Risks in Iran, Ecuador, Angola, Lebanon and Chad

14 March 2017

In the March 2017 edition of their monthly newsletter Risk Outlook, JLT Specialty's Credit, Political and Security Risks (CPS) Analytics team assess the security, trading and investment environment in Iran and four other countries that have been the subject of recent enquiries by JLT's client base.

Here are a few of the team's findings:

Iran: The imposition of fresh US sanctions in February 2017 due to a ballistic missile test by Iran on 29 January 2017 is unlikely to result in the cancellation of the January 2016 Joint Comprehensive Plan of Action (JCPOA) nuclear agreement. Although US President Donald Trump will attempt to implement stricter enforcement of the nuclear deal in the short term, this is not likely to spark Iranian non-compliance of the JCPOA. The maintenance of the JCPOA will be vital for Iran to attract the investment necessary for sustained economic stability; the country hopes to attract almost USD 13 billion of foreign direct investment by the end of FY 2016/17.

Ecuador: An April 2017 run-off presidential election, after the first round in February 2017 failed to deliver a conclusive outcome will most likely result in the victory for the right-leaning candidate Guillermo Lasso. If elected, Lasso would likely remove import tariffs that have been used by President Rafael Correa to control the country’s current account deficit, leading to a rise in demand for imports in the short to medium term. A Lasso administration would mark the end of a decade of left-wing rule by Correa, which has seen the adoption of populist policies that hinder private investment. Lasso will look to reduce the tax burden on foreign companies and remove tariffs in an attempt to attract foreign investment and create jobs.

Angola: Structural weaknesses exist in the Angolan economy. Hydrocarbon revenues still account for around 40% of GDP, leaving the economy exposed to a renewed downturn in global prices. Sovereign credit risks are also elevated. The country's debt burden stood at over 70% of GDP at the end of 2016, giving Angola one of the most elevated debt burdens in the region. Whilst Angola’s ratification of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards in October 2016 strengthened investor protection, some risks remain for overseas investors.

Lebanon: The Syrian civil war will continue to negatively affect the security environment and economic growth in Lebanon. There is a heightened risk of attacks by Sunni Islamist groups and individuals linked to Islamic State due to Hezbollah’s support for President Bashar al-Assad in the Syrian conflict. Regional insecurity will weigh on infrastructure investment and exports, leading to modest growth of around 2% in 2017, up from 1.7% in 2016. The election of President Michel Aoun in October 2016 ended a presidential power vacuum of over two years and has the potential to break political deadlock, allowing the country to address country economic risks.

Chad: Suppressed hydrocarbons prices will continue to have a negative effect on Chad's oil-dependent economy, weakening the country’s fiscal position and dragging on economic growth. There are significant legal and regulatory risks under President Idriss Déby, creating a challenging operating environment for hydrocarbons companies; in October 2016, a consortium headed by US firm ExxonMobil was handed a record USD 74 billion fine by the High Court over the payment of royalties.

To get detailed information on any of these countries, please click on the respective country's name and visit the JLT Specialty Limited website