Will Bahrain and Iran address their financial woes before their human rights issues?

 

Country Risk analysis involves more than just financial indicators. It also includes the comfort businesses have regarding political institutions, rule of law, and a country’s human rights record.  Last week, Moody’s Investor Services downgraded Bahrain from Baa2 to Baa1 with a negative outlook for the next quarter.  Moody’s focuses on the financial and credit scores of countries as borrowers and lenders.  Will Bahrain and Iran address their financial woes before their human rights abuse issues?

Moody’s downgrades Bahrain’s government issuer rating to Baa2; outlook negative

Thursday 19, September 2013 by Robin Amlôt Source: CPI Financial

Moody’s Investors Service has downgraded Bahrain’s government issuer rating by one notch to Baa2 from Baa1, and assigned a negative outlook to the rating. The rating action concludes the review for downgrade announced in June 2013.

The rating action is driven by (1) the government’s weak fiscal position, arising from a high and rising fiscal break-even oil price; and (2) the outlook for lower-trend economic growth over the medium term.

The negative rating outlook reflects the high degree of event risk,particularly regarding Bahrain’s susceptibility to domestic and regional geopolitical instability, as well as potential negative impact from an oil price shock.

At the same time, Moody’s lowered Bahrain’s country risk ceilings to A3 from A1. The long-term foreign currency bond ceiling was also lowered by one notch to A3, while the short-term foreign currency bond ceiling was affirmed at Prime-2. The long-term foreign currency deposit ceiling was lowered to Baa2 from Baa1, while the short-term foreign-currency depositceiling was affirmed at Prime-2.

The offshore banking centre’s long-term foreign-currency bond and bank deposit ceilings were lowered by one notch to A2 from A1, while the short-term ceilings were affirmed at Prime-1.

RATINGS RATIONALE

–RATIONALE FOR DOWNGRADE

The first driver underlying Moody’s decision to downgrade Bahrain’s sovereign rating is the country’s weak fiscal position. The IMF estimates… [Click here to continue.]

Iran to invest over $1 bln in aluminum sector

Iran plans to invest around $1.2 billion in its aluminum industry as part of plans to nearly quadruple production by 2025, an official at mining group Imidro said on Thursday.

Iran is the 20th largest producer of aluminum in the world, according to the Iranian Mines and Mining Industries Development and Renovation Organization (Imidro), and needs the extra supplies to meet demand which is growing by 10 percent a year.

Aluminium is a lightweight metal used widely in transport, packaging and construction. It can also be used to make tubes for uranium enrichment gas centrifuges.

Iran’s economy has been hobbled by western sanctions aimed at pressuring Tehran to stop efforts to enrich uranium to levels that could be used in weapons.

Iran produced 338,000 tons of aluminum last year and is aiming for 770,000 tons in 2016 and 1.5 million tons by 2025, Panthea Geramishoar, senior expert in Imidro’s non-ferrous department said at a Metal Bulletin conference in Geneva.

Geramishoar did not give a timeframe for the eight projects involved in the program, but added that bidding was underway for one plant and financing was being arranged for two others.

Iran could struggle to increase production so quickly given it is heavily dependent on importing the raw ore bauxite or the refined ore alumina at a high cost. Alumina costs have been pushed up by the impact of sanctions.

According to Press TV, an Iranian news site, Iran’s aluminum output hit 119,560 tons in the first four months of the current Iranian calendar year, which began on March 21.

At this rate, the country would produce 358,680 tons for 2013, just 6 percent above last year’s output level.

Challenges ahead

Geramishoar said higher prices for alumina imports have already contributed to a rise in the cost of aluminum production to over $2,000 a ton.

LME aluminum was trading at $1,827.75 per ton at 1129 GMT.

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