Business Risk Analysis Global Business Plan
Today, Argentina is a solemn nation and political violence in this country is desolate. For over one hundred years, since about 1900, Argentina’s magnified economic prosperity and nationalism is identified more along the lines of Europe and the United States of America rather than countries in Latin America. The commitment to international trade with such nations follows a hard to ignore economical and political collapse. Although strong industrial policies and global trade agreements pave the road to recovery for Argentina, investors fear there is some room for concern.
Concern over political risks sets back the progress of foreign investment. It decreases the creation of jobs and advancements in modern technology. There are, however several agencies that aid investors address problems with legal and regulatory risks. Organizations such as the Multilateral Investment Guarantee Agency (MIGA) and the Overseas Private Investment Corporation (OPIC) provide investment guarantees insuring investments against any political risk. These agencies were created to provide promotional and advisory services, which help create an attractive investment climate and promote direct investment among foreign countries.
II. Business Risk Analysis: Economic Risk Analysis of Argentina i. When a company begins a transaction in a foreign currency, it accepts an economic risk due to fluctuating exchange rates. Even though Argentina has had problems attracting foreign investment, the country does provide ample opportunities for investment. Prices for Argentina’s defaulted bonds have climbed to unrealistic levels. High risk is associated with these bonds. Apart from these assets, investment risk in Argentina is low. Low investment risk will continue to support domestic equity prices as well as the value of the peso.
External credit will remain dispensable to Argentina for a period of about two years. In 2001, after 2 years of stagnation, caused by the financial crisis of emerging markets and the Brazilian devaluation, the Government has launched an economic plan aiming to invigorate the economy, based on two main concepts: an improvement of competitiveness; and the completion of outstanding State reforms. (PRS Group, Inc. 2003) Argentina and President Kirchner’s economic policies are the foundation for the current stability.
Any sharp change in these policies, as presumed by the IMF and defaulted bondholders, would undermine the stability, making such change unlikely. “The growing maturity of the financial system has begun to promise the stability that enables the longer range business planning critical to attracting foreign capital, and -perhaps even more important- has begun to restore the public’s confidence in the political and financial system. ” (PRS Group, Inc, 2003) Economic growth risk in Argentina is low. Economic growth will continue to be driven by domestic demand growth.
Domestic demand growth will continue to boost revenue while debt repudiation will limit expenditure growth. Balance of payments risk is low. The current account surplus will gradually decline, though reserves will continue to build, in a period of two years. (Author unknown, n. d. ) III. Business Risk Analysis: Market Risk i. Marketing tactics includes the practice of planning and conducting transactions into Argentina in order to create interactions that satisfy the objectives of the organization and Argentina.
There is some ambiguity about the risk impact entering into the Argentinean market. When entering into an international market, a corporation has to take into consideration the organizations and individuals affected directly or indirectly by economic and political developments that occur in the international market. However, equally importance must be given to the socio-cultural factors when developing marketing strategies. To ease this risk, strategies will be evaluated as needed for its focus on eliminating the remaining market barriers.