Sample Coursework Paper on Globalization and Global Differences

Globalization and Global Differences
There is a common misapprehension that the Latin American market is a homogeneous market. However, the reality is completely the opposite as each country within the Latin American market has its own unique features that it identifies with including segments that collectively span much of the reward and risk scales (Deal & Rosso, 1998). A variety of stakeholders in the real estate sector look at the Latin American market as a land of economic problems. However, on the other hand, many outside investors are searching for investment opportunities within the region. The primary objective of this coursework is to analyze in depth the rewards and risk factors involved in Venezuela and Brazilian economies from a foreign investor’s point of view.
Both countries have strong economies comparatively. Venezuela’s economy is highly pegged on oil revenues, which account for approximately 96% of her export earning, approximately 12% of her GDP, and 45% of budget revenues (CIA FActbook). The country’s high oil prices fueled the government’s pre-election expenditure, which aided in spurring the country’s GDP growth in 2012 to 5.6 percent. On the hand, the Brazilian economy is characterized by expansive and well established manufacturing, agriculture, service sector, a rapidly expanding range of middle class, and mining(CIA FActbook). The Brazilian economy is however superior comparative to other South American countries, expanding its presence to world markets. Brazil has consistently improved the stability of her macro-economy by reducing its debt profile and building up foreign reserves (Deal & Rosso, 1998).
The risk factors in the two countries vary significantly. Beginning with Venezuela, companies operating within the country are most likely to face the risk of political instability, which has been on the rise. Other risk factors within the country include rising currency risk and rising risk in non-payments. The current president, Maduro, took leadership in 2013 and is still struggling to follow in the footsteps of the previous president, Chavez. As a result, he is still under the pressure of economic crisis with inflation within the country rising up to 60%, aside from increased insecurity, and shortages in food products(Cardenas, 2014).
The current president’s government has been characterized by improvisation, which has created different norms and conditions for companies operating within. For instance, the country’s exchange rate system has been changed over and over again by the government, which inconveniences companies due to frequent changes in the manner through which they would acquire access to foreign currency (Cardenas, 2014). Venezuela is also facing a liquidity crisis and a decrease in international reserves, reducing their imports greatly. Companies operating within the country are faced by difficulties in gaining access to foreign currency to facilitate or repatriate imports and returns respectively due to scarcity in foreign currency. The country is also faced by increase in rates of crime, intense shortage in food supplies, and highest civil unrest due to high rates of inflation (Cardenas, 2014).
Brazil on the other hand has risks of structural issues. The country has a wide and complex system of taxation. Other risk within the country include bid infrastructural bottlenecks, which hinder competitiveness and high costs of labor (Cardenas, 2014). At the moment, the Brazilian country seems to have lost its shine. As much as it is very comfortable with its internal position, its economy has reduced significantly as compared to what it was before the financial crisis and it is not achieving the levels expected by foreign investors of between 5%-6% of GDP.
However, Brazil offers vast opportunities for foreign investors as compared to Venezuela. The country has more stability and a bigger infrastructure budget in its program aimed at accelerating growth of 500 billion USD(Cardenas, 2014). An investor would be recommended to invest in Brazil as compared to Venezuela. However, it would be important for investors to note that the Brazilian government is highly nationalistic, which implies that it would be cheaper for an investor to set up their investment in Brazil, as they would be taxed lightly as compared to if they set up their investment outside (Cardenas, 2014). This is because foreign goods are taxed heavily and would be very difficult to sell within the country.

References
Cardenas, C. (2014). Political risks in Argentina, Brazil, and Venezuela. Accessed 21st October, 2014, from http://www.ihs.com/tl/quarterly/videos/political-risks.aspx
Deal, M. & Rosso, C. (1998). Foreign Investment in Latin American Real Estate: A comparison of Argentina, Brazil, and Mexico. 6-16.
Venezuela vs Brazil. CIA Factbook. Accessed 21st October, 2014, from http://www.indexmundi. com/factbook/compare/venezuela.brazil