You are asked to lend money for a major commercial real estate development in a foreign country. There is some talk about a further devaluation of the foreign country's currency. What information do you need to assess the creditworthiness of this project? In your evaluation of the project, be sure to take into account translation exposure and economic exposure (operating and transaction), as well as exchange risk.

Before Investment for the real estate development in a foreign country, it is very crucial to determine the viability of the project, and more importantly how the cash flows are being populated over the period. One of the major risks involved in investing in foreign country is the currency exchange risk. The value of currencies for the countries continue to fluctuate based on several economic conditions and other macro factors.

If a regulator in a foreign country is devaluing the country’s currency, then it goes in favour of exporters, as the foreign consumers can afford to buy more goods and services with the same amount. However, the people residing in the the country(importers) faces a huge trouble spending in foreign country due to currency devaluation.

To identify the creditworthiness of the project we need information regarding the property prices, its growth, and public spending in the country where we want to make our investment. Secondly, we need the historical data of currency devaluation event (if any) to assess the actual impact it will have on the economy once the devaluation takes place. Thirdly, we need to identify the exposures or the risk involved in operating the business in the foreign country, and how are we go about mitigating the risk from transaction and operating exposure.