Discuss the importance of foreign capital flows for country

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Reference no: EM133630012

Homework: Business and Finance- Country Risk Report

Directions:

In this homework, you will create a project which includes the following:

A. Collect information on a developing country
B. Evaluate the main risks affecting FDI in the country
C. Summarize the information and provide a recommendation

Instructions

This is a group homework, up to a maximum number of two members per team. The homework is due by 5:00pm on Wednesday January 31st.

Prepare a risk analysis of a country of your choice, with the following restrictions:

The country or economy has to be considered a "developing economy" by an international organization such as the UN, the World Bank, or the IMF; and/or the country's capital markets must be considered "emerging market" by MSCI

You cannot select one of the countries analyzed in the textbook, in the 10th edition (Chapter 16, Exhibits 16.10-Vietnam, and 16.11-Turkey) or in earlier editions. (See page 463 in textbook to see list of countries to choose from)

Guidelines:

The risk analysis should be done from the perspective of a multinational company considering investing (i.e., FDI) in the country. Refer to Chapter 16 to understand the types of risks associated with FDI and the appropriate evaluation (pp. 458-465). You may also find it helpful to review the exhibit and discussion associated with sovereign ratings on p. 350.

I recommend you start at the link below to gather essential country information, but then consult other sources to complete your analysis:

Export Finance Australia - Country Profiles

Look at recent Wall Street Journal, Financial Times, or The Economist articles for current events that have put the country in the news and discuss what the current climate is for multinational investment.

Take advantage of existing sources available through the library (Databases, Browse, Subject=Business and Economics)

Use resources from international organizations, such as the World Bank, the IMF, OECD, etc. as well as local resources if possible.

In addition to economic, political, and financial variables following chapter 16, make sure to describe the type of currency regime (pegged, floating), and whether there are currency derivatives available to manage currency risk.

Also, discuss the importance of foreign capital flows for the country (i.e., relate to the Balance of Payments chapter).

It is said that there are four major factors that attract foreign direct investment:

1. Stable property rights
2. Peaceful industry-labor relations
3. Political stability
4. Cost advantages in wages, taxes, and infrastructure.

Reference no: EM133630012

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