Globalization and Implementation Plan Country Selection: Monetary System - Essay Example

Monetary System It is worthwhile to mention that a global business expansion plan could not be put into practice without comprehensive knowledge of monetary system and financial structure of chosen destination. In the following sections, the researcher will specifically throw light over monetary / financial structure of Morocco in the context of export of wheat plan from USA. The repercussions for US exporters, if any, will also be presented to analyze the actual scope of exporting wheat to Moroccan importers.

First of all, it is necessary to understand that Morocco, although a developing nation, is a relatively stable economy; therefore, it currency known as Moroccan Dirhams (MAD/DH) is also relatively stronger. At present, the Moroccan Dirham fluctuates in a range of 8 – 9 MAD per US Dollar. Multiple factors affect Moroccan currency that include depletion of foreign reserves, decline in exports, more than proportional increase in imports, weakening of US Dollar in international market, oil and commodity prices, remittances etc.

(Morocco Website, 2011). Secondly, it is mandatory for foreign business groups to have sound insight over Moroccan banking industry because these institutions support export / import through legal channels. In other words, the banks prohibit cash-to-cash money transfer, which is also known “Hundi or Hawala. There are three largest banks in Morocco named “Attijariwafa Bank (with assets of nearly $17 billion during 2009 and highest market share of 27%), Banque Centrale Populaire (with assets of $14 – 15 billion in 2008 and share of 24%) and Banque Marocaine du Commerce Exterieur (with assets of $8.

0 billion and share of 14% approximately in 2008)”. Nonetheless, these three banks dominate banking industry because they enjoyed nearly 65% market share during 2008 – 2009. In addition, the Citi Bank is also operational in Morocco; therefore, US exporters could use Citi bank for export business transactions with their Moroccan buyers. These banks tend to offer business loans for export / import purposes to interested Moroccan investors so that they support nation’s economy. Finally, the nation also a relatively underdeveloped insurance sector with 17 firms in which three companies dominate and enjoy over 50% cumulative market share.

The insurance firms, however, do not work in collaboration / partnership with local commercial banks neither they enjoy strong relationships (Hajoui et al, 2009). El Bouhadi & Benali (2008) has demonstrated the role of Moroccan Central Bank, which formulates extensive monetary policy and decides upon currency exchange rates (set / floating). For instance, the state bank is also responsible for setting interest rates after analyzing inflationary trend across Morocco (Agenor & Aynaoui, 2007). Since inflation across Morocco was under 3% in 2010 – 2011, the prevailing key interest rate was 3.

25% (Reuters News, 2010). In the light of aforementioned facts, it becomes evident that Morocco is a stable economy where government institutions effectively control economic indicators for consumer welfare and business development. In conclusion, US exporters could initiate wheat export venture (through citi bank) because of strong trade ties between developed USA and stable Morocco. References El Bouhadi, A. and Benali, M (2008).The Moroccan Monetary and Financial Structure Reforms and Economic Agent’ Behavior.

Agenor , Pierre-Richard and Karim Aynaoui (2007). The Transmission Mechanism of Monetary Policy in Morocco: An Analytical Framework. Economics Research Forum Morocco Webstie (2011).Money in Morocco - Dirham, Francs and Pestas. Morocco.com [Online] Available at http://www.morocco.com/currency/ Hajoui, Mehdi, Aviel Marrache, Roman Rosenberg and Kelly Spriggs (2009). Morocco. Wharton [Online] Available at http://fic.wharton.upenn.edu/fic/africa/Morocco%20Final.pdf Reuters News (2010). Morocco maintains key interest rate steady: Central bank.

Reuters Africa http://af.reuters.com/article/investingNews/idAFJOE68K0M620100921