Mexico foreign oil companies cannot obtain 100

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Mexico – Foreign oil companies cannot obtain 100% ownership of Mexican oil firms. United States – Restricts inward investments seen to affect national security. E.g., the U.S. Congress blocked Dubai Ports World, a Middle Eastern firm, which sought a deal to manage U.S. ports.
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Country Risk Arising from the Host Country (cont’d) Laws on income repatriation limit the amount of net income or dividends that firms can bring back to the home country. Environmental laws aim to preserve natural resources, combat pollution, and ensure safety. Contract laws affect the sale of goods and services; intermediary agreements; licensing and franchising; foreign direct investment; and joint ventures. International Business: The New Realities 7-32 Example In Germany, firms are responsible for recycling product packaging.
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Inadequate or underdeveloped legal systems , or poor enforcement of existing laws. Laws may be weak regarding intellectual property, pollution, consumer protection, and other areas. While the problem is common in developing economies, it can occur in advanced economies too. Country Risk Arising from the Host Country (cont’d) Examples In China and Russia, foreign firms sometimes abandon business ventures due to erratic legal environments. The recent global financial crisis was triggered partly by poor regulation in the United States and Europe.
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International Business: The New Realities 7-34 Managing Country Risk Proactive environmental scanning : Management should develop a comprehensive understanding of the political and legal environment in target countries. Scanning – ongoing assessment of potential risks and threats to the firm, via intelligence sources such as: Employees working in the host country Embassy and trade association officials Consulting firms, such as Business Entrepreneurial Risk Intelligence ( ) Minimize exposure to country risks
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International Business: The New Realities 7-35 Managing Country Risk (cont’d) Strict adherence to ethical standards : Firms that engage in questionable practices or operate outside the law invite redress from the governments of the host countries where they do business. Alliances with qualified local partners : For example, firms often enter China and Russia by partnering with local firms who assist in navigating the complex legal and political landscape.
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International Business: The New Realities 7-36 Managing Country Risk (cont’d) Protection through legal contracts : Contract law varies widely. The firm must follow the law in each country. Three approaches for resolving contract disputes: o Conciliation is a formal process of negotiation whose objective is to resolve differences in a friendly manner. It is the least adversarial method. Common in China. o In arbitration , a neutral third party hears both sides of a case and decides in favor of one party or the other, based on an objective assessment of the facts. o Litigation occurs when one party files a lawsuit against another. The most adversarial approach, it is common in the United States.
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