1) Please go through these two presentations and post at least one question, remarks and comments for each.

length should be 1/2 double spaced page each

2) What should a multinomial company do to obtain a proper forecast?

Can Weak Currencies in Latin America Negatively Impact US Multinationals Cash Flows? Amplifying their operations to other countries is a tactic that all of the United States' major companies embrace at some level of their development. American companies have moved overseas in order to catch new costumers, gain advantage, find a cheaper way to produce their products, help create crucial assets through the creation of partnerships and restructure their overseas assets due to economic changes throughout other regions. The Focus of this paper is on operational restructuring (firms want to change the composition of their structure by acquiring others). US Multinationals are able to benefit from dynamic economic, political, and industrial circumstances beyond regions. 2 Many US companies are opening their business into Latin America countries ( a region rich in natural resources, but despite these privileges has not been able to transcend in a globalized world). Latin America has always been one of the most challenging areas to do business. The fact of study, is to examine the impact exchange rates have on US Multinationals cash flows. Can the cash flow of a U.S. based MNC have a negative impact from acquiring a firm in Latin America due to weak currencies? 3 When MNCs involve in restructuring they see to accomplish long-term success. Cash plays an essential part in the entire economic life of a company. Cash flow (flow of funds within a company during a period of time)is the consequence of business actions connected to investments, operations, and financial deals. Corporate restructuring influences the structure of a company's assets, which will alter the present value of its cash flow. If a US MNC plans to acquire a foreign target, it must consider how future exchange rate movements may affect the target's local currency cash flows. 4 Changes in exchange rates have effect on cash flows/value of firms engaged in international activities as well as firms of domestic nature. The value of pure domestic firm is affected by economic exposure. Firms withmore foreign costs thanforeign revenues will be unfavorably affected by stronger foreign currencies. Firms withmore foreign revenuesthanforeign costs will be unfavorably affected by weaker foreign currencies. Appreciation/ depreciation influences the present value of future cash flows. 5 b. The U.S. dollar's strong rise this year has helped it gain a lot of ground on Latin America currencies (more expensive to pay debt that is in US dollars). If the domestic currency appreciates-goods for foreign sales in domestic currency become more expensive in foreign currency. Foreign sales fall and cash flows decline as a result of domestic currency appreciation. Exchange rates influence the conversion of the target's transferred earnings to the US firm. Dividends from foreign direct investment and portfolio will decrease -US dollar appreciate and foreign currencies depreciate. 6 The weakness of the Latin America currencies has hurt US corporate profits. Latin American currencies have contracted in value this year. Mexico's currency -The Mexican Peso has collapsed 20% against the US dollar. Brazil's currency -The Brazilian Real has declined 35% and the Colombian Peso 37% 7 Some well-known US Companies had already reported financial hits related to the depreciation of Latin America Currencies: 1.General Motors Co. and Ford Motor Co. are experiencing tough conditions in South America- (Venezuela's currency affecting unfavorably the automotive sector making almost impossible to pay dividends and obligations in dollars). 2.3M Co: its second quarter results in July: immediate distresses due to weak results obtained due to the negative impact of foreign exchange fluctuations- investors disappointed by the lowered revenue and earnings-affecting growth and stability in the market. 3.Kimberly-Clark Corp: sales of $4.7 billion in the first quarter of 2015 were down 4% compared to year ago period. Changes in foreign currency reduced sales 9% as a result of the weakening of most currencies relative to the US(Mexican Peso). 4.Nextel International: Performance in the second quarter fell short of their expectations due to their inability to deliver on their revenue growth goals. Results: impact of a challenging macroeconomic environment affecting the wireless industry- foreign exchange rates continue to affect their business in Brazil and Argentina. 8 Despite the fact that exchange rates lead to bring the most attention, what really concerns to multinationals are transformations in real terms-inflation. In a perfect world- if prices were to decrease as currency values ascend, or vice versa, then the purchasing power of companies' cash flows would be constant and no real currency risk (works over the long run but not for all exchange rates and no in the short run). Many MNCs seem to control only the most detectable risks (exposure from transactions in developing countries- through options or currency futures- but they do not work for every exchange rate risk). Due to US MNCs global operations in Latin America -cash flows are exposed to currency rate fluctuations. Latin America currencies have reduced value this year-the strength of US dollar affecting their currencies to fall dramatically in value. The currency volatility has heavily and unfavorably impact on US MNCs cash flows. Depreciation of Latin America currencies generates weaker profits and affects negatively MNCs performances and profitability. 9 Acquire Media. Kimberly-Clark. \"Kimberly- Clark Announces First Quarter 2015 Results.\" Dallas. Online. 21 April. 2015.Web. 1 Oct.2015. DePamphilis, Donald M. Mergers, Acquisitions, and other Restructuring Activities: An Integrated Approach to Process,Tools, Cases, and Solutions. California: Elsevier, 2012. Print. Gillespie, Patrick. \"The Next Domino to Fall: Latin America.\" CNN Money. C N N Money New York. 9 July . 2015.Web. 20 Sep.2015. Hernandez Vargas, Jose G., Jorge Pelayo Maciel, and Jose Satsumi Lopez Morales. \"Latin American Multinational Companies Growth.\" International Journal of Advances in Management and Economics. Vol.2. Issue 4. (2013): 65-72. Jay Choi, Jongmoo, and Anita Mehra Prasad.\"Exchange Risk Sensitivity and Its Determinants: A Firm and Industry Analysis of U.S. Multinationals.\" Financial Management.Vol.24. No.3, Autumn. (1995): 77-88. Madura, Jeff International Financial Management. Ohio: South- Western Cengage Learning, 2008. . Print. McLaughlin,Tim and Svea Herbst-Bayliss. \"Venezuela's Currency Woes an Increasing Threat to U.S. Corporate Profits.\" Reuters. Boston Reuters. 24 Jan. 2015.Web. 29 Sep. 2015. Morgan, Glenn, Peer Hull Kristensen, and Richard Whitley. The Multinational Firm: Organizing Across Institutional and National Divides. New York: Oxford University Press, 2001. Print. Peterson Drake, Pamela, and Frank J. Fabozzi. The Basics of Finance: An Introduction to Financial Markets, Business Finance, and Portfolio Management. New Jersey: John Wiley & Sons, Inc. 2010. Print. PR Newswire. Browse News Releases. \"NII Holdings Announces Second Quarter 2015 Results.\" Virginia. Online. 7 Aug.2015.Web. 1 Oct.2015. 1 1 How Does Direct Foreign Investment Affect Growth in Latin America? 1. Introduction In this era of increasingly globalized world economy, DFI defined as \"investment made to acquire a lasting interest in or effective control over an enterprise operating outside of the economy of the investor\" (IMF, 1993) is a particularly significant driving force behind the interdependence of national economies. Even though, most of the DFI flows have always concentrated in the developed countries, its importance is undeniable for developing countries as well. DFI plays a central role in Latin America's current and future economic situation. It is a key component of its growth. 2 2. Literature Review Though my thesis focuses on DFI in Latin America, this section gives a brief introduction to the body of economic literature that has explored the effect of DFI on growth at a macroeconomic level. 2.1 Does DFI conduce to growth? The results of macroeconomic studies on DFI and growth have generally been mixed. Most studies have found some positive correlation between DFI and growth. 3 2. Literature Review (Li and Liu, 2005) found that DFI is expected to be growth through encouraging the incorporation of new inputs and technologies in the production process. (Bengoa et al. 2003) showed that DFI is positively correlated with economic growth, but host countries require human capital, economic stability, and liberalized markets. (Borensztein et al. 1998) suggested that DFI enhances growth via increasing domestic capital formation, technology and improved productivity. 4 3. Positive Trends and Impacts in L.A Inflows of DFI into Latin America have increased significantly in two main waves over the past couple of decades. The first surge occurred in the 1990s (Figure 1). The greater part of these investments were in the services sectors. 5 3. Positive Trends and Impacts in L.A Investment also increased at this time in the manufacturing sector, in response to general economic liberalization in economies such as Argentina and Brazil. There is a clear correlation between the openness of Latin American economies to trade and the amount of DFI they receive. One straightforward benefit is the increased availability of capital within the region. Another potential benefit are technology and productivity improvements, such as through knowledge spillovers. 6 4. Characteristics of recent DFI inflows to L.A -second wave1. Foreign investment has increasingly targeted innovative product manufacturing. 2. Reinvested earnings have become the key source of foreign investment in the region. 3. Foreign firms are amplifying their research and development (R&D) activities in Latin America. 4. Latin America has received an increase in foreign investment from venture capital funds. 5. DFI inflows from within the region are increasing. 7 5. Reforms to stimulate Investment There is a range of reform areas that Latin American governments could consider to attract additional DFI inflows. Domestic market size and growth potential are two primary drivers of DFI flows. Other key factors relate to macroeconomic management and rule of law, such as maintaining low inflation and respect for private property rights. Regulatory reforms represent one important potential component of a reform agenda to keep L.A attracting DFI. 8 6. Conclusion DFI continues to offer significant potential to spur innovation and contribute to broadbased growth in L.A. DFI has increasingly targeted innovative product manufacturing in response to the rising purchasing power of the emerging middle class. Developing and transition economies now constitute half of the top 20 ranked by DFI inflows. Improving the business environment could make L.A a more attractive investment destination. Institutional and regulatory reforms are needed. Nearly half of foreign owned firms operating in L.A identify corruption as a major constraint. DFI inflows to L.A have been increasing substantially, and this foreign investment offers significant potential to enable productivity enhancing economic growth. 9 7. References Alfaro, Laura. (2003). \"Foreign Direct Investment and Growth: Does the Sector Matter.\" Harvard Business School. Alfaro, Laura and Maggie Chen. (2012). \"Selection, Reallocation, and Spillover: Identifying the Sources of Gains from Multinational Production.\" NBER Working Paper 18207. Arnold, Jens, Beata S. Balasubramanyam,V. N., Salisu, M. and D. Sapsford. (1996). \"Foreign Direct Investment and Growth in EP and IS Countries,\" The Economic Journal, vol. 106(1), p. 92-105. Bengoa, M. and B. Sanchez-Robles (2003), \"Foreign Direct Investment, Economic Freedom and Growth: New Evidence from Latin America,\" European Journal of Political Economy, vol. 19(3), p. 529-545. Bhagawati, J. N. (1978). \"Anatomy and Consequences of Exchange Rate Regimes,\" Studies in International Economic Relations, vol. 10, New York: NBER. Borensztein, E., De Gregorio, J. and J. W. Lee. (1998). \"How Does Foreign Direct Investment Affect Economic Growth?\" Journal of International Economics, vol. 45(1), p. 115-135. Busse, Matthias and Jos Luis Groizard. (2008). \"Foreign Direct Investment, Regulations and Growth.\" The World Economy 31(7): 861-886. CAF - Banco de Desarrollo de Amrica Latina. (2013). \"New Trends and Realities in Foreign Direct Investments in Latin America.\" Background paper. Carkovic, M. and R. Levine. (2005). \"Does Foreign Direct Investment Accelerate Economic Growth?\" in Theodore Moran, Edward Graham and Magnus Blomstrm (eds.), Does Foreign Direct Investment Promote Development? Washington, DC: Institute for International Economics, p. 195-220. Daude, Christian and Ernesto Stein.( 2007). \"The Quality of Institutions and Foreign Direct Investment.\" Economics & Politics 19(3): 317-344. 10 7. References de la Torre, Augusto, Eduardo Levy Yeyati and Samuel Pienknagura. (2013). \"Latin America and the Caribbean as Tailwinds Recede: In Search of Higher Growth.\" LAC Semiannual Report, World Bank, Washington DC. Durham, J. B. (2004). \"Absorptive Capacity and the Effects of Foreign Direct Investment and Equity Foreign Portfolio Investment on Economic Growth,\" European Economic Review, vol. 48(2), p. 285-306. Francis, David, Federica Saliola and Murat Seker. (2013). Measuring Firm Performance in Latin America and the Caribbean. Enterprise Surveys Latin America and the Caribbean Series Note No. 2. Available at: http://www.enterprisesurveys.org/ Topic-Analysis. Javorcik, Beata. (2004). \"Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages.\" American Economic Review 94(3): 605-627. Javorcik, Beata. (2010). Foreign Direct Investment and International Technology Transfer. Entry for Encyclopedia of Financial Globalization. See: http://www.chch.ox.ac.uk/sites/default/ files/Javorcik.pdf Lederman, Daniel, Julian Messina, Samuel Pienknagura and Jamele Rigolini. (2013). \"Entrepreneurs in Latin America and the Caribbean: survivors but not innovators.\" Draft manuscript of the World Bank Latin America Office of the Chief Economist. Li, X. and X. Liu. (2005). \"Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship,\" World Development, vol. 33(3), p. 393-407. Madura, Jeff. (2008). Direct Foreign Investment. International Financial Management. 9th ed (p 375). Mason: South Western. Print. Moran, Theodore, Edward Graham and Magnus Blomstrm, eds. (2005.) Does Foreign Direct Investment Promote Development? Institute for International Economics. 11 7. References OECD (2014) \"Putting foreign direct investment to work for development\