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Managing Political Risk in Latin America
Elections matter in Latin America, campaign rhetoric less so. Policy is driven by the financial and political backers of winning candidates and the confidants to whom they entrust important postings. In some jurisdictions, the rule of law is powerful enough to counter-weight the pull of family ties, financial motivation or political debt. But in most countries, at most points of time, influence is the currency that dictates policy and the enforcement (or not) of regulations.
Investors who operate in highly regulated industries must be knowledgeable of the full political risk their projects face and remain aware of its changing dynamic to continue to mitigate all forms of political risk. Such an effort can rarely be done internally and requires the discreet intelligence gathering and reporting of experienced market intelligence professionals.
All Americas Market Intelligence (AMI) industry practices offer political risk analysis as a core service to their clients, but none more than our Natural Resources and Infrastructure practices where LTO (license to operate) risks are today the most important deciding factor (along with commodity pricing) to determine a project’s viability.
Political risk must be a broadly defined term for its analysis to be effective. It is not enough to focus on capital city politics. Most projects are also impacted by local community risk as well as a gamut of risks whose levers originate well outside of national government. AMI political risk assessments of projects often look at local mayoral politics, province or state level politics, the actions of local NGOs, unions and community groups as well as illicit players whose influence can loom large in remote locations.
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