How does country risk matter for foreign direct investment?

In this paper, we aim to identify the political and financial risk components that matter most for the activities of multinational corporations. Our paper is the first paper to comprehensively examine the impact of various components of not only political risk but also financial risk on inward FDI, from both long-run and short-run perspectives. Using a sample of 93 countries (including 60 developing countries) for the period 1985-2007, we find that among the political risk components, government stability, socioeconomic conditions, investment profile, internal conflict, external conflict, corruption, religious tensions, democratic accountability, and ethnic tensions have a close association with FDI flows. In particular, socioeconomic conditions, investment profile, and external conflict appear to be the most influential components of political risk in attracting foreign investment. Among the financial risk components, only exchange rate stability yields statistically significant positive coefficients when estimated only for developing countries. In contrast, current account as a percentage of exports of goods and services, foreign debt as a percentage of GDP, net international liquidity as the number of months of import cover, and current account as a percentage of GDP yield negative coefficients in some specifications. Thus, multinationals do not seem to consider seriously the financial risk of the host country.

The Sandinista Revolution and Post-Conflict Development--Key Issues

Following Daniel Ortega's victory in the presidential election held in November 2006, Nicaragua has been undergoing a transition from a democratic to authoritarian system. In the 1980s, Ortega served as President of the Sandinista government and implemented a Cuban-type socialist system, but the system failed and democracy was established during 1990-2007. Considering this failure, why did Ortega succeed in taking power again? This paper provides a brief history of modern Nicaragua and gives some insights into the twists of Latin American politics. The paper was prepared for the international seminar on Helping Failed States Recover: The Role of Business in Promoting Stability and Development, organized by the University of Kansas Center for International Business Education and Research (CIBER), held on April 4-6, 2007 in Lawrence. The opinions and views expressed herein are those of the author. All mistakes and/or errors are entirely the author's responsibility.

Conflict and land tenure in Rwanda

The purpose of this paper is to shed light on the historical relation between conflict and land tenure in Rwanda, a country that experienced a harsh civil war and genocide in the mid-1990s. The victory of the Tutsi-led rebel, Rwandan Patriotic Front (RPF) at that time triggered a massive return of refugees and a drastic change in land tenure policy. These were refugees who had fled the country at around the time of independence, in 1962, due to the political turmoil and persecution (the "social revolution") and who shared the background of the core RPF members. The social revolution had dismantled the existent Tutsi-led political order, compelling many Tutsi families to seek refuge outside their homeland. Under the post-independence rule of a Hutu-led government, the Tutsi refugees were not allowed to return and the lands they left behind were often arbitrarily distributed by local authorities among Hutu peasants. After victory in the mid-1990s civil war, the newly established RPF-led government ordered the current inhabitants of the lands to divide the properties in order to allocate portions to the Tutsi returnees. Different patterns of land holding and land division will be explained in the paper from data gathered through the authors' fieldworks in the southern and eastern parts of Rwanda. Although overt resistance to land division has not been observed to date, the land rights of the Tutsi returnees must be considered unstable because their legitimacy depends primarily on the strength and political stability of the RPF-led government. If the authority of RPF were to weaken, the land rights will be jeopardized. Throughout Rwandan history, in which political exclusion has often led to serious conflict, macro-level politics have repeatedly influenced land holding. Promotion of an inclusive democracy, therefore, is indispensable to escape the vicious circle between political instability and land rights.

Food crop diversification as a risk mitigating strategy during conflict : evidence from Cote d'Ivoire

This study examines the significance of food crop diversification as a household risk mitigating strategy to achieve "self-sufficiency" to ensure food security during the civil conflict in Cote d’Ivoire. The main motivation for seeking self-sufficiency stems from the fact that during the period of heightened tension due to conflict, the north–south divide set by the UN peacekeeping line disrupted the agricultural supply chain from the food surplus zone, Savane in the north. While we theoretically predict a positive effect on crop diversification because of interrupted food supply chain, we also consider a negative effect due to the covariate shocks. We find robust and statistically significant empirical outcomes supporting such claims. The baseline outcomes withstand a series of robustness checks. The net effect of conflict on crop diversification is positive but not statistically significant. In addition, we find that increasing vulnerability to poverty and food insecurity during conflict seems to be the underlying factors that motivate farm households to adopt such coping strategies.