Policy Risk Essay

1344 words - 6 pages

Policy risk of Argentina
Budgetary policy is lacking of rigor due to the conflict among departments and the restricted import policy. Argentina’s policy remained a controversial conflict between executive department and congress. Because the Kirchner government enjoys a high popularity and controls the majority seats in congress, it passed some controversial legislation, and those actions bring criticism within the country. For instance, in 2012, Kirchner used her executive power to force congress to comply the federal budget bill that congress previously had more power to plan the budget bill than Kirchner’s Government (Fausto, 2010). The action weakened budget’s rationality because the ...view middle of the document...

In July 2011, the government increased import licenses so that firms must export an equivalent amount of goods for the amount they import (Argentina: risk assessment, n.d.). The companies violating the regulation would be forced to halt because of the trade balancing regulations (2013 investment climate, 2013). Furthermore, importers have to report the banks at 10 days in advance for requiring foreign currency (Argentina: risk assessment, n.d.). As the result, transactions in dollar-based market slowed down considerably. For instance, foreign exchange controls increased the risk of currency’s convertibility, and it directly created the black market rate, which reach almost 37% gap against the official exchange rate (Argentina: risk assessment, n.d.).
For international Smartphone business perspective, exchange control policy defiantly reduced the currency convertibility, and it would increase the cost of operation and cost of financial transfer. At the same time, existing black market rate is an unstable factor for economic.
The risk of trading partners’ relationship and social tensions are emerging. Firstly, import restrictions increased the tension with its trade partners, especially with Mercosur and U.S.A. (Argentina: risk assessment, n.d.). As the biggest export destinations for Argentina, Mercosur and U.S.A might launch trade sanctions to Argentina’s export good because of Argentina’s import restricted policy. The tension of trade relationship would influence the Argentina’s investment environment and economic prospective. Secondly, foreign exchange control policy isolated the Argentina’s international trade and increased social tensions. The limitation of MNCs was obvious, because the restricted exchange market environment would reduce the MNCs’ DFI and import’s enthusiasm. Eventually, the effect would spread to citizen’s daily life because of imbalanced market demand. For instance, Argentina’s private investor needed foreign reserve to resist peso’s devaluation, and the demand of import goods was suppressed by the current import policy. As a result, the dissatisfactions of restricted policy might increase the risk of political stability. For instance, demonstration activity was increasing in metropolitans and other major cities. Although the protest demonstrations have been usually nonviolent, injuries and deaths sometimes happened. In December 2012, the conflict cause two deaths and 25 injured (2013 investment climate, 2013).
For international Smartphone business perspective, the potential risk of therelationship between Argentina and its trade partners might encumber the subsidiaries business; especially it would influence the export condition in Argentina. Besides, the social tensions were not so obvious that affect the economic.
The concerns about transparency of the regulatory system and taxation regulation may increase uncertainty. According to Argentina government authorities, several ministries intended to implement a series of...

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