It is all too easy to see explosive media headlines pronouncing country expropriations of resource properties or companies - events that have occurred in recent weeks in both Argentina and Bolivia to name but two countries - and conclude all developing (and some developed) countries are unsafe places in which to invest. As a minimum, it makes sense for investors and traders to distinguish between:

• resources that are or may be:

  • strategic to a country such as oil & gas, and perhaps potash,

  • important to a country in the context of its trade balances, such as copper is to Chile, and

  • resources that are not strategic such as diamonds or precious metals;

• the current and prospective political bents of country governments;

• the propensity and likely propensity of a country to 'change the rules' to the short-term benefit of their populaces, as contrasted to looking to longer-term benefits to be realized from development; and,

• each company's attitudes and behavior in the broad context of 'corporate social responsibility'.

What all the current talk and practical examples of country risk 'in action' ought to do is no more/no less that what is done in practical market and investment terms with all other financial and market risks. That is, it ought to focus the attention of investors and traders on all aspects of country risk as they assess whether to invest or not to invest in any given company operating in any given country or countries.

Country risk has always existed, it is just that it now seems to be getting ever increasing attention. Country risk does not mean all investors and traders ought to 'head for the hills'. It simply means that investors and traders ought to clearly identify that there are 'hills', and carefully assess whether the tops of those hills have suitable rewarding prizes if one elects to attempt to climb them.

Topical Reference: Accurately assessing political risk: what Argentina can teach us, from Mineweb, Sara Patterson, July 13, 2012 - reading time 4 minutes.