The opinions expressed in this column are those of the author, a correspondent for Reuters.

By Ross Kerber

April 15 (Reuters) - Backers of Hungary's nationalist Prime Minister Viktor Orban included U.S. President Donald Trump and Vice President JD Vance, who campaigned for Orban in Budapest last week before his big election loss on Sunday.

But the international investment community had a much different take on Orban, whose "illiberal democracy" ambitions pumped up companies aligned with his administration and frightened money away from the country's economy.

On Monday, after Orban was soundly defeated in national elections, Budapest's stock exchange gained almost 5% on expectations the European Union would unfreeze billions of euros in funds withheld over questions of rule of law and human rights.

The dynamic illustrates a risk that authoritarian regimes pose for businesses, according to experts I spoke with from various parts of the political spectrum. In their telling, right-wing political leaders may cut taxes and regulations but often accompany such policies with special favors for friends and barriers for those without connections.

That looks like the case in Hungary, where state-connected companies prospered and others suffered, said Johan Norberg, a senior fellow at the Cato Institute in Washington.

"Hungary shows that weakening the rule of law and providing friends and allies with preferential treatment doesn’t create a more 'business-friendly' environment, it produces politically allocated markets, where success depends on proximity to power," Norberg told me via email. "Even if this offers short-term advantages for some, it is a risky model for corporate leaders, who can quickly become hostages to erratic politicians with their own agendas."

Norberg said Trump's interventions with the U.S. economy offer parallels to what he called "Orban's one-party economy." However risky it may be for corporate leaders to speak out, he said, they also face political risk when they align too closely with a government that could lose power.

Norberg said examples include the telecommunications, IT and defense company 4iG IGNY.BU and Opus Global OPUSG.BU, a conglomerate involved in heating-equipment manufacturing, construction and office properties. Both Budapest-based companies have ties to Orban's Fidesz Party. Shares of both fell sharply over the past three months as Orban's prospects dimmed in polls, even as the country's overall index .BUX rose.

In a statement sent by a representative, 4iG said it is "active in industries that, by their very nature, require close cooperation with the respective national governments" and that it has strategic relationships with other national governments and defense contractors. Germany's Rheinmetall RHMG.DE owns 25% of 4iG.

"Defense and space industry activities typically operate on a B2G (business-to-government) basis worldwide; this is not a Hungarian peculiarity but rather an established international industry practice," 4iG said.

Opus Global representatives did not respond to requests for comment.

There are parallels with government-business ties in the U.S., though they are not exact. The Trump administration has taken stakes in U.S. companies like Intel INTC.O and US Steel X.N without much executive pushback. The U.S. Chamber of Commerce, the biggest trade group in Washington, has largely avoided confronting Trump but did file an amicus brief against his ability to impose tariffs, a case the administration ultimately lost at the U.S. Supreme Court in February.

Jozsef Peter Martin, executive director of Transparency International Hungary, said Hungary's election results are worth noting for U.S. executives thinking about cozying up to autocrats. He estimates about half of Hungary's economy is tied to multinational corporations, with the remainder split between traditional market-oriented companies and what he called the "crony segment" like businesses that owe their success to no-bid state construction contracts.

Managing those relationships will test Hungary's new leaders, he said, since they will not want the companies to go bankrupt and become a drag on the state. "It will be a very big challenge for the new government, what to do with these crony companies," he said.

One measure of Hungary's fortunes is its current overall score of 62.5 in the Heritage Foundation's "Index of Economic Freedom." That is the lowest of any country in the European Union and a decline from its score of 66.1 in 2010, the year Orban began his current stint in power. At the time, Hungary outranked Greece, Italy and Poland.

A lesser "government integrity" score was a main reason for the decline, Heritage Research Fellow Anthony Kim said in an interview.

"The perception of the Hungarian people, looking at Orban, was they may not see the whole picture. People in Hungary have been thinking things aren't as transparent as they could be," Kim said.

In a note to clients on Monday, Fitch Ratings wrote that the big win for Orban's challenger, Peter Magyar, and his pro-EU stance "are likely to support improved cooperation with Brussels, possibly including unblocking Ukraine funding, and implementation of policy measures that address concerns about rule of law, judiciary independence, and corruption; in turn, these would lead to an unlocking of EU funds."