I am writing to set the record straight about an article you recently published about Standard & Poor’s sovereign ratings methodology, and particularly its application to Tunisia, entitled “Standard & Poor’s cuts Tunisia’s rating: limited methodology or bad intentions?”. The article contains numerous factual errors and repeats false allegations against us, several of which I list below.
We have contacted the author of the piece, Mariem Ben Abid, to point out the various errors her article contained, and to express our disappointment that she claimed in the article to have “interviewed” Olga Kalinina. In fact her contact with Ms Kalinina was not in an agreed interview setting but in a seminar organized for students at American University for research purposes only. However, I am now writing to you, as the publisher of her article, to request that you publish this letter and retract her article.
1. Most seriously, the article repeat the serious and unfounded allegation that S&P engages in “market manipulation”, citing the research of Prof. Manfred Gartner and Bijorn Griesbach of the University of St Gallen to support this assertion. S&P has vigorously defended itself against this groundless accusation, which is based on a flawed methodology. We published a detailed response to this research explaining why it is wrong, which you can read here .
It is a great pity that Ms Ben Abid did not ask us for comment on this before repeating these allegations, writing “It is then important to question what forces are influencing this market manipulation”. We are not alone in our opinion about the poor quality of Gartner and Griesbach’s research. It may interest to you to know that, according to media reports, St Gallen University has rejected Griesbach’s doctoral dissertation–which was based on his critique of our methods and supervised by Prof. Gartner–as “unscientific”.
At Standard & Poor’s we work to the highest standards of professional integrity and thus reject these allegations to the contrary. We publish transparent methodologies and are closely regulated in the jurisdictions in which we operate. The suggestion that we are somehow conspiring with international banking institutions to increase interest rates is therefore entirely without merit.
2. The article states that Samira Mensah is “the primary credit analyst, [and] is responsible for grading Tunisia and making these predictions at S&P London.” This is incorrect for two reasons. Firstly, Ms Mensah is not a sovereign credit analyst, but is our primary analyst for Tunisia’s banking sector. Secondly, no single analyst is “responsible for grading Tunisia and making these predictions”. All our ratings are decided by a committee, which will approve or modify forecasts presented to it as it sees fit.
3. The article states that it is “unfortunate” that our analysis did not take into account the guarantee of the US government for “on any financial options that Tunisia would need”. This too is incorrect. The US has not guaranteed “any financial options that Tunisia would need”. It had guaranteed one particular bond issue at the time she interviewed me. A sovereign credit rating refers to the ability of a government to make payments of interest and principal of its debts in full and on time. A guarantee by another government of a particular sovereign bond issue would not affect the intrinsic creditworthiness of the sovereign in question, which is what our issuer ratings refer to.
4. The article claims S&P spends just 3 days assessing a country’s risk. This is incorrect. We monitor trends in risk throughout the year, not just at our management meetings with the authorities and third parties in the countries whose governments we rate.
5. The article states that the US has a AAA credit rating from us. This is also incorrect. S&P downgraded the US sovereign long-term ratings to AA+ in August 2011 amid considerable global media attention.
6. The article misreports the chronology of our ratings actions on Tunisia. It states that we lowered the long- and short-term local currency ratings after downgrading the foreign currency ratings and then revising our BICRA score. This is incorrect: the foreign- and local-currency ratings were all downgraded at the same time in May 2012.
Journalists are of course entitled to disagree with our assessment of political risk in Tunisia. And we welcome well informed criticism of our methodology. However, what is not acceptable is questioning our integrity on the basis of discredited academic research, and publishing an article containing a litany of basic errors about how we work. It is a pity that we were not sent a draft version of this article prior to publication, as we would have been glad to point out the numerous errors it contained before Nawaat published it.
To set the record straight and to protect Nawaat’s reputation, we ask that you publish this letter prominently on your website and retract Ms Ben Abid’s deeply flawed article.
I look forward to your response.
Yours sincerely,
Patrick Raleigh
Associate
S&P
S&P, ça reste toujours l’avocat du diable mais ce que ce mec raconte c une leçon! honnetement l’enthousiasme et croire defendre une cause juste ne suffit pas sans etre professionnel et méthodique. Je crois que AlJazeera est un bon example pour ça.
Ca y est la guerre est ouverte ,
Et par cette lettre S&p essayent de vous intimider
Vous ne devriez en aucun cas enlever l’article de mariem , mais lui donner ledroit de reponse a ce droit de reponse
Ils sentent que le peuple tunisien se reveillet donc ils reagissent .
Dear Patrick,
Thank you for spending the time to dissect my article. I wish you contacted me like you mentioned in this letter since we already had an email exchange. Instead of that S&P asked the university to put pressure on me, which didn’t work.
Also one of the things I’ve learned from my PhD studies is that ANY methodology (including S&P’s) can be criticized and that’s why good researchers must recognize the limitations of their methodologies at the end of their publications. In my article I ONLY criticized S&P’s methodology:
1) Manipulating the market was an assumption that I based on Dr. Garner’s great research and I’m aware that you published something about his research but that doesn’t mean that I’m not allowed to refer to his research, In addition S&P critiques about Gartner’s dissertation didn’t really convince me.
2) I mentioned 3 arguments for why I assumed that there is manipulation by S&P and in this letter you are not discussing any of these arguments. This gives more validation about the accuracy of my piece
3) I had a meeting later on February 28 with Amine Mati, chief economic at the IMF and he acknowledged that he has been contacted by S&P to ask him whether they should downgrade Tunisia. Thanks the this downgrade, the IMF had more pressure to push the government of Tunisia to sign the precautionary loan as after the downgrade the government has fewer option of lenders on the international market which expedited the negotiations on the IMF loan
Again please don’t take it personally, in research it’s very common that we criticize methodologies and S&P should know that.
All the best,
mariem
Dear Mariem
I am very sorry you had to explain yourself to a company about your opinion and your approach to research. Goes to show that S&P had a stake in what you wrote, so KUDOS to you. I have no intentions here of repeating what the fellow Nawaatians have written in your defense (and rightfully so) – because (1) we don’t appreciate bullies of any size, shape or color and (2) you said beautifully, you should NEVER appologize for your research. I laughed my head off when I read he asked to have your article retracted (still giggling actually) – did they think they were dealing with the Trabelsia Mafia family?? Naa’a wake up World, this is the NEW face of Tunisia, we don’t back down and we are educated too.
Say Mariouma, I have an idea for your next paper which should send frozen chills down S& P spine (that is if they have one) – did you know that they were facing a lawsuit from the FBI in the USA? Check it out, also go back in time and pull all the market and economic variable and adjust them to real data under the Ben Ali Regime and publish a paper about how they rated us so much higher when in fact The Tunisian economy was Un Geant aux Pieds d’Argile!
So yea, also check out a documentary called “the inside job” that should also give you all the names of like-minded researchers you can read their publications etc.
One word of wisdom, don’t waste your time responding to sharks… they ain’t in it for the ‘good of the masses’ instead they are in it for the benefit of a chosen few.
Tahya Tounes!
En fait la guerre est ouverte entre l’hortodoxie economique (ecole de chicago) et l’heterodoxie.(ecole de la regulation , ecole institutionnelle…)
Depuis quelques decennies , les critiques entre chercheurs fusent
Et elle a amplifié depuis 2008 avec la crise mondiale des subprimes
Puisque ces crises a repetition du capitalisme donnent raison au courant hetérodoxe ,
C normal que S&P se defende par un article qu’ils publient par leur propre compagnie , l’article publie pour repondre a ces accusations n’a aucune valeur scientifique
Faites des recherches , il ya une tonne de litterature scientifique heterodoxe qui pointe du doigt le role des agences de notation des institutions financieres internationales et de la financiarisation de l’economie dans les crises du capitalisme
Un peu de lecture pour ceux qui s’y interessent
http://www.iris-recherche.qc.ca/wp-content/uploads/2012/11/Brochure-Notation-web.pdf
Bien repondu mariem :-)
Dear Patrick,
Many thanks for you response to Mariem’s article, which we published here and we gave your full right to a droit de réponse.
However, as for your request to retract her article, we are sorry to disappoint you. We never retract an article that we’ve published on our website; that’s our policy. We do however give a droit de réponse and open our space to your comments.
Best
hi mariem…
just read your exchange with standard and poors. CONGRATULATIONS! they are indeed very defensive to engage in an open fight with you, probably means, besides the info in the article, that they are concerned more generally about your work. further, to discredit your academic work personally is to try to neutralize the growing concern in tunisia about the proposed IMF agreement. at least that is how i see it.
i hope that such an attack doesn’t discourage you — it is not an indication of your intellectual sloppiness, to the contrary…looking at it all from afar – can’t get much further away then denver! – it is something like this that has been needed to open up the public discussionin tunisia on the impending imf agreement. like so often in the past, the imf is trying to get tunisia to swallow this bitter pill with virtually no discussion either from the constituent assembly (which seems to be something of a dead fish anyway), the tunisian media or civil society… the little bit of openness that the country has won from your recent struggles has made such typical, cynical maneuvers on the imf’s part, that much more difficult.
what is most impressive to my mind is the complete brittleness of the IMF in this situation (and also standard and poors). no discussion/admission of how their structural adjustment policies were a major factor contributing to the regional uprising, the Arab Spring, not just in Tunisia but region-wide, no `corrective policies’, just more of the same old, same old – the same formulas that have devastated the Third World for 30 years, being applied not much differently from how they were in 1984 when the Tunisian bread riots broke out. that is bad enough, but now look how the new Tunisian transiltional government, led by Ennahdha, is so willing to play ball with the IMF, to swallow the pill, one that will not address the country’s socio-economic crisis, only deepen it.
cheers, rob p.
I thought the original article was well balanced and well presented. Those who are familiar with the field will undoubtedly see the truth in it. Mr Raleigh’s reply, on the other hand, reeks of intimidation; a tactic that has become common place the last decade or so, whenever the Establishment or one of its institutions is questioned.
Other than Nawwat’s policy expressed by Mr. Sami ben Gharbia.S & P gave no single compelling reason for Nawwat that may oblige them to remove the article.
When we look at how Standard & Poor’s argues, we see that their methodology has evolved and it’s now linked to fundamental policies rather than economic factors, While the political climate in Tunisia was not so disastrous
Mariem’s criticism of S&P’s methodology is very legitimate and she has a full right to condemn their bad faith that has surpassed the bounds of decency and credibility. This is a fact visible by the entire world .
Keep up the googd work Mariem
When standard and poor states:
our rating are decided by a committee which will approve or modify
the rating as it sees fit.
with that statement you are indicating :l’etat c’est moi.
the ultimate arrogance and belief of unfallability.
the kind of arrogance religions try to use on people.
any organisation that thinks it can’t be questioned ain’t worth trusting.
after all;it is run by economists which i may define as a whichcraft science.
ask a five economists in a room the same question and you get five different
answers and none more than an opinion of theirs.
if all nations decide not to call on rating agency services they will become
an irrelevant tool and the world will still function.
a bit rich from a crook organisation to demand that it can’t be questioned
and intimidate a research student.
get stuffed standard and poor from a son of tunisia living in australia.
no intimidation,no retraction from a questionable organisation like u.
[…] the loans have appeared in Arabic, French and English at the Tunisian alternative media website, Nawaat.org. which has broken key elements of the story to the Tunisian public. It is precisely this kind of […]
Let’s rate the rating agency a la tunisienne:
it has a poor standard and the name says it all.
it stand arise the poverty by giving a justification for the imf to go
for the kill by charging a higher interest rates.
the raison d’etre for the imf is to come to the rescue to any country
finding itself in trouble.
these rating agencies are a tool for banks to extract more blood from
anemic nations that hardly can ill afford to pay more.
what were they doing not long ago splashing good rating to spain ,porthugal
ireland,italy greece,cyprus and so on.
djerba alone has more prospect and sounder economic basis than cyprus
and yet the later is being advanced from something like 8 to 14 billions dollars.
the logic of these rating agencies and world bank is very suspect.
tunisia is better off using her own means and live with her constraints.
if these naive god’s merchant think the world bank is allah the benevolent
than tunisia will be in the gutter for a very long time.
mariem don’t be intimidated by their crap and keep the courage?.
we ain’t gonna be all the way with the bitter pill of a poor standard agency
rating agency that has her views and we have ours.
and her views ain’t necessary better than ours.
Up to now S&P, Fitch and Mood’s estimations are rights with all concerned countries.
I still prefer to trust these agencies before investing!
Sorry Meriem!
However I’m curious why many of you (I’m not saying 100%) does not criticize the same agencies when they up grade a country :)!! Think about it!
However again, this does not mean that you are wrong, but the fact is that these agencies were established to give an objective analysis of each country to investors.
You may ask this question: why investors do not believe governments?
Answer: Investor are private, they can do what ever they want with their money and they can believe on whatever they want (and they believe on these agencies (many of them). So you (It does not refer to you) don’t really have a choice.
Finally, if I’m an investor, Tunisia G. will be the last one to trust for the following reasons:
1- This is a temporary G. and we don’t know if the following one will continue on the same direction or he will change.
2- The population looks like not satisfied with the efficiency of this G. and then this G. will not be able to handle any social crisis efficiently.
Good luck,
You’re discussing the results while I’m discussing in my paper the rating methodology such as the model and variables used to come up with ratings whatever the result. Check out my paper.
http://nawaat.org/portail/2013/02/21/standard-poors-cuts-tunisia-rating-limited-methodology-or-bad-intentions/
Also investors and traders don’t wait for S&P, Fitch or any one to value the opportunity. …They just value trade and invest and you can ask them, you will probably get the same answer. Very often rating agencies come too late; as an example, during the European crisis and in 2008 during the financial crisis in the US. Did they predict? No, they came too late in fact.
I understand you are discussing the methodology but be careful.
Are you trying to convince some people, please do not trust S&P reports because of their controversial methodology and try to have your own analysis and understanding?
Come on!!!!!
These agencies are supposed to have the smartest people in the world to predict the future (And believe me they do, or may be the future depends on these agencies ;)).
I’m not supporting any part (neither you or S&P) but look, even if you claim that S&P methodology is criticizable I prefer to trust them for some countries (Tunisia is one of them).
In the case of europe and USA, it is a different case: these countries have strong institutions and even if S&P, fitch or moody’s downgrade them, we still trust the fed for example.
Counter example: these agencies are claiming there is a risk to downgrade germany. I’ll not trust them and Ill continue investing in germany because I know that it is a strong country.
So my friend, the countries in the world are classified in two categories: Trusted and not trusted. and for not trusted, even if you criticize S&P methodology it is still better than the institution if these countries.
Second, S&P is a strong company, you can fight against them but you lost your fight before even starting. They are rich and they have a strong lobby, even US Gov. can not fight them.
Again, I’m not taking part against you (trust me), but I found this topic very interesting and for few times we have high level exchange.
Good luck for your work.
PS: …Also investors and traders don’t wait for S&P, Fitch or any one to value the opportunity…. You are right but they wait for S&P, Fitch, moody’s to evaluate the risk.
Remember Investing= Opportunity + risk ==> the goal is to have a good opportunity with the lowest risk.
For example: Irak is a good country to invest for US oil compagnies: Why? Because US army is there to protect them so even if the country is among the worst in the world, the risk is very low. In this case, oil companies don’t worry about S$P reports but for unkown countries like tunisia the only data they have is the ones coming for S&P…
anyway, even what I said is criticized… so don’t worry I’m not against you ;)!!!!
C etait quoi la note de la grece avant l offensive generale ????!!! qui a dit “”manip” ??? pas moi ..!!
[…] clôturer cette semaine, nous publions le droit de réponse de l’agence de notation « Standard & Poors » concernant notre analyse de la méthodologie […]
I’ll end my comments on this thread by the following:
GOOD JOB NAWAAT!!
It’s crucial not to remove the article of the author “Mariem Ben Abid” even under the pressure of S&P. S&P sent their answer to that article and let’s keep the reader decides by himself!
Again I’m not taking part for any partie, I’m not an expert in the field to have a deep analysis of the subject (I don’t believe also that all investors are experts in this field also :) ). But at least we have the minimum requirement to have a personal point of view on what’s happening.
Well done Nawaat!! Keep going!!
[…] came across this letter by Patrick Raleig in which he respond to an article by Mariem Ben Abid which was published by Nawaat. Well, I am a […]
[…] came across this letter by Patrick Raleig in which he respond to an article by Mariem Ben Abid which was published by Nawaat. Well, I am a […]