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The seizing of a company's assets without payment is called **confiscation**. This is the most severe form of political risk that a foreign investor can face, as it means the loss of ownership and control over the assets without any compensation¹. Confiscation was more common in the 1950s and 1960s, when some underdeveloped countries saw it as a means of economic growth².
Other forms of political risk that can affect foreign investors are:
- **Expropriation**: This is when a government seizes an investment but provides some reimbursement for the assets. The compensation may not be fair or adequate, and the investor may lose future profits from the investment¹.
- **Domestication**: This is when a government requires foreign investors to transfer ownership, management, or control of their assets to local nationals. This may be done as a condition for investment or as a gradual process over time¹.
- **Exchange controls**: These are restrictions on the movement of currency in and out of a country. They may limit the amount of foreign exchange available to foreign investors or impose unfavorable exchange rates on them¹.
- **Local-content laws**: These are laws that require foreign investors to use a certain percentage of local resources, such as labor, materials, or parts, in their production processes. This may increase the cost and reduce the quality of the products¹.
I hope this answer helps you understand the different types of political risk that can affect foreign investments. If you have any other questions, please feel free to ask me.