Magazine article Business Credit

Doing Business in Emerging Markets: The Global Management Program - Georgetown, March 12-16, 1995

Magazine article Business Credit

Doing Business in Emerging Markets: The Global Management Program - Georgetown, March 12-16, 1995

Article excerpt

In March, a joint NACM, FCIB, and Center for International Business Education and Research (Georgetown University School of Business) senior executive program provided in-depth exposure to selected topics essential to understanding international business. Designed to assist executives in sales, credit, finance, and related fields, this program bridged the gap between domestic and international responsibilities. Experts from industry, government, and academic fields presented sessions on risk management, ethics, cultural issues, negotiation, trade finance, and third-world management issues. Here are some highlights.

Doing Business in Emerging Markets of the World

This session provided an introduction to financial reporting for foreign operations and foreign currency transactions. U.S. reporting requirements, International Accounting Standard Committee (IASC) rules, and accounting standards of major countries were compared. Tony Sondhi, visiting associate professor, Georgetown University School of Business, presented a comparative analysis of the effects of different reporting methods on key financial statement relationships and ratios. Analytical principles derived from those reporting differences were applied to case studies of real international corporations.

One of the highlights of this session was NAFTA: One Year Later and Beyond, presented by Regina Vargo, director, NAFTA Office of the U.S. Department of Commerce. The impact and benefits of NAFTA for the U.S., Canada, and Mexico were reviewed as well as its effects on Latin American neighbors.

U.S. exports to Mexico are expected to decline in 1995. Imports will cost more in peso terms than before the devaluation; however, the impact on U.S. exporters will vary according to the type of goods produced. Non-essentials, such as consumer goods, will be hit hardest, although luxury market items may fare better because upper-class Mexicans have more discretionary purchasing power and often have dollar holdings.

U.S. companies may find opportunities as a result of the lower price of Mexican exports. Mexican companies gearing up to export and with access to financing will require increasing amounts of capital and intermediate goods. Mexico's infrastructure also needs investment, and the Mexican government has announced plans to privatize more government-owned operations to raise cash. And, a number of petrochemical plants are expected to be put up for sale - U.S producers of goods related to these sectors will want to follow developments carefully.

Exporters are cautioned that financing and payments will be even more important than in the past. Interest rates have skyrocketed, increasing risks to the exporter and making trade finance even more crucial. Those not using foreign receivables insurance should consider it for future sales.

Letters of credit are not expected to experience payment delays; Mexican banks appear to be in an adequate position to liquidate their obligations. However, letters of credit should be confirmed until the markets calm.

U.S. exporters are urged to continue their efforts in Mexico. Many opportunities remain, however, caution should be used in trade financing. Over the long-term, Mexico's market for U.S. goods will continue to grow. NAFTA is not expected to play as prominent a role in U.S. export growth in 1995; Mexico's demand for U.S. goods will slacken in the short-term due to a continued depreciation of the peso, lower Mexican incomes, and the government's austerity program. As the Mexican economy adjusts over the next couple of years, U.S. exports will probably rise again as prosperity returns. Faster economic growth in Europe and Japan will likely pick up this slack in 1995.

Another highlight of the Global Management Program came in the examination of the business climate in several countries, including China and Vietnam. Both countries come from long traditions of Communism, but are now capturing the imagination of capitalists, who predict more openness in business and trade in the coming years. …

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