Describe how COUNTERTRADE is used in global financing, and its importance in managing risks.© BrainMass Inc. brainmass.com March 4, 2021, 7:38 pm ad1c9bdddf
Many countries of the world lack a fully elastic currency capable of expanding with the growth of production to meet the demands of product and service markets. The money supply in these countries is often controlled by monetary authorities targeting specific economic objects like curbing inflation, ensuring full employment, and protecting the value of its currency in foreign exchange markets. Countertrade and financing terms in these country markets are becoming as important as the quality and availability of desirable product.
Countertrade is basically a generic term for parallel business transactions that link a sales contract with an agreement to purchase goods or services as a means of reducing the flow of convertible currency.
For proactive marketers, it is viewed as a respectable and essential global strategy tool. Countertrade is a resourceful way to arrange for the sale of a product from an exporter to a company in a country that does not have the resources to pay for it in hard currency.
The main reason that American firms engage in countertrade is to meet requirements set forth by foreign governments or customers. Countertrade, however, can be an effective and excellent mechanism to gain entry into new markets. The party receiving the goods as a mode of full or partial payment of exported goods or services may be ...
Describe how COUNTERTRADE is used in global financing, and its importance in managing risks.