Multinational Corporations in Latin America

Table of Contents

INTRODUCTION1

DISCUSSION2

RECOMMENDATION10

Works Cited11

INTRODUCTION

The relationship between foreign companies and the governments of host country is considered to be an important concern in international business. In order to get benefit from different opportunities in different parts of the world, companies expand their business operations to different parts of the world. When operating in a new economy, foreign companies deal with different situations that are related to the economic, political, and social environment of different countries. In some countries, the economic, political, and social environment encourages foreign investment. In recent years, many multinational companies have adapted to the challenges of doing business in emerging economies. But as countries such as Brazil, Russia, India, and China (the BRICs) become more familiar, unfulfilled opportunities wait in other, less-developed countries.

There are different theories that have been developed in order to deal with the phenomena of multinational corporations and different market based variables such as cost of production and cost of transportation. The role of multinational corporations in the economic development is a heated issue. Multinational Corporations help emerging economies in the modernization of economies and industries. The modernization of economies takes place through technology transfer. The presence of multinational corporations is associated with the intensification of competition, availability of goods and services, and access to export markets. On the other hand, MNCs may result in some negative consequences such as they stifle economic development. It is also believed that the presence of MNCs results in the crowing out of jobs as well as local investment. The practices of multinational corporations are anti-competitive. As a result, the consumer welfare is reduced and unsuitable consumption patterns are built. Despite the opposing arguments related to multinational corporations, it is believed that multinational corporations are boon for emerging economies. The foreign direct investment made by multinational corporations is the key to economic development. There are different factors that attract foreign investments including government policies, FDI impacts, and others. The other factors include investment motives of MNCs such as a low cost of production, availability of skilled and cheap labor, entry strategies, absorptive capacities of the local industry, and others. An important issue that is associated with the economic development of MNCs is the interaction between local firms and industries.

In the global South, there are different concerns that surround the impact of multinational corporations. According to those concerns, multinational corporations have an impact on the growth of the local economy. The roots of these concerns lie in the tendency of multinational corporations to choose countries in the Global South as production sites. The purpose of choosing Global South countries as production sites is to get benefit from cheap labor for production and avoiding union pressures. It is argued that multinational corporations have the tendency to either encourage or inhibit economic development. However, the impact of MNCs on economic development depends largely on the way they invest in an economy and the way they operate in the host country.

DISCUSSION

In Latin America, the state government has ...