Political Risk Insurance Becomes All the Rage in Emerging Markets

Business 101: A company's bond rating is almost never higher than its home country's sovereign rating.

But when Fomento Economico Mexicano's (FMX Quote) Femsa Cerveza, the Mexican beer and soft-drink company best known for brewing Dos Equis, tapped the global bond markets last month, it was able to get an A rating -- better than Mexico's BA1. The secret: a not-so-new instrument that is getting new use -- political risk insurance.

PRI, not to be confused with the Mexican political party, gives the kind of guarantee that once-bitten, twice-shy investors and corporations are seeking. Gone are those heady days when companies entered emerging markets with more enthusiasm than caution. Now nervous foreign companies and investors, wary that the rules in overseas markets can change almost overnight, are requesting products that insure their entry back into emerging markets. ...