Final Word from Wednesday, July 16, 2003

A study by the Fraser Institute of Canada found that the CR is the 39th most economically free country of the 123 surveyed, compared to 77th for Poland and Slovakia, and 112th for Russia. The recent arrest of a top Yukos official, and the raid of the oil company's Moscow offices, show why Russia lags behind. Foreign investors there are afraid that opening up old privatization cases will endanger their assets, many of which were bought "in good faith" from crooks. In the CR, investors have gotten used to stability. After the wild 1990s, ownership stakes are for the most part well-defined and safe. Political risk is low. Still, the recent failure of investors to fully subscribe a state bond issue and a new weakening of the crown suggest that the CR might not be as stable as it looks. The shock in Russia serves as a useful reminder that investors shouldn't let their guard down.


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