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Common Economic Problems of Countries

Extracts from this document...

Introduction

Economic Problems 2.1.2. Currency Devaluation Currency devaluation is one of the most frequent problems that developing countries have to face when considering growth into international trade. 'An upward shift in the supply of foreign exchange due to rising capital inflows tends to lead not to real exchange rate devaluation but to appreciation, which offsets liberalization's incentives for traded goods production by reducing profits from exports and making imports cheaper.'(Taylor, 2000, p.43) Developing countries trying to be competitive and to present a good setting for trade and investment, sometimes tend to overvaluate their currency, this is the first stage of currency devaluation. If they do not become competitive enough to raise the exports to a higher level than imports, they would need to establish currency devaluation measures in order to pay their international debt obligations. A current example of a country that suffers this problem is Argentina. In 1991 the government establish a new economic scenario on 'an open economy'. They adopted a series of policies in order to achieve economic growth. The most important was the convertibility plan, which pegged the peso to the dollar at the one-to-one exchange rate. This worked at first, however the consequences were show years later. The past year Argentina fell into a terrible economic crisis. After many years with an overvalued currency, they had to devaluate. They were not able to generate more exports than imports and the exchange rate was fixed too high. In addition, the foreign debts were growing at levels impossible to manage. 2.1.2. Current Account Deficit 2.1.3. The real exchange rate is an element that can make dramatic changes to a country's economy. 'Real exchange rate appreciation is pointed as a factor that contributed to the deterioration of the trade accounts' (Aybar & Milman, 1999, p.39) Most developing countries in the task of improving their economy, face the increase of imports rather than exports, because of the exchange rate appreciation. ...read more.

Middle

* Privatization The opening of traditional areas of the state action to the private sector is part of the route that these countries had to follow. The private sector has management priorities different to those of the government, caring more about profits. In order to be more profitable they implement productive measures that cause workers diminution. Internationalization creates an interest's confrontation between the members of the society (government, enterprise, workers) that agree and those that do not. Sometimes, the governments in these countries focus on their economic goals and forget about the social consequences that this process involves. The dissatisfaction of some members of society with the government measure, can slow down economic growth of the country. This is the case of many countries in Latin America. For example in Argentina, where an inadequate open economy process, that the state implemented, caused the Argentineans displeasure. It kept growing as they saw that the situation was getting worse and they were not able to see any benefit from it. By the end of the past year, all these feelings led them to the political instability that they are facing now. (El Pais, [web site]) 2.4 Cultural Problems The process of open economy involves elements that may change in some way the custom and behavior of a particular society. "The argument concerning cultural homogenization suggests that national cultures that were very different are becoming less so as a consequence of such developments as increased international travel and global media and communication systems". (Segal-Horn, 2002, p.9) For example, in China, even though they preserve their culture, young people are now more likely to accept and to imitate U.S. life styles and values. The reason for this change is the influences of the global media in this country. Chinese consumers have been exposed to free choice over recent decades. 'Currently, an increase of opportunity has become available, and this is new to them. ...read more.

Conclusion

In addition, this country can gain access to their technology and human resources and incorporate them into their own country in order to maintain its economic growth and development and internationally competitive strength. (mirar bibliografia mexico) Reference List Aybar & Milman, (1999), " Globalization, emerging market economies and the currency crisis in Asia: Implications on Economic Reform and Development. Multinational Business Review. Vol.7, No. 2. pp. 37-44. Balassa, B. (1998), "The Lesson of East Asian Development: An Overview", The University of Chicago, pp.273-289 Doryan, Eduardo. (1993), " An Institutional Perspective of Competitiveness and Industrial Restructuring Policies in Developing Countries", Journal of Economics Issues, Vol.28, No. 2. pp. 451-457. El Pais (2001), Dossier Documental, <htt://www.elpais.es/temas/dossiers/argentina.html> accessed 5 April 2002. Jenkins, Rhys. (2001). "Reconciling Trade and the Environment: Lessons from Case Studies in Developing Countries / Trade, Environment and the WTO: The Post-Seattle Agenda", The Journal of Development Studies, Vol.37, No. 5. pp.163-165 Kedia, B & Mukherji, A. (1999), "Global Managers: Developing A Mindset For Global Competitiveness, Journal of World Business, Vol. 34, No. 3. pp. 230-239 Lee, Eddy. (1996), "Globalization and employment: Is anxiety Justified?", International Labour Review, Vol. 135, No. 5. pp. 485-497 Mahoney, D., Griffin, R, Pustay, M and Trigg, M. (2001), International Business, (2nd edn), Prentice Hall, Australia. Morrissey, Oliver & Filatotchev, Igor. (2000), " Globalization and Trade: The Implications for Exports from Marginalized Economies", The Journal of Development Studies, Vol. 37, No. 2. pp. 1-12. Ocampo, Jose & Tovar, Camilo. (2000), "Structural Adjustment, Macroeconomic and Equity in Colombia", CEPA, Working paper No. 14. Ros, Jaime & Lusting, Nora. (2000), "Trade and Financial Liberalization with the Volatile Capital Inflows. Macroeconomic Consequences and Social Impact in Mexico During 90s", CEPA, Working paper No. 18. Segal-Horn, Susan, (2002). "Global Firms - Heroes or Villains? How and Why Companies Globalise", Europen Business Journal, Vol. 14, No. 1. pp. 8-19 Shimp, T. (2000), Advertising Promotion, (5th edn), Harcourt College Publishers, United States. Taylor, Lance. (2000), " The consequences of Capital Liberalization", Challenge, Vol. 43, No. 6. pp. 38-57. Taylor, Timothy. (2002), "The Truth About Globalization", Public Interest, No. 147. pp. 24-44. ...read more.

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