International Business: The conference at Bretton Woods - Essay Example

Download file to see previous pages... IMF and IBRD became operational in 1945 and IBRD is currently the part of World Bank. Bretton Woods conference asked the countries to adopt a monetary policy in accordance with the exchange rates of American dollar in order to connect the temporary imbalances of payments and to conduct international trade in an efficient manner. Since foreign trade affects the standard of life of every people, all countries have a vital interest in the system of exchange of national currencies and the regulations and conditions which govern its working. Because these monetary transactions are international exchanges, the nations must agree on the basic rules which govern the exchanges if the system is to work smoothly. When they do not agree, and when single nations and small groups of nations attempt by special and different regulations of the foreign exchanges to gain trade advantages, the result is instability, a reduced volume of foreign trade, and damage to national economies. This course of action is likely to lead to economic warfare and to endanger the world's peace (CONFERENCE AT BRETTON WOODS) The interests of different nations could be different while they perform international trade activities. ...
Apart from IMF, the Breton Woods conference also agreed to establish another international body called International Bank for Reconstruction and Development (IBRD) in order to regulate the way of doing international business. The major function of IBRD is capital in the form of loans to states at a reasonable rate for longer periods in order to assist the state in stimulating its economic growth. However, it is impossible for the countries which take loans from IBRD to spend it freely. The country which seeks loans from IBRD should spend the loan strictly in accordance with the instructions of the Bank. For example, if a country takes loans for developing drinking water projects from IBRD, it may not have the authority to distribute drinking water freely to the public. In other words, the country should take service tax from the public for providing or establishing public utility services like drinking water projects. In other words, the free public tap system may not be possible if the country takes loans for developing drinking water projects from IBRD. Woods (2006) has argued that World Bank and IMF can encourage sensible public sector development programs. He has cited Mexico as the example to prove his arguments (Woods, 2006, p. 44&56). Mexico is a country which succeeded in stimulating its economic growth with the help of huge loans it received from IMF and World Bank. Mexico has implemented lot of economic reforms in order to get loans from these global financial institutions. Mexico was only an underdeveloped country earlier, whereas it is a rapidly developing country at present. Mexico struggled to mobilize its resources because of the absence of infrastructure developments. However, the strict guidelines of IMF ...Download file to see next pagesRead More