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International Risk Roundup: Spring 2012

Creditworthiness and paying habits along sovereign lines was, as expected, a recurring topic of interest throughout FCIB's Annual International Credit and Risk Management Summit in Hamburg in May. While sources noted the importance of weighing conditions within each region of a country and relationships with existing customers in such places, FCIB delegates still craved information at the national level, and not just about often-discussed problem nations like Greece, Spain and Russia. Based on panelist, speaker and delegate observations, here is a rundown of some of the latest risk and big-picture economic trends to keep in mind for some less-discussed nations:

Argentina and Bolivia: Concern is growing among those who do business in these nations as the threat of confiscation, such as in Venezuela in the recent past, continues to rise. As such, the short-term credit market is rife with risk, and options like credit insurance are in short supply. The key phrase here is "wait and see."

Bangladesh: Emerging as a manufacturing outsourcing destination because of lower wage demands than other production powerhouses such as China and India.

Egypt: Major changes to the banking system are taking place post-revolution. Hence, even timely payments are often subject to delays of a week or more. One panelist noted that Egypt resembles the Turkey, now a sub-BRIC emerging economy of note, of 25 years ago. Granted, the process of change and reaching potential is more likely to come over decades, not months or years.

Hungary: Those doing business here generally do so on open account following a short period of COD-type arrangements, and characterized Hungary as one of the better-paying European nations at present. However, it often takes three to five days for clearing and gaining access to the payment.

Italy: This PIIGS nation fell off media radar somewhat, but is doing a good job of quickly executing reforms. However, its debt burden remains tremendous, and the nation could struggle more if well-publicized problems in Greece or Spain escalate further.

Netherlands: Held up as the example of how a nation can progress from perennial debtor (up to the late 1990s, early 2000s) to creditor over the course of a decade. Few are in better a position financially, save Germany, in the European Union at present.

Nigeria: Continues to be a high-risk market although, because of the oil trade, can be lucrative as well. Financial problems at Pipelines and Products Market Company (PPMC) remain a concern with possible spillover effect. Fuel shortages have been blamed on PPMC woes, and it is estimated the private market has exposure well exceeding $1 billion.

Slovenia and Croatia: Cash-flow problems for companies there have been an issue for years, but that seems to be abating somewhat.

Tunisia: Showing no improvement, payments are continually late or delayed. A wait of a month for banks to make the money available is not out of the question even when payment is made on time.

United Arab Emirates: The UAE actually benefitted from the Arab Spring revolts. Like parts of Turkey, Dubai now has become a bit of a trading center between more Islamic-tied business, including those operating under Sharia Law, and the west.

- Brian Shappell, CBA, NACM staff writer