...Analysis of Foreign Direct Investments of North America Kristin Daughdril & William Cassidy Business Administration 418 Abstract Foreign Direct Investment (FDI) is an investment involving a long-term relationship and reflecting a lasting interest in and control by a resident entity in one economy of an enterprise resident in a different economy (UNCTAD). There are two types of FDI, inflows and outflows, which can be used to help determine the investment strategies and economies of countries engaged in FDI. North America has been the source of nearly one-half of all investment and almost three-quarters of the jobs created throughout the globe (Huggins, 442). North America is probably the most important continent when it comes to dealing with FDI. The three main countries of North America, the United States, Canada, and Mexico, all rank in the top 15 of world economies, proving them to be desirable partners in FDI transactions. The trends of FDI discussed in this report will be unparalleled to this information and can lead to some predictions on how future trends of the countries of North America will continue to be superior to that of the other continents of the world. Keywords: Foreign Direct Investment, FDI Inflow, FDI Outflow Foreign Direct Investment is investment of a company located in a different country either by buying a company in the country or expanding its business into the country. FDI can be done for many purposes. Companies may have tax incentives abroad...
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...for capital invests so that countries such as Mexico could improve economically. In this section, we will look into the impacts of NAFTA on the lives of Mexicans with focus on the economic lives. We also determine the attainment of the objectives of NAFTA NAFTA did not bear any resemblance to the forecasts and the expectations of the agreement. The agreement was not a solution to the unemployment challenges in mexico.it was not helpful in raise the average wages of the Mexicans or reducing the flow of Mexican immigrants to the US. It was however useful in...
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...to recognize potential business partners for trade and to evaluate a country’s performance in the global economic competition. . In this mini-case we will look into 4 key aspects such as Mexico’s key economic indicators, the causes of the country’s balance of payment problems, policies in which Mexico could have implemented in order to avoid the problems and the lessons in which developing countries can learn from this incident. Through these 4 key aspects, the reader would be able to gain a better understanding about Balance of Payments concepts. Trend in Mexico’s key economic indicators: balance of payments, exchange rate, and foreign reserve holdings. Yr | Balance of Trade | Current Account | Direct Foreign Investment | Portfolio Investment | Gross International Reserves | Total External Debt | Public Sector External Debt | Interest Payments | 1994 | -18.5 | -29.7 | 6.1 | 8.2 | 6.1 | 142.2 | 85.4 | 11.8 | 1995 | 7.1 | -1.6 | 15.7 | -9.7 | 15.7 | 169.9 | 100.9 | 13.6 | Mexico’s current account deficit was continuously increased from $5 billion to $25 billion during the period 1988 through mid-1994. In late 1994, it became $30 billion. Prior to 1994, Mexico experienced sharp rising trade deficits starting from 1989 and caused the current account to sink into deficit, ballooning from a deficit of US$4 billion in 1989 to US$29 billion in 1994. In the period between December 1988 and November...
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...education and attention to the health of an individual. The inclusion of human capital in the economic analysis is an important step. It is generally theorized that accumulation of human capital is a key driver of economic growth. According to economists, dissemination of knowledge to general population allows increasing returns and generates positive externalities. Therefore, it is a central concept of development economics that investment in human capital should be the foremost priority of developing countries. Foreign direct investment refers to international movement of capital across national boundaries. This may take the shape of creation of a subsidiary abroad or to exercise control on the management of a company in another country. The effects of FDI are generally considered to be highly positive on the growth of host country since it leads to transfer of technology and generation of employment in host countries. FDI has experienced strong growth since the mid-1980s and also contribute significantly to economic globalization. Foreign direct investment is also presumed to have positive outcomes for workers in the form of higher wages (Eicher &...
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...Faculty of Management Studies (MSU) Assignment on NAFTA (Subject : International Marketing) 1 Assignment on NAFTA Sub: International Marketing Submitted by: Submitted to: Rajesh Madnani Roll No. 9 5th Semester MBA – Evening (XVIIIth Batch) Mr. Seshan Iyer FACULTY OF MANAGEMENT STUDIES THE M.S.UNIVERSITY OF BARODA Submitted by Rajesh Madnani (Roll No.9) Submitted to Mr. Seshan Iyer Faculty of Management Studies (MSU) Assignment on NAFTA (Subject : International Marketing) 2 What is NAFTA North American Free Trade Agreement (NAFTA) is an agreement made between the governments of Mexico, Canada and the United States for the purpose of eliminating trade barriers among them. Important Documents: - North American Free Trade Agreement (with preamble, 22 chapters, 7 annexes, and articles) -procedural forms NAFTA has two supplements: the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC). Following diplomatic negotiations dating back to 1990 among the three nations, U.S. President George H. W. Bush, Canadian Prime Minister Brian Mulroney and Mexican President Carlos Salinas, each responsible for spearheading and promoting the agreement, ceremonially signed the agreement in their respective capitals on December 17, 1992.[5] The signed agreement then needed to be ratified by each nation's legislative or parliamentary branch. The agreement was then given to each country’s legislative in order to make changes...
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...Cemex and the host nations. Cemex had to face some challenging questions; What are the primary factors in why Cemex has chosen Direct Foreign Investments versus some alternatives; What is the impact of their choice in FDI on the host-country, as well as home-country. What are the primary factors in why Cemex has chosen Foreign Direct Investments versus some alternatives? There are several options to consider when a company wants to move into the international global market. The biggest questions firms usually ask is, “Why do firms go to all of the trouble of establishing operations abroad through foreign direct investments when two alternatives, exporting and licensing, are available to them for exploiting the profit opportunities in a foreign market?” (Hill, 2008). This question was undoubtedly debated heavily by Cemex prior to investing in foreign markets. One of the industry specific novelties of cement manufacturing, is the product itself. “The company sells ready-mixed cement that can survive for only about 90 minutes before solidifying, so precise delivery is important” (Hill, 2008). This industry is already at a predisposed peril if it were to consider exporting their goods. The cement industry requires this product to be made on site. Due to this requirement, Cemex could have considered Licensing, “Occures when a firm grants a foreign entity the right to produce its product, use its production processes, or use its brand name or trademark in return for a royalty...
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...Mexico Overall, Mexico is the second largest economy in Latin America after Brazil and is also an oil-exporting nation. Mexico realized that trade is one of the most important factor that driven Mexico economy, this country started free trade in a early time and continue participates lots of free trade agreements for decades. Based on the data that I have downloaded from work bank(2017), GDP per capita are: 7236.6 in 1990, 7277.6 in 1995, 8568.1 in 2000, 8706.1 in 2005 and 8861.5 in 2010. From that, we can see that economy develop in Mexico is increasing but modest in general. Since 1994, Mexico participated NAFTA and thought that agreement would boost Mexico’s growth and economy development. However, the economy performance was not going...
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...Cemex and the host nations. Cemex had to face some challenging questions; What are the primary factors in why Cemex has chosen Direct Foreign Investments versus some alternatives; What is the impact of their choice in FDI on the host-country, as well as home-country. What are the primary factors in why Cemex has chosen Foreign Direct Investments versus some alternatives? There are several options to consider when a company wants to move into the international global market. The biggest questions firms usually ask is, “Why do firms go to all of the trouble of establishing operations abroad through foreign direct investments when two alternatives, exporting and licensing, are available to them for exploiting the profit opportunities in a foreign market?” (Hill, 2008). This question was undoubtedly debated heavily by Cemex prior to investing in foreign markets. One of the industry specific novelties of cement manufacturing, is the product itself. “The company sells ready-mixed cement that can survive for only about 90 minutes before solidifying, so precise delivery is important” (Hill, 2008). This industry is already at a predisposed peril if it were to consider exporting their goods. The cement industry requires this product to be made on site. Due to this requirement, Cemex could have considered Licensing, “Occures when a firm grants a foreign entity the right to produce its product, use its production processes, or use its brand name or trademark in return for a royalty...
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...Foreign 99 Chapter III Direct investment by China in Latin America and the Caribbean A. Introduction Since 2008, China has become one of the world’s largest sources of direct investment. These flows first reached significant levels in Latin America in 2010, when it is estimated they surpassed US$ 15 billion. Chinese companies have in fact burst on the scene in the region so recently that several of the biggest projects were still being finalized in early 2011, or had only just been put into operation. Most investments have been made in natural resource extraction, but over the medium term this is expected to diversify into other sectors such as manufacturing and infrastructure construction. Paradoxically, there is a lack of data on this extremely important phenomenon, which poses a constant problem for policymakers and analysts studying Chinese foreign direct investment (FDI). Appraisals of the possible opportunities and challenges presented by this increased investment flow therefore tend to lack supporting empirical evidence. The aim of this chapter is to make some progress on this issue, at least as far as investment in the region is concerned. A variety of sources have been consulted, including investment announcements in the media and interviews with Chinese company managers and Latin American and Caribbean government authorities. Despite the evident limitations of this kind of material in terms of data quality and reliability, this course of action does provide...
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...managed float system, governments will allow exchange rates move according to market forces; however, they will intervene when they believe it is necessary. A freely floating system may help correct balance-of-trade deficits since the currency will adjust according to market forces. Also, countries are more insulated from problems of foreign countries under a freely floating exchange rate system. However, a disadvantage of freely floating exchange rates is that firms have to manage their exposure to exchange rate risk. Also, floating rates still can often have a significant adverse impact on a country’s unemployment or inflation. 2. Intervention with Euros. Assume that Belgium, one of the European countries that uses the euro as its currency, would prefer that its currency depreciate against the dollar. Can it apply central bank intervention to achieve this objective? Explain. ANSWER: It can not apply intervention on its own because the European Central Bank (ECB) controls the money supply of euros. Belgium is subject to the intervention decisions of the ECB. 3. Direct Intervention. How can a central bank use direct intervention to change the value of a currency? Explain why a central bank may desire to smooth exchange rate movements of its currency. ANSWER: Central banks can use...
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...Introduction The impact of Foreign Aid on the growth and development of less Developed Countries (LDCs) is a matter of strategic importance for the policy makers of these countries in framing their future economic programs and strategies. There has been a significant increase in the flow of foreign aid in the developing countries (Figure 1&2).According to Alberto Alesina, foreign aid is determined by political condition, economic needs and policy considerations of recipients. Despite the advancement of technology and infrastructure, a large number of developing countries still face the acute shortage of basic amenities of life such as Food and shelter. Thus, the influx of foreign aid can be a crucial factor to address these issues. Figure 1 FINN - 321 2 Research Paper Figure 2 The economic theory suggests positive effects of investment on the national income of the country. John Maynard Keynes in his most famous book The Theory of Employment, Interest and Money, argued that the national income of the country increase by more than the amount of investment by a phenomenon known as the MULTIPLER EFFECT. The qualitative effects of the investment such as Foreign Aid include the inflow of new technology, alleviation of poverty and establishment of infrastructure in the host economy. Thus, the increase of Foreign Aid is a positive sign for the future growth of a developing economy. The main objective of this empirical project is to analyze the effects of Foreign Aid on the growth...
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...At the end of 1994 Mexico was hit by one of the worst economic crisis in its history, which is called "The Peso crisis" or "Tequila Crisis" and is considered one of the first ones that had global effects. After only three weeks in charge, the newly elected President Ernesto Zedillo Ponce de León was forced to lift the upper band of the exchange rate by 15%, devaluating de facto the Mexican currency. In fact, the Central Bank of Mexico had insufficient international reserves to keep the fixed exchange rate with the US dollar. This triggered panic among Mexicans, who started buying dollars because they were fearing that further and more serious devaluations would occur. This contributed to exacerbate the situation even more. The crisis was very harsh, but thanks to a US$50b rescue package from USA, the IMF, the Bank for International Settlements and private commercial banks, Mexico was able to roll over its short term dollar denominated debt and did not default on its short term securities. As it results from the following data, Mexico managed to recover very quickly: * The GDP decreased by 5.8% in 1995, but in 1996 and in 1997 it grew by 5.9% and 7.0% respectively * Household final consumption expenditure contracted by 11.5% in 1995, but in 1997 it went back again to 1994 level * Foreign direct investments decreased by 13% in 1995 and by 4% in 1996, but they grew by 40% in 1997 to a level 16% higher than in 1994 * Unemployment rate grew by almost 3 percentage...
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...NAFTA and its effect on regional integration as well as state economies from several perspectives. In 1993, the United States, Canada and Mexico signed the North American Free Trade Agreement to achieve the higher level of regional integration. This NAFTA not only concerns the removal of trade barriers, but also aims to promote the movement of capital. Firstly, this essay will explain the evolution of NAFTA and its successful influence on economic integration. Furthermore, this chapter will provide the criticism on the influence of NAFTA. Secondly, this study will discuss the impact of NAFTA on regional integration, particularly economic integration. Then, this essay will propose the understandings on the effect of NAFTA on members’ economies and businesses from four perspectives, including trade, economic growth, employment and FDI. Main body The Evolution of NAFTA The North American Free Trade Agreement (NAFTA) issued in 1993 aims to removal trade barriers and liberalise economics and business among the United States, Canada and Mexico. Compared with similar FTA economic relationship, such as EU, NAFTA is described as the most implemented FTA (Orme, 1996). Like most FTAs, NAFTA not only effectively coordinates resource and improves competitiveness of countries and corporates, but also promotes the movement of products, services and investment, even financial integration. For instance, Krugman & Hanson (1993) stress that the implementation of NAFTA can facilitate firms obtain...
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...issues related to FDI (foreign direct investment) in the contexts of Botswana (the joint venture with DeBeers to exploit diamond wealth) and India (SEZs as arrangements to attract FDI). One of the stated reasons Mexico joined NAFTA (North American Free Trade Agreement) was to increase its inflow of FDI. Using your research skills as necessary, has NAFTA resulted in increased FDI inflows into Mexico? If so, has the FDI increase yielded economic benefits to Mexico, specifically in the form of long-term growth? Justify your answer. Mexico’s joining NAFTA has resulted in increased levels of Foreign Direct Investment (FDI), with the World Bank estimating that levels of FDI in Mexico would be 40% lower had it not joined NAFTA (1.) While the amount of FDI flowing into Mexico increased, this was not accompanied by the expected boost to long-term economic growth. NAFTA aimed to benefit Mexico with by closing the US-Mexico wage gap, boosting job growth, fighting poverty, and protecting the environment. These goals, while honorable, have not been achieved to date. Despite NAFTA’s goal of reducing poverty in Mexico, the country experienced an increase in the percentage of people living in poverty and extreme poverty between 1994 and 1996. In contrast, both of these measures fell throughout the rest of Latin America in the same time period. While the trend of increasing poverty in Mexico was short lived, poverty measures continue to be a concern, and as of 2013, Mexico remains above the average...
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...Table of content Page Introduction 1 Asian Contagion 1 Emerging Market Crises 3 Meltdown in Thailand 7 The International Monetary Fund 9 Implication for Business 11 Malaysia 13 Preventing and Managing Future Crises 14 Conclusion 16 References 18 Introduction Asian Contagion In March 1997 Asia faced a serious crisis in financial sector. This concern was started from Thailand and has spread to a lot of countries in Asia. Obviously it affected to those countries in economy situation such as currency value. Also called the "Asian Contagion", this was a series of currency...
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