The woman in the dark suit (serious women always wear black suits) leafed through the papers on her desk. She was a fund manager and she was nearing the deadline for an investment decision by one of her leading clients, who wanted to invest in sovereign bonds in a developing country. She had identified three possible candidates with low, middle and high income levels for the investment. Her task now was to select one of the three as the investment site, and to rank the others in order of priority in case her client had an objection to the number-one choice.
The woman had data on certain basic indicators for the same six-year period for all countries. She also had some basic descriptive data on each country’s political, economic and labour situation and indicators on certain aspects of the individual countries´ institutions so that she could evaluate other types of risk.
1. Which variables from the data presented here should the fund manager select to assess the risk represented by these countries? Defend your approach and prioritize (do not use all variables some might not be relevant in your decision!!). Remember that it is an investment in government bonds NOT portfolio investment or FDI.
2. How will she (and you) rank the countries for the investment decision based on the macroeconomic data? Justify. Present the scorecard you used in your analysis.
3. Would your decision change if you were looking for an FDI investment in the manufacturing sector? Be brief (just state how the variables that you considered for government bonds would change for FDI investment)