by anon1984

Created on: April 22, 2008   Last Updated: September 02, 2008

Political risk is one of the most considerations for international trade. By understanding several risks will avoid the companies from any losses. These risks should be considered from beginning of the trade process and pointed out scenarios that possibly to occur because of domestic or international politics. At this point of view, I will address 3 groups in political risks:

1.Domestic Politics
Different countries have various political environments, especially in Asia, Latin America and Africa. The unstable political situation will be affected to any businesses as well as the changes of government from different political party also influence in regulation. For example in Venezuela, President Hugo Chavez announced new policies to encourage the economic development. There are several controversy regulations about labors, economy and foreign policies. As an oil producer country, Venezuela is a great opportunity for business. But, nationalization policies announced by Chavez government have increased risks of investments by foreign company and even discourage foreign companies to do business in Venezuela.

The changes of government in a country influences the business safety, because sometimes there are no safety guarantee from a government for any properties, venture or specific assets and if there is unexpected scenario occurs, the companies faced with losses even though there is a compensation but unfair.

2.International Interfere
Differ with domestics politics, international interferes will affect to domestic stability politically or economically. The interventions of international community drive foreign businessmen to move their business to other countries that having no influences by other countries. For example, Burma's military dictator who arrested Aung San Suu Kyi has stimulated international protests for doing business in Burma. The impacts of human rights violations and drugs trade were embargo in several sectors by international community which meant lower economic development because of inflation. As a rich agricultural country, Burma should be a great opportunity place for agriculture business. Unfortunately, international community interferes discourage foreign companies to do business in Burma.

The newest action by international community is boycott of Olympic 2008 in Beijing, China caused by human right violation in Tibet where killed hundreds people. By having boycott for Olympic 2008 will affect domestic economic and international business. And

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