The Worldview Guide to Investing in North Africa

08/28/2012

Sailing South: Investment in North African Emerging Markets

INTRODUCTION

The North African states of Morocco, Algeria, and Tunisia lie just beyond the borders of Southern Europe. As investors look around for undiscovered emerging markets, how do these countries look?

Following the Arab Spring of 2011, the entire Arab world has received more attention in terms of the possibilities for democratization, economic revitalization, and also in terms of risks and opportunities for investment. The three western-most countries in the Arab landscape are all relatively small markets and exhibit differences both in their economies and the political risk factors they face.

Morocco is a liberalizing constitutional monarchy with a well-liked king devolving power in a more decentralized manner. Algeria is technically structured as a republic, but with tightly controlled political parties and little rotation of power-holders over time. It is effectively an authoritarian regime. Tunisia is an early transitional democracy in the process of consolidation, having ousted a regime not unlike Algeria’s. Although there is hope for meaningful change and advancement in Tunisia, the range of possible outcomes is currently quite wide. Although many people picture North Africa as a land of desert, the coastlines along the Mediterranean and the Atlantic Ocean are actually fertile, meaning that agriculture is still an important contributor to both the economy and employment in these countries. The entire region was known as a breadbasket as far back as Roman times. However, agriculture is an industry sensitive to drought, and so changing climate and rainfall patterns can wreak havoc with both economic and political stability in this region.

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