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International Trade and Investment Study

1. How can international trade adversely affect socioeconomic development in developing countries? What are some of the adverse implications of international trade in a developing country? What are some problems that can arise from trade between developed and developing countries? How may such problems be resolved?

2. How can businesses access new sources of capital either directly or indirectly from international financing organizations? What organizations are specifically available for financing business activity in the Latin American Theater? How do the World Bank and International Monetary Fund financing packages address the economic needs of borrowing countries?

3. What are the components of the balance of payments? How do foreign exchange rates impact the current account of the balance of payments? What would happen to a country's balance of payments if its currency suffered devaluation?

4. What are the five key currencies that facilitate international trade investments? Which, among the five is argued to be the emerging currency of choice for international transactions? Why? What would happen if the Euro would become the currency of choice for international transactions?

5. What is the difference between portfolio investment and FDI? What are the current trends in FDI? How does FDI influence change within an organization's global operations?

Solution Preview

1. There is following problems developing countries face when it comes to the international trade:
(i) Developing countries only rely on one or two of there primary goods as there main source of export.
(ii) Developing countries do not have control over the price they export or import to/from other part of the world.
(iii) As the price of there goods fluctuate it becomes difficult to go for any future planning.
(iv) Increasing the supply of goods the developing countries export leads to decline in the price of those goods causing loss to the exporters.

The problem that developing countries face due to the international trade is the increasing level of competition from the multinational corporation. International trade also force the developing towards increase in inflation as most of the traders try to export there products to the country where they feel they can get more benefit.

It has been found out that most less-developed countries have agriculture-based economies, and many are tropical, causing them to rely heavily upon the proceeds from export of one or two crops. As the markets for such goods are extremely and due to this prices of these goods are extremely sensitive to every change in demand or in supply from the country. But when it comes to the prices of manufactured goods that are the typical exports of developed countries, are commonly much more stable and have very less impact of market conditions. And this is the reason the tropical country experiences large fluctuations in its trade balance causing a painful impact on the domestic economy.

To help the developing countries to resolve the problems that arise due to the price fluctuations efforts have been made at price stabilization and output control for some essential commodities that has a great importance on the trade of the developing countries.

2. There are few international organizations that fulfill the business financing need for the global countries. To access new sources of capital either directly or indirectly the business organization will have to fulfill some of the ...

Solution Summary

The importance of international trade and foreign investment is discussed.