...and Its Advantages in Mexico Regional Integration is described as a process in which states enter into a regional agreement in order to enhance regional cooperation through regional institutions and rules. North American Free Trade Agreement was the removal of barriers between Mexico and the United States. It was the phasing out of virtually all restrictions on trade and investment flows. “The expanded trade resulting from NAFTA has raised the United States' gross domestic product very slightly. (The effect on Mexican GDP has also been positive and probably similar in magnitude. Because the Mexican economy is much smaller than the U.S. economy, however, that effect represents a much larger percentage increase for the Mexican economy.)” (The Effects of NAFTA on U.S. –Mexican Trade and GDP, May 2003). Over the years NAFTA has helped Mexico to improve on their exports and imports trading with the United States. NAFTA has had a positive effect dealing with the international investments. This is because some of the restrictions Mexico had on their foreign investment dealing with the ownership of capital. NAFTA also allowed Mexico to do away with tariffs and quotas. This allowed Mexico to become a profitable place to invest, in plants and assembling of products in the United States. NAFTA eliminating the tariffs in Mexico helped to reduce the different license requirements and restrictions on foreign investment. This meant that it would open the doors for Mexico to invest in private...
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...Mexico: The Tequila Crisis 1994-1995 What Caused Mexico’s peso crisis of December 1994? Mexico, the Latin American country that survived the huge debt crisis in the 1980’s found itself amidst one of the most viral economic crises that it had ever encountered in its history. The crisis took place under President Zedillo; however, the causes of the crisis are usually linked to Carlos Salinas de Gortari and his outgoing administration. Gortari’s government currency policy put an unbelievable strain on the nation’s finances. In the early 1990’s, Mexico seemed to have established itself as a reformer and was establishing economic development. Domestic deregulation and privatization combined with liberalization of trade and investment led to rapid growth and massive inflow of direct and foreign investments. By May 1994 Mexico falsely believed that there was prosperity in the nation and that it in fact could be a first world nation. The Banks were just lending credit without conducting proper checks or having any accountability and it was widely known that the currency was overvalued and there was economic mismanagement taking place. The situation was not helped and led to a collapse in confidence by several political shocks that took place like the uprising in the South and the assassination of the leading presidential candidate (Gil-Diaz, the CATO journal vol.17 no 3). The government’s corruption caused the increased account deficit fostered by consumer binding and...
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...Polaris Case Rui’s qualitative analysis External Factors Opportunities 1. Moving manufacture to China or Mexico would reduce cost and increase profitability 2. Increasing sales in International market 3. Easy to find well trained trades people in LCCs (China and Mexico) 4. Joint venture or acquisitions in LCCs for market growth would help Polaris get in. 5. Major demand for Side-by-Sides are from southern US (California and Texas) Threats 1. Economics slowdown in US negatively impact the sales and the trend may continue in the upcoming years. 2. Increasing oil price may add to cost (production closer to customer would be ideal). 3. Macroeconomics perspective: inflation in Mexico and China might not be advantage. 4. Lack of talent in America or trades students don't like their manufacturing place. 5. Laying off 60 trained domestic employees with financial loss of 1.2 million and damage to the brand and may damage brand image. Internal Factors Strength 1. Experienced and well respected in the industry 2. Strong sales and brand name 3. Ability to extend product lines given parts and accessories market grew significantly and introduction of “Victory” 4. Established warehouse and distribution facilities in Minnesota, South Dakota, and Winnipeg 5. Proactive approach from management. Looking for ways to improve and save cost Weakness 1. 80% sales from US while the economy is sinking. Not enough exposure...
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...4194 APRIL 19, 2010 TIMOTHY A. LUEHRMAN JAMES QUINN Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation On June 23, 2008, a Monday morning, Arnaud Martin arrived at his office in Groupe Ariel’s corporate headquarters in Mulhouse, France. The previous week, Martin had requested additional financial information about an investment proposal from Ariel-Mexico, a wholly owned subsidiary that operated a manufacturing facility and a regional sales office in Monterrey, Mexico. The information had arrived late Friday—too late for Martin to analyze—and was waiting for him Monday morning. As a financial analyst for a global manufacturer of printing and imaging equipment, Martin examined many cross-border projects, particularly since Ariel had accelerated its move into emerging markets several years earlier. The Mexican investment proposal called for the purchase and installation of new automated machinery to recycle and remanufacture toner- and printer cartridges. Cartridge recycling had become an important part of Ariel’s business in many markets and promised continued growth. Many office product retailers operated formal toner cartridge recycling programs, for both the environmental benefits of keeping materials out of landfills and demonstrated cost savings for their customers. Writing in a leading trade journal, one analyst predicted, “We are going to see more and more refined approaches to recycling and remanufacturing [cartridges] in the coming months...
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...4194 APRIL 19, 2010 TIMOTHY A. LUEHRMAN JAMES QUINN Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation On June 23, 2008, a Monday morning, Arnaud Martin arrived at his office in Groupe Ariel’s corporate headquarters in Mulhouse, France. The previous week, Martin had requested additional financial information about an investment proposal from Ariel-Mexico, a wholly owned subsidiary that operated a manufacturing facility and a regional sales office in Monterrey, Mexico. The information had arrived late Friday—too late for Martin to analyze—and was waiting for him Monday morning. As a financial analyst for a global manufacturer of printing and imaging equipment, Martin examined many cross-border projects, particularly since Ariel had accelerated its move into emerging markets several years earlier. The Mexican investment proposal called for the purchase and installation of new automated machinery to recycle and remanufacture toner- and printer cartridges. Cartridge recycling had become an important part of Ariel’s business in many markets and promised continued growth. Many office product retailers operated formal toner cartridge recycling programs, for both the environmental benefits of keeping materials out of landfills and demonstrated cost savings for their customers. Writing in a leading trade journal, one analyst predicted, “We are going to see more and more refined approaches to recycling and remanufacturing [cartridges] in the coming months...
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...Canada, Mexico, and the United States. NAFTA, also known as the North American Free Trade Agreement, is an agreement among the United States, Canada and Mexico designed to remove tariff barriers between the three countries. This 1994 agreement had resulted in benefits to the countries such as: increased wages, reduction of tariffs, and more trade. Regardless of NAFTAs benefits, it also has several negative impacts such as: excessive pollution and little changes to limit trade. Both, these benefits and costs have impacted the everyones lives within Canada, Mexico, and the United States after 1994, when the agreement was established. After NAFTA was...
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...Cross-Border Valuation Abstract This case discusses Cross-Border valuation of projects. This kind of analysis is common for companies that are operating in many countries. Groupe Ariel is one such company that is considering investing in a project in its own subsidiary in Mexico. The company manufactures and sells printers, copiers and other document production equipment in many countries. As far as, expansion into new markets is concerned, company is very slow in taking initiatives as compared to its competitors owing to the recent recession. But the management of the company believes that better durability and lower after-sales service costs of their products enable the company to build customer loyalty. The company is now considering replacing the manual equipment used for recycling in Mexico by new equipment that requires less material and labour costs. But, the uncertainty linked with certain macroeconomic factors like exchange rate, inflation and interest rate has made the valuation of the project very complex. Compute the NPV of Ariel-Mexico’s recycling equipment by counting incremental peso cash flows at a peso interest rate. How should this NPV be translated into Euros? Assume expected future inflation for France is 3% per year. For the purpose of calculating NPV in Pesos, incremental cash flows of the project for the next 10 years should be calculated first. The initial outflow of cash flow at time “0” is the cost of new equipment. This cost is 3500,000 Pesos. The...
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...1. How has the implementation of NAFTA affected Walmart’s success in Mexico? Walmart’s marketing campaign has been “everyday low prices”. This was not the case in Mexico prior to NAFTA. Walmart was paying higher tariffs to import American goods. Once NAFTA was implemented, Mexico became a free trade zone. This made it possible for Walmart to reduce its tariffs from 10% to 3% creating a level playing field with its competitors. With the signing of NAFTA, it also opened up the doors to foreign investment in Mexico. Walmart was also paying huge fees for goods to be shipped from Europe and Asia into Mexico. Once these companies knew that building manufacturing plants in Mexico they could keep the costs low by using Mexican labor, they facilitated it. This allowed Walmart to purchase these products without paying high import tariffs. “NAFTA resulted in better suppliers due to an increase in competition, competitiveness and efficiency among the companies in order to gain the trust of their clients. Better supplies also increased the variety of products available to consumer with wider price ranges, which allowed Walmart to offer customers better savings and thus increase their purchasing power. NAFTA also helped Mexico achieve greater economic growth at a lower rate of inflation, which also added to the purchasing power of consumers.”(Daniel & Radenbaugh, pg. 321) 2. How much of Walmart’s success is due to NAFTA, and how much is due...
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...Mexico has always struggled with water allocation and getting clean water to its inhabits. Whenever anyone visits Mexico they are instructed to only drink from bottled water due to the fact that the water is contaminated from faucets and showers. People who live in poverty may not have access to this bottled water and are forced to drink the contaminated water, which can lead to sickness and lack of health within the country. As Mexico is developing this problem is holding them back from really being a leading country within the world. Their economy is making strides to become a large and prosperous economy. Mexico has many natural resources that can be exploited and used to further their development, such as wealth in mining and many other resources. But, in order for the resources to be exploited water is needed and this takes away from the drinking water for the inhabitants. Mexico has not been able to allocate water correctly and their economy and people have been suffering. As a team we addressed the issue by doing a lot of background research on not only the water industry, but also on the culture and economy of Mexico. This gave us insight into every aspect of how Mexico is attempting to solve this problem of water allocation. In our research we found that there are two main industries that the lack of clean water effects and those are the bottled water industry and the mining industry. After we narrowed it down to these two industries we researched them heavily and...
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...its Mexican subsidiary to purchase and install a new cost-saving machinery at a manufacturing facility in Monterrey. This new equipment will allow automating recycling and remanufacturing of toner and printer cartridges, and would have a useful life of 10 years. To analyze the investment proposal, Group Ariel needs to conduct a DCF analysis and run an estimate for the Net Present Value (NPV) for capital expenditures. However, the company needs to keep in mind the exchange rate between Mexican Pesos and Euros, as well as the inflation rates over time and the risks involved with this type of investment. Indeed, a major challenge for the analysis will be deciding which currency to use between the Euro and the peso. Scenario #1: Mexican Inflation = 7% Given the fact that the expected future inflation is 7% for Mexico and 3% for France. The discount rate used for the Peso NPV can be calculated using the equation for the International Fisher Effect: WACC-Mexico = 12.19% · Method A: NPV in pesos and then in Euros. The NPV in Pesos = 1,478,505[1] and using this NPV, we can translate it into Euros using the current MXN15.99/EUR exchange rate. The NPV in Euros is €92,464. [1] See Exhibit 1. · Method B: NPV in Euros. Assume that PPP and Fisher Equation holds, then we can get the future spot rate of exchange for each year and conclude the NPV in Euros at €92,464[2] · Conclusion: The NPV of this equipment investment would be same whether we use Method A or Method B as long...
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...NAFTA Assignment Benefits of NAFTA NAFTA is a highly controversial free trade agreement between the countries of Canada, Mexico and the USA. I believe it has more benefits than drawbacks as it has quadrupled trade, lowered prices, increased economic growth and created jobs. Trade The trade between the three countries quadrupled, from $297 billion to $1.14 trillion (Advantages of NAFTA). Which in turn boosted economic growth, profits, and jobs. As well it lowered prices for consumers. A huge reason for the boost in trade between them is because with trade you do away with tariffs that you would usually encounter with other countries. With the cost of trade lowered it was a huge help to small businesses and business owners, now they had a better chance at expanding their businesses. Imports and Exports With lower tariffs the price of imports grew less and less. This is a huge factor for oil prices since instead of getting oil from the Middle East it could be imported from Mexico or the USA. Not only oil had a huge decrease in price and how much could be imported but fresh fruit, which is usually quite expensive, dropped in value and rose in imports. Natural Resources...
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...REPORT: MEXICO VS U.S.A HEALTHCARE MERCK - DIABETES Group 14 – Campus Santa Fe: Angelica Hidalgo 1461526 Alejandro Meza 1464801 Cinthia Merlos 1462113 Juan José Ibarra 1465263 April 10th, 2012 INDEX 1. INTRODUCTION 2. ECONOMIC VARIABLES 3. POLITICAL VARIABLES 4. SOCIO –CULTURAL AND DEMOGRAPHIC VARIABLES 5. COUNTRY ATTRACTIVENESS SCORE 6. THE DECISION 7. EXHIBITS 8. BIBLIOGRAPHY 1. INTRODUCTION 2. ECONOMIC VARIABLES The total economic impact of diabetes worldwide In the world the economic impact about the diabetes was 376 billion dollar in 2010, this is the 11.6% of the total healthcare budget in the world. This facts give us an idea about how is important to analyze the impact in economies of this disease and we are going to go deeper for the analysis of Mexico and United States of America. MEXICO In Mexico the economic impact due to diabetes cost more than 7 billion dollars in 2011 according to the Instituto Nacional de Salud Publica. And is expected an increase of 15% this year of 2012 this impact is really huge because 50% of this expense was made by families and the other 50% was made by government in Latin America Mexico is the country that spent more money...
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...| Inflation behavior in financial crisis. | | | MAY 4, 2011 INDEX INTRODUCTION | 3 | TYPES OF INFLATION | 4 | * MODERATE INFLATION | 4 | * RUNAWAY INFLATION | 4 | * HYPERINFLATION | 4 | INFLATION CAUSES | 4 | * DEMAND PULL INFLATION | 5 | * COST PUSH INFLATION | 5 | * BUILD-IN INFLATION | 5 | * FORMULA | 5 | INFLATION EFFECTS | 6 | * EXPECTED INFLATION | 6 | * UNEXPECTED INFLATION | 6 | HOW TO STOP INFLATION? | 7 | INFLATION IN DIFFERENT COUNTRIES | 8 | * GERMANY | 8 | * FRANCE | 9 | * MEXICO | 10 | * USA | 11 | * GREECE | 12 | CONCLUSION | 13 | REFERENCES | 14 | INTRODUCTION The main objective of this paper is to explain the behavior and the effects of the inflation from the financial crisis in several countries talking about inflation and the causes and effects and later comparing different significant countries. The economic crisis from 2008 to 2011 is known as the world economic crisis that began that year, originates in the United States. Among the main factors causing the crisis would be high raw material prices, the overvaluation of the products, a global food and energy crisis, high world inflation and global threat of a worldwide recession, also a credit, and trust and mortgage crises on the markets. The root cause of all crises according to Austrian business cycle theory is an artificial expansion of credit. The origin of the crisis comes from the strong expansion...
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...traffic forecast must be done by an expert hired by financiers (sponsor’s forecast could be biased to get the deal done). Relying on well documented operation history if roads already exist Currency Currency risk is a major issue for toll roads financed with foreign capital because a project may be unable to pay a return on foreign currency-denominated capital if local earnings are not convertible at the expected exchange rate. At the time of the negotiations Mexico country risk score was 36 with an S&P rating of BBB-. Its annual inflation rate was 9.7% (Much greater than the US and dollar) and 2.8% Annual GDP growth. The revenues were in Pesos and the debt was to be repaid in $US. The Mexican peso was devaluated two years after the international bond was issued. Mitigation: The exchange rate risk is often mitigated by indexing the toll rates to local inflation or the exchange rate of the foreign currency-denominated capital. Large foreign currency debt service reserves can also be used (as in Mexico) to protect against the risk of exchange rate fluctuations and inconvertibility although tying up capital in reserve funds is expensive. Projects can avoid this risk by tapping local capital for funding....
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...the role of a Chief Executive Officer of a transnational organization such as HSBC Holdings seeking to expand its global operations into Mexico of which the market analysis is favorable. In this paper, the subject is to develop an implementation plan by examining best business, cultural, and legal practices. Other considerations include the integration of the organization’s entry mode into the banking industry in Mexico and how HSBC will create and maintain a competitive advantage in Mexico. Expanding into Mexico Mexico ranks number one in terms of economic clout in Latin America and number four as an emerging market. The Mexican economy as prospered during the last few years. Mexico has reduced sharply its government and external debt. The government has helped the economy by imposing monetary and fiscal policy discipline to promote stability and growth in per-capita income. According to Grant Thornton (2011), the Mexican economy has unprecedented stability for the last eight years. Inflation and the peso have been stable. The country has 12 free trade agreements with 43 countries and exports have surged. Mexico also benefits from qualified labor, together with powerful manufacturing and assembly industries. In view of this favorable analysis Mexico will be suitable for HSBC to expand its operations. Mexico is very important location within the emerging markets, (Thomann, 2007). The domestic financial market has developed strongly in terms of...
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