SYLLABUS

Unit-I
Introduction
Objective
Scope
Perlmutter’s EPRG Model
Unit-2
Country Analysis
PESTEL analysis
The Atlas of Economic Complexity
Porters Diamond
Country Risk analysis
Unit II COUNTRY ANALYSIS
PESTEL analysis
The Atlas of Economic Complexity
Porters Diamond
Country Risk analysis
The Atlas of Economic Complexity is a 2011 economics
book by Ricardo Hausmann, Cesar A. Hidalgo, Sebastián
Bustos, Michele Coscia, Sarah Chung, Juan Jimenez,
Alexander Simoes and Muhammed A. Yıldırım.
The book attempts to measure the amount of productive
knowledge that each country holds, by visualizing the
differences between national economies. The book's
originality is to go beyond standard statistics by making use
of “complexity statistics” of 128 countries.The book
concludes with hints "at how difficult and complex it may
be for government planners to kick-start a new industry —
while showing that there are new industries that will
struggle to get started without help.".
The Atlas of Economic Complexity
attempts to measure the amount of
productive knowledge that each country
holds. Measure of productive knowledge
can account for the enormous income
differences between the nations of the
world and has the capacity to predict the
rate at which countries will grow.
A central contribution of this Atlas is the
creation of a map that captures the
similarity of products in terms of their
knowledge requirements. This map
provides paths through which productive
knowledge is more easily accumulated.
Economic complexity, therefore, is
expressed in the composition of a
country’s productive output and reflects
the structures that emerge to hold and
combine knowledge.
Hausmann and Hidalgo (2009, 2011, 2014)
developed the concept of economic complexity (EC),
defined as a national indicator able to measure the
non-observable capabilities (know-how) required in
the production of goods and services. This concept
puts the emphasis in how the production process of a
specific product/service implies the interaction of
different specific knowledges, and how these
interactions permit the innovation and production of
more complex products, and therefore, in the
configuration of a more complex and dynamic entire
economy.
In this paradigm, complexity is calculated through an
iterative process between countries diversification level,
the number of products that countries export with a
revealed comparative advantage, and products ubiquity,
the number of countries that have a revealed comparative
advantage in the product (Hausmann and Hidalgo, 2014).
Countries with more capabilities will be able to make
more products (higher diversification), while products
that require more capabilities will be accessible to fewer
countries (lower ubiquity). Thus, it is expected that more
complex countries will be both more diversified and
would make less ubiquitous products
Diversity and ubiquity
COUNTRY ANALYSIS
Country analysis involves the examination and
interpretation of a nation’s economic, social and political
environment. The analysis offers a comprehensive
overview of a country.
Country analysis is useful for:
Investors in the financial market

Companies intending to set up a subsidiary

Companies wishing to enter a new market

People wishing to reside in the country

 FACTORS
There are many factors from which risk can
be analyzed following are some examples
that can be contributed :- •Political •
Economic •Location •Sovereign •Transfer
Risk •Economical Risk •Exchange Rate Risk
•Financial Factor •Subjective •Terrorism
•Corruption
 .
Economic Risk in International Trade
It is important to always carefully evaluate economic data by country to
determine risk. Businesses can analyze economic data by country using the
following
 key economic indicators. These indicators provide a snapshot of a
.
country’s economic performance and future prospects that can help paint a fuller
picture when evaluating country risk.
•The stability and solvency of banks
•The short-, medium- and long-term outlook for country’s
GDP and GNP
•Debt-to-GDP ratio
•Unemployment rate
•Overall government finances
•Monetary policy and currency stability
•Currency exchange rates
•Access to affordable capital
. Political Risk

. In every country, from the most and to the least developed, there
is some level of political risk. A shift from less to more regulation,
greater state ownership of certain industries or more government
involvement in the economy also represent political risk.
Government stability
Information access and transparency
Terrorism, violence and crime
Regulatory and policy environment
Workforce freedom and mobility
Government assistance programs for businesses
Immigration and employment laws
Attitudes toward foreign investment
Sovereign risk

There is some crossover between political and sovereign

risk, although the latter – also known as sovereign
default risk – primarily examines debt. Specifically, this
risk category measures the build up of debt that is the
obligation of a government or its agencies (or that is
guaranteed by the government), and how much said
government is anticipated to fulfil these obligations.
For example, if a government agency refuses to carry
out debt refunding, this could impact local lenders and
lead to losses. This would of course have roll-on effects
to local businesses and anyone undertaking trade with
them.
Neighbourhood risk

Neighbourhood risk, also known as location risk,

may not be the direct fault of the country with
which your clients are dealing, but instead is caused
by trouble elsewhere. Neighbourhood risk can be
caused by:
Geographic neighbours.
Trading partners.
Co-members of certain institutions or organisations.
Strategic allies.
Nations with similar perceived characteristics.
Subjective risk

Subjective risk is not a term that is used

everywhere, but it measures factors that
are common to most risk assessments –
and could greatly impact foreign business
owners trading with a host nation.
Subjective risk is about attitudes, and can
include social pressures and consumer
opinions – whether to certain types of
goods or certain types of enterprise. 
Exchange risk

Any predicted loss created by sudden changes in

exchange rate are generally covered under the
exchange risk factor. This is another all-encompassing
term as fluctuations in the foreign exchange can be
caused by a wide variety of factors. Economic and
political factors such as those mentioned above can be
significant drivers of exchange risk, although
currency reserves, interest rates and inflation are also
potential factors.
One example of political change that can harm
economic risk is a change in currency regime, for
example from fixed regime to floating.
Transfer risk

The final country risk assessment factor we'll discuss

today is transfer risk. This is where the host
government becomes unwilling or unable to permit
foreign currency transfers out of the nation. Sweeping
controls such as these may be a side effect of a nation
in crisis attempting to prevent creditor panic turning
into significant capital outflow. A major example of
this occurring is the Malaysia credit controls after the
1997-98 Asian currency crisis.
Regardless of cause, capital control can prevent
foreign traders from retrieving profits or dividends
from the host country.