As foreign companies invest a lot in their resources, they create inflation. This will affect Latin American’s companies as they are impacted by the inflation. Due to the inflation, domestic firms are unable to perform business activities as the expenses are automatically higher. As a result of inflation, the local firms are unable to invest because the prices are simply higher. If a country has higher inflation rate than others this will make the export of the country less competitive and its imports more expensive. Then the exchange rate will fall which could lead to even higher import prices of goods and because of cost-push inflation which might drive the overall inflation rate even more.It will indirectly leads to instability economic growth. ……[expand and relate to a case in Latin America]....EDWIN
Other disadvantage is that since the company is multinational based company or better known as foreign company, all the profits that the company gain will come back to the host country. It is part of the theory of decapitalization of local economies, which highlights the host country will not benefit from the capital as the majority of capitals in form of profits is transferred back to the origin country of the foreign company. As a result, Latin America will not gain any profits from it.Furthermore, as FDI creates competitiveness as the investors are more likely to invest in the multinational companies, it will kill the survival of local companies. Foreign companies have more reputation, brand name and steady performa which attracts potential investors to invest in, comparing to the local firms. As the investors are aggressively searching for firms that will give them best returns of their investment with least risk, they will ...
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Haskel, Jonathan E., Sonia Pereira, and Matthew J. Slaughter 2002. Does Inward Foreign Direct
Investment Boost the Productivity of Domestic Firms? NBER Working paper No. 8724. Web. 28 Nov. 2013.
Javorcik, Beata. “Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages.” The American Economic Review. Volume 94, Number 3 (June 2004). P. 605-627.
Kumar, Pramod. “100% FDI in pharma sector bad for country: Parl committee.” First Post. 15 August 2013. Web: http://www.firstpost.com/economy/100-fdi-in-pharma-sector-bad-for-country-parl-committee-1035703.html
OECD PUBLICATIONS, 2, rue André-Pascal 2002, 75775 PARIS CEDEX 16 No. 81839 2002 Web. 28 Nov. 2013.
Rodrigues, Rhys. "Disadvantages of Foreign Direct Investment (Host Country)."Yahoo Contributor Network. Yahoo! Voices, 06 June 2010. Web. 28 Nov. 2013.
Off-shoring is the establishment of business operations outside national boundaries. The process of moving business outside these boundaries is to garner an advantage either through tax breaks, lower wages, lower transportation cost and/or relaxed regulations ("Offshore definition," 2014). Many firms either branch out as a horizontal multinational or vertical multinational. Horizontal multinational’s produce the same good or services as abroad. This foreign direct investment (FDI) is done to strategically place production closer to the target market. Doing this provides advantages surrounding transportation cost while enhancing learning associated with local needs. A vertical multinational is one that fragments a portion of its good to take advantage of lower cost (i.e. cheap labor). Markusen and Maskus found horizontal multinational replaces trade whereas, a vertical multinational positively correlates with trade (Markusen & Maskus, 2001).
The United States, Germany, and Japan make up the bottom three lines while Angola and Uruguay are represented by the top two lines. The first distinction that can be made is the development of each country. The US, Germany, and Japan are all highly developed countries that have strong infrastructures and high GDP per capita. Each of these countries have enjoyed years of political and social continuity. On the other side, both Uruguay and Angola are developing countries and have poor infrastructures that have been prone to political corruption and social unrest. While these conditions play a part in high or low inflation rates they are not the only factors. Each country is dealing with unique circumstances that are helping or hindering their economies and impact inflation rates. Inflation rates are a byproduct of an economy and in some ways can give an indication if the economy is healthy. The issue is that inflation adjusts over longer periods of time when any number of issues can change. So trying to take direct action against inflation may not be the best policy. Instead working on issues of infrastructure, trade restrictions and tariffs, and efficient productivity may have a greater impact on the lowing and stabilizing of inflation
Inflation increased from 19.91% in 1995 to 26.4% in 1996 before dramatically decreasing to 9.67% in 1997 and hitting a nearly twenty year low of 5.95% in 1999 (See Appendix B). Foreign direct investment inflows continually increased from 1996 to 1999 (See Appendix C). Alternatively, foreign direct investment outflows decreased from $45.3 million in 1996 to $9 million in 1997, but saw a steep increase of 389% to $35M in 1998 and 76% increase to $45.9M in 1999 (See Appendix D). (World
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
Since foreign aid programs are here to stay, it is important to focus on the enormous potential for foreign aid to be effective. One such way is through augmenting a state’s ability to attract foreign direct investment (FDI). FDI is a good option because it has the potential to be a more long-term solution than pub...
Phatak, A. (1998 йил 01-01). The pharmaceutical industry and the medical profession. Retrieved 2012 йил 19-01 from Indian Journal of Medical Ethics: http://www.ijme.in/064cr131.html
Rao, S. , P. Sharma, and R. Acharya.Canada–U.S. trade and foreign direct investment patterns. Calgary: Calgary University Press, 2003.
Nguyen, J. (2011, September 8). The 3 Biggest Risks Faced By International Investors. Investopedia.com. Retrieved February 25, 2014 from http://www.investopedia.com/articles/basics/11/biggest-risks-investors-face.htm
Political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment. If a country's political or legal system discouraged or prevented foreign investment, that country was disqualified from further consideration. Factors considered when assessing the political and legal environment:
First is the language communication problem. Thai is the official language of Thailand, all Thai laws and regulations are written in Thai, and this brings difficulties to foreign investors. And in local culture, people generally emphasis on the status and relationships, so it will increase the foreign investment in intangible costs.
Woodward, D. (2001). The next crisis?: Direct and equity investment in developing countries. London: Zed Books.
In the country’s early post-independence era, foreign enterprises were seen by some as a form of “neo-colonialism” and deterred (Gaur 2006. No pagination). That has now changed and the investment climate is more positive, although still challenging.
International Monetary Fund. WEI, Shang-Jin (2001). Corruption and Globalization. Last accessed on 31 March 2005 at URL: http://www.brookings.edu/comm/policybriefs/pb79.pdf ZEKOS, Georgios I. (2003). Foreign Direct Investment in Digital Economy.
There are many factors that affect the economy, inflation is one of them. Basically inflation is risingin priceof general goods and services above a period.As we see value of money is not valuable for the next years due to inflation. Today every country has facing inflationary condition in their economy.GDP deflator is a basictool that tells the price level of final goods and services domestically produced in an economy.GDP is stand for gross domestic product final value of goods and services, Furthermore GDP deflator shows that how much a change in the base year's GDP relies upon changes in the price level. . Inflation in contrast, how speedy the average prices intensity is increases or changes above the period so the inflation rate define the annual percentage rate changes in the level of price is as measure by GDP deflator more over GDP deflator has a advantage on consumer price index because it isn’t only based on a fixed basket of goods and services. It’s a most effective inflation tool to identify the changes in consumer consumption and newly produced goods and service are reflected by this deflator. Consumer price index (CPI) is also measure the adjusting the economic data it can also be eliminate the effects of inflation, through dividing a nominal quantity by price index to state the real quantity in term.
The Article discussed inflation in the Philippines this year, its effect to the economy and how the country handle it over time. The analysis looks into the macroeconomic issues that affects economics. It focuses on the main points about inflation. This will cover how inflation are being measured, the effects on demand and supply and analyse the relationship of inflation to the Philippine economy.