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New in-depth reports from Maplecroft highlight investment and labour risks in Algeria, Guinea, Jordan, Mauritania, Mexico and Russia

21/04/2011

Regime stability, political violence and the global economic downturn feature prominently in the risks for business and investors across six countries, which are the subject of new in-depth country reports from Maplecroft.

Algeria

Maplecroft’s in-depth Country Risk Report on Algeria offers high-level analysis and maps of regime stability, business integrity and corruption, the regulatory and business environment, water security, political violence, human security, labour rights, and the macroeconomic environment.

Continued protests have placed the government under increased pressure to respond to a multiplicity of grievances. High unemployment, corruption, the rising cost of living, a grave housing shortage and government inefficiencies along with inadequate infrastructure are likely to remain sources of socio-political dissatisfaction for the medium- to long-term. Though Algeria’s regime is likely to weather public protests in the short term, underlying grievances will need structural changes and long-term solutions. Pressure may grow if more substantive changes do not become visible in the economic, housing, and civil liberties spheres.

The protests come as al-Qaeda in the Islamic Maghreb (AQIM) seeks to exploit the security vacuum in neighbouring Libya. Inside Algeria, AQIM and its partners continue to carry out attacks and kidnappings, particularly in the north of the country, while abductions are more prevalent in the south-east and other remote, sparsely populated areas of the country. These areas merge with the greater Sahara / Sahel region. The financial incentive for tribal cooperation with AQIM means that the kidnapping trend is likely to continue or increase in spite of government efforts to combat terrorism. Businesses operating in Algeria continue to face a high level of risk to their personnel and physical assets. Foreign companies and individuals, especially European and North American, will be seen as potential targets.

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Guinea

Maplecroft’s in-depth Country Risk Report on Guinea offers high-level analysis and maps of the governance framework, the regulatory and business environment, political violence, human rights and the environment.

Guinea is embarking on a path of transition to civilian leadership, with presidential elections in November 2010 returning the first democratically elected president since 1958. Long-time opposition member Alpha Conde faces numerous challenges to establishing a stable democratic regime. High on the list will be establishing a truth and reconciliation commission to examine the shocking events of 2009, when security forces committed gross human rights violations that led to the deaths of 160 peacefully protesting civilians. Poor service delivery and living conditions heighten the risk or a return to societal unrest, the threats of which remains significant due to underlying ethnic tensions.

The transition means regulatory and policy uncertainty to business. Existing shortcomings of the judicial system, including lack of transparency, poor training and corruption, mean that enforcement of regulations is poor where the law has been tested and likely to be so in the significant areas of untested law. During periods of military rule, the Constitution has been suspended, adding to legislative uncertainty. Moreover, even though this military leadership has been brought under some control, factionalism persists. Members of the military have in the past been engaged in corrupt practices, including in the extractives industry. Allegations of human rights violations by security forces have been made on numerous occasions in the past. Despite the attractive nature of Guinea’s resources, such factors indicate substantial risks to business.

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Jordan

Maplecroft’s in-depth Country Risk Report on Jordan offers high-level analysis and maps of regime stability, corruption, the regulatory and business environment, political violence, labour rights, macroeconomic risk, water security and the environment, as well as an assessment of Israeli-Jordanian economic collaboration.

Jordan has not escaped the protests flooding the MENA region. Demonstrations in January spread across the country to the capital, Amman. Key drivers of unrest have included unemployment, high living costs and corruption, but a consensus has emerged in demands for political reforms. The principal targets for reform are electoral laws which bias representation in parliament and discourage the participation of political parties in the political process. The protests have so far been scattered and small in size, but the involvement of members of East Bank tribes has created an unusually diverse front calling for reforms. This threatens the monarchy’s traditional base of support from the rural tribal areas and the armed forces.

Jordan is one of the top-ten most water scarce countries in the world. This condition is exacerbated by an increasing population and water intensive sectors such as agriculture and industry. Furthermore, climate change is expected to result in higher temperatures and less rainfall, making water scarcity an important issue to consider in the future. Investors should investigate available water resources, including the source and the price of water. Investors that consume large quantities of water may face higher costs and public criticism as water becomes scarcer. In this case, water use and management planning is essential. Investors must consider how to most efficiently use the resource by limiting waste and investing in water reuse technologies.

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Mauritania

Maplecroft’s in-depth Country Risk Report on Mauritania offers high-level analysis and maps of the governance framework, the regulatory and business environment, political violence, human rights and the environment.

Corruption remains a significant problem across all levels of government, police and judiciary. Corruption is most pervasive in government procurement, bank loans, distribution of lands, licenses and tax payments. A legislative framework to fight corruption, albeit incomplete, is in place. However, business should be aware that the government does not enforce the law effectively, and impunity is widespread.

Political violence remains an issue in Mauritania. The risk of terrorism posed by al-Qaeda in the Islamic Maghreb (AQIM) remains high. The group continues to target Mauritanian security forces and, more recently, the French Embassy in Nouakchott. Foreigners are at particular risk of ransom, as the group relies on ransoms from kidnappings to funds its operations. Mauritanian security forces reportedly use torture and ill-treatment against detainees and prisoners, although the law prohibits such practices. Complaints against the police are investigated only in exceptional cases.

In the light of recent anti-government protests in Nouakchott, President Abdel Aziz said the government will guarantee freedom of expression and association. He has also condemned the excessive use of force used by Libyan security forces. However, in February 2011 opposition party RFD reported that Mauritanian security forces cracked down on a local protest in Vassal-Nere. Elections due in November 2011 are likely to mean continued opposition protests in coming months.

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Mexico

Maplecroft’s in-depth Country Risk Report on Mexico offers high-level analysis and maps of political violence, business integrity and corruption, the regulatory and business environment, and civil and political rights.

Mexico is an important in the America’s and globally, but its high growth potential has been impacted by security and governance challenges.

The country is a major transit corridor for South American narcotics destined for the United States. Traffickers are currently engaged in a drug-war for control of smuggling routes and territories, resulting in widespread insecurity and casualties. As the Mexican government intensifies its fight against the drug cartels, groups come under pressure to diversify their sources of income and have turned to kidnappings of high-profile individuals for ransom and extortion. Businesses should therefore be aware of the heightened risk of kidnappings and generally of threats posed by drug cartels to personnel safety. In addition, companies should take into account the high costs of security measures to protect their operations in the country and the existence of extortion rackets.

Mexico lacks judicial independence and corruption is widespread. Mexico’s record in guaranteeing judicial independence and judicial effectiveness is very poor. There have been occasional killings of and attacks on federal prosecutors and judges, as well as lawyers working on cases involving drug cartels and human rights issues. In addition to undermining the fight against drugs, corruption poses a problem to businesses that should be aware that court decisions are susceptible to improper influence by both private and public entities. Business should additionally remain cautious in their dealings with local officials, business partners and suppliers, mindful of the potential strategic, operational and reputational risks stemming from allegations of corruption.

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Russia

The Labour Standards Report on Russia offers in-depth analysis for all major labour issues, country scores, maps, key recent events and stakeholder viewpoints.

Russia faces a number of challenges in the labour market. The first is recovering from the recent global economic downturn, which has resulted in larger than expected losses in output and employment as well as a sharp rise in poverty. There are signs of recovery in the short-term, aided by higher oil prices and stronger global demand for oil. However, low growth is still likely this year.

With economic problems increasing, and the employers not being able to manage those effectively, the number of labour disputes in Russia has risen since 2009. The forms of protest are also changing, with formalised legal strikes, which are onerous and hard to get approved, being replaced by street protest campaigns. The number of trade unions is also on the increase as a result of employees trying to organise and more effectively defend their rights. These new trade unions have been formed in areas where they never existed before, such as trade, food industry, and mass media. Furthermore, the existing trade unions have intensified their activity under the pressure of employees. In turn, the pressure on trade unions and the violations of the rights of freedom of association and collective bargaining is also increasingly becoming an issue.

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In-depth reports contain detailed analysis, country scores, maps, key recent events and stakeholder viewpoints. They are available for all countries, sectors and issues. Please contact info@maplecroft.com for more information.