Why might political instability in a country discourage investors?

Question

This is for my Geography question in my book, unfortunently in the section we read, there is no mention of this. Help is greatly appreciated.

Answer 1

unstable political countries could easily have a economy collapse thus causing investors to lose money

Answer 2

Foreign investment can be a tricky business. If a government is unstable, the initial investment laid out by a corporation can be wiped out with no hope of return. If a country begins as communist where the government owns all property but then goes to a capitalist philosophy and allows outside investments only to suffer an over-throw by military action, the outside investor just lost out. They have no means of recovering their investment. All property belongs to the government. Without a stable government, stable currency, and dependable work force investment is not likely.

Answer 3

Political instability shows a sign of chaos in a country which is never good for economic matters. You see if a country does not have a competent or legitimate leadership this puts people on the wary because you would not want to put money in a country that might be turning bad and even be your enemy. It is definitely money lost if you invest in any country that lacks stability.

Answer 4

If a country is politically unstable, chances are the economy is equally unstable. An investor wants to find a market in which they are likely to profit, so naturally an unstable economy is not going to appeal to an investor. It's simply to risky.

Answer 5

because if you invest in a business in a politically unstable country you could lose your investment quite easily suppose the military takes over in a coup and you do not have ties to the new leaders so any deal you had before is now no good, or due to the same set of circumstances a war breaks out at any time and the investment you made in equipment and personel and raw materials goes boom with the bombs you see it is not a good bet to invest in an unstable country due to those circumstances

Answer 6

Guerrillas might sabatoge your capital and equipment (example, blow up oil pipes)
The government might nationalize your company's assets and effectively take over the factory and throw you out (example, Venezuela's socialist government taking over mineral mines)
Local currency might be so erratic, it would be impossible to project earnings, because the value of the currency drops every day, or inflation destroys wages.
Physical danger to contractors and other workers.
Stock markets might crash locally.
Economic sanctions by the U.N. or other nations might make your investment worthless because you can't sell anything.
War and sabatoge in general makes it hard to use electricity, roads, bridges, even food and water.