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Credit, political risks rising in 18 nations: Analysis

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Rising credit and political risk claims are increasing the danger of doing business in 18 countries, an analysis by Chicago-based Aon Risk Services concludes.

“The risk factors that we think are the ones to watch in 2010 are sovereign nonpayment, exchange transfer and political interference risk,” Miles Johnstone, director of Aon Crisis Management, a division of Aon Risk Services, said during a Wednesday webcast. “They are all on the rise as the fallout from the global financial crisis continues to be felt.”

Aon identified 18 countries that were downgraded on its 2010 political risk map to riskier categories, largely because of credit and political risk claims.

Of the 18 downgrades, Aon highlighted four—Ghana, Latvia, Ukraine and Yemen—as particularly representative of this year's analysis, where credit and political risk claims have been heavy. The four nations' economies have been thrown into turmoil that sparked discontent like political uprisings among their populations, Aon said of downgrading the countries.

Aon downgraded three countries—Sudan, Venezuela and Yemen—into the“very high” risk category.

“One of the major findings from our analysis this year is really the continuation of a trend we identified in 2009—namely, that the fallout from the global financial crisis of late 2008 and early 2009 continues to manifest itself in increased levels of political instability,” Mr. Johnstone said during the webcast. “The initial impact has shifted from being an economic problem to a political problem.”

Aon upgraded nine countries to a less risky status: Albania, Columbia, East Timor, Hong Kong, Myanmar, South Africa, Sri Lanka, Vanuatu and Vietnam.

A new feature of this year’s map is an index that ranks countries at the greatest risk of having their food and water supplies disrupted. At the top of the index is Mauritania, a country where the Aon Corp. unit said it believes agriculture will suffer from the effects of global warming.

A surprising entry in the index is the Netherlands, Mr. Johnstone said. He said the analysis concluded that potential sea level rises could threaten the country’s supply of fresh water.

In this year’s report, Aon also analyzed potential disruption of agricultural commodities and nations most at risk of having such problems. Cocoa topped the list, with Indonesia, Ivory Coast and Nigeria most likely to suffer the greatest problems.

Aon has produced the risk map for 17 years, using an analysis by Oxford, England-based consulting firm Oxford Analytica Ltd.

Information is gathered from analysts and insurance underwriters on the dangers of terrorism, war, strikes or riots, the nonpayment of sovereign debt and other perils.