk ratings 2004-12, FDI weighted
KEY
2004
2005
2006
2007
2008
2009
2010
2011
2012
2004
2005
2006
2007
2008
2009
2010
2011
2012
Figure 7: Global security risk ratings 2004-12, FDI weighted
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

RiskMap Report 2014
11
countries than advanced countries,
about twice as much investment was
directed towards countries that
Control Risks rates at medium to high
security and political risk as in 2003
(Figures 6 and 7). Even countries with
the most extreme security and
political risk profiles – such as Iraq,
Yemen and Somalia – attracted
significant investor attention, at least
in the oil and gas sector.
LOOKING FORWARD: 2014
AND BEYOND
These trends place the world in a
novel situation. The last time the
current set of emerging and
developing countries – China, India,
Brazil, Turkey and so on – had such
weight in the global economy was
probably in the late 19th century,
under radically different social, political
and geopolitical circumstances.
Charting the risk landscape ahead
therefore requires identifying and
assessing how these fundamental
economic shifts are likely to play out
for security and political risk. We have
identified four trends that we believe
are particularly important: changing
bases of political legitimacy, new
demands of the global middle class,
emerging global security power
vacuums and shifting strategic interests.
CHANGING BASES OF LEGITIMACY
Emerging markets is increasingly a
misnomer. After ten or more years of
torrid growth, leading emerging and
developing economies are highly
globally integrated, and increasingly
liberalised and competitive. In short,
they have emerged. As their resilience
to the global financial crisis showed,
many of the problems that plagued
emerging markets in the 1990s – high
external debt, inflexible exchange
rates and erratic macroeconomic
policy – have been largely resolved.
However, emerging-market growth
models are under pressure. Before
the financial crisis, they relied on
debt-fuelled consumption by the US
and other Western countries. Since
the crisis, growth has floated on a
flood of cheap money, courtesy of
rock-bottom interest rates in the US
and Europe, and generous fiscal and
financial stimulus at home. Moreover,
emerging markets are still too reliant
on relatively narrow bases of
economic activity: manufactured
exports, cheap credit and domestic
investment in China; high oil and gas
prices in the Gulf, Middle East and
Russia; and mineral and agricultural
commodity demand in South America.
These sources of growth are already
unsustainable: inflation, asset bubbles
and overcapacity are increasingly
problematic, the outlook for
commodity prices is negative,
consumption in the US and Europe is
flat, and monetary tightening is
inevitable. Indeed, a timely reminder of
the inherent dangers of overreliance
on cheap capital occurred in late
2013, when mere consideration of US
Federal Reserve ‘tapering’ caused
emerging-market currencies to plunge,
and raised the spectre of crises from
TOP: Workmen, Changyang, China,
by Harry Koops, Control Risks.
BOTTOM: Rajasthan, India.

RiskMap Report 2014
12
India to Indonesia to Brazil. That was a
dress rehearsal: tapering will be a
reality by the end of 2014.
With the pillars of rapid emerging-
market growth eroding, political
settlements founded on so-called
‘performance legitimacy’ – based
on delivering rapid growth and
achieving concrete policy objectives
– are increasingly brittle. For the last
ten years, ruling parties and leaders
in major emerging markets have all
managed to stay in power thanks in
large part to rapid growth. But
growth has fallen sharply since 2011
in most major emerging markets
and is expected to remain below
average next year (Figure 8).
Performance legitimacy is also
inherently self-limiting: high
performance raises expectations,
making subsequent goals
progressively more difficult to meet.
To stay in power, many emerging-
market governments will need to
both find new ways of delivering
growth and cultivate more durable
sources of political legitimacy.
This is where political risk enters the
outlook. It is impossible to restructure
a large, complex economy without
politicising the process. Many
well-intentioned reforms have
foundered in the face of well-organised
political opposition. There is always
an incentive to adopt populist policies
or ideological frameworks that deflect
attention away from slowing growth.
But ideological bases of political
legitimacy – such as those instituted
across Latin America and in parts of
the Middle East over the last ten years
– are often bad for business and ruinous
for foreign investors. The hunt for
Figure 8: Average annual growth, 2004-11 and 2012-14 (projected)
Brazil China Turkey India Indonesia Vietnam Russia
KEY
2012-14
12%
10%
8%
6%
4%
2%
0%
4.3
10.9
6.6
2004-11
8.2
4.1
4.6
2.6
2.0
5.4
7.5
3.2
5.3
5.75.7
Source: IMF

RiskMap Report 2014
13
growth, meanwhile, has provoked a
new wave of trade protectionism and
beggar-thy-neighbour policies. In the
year ahead, how countries choose to
deal with slowing growth will be a
critical variable of the political risk
landscape for business.
RISING MIDDLE CLASSES
Emerging-market governments are also
facing different kinds of political
demands. One of the historic effects
of emerging-market growth is the rise
of the global middle class – those
with annual incomes above $4,000 in
purchasing power parity (PPP) terms.
The middle class grew to more than
2bn people in the last ten years and is
projected to expand to more than 3bn
in the next ten. With sheer economic
income moving comfortably above
poverty levels, emerging middle
classes are beginning to focus on a
wider range of issues linked to
personal freedom, economic
opportunity and good governance.
These demands invariably clash with
entrenched political systems and
vested economic interests. Indeed,
the mass social protests since 2011
– including the Arab spring, Occupy
and Indignados movements, and
anti-government unrest in Turkey,
Brazil and Bulgaria – reflect how
economic change has greatly
outpaced political change during the
emerging-market era. Rising middle
classes, armed with the trappings
and ambitions of technological
Figure 9: PPP per capita GDP at the time of emerging-market unrest, 2011-13
Bulgaria 2013
Romania 2013
Turkey 2013
Brazil 2013
Argentina 2012
Russia 2011
Tunisia 2011
Egypt 2011 $5,764
$8,227
$14,731
$12,340
$15,578
$14,870
$13,251
$18,200
Political repression,
unemployment, corruption
Political repression,
unemployment, corruption
Disputed elections,
corruption
Inflation, constitutional
amendments, corruption
Economic inequality,
public transport fares,
inflation, corruption
Political and social
repression, police brutality
Electricity prices,
corruption
Working conditions,
unemployment
Middle-class threshold:
$4,000
Key motivations

RiskMap Report 2014
14
modernity, remain saddled with
antiquated, opaque, inefficient and
frequently corrupt governments and
bureaucracies (Figure 9). Rather than
simply plaudits from international
financial institutions, they expect rapid
growth to generate new and better
opportunities for them, their families
and their communities. The gulf
between economic and political change
is also replicated in the volatile distance
between aspirational middle classes
demonstrating in city centres and
regimes rooted in conservative rural
constituencies. And it is not just
government that is targeted: business
is also under middle-class scrutiny, on
environmental, indigenous rights,
workplace safety and economic
justice grounds.
The risks embedded in the rising
global middle class are primarily
political: people with tangible assets
to lose are unlikely to promote violent
insurrection, given the potential for
collateral damage. Such social protest
movements also rarely topple
governments, but often provoke
short-term accommodation, from
rolling back economic liberalisation to
beefing up public spending. Over the
longer term, of course, rising middle
classes have often been agents of
broader – even systemic – political
change. Urbanisation itself often
provides the anvil on which multilingual,
multi-ethnic societies are ultimately
forged, removing levers of division
that elites have manipulated to hold
on to power. What’s more, small
entrepreneurs flourish and gain
political influence in more densely
populated settings as populations
must manufacture solutions to the
logistical and infrastructure problems
that governments fail to deal with.
This implies that governments that do
not address urban middle-class
concerns are increasingly living on
borrowed time.
POWER VACUUMS
Where social unrest led to durable
conflict and political instability – namely
in Egypt and Syria – it exposed the
dysfunction of the current global
governance architecture. While
growing economic heft has made
leading emerging markets
indispensable to global governance,
formalised by the inauguration of the
Group of 20 (G20) leaders’ summit
during the financial crisis, it has not
yet compensated for the relative
decline of the US and Europe, both of
which remain consumed with domestic
political and economic challenges. Put
another way, rising powers may be able
to veto the global agenda – on climate
change, intervention in Syria or trade
liberalisation, to name a few – but still
lack the domestic stability, diplomatic
maturity, hard power resources and
soft power attraction to offer and
enforce an alternate agenda. Stable
platforms for strategic co-operation
are currently few and far between.
This has left global governance –
especially global security
management – at the mercy of
bilateral negotiation and ad hoc
TOP: Protest in São Paulo, Brazil,
October 2013.
BOTTOM: G20 Summit in
St Petersburg, Russia,
September 2013.

RiskMap Report 2014
15
interventions, while making it more
prone to disruptive tensions and
strategic blunders. The unexpected
deal over Syria’s chemical weapons
programme – in the absence of any
coherent strategy for managing the
conflict’s spillover impacts – and
sporadic flare-ups along the Line of
Control in recent years in disputed
Kashmir are cases in point.
Meanwhile, the US expects Europe
(grappling with the strategic fallout of
the Arab spring) and the Gulf Arab
states (vying with Iran for regional
clout) to assume the mantle, and
costs, of their own security. We
expect these conditions to develop
further in 2014 as the departure of
most NATO military forces from
Afghanistan more or less completes
the strategic withdrawal of the
administration of US President
Barack Obama from the Muslim
world. Much hinges on the ability of
the US and China to see past a
legacy of distrust and co-operate
pragmatically on shared interests,
such as nuclear non-proliferation and
the containment of militancy in the
Middle East and Central Asia.
A global power vacuum poses both
security and political risks to business.
The security risks are perhaps more
obvious, given that the diminishing
war on terrorism – which requires
collaboration and information sharing
to function – will remit fewer resources
and less training to countries already
struggling to contain militancy.
Pakistan, in particular, is about to get
rather less strategic for the US in the
absence of the need to sustain a large
footprint in Afghanistan, while persistent
capacity deficits in East Africa and the
Sahel region continue to create
permissive operating environments for
militants. A primary concern is that
militant groups – whether linked to
jihadist ideology, organised crime, or
both – will avail themselves of any
breathing room to regroup, recruit
and potentially reorient.
Political risks, meanwhile, will continue
to manifest primarily in trade and
investment. The vaunted US ‘pivot’ to
Asia, for example, incorporates a trade
agreement – the Trans-Pacific
Partnership, slated for completion in
2014 – that pointedly excludes China,
the world’s second-largest trading
nation. This may, in the short term,
increase the threat of politicised
tit-for-tat trade disruptions in certain
sectors, and in some quarters is
perceived as an assault on the global
trading system itself. However, if it
spurs a new wave of trade liberalisation
outside the WTO’s moribund Doha
round – tackling the thorniest non-tariff
barriers, such as import quotas and
export subsidies – opportunities for
business could flourish, even without a
truly global deal.
SHIFTING INTERESTS
Geopolitical uncertainty owes, in part,
to rapid but fundamental shifts in
strategic interests. Shale fracking has
already dramatically reduced oil
imports to the US from West Africa,
and will gradually change US incentives

RiskMap Report 2014
16
in the Middle East over the next decade.
Simultaneously, China’s ravenous
energy and mineral consumption
over the last ten years has bestowed
strong strategic imperatives in
sub-Saharan Africa, as have the
burgeoning food needs of water-scarce
but cash-rich Gulf emirates. Moreover,
further strategic change is queued up
for 2014 and beyond, as cargo volumes
increase along newly ice-free Arctic
shipping routes and liquefied natural
gas (LNG) export projects come online
in Australia and – eventually – the US
and East Africa.
Many of these shifts have only
materialised over the last five years,
and countries are still trying to identify
and determine how to manage their
strategic implications. Across a range
of indicators, economic realities are
complicating the status quo and
threatening to rewrite geopolitics
(Figure 10). Both the US and China,
for example, are beginning to chafe at
US security and freedom of navigation
guarantees in the Middle East. Indeed,
China overtook the US for the first
time in late 2013 as the world’s
biggest net oil importer. Its ‘string of
pearls’ strategy in the Indian Ocean –
viewed in part as a hedge against US
dominance of global sea lines of
communication – is fast becoming a
reality, with major commercial port
developments up and running in
Pakistan and Sri Lanka. Meanwhile,
US allies Japan and South Korea –
anticipating China’s influence over
their own energy supply – increasingly
perceive a need to underwrite
commercial relationships with military
and diplomatic power.
Shifting interests will generate new
opportunities for business as
developing geopolitical relationships
forge pathways for investment.
Markets that have long been closed
or dominated by trade with major
powers are being relentlessly prised
Figure 10: Shift of key exports away from US and Europe to Asia, 2003-12
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Middle Eastern oil South American
agriculture
African extractives Russian extractives
KEY
DECREASE IN EXPORTS TO US AND EUROPEINCREASE IN EXPORTS TO ASIA
TOP: Arctic shipping routes will be
increasingly ice-free.
BOTTOM: US President Barack Obama,
March 2012.

RiskMap Report 2014
17
open by geopolitical competition
– as true for some advanced
countries such as Canada as for
emerging markets such as Ukraine
and Nigeria. But they will also be
attended by collateral political risks,
given the institutional and regulatory
immaturity of many frontier
investment destinations and the
plausible assumption that
diplomatic attention should bring
commercial benefits. Company
nationality has always been a factor,
but is likely to play an increasing role
in political risk.
A similar condition can be applied to
security risks, in cases where local
communities reject an influx of foreign
capital, foreign workers or both. The
security profile of established firms can
also change in line with geopolitical
realities, as US and European
companies have experienced in North
Africa since the Arab spring.
LOOKING AHEAD
Over the last ten years the global
economy has shifted up the political
and security risk scales, changing the
types of threats companies are likely
to face today and in the future. A
decade of rapid growth in the
emerging world has fundamentally
altered social arrangements and is
beginning to put pressure on political
systems, particularly in terms of how
governments justify their authority. In
certain regions, such as the Middle
East and North Africa, this has
provoked change that the current
global power balance is ill-equipped to
manage, introducing security threats
that will cast a shadow over the
coming year. These developments are
coinciding with fundamental and long-
term shifts in strategic incentives,
often linked to resources, that are
likely to rewrite the global distribution
of power as much as economic
change has revised the global balance
of power. These factors put upward
pressure on both global political and
security risks in 2014.
But this comes at a time when
opportunities for business are diverse
and improving in some fundamental
ways. Ten years ago, HIV/AIDS
threatened economic and social
coherence in much of the developing
world. Today, access to treatment
has expanded exponentially and
annual new infections have fallen by
25%. Over the same timeframe,
extreme poverty fell by more than
400m people, even as the global
population rose by nearly 1bn,
sending poverty rates to historic lows.
Meanwhile, over the next year more
people in developing countries will
access broadband on mobile devices
than there were global internet users
in 2003, and more children will have
access to education than ever before.
The hangover of the global financial
crisis is fading, even in the US and
Europe, Japan is at its most bullish in
20 years, and emerging markets in
general are much better equipped to
face economic challenges than
during the 1990s. In this light, risk
seems more attractive than ever.

REGIONAL OVERVIEWS
This regional overview section looks at how the global themes we have identified
will play in to political and security dynamics over the coming year in sub-Saharan
Africa, the Americas, Asia, Europe, and the Middle East and North Africa. In
addition, we spotlight five countries that merit a closer look in 2014 and examine
some of the big questions they face. For more detailed analysis on more than
220 countries, please visit our Country Risk Forecast online service.
To sign up for a free trial of Country Risk Forecast, please visit: www.controlrisks.com
01
AFRICA
SPOTLIGHT ON:
TANZANIA
02
AMERICAS
SPOTLIGHT ON:
COLOMBIA
03
ASIA-PACIFIC
SPOTLIGHT ON:
INDIA
04
EUROPE
SPOTLIGHT ON:
TURKEY
MIDDLE EAST
AND NORTH
AFRICA
SPOTLIGHT ON:
UNITED ARAB
EMIRATES
05

MALTA
CYPRUS
SYRIALEBANON
JORDAN
ISRAEL
PALESTINIAN TERRITORIES
EGYPT
L I B Y A
TUNISIA
A L G E R I A
MOROCCO
Western
Sahara
MAURITANIA
Canary Islands
(SPAIN)
Madeira
(PORTUGAL)
CAPE VERDE
SENEGAL
GAMBIA
GUINEA-BISSAU
GUINEA
SIERRA LEONE
LIBERIA
CÔTE
D'IVOIRE
GHANA
TOGO
BENIN
BURKINA FASO
M A L I
N I G E R
N I G E R I A
C H A D
S U D A N
SOU TH
SU D AN
CENTRAL AFRICAN
REPUBLIC
CAMEROON
EQUATORIAL GUINEA
SÃO TOMÉ AND PRINCIPE
GABON
CONGO
CONGO
(DEMOCRATIC REPUBLIC OF)
RWANDA
BURUNDI
UGANDA
TANZANIA
KENYA
A N G O L A
Z A M B I A
MALAWI
MOZAMBIQUE
ZIMBABWE
BOTSWANA
NAMIBIA
SOUTH AFRICA
HIGH security in deprived urban areas
LESOTHO
SWAZILAND
ERITREA
E T H I O P I A
DJIBOUTI
Somaliland
SOMALIA
Y E M E N
S A U D I
A R A B I A
OMAN
UAE
QATAR
BAHRAIN
KUWAIT
MADAGASCAR
COMOROS
SEYCHELLES
MAURITIUS
Réunion
(FRANCE)
I R A Q
I R A N
Zanzibar
Cabinda
(ANGOLA)
ATLANTIC
OCEAN
Athens
Kandahar
K
Tehran
Baghdad
Basra
Erbil
Amman
Cairo
Alexandria
Tripoli
TunisAlgiers Annaba
Oran
Rabat
Casablanca
Muscat
Abu Dhabi
Dubai
Al Khobar
Riyadh
Jeddah
Port Sudan
SanaaAsmara
Hargeisa
Khartoum
Addis Ababa
NdjamenaKano
Lagos
Port Harcourt
Niamey
OuagadougouBamako
Nouakchott
Dakar
Bissau
Conakry
Freetown
Monrovia
Yamoussoukro
Abidjan Accra
Cotonou
Lomé
Malabo
Douala
Yaoundé
Libreville
Bangui
Kampala
Nairobi
Mogadishu
Kismayo
Mombasa
Dar es Salaam
Dodoma
Lilongwe
Blantyre
Mbuji-Mayi
Lubumbashi
Lusaka
Luanda
Kinshasa
Brazzaville
Windhoek
Harare
Bulawayo Beira
Gaborone
Pretoria
Johannesburg Maputo
Durban
Cape Town
Antananarivo
Port Louis
Damascus
Beirut
Abuja
Kurdistan Region
AFGHANISTAN

RiskMap Report 2014
AFRICA
20
POLITICAL RISK 2004-14
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
KEY
SECURITY RISK 2004-14
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
AFRICA
Against a backdrop of faltering growth and weakening currencies in major
emerging markets, a number of sub-Saharan African countries have been
bucking the trend with spirited debuts of sovereign bonds. Angola, Kenya,
Nigeria, Rwanda, Senegal, Tanzania and Zambia have all raised during
2013 – or plan to raise in early 2014 – hundreds of millions of dollars this
way, bringing the continent further into the fold of global capital markets.
This symbolises the transformation in
Africa’s fortunes over the past
decade, which has seen buoyant
commodity prices fuel sustained
economic growth and poverty
reduction. But it has not all been luck:
prudent macroeconomic
management, enhanced political
stability and incremental operational
improvements have played their part.
Now, as the global boom in
commodity prices eases, attention
has turned towards a new growth
story – the African consumer.
Hopes are riding high that Africa’s
so-called ‘youth bulge’ – nearly half
of sub-Saharan Africa’s population
are between 15 and 29 years of age
– coupled with a burgeoning middle
class concentrated in urban centres
around the continent will provide a
more sustainable economic path, as
well as myriad investment
JEAN DEVLIN
ASSOCIATE DIRECTOR, AFRICA
CONTROL RISKS
SUB-REGIONAL RISK AVERAGES
Southern
Africa
Central
Africa
West
Africa
Pol Sec Pol Sec Pol Sec Pol Sec
East
Africa
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
K

RiskMap Report 2014
AFRICA
21
opportunities. There are substantial
grounds for optimism. The continent’s
current trajectory compares well both
to its past performance and to other
developing regions further up the
convergence curve. The IMF predicts
that by 2017 more than half of the 20
fastest-growing economies in the
world will be in Africa.
At the same time, there is significant
divergence: Africa also holds the
majority of the world’s least
competitive economies.
Underperformance in the key areas
of job creation, reducing inequality
and infrastructure development
further tempers optimism. With the
African Development Bank (AfDB)
estimating that 10m people enter the
workforce each year, governments
face serious challenges, both
economic – in terms of improving
employment opportunities – and
political, in coping with the demands
of a younger, more educated and
more informed electorate. Frustration
with the stagnation of living standards
and lack of services for large swathes
of the population is also shaping
domestic political debate, and is likely
to translate into more regular unrest
and differing patterns of political
competition and violence in many
places. This mix makes for an
attractive but complicated
environment for investors in 2014.
RISE OF THE URBANITES
The African consumer story hinges
on the growth of the continent’s mega
cities: Lagos and Abidjan in the west;
Kinshasa and Luanda in Central
Africa; and Nairobi, Dar es Salaam
and Johannesburg in the east and
south. The continent is rapidly
urbanising, and half of all Africans are
Source: World Bank Doing Business report, 2014
TOP
5
BOTTOM
5
5
3
RWANDA
52 in the world
67 in the world
GHANA
2 1
1
MAURITIUS
20 in the world
2 3
RWANDA
32 in the world
4
BOTSWANA
56 in the world
5
ERITREA
184 in the world
4
185 in the world
REP. OF
CONGO
3SOUTH
SUDAN
186 in the world
2
41 in the world
SOUTH
AFRICA
188 in the world
CAR CHAD
189 in the world
The best and the rest: Africa’s Doing Business rankings, 2014

RiskMap Report 2014
AFRICA
22
TOP: Lagos, Nigeria.
BOTTOM: Nairobi, Kenya.
expected to live in cities by 2040. In
the most populous country, Nigeria,
that proportion has already been
reached. Amid the sprawl and
congestion, a new breed of urbanites
has become established. Affluent,
well-educated and brand conscious,
these consumers are being targeted
as a lucrative market segment, with
ever more shopping centres (malls)
being built to cater to tastes in
consumer retail, coffee and fast-food
chains, supermarkets, consumer
electronics, banking and leisure.
Urbanisation and a growing middle
class bring opportunities to diversify
growth into consumer sectors and
lower transaction costs, improving
service delivery and encouraging
innovation. The most striking example
in the past decade is the rapid
expansion of mobile technology in
Africa, which has seen advances
beyond those in many developed
countries. An estimated 35% of
Kenyan and 25% of Tanzanian GDP
now flows through mobile payments
and online banking. The development
of ‘Silicon Savannah’ – Nairobi’s tech
innovation hub – and the regional
expansion of South African
supermarket chains such as Shoprite
demonstrate the diversity of
opportunities on the continent outside
the extractives sector, where FDI has
traditionally been concentrated.
Moreover, the most dynamic
commercial developments are not
coming from new investors, but are
driven by those already doing business
Source: Population Division of the Department of Economic and Social Affairs of the UN Secretariat, World
Population Prospects: The 2010 Revision and World Urbanisation Prospects: The 2011 Revision
Africa is urbanising: projected population split to 2050
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
KEY
URBAN
60%
50%
40%
30%
100%
90%
80%
70%
20%
10%
0%
RURAL

RiskMap Report 2014
AFRICA
23
on the continent. This includes
African-owned businesses, often with
a concentration within one market
and now looking to expand beyond
their region. Nigerian and South
African banks, and telecoms companies
such as Kenya’s Safaricom are just
some examples of a growing trend of
targeting mainly urban dwellers
across sub-Saharan Africa.
GREAT EXPECTATIONS
While the expectations of Africa’s
urban elites have so far been broadly
accommodated within existing political
systems, the weight of expectations
of those further down the income
ladder has become more pressing.
How the spoils of newfound prosperity
are shared matters greatly to continued
stability. Africa is less equal than it was
ten years ago, and is second only to
Latin America in terms of the proportion
of wealth controlled by the top 10%
of the population. To ensure long-term
stability, some governments have
realised that they must spread the
benefits of growth beyond a narrow
elite. But this has not always resulted in
the implementation of effective policies
to achieve more equitable results.
Unlike Europe and North America, or
more established emerging markets
such as Brazil or Turkey that have seen
social upheaval driven mainly by the
middle classes, the key actors in Africa
are less affluent urbanites: the so-called
‘floating middle class’ (those spending
between $2 and $4 per day) and the
urban poor (those living on less than
$2 per day). Poverty, high levels of
youth unemployment and frustrations
over living standards will remain the
main drivers of protests and social
unrest. Over recent years, unrest has
tended to erupt in response to
unpopular reforms, such as removal
of subsidies, utility tariff increases
and other service delivery issues or,
in countries where organised labour
is strong, wage negotiations.
Protests over the removal of fuel
subsidies of the kind that paralysed
Nigeria in early 2012 and fractious
labour disputes such as those in
South Africa in 2013 will become more
common as administrations struggle
to tackle difficult issues that
disproportionately affect lower-income
groups. In Sudan, the protests that
have been a notable feature of the
past three years are likely to recur in
the coming year should the government
move ahead with the removal of
subsidies on wheat and other food
commodities. Meanwhile, access to
information and means to mobilise
can be a force to drive accountability,
but can also cause unrest to
escalate, posing a concomitant risk
of business disruption.
Aside from the increased risk of
operational disruption, near-jobless
growth combined with rising
inequality presents a deeper
challenge to the legitimacy of
governments and their leaders, as
events in North Africa over recent
TOP: Sasolburg protest, South Africa,
January 2013.
BOTTOM: The Lukasrand Tower,
Pretoria, South Africa,
August 2012.

RiskMap Report 2014
AFRICA
24
years amply demonstrate. The
structural factors that have for
decades driven instability in Africa
have not disappeared. Strong
economic growth in the past ten
years has improved long-term
prospects for stability, but the twin
pressures of urbanisation and
growing youth unemployment over
the next decade will weigh on those
prospects. Such pressures are most
acutely evident in countries with weak
state institutions and recent histories
of violence, such as the member
states of the Mano River Union
(Guinea, Liberia and Côte d’Ivoire),
which saw some of the worst
conflicts of the turn of the millennium.
They now face the daunting
challenge of providing sufficient
numbers of stable jobs for their
growing youth populations.
Source: World Bank, GINI index
The GINI coefficient measures income inequality; higher numbers indicate greater inequality
63.9
63.1
57.5
56.3
52.5
51.5
50.8
50.8
50.5
50.1
48.8
47.7
47.3
47.3
45.7
45.5
44.4
44.3
44.1
43.9
42.8
65.8
41.5
41.5
40.5
40.3
39.8
39.8
39.4
39.3
38.9
38.638.2
37.6
35.5
35.4
35.3
34.6
33.6
33.3
33.0
42.7
64.3
N/A
N/A
N/A
N/A
N/A
N/A
30 - 39
50 - 59
60 +
40 - 49
KEY
An unequal continent: income inequality as measured by GINI coefficients

RiskMap Report 2014
AFRICA
25
POWER TO THE PEOPLE
Many governments have put
development of infrastructure, and in
particular power, at the top of the
agenda, both to provide a boon to
business and to respond to popular
demands for improved standards of
living. Much of the financing raised
through bond issuances has been
earmarked for projects in these
areas. Even Nigeria, which has long
suffered from debilitating power
shortages stemming from its
notoriously inefficient power sector, in
2013 finalised its drawn-out
privatisation of the sector, paving the
way for long-term improvements.
Meanwhile, US President Barack
Obama in July 2013 made the
announcement of a $7bn ‘Power
Africa’ initiative to improve access to
electricity over the next five years in
East Africa the cornerstone of his trip
to the region.
However, operational barriers such as
dilapidated power transmission grids,
outdated regulatory frameworks and
vested interests clinging to the
dysfunctional status quo will mean
that improvements to the business
environment stemming from new
investment and reforms such as
those in the energy sector will remain
slow and patchy. One of the biggest
infrastructure projects on the
continent, the $80bn Grand Inga
dam in Congo (DRC), which would
supply more than 500m people with
renewable energy, is unlikely to be
operational before the 2030s,
hampered by financing constraints
and uncertainty about the government’s
commitment to the project.
Job creation is a second area of
focus, underlined by a growing
emphasis, at least at the policy level,
on economic diversification, fiscal
incentives for labour-intensive
industries and a reinvigorated agenda
on agricultural development.
However, as with infrastructure,
effects on living standards will only be
felt in the long term.
ACCOUNTABILITY FOR SOME…
Frustrations over difficult reforms and
stagnant living standards are feeding
into a wider campaign for
accountability in Africa. As in other
emerging markets such as India,
corruption has become a rallying
point for civil society to demand
greater accountability and
transparency from governments.
This has also been on the agenda of
international donors, which maintain
significant, if declining, influence in
Africa. Debt relief and budgetary
support over the past decade have
had ‘performance indicators’
attached, including greater
accountability of governments to their
citizens. Failure to meet these has
been backed up by the withdrawal of
assistance, such as the removal of
donor funding in Zambia in 2011
following high-level corruption
scandals, or blacklisting of the worst
TOP: Madagascar President Andry Rajoelina,
December 2012.
BOTTOM: Congo (DRC) President
Joseph Kabila,
September 2013.

RiskMap Report 2014
AFRICA
26
offenders, such as Madagascar’s
Andry Rajoelina or Guinea-Bissau’s
Gen Antonio Indjai, the leader of an
April 2012 coup. In Congo (DRC),
although donors turned a blind eye to
the questionable circumstances
surrounding President Joseph
Kabila’s re-election in 2011, the IMF in
late 2012 suspended $240m in
planned loans over the government’s
failure to publish dubious mining
contracts. The financial impact of the
decision appears to have prompted
some improvements in transparency
in the country’s mining sector, as it
tries to win back compliant member
status of the Extractive Industries
Transparency Initiative (EITI).
Nonetheless, as leading donors –
largely in Europe and North America
– reorient towards a model of
‘economic diplomacy’ to defend
their commercial interests on the
continent against the inflow of
money and interest from rising
powers such as Brazil, China, India
and Turkey, their leverage to
influence African governments is
likely to decline. These new partners,
with different historical ties and
objectives informing their
engagement, take their own unique
approach to Africa. China in
particular, which has become the
continent’s largest trading partner in
recent years, has generated much
debate over its approach, though
commentators often fail to
appreciate the multitude of actors
and interests that make up the story
of ‘China in Africa’.
Source: OECD Factbook 2011: Economic, Environmental and Social Statistics
China, now Africa’s largest trading partner: as a percentage of total trade
1992 2000 2005 2009
KEY
GERMANY
16%
14%
12%
10%
8%
6%
4%
2%
0%
CHINA
UKRUSSIA
BRAZIL
US
INDIAFRANCE JAPAN

RiskMap Report 2014
AFRICA
27
The main result of these shifts is that
civil society organisations and local
media will gain a more prominent role
as advocates for better governance.
Local civil society and vibrant local
media in many countries are
furthering the momentum of
international accountability
campaigns. Liberia’s President Ellen
Johnson-Sirleaf, long a darling of the
country’s international partners, has
faced mounting domestic criticism of
public appointments favouring family
connections, likely contributing to the
September 2013 resignation of her
son as head of the National Oil
Company of Liberia.
…BUT NOT FOR OTHERS
Nonetheless, progress in the area of
accountability will remain slow.
Countries with entrenched
leaderships, though not immune to
the momentum generated over the
past decade, will take longest to
change. A steadfast contingent of
ageing presidents continues to cling
to power, from the continent’s record
holder, Equatorial Guinea’s Teodoro
Obiang, to Angola’s José Eduardo
dos Santos, Robert Mugabe in
Zimbabwe, Paul Biya in Cameroon
and Uganda’s Yoweri Museveni.
While such gerontocrats will eventually
cede power to new generations, the
continued dominance of former
liberation movements in southern
Africa in particular is likely to remain
strong. These have a superficially
stabilising but ultimately corrosive
effect on governance in what is the
continent’s youngest region in terms
of independence. Angola remains
one of the continent’s most unequal
societies, with a poor reputation for
tackling corruption, though it provides
relatively high levels of predictability,
particularly for the offshore oil sector.
Similarly, in Mozambique the ruling
Frelimo party presents the country as
a stable and attractive investment
destination, though discontent continues
to bubble up regularly, driven by dashed
hopes of socio-economic development.
Weak bureaucracies and pervasive
corruption across African countries
will continue to blight the business
environment. Moreover, sudden or
fundamental shocks in systems lacking
accountability can prompt stability to
quickly dissolve, as seen in North Africa.
INCREASED CONTESTATION
Nonetheless, outright conflict has
become less of a headline risk for
business in Africa than at the turn of
the millennium. Outside Somalia and
Central Africa, sustained large-scale
armed opposition has largely
disappeared from the political
landscape. Politicians and parties
have become more likely to appeal
against unfavourable results or
mobilise protests than to launch an
armed campaign against the
government, particularly in countries
with large urban populations well
connected through social media.
Threats since mid-2013 by
TOP: Liberian President Ellen Johnson-Sirleaf,
November 2012.
BOTTOM: Zimbabwe President Robert Mugabe,
September 2013.

RiskMap Report 2014
AFRICA
28
opposition party and former rebel
movement Renamo to trigger a
renewed civil war in Mozambique are
an exception, but serve primarily to
underline its desperation to remain
relevant in a post-conflict
environment dominated by Frelimo.
This is not to say that political
violence is fading as a risk to
business. Rather, it will present more
nuanced and manageable risks
across different geographies.
As competition at the ballot box has
increased, so too has the potential
for unrest, with upsurges in electoral
violence likely to become increasingly
common. 2013 saw violence around
Contestation increasing at the ballot box
Sep 13 Guinea legislative Yes, UN envoy called for
disputes to be settled in court
Violent riots
pre-election
Feb 13 Djibouti legislative By opposition Yes,
but late
Post-election protestNo
Mar 12 Guinea-Bissau
presidential
Military coup seized
former PM Carlos
Gomes (front-runner)
and interim President
Raimundo Pereira
Jul 12 Congo legislative Limited clashes
in districts with
opposition supporters
Aug 12 Angola legislative By 4 parties and 5 coalitions Yes
No
Nov 12 Sierra Leone
presidential
and legislative
By opposition
By opposition
- - -
-
-
-
-
Yes
Dec 12 Ghana presidential
and legislative
By opposition, NNP Yes No
No
No
Mar 13 Kenya presidential By defeated candidate
Raila Odinga
Yes Post-election violence
in stronghold of
defeated candidate
No
Jul 13 Zimbabwe legislative
and presidential
By opposition Yes
Yes Ruling
pending
Very limited reports of
voter intimidation
No
No
No
No
Very limited reports
May 13 Equatorial Guinea
parliamentary
By opposition No
Sep 13 Rwanda
parliamentary
No Two grenade attacks
couple of days before
election
Small-scale protests
in capital Lomé
Jul 13 Togo legislative Opposition denounced
irregularities and fraud but
election observers said process
was fair and transparent
Date
Appeal
accepted
Appeal
lodged
Results disputed
Country/
Election
Incidence of
violence
No
No
Source: IFES Election Guide

RiskMap Report 2014
AFRICA
29
legislative elections in Guinea, while
despite the relatively peaceful polls in
Kenya and Zimbabwe, both retain an
explosive mix of ingredients that will
complicate future elections. 2014
should be comparatively quiet, with
voters in Namibia, Mozambique and
South Africa going to the polls.
However, 2015 holds greater
prospects for unrest as voters turn
out in traditionally more volatile
Guinea, Nigeria and South Sudan.
Meanwhile, political friction will
increase in Tanzania ahead of a
constitutional referendum in 2014
and general elections in 2015.
Politics is also becoming more
factionalised, with different groups
competing for political influence to
promote their own agendas and favour
their own members, whether on ethnic
or other grounds. The extent and nature
of such factions varies across the
continent. In Kenya, for example,
political parties are more akin to highly
personalised vehicles created solely
for election purposes and with a narrow
focus on promoting the specific
interests of their respective leader’s
ethnic group. Even in de facto one-
party states such as South Sudan,
deep rifts between competing ethnic
groups and political alliances within
the ruling elite are becoming more
visible. This is detrimental to building a
common agenda and, as is clear from
the factional struggles that have
divided Nigeria’s ruling People’s
Democratic Party (PDP) in 2013,
complicates policymaking to the
point where essential reforms to
improve competitiveness are
continually deferred.
POLITICAL GAMES
Resource nationalism, which has
garnered significant investor attention
amid a slew of contract reviews, new
legislation and regulatory changes
across the continent, should be
viewed in the light of these shifting
political dynamics. Provisions for
greater local content are often a
slightly awkward government response
to popular expectations that ordinary
citizens are entitled to the proceeds
of the commodity boom. Higher royalty
payments, more stringent tax regimes
and local content legislation all
featured in reviews of legal and
regulatory frameworks for mining and
oil and gas from Côte d’Ivoire to
Equatorial Guinea in 2013. Meanwhile,
public concerns over environmental
degradation and destruction of local
livelihoods are gaining traction with
governments under growing popular
pressure. Governments aim to
manage public expectations in these
areas without unduly compromising
relations with investors.
Although South Africa’s ruling African
National Congress will base its
campaign for the April 2014 elections
on a long-term economic development
plan, the party is expected to push
through reforms to the mining code
ahead of the polls in a bid to placate
calls for economic transformation

RiskMap Report 2014
AFRICA
30
from its core constituency. The
possible introduction of export
controls on a group of yet to be
determined ‘strategic minerals’ will
further dampen investor sentiment
and scupper government plans for
robust economic growth.
THE LIMITS OF
REGIONALISATION
Diverse political and in some cases
security challenges have begun to
test the fledgling conflict resolution
mechanisms of regional organisations,
with the African Union struggling to
take a leading role in the Mali crisis in
2013 and the UN stepping up to the
plate in Central African Republic and
Congo (DRC). Sub-regional bodies,
most notably the Southern African
Development Community (SADC),
which has been key to facilitating the
2013 elections in Zimbabwe and
mediating the crisis in Madagascar,
have played a more significant role.
Increased regional integration will
continue to be touted as one of the key
tools for Africa to develop: on paper, the
benefits are self-evident. However,
such optimism has so far outstripped
the operational capabilities of these
organisations to decisively resolve
conflicts. As Chinese, Indian and
Brazilian engagement in Africa
expands and US interest in the
continent has waned with Obama’s
‘pivot’ towards Asia, the question of
who underwrites security, particularly
in parts of the continent of little
strategic significance such as Central
African Republic, will weigh on the
outlook for long-term stability.
BUCKLE UP
The growing complexity of risk in Africa
underlines the need for risk
management tailored to specific
business activities in the local context.
The fostering of a greater number of
consumers through more inclusive
growth by governments is a key
strategic growth area for non-resource
investors, and while this sector is less
susceptible to classic political
interference, it is affected in other ways.
The corrosive effect of poor governance
and insecurity in large, mainly remote
areas mean that transnational threats
of smuggling and terrorism pose risks
to businesses dependent on
extended supply chains, for example.
Exposure to corruption, the large
presence of counterfeit goods and
lack of enforcement against
organised crime also present serious
challenges for these sectors.
Africa’s boom is far from over: growth
rates are forecast to outstrip most
other regions over the next ten
years. If the continent’s
governments can overcome the
challenges of diversifying
economies, managing expectations
and building flexible labour markets,
the picture will be positive. But for
those looking to jump on the
bandwagon, be sure to buckle up:
it’s going to be a bumpy ride.
TOP: Oil and gas refinery.
BOTTOM: Central African Republic rebels,
March 2013.

RiskMap Report 2014
SPOTLIGHT ON: TANZANIA
32
RiskMap Report 2014
32
RWANDA
BURUNDI
TANZANIA
KENYA
Zanzibar
Kampala
Nairobi
Kismayo
Mombasa
Dar es Salaam
DodomaMbuji-Mayi
Lubumbashi
LOOKING AHEAD
Buoyed by its sizeable
natural gas reserves,
strategic location, and
relatively benign security
and political environment,
Tanzania’s international
profile will continue to rise
in 2014. A constitutional
referendum should pass off
peacefully, while planned
infrastructure developments
will start to bear fruit in the
coming years, enabling the
country to maximise its
investment potential.
Nonetheless, corruption
and unrest stemming from
rising popular expectations
will continue to temper
investor optimism.
Tanzania will attract more investor interest in 2014 – and with good
reason. Although its 40 trillion cubic feet (tcf) of proven natural gas
reserves are its prime attraction, the country also offers a relatively benign
political and security environment (by regional standards), and a strategic
location. Growth of 7% is forecast for 2014 on the back of anticipated
expansion in the energy and mining sectors. Meanwhile, international
investors are likely to respond positively to the finance ministry’s August
2013 request for a syndicated loan of up to $700m, and the government’s
plans to issue a $1bn sovereign bond in 2014.
Nigeria, South Africa and Kenya have
been the traditional entry points and
operational bases for investors in
Africa. However, each has its
drawbacks: political tensions and
challenging industrial relations in
South Africa, and high-profile
security threats in Kenya and
Nigeria – given added prominence
by the September 2013 attack by
Somali extremist group al-Shabab
on the Westgate shopping centre
SIMISO VELEMPINI
ANALYST, AFRICA
CONTROL RISKS

RiskMap Report 2014
33
(mall) in the Kenyan capital Nairobi.
Risk-averse investors will increasingly
look to more stable, peripheral
countries that can provide similar
advantages at lower risk.
In a nod to its rising international
profile in 2013, Tanzania welcomed
both Chinese President Xi Jinping
and US President Barack Obama.
During Xi’s first visit to Africa as an
elected official, he unveiled an
$800m infrastructure development
package. Meanwhile, Obama
announced that the country will be
one of the first beneficiaries of the
US government’s $7bn Power Africa
initiative to reform the continent’s
energy sector.
FINAL FRONTIER
Compared with the three African
powerhouses, Tanzania is a frontier
market with a rapidly urbanising
population. Its overlapping
membership of two regional
organisations – the East African
Community (EAC) and the Southern
African Development Community
(SADC) – means that it is well
positioned to give investors access to
a high-growth market with roughly
400m residents. EAC moves towards
harmonising investment incentives
and the SADC’s removal of almost all
tariff barriers underscore both
regions’ commitment to leveraging
their natural resources and human
Projected GDP growth in selected African markets, 2012-16
6%
5%
4%
3%
10%
9%
8%
7%
2%
1%
0%
2012 2013 2015 2016
KEY
KENYAGHANATANZANIA
ZAMBIA
NIGERIA SOUTH AFRICA
2014
Source: IMF

RiskMap Report 2014
34
TOP: Dar es Salaam port.
BOTTOM: President Jakaya Kikwete and
Chinese President Xi Jinping,
March 2013.
capital to ensure collective
sustainable growth.
Increased global interest in
gas-to-power projects and demand
from South-east Asian countries
seeking to diversify their energy
sources will drive development of
Tanzania’s nascent gas sector.
Japan’s Sumitomo Corporation in
May 2013 signed a $414m deal with
the government to build a 240MW
natural gas-fired power plant,
signalling strong Asian interest in
Africa’s aspiring entrant into the
continent’s select group of gas
exporters. Regional power deficits
will give the government further
impetus to meet its target of
exporting gas to other African
countries by 2015.
Elsewhere, a move from subsistence
to commercial agriculture provides
opportunities for export to
neighbouring countries. The
Southern Africa Growth Corridor of
Tanzania initiative aims to equip
subsistence farmers seeking to
make the transition to commercial
farming. However, land rights remain
a contentious issue, while
bureaucratic bottlenecks and
multiple land claims from locals will
delay both agriculture and mining
projects. Although it will continue to
attempt to attract investment in the
aforementioned areas, the
government is also likely to
concentrate its efforts on boosting
investment in tourism, FMCG,
construction and pharmaceuticals.
GREAT EXPECTATIONS
Inadequate infrastructure will remain
one of the primary challenges facing
investors in the coming years. The
government is highly likely to allocate
a significant proportion of the
proceeds of the $1bn sovereign bond
to improving power and transport
infrastructure. Various initiatives
outlined in the government’s ‘Vision
2025’ development plan underline its
commitment to facilitating
infrastructure investment to unlock
Tanzania’s economic potential. The
government plans to complete a
$211m upgrade to bring Dar es
Salaam’s port up to the standard of
that in Mombasa (Kenya) by 2015,
galvanised by World Bank estimates
that inefficiencies at the port cost
Tanzania $1.8bn in revenue annually.
A planned upgrade of the TAZARA
railway line – the infrastructural
backbone of the EAC and SADC – is
also slated for completion by 2015.
Public-sector corruption and weak
institutional capacity will undermine
the government’s ability to effectively
manage the country’s resources. But
tentative moves towards improving
transparency are encouraging. The
draft Natural Gas Policy – likely to be
enacted in late 2014 – takes a strong
line on transparency, and is likely to
lead to a long-term reduction in
corruption in the sector. However,
the deep systemic reforms needed
to plug revenue leakages and
ensure the efficient deployment
and use of capital across line

RiskMap Report 2014
35
ministries will not be forthcoming in
2014, given the distraction of the
general elections looming in 2015.
Nonetheless, sustained progress is
likely thereafter.
Meanwhile, socio-economic
pressures are rising in tandem with
development of the gas sector. The
majority of the population lacks
access to electricity and running
water. Public expectations of the
government’s ability to create new
jobs and improve access to basic
services are high at a time when it
has limited means of addressing
them. These issues will exacerbate
latent sectarian tensions and drive
localised unrest, primarily directed at
the government, in the medium term.
CONTINUITY NOT CHANGE
A constitutional referendum set for
April 2014, and presidential and
legislative elections in 2015 will cause
limited political upheaval. The
referendum has contributed to an
escalation in sectarian violence since
early 2013 both in Zanzibar and on the
mainland. Zanzibari demands for
greater autonomy stem from the
prospective economic impact of the
development of offshore gas reserves.
Planned infrastructure projects, 2013-18
Improvement of
TAZARA line
Construction of
freight station
Mbeya
Kapri Mposhi
Isaka
Kigali
Mtwara
Tanga
Bagamoyo
Dar es Salaam
KENYA
CONGO
(DRC)
ZAMBIA MOZAMBIQUE
MALAWI
BURUNDI
RWANDA
KEY
Port under
construction
Port upgrade
Railway under
construction
Railway
Construction
of natural
gas pipeline
Terminal under
construction
Airport under
construction
Source: Tanzania Five Year Development Plan 2011/12 - 2015/16, President’s Office, Planning Commission

RiskMap Report 2014
36
Nonetheless, the demands of a small
but vocal separatist group for a
dissolution of the union and the
creation of an independent Zanzibari
state are unlikely to be realised.
Instead, with an eye towards the 2015
polls, the ruling Chama Cha Mapinduzi
(CCM) party is likely to agree to a
revised revenue-sharing deal that will
pave the way for more offshore
exploration off the coast of Zanzibar.
The overall impact of the various
ballots on the broader security
environment will be limited, with
violence on the scale of that seen
around the elections in Kenya in
2007-08 highly unlikely. Meanwhile,
the likely victory of the CCM and its
presidential candidate in 2015 will
also ensure broader policy continuity
and stability in the longer term.
COMING IN FROM THE COLD
Kenya and Mozambique have
grabbed international headlines
and stoked investor interest in East
Africa in recent years, relegating
Tanzania to third place. However, as
the operational environment
becomes increasingly complex in
neighbouring countries, Tanzania’s
stable outlook, strategic location and
pro-investment climate will become
ever more appealing.
Proven natural gas reserves and reported discoveries in East Africa, 2013
0.88
ETHIOPIA
KENYA
TANZANIA
MOZAMBIQUE
UGANDA
0
0.5
0.23
4.5
Ogaden basin: 2.7 tcf in
Calub and 1.3 tcf in Halila
Discovery of gas in Mbawa 1
block L8 but no proven reserve
32-65 tcf of recoverable gas
in Area 1, 87 tcf in Area 4
10-13 tcf in block 2; 11-21
tcf in blocks 1,3 and 4
Albertine Region
KEY
0.0 - 0.4
1.0 +
0.5 - 0.9
Proven reserves (tcf)
Source: US Energy Information Administration (May 2013) and UK Trade & Investment

U N I T E D S T A T E S O F A M E R I C A
M E X I C O
BELIZE
GUATEMALA
EL SALVADOR
HONDURAS
NICARAGUA
COSTA RICA
PANAMA
CAYMAN ISLANDS
(UK)
JAMAICA
CUBA
BAHAMAS
TURKS AND
CAICOS
BERMUDA (UK)
HAITI
DOMINICAN
REPUBLIC
PUERTO RICO
BRITISH VIRGIN
ISLANDS
ANGUILLA (UK)
SINT MAARTEN
DOMINICA
US VIRGIN ISLANDS
ARUBA CURAÇAO
BONAIRE
ANTIGUA AND BARBUDA
GUADELOUPE
MARTINIQUE (FRANCE)
BARBADOS
ST VINCENT AND
GRENADINES
GRENADA
ST LUCIA
ST KITTS-NEVIS
TRINIDAD AND TOBAGO
FRENCH GUIANA
SURINAME
CHILE
A R G E N T I N A
PARAGUAY
URUGUAY
B R A Z I L
GUYANA
COLOMBIA
ECUADOR
P E R U
B O L I V I A
VENEZUELA
CAPE VERDE
PACIFIC
OCEAN
ATLANTIC
OCEAN
Córdoba
Vancouver
Seattle
San Francisco
Los Angeles
Tijuana
Phoenix
Minneapolis
Chicago
Detroit
Toronto
Montréal
Ottawa
Quebec
New York
Philadelphia
Washington (DC)
St Louis
Atlanta
Houston
Dallas
Hermosillo
Monterrey
Tampico
Guadalajara
Mexico City
Acapulco
Cancún
Miami
Havana
Kingston
Port-au-Prince
Santo Domingo
Belmopan
Guatemala City
San Salvador
San Pedro Sula
Tegucigalpa
Managua
San José
Panama City
Colón
Cali
Bogotá
Medellín
Caracas
Georgetown
Paramaribo
Cayenne
Belém
Guayaquil
Manta
Quito
Lima
Arequipa La Paz
Santa Cruz
Asunción
Santiago
Buenos Aires
Montevideo
Recife
Belo Horizonte
São Paulo
Rio de Janeiro
Brasília
Salvador da Bahia
Boston
New Orleans

RiskMap Report 2014
AMERICAS
38
2014 will see the effects of the likely tapering of quantitative easing in the
US take hold across Latin America. The region’s assets have been
magnets for capital in recent years, and logic has it that an eventual US
stimulus withdrawal will increase US bond yields and prompt a reversal in
the flow of funds – out of Latin America. That will weaken local currencies,
cause interest rates to rise and threaten countries such as Brazil that have
heftier financing needs. To paraphrase Warren Buffett, only when the tide
goes out do you discover who’s been swimming naked.
2014 will expose the divide between
these countries and their more
pragmatic cousins, led by the likes
of Chile, whose more solid
economic fundamentals will better
insulate them from market volatility.
These countries enjoy the
protection afforded by low current
account deficits, higher reserve
levels and less dollar-denominated
debt. They also have more margin
for currency depreciation.
TAPER TANTRUM
The panicked reaction to the US
Federal Reserve’s initial tapering
announcement in May 2013 means
that the withdrawal of stimulus is
likely to be modest in its initial stages.
NICHOLAS WATSON
HEAD OF ANALYSIS, AMERICAS
CONTROL RISKS
AMERICAS
POLITICAL RISK 2004-14
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
KEY
SECURITY RISK 2004-14
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
SUB-REGIONAL RISK AVERAGES
South
America
Central
America
North
America
Pol Sec Pol Sec Pol Sec Pol Sec
Caribbean
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

RiskMap Report 2014
AMERICAS
39
We do not expect a repeat of 1994’s
so-called ‘Tequila crisis’, when
sudden Fed tightening caused a
sharp devaluation of the peso in
Mexico, with impacts across the
region. If tapering advances, it would
signify that a sustainable recovery is
under way in the US. Although China
is now the leading trade partner for
the likes of Brazil, Chile and Peru,
the US remains Latin America’s
pre-eminent trade partner. For
Mexico, which sends more than 80%
of its exports to its northern neighbour,
measured tapering should be seen
as a boon, not a blow, because it
represents a vote of confidence in the
US’s economic recovery.
But the economic climate will be less
benign for Latin America than it has
been for many years. Prices for
commodities, on which many
countries relied in the boom years,
are on a downward trend as China’s
growth slows and in all likelihood
enters a new phase of development
– a steady clip of 7% rather than the
9% gallop of the last decade. Studies
show that for every percentage point
the Chinese economy slows, the
Latin American countries with the
closest ties to China decelerate by
1.2%. Nobody is saying Latin America
will catch a cold because China
sneezes, but the likes of Brazil and
Peru may have a case of the sniffles
in 2014. Nonetheless, the picture is
far from uniform. Mexico is more of a
competitor in manufactured goods
markets than a supplier of commodities,
and its labour cost advantage is likely
to continue in 2014 as near-shoring
comes back into vogue.
Annual GDP growth, selected Latin American markets and China, 2010-14
6%
4%
12%
10%
8%
2%
0%
2010 2011 2013 2014
KEY
CHILEBRAZIL MEXICO PERU CHINA
2012
Source: IMF

RiskMap Report 2014
AMERICAS
40
TOP: A member of YoSoy132,
Mexico City, June 2012.
BOTTOM: Oil workers’ protest,
Rio de Janeiro, Brazil,
October 2013.
GOVERNING GETS HARDER
While the Mexico-Brazil reversal of
fortunes will not be as pronounced as
the markets sometimes make out,
Brazil’s problems point to a failure to
address key issues during the boom
years. Faced with a cooling of both
domestic and international markets,
Brazil will struggle to switch swiftly to
an investment-led growth model
because of the failure of recent
governments to tackle the infamous
‘Brazil cost’ – the umbrella term for
the burdens of doing business there,
covering poor infrastructure, high
borrowing costs, a complex tax
regime and archaic labour legislation,
among others. President Dilma
Rousseff’s record of state intervention
limits reasons for optimism, and
suggests she is more likely to address
the symptoms of Brazil’s declining
competitiveness than the causes. To
top it off, Brazil faces a presidential
election in October 2014 that will limit
the scope for much-needed reforms,
including a tax overhaul and an
update of the labour code.
Brazil is not the only country where
trickier economic conditions will
make governing more difficult and
reduce the political appetite for
reform. Approval ratings for Peruvian
President Ollanta Humala are likely to
remain low in 2014, though this does
not presage a political crisis: his
predecessor but one, Alejandro
Toledo (2001-06), governed with
single-digit approval ratings for much
of his presidency. Possible routes to
overcome tougher economic
conditions will not always be
exploited. Peru’s massive Conga
mining project is likely to remain
hostage to regional elections in 2014,
and will therefore remain stalled.
In neighbouring Argentina, dwindling
support for President Cristina
Fernández following a setback in the
2013 legislative elections is unlikely to
herald any U-turn on state
intervention in the economy or a
concerted effort to tackle inflation.
The economy is therefore likely to
remain weak. Nonetheless,
Fernández will continue to defer
dealing with problems beyond 2014.
LATIN SPRING?
The 2013 protests in Brazil prompted
concern that Latin America may be
vulnerable to further outbursts of
middle-class unrest. After all, the
inequality, corruption and poor public
services that triggered the Brazilian
protests are problems across much
of Latin America. But this does not
necessarily herald the onset of a
wider ‘Latin spring’, despite the
economic frailties and public
frustration evident in some countries.
Latin America has long endured high
levels of unrest, and it would be
wrong to see every strike and protest
as foreshadowing the eruption of
major social upheaval. Not only were
Brazil’s newly prosperous middle
classes frustrated with crushing
commutes, but gathering inflation,
insipid economic performance and,

RiskMap Report 2014
AMERICAS
41
most significantly, conspicuous
expenditure ahead of the 2014
football World Cup created the
conditions for mass protests. The
Brazilian middle class – and
expectations of its rights and dues – has
grown more significantly than that of
any other country in the region in
recent years, while public spending
ahead of the 2014 World Cup and 2016
Olympics is a unique double-barrelled
catalyst for unrest.
The phenomenon of middle-class
frustration certainly exists beyond
Brazil. A decade of growth across
most of the region has forged new
social demands that those in
government have not always kept up
with. In Chile, frustration has
crystallised around the costs and
unfairness of the education system.
In Mexico, the YoSoy132 movement,
mainly comprising middle-class
students, has denounced what it
sees as President Enrique Peña
Nieto’s too-cosy relationship with the
mainstream media. The Mexican
middle class will also continue to
grumble about tax rises – especially
the 16% value-added tax on home
mortgages that Peña Nieto hopes to
levy from 2014 – and the opacity of
government spending. Both here and
in Chile, urban middle classes
increasingly compare their countries
to far-flung peers in the OECD, to
which they both belong, rather than
their immediate neighbours. But this
does not portend mass protests that
transcend class or sector interests.
Mexican teachers will remain restive
in 2014 and the left’s losing
presidential candidate in 2006 and
2012, Andrés Manuel López Obrador,
will whip up opposition to energy
reform, but neither of these
movements will rock Mexico’s
political foundations.
Similarly, a steady background hum
of protest will be evident in Venezuela
as frustration simmers at government
mismanagement of the economy,
crime and shortages of basic goods.
But this is unlikely to coalesce into a
national movement or social
explosion in 2014, barring a
significant drop in the price of oil.
Venezuela will instead remain acutely
polarised amid economic confusion,
not crisis.
The new demands of emerging and
emerged middle classes, and the
disconnect between their aspirations
and the ‘old’ way of doing politics, will
not bring sudden or dramatic political
change. The ‘old’ politics is less
sclerotic than it is sometimes given
credit for, and most demands centre
on the problems of daily life, not a
desire for revolutionary change. If she
runs, anti-establishment presidential
candidate Marina Silva in Brazil – who
might be expected to pick up a
sizeable protest vote – would be likely
to win fewer votes in 2014 than she did
in 2010. Rousseff will win re-election,
even though a self-serving Congress
will dilute a political reform expressly
designed to appease the
disillusioned. In Colombia, where
major protests took place across the
TOP: Brazil’s Marina Silva,
February 2013.
BOTTOM: Mexican President
Enrique Peña Nieto,
October 2013.

RiskMap Report 2014
AMERICAS
42
country in August 2013, the
establishment incumbent – or
possibly his protégé – will win the
2014 presidential election.
In Chile, independent Marco
Enríquez-Ominami’s political high-water
mark is likely to have been 2010, not
2013, and former president Michelle
Bachelet (2006-10) will return to
power at the beginning of 2014.
Bachelet’s pledge to undertake
constitutional reform reflects the need
for an update of the social contract,
which in turn reflects the changes
wrought on society by economic
growth. Ironically, the need to tweak
the underlying settlement between
people and politicians will generate
outbursts of social strife as Bachelet
challenges social conservatives. She
will also face pressures on her left
Source: IMF
GREENLAND
PERU
COLOMBIA
GUYANA
VENEZUELA
JAMAICA
CUBA
BOLIVIA
CHILE
5.7%
4.2%
5.8%
1.7%
5%
4.5%
PANAMA
6.9%
EL SALVADOR
1.6%
1.2%
2.8%
HONDURAS
2.8%
KEY
Booming markets
Bypassed markets
Booming and bypassed markets, projected growth rates 2014

RiskMap Report 2014
AMERICAS
43
flank: she is likely to enact some kind
of education reform in 2014, but it will
be a watered down measure that will
not end protests.
Where discontent translates into
protest in the region, it will not always
be led by the middle classes, still less
by the tech-savvy or urban
‘Twitterati’. Latin America may now
be more urban than rural, but
traditional sectors with long-standing
grievances remain potent actors. In
many cases, protests will not
represent the phenomenon of the
‘emerged market’, but rather the
enduring reality of the ‘bypassed
market’: the swathe of Latin America
that believes the benefits of stellar
growth have not trickled down to
them. So mining projects in Peru will
remain entangled in locally driven
protests amid rising frustration that
Humala is failing to deliver socially
inclusive growth. In Colombia,
concerns over the impact of free
trade on local agriculture and the
poor state of infrastructure will remain
sore points outside the cities. And in
Mexico, protests against energy
reform will attract NEETS (not in
education, employment or training)
and retired government employees.
LOCAL VACUUMS
For decades Latin America
complained about the overweening
presence of the US in its affairs. In
the early 2000s, as US foreign policy
turned overwhelmingly to the Middle
East and elsewhere, the tables turned
and some regional policymakers
grumbled about US ‘neglect’ in the
face of a leftist tide across Latin
America. They would argue that
Latin America has suffered the
effects of a power vacuum for years
already. Others seized the
opportunity to diversify their trade
relations, embracing China as a
voracious new consumer of the
region’s raw materials. Those
countries – led by Brazil, Peru and
Chile – must now adjust to a slower
rate of Chinese growth, which, if far
from representing a vacuum, poses
challenges to the commodity
export-led model.
Overall, the most significant power
vacuums across the region will be
local, and none more so than that
triggered by Venezuela’s slow-burn
diplomatic and economic retreat
following the death in 2013 of its
larger-than-life former president Hugo
Chávez (1999-2013). The parlous
state of the economy – held aloft
largely by the price of oil – means
Venezuela can no longer afford to
punch above its weight on the
regional (or world) stage. Most
significantly, the retrenchment of
Venezuela’s regional oil subsidies is
likely to gather pace in 2014, with the
Caribbean beneficiaries – apart from
Cuba – most likely to face interest
rate rises and stiffer conditions from
state oil company PDVSA.
The likely curtailing of Venezuelan
largesse in the Caribbean highlights
the region’s most unreported and

RiskMap Report 2014
AMERICAS
44
disconcerting vacuum, where high
debt levels, weak external demand
and financial-sector vulnerabilities will
persist in 2014. The economies of
Belize, St Kitts and Nevis, and
Jamaica are in particularly poor
shape, with the last remaining under
IMF tutelage.
In Cuba, the risk of vacuum has
become permanent. Putative
presidential successor Miguel Díaz-
Canel will quietly continue his
apprenticeship to Raúl Castro, but
were the latter to die in 2014 (he will
be 83), Díaz-Canel would preside
over a transition marked by deep
uncertainty. Frustration over the
government’s cautious approach to
economic reform will be ever present,
though social control will remain tight,
and emigration as ever will provide a
neat escape valve. Honduras
represents a more immediately
worrying case: political tensions will
remain high and the fiscal situation
precarious, hindering the fight against
rampant crime and the penetration of
drug trafficking into the country’s
institutional fabric.
While there is no power vacuum in
Brazil, 2014 is likely to throw into relief
the gulf between the country’s
projected image and reality. The
sporting prowess and cultural vitality
highlighted by the World Cup will
underline Brazil’s already well-
established soft power credentials.
But failure to make headway on
political reform, the lag in realising oil
projects and continued corruption
– which will remain under intense
scrutiny – point to the limitations that
continue to hold back Brazil’s global
power pretensions. Brazil’s quest for
the elusive UN Security Council seat
will therefore remain unfulfilled in
2014, even if its relationship with the
US is likely to recover after the bumps
of late 2013.
REJECTION OF DEFECTION
The broad-brush division between
left-leaning governments and more
pragmatic centrists will persist in
2014. There will be no ‘defections’
from one group to another, though
the political momentum in Argentina
will continue its drift away from
Fernández’s heterodox model, even if
this will not culminate until 2015. El
Salvador – already highly pragmatic
under President Mauricio Funes – is
likely to switch to the right in the
March 2014 election. Venezuelan
leadership of the Bolivarian Alliance
for the Peoples of Our Americas
(ALBA) will remain muted as
domestic woes and economic
imbalances limit its ability to shell out
oil dollars as liberally as it did under
Chávez. Ecuador’s President Rafael
Correa will continue to hustle and
bustle on the world stage as
Chávez’s would-be heir, but his
impact will remain limited.
One of the most significant
developments in 2014 will be the
continuing evolution of the Pacific
Alliance – comprising Mexico,
Colombia, Peru and Chile, which
TOP: Chile’s Michelle Bachelet,
October 2013.
BOTTOM: Venezuelan President Nicolas Maduro
and a framed image of deceased
former president Hugo Chavez,
October 2013.

RiskMap Report 2014
AMERICAS
45
together account for 35% of Latin
American GDP – not just as a
counterpoint to the ALBA, but as an
enhanced platform for increased
engagement outside the region. With
little fanfare, 2014 could feasibly see
the Pacific Alliance ripen into a far
more effective alternative to the
Southern Common Market
(Mercosur) trade bloc, which will
continue down the path of gradual
obsolescence. The business
environments in the Pacific Alliance
countries are among the most
attractive in the region, with
predictable policy frameworks,
fewer protectionist tendencies,
independent central banks and
higher productivity levels.
The cementing and expansion of the
Pacific Alliance will consolidate Latin
BRAZIL
VENEZUELA
MEXICO
COLOMBIA
PERU
CHILE
URUGUAY
PARAGUAY
ARGENTINA
KEY
Mercosur
Pacific Alliance
Members of Mercosur and the Pacific Alliance

RiskMap Report 2014
AMERICAS
46
America’s growing links with the
Asia-Pacific region outside China.
For example, the reinvigoration of
free-trade talks between Mexico and
South Korea is likely in 2014. Outside
the alliance, the consolidation of
Venezuelan oil flows to India will
continue and Trans-Pacific
Partnership negotiations will
conclude, benefiting Mexico, Peru
and Chile. Colombia already has a
free-trade agreement with South Korea,
but is struggling to fully exploit it while
its own Pacific region remains retarded
by years of government neglect and
conflict. A peace agreement should
mark the beginning of a regeneration
process in the area, even if tangible
improvements in port and road
infrastructure will only materialise after
2014. Oil pipelines to Colombia’s
Pacific coast from Venezuela will have
to wait until after 2014, though with
Asia set to account for most of the
expected growth in oil consumption in
coming years, the stage is set for further
geopolitical shifts affecting the region.
China will remain a key player, even if
its growth rates drop down a gear,
remaining a prime creditor for
Ecuador and continuing to take 80%
of Chile’s copper. China will be a
growing oil buyer for Venezuela as
the latter continues to decouple
commercially from the US. If
Venezuela is to maintain Chinese
trust, President Nicolás Maduro
needs to deliver on oil deals – proof, if
ever it was needed, that Chinese
interest in Latin America is not
ideological but highly practical.
China’s interest in Latin America will
not detract from the fact that the
region’s geostrategic relations will
continue to hinge largely on the US,
which will retain strong economic and
security interests in the region in 2014.
NO HARD LANDING
Latin America faces more challenging
conditions in 2014 amid reduced
global liquidity and increased market
volatility. But the risk of a hard landing
is lower than in the past thanks to the
trade diversification and reforms put
in place across much of the region in
recent years. Where reform has been
lacklustre, vulnerabilities will be more
pronounced, but those most affected
will in all likelihood muddle through
and avoid painful adjustments. Social
protests stemming from historic
problems and newer challenges that
have arisen from growth and
economic success will persist, but
are highly unlikely to coalesce into
movements that threaten stability.

RiskMap Report 2014
SPOTLIGHT ON: COLOMBIA
48
RiskMap Report 2014
48
NICARAGUA
PANAMA
ARUBA CURAÇAO
BONAIRE
ST VINCENT AND
GRENADINES
SURIN
GUYANA
COLOMBIA
ECUADOR
VENEZUELA
San José
Panama City
Colón
Cali
Bogotá
Medellín
Caracas
Guayaquil
Manta
Quito
BRAZIL
LOOKING AHEAD
With an end to the
long-running civil conflict
in sight, long-term
improvements to the
security environment are
on the cards. However,
security in rural areas will
see a short-term dip, while
the challenges of
implementing any peace
agreement will use up much
of the political capital of
the new government
elected in 2014. Incumbent
President Juan Manuel
Santos is likely to be at the
head of that government,
spelling policy continuity
for investors.
2014 will be a decisive year for Colombia. With an end to more than
50 years of internal armed conflict finally in sight, it has never looked so
attractive to investors. Already offering one of the most stable political
environments in the region, the government is working hard to improve
the country’s global competitiveness and deepen economic links with
countries in Europe, North America and Asia.
The largest-ever investments by a
Colombian government in infrastructure,
ambitious programmes to stimulate
industrial productivity and growth,
and burgeoning domestic demand
will make the country an increasingly
attractive market for industries
ranging from extractives to construction
and consumer goods.
PEACE DIVIDENDS
Talks between the government and
leftist guerrilla groups are likely to
succeed in reaching a peace
agreement in 2014, bringing with it
the prospect of an end to much of
the violence that has haunted the
country for decades. Such a deal
OLIVER WACK
ANALYST, AMERICAS
CONTROL RISKS

Control Risks' RiskMap Report 2014 explores global risks

Control Risks' RiskMap Report 2014 explores global risks

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Control Risks' RiskMap Report 2014 explores global risks