Angola - AAA

 

Debt/GDP = 0,24 (24%)
Accumulated deficit for last 5 years/budget income for last 5 years = -0,08 (Surplus) 
Years since last default = 10 (2002)
5-year inflation = 0,65 (65%)
Budget expences/GDP = 0,35
Trade deficit/GDP = -0,41 (Large surplus)
Political factor = 0,3
Crisis factor = 0,2

OVERALL CREDIT SCORE: 1,37 (137%). This responds to AAA.


Is this result a "bug" in the formula?

There are no perfect formulas. Every calculation method has bugs that lead to incredible results that do not respond to the real situation. I do not claim that my formula is an exception of this rule. Generally the "bugs" are an evidence that the formula is real and is a formula for a world of humans, that in implicit is not perfect.
So it looks strange this "triple A" for an African country, based only on natural resources and so called "bloody" diamonds. So it is possible, this result to be a "bug", sourced mainly from very high trade surplus.
So after recalculating and proving the result, I had to made an additional research on Angola to check the situation.
So I discovered that Angola is really a reliable debtor. For instance, its capital is one of the most expensive cities in the world. It is an unpleasant truth that in Angola there is much poor people - mostly in countryside and out of capital. Angola is not high developed country and has much to do in education and healthcare, in reforming political system and fighting corruption. So it looks as this AAA rating is not real and is a "bug" in the formula.
But I am not convinced in this. These thoughts are based on the general shift of perception what the credit rating is. Traditional credit raters, as a result of long years of political influence and conflict of interests has changed the meaning of the phrase "credit rating". In their view this means something like a general evaluation of the country development, additionally influenced by the money the country pays to the credit rating agency, and also - influenced by interests of other customers of the agency. That's why non economic factors can create an image of the country, that is incompatible with a high credit rating. That is the reason we think it is not normal for Angola to have "triple A".
But the credit rating is not a political, PR, image or negotiational indicator. The credit rating means just one thing - the ability to repay your loan. So with Angola we have a stable cash flow, budget and trade surplus and only 24% to GDP debt. So the clear fact is that Angola can easily repay its loans. So Angola is a reliable debtor. For the investor this is important. It is not so important the situation in education or in healthcare. It is not important the fate of the poor part of population. In fact, the business is heartless, so the indicators that help the business also must be heartless. Therefore, the rating of Angola is really AAA.
This rating means high confidence of creditors that they will have their money back. This rating does not mean obligation to invest. If you are motivated by non-business arguments like the fate of poor and life of people in countryside, you may refuse to invest or give loans. It is a choice of yours. But this thinking must not be a part of the credit rating. This is a decision, based on non-business ethical factors. The quality of the country as debtor is the content of credit rating. And the impressive cash flow to Angola, combined with stable budget and overall debt discipline, these factors make the country reliable and lead to "triple A".
Anyway I will continue to think about this result and have it in mind as eventual "bug"...

Dobri



Feb 20th 2012

Recalculating the rating with the new version of formula:

Debt/GDP = 0,24 (24%)
Accumulated deficit for last 5 years/budget income for last 5 years = -0,08 (Surplus)
Years since last default = 10 (2002)
5-year inflation = 0,65 (65%)
Budget expences/GDP = 0,35
Trade deficit/GDP = -0,41 (Large surplus)
World GDP per capita/Country GDP per capita = 1,58
Political factor = 0,3
Crisis factor = 0,2
Other unique factors = 2 (Generally dangerous region with too much risky neigbour-countries and too recent long 27 year civil war)

OVERALL CREDIT SCORE: 0,93 (93%). This responds (again) to AAA.


(Confirming the AAA of Angola with the new improved formula is an evidence that Angola is not a "bug" in the formula)
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