Investors can’t be taken for granted
Let’s be realistic. No amount of calls from French President Francois Hollande, former US President Bill Clinton or other high-ranking foreign official is enough to convince cautious foreign investors to put money into Greece, as long as the fundamental problems remain. Like many prime ministers before him, Alexis Tsipras will soon realize that investment pledges from foreign leaders visiting the country usually evaporate soon after take-off. This is because investors always check three things: First, the experience of others. Second, the country’s reputation in terms of bureaucracy, corruption and the tax environment. Finally, political stability and the risk of financial collapse. After analyzing the above parameters, they will look for investment opportunities with a significant profit margin. They are usually put off before they even get to that point. They are discouraged by Greece’s bad reputation. A significant number of investors lost their money because some new administration changed the terms and conditions of a certain deal. There are endless stories of meetings with government officials who turned up unprepared. Investors also hear about Greece’s dysfunctional justice system, the huge backlog and the controversial prosecutions. Connect the dots and what you get is a minefield. Those who do show some kind of interest usually end up being bullied into doing business with some middleman. The “Greece” brand has suffered huge damage. Except for bankruptcy, it has also been associated with failure. The prime minister and his aides are deluding themselves if they think they can just wink at some Greek-American or foreign investor and say “it’s okay, you can have the Elliniko site” and he’ll come running. This is not how it works. Maybe it would, if Greece were outside the euro or a bit further south. Instead, it is a hybrid, an almost-developed country that is trying to survive within a European institutional framework. More daring investors could perhaps be found in countries like Russia or China. Moscow is still upset after the Greeks used it as a bargaining chip in negotiations with Berlin. And they are not easy customers. Meanwhile, the Chinese are fed up by the Piraeus port privatization. If and when it happens, they will then consider if there is anything else they are interested in. Again, some people like to think that the White House will dispatch 747s full of investors. I wouldn’t bet on that. Any flight from New York and London will more probably be booked by distress fund managers looking for investment opportunities in the red loans of Greek banks.