1. Coface Country Risk Conference 2007 Coface Country Risk Assessment Sylvia Greisman Chief Economist, Coface

2. Coface Country Risk Conference 2007 The country risk @rating assesses the average risk of payment default by companies in a given country It combines the different aspects of country risk such as economic, financial and political, with the payment experience on companies calculated from Cofaces internal database There are seven different rating grades: A1 to A4, B, C, D The ratings are regularly updated on 154 countries Ratings, indicators of payment incidents and country risk assessment are available on : www.cofacerating.com The Country Risk @rating

3. Coface Country Risk Conference 2007 Economic sectors @rating The sector risk @rating assesses the average risk of payment default by companies in a given sector in short-term commercial transactions To calculate sector @rating Coface combines three types of measurements: economic vulnerability of the sector, company financial solidity, payment experience on short term transactions, as reflected in Cofaces internal database There are ten different rating grades: ranging from A+ for the lowest risks to D for the highest risks The ratings are regularly updated for 14 economic sectors Ratings, indicators of payment incidents and sectoral risk assessment are available on : www.cofacerating.com

4. Coface Country Risk Conference 2007 Barcelone - Mai 20074 2007 : A moderate slowdown After the past years effervescence, the economic slowdown will be moderate and centred on the US. Growth in emerging countries will slow in line with less buoyant global demand. However, it will remain driven by robust domestic demand. Emerging countries growth 0 2 4 6 200520062007 %

5. Coface Country Risk Conference 2007 Coface basic diagnosis remains : no global credit crunch in 2007

6. Coface Country Risk Conference 2007 Industrialised countries : No credit crunch but certain risks not to be neglected... The drop in property prices in the US and in some European countries could exacerbate the economic slowdown The dramatic rise in LBOs exposes companies and investment funds to financial difficulties in the case of an intensified economic slowdown. US current account deficit maintains the risk of a significant USD depreciation

7. Coface Country Risk Conference 2007 United States (A1 ) Moderate payment deterioration is expected Economic growth and payment incident index Payment incident index 12 months moving rate *Payment Incident index 100: World 1995-2000 basis 0% 1% 2% 3% 4% 5% 6% 7% 19971998199920002001200220032004200520062007 (f) 0 50 100 150 200 250 300 Economic growth rate Payment incident index

8. Coface Country Risk Conference 2007 United States (A1 ) Several sectors have to be watched closely 2007 sectoral risk scale Information technology Clothing / Textiles Steel Telecommunications HIGHEST RISK LOWEST RISK Construction Air transport Electronic components Pharmaceuticals / Mass retail Mechanical engineering / Paper / Chemicals Automobile : Downgradedsector D C+ C- B- A C A+ A- B B+

9. Coface Country Risk Conference 2007 Japan (A1) Stabilisation of credit risk at a low level in 2007 Economic growth and payment incident index Payment incident index 12 months moving rate *Payment Incident index 100: World 1995-2000 basis -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 19971998199920002001200220032004200520062007 (f) -100 -50 0 50 100 150 200 250 300 Economic growth rate Payment incident index

10. Coface Country Risk Conference 2007 Japan Export sectors are still benefiting from dynamic regional demand and strong competitivity 2007 sectoral risk scale : Upgraded sector : Downgraded sector Information technology / Construction Clothing Pharmaceuticals D C+ C- B- A C A+ A- B B+ Mass retail Textiles Papier / Chemicals Mechanical engineering / Automobile / Steel Electronic components / Telecommunications Air transport HIGHEST RISK LOWEST RISK

11. Coface Country Risk Conference 2007 Western Europe Expected moderate increase in payment incidents *Payment Incident index 100: World 1995-2000 basis Economic growth and payment incident index 0% 1% 2% 3% 4% 5% 6% 7% 19971998199920002001200220032004200520062007 (f) 0 50 100 150 200 250 300 Economis growth rate Payment incident index

12. Coface Country Risk Conference 2007 Western Europe A still uneven economic growth 0 1 2 3 4 5 European Union 15 Germany United Kingdom France Italy Spain 20062007p GDP growth in Western Europe

13. Coface Country Risk Conference 2007 *Payment Incident index 100: World 1995-2000 basis Payment experience in Europe : Italy is back to « normal », beware of overheating risks in Spain

14. Coface Country Risk Conference 2007 Industrialised countries: … USA now on negative watch

15. Coface Country Risk Conference 2007 Western Europe Construction and automobile sectors are particularly exposed Mass retail is recovering 2007 sectoral risk scale : Upgraded sector : Downgraded sector Automobile / Information technology Textiles Steel Telecommunications / Paper / Construction Air transport Pharmaceuticals / Chemicals / Mechanical engineering Mass retail Electronic components Clothing D C+ C- B- A C A+ A- B B+ LOWEST RISK HIGHEST RISK

16. Coface Country Risk Conference 2007 Sylvia Greisman Chief Economist, Coface Coface Risk Assessment Emerging Countries

17. Coface Country Risk Conference 2007 Emerging countries : a healthier financial situation and still robust growth expected in 2007 Several years of robust growth GDP growth (%) and current account surpluses Current account balance (%GDP) Have lead to impressively shrinking external debt ratios 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 199719981999200020012002200320042005 2006e2007p Debt/Good and service Exports (%)

18. Coface Country Risk Conference 2007 … but inequalities between regions

19. Coface Country Risk Conference 2007 Central Europe - Turkey : a sustained growth… Economic growth (%) 0 2 4 6 8 10 12 Hungary Slovenia Turkey Czech Republic Ukraine Romania Bulgaria Poland Lithuania Latvia Estonia 20062007f

20. Coface Country Risk Conference 2007 Central Europe, Turkey …favourable to construction, automotive and steel industries

21. Coface Country Risk Conference 2007 But weaknesses remain High budget and current account deficits… …weigh on foreign indebtedness, notably the private sectors

22. Coface Country Risk Conference 2007 Some currencies are particularly exposed to depreciation risk... Philippines Turkey Thailand South AfricaHungary IndiaPolandSlovak RepublicLatvia MexicoIndonesiaBulgariaLithuania ArgentinaIsraelUkraineEstonia Brazil JordanCroatia Venezuela Romania Chile Lebanon Russia Low probability (35%) Average probability (50%) Very high probability (60%) Very low probability (20%)

23. Coface Country Risk Conference 2007 Scale of Risk Turkey B Hungary A3 Financial vulnerabilities in Hungary (A3) and Turkey (B) Payment incident index 12 months moving rate * Payment Incident index 100: World 1995-2000 basis

24. Coface Country Risk Conference 2007 Central Europe : Changes in ratings

25. Coface Country Risk Conference 2007 CIS : Buoyant economic growth but weak business environment Rule of law (World Bank classification 2005) Singapore Hong Kong Taiwan Slovenia Israel South Korea Czech Republic Hungary Poland Saudi Arabia South Africa Thailand India Turkey Egypt Sri Lanka Croatia Bulgaria Romania Brazil Vietnam Armenia China Mexico Phillipines Argentina Moldova Ukraine Algeria Lybia Bosnia Iran Kazakhstan Serbia Pakistan Georgia AzerbaIjan Russia Albania Indonesia Bengladesh Belarus Kirghisztan Yemen Venezuela Uzbekistan Nigeria Turkmenistan Congo Zimbabwe Ivory Coast Sudan -2,00 -1,50 -1,00 -0,50 0,00 0,50 1,00 1,50 2,00

26. Coface Country Risk Conference 2007 Russia (B) : …and booming corporate debt

27. Coface Country Risk Conference 2007 CIS : Changes in ratings

28. Coface Country Risk Conference 2007 Emerging Asia : continuing dynamic growth supports companies financial situation Economic growth and payment incident index Payment incident index 12 months moving rate *Payment Incident index 100: World 1995-2000 basis

29. Coface Country Risk Conference 2007 Emerging Asia : highlights Robust current account surpluses Have led to high forex reserves creating massive domestic liquidity

30. Coface Country Risk Conference 2007 But some sectors face fierce competition and in China, watch for overcapacities Construction D A C A+ A- B B+ Massretail/ Pharmaceuticals Highest risk Clothing Automobile Chemicals/Paper Electroniccomponents /Mechanicalengineering Steel Lowest risk Telecommunications Informationtechnology Textiles : Downgradedsector : Upgradedsector

31. Coface Country Risk Conference 2007 Competition on the domestic market and problematic corporate governance weigh on risks in China First Results of 2006 Coface China Survey

32. Coface Country Risk Conference 2007 China A3- India A3- Risks remain at a manageable level

33. Coface Country Risk Conference 2007 Asia : Changes in ratings

34. Coface Country Risk Conference 2007 Latin America : Companies benefit from a still robust domestic demand 0% 1% 2% 3% 4% 5% 6% 7% 19971998199920002001200220032004200520062007 (f) 0 50 100 150 200 250 300 Economic growth Payment incident index* * Payment Incident index 100: World 1995-2000 basis Economic growth and payment incident index

35. Coface Country Risk Conference 2007 Latin America : Highlights Several years of current account surpluses have led to a significant reduction in debt ratios Elections have underlined the rise in claims for wealth redistribution External debt (% of exports) 0% 50% 100% 150% 200% 250% 2000200120022003200420052006e2007f Latin AmericaEmerging countries

36. Coface Country Risk Conference 2007 Brazil A4 – Argentina C : Diverging risk level Geopolitical and governance vulnerabilities Banking sector's fragilities Foreign currency liquidity crisis External overindebtedness Sovereign financial vulnerability Growth vulnerability Companies' payment behaviour ArgentinaBrazil low risk manageable significant high risk

37. Coface Country Risk Conference 2007 Latin America : Changes in ratings

38. Coface Country Risk Conference 2007 Northen Africa – Middle East : Companies benefit from a booming activity *Payment Incident index 100: World 1995-2000 basis Economic growth and payment incident index

39. Coface Country Risk Conference 2007 Northen Africa – Middle East : Highlights Large current account surpluses But geopolitical tensions in the ME countries have negatively impacted the risks Have led to significant debt reduction

40. Coface Country Risk Conference 2007 Israel (A4) – Saudi Arabia (A4) : Good companies payments despite geopolitical tensions Payment incident index 12 months moving rate

41. Coface Country Risk Conference 2007 North Africa, Near and Middle East : Changes in ratings

42. Coface Country Risk Conference 2007 Sub Saharan Africa : Oil and commodity output bolsters growth, but companies payment experience is not improving Economic growth and payment incident index

43. Coface Country Risk Conference 2007 Sub-Saharan Africa : Highlights but current account deficits are still high Commodity exports and debt cancellation have improved debt profile and important institutional fragilities remain

44. Coface Country Risk Conference 2007 South Africa (A3) – Nigeria(D)

45. Coface Country Risk Conference 2007 Sub-Saharan Africa : Changes in ratings

46. Coface Country Risk Conference 2007 Range of regional risks

47. Coface Country Risk Conference 2007 No credit crunch but certain risks not to be neglected... Many of them linked to an abundance of liquidity … Real estate bubbles Stock market bubbles Company over-indebtedness …or to other imbalances Current account deficits and the attendant currency depreciation risk Industrial overcapacities in China Geopolitical tensions and volatility in oil prices