You are the chief executive officer of a multinational痴 subsidiary in a developing host country. The subsidiary
has been in business for about eight years, making electric motors for the host country痴 domestic market, with mediocre financial results. Before you left the home country a month ago, you were told to make the subsidiary profitable or consider closing it. After a month in the host country, you have discovered that it is running a worsening balance of payments (BOP) deficit and that the government officials are very concerned about the situation. They are considering various measures to stanch or reverse the deficit flow. What measures might they adopt? Given that you would prefer to keep the subsidiary open, since it employs locals and contributes to the country痴 economy in other ways also, can you think of some ways your company might profit from or at least minimize the damage of these potential measures?Take a shot. what do you think? Hint: list the many kinds of transactions that lead to a worsening balance of payments problem. Of those, list the ones your company contributes to. With each of these, think about what a government could do to mitigate the problem, if anything. Would this government solution help or hurt your company?