Coface underlines improvement in seven emerging countries. - According to the most recent forecasts by Coface (French insurance company for external trade) published in mid-July, the pace of growth of emerging countries is set to continue at 5.7% in 2011, despite a slowdown in relation to 2010. This contrasts with the growth of only 1.8% for developed economies. The buoyancy of emerging economies goes hand in hand with improvements in the business environment. Thus, four years after launching its business environment assessment, Coface is announcing several upgrades in central Europe, Africa and Latin America. Coface notes: (1) Central Europe - marked improvement in the business environment: the business environment assessments of three central European countries have been upgraded: Poland (from A3 to A2), Lithuania (from A3 to A2) and Macedonia (from C to B). These three countries have in common an improvement in the access to companies' financial information. Poland and Lithuania have benefited from the process of their integration into the European Union. Lithuania has developed its infrastructures, while in Poland there have been notable improvements in the quality of regulation, due to streamlining of its administrative procedures and its tax system and an improved supervision of its banking system. Macedonia, which plans to join the European Union, has made great strides in terms of governance, reducing corruption and increasing respect for the law. (2) Greece and Cyprus among the worst rated countries in Europe: In contrast, the business environment assessments of Greece and Cyprus have been downgraded to A3, which places them among the worst rated countries in the European Union. Only Romania and Bulgaria (A4) have worse assessments. Coface finds access to financial information to be difficult and notes a worsening of companies' payment behaviour, which indicates greater difficulties concerning debt collection. Cyprus also stands out for its opaque banking system. Greece and Cyprus have seen their country risk assessments drop a notch. These downgrades reflect the impact of the Greek sovereign debt crisis on the country's companies, which is conveyed through various channels: bank credit is difficult to obtain by companies and, if obtained, is expensive. The macroeconomic climate deteriorates as the recession deepens. Lastly, companies are bearing the brunt of the austerity budget plan, which, in some cases, could lead to their experiencing overdue payments owed to them by the country's administration. Furthermore, Coface notes deterioration in the payment behaviour of Greek companies in 2011. The country risk for Cyprus has increased because of its banks' exposure to the Greek risk. (3) Africa and Latin America: progress has been made in the reliability of financial data: Coface has raised the business environment assessment of Colombia by one notch to A4, placing it above the average of emerging countries and ranking it first in Latin America, in terms of accessibility and reliability of financial data. Despite the country's persistent corruption, Coface notes greater reliability of financial information, thanks to stringent tax audits. In Sub-Saharan Africa, three countries have seen their business environment assessments raised: Ghana (from C to B), Mozambique and Tanzania (both from D to C). These countries' upgrades are in part due to the progress made in fighting corruption. However, Coface finds that the less-than-stringent legal obligations of Mozambique and Tanzania mean financial information is difficult to access in both countries. Ghana has made noteworthy progress, confirmed by the fact that it is placed above the average of the 212 countries ranked by the World Bank. (4) Middle East - the institutional environment impacted by the Arab spring: Bahrain's downgrade from A3 to A4 comes within the context of the Arab spring, in which the government's efficiency is hampered by the population's strong resentment towards those in power. Though the country remains above the average of emerging countries, Coface points out a worsening access to financial information. “Since the launch of its business environment assessment in 2007, Coface has revised the assessments of some ten countries, thus reflecting the improvement in its payment records of companies in emerging countries. Upgrades of seven emerging countries support our finding of a gradual improvement in country risk of emerging economies, an improvement that is not solely due to a resilient economic situation. It is also due to more structural developments, that is, the improved governance of these countries”, comments Yves Zlotowski, chief economist of Coface. (I.L./transl.fl)