III. The Price
A product’s price reflects the shifting balance between supply and demand (scarcity) as well as the value of inputs, the product’s quality, and its image as conveyed and fostered by marketing and advertising campaigns (positioning). Price is, therefore, a packet of compressed information exchanged between prospective buyers and interested sellers.
In principle, countries “price” themselves no differently.
But, first, we should see how the price mechanism comes into play in the global marketplace of sovereigns and their offerings.
The “price” of a country is comprised of two elements:
(i) The average (internal rate of) return on investments in its infrastructure, human capital, goods, and services – adjusted for (ii) The risks associated with doing business there.
The first component takes into account the costs of conducting business in the territory – everything from outlays on inputs to taxation. The second component considers the country’s political risk, volatility (as measured, for instance, by fluctuations in the prices of its financial assets and obligations),...
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