Argentina is located in the southeastern part of South America. Its neighboring countries are Brazil, Paraguay, Chile and Uruguay. The size in square kilometers of Argentina is 2,736, 690.00. In 2012, the recorded population of people in Argentina was 41.3 million. Argentina is a federal presidential representative democratic Republic. The President of Argentina is The head of Government and Head of State. Legislative power is vested in the Argentine National Congress and the president. The Judiciary in Argentina is independent of the Legislature and the Executive. The country holds regular elections on n a multi-party system. The Head of Government and Chief of State in Argentina is President Cristina Fernández de Kirchner. The current political party in power in Argentina is the Justicialist Party.
The Civil Law Legal System is the legal system of Argentina. The pillars of the legal system in Argentina are the Civil Code of Argentina and the constitution of Argentina. Traditionally, Argentina’s economy was based on agriculture but the service and industrial sectors have grown in recent years (Dicken & Oberg 110). In 2006, the GNI per capita was 201.6. Natural resources in Argentina include fertile plains of the pampas, zinc, lead, tin, iron ore, copper, manganese, uranium and petroleum. Argentina exports primarily raw materials and agricultural products to the European Union. The European Union exports machinery, chemicals, transport equipment and other manufactured goods to Argentina. The European Union is the biggest foreign investor in Argentina. The name of the currency used in Argentina is the Argentine Peso. It can freely be exchanged. The currency can be exchanged freely with 1 peso being equivalent to 0.13 US dollars.
Greenfield investments are a good International business proposition. It is a form of foreign direct Investment. A parent company constructs new operational facilities as a venture in a foreign country. Not only does the parent company build up new facilities, they also avail long-term jobs in the foreign country as they hire employees from the foreign countries. The reason for their business venture in foreign countries is because developing countries usually offer prospective companies subsidies, tax-breaks and other different incentives making it easy to set up this kind of investment. This is usually a small price to pay as it results to creation of job opportunities and technology and knowledge is gained that helps in boosting country’s human capital. The advantages of Greenfield investments outweigh its disadvantages making it a good international business proposition.
Argentina was one of the main areas of foreign direct Investment in the 1990’s. Transnational Corporations were a huge part of the Argentine economy. The role of Transnational Corporation increased with the increase of Foreign Direct Investments at this time. By 2003, 500 leading Argentine firms were owned by Transnational Corporations generating over 80 percent of the value added.
According to reformers, Foreign Direct Investment played a huge role in restructuring Argentina’s economy. Foreign Direct Investment helped finance account deficits at a t the macroeconomic level. Foreign Direct Investment was expected to contribute investment that would result to increased employment and economic growth both directly and indirectly.
Foreign firms taking part in Foreign Direct Investment at the microeconomic level have ownership advantages over the local firms in the economies where they invest (Dicken &Oberg, 115). One advantage is having greater access to new technology that results to development of new products and production processes.
Greenfield investments are a good international business proposition and its advantages should be reflected in the production processes, introduction of new products and their records on productivity in their host countries. Trade systems and international production of Transnational Corporations should foster the export performance of its affiliates as the affiliates could act as suppliers of components or products to other affiliates or the parent company.
It is a good international business proposition as Transnational Corporations can also transfer technology that is environmental friendly to economies that are developing and are more compliant. It is cost effective to come up with a single set of standards and practices instead of reducing overseas facilities or environmental investments. Transnational corporations adjust their operations to standards that are higher than those imposed in local regulations because they receive more scrutiny and the prospect of liability if they fail to reach the levels of standards.
Indirect effects could also be experienced because of Foreign Direct Investments on the hoist country. This is because of the impact of the presence of Transnational Corporations on the performance of domestic firms. Indirect effects of Greenfield investments can be significant since there are many domestic firms than Transnational Corporations in the business sector in many countries. Example of indirect effect is spillovers.
Transnational corporations usually have limited private economic goals while nation states have a broader range of economic and non-economic objectives (Saee, 87). Transnational corporations are usually interested in maximizing global sales or profits while states’ interests are in maximizing their citizen’s welfare. Therefore Greenfield Investments are a good international business proposition as both parties rip benefits from the investment.
At the macroeconomic level, Foreign Direct Investment could result to crowding-out effect instead of crowding-in effect. Profit flows from Foreign Direct Investment sometimes end up having a negative impact on balance of payments. In the long run, Foreign Direct Investments can end up having negative effects on the balance of payments in the host country.
At the microeconomic level, the presence of Transnational Corporations may bring up not just positive but also negative spillovers (Fleury& Fleury 90). The affiliates of Transnational Corporations result to negative horizontal spillovers in cases where domestic firms have to reduce their production or exit the market because of competition with other Transnational Corporations. Negative spillovers could also happen if there is displacement of domestic suppliers because of Transnational Corporations being bias in favor of suppliers who are foreigners.
Greenfield Investment could have a negative impact on employment if Transnational Corporations affiliates acquire local firms and replace the local suppliers with imports. Domestic enterprises could also be squeezed out by strength and size of foreign branch plants (Saee, 56). Formation of new firms could also be inhibited. Transnational corporations may displace potential or existing jobs in local firms.
Greenfield investments could also result to developing countries becoming pollution havens. Transnational Corporations sometimes escape from countries with high environmental standards. They could also use technologies which are not accepted in their home countries because of their negative impacts on health or the environment. This could be prevented by having international set standards that transnational corporations should employ for safety.
In conclusion, Greenfield investments is a good international business proposition for Argentina and internationally. The benefits are more for a country as compared to the negative impacts. Advantages such as the creation of employment, improvement of technology and knowledge are seen from the above essay. This makes it advantageous for the parent company and the host country.
Dicken Peter & Öberg Sture. The Global Context: Europe in a World of Dynamic Economic and Population Change. European Urban and Regional Studies. vol. 3, 2: pp. 101-120. 1996. Print.
Fleury Afonso & Fleury Maria. Brazilian Multinationals: Competences for Internationalization. Cambridge University Press; First Edition edition. 2011. Print.
Saee John. Contemporary Corporate Strategy: Global Perspectives (Routledge Studies in International Business and the World Economy). Routledge; 1 edition. 2012. Print.