Risk in Cambodia: a review of Country Risk Premium and its alternatives for investors and Cambodian financial markets

Abstract

Just over a year ago, Javier Milei burst onto the political scene becoming President of Argentina. As a self-identified minarchist, he promised to take a chainsaw to government agencies and regulations to unleash Argentines from decades of state control over the economy ushering in liberty and restoring economic fundamentals to the beleaguered country. Thus far, his focus on economic principles has been showing signs of progress. Inflation is stabilizing, business confidence is growing, tariffs are falling, and the official foreign exchange rate is now much closer to the black market “blue dollar” rate in the country. One surprising effect is that economic ideas have become central to how Argentine’s view their country and its remaining problems. This is most easily seen in the Country Risk Premium (CRP), which measures the increase in yield needed by capital owners to consider investing in the country compared to a risk-free rate. The CRP is shown, alongside exchange rates, on a ticker on all TVs in Argentina. Great excitement and hope is palpable as the CRP continues to decline, from a recent high of 4362 bps in 2020, to now below 600 bps. It is an easy to understand number, both clear and measurable, that everyday citizens can use to track the progress of the country and which is bolstering the optimism of an economic comeback and attracting investment.