Producing a product at home or in Brazil
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Scenario
You are assisting in setting up business development in Central & South America for Primetime Systems, Inc. (NSI).
The firm has negotiated the framework of supplying $18 million (paid in U.S. dollars) in Primetimes systems for Empirical aircraft in Brazil for 10 years.
If the products are manufactured in the United States and delivered to Brazil, then Primetime Systems Inc. would be paying an 8% import tariff on $18 million in product.
As an alternative, the Brazilian government has offered to pay for all costs associated with building and locating a manufacturing plant in Brazil to build the product, and Empirical Aircraft would pay an additional 10%, making annual sales $19.8 million (paid in U.S. dollars), and no tariff would be levied.
Assignment
1. The vice president of sales has asked you for the total amount of money NSI would receive from each scenario.
2. He also asks that you report on what effect the Free Trade Agreement of the Americas (FTAA) or the possible regional integration, like Mercosur, would have on each scenario.
3. Please cite all references used.
Thank you!
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Solution Summary
The solution takes a definitive standpoint on the scenario provided, as well as furnishing the student with several resources on the FTAA and Mercosur.
Solution Preview
Thank you for posting today. It is my goal to provide ideas, definitions, research help, and instructions on how you, the student, should approach the assignment.
1: In the scenario where we are producing the product in Brazil, then sales would be $19.8 million, as stated. If you do the products in the US, then price would be 18mil, less 8%, which is 16.56 ...
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