KSBM – Would the bank be better off negotiating the loan in New York or Lima? Why


Would the bank be better off negotiating the loan in New York or Lima? Why

Would the bank be better off negotiating the loan in New York or Lima? Why

 

Assignment Solutions, Case study Answer sheets

Project Report and Thesis contact

aravind.banakar@gmail.com

www.mbacasestudyanswers.com

ARAVIND – 09901366442 – 09902787224

 

International Business

Case 3: Peru

Peru is located on the west coast of South America. It is the third largest nation of the continent  (after  Brazil  and  Argentina),  and  covers  almost  500,000  square  miles (about 14 per cent of the size of the Unites States). The land has enormous contrasts, with a desert (drier than the Sahara), the towering snow-capped Andes Mountains, sparkling grass-covered plateaus, and thick rain forests. Peru has approximately 27 million people, of which about 20 per cent live in Lima, the capital. More Indians (one half of the population) live in Peru than in any other country in the western hemisphere. The ancestors of Peru’s Indians were the famous Incas, who built a great empire. The rest of the population is mixed and a small percentage is white. The economy depends heavily on agriculture, fishing, mining, and services. GDP is approximately $115 billion and per capital income in recent years has been around $4,300. In recent years the economy has gained some relative strength and multinationals are now beginning to consider investing in the country.

One of these potential investors is large New York based bank that is considering a

$25  million  loan  to  the  owner  of  a  Peruvian  fishing  fleet.  The  owner  wants  to refurbish the fleet and add one more ship.

During the 1970s, the Peruvian government nationalized a number of industries and factories and began running them for the profit of the state. In most cases, these state-run ventures became disasters. In the late 1970s, the fishing fleet owner was given back his ships and allowed to operate his business as before. Since then, he has managed to remain profitable, but the biggest problem is that his ships are getting  old  and  he  needs  an  influx  of  capital  to  make  repairs  and  add  new technology. As he explained it to the New York banker. “Fishing is no longer just an art. There is a great deal of technology involved. And to keep costs low and be competitive on the world market, you have to have the latest equipment for both locating as well as catching and then loading and unloading the fish.”

Having reviewed the fleet owner’s operation, the large multinational bank believes that the loan is justified. The financial institution is concerned, however, that the Peruvian government might step in during the next couple of years and again take over the business. If this were to happen, it might take an additional decade for the loan to be repaid. If the government were to allow the fleet owner to operate the fleet the way he has over the last decade, the loan could be repaid within seven years.

Right now, the bank is deciding on the specific terms of the agreement. Once these have been worked out, either a loan officer will fly down to Lima and close the deal or  the  owner  will  be  asked  to  come  to  New  York  for  the  signing.  Whichever approach is used, the bank realized that final adjustment sin the agreement will have to be made on the spot. Therefore, if the bank sends a representative to Lima, the individual will have to have the authority to commit the bank to specific terms. These final matters should be worked out within the next ten days.

Questions:

  1. What are  some  current  issues  facing  Peru?  What  is  the  climate  for  doing business in Peru today?

  1. What type of political risks does this fishing company need to evaluate? Identify and describe them.

  1. What types of integrative and protective and defensive techniques can the bank use?

  1. Would the bank be better off negotiating the loan in New York or Lima? Why?

Would the bank be better off negotiating the loan in New York or Lima? Why

Would the bank be better off negotiating the loan in New York or Lima? Why

Our Key Services

Assignment Help

Case study help

Report Writing

Homework / Assessment help

Essay writing and editing

Project Report

Dissertation writing

Thesis writing & editing

Professional report writing

Academic writing

Coursework Writing

Research paper writing

 

Dr.ARAVIND BANAKAR 

aravind.banakar@gmail.com

https://www.mbacasestudyanswers.com

09901366442 – 09902787224

Share Button