Despite immense GDP growing in the last old ages, due fundamentally to the oil militias, Guinea Equatorial presents several inequalities and hazards, chiefly of them derived from the political state of affairs.
This state, which could be a little but interesting market for some European states, has had an first-class DGP growing since the find of oil militias in 1996 and the cancelation of external debt with EU states ( chiefly Italy and Spain ) . On the other manus, this economic growing and the addition in oil gross have had really small consequence on poorness decrease and on bettering the general criterion of life of the population and their buying power, every bit good as making another sort of industry. The poorness rate in Equatorial Guinea remains highly high, and there are few people in the medium category degree. Wealth remains in the custodies of a few, particularly relations and friends of the president Obiang.
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A hazardous political ( particularly in medium and long term ) and economic state of affairs ( an economic system wholly dependent on oil militias ) and an frequently really hard concern environment can hold a really important impact on corporate payment behaviour. Expropriation and authorities action hazard can non be neglected for oppositions to the government. However, the state itself should non show liquidness or solvency jobs in the entrance old ages.
2.- THE COUNTRY AND THE MARKET
As can be seen on the map, Equatorial Guinea is a really little state in the seashore of West Africa. It has a population of 676,000 occupants. The capital is Malabo where 100,000 dwellers unrecorded. Equatorial Guinea got its independency from Spain in 1968. Therefore, Spanish, Gallic and Portuguese are official linguistic communications.
The president of Equatorial Guinea is Teodoro Obiang, who has been in charge since the putsch vitamin D ” cheapness of 1979. The current Fundamental law from 1982, written with of import aid from the United Nations, gives Obiang general powers, including naming and disregarding members of the authorities, making Torahs by edict, negociating and signing pacts and naming legislative elections. Obiang is besides commander-in-chief of the ground forces and curate of defence, holding his household a great power in the state.
Equatorial Guinea has a comparatively high GDP in buying power para of 36,100 US dollars ( CIA Factbook ) which is in 2009 the thirtieth highest in the universe, higher tan states like Germany, Spain or Italy.
However, of the entire population, 67 per cent are populating in utmost poorness ( income of less than one dollar a twenty-four hours ) . This figure rises to 70 per cent in rural countries ( UN information in 2001 ) . Furthermore, harmonizing to a family study for poorness rating ( EEH ) carried out by Equatorial Guinea in 2006, 76.8 per cent of the population is hapless, which translates into a head-of-household poorness ratio of 66.4 per cent. For case, one of every three adult females does non have aid in the childbearing. The rate of female parent mortality is of 680 for every 100.000 born alive babes.
Presently, Equatorial Guinea is the third-largest oil manufacturer in Sub-Saharan Africa. Its oil production has risen to 360,000 barrels/day. This manner, Guinea ‘s economic system depends in a immense sum on the oil monetary values, as for the IMF, oil represents around 75 % of GDP. Besides oil, Equatorial Guinea is rich in natural gas sedimentations, particularly methanol, with estimated militias of 40 billion M3s. Apart from this, Equatorial Guinea bases a little part of its GDP besides on Forestry, subsistence agriculture, and fishing.
Sing the Business Environment, The 2010 edition of the World Bank ‘s study on the concern environment, Making Business 2010, gives Equatorial Guinea a universe ranking of 170, down from 157 in 2005. This manner, it takes about 136 yearss to open a concern with a sum of 20 mean processs. This study besides stresses the rigidness of the Equatoguinean labour system.
3.- POLITICAL RISKS
President Obiang has late been re-elected by landslide in 2009. The President reappointed Prime Minister Ignacio Milam Tang and installed a new authorities in Equatorial Guinea on January 12, 2010. This election raised several concerns highlighted by Human Rights Watch.
The corruptness watchdog Transparency International has put Equatorial Guinea in the top 12 of its list of most corrupt provinces. This has affected every bit good the entree to funding as a series of assistance plans held by the World Bank and the IMF have been cut off since 1993 because of authorities corruptness and misdirection of financess. This manner, Equatorial Guinea is no longer eligible for concessional funding because of big oil grosss.
A US Senate study in 2004 found that Riggs Bank helped functionaries of Equatorial Guinea to steal 100s of 1000000s of dollars in oil grosss. The Senate study found that Riggs Bank helped authorities leaders in Equatorial Guinea pull off oil grosss to histories put up for them in Washington. Equatorial Guinea has been cited by the U.S. State Department for human rights maltreatments, corruptness, and recreation of oil grosss to authorities functionaries. Some were authorities histories, while others were the private histories of President Teodoro Obiang Nguema, other authorities functionaries, and their households.
IMF managers have worried about Guinea ‘s financial subject, answerability, and direction of public sector resources. This manner, IMF functionaries besides have stressed the demand of crystalline economic information. However, until the minute, oil wealth allows the authorities to avoid bettering these facets.
Harmonizing to BBC and since 2004, political relations within the state are presently dominated by tensenesss between Obiang ‘s boy, Teodorin, and other close relations with powerful places in the security force. The tenseness may be rooted in power displacement and power sequence, given the personality-based nature of the government. This manner, and despite evident political stableness, the state of affairs could acquire easy worse if sick wellness were to compel Mr Obiang to discontinue all of a sudden, given the personality-based nature of the government.
This raises the inquiry of the domestic political force, which should be taken into history, every bit good as the opportunity of civil war after Obiang. For International Amnesty, there are tonss of political captives in the Guinean prisons and grounds for possible future political turbulencies. Besides, it may be besides taken into history an rebellion of other cultural groups after Obiangs ‘ theoretical leave ( as he belongs to the bulk cultural group Fang ) .
Although really little, there is besides a hazard of terrorist groups in the Niger Delta. This manner, the possibility of plagiarists in the Equatorial Gulf is besides present.
3.- ECONOMIC Hazard
As has been antecedently pointed out, Equatorial Guinea is wholly dependent on its exports of oil ( chiefly to the US, China and Spain ) , and in smaller proportion, gas. It must be noted that since the find of oil militias in 1996, agribusiness has been neglected and non modernized. Same state of affairs faces the industry.
With this the economic system is capable to fluctuations in the oil monetary values, but generates larges influxs of foreign exchange. As a effect, as it can be seen in the chart of the Economist Intelligence Unit, it has generated a high rising prices rate, particularly in existent estate and labour. Besides, this rising prices is expected to be over 5 % in 2010 and 2011.
Similarly, existent GDP is forecast to turn by 2 % in 2010 and 3.7 % in 2011. This could let go oning the authorities financial policy. The current-account shortage is forecast to contract from an estimated 7.4 % of GDP in 2009 to 4.4 % of GDP in 2010, before widening aggressively to 8.8 % of GDP in 2011 as a consequence of the deteriorating trade balance.
Harmonizing to informations late published by the Gallic cardinal bank, Banque de France, the budget excess reached an estimated 19.9 % of GDP in 2008. Part of this gross is due to the high oil monetary values. On the other manus, the authorities is increasing the public disbursement in signifier of public investings and increased subsidies. This represents a good chance to make a stable industry and a favourable concern environment, or to put in touristry. To the minute, concerns, for the most portion, are owned by authorities functionaries and their household members and present inefficiencies and misdirection. Given this facts, and due to the features of the government, expropriation and authorities action hazard can non be neglected, particularly for oppositions to the president.
With regard to the hereafter, the CIA factbook establishes an oil modesty of 1.1 one million millions barrel. Given the current production of 359,200 barrels per twenty-four hours, this could intend militias for no more than 9 old ages. This manner, in the long term, terrible jobs may endanger the Equatoguinean economic system if another industry does non take the lead of oil.
3.1 Sovereign and currency hazards
Due to the features of the Equatoguinean economic system, and the copiousness of foreign militias, crowned head hazard is non really high. Concretely, as these debts represent less than 1 % of foreign-exchange militias the external duties should be met. However, controls of financial disbursement remain weak, and more transparence in public figures would be desired as stated by the IMF.
Sing the currency, the nog of the Cardinal African Franc to the euro is about certain to be maintained at its current rate. In this sense, the frights of devaluation ( in order to better the trade shortage of the states involved ) expression to be far. In this respect, the states seem to be able to accept an over rated currency instead than any major devaluation would damage the Franc Zone ‘s repute for macroeconomic stableness. In any manner, currency convertibility hazard is really low.
The Equatoguinean banking sector is rather little but seems to be stable. The four Bankss, have a good hazard screen ( net-equity ratio is over 8 per cent ) and have resisted good so far the planetary economic crisis. Concretely, the Bankss did non have a large stock of toxic assets and are expected to be benefited from the authorities financial disbursement. A rapid rise in non-performing loans is non expected.
It must be noted, that although Cardinal African CFA franc ( XAF ) has been pegged to the euro at a rate of 655.957 CFA francs per euro ; Cardinal African CFA franc ( XAF ) coins and bills are non accepted in states utilizing West African CFA francs ( XOF ) , and frailty versa, even though the two currencies trade at par.
Despite selective Torahs application and corruptness, the state ‘s natural resources have helped to pull public and private capital. For case, in 2006, Equatorial Guinea received from more than tierce of foreign direct investing in the Central Africa part.
3.2 International Aid
The international assistance to Equatorial Guinea is non really important. In the 1980s and 1990s, this state, received foreign aid from legion bilateral and many-sided givers, including European states, the United States, and the World Bank. However, bulk of these assistance plans have ceased wholly or hold diminished, due to the DGP growing, the low external debt and political corruptness.
Spain, France, and the European Union continue to supply some undertaking aid in concrete facets, as do China and Cuba. The authorities besides has discussed working with World Bank aid to develop authorities administrative capacity even if it is no longer eligible for concessional funding because of big oil grosss.
3.3 Country hazard ratios
After a bilateral external debt renegotiation with Italy and, specially, Spain, the state ‘s external debt, is the lowest in the part. Therefore, the ratio of external debt in relation to GDP fell from 4.1 per cent in 2005 to less than 1.8 per cent for 2007 and 2008. On the other manus, debt service as a per centum of budget gross increased from 1.1 per cent in 2005 to 1.9 per cent in 2006, but still remains non debatable. This manner, the indexes for solvency seem to be far from a hard zone even if we refer to an exporter state with an unfastened economic system. Concretely, exports mean 8.27 billion or 74 per cent of the GDP in the official exchange rate ( 11.18 one million millions ) .
Sing the liquidness ratio, Equatorial Guinea has a stock of $ 4.575 billion foreign exchange militias and gold. With a imports figure of 2.851 billion ( C.I.A. Factbook ) , it means 19,5 months of endurance, which is more than adequate.