“Country Risk and Foreign Direct Investment”

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Date Submitted: 03/03/2011 04:08 PM

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Duncan H. Meldrum’s article “Country Risk and Foreign Direct Investment” is one of the many articles today discussing the topic of Country Risk Assessment. By comparing Michel Henry Bouchet, Ephraim Clarke, and Bertrand Groslambert’s

“Country Risk assessment: A Guide to Global Investment Strategy” I will attempt to discuss and characterize Country Risk Assessment along with Meldrum’s findings on the matter.

The two writings seem to be in accordance on many topics, but Meldrum’s article is solely focused on the topic of Country Risk and Foreign Direct Investment rather than the many differences within the topic. Meldrum begins his article by noting that Country Risk is a somewhat indefinable and ambiguous term in today’s world. Bouchet, agreeing with this idea, exhibits this argument by referencing numerous authors’ different definitions. Through Bouchet’s research it could be concluded that most researchers in this field, believe that risk must be defined before any sort of definition of Country Risk can be compiled. Meldrum begins his article with a logical but somewhat vague introduction to the topic:

“All business transactions involve some degree of risk. When business transactions occur across international borders, they carry additional risks not present in domestic transactions. These additional risks, called country risks, typically include risks arising from a variety of national differences in economic structures, policies, socio-political institutions, geography, and currencies. Country risk analysis (CRA) attempts to identify the potential for these risks to decrease the expected return of a cross-border investment.” (Meldrum, 2000)

This statement denotes key topics where the differences in views of Country Risk begin to occur. Depending on the views of the author; the definition of risk and its many categories change drastically. For example Meldrum views risk as a negative outcome instead of a difference in variance; this indicates Meldrum...