Doing Business In Latin America

Doing Business In Latin America presentmentTodays dry land is ever changing. National borders atomic number 18 becoming less here and nowant in times of global capital movements, cross-border migration and highly interwoven transnational barter relationships. Globalisation is since the 1990 and the collapse of the bipolar sphere a healthful-known phenomenon and it is beyond question that nation states result have to adjust to its influences in the pine run. The policy-making response has so far been the creation of international needy make out symmetricalnesss and multi advancedral institutions like the WTO for instance, which are to oversee global hand systems and which also have as their task the liberalization of markets around the cosmos.Advocates of work liberalization claim that the eradication of dispense barriers ultimately leads to an increase in a countries overall wealth, whereas more leftist opp acents stress that step down treat predominantly benefits multinational corporations and the corpo grade ruling class. As a field of study of fact, States themselves or Governments do not trade. Consequentially, companies and corporation are about presumable to benefit from free trade Areas and investment opportunities abroad. However, doing crease in threesome countries underlies substituteing circumstances. Taxation, environmental deliverances, labour standards and investment regulations are factors of production that vary from country to country.For patronagees in order to make use of comparative advantages, it is hence essential to know near the differences amongst countries in wrong of the local clientele climate. This paper aims at unfolding those differences for three Latin American countries Mexico, Belize and Cuba.Furthermore, this paper shall function as a guide to companies who are elicit in doing business in the Latino Americas and especially in angiotensin-converting enzyme of the three countries mentioned a bove. The paper starts with a world(a) frugal introduction of the countries in concern. For this purpose, economic data provide be analysed. Then in the endorse part, the document allow for focus on unravelling differences in terms of business climate and investment opportunities. Lastly, a conclusion will be drawn.2.0 Introduction to MexicoMexico lies at the bottom of Central America, bordering the Caribbean Sea and the Gulf of Mexico, between Belize and the linked States and bordering the North Pacific Ocean, between Guatemala and the united States. It has a population of about 112 million inhabitants.From 1930 to 1970, although starting from a low baseline, Mexico go through tremendous economic growth. Achievement historians call it El Milagro Mexicano or The Mexican stinting Miracle. The categorybook economic growth of Mexico hit an average of 3% to 4% during this period, with an estimated annual rate of inflation of 3%. It was not really a miracle nevertheless it w as actually a result of the government policy. The policy put an idiom on primary education which increased the enrollment rate between 1929 and 1949 by 300%. The policy also imposed high tariffs on imported domestic goods, and lastly, the policy customsaryly invested in agriculture, skill and conveyance infrastructure. From the 1940s, external immigration into Mexicos cities expanded the countrys urban population. Despite the falling foreign investment of the Great Depression during that period, the economy grew. The assumption of mineral rights and the concomitant nationalization of the oil industry into Pemex during the pre boldnessncy of Lzaro Crdenas del Ro was a widely accepted move.On 1 January 1994, Mexico became a full member of the North American Free address obligation (NAFTA), joining the United States of America and Canada. In 2005, North American economic integration was further strengthened by the signing of the Security and successfulness Partnership of Nort h America.Mexico has a free market economy that of late entered the trillion-dollar class. It contains a mixture of modern and outmoded industry and agriculture, increasingly predominate by the private sector. Recent governings have expanded competition in sea ports, railroads, telecommunications, electrical energy generation, natural gas distri exception, and airports. Per capita income is one-quarter that of the United States income distribution mud highly unequal. Trade with the United States and Canada has trip guide since the implementation of NAFTA. Mexico has free-trade agreements with more than 40 countries, administration 90% of its foreign commerce.2.1 State of the Mexican EconomyAs mentioned before, Mexico has a free market economy in the trillion dollar class. It contains a blend of modern and outmoded industry and agriculture, increasingly dominated by the private sector. Recent administrations have expanded competition in seaports, railroads, telecommunications, e lectricity generation, natural gas distribution, and airports. Per capita income is roughly one- leash that of the US income distribution system highly unequal.Trade with the US and Canada has nearly tripled since the implementation of NAFTA in 1994. Mexico has free trade agreements with over 50 countries including, Guatemala, Honduras, El Salvador, the European Free Trade Area, and Japan, putting more than 90% of trade under free trade agreements. In 2007, during its first year in office, the Felipe Calderon administration was able to pick up support from the opposition to successfully pass pension and fiscal emends.The administration passed an energy reform measure in 2008, and another fiscal reform in 2009. Mexicos gross domestic product plunged 6.5% in 2009 as world demand for exports dropped and summation prices tumbled, but gross domestic product is expected to post positive growth late in 2010. The administration continues to face many economic challenges, including impro ving the public education system, upgrading infrastructure, modernizing labor laws, and fostering private investment in the energy sector. Calderon has stated that his top economic priorities rebriny reducing poverty and creating jobs.2.2 Doing business in MexicoIn 2004 Mexicos securities market was a tiny fraction of what skill be expected for an economy of its size. And while Latin America standard 9% of global private equity flows, Mexico, with more than a third of the regions income, received only a tenth of that. More companies were delisting rather than payoff new shares on the Mexican stock exchange. It was time for reform.Mexico overhauled its securities laws, with useful foreplay from stakeholders. A new law attacked self-dealing, a major problem in the country, to better protect investors. Mexico also extended corporate governance obligations to subsidiaries. In addition, listed companies were required to set up committees of independent directors. Changes in the law w ere enacted to alleviate protect investors and boost their confidence in Mexican markets.Although Mexicos economy took a plunge during the 1996 recession, the worst has passed and Mexicos economy is headed towards a recovery. Mexicos economy depends a mussiness on the United States it derives a great deal of income and stability from the United States. When purchases, tourism, hiring, and investment from the United States declines, Mexicos economy declines.If the United States continues to suffer from unemployment, tight credit, and general market instability, Mexico will suffer from the alike(p). If unemployment in the United States soars to 10%, Mexicos unemployment will equally increase to follow suit.A simple solution would of cartroad to break by from the dependence on the American economy but it would not be viable. The American economy is a strong one and instead of breaking away from it, Mexico should instead attract investors from other regions of the world (such as th e European Union), so that their economy would not be so tightly tied to just one economy.4.0 Introduction to CubaCuba, an island country, is located in the Gulf of Mexico. Cuba has a population of about 11 million inhabitants, most of them living in the cities of Havana, the nations capital, and Santiago de Cuba. The official language is Spanish. Cuba, like Mexico and most of the Latin American countries, has formerly been a Spanish colony, but managed to do good independence in 1902. In the 1950s the world famous Cuban revolution took place, which changed the political system in Cuba towards a regime found on communist socialism.Fidel Castro, Cubas dictator had close ties to the Soviet Union, which was at the same time the countries mayor trade partner and financial contributor. During the Cold war, Cuba took side of its communist allies and became center of public attention, as Soviet thermonuclear weapons were placed on Cuban territory during the 60s and the U.S felt threaten ed by this behaviour. It was due to this incidence that the U.S. imposed a trade embargo on Cuba, which exists in some form up till today. Since the breakdown of the UDSSR, Cuba confused its greatest ally and exports and financial support fell drastically. By now, Fidel Castro who led the Regime for 50 long time has been replaced through his brother Ral due to bad health conditions.Rul Castro is likely to impose frugal and political reforms in the near future in order to disseminate up Cubas economy to investment and international trade. In addition to the world wide economic recession, Cuba suffered in 2008 severe damage due to Hurricanes Ike and Gustav. The economist estimated the damage to lie around 10 billion US$, an occur that is hard to bear for a country that weak in terms of productivity and economic stability (The Economist, 2008).4.1 The state of the Cuban Economy socialism and poor governance have, over the years, hemmed economic development substantially. The count rys annual GDP is with 50 bn comparatively small and close to the poorest 25 % of the worlds countries. Cubas GDP has experienced an unstable development during the last decade (U.S. Department of State, 2010) 3.2 % growth in 2002, 1.4 % in 2001, 3.8 % in 2003, 5.8 % in 2004, 11.2 % in 2005, 12.1 % in 2006, 7.3% in 2007, 4.1 % in 2008, 1.3 % in 2009. The decline in GDP growth during 2008 and 2007 can be ascribed to the global economic recession and it is apparent that the Cuban economy has been poorly hit.According to the an article published by the Guardian, Cuba faces a dogged, hot pass of discontent. Virtually every key economic indicator is moving in the wrong direction as the global economic slowdown is excerbating deficiencies long been apparent in Cubas economic management (The Guardian, 2009). Cubas GDP per Capita was 4, 450 US$ per year and therewith around 10 times smaller then the capita GDP in the United States. The average monthly salary amounts to 18 $ which would suppose that the average Cuban would live of 50 cents a day. As a consequence of this low income, Cubans are obliged to scrimp and hustle on the black market even when things are going relatively well (The Guardian, 2009).However, due to Cubans social policy, citizens receive free food vouchers and other governmental support. About 60 % Cubas labor force, which covers 5 million people, work in the services sector, with tourism being the largest part. The rest of the Cuban workers are every employed within the agricultural sector or the industry with the last mentioned only producing light industrial goods. . The unemployment rate is with 1.7 % considerably low and is in fact the 9th lowest in the world. This , however, cannot be taken as a reliable figure as the socialist government tries to hide away unemployment through public occupation campaigns. The public dept in 2009 amounted to 35 %, concord to the CIAs World Fact book (CIA, 2009).Moreover, the industrial production growth rate is declining (-1 % in 2009).Cubas main export partners are China (25 %), Canada (20%), Spain (6%) and the Netherlands (4.53%), importing in the first place sugar, nickel, tobacco, fish, medical products, citrus and coffee. The value of Cubas exports in 2009 was 2.458 billion U.S. $. With imports in likeness being 4 times higher, Cuba runs a steeply negative trade balance.According to the World Fact Book, Cuba mainly imports food, machinery and equipment and chemicals. Summing up, the Cuban economy finds itself in a critical situation and economic reform are suddenly necessary to guarantee stable economic growth.Unfortunately, data about Cuba from this years competitiveness index cant be presented here, since neither the World Economic Forum nor the IMF process the Cuban case.4.2 Doing business in CubaSince Canada is one of Cubas main trade partners, the Canadian Foreign Ministry releases information on the Cuban business climate as well as import regulations.For U.S. compan ies, doing business in Cuba is even more complicated as the international relationship nevertheless suffers from the trade embargo of the 1960s.Firstly, it turns out that importing can only be undertaken by Cuban government entities and joint ventures holding permits for the specific goods in question. Certain Agents and intermediaries are allowed to handle certain goods, but due to the political regime, these persons are not allowed to import on their own (Government of Canada, 2009).Furthermore, to obtain import licences, Canadian businesses will most likely see themselves forced to join forces with Cuban partners first before any governmental approval will be issued.For about 4.500 products and commodities Cuba applies its MFN tariff, which is 10.4%. However, for some well protected commodities, Cuba applies a 30 % import tariff. According to the Canadian Government, Entities with foreign partners may be tending(p) duty free status for some or all of those products as part of their economic association or joint venture agreement (2009). Mostly, this clause applies to members of the Latin American Integration Association (ALADI) in which Canada is not taking part.Canadian exporters are obliged to hire Cuban custom brokers for the carrying out of custom formalities. Moreover, it is essential to fully be with all regulation and elaborate documentation is furthermore of great importance. According to the Canadian Government, plainly minor discrepancies can lead to confiscation of improperly imported goods. Although conformance with these regulations is technically the responsibility of the importer or the agent handling consignment shipments, close documentation on the part of the shipper will reduce errors and delays (2009).Also, exporters have to comply with labelling, sanitary, phytosanitary and product safety standarts.What is more, due to Cuban investment law, foreign companies will find it difficult to set up representative offices and subsidiaries in Cuba since they are expected to establish a substantial trade relationship with Cuba for at least three years, before being allowed to establisha presence in Cuban national territory (Canadian Government, 2009).Regardless of these restrictions, consignment sales sales in which goods cross the border and are still considered to be owned by the exporter are possible as long as they are cover by a contract for sales of merchandise imported on consignment.Summing up, one can see that doing Business in Cuba is complicated in most of the instances we have addressed here. The Cuban government has to restructure its economy and especially open it up for foreign investment since foreign investment is one crucial factor for economic growth of a country.