Foreign Debt

In: Business and Management

Submitted By wt4787
Words 289
Pages 2
Since 1982 when the Mexican government declared its inability to service its foreign debt, the debt crisis of Latin America has become increasingly more alarming to foreign investors who began limiting their investments in this volatile region (49). The less developed Asian countries actually began to surpass Latin America as a potentially productive site for MNE operations (49).
Ironically, due to the debt crisis, Latin American countries were forced to become more open to foreign investment. Significantly, the debate as to what are the proper boundaries for public and private sector activities has intensified. Given the distinctive personalities of each country involved, the issues are handled differently in each host country. Since government-owned countries compete with and often actually preclude the operation of MNEs, Grosse sketches how public policy influences Latin America's potential international business growth. Grosse surveys foreign manufacturing MNEs in Venezuela and the restrictive regulatory practices enforced by the Andean Pact countries from 1971 to 1987.
In discussing managerial issues, a study of Fortune 500 companies is offered as a means of investigating inter-company rivalry as opposed to company-government relations. Grosse includes a compelling study of foreign MNEs strategies in Peru which reflect inter-industry difference in strategy in structure. In his fourth and final section, Grosse offers a comprehensive view of MNE activity in Latin America. Specifically, two specific types of MNEs, chemical companies and government-owned MNEs are scrutinized in an attempt to glimpse the future.
What is most appealing about Grosse's well-balanced and exhaustively detailed research is his concern that foreign investors must more clearly recognize that the rules of doing business operate differently in Latin America. Grosse attempts to prepare…...

Similar Documents

Foreign Debt Crisis Amangement of Rcom

...International Financial Management (IFM) Individual Project Report Title of the project- Foreign Debt crisis management of RCOM Batch–PGCBM -21 Centre –DAKC, Mumbai Name- Rajesh Kumar Verma Email-, SMS No- 110387 SID- RB12044 Table of Contents 1. Introduction 2. Purpose of the assignment 3. Gratitude to Professor and support staff 4. Introduction of IFM Assignment topic- Foreign Debt Crisis Management of RCom 5. Company Profile 6. Assignment analysis and study A. Reliance Communications has secured loans from a host of Chinese banks to refinance $1.18 billion B. RCom has filed a prospectus with the Singapore Stock Exchange and plans to divest as much as 75% stake in Flag Telecom to raise about $1 Billion i) Background of Reliance Globalcom (Flag Telecom) ii) Cable network of Flag Telecom iii) Solutions offered by Reliance iv) Strategic Move by Reliance to fight with debt crisis C. Reliance Communications has put on hold the initial public offering of its undersea cable unit Flag Telecom in Singapore D. Impact of heavy debt on company's financial credit worthiness and impact of rupee devaluation on overseas loan E. The impact of the high-debt levels has been further compounded because of the steep depreciation of the rupee 7. Impact of Un-hedged foreign currency debts due to rupee devaluation 8. Conclusion INTRODUCTION As a student of International Finance......

Words: 3768 - Pages: 16

Debt Crisis

...Brazil, Argentina and Mexico. Reminiscence of few decades before, these progressive nations took out significant figures of loan packages to stimulate their economy expansion (examples). Unfortunately, this manner accompanies with a significant drawback; the ‘Debt Crisis’ that followed due to unpredictable economy fluctuation all around the world. A debt crisis deals with countries and their ability to repay borrowed funds; which include international lending, national economies and budgeting. The “Debt Crisis" definition have varied over time, the most common one – “when a national government cannot pay the debt it owes and seeks, as a result, some form of assistance” (, 2012). An international debt crisis erupted in the early 1980s was “one of the most traumatic international financial disturbances” of the twentieth century (Cline, 1995). Nineteenth century’s debt crises plus far-flung nonpayment loans specifically in 1930s sternly interrupted capital flows to Latin America and Southern and Eastern Europe. Yet, offhanded 1980s debt crisis undoubtedly threatened the international banking system and many less developed countries. AIMS This paper will discuss the factors which lead to the notable 1980s debt crisis. At first, we will describe the economics background concerning 1970s and 1980s. Then, it follows by the factors; both from the debt’s demand and supply perspectives. On the demand side, the factors are non-productive investments, the oil prices, the......

Words: 1025 - Pages: 5

Debt Glossary

...Appendix: Debt Glossary External debt: total liabilities of a country with foreign creditors, both official (public) and private. Creditors often determine all the terms of the debt contracts, which are normally subject to the jurisdiction of the foreign creditors or to international law (for multilateral credits). Total government debt (total public debt): total debt liabilities of a government with both domestic and foreign creditors. The “government” normally comprises the central administration, provincial governments, federal governments, and all other entities that borrow with an explicit government guarantee. Government domestic debt: all debt liabilities of a government that are issued under—and subject to—national jurisdiction, regardless of the nationality of the creditor or the currency denomination of the debt (therefore it includes government foreign-currency domestic debt, as defined below). Terms of the debt contracts can be market-determined or set unilaterally by the government. Government foreign-currency domestic debt: debt liabilities of a government issued under national jurisdiction that are nonetheless expressed in (or linked to) a currency different from the national currency of the country. Central bank debt: not usually included under government debt (despite the fact that it usually carries an implicit government guarantee). Central banks usually issue such debt to facilitate open market operations (including sterilized......

Words: 323 - Pages: 2


...Debt Maxed Out was a very informational movie to me especially because I learn things about debt that will help me. My family has problems with debt and credit card using so I wish by watching this movie I may help them with those problems. Some of the things that I heard and saw on this movie, I never knew about. Maxed Out gave me an advantage over most college students who are prone and vulnerable to credit cards and debt. College Students usually are the most vulnerable to credit cards and debt. When you go to school on your first day you see many stands with credit card companies or banks who are offering to take you in to their company. They don’t do it because they want to help but because they know that they can get money from student. When you are in college you may not have a lot of money and so you get a credit card and use it because you think it won’t hurt you. Therefore they get the student with the interest which they can not pay because if they had extra money then they wouldn't have had to use the credit card. Credit card companies also have another type of people that they target and maybe more than college students which is people who have already filed for bankruptcy. They go after people who have filled for bankruptcy because once you file for it once then you can’t do it again. Of course the reason most people are bankrupt in the fist place is because of debt with credit cards or loans. So then they already no that they get addicted......

Words: 615 - Pages: 3

U.S. Debt

...The U.S. debt and its budget surplus and deficit(s) has been an on-going discussion way back from the foundation of America. America started borrowing money during the American Revolution. It wasn't officially considered a national debt until the Independence and the declaration of the U.S. Constitution. By the year of 1835, they were completely debt-free due to several budget surpluses and an effective budget planning. However, the budget surplus didn't last that long as the borrowing of money started again right after a year. The U.S. borrows money from Federal Reserve, U.S. Individuals and Institutions, Social Security Trust Fund, and other foreign nations and governments by issuing bonds for sale through the U.S. Treasury. Throughout history, some of the key reasons for the accumulation of the national debt was due to wars such as; WWI, WWII, Cold War, etc., drastic tax-cuts, The Great Depression, economic recessions, military and defence spending, welfare programs, bail-outs of big corporations, etc. America is forced to borrow money every time when their expenses are more than their revenue. This borrowing of money ultimately puts a debt on the U.S. and its citizens. The majority of the U.S. debt is owned by Federal Reserve and other U.S. individuals and institutions like; Social Security Fund, etc. whereas the second largest holder of the U.S. debt is China followed by Japan. Both China and Japan own 1.1+ trillion of U.S. debt each. The major borrowing of the debt......

Words: 2249 - Pages: 9

Debt Financing

...Debt Financing Ayivi Koutodjo Business 530 Abiola Fapetu Liberty University Debt financing decision is not a process of couple hours of meeting. It required thorough scrutiny and an effective brainstorming. Managers are, most of time, facing huge challenges in meeting the company’s cash flow target. The task on hand is to find solutions of the possible organization’s incoming shortage of cash, more precisely how to raise and maintain cash in the company six months from now until the next two years, when the company will lunch his lucrative product. Many possibilities will be analyzed and the best one will be presented to the board of directors. Debt financing is an on-going process that company uses to achieve their objectives. It is one of the chief financial officer (CFO) duties. The CFO has multitude of choices to choose from when I comes down to raise cash. He could decide to retain earnings, to sell bonds, to sell stocks, or to obtain a loan. The CFO has to choose the one that add value to the shareholders wealth. To be successful in this task the CFO must consider the current economy condition and the current organization’s standing and objectives. Furthermore, the CFO must remain trustworthy and must......

Words: 1012 - Pages: 5

Public Debt

...II. Greece public debt 1. Current situation Greece has been in the public debt crisis since 2009. The Greek public debt crisis is one of a number of current European sovereign-debt crises and is believed to have been caused by a combination of structural weaknesses of the Greek economy coupled with the incomplete economic, tax and banking unification of the European Monetary Union. Those days, Greece has confronted with three main related problems: government trust crisis, declining liquidity capacity and high risk of bankruptcy. a) Government trust crisis The prestige of Greek government was impaired seriously during crisis time. Greece borrowed uncontrollable amounts from the financial market to ensure the liquidity for the budget deficit. The budget deficit limit allowed in Eurozone was only 3% of the GDP, while this level of Greece in 2009 was 13.6% and might even increase to over 14%. To cover the overspending in the past years, the Greek government had reported data inconsistently and bias, containing various unusual sections in budget. This action drew to the negative consequences on the reputation of the Greek government on the domestic as well as international market. The credit ascertaining organization successively downgraded Greece recently. Within the first four months of 2010 S&P had lowered continuously the credibility coefficient of Greece, from A- to BBB+ and BB+. b) Declining liquidity capacity Unpaid debt of Greece was nearly 400......

Words: 1933 - Pages: 8


... FOREIGN EMPLOYMENT: A PERSONAL PERSPECTIVE John Smith Grantham University BA405 Multinational Management December 12, 2014 FOREIGN EMPLOYMENT: A PERSONAL PERSPECTIVE I have often thought of working and living in a foreign country. As a soldier, I was able to achieve that while stationed in Germany and South Korea. As a soldier though, one does not get the full effect of living within a society that has norms, customs and traditions different from those we find in the United States. To work and live in a foreign country as a private citizen would be a terrific experience. Much thought has been given over the years as to where. Perhaps Belize, where it is always warm, costs are comparatively inexpensive and a place that has a motto for tourist that says “go slow”. There’s probably not going to be much going there though where one can pull down a livable wage with benefits. Africa has also sounded good from time to time. I once met a soldier from Ghana. He informed me one day he was going home for vacation and as the conversation progressed, I learned that on an income of less than $1500 one could live like a king with an estate, a driver and servants. However, Western Africa may be a bit hostile for my taste. As the list narrows, I am left with Mexico, Germany and England. I have never been to England. To begin with, I would never give up my citizenship as an American. I enjoy the American......

Words: 2145 - Pages: 9

The Contagious Impact of the European Sovereign Debt Crisis on the Foreign Exchange Market

...contagious impact of the European sovereign debt crisis on the foreign exchange market 1. Introduction In 2010, the debt crisis caused the euro to go down 10% in a three-month period. Some largest hedge funds in America discovered this opportunity and short euro in groups to an enormous scale. Later on, the British pound is being infected. It continuously dropped for six days, which wrote the longest dropping period record. In this paper, the objective is to critically analyse how the European sovereign debt crisis affects foreign exchange markets. The theme focuses on the contagion on the markets. The contagion phenomenon exists between foreign exchange spot and derivative markets. One of the channels is the investor sentiment, which makes large scale of influences on both markets and volatility dynamics (Corredor, P., Ferrer, E., Santamaria, R., 2015). It makes sense on aspects like trading volume, effective transaction costs and so on. This paper has two main parts. The first part is to evaluate impacts on foreign exchange spot market through analysing the political channel, bank channel and financial markert channel. The second part is to investigate impacts on foreign exchange derivatives, especially on the foreign exchange swap. 2. Contagious impact on the foreign exchange market 2-1 Impacts on foreign exchange spot (impacts on euro) In this part, we explain how the debt crisis makes impacts on the foreign exchange spot market, especially, we focus......

Words: 2683 - Pages: 11


...Debt Ceiling Crisis This essay is intended to provide a breakdown of the debate concerning the debt ceiling. As the house debates, the debts increases and the issue continues to become complicated. The nation is in a crisis along with complex issues. President Obama along with the rest of the house is at odds deciding if the debt ceiling should be raised. The debate on Capitol Hill has been going on for few months now, as the August 2, deadline nears. The democratic and Republican Party both agree it is imperative that the ceiling needs to be raised but the issues surrounding the debt separates congress. The current debt ceiling stands at 14 trillion dollars and continues to grow. This debate has divided the nation’s citizens as well. It is not just a situation of more money to spend, if the ceiling is not raised the money would have to come from social security and Medicare. The Democratic Party supports raising the debt ceiling. The democrats know that if the ceiling is not passed there would be a dramatic downward spiral in the nation’s economy. This act would cut social security and Medicare. The democrats acknowledge the monies borrowed must be repaid but not at the expense of taking away from the elderly. “Understand - raising the debt ceiling does not allow Congress to spend more money. It simply gives our country the ability to pay the bills that Congress has already racked up. In the past, raising the debt ceiling was routine. Since the 1950s, Congress has......

Words: 669 - Pages: 3

Life and Debt

...Ryan Fahrenkopf English 201 Fremio Sepulveda Research Paper “Every empire, however, tells itself and the world that it is unlike all other empires, that its mission is not to plunder and control but to educate and liberate." – Edward W. Said “Life and Debt” is a documentary directed by Stephanie Black with the screen play and voice over done by Jamaica Kincaid about how the IMF, the World Bank, and the World Trade Organizations destroyed Jamaica economically. This movie is based specifically on what happened in Jamaica but it is a model for how the IMF and first world countries have impacted the rest of the world. The film is about globalization and exposing first world countries, mainly the United States, for destroying third world countries. The Oxford English dictionary defines a documentary as a factual, realistic, applied esp. to a film or literary work, etc., based on real events or circumstance, and intended primarily for instruction purposes. “Life and Debt” mostly follows this definition because it does present real factual information, although it varies a little from the definition of a documentary because it is a little biased on the side of Jamaica. Another critical concept from the film is the term globalization. The Oxford English Dictionary defines globalization as the action, process, or fact of making global; esp. (in later use) the process by which businesses or other organizations develop international influence or start operating on an......

Words: 1877 - Pages: 8

Debt Crisis

...July‐December 2011               SR/GFC/11‐9  SESRIC REPORTS ON GLOBAL FINANCIAL CRISIS – 9 SESRIC REPORTS   ON THE GLOBAL FINANCIAL  CRISIS                                         European Debt Crisis and Impacts on  Developing Countries    STATISTICAL ECONOMIC AND SOCIAL RESEARCH AND  TRAINING CENTRE FOR ISLAMIC COUNTRIES (SESRIC)  1  SESRIC REPORTS ON GLOBAL FINANCIAL CRISIS – 9     2011‐2 Issue    EUROPEAN DEBT CRISIS AND IMPACTS ON DEVELOPING  COUNTRIES    July – December 2011    SESRIC  Reports  on  Global  Financial  Crisis  :  The  financial  crisis  which  started  in  July  2007,  when  investors  lost  their  confidence  in  the  mortgage‐  and  asset‐based  securities  in  the  United  States,  has  deepened  during  2008‐2009  with  a  global  reach  and  affecting  a  wide  range  of  financial  and  economic  activities  and  institutions  in  both  developed  and  developing  countries  around  the  world.  As  the  crisis  deepened, the governments of major developed and developing countries as well as international financial  regulators attempted to take some mitigation actions and coordinate efforts to contain the crisis.  Given  this  state  of  affairs,  the  SESRIC  has  been  preparing  short  reports  since  May  2009  with  the  aim  of  monitoring  the  developments  related  to  the  current  global  financial  crisis  at  the  global,  regional  and national  levels.  In  particular,  these  reports ......

Words: 3090 - Pages: 13

National Debt

...Natioinal Debt 1. What is the debt? How much is it? Examples The national debt has grown significantly in recent years due to rising annual deficits. A deficit occurs in any year the government spends more money than it takes in. Borrowing to make up the difference is added to the national debt -- technically referred to as the gross federal debt. The gross debt has two components: 1) Debt held by the public -- money the government borrows on the open market from domestic or foreign investors; and 2) Intra-governmental debt -- money the government owes itself, as in the Social Security trust fund. $15.7 trillion If you spent $1 million a day since Jesus was born, you would have not spent $1 trillion by now...but ~$700 billion- same amount the banks got during bailout. 1 trillion is 10ft high larger than a football field 2. Decrease politican pay. Examples The current salary (2011-2012) for rank-and-file members of the House and Senate is $174,000 per year. •Members are free to turn down pay increase and some choose to do so. Leaders of the House and Senate are paid a higher salary than rank-and-file members. Senate Leadership Majority Party Leader - $193,400 Minority Party Leader - $193,400 House Leadership Speaker of the House - $223,500 Majority Leader - $193,400 Minority Leader - $193,400 A cost-of-living-adjustment (COLA) increase takes effect annually unless Congress votes to not accept it. The most recent salary increase, to......

Words: 415 - Pages: 2

Public Debt

...Public Debt? Public debt is also sometimes referred to as government debt. It is a term for all of the money owed at any given time by any branch of the government. It encompasses public debt owed by the federal government, the state government, and even the municipal and local government. Public debt accrues over time when the government spends more money than it collects in taxation. As government engage in more deficit spending, the amount of public debt increases. Public debt can either be: 1.1External debt 1.2Domestic debt or Internal Debt 1.1External debt: Public debt can be made up of all sorts of different types of debt. A great deal of public debt is external debt, which is money that is owed by the government to foreign lenders, either in the form of international organizations, other governments, or groups like sovereign wealth funds which invest in government bonds 1.2Domestic debt or Internal Debt: Public debt is also made up of internal debt, where citizens and groups within the country lend the government money to continue operating. In some ways, this is a lot like lending to oneself, since ultimately the responsibility for public debt falls back on the very people lending money. 2.0Benefits of Public Debt * It is an alternative for financing fiscal budget deficit * Deficit budget raise the recession and public borrowing help the economy not to be fall in recession * Public debt......

Words: 3276 - Pages: 14


...------------------------------------------------- Debt A debt is an obligation owed by one party (the debtor) to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to covermoral obligations and other interactions not based on economic value.[citation needed] A debt is created when a creditor agrees to lend a sum of assets to a debtor. Debt is usually granted with expected repayment; in modern society, in most cases, this includes repayment of the original sum, plus interest.[1] In finance, debt is a means of using anticipated future purchasing power in the present before it has actually been earned. Some companies and corporations use debt as a part of their overall corporate finance strategy. ------------------------------------------------- Debtor A debtor is an entity that owes a debt to another entity. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor. When the counterparts of this debt arrangement is a bank, the debtor is more often referred to as a borrower. ------------------------------------------------- Accounts receivable Accounts receivable also known as Debtors, is money owed to a business by its clients (customers) and shown on its Balance Sheet as an asset.[1] It is one of a series ofaccounting transactions dealing with the billing of a customer for goods and services that the......

Words: 783 - Pages: 4