Several countries saw improvements in their overall country risk ratings this quarter according to Aon's political risk newsletter, including Haiti, Ethiopia, Iran, and China. Only Suriname saw a deterioration in its rating. A number of anti-corruption campaigns in Asia were discussed as potentially improving political risk outlooks by reducing uncertainty. The newsletter provides regional overviews of political risks, noting both improvements and deteriorations across various countries and risks.

1. Risk. Reinsurance. Human Resources.
This quarter several countries experienced
an improvement in their overall country risk
rating, reversing the recent trend that has seen
more deterioration than improvement over
the last several quarters:
Haiti improved from very high to high due to
a slight decrease in political violence risk.
Ethiopia saw its overall country risk rating
improve from high to medium high, driven by
improvements to political violence risk,
sovereign non-payment risk and banking
sector vulnerability.
Iran’s country risk rating dropped from very
high to high as the prospects of relief in
sanctions drove improvements following the
signing of the Joint Comprehensive Plan of
Action agreement on Iran’s nuclear
programme.
Finally, China improved from a medium high
to medium country risk rating thanks to a
decrease in political violence risk as well as a
reduction in supply chain disruption risk.
Meanwhile, only one country – Suriname –
saw a deterioration in its overall country risk
rating, moving from medium to medium
high due to an increase in supply chain
disruption risk.
There were a number of countries that
experienced a change in some of their
individual risk icons this quarter, but changes
were not sufficient to trigger an overall
rating change. These are nevertheless
worth monitoring as potential precursors
to future changes.
Countries that saw an improvement in three
or more individual risk icons include Albania,
Macau and Turkmenistan (although the latter
also saw a deterioration in one risk - political
violence). On the other hand, Belize saw a
deterioration in supply chain risk, political
interference risk and the ability of the
government to stimulate the economy,
although these were partially balanced by
an improvement in exchange transfer risk.
Aon Risk Solutions | Political Risk
Q4 2015
Summary
PoliticalRisk
QuarterlyNewsletter
ComplementingtheannualPoliticalRiskMap,Aon’spoliticalrisknewsletterisdevelopedinpartnership
with Roubini Global Economics, an independent, global research firm founded in 2004 by renowned
economist Nouriel Roubini. The newsletter is released on a quarterly basis and provides insight into
levels and types of Political Risk in non-EU and -OECD countries.
In this Issue
2 Regional overview
of political risks
3 In the spotlight this
quarter - Asian anti-
corruption campaigns
and political risk
3 Country Risk Rating
Overviews
4 Key Contacts

2. Political Risk Newsletter | Aon Risk Solutions | Q4 2015 2
Regional overview of political risks
Asia
Political risk ratings in Asia have been relatively stable apart from
the improvements in China. However, weaker growth and greater
government interference in driving investment in Malaysia,
Indonesia and Thailand raises future risks (these are accounted
for in the country risk ratings). Similarly in India, the fiscal and
economic reforms seem to have stalled due to vested interests in the
agricultural sector, which will weigh on social cohesion.
Lower oil prices are generally positive for this region, as is the
Chinese stimulus. We are monitoring the possibility of greater
sovereign non-payment risk in Indonesia due to delayed payments
to national governments.
Eastern Europe and CIS
Political risk has stabilised in many of the CIS and Caucasus countries
such as Moldova as the conflict in Ukraine has subdued, and
economic and social conditions in Russia have remained stable as the
country focuses on its defence policy.
Russia continues to be a country with significant hurdles for foreign
investors. It is reducing reliance on imports and foreign capital.
Russia’s recession is weighing heavily on the income of CIS countries
like Turkmenistan, Kazakhstan, Uzbekistan and Kyrgyzstan, where
remittances have weakened. The fall in oil prices have reinforced this
stress on the balance sheets of Turkmenistan and Kazakhstan, which is
now manifesting in greater pressure on several economic and political
institutions such as central banks. Public criticism of policy makers
undermining the independence of these institutions are adding to the
exchange transfer risk, as well as exacerbating the uncertainty around
the regulatory environment for foreign investors.
Rising inflation is adding to the political risk outlook, which is
manageable in Russia but of greater concern in neighbouring
countries. Although Ukraine’s government has passed several reforms
that reduce the risk of doing business, there is a growing nationalist
shift, which raises questions about implementation.
The restructuring of sovereign debt looks set to go ahead despite
legal challenges from Russia. Private sector external debt restructuring
is likely to follow, suggesting ongoing legal issues for creditors.
Latin America and Caribbean
Political risk in Brazil continues to increase towards a possible
impeachment case and collateral damage from the ‘Lava Jato’
corruption scandal, which are adding to the uncertainty for foreign
and local investors. As the economy sinks, the fiscal implications mean
local businesses face increased uncertainty. The legal process has
actually resulted in an improvement in the quality and predictability
of the judicial system, which bodes well for implementation in the
future, but in the near-term risks are high as the political gridlock
persists.
Recent elections in Argentina and Venezuela signal a desire for change
in these countries that could set in motion various economic and
social reforms. Argentina’s political risk rating may well drop in 2016
if some of the promised social policy and structural measures are
implemented. A paucity of FX reserves suggests exchange transfer risk
remains high in the short-term and it remains unclear how effective
the government will be at implementing these reforms.
In Venezuela, political violence remains high (and increased during
the legislative election campaign), along with all other elements
of political risk. We expect implementation risks to remain very
high given the uncertainty of legal, regulatory and exchange rate
changes. Should the government not fully recognize the results,
protests are possible.
Elsewhere in the region, risks have been stable.
Middle East and North Africa
The MENA region continues to have some of the highest-risk
countries in the world, with few changes in overall country risk
rating. Weaker oil prices and continued regional conflicts have
challenged the resilience of key economies and political systems and
we think the trend is towards heightened political risk, particularly
as the Syrian conflict becomes more global. The involvement of
global and regional parties in the conflict against ISIS raises risks
of accidents and retaliatory measures such as the recent sanctions
pressure between Turkey and Russia. The ongoing conflicts in Syria,
Iraq, Yemen and elsewhere will intensify the focus on military and
security spending despite lower government revenues.
The weakness in the oil price suggests a further weakness in
economic risk ratings across regional producers including those in
the Gulf Cooperation Council (GCC), while some regulatory costs
are likely to rise as new taxes on corporations are implemented.
We expect greater pressure to employ nationals in Saudi Arabia
and Oman and note that both are experiencing weakness across
several country risk ratings. In general, GCC countries have
more savings to deploy to avoid economic shocks, but the cost
of financing will rise, as will government interference in the
economy and banking system.
Energy importing peers generally have stable, although high,
country risk ratings, but will suffer from a general tightening of
regional financial conditions. Egypt stands out as vulnerable.
Sub-Saharan Africa
As in the MENA region, weaker commodity prices are putting strain on
these economies and generally reinforcing the high levels of country
risk. Oil and metal producers like Nigeria, Mozambique, Uganda,
Zambia and Ghana have seen a deterioration in some country risk
factors, including legal and regulatory risk as well as exchange transfer
risks. Mozambique, Uganda and Angola have all increased government
arrears to the private sector and there remains the risk of non/delayed
payment particularly in the energy sector. Oil and gas producers,
Uganda and Tanzania risk further delays in developing their resources in
the face of a declining global energy sector.
By contrast, oil importing nations in East Africa have experienced a
modest reduction in risk, notably Ethiopia and Kenya, where some
recent regulatory reforms and a reduction in political violence have
improved the outlook politically and economically. We assume this
trend will continue.

3. Political Risk Newsletter | Aon Risk Solutions | Q4 2015 3
In the spotlight this quarter
Asian anti-corruption campaigns and political risk
2015 has marked a period of important anti-corruption campaigns
across Asia and many emerging market regions. Xi Jinping’s
government in China carried out a significant crackdown on
corruption as part of his attempt to consolidate political control.
Moreover, the Jokowi and Modi administrations in Indonesia and India
respectively came to power on the back of promises to reduce
corruption. In Malaysia, President Najib’s corruption scandal has
weakened investment prospects and reduced the country’s resilience
to lower energy prices.
In China, there are signs that the anti-graft campaign has now
stabilised and entered into a new phase focused more on the financial
sector (previously the focus was on major regional politicians and
state-owned enterprises—SOEs; which contributed to a marked
slowdown in conspicuous consumption). After mid-2015, the pace
and size of corruption investigations slowed and this stabilisation of
the regulatory environment may have been one of the drivers of the
reduction in legal and regulatory risk in our country risk rating.
Since the summer market sell-off, the Chinese authorities have shifted
to probing financial company managers versus investigating
bureaucrats (their first target) and officials at SOEs (second). This may
suggest that the leadership is satisfied that it has consolidated its
political power, implying that they may now have a better chance of
implementing reforms and other policies. It also suggests less
uncertainty for foreign investors around implementation. Economic
policy makers are thus more focused on short-term stimulus and
meeting the goal of medium-term growth and consumption target.
China’s anti-corruption campaign has shifted towards SOEs
and the financial sector
Country Risk Rating Overviews
Improvements to country risk rating:
Haiti (high) saw a slight decrease in political violence risk.
Ethiopia (medium high) saw improvements to political violence risk,
sovereign non-payment risk and banking sector vulnerability.
Iran (high) improved on the prospect of relief of sanctions following
the signing of the Joint Comprehensive Plan of Action agreement on
Iran’s nuclear programme.
China (medium) improved thanks to a decrease in political violence
risk and a reduction in supply chain disruption risk.
Deteriorations in country risk rating:
Suriname (medium high) deteriorated due to an increase in supply
chain disruption risks.

4. Risk. Reinsurance. Human Resources.
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About Roubini Global Economics
Roubini Global Economics (RGE) was founded in 2004 by Professor Nouriel Roubini. Through his national balance
sheet approach to analysing economies, Nouriel Roubini foresaw the coming US housing crisis and was eager to
bring the same approach to analyse the rest of the world. Now numbering nearly 100 staff around the world,
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Matthew Shires
Aon Crisis Management
Head of Political Risk
matthew.shires@aon.co.uk
Prateek Singh
Head of Political Risk Analytics
prateek.k.singh@aon.co.uk
Gareth Hollins
Roubini Global Economics
Research Consultant
gareth.hollins@roubini.com
Key Contacts