Investment Decision Selection Hyundai Motors & Brazil - Essay Example

Hyundai Motors & Brazil Hyundai Motors & Brazil Globalization liberalized cross border trade barriers and this processesin turn enhanced international trade activities. In this new global economy, effective flow of goods and services is vital for the promotion of a country’s economic growth. Obviously legal, institutional, and operation constraints are likely to impede a nation’s economic development. In other words, domestic economic behavior can be directly linked to international flow of goods, services, and capital.

To illustrate, emerging economies like Brazil and India are attractive global investment destinations because they offer concessional trade tariffs to foreign businesses. In contrast, China, one of the fastest emerging economies in the world, tries to save its domestic industries from foreign competition by imposing operational restrictions to foreign businesses. However, today China is removing such operational regulations so as to attract more potential global investors.Balance of payments (BoP) is an accounting record that keeps all trade or monetary transactions between a nation and the rest of the world.

Some economists opine that the concept of balance of payments would help to analyze the difference between a country’s total exports and total imports. It is considered that a country has positive balance if it maintains a surplus of exports over imports. According to the Brazil’s Ministry of Development, Industry and Foreign trade, the country kept a positive balance in 2011 by maintaining exports of US$ 256 billion over its US$226 billion imports. Reports also indicate that this approximately 30 billion surplus achieved by the country is the highest since 2007 (EcoHouse).

This positive balance of payments can be directly linked to international flow of goods, services, and capital. While analyzing the Brazilian offshoring sector, it seems that the country has a range of competitive advantages in the IT and software industries. Hence many foreign companies outsource their IT and software related projects to Brazil. In addition, the country has better human capital strengths. The Brazilian government provides industrialists with extensive subsidies for R&D activities because the government greatly enhances innovations.

In short, it can be stated that the country’s domestic economic behavior is favorable for international trade, which in turn facilitates cross border flow of goods, services, and capital. As it is claimed, “international flow of goods and services and the international flow of capital constitute the sum total of reasons for the supply of and demand for foreign exchange” (Levi, 2005, p.22). Brazil’s investor-friendly economic environment played a crucial role in assisting the country to maintain a positive balance of payments.

Currently Brazilian economy is the sixth largest in the world in terms of nominal GDP. Among Latin American nations, Brazilian economy is the largest one. It is interesting to note that the Brazilian economy maintains annual GDP growth of over 5% (The World Bank). The International Trade Administration (ITA) predicts that Brazil would develop to one of the five largest economies in the world in the near future. The ITA report adds that Brazil will be a potential export market for the United States in future.

Based on the above identified facts, Brazil would be a potential investment destination for the Hyundai Motors Company. As Brazil maintains a free market environment, Hyundai may not face much difficulty in making additional investments in the country. ReferencesEcoHouse. (n. d.). Positive balance of payments for Brazil. Retrieved from http://www.ecohousedevelopments.com/Positive-Balance-of-Payments-for-Brazil.htm Levi, M. (2005). International Finance. US: Routledge. The World Bank. (n. d.).

GDP Growth (annual %). Retrieved from http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries