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    Developed vs. Developing Country

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    Developed vs. Developing Country

    You have been recently hired by a multinational firm that manufactures airplanes parts. They are interested in investing in a new factory. However, the CEO is unsure of where they should invest. The CEO would like to either invest in a developed or a developing country and your input is valuable to his decision. Your focus will be on providing specific information on both a developed and developing country, providing that both countries have data for the last 20 years. You will need to provide support, through your analysis, for which country you think will be best for this factory to invest in. Do not pick a country that does not have data that is easily accessible.

    Be sure to include the following items in your paper:

    Select a developed and developing country.
    Explain why you selected those particular countries.
    Analyze four economic indicators that are important for the two countries you selected.
    Describe these indicators and why you selected them.
    Compare and contrast their fiscal and monetary policies during a recent economic growth and recessionary periods. How have their policies lead to economic stability?
    Evaluate two recent trade policies in the countries that you have selected. Explain the impact of these policies on your investment.
    Choosing one of the two countries, analyze their decision to reduce trade restrictions, such as how import tariffs affect the ability to borrow in the world capital market.
    Examine the currency of each currency and explain how that will influence your investment.
    Provide a conclusion, supported by academic research, for which country you would recommend to the CEO .

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    Solution Preview

    In compliance with BrainMass rules this is not a hand in ready paper but is only guidance.

    The developed country selected is United States of America and the developing country is Mexico.
    The developed country selected is the USA because in the developing countries, the USA has the strongest and most stable economy. The economy has successfully come out of recession and the growth phase of the business cycle can be expected. Further, USA has been selected because the multinational company makes airplane parts. The airplane parts have a good market in the USA. Airlines and aircraft makers can use these parts.
    The developing country selected is Mexico. Mexico has been selected because its labor costs are relatively low. Mexico has a predictable steady wages that offer certainty so that manufacturing costs can be estimated. The finished airplane parts in Mexico can be shipped easily to the market in United States. NAFTA enables quick and efficient shipping of parts. Further, the Mexican Peso has over the last decade become cheaper in relation to the US dollar. This makes it cheaper to import finished airplane parts from Mexico (1). Mexico allows its currency to float in world currency markets and this keeps its wages relatively stable. Mexico is relatively close to USA, the language spoken in English, and customer visits to a plant in Mexico can be completed within two days. The shipping time is less than one day to the US. If a part is rejected, it can easily be sent to Mexico for reprocessing. In addition, there is easy availability of qualified workers and the country has high birth rates which will ensure a good supply of labor in future. The direct labor rate is between $2.50 and $3.00 per hour. Mexico also has a thriving aerospace industry.
    The four economic indicators that are important for the two countries selected are: GDP growth rate, Unemployment rate, hourly wage rate, and ease of doing business rank.
    The GDP growth rate of United States is 2.4%, and Mexico is 0.8%, the Unemployment rate of US is 4.9% and Mexico is 6.5%, the hourly wage rate in the United States is $16.71 (median) and Mexico is between $2.5 and ...

    Solution Summary

    The answer to this problem explains the choice between developed country and developing country. The references related to the answer are also included.