Lets Talk “Actual” Sovreign Risk., page-2

TowieO,

One of the things that was most noticeable to me on recent site visits in Myanmar and Cameroon was that while there is an hysteria about risk in countries such as these, often generated off real but limited issues then applied to an entire populace, the lived reality on the ground was far different.

Now that is not saying that many of these countries are not coming from some distance back and that they dont have a job ahead of them in improving further the lives of their citizens. However, what I saw was progress being achieved and aspired to. Every country has room to grow, even those with a low perceived 'country risk'. One of the funniest experiences was that some of the professionals I met in one county would be very uninclined to be invested in the other country for 'perceived country risk' reasons and vice versa. So the African professionals very comfortable with what they knew, their experience range and the Asian professionals very happy with their environment yet both saw each others environment as a 'risky' environment. This reinforced for me how one of the biggest edges we have as fundamental investors, the gap between price and value, can be powerfully aided by this gap between 'perceived risk' and actual risk.

Of course in any geopolitical region, the people running the company and the way the projects are strategised are still of the utmost importance. I look for situations where there is a tier one resource first and foremost (mineralisation, infrastructure etc) , this allows win-win scenarios to be far more easily achieved than when the dollars in a project are marginal and all parties cant be adequately compensated. Next I look for a management team that demonstrates skills and experience appropriate to the project. then I look to the way 'rule of law' can be expected to be implemented within the host country (legal framework, regulatory environment etc).

Needless to say, I'm invested where personally I see great opportunity and often where the risk is IMO over inflated.