Mfn-Case
http://www.docstoc.com/docs/15344676/Mattel-Case-Study
IBU5MFN
Case: The Venezuelan Bolivar Black market
Yue Liu (15931951)
Miguel Paolo Trinidad (17237338)
Venezuela imposes capital controls Capital controls are usually dependent on both external and internal factors that affect a country’s economy. In this case, Hugo Chavez implemented capital controls which he sought as a means of controlling his country. It is debatable what comes first as the history of the political turmoil in Venezuela wasn’t mentioned in the case and will largely irrelevant to the discussion. The point is that capital controls were sought to control the economy in spite of the question of whether it was the economy that gave rise to the political problems or was it the other way around. Regardless, the problems have already arisen and it was mentioned that the Bolivar (Bs) was doing horribly against the United States dollar (USD). Given that relationship, businesses in Venezuela who rely on the USD and use the Bs as a means of exchange would tend to perform terribly. In this case, Santiago owns a pharmaceutical distribution business whose suppliers are based in the United States. This is an assumption because it simply mentions that he is importing for his business and that he needs USD to do so. Therefore, the economic policies of Hugo Chavez would be bad for a business that uses US imports as a factor of production such is the case with Santiago. However it did also mention that an exports such as oil markedly improved with the softening of the Bs. If that is the case then with the softening of the Bs why did Hugo Chavez see the need to implement stringent economic policies that would further devalue the Bs? If the Bs devalues further, wouldn’t export oriented businesses make up for the poor performance of export-oriented businesses? Economics is not a zero sum game in which export oriented countries gain absolutely more in comparison to countries
IBU5MFN
Case: The Venezuelan Bolivar Black market
Yue Liu (15931951)
Miguel Paolo Trinidad (17237338)
Venezuela imposes capital controls Capital controls are usually dependent on both external and internal factors that affect a country’s economy. In this case, Hugo Chavez implemented capital controls which he sought as a means of controlling his country. It is debatable what comes first as the history of the political turmoil in Venezuela wasn’t mentioned in the case and will largely irrelevant to the discussion. The point is that capital controls were sought to control the economy in spite of the question of whether it was the economy that gave rise to the political problems or was it the other way around. Regardless, the problems have already arisen and it was mentioned that the Bolivar (Bs) was doing horribly against the United States dollar (USD). Given that relationship, businesses in Venezuela who rely on the USD and use the Bs as a means of exchange would tend to perform terribly. In this case, Santiago owns a pharmaceutical distribution business whose suppliers are based in the United States. This is an assumption because it simply mentions that he is importing for his business and that he needs USD to do so. Therefore, the economic policies of Hugo Chavez would be bad for a business that uses US imports as a factor of production such is the case with Santiago. However it did also mention that an exports such as oil markedly improved with the softening of the Bs. If that is the case then with the softening of the Bs why did Hugo Chavez see the need to implement stringent economic policies that would further devalue the Bs? If the Bs devalues further, wouldn’t export oriented businesses make up for the poor performance of export-oriented businesses? Economics is not a zero sum game in which export oriented countries gain absolutely more in comparison to countries
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