International Finance Case Study
1. foreign exchange and political risks
Current exchange rate: $1USD= 8.91 South African Rand (ZAR)
With the United States having close political ties with South Africa on the rise since 1994, the risk politically would be minor. With the strong political ties between the two countries since 1994 with multiple ambassadorial trips taken both ways, there would be little risk of immediate losses due to politics. There is a local embassy established in the country.
The top ten political risk factors common to this country would be nationalization, confiscation, creeping exploration, and currency inconvertibility, breach of contract, non-honoring of government guarantees, war, violent civil unrest, non-violent civil unrest, and terrorism. The other major risk would be dealing with the private company that the firm would be dealing with. In the case of the company being private, there are a lot of issues that could arise. The company could put loopholes in the contract or specific stipulations so that way it could be voided at any time, leaving the firm to pick up the pieces. In dealing with a governmental company, on the other hand, the contracts would be more long term and tend to work out better. If the contract fails due to the South African government’s fault, it could look poorly upon …show more content…
That creates an opening for rich-world investors seeking a better return than is available at home. North Africa, tied to Mediterranean trade, is fairly well developed and is seen by some as a separate investment proposition. So is South Africa, the continent’s biggest economy, which has a slower growth rate than most of its neighbours and more mature consumer and financial industries.
2. Examine the economic trends and impact of globalization in the chosen market and determine which of those emerging factors have potential for disruption that could affect operations.
23 April 2013
South Africa's largest privately owned defence and aerospace firm, Paramount Group, has won an international bid to supply security vehicles to Brazil, the company announced last week.
While there is a privately owned defence and aerospace firm established there, Raytheon, with its larger firm and better assets, could move in and either partner with Paramount or just muscle its way in.
3. Assess whether the country you have chosen maintains a fixed or a flexible exchange system and discuss how this monetary system will affect your MNC. Provide a strong rational for possible implications and drawbacks of the existing system.
Flexible. The country has tried to implement a fixed exchange rate, but has had a hard time in doing