Country Risk Analysis

Running head: COUNTRY RISK ANALYSIS Balance of Payment The current account balance of China amounts to 297. 1 bn US$ in the financial year 2009, whereas for the Guatemala it amounts to -0. 62 bn US$ in the same financial year (China's current-account balance 1982-2009). This implies that the current account balance of the home country stood at surplus as compared to that of the host country. As far as capital account is concerned, it amounts to 109. bn US$ in 2009 for China whereas for Guatemala was far less compared to that of China which implies that the home country's capital account balance is also at surplus in comparison to that of host country. Apart from the current account and the capital account balances of both the countries, the official gold holding of China as on December 2009 amounts to 1054 tonnes which was equivalent to 1. 5% of the of the national forex reserve, whereas for that of Guatemala, it was 6. tonnes in the same financial year equivalent to that of 4. 5% of the national forex reserve (Guatemala Economic Statistics and Indicators, 2010). Government variables: The government of China has been actively involved in formulating an effective fiscal policy so that the key projects can be easily financed by issuing government debt. Apart from the fiscal policy, the monetary policy is formulated in coordination to that of the fiscal policy so as to promote economic growth by containing deflation to the extent possible. As far as the monetary and the fiscal policy of Guatemala is concerned, a series of structural reform is done with a primary motive to increase the economic efficiency by strengthening balance of payments and controlling inflation. The monetary rate has been stable because of the strict fiscal administration and the abundance of natural resources. The legal court system of china is based on civil law which was divided into four level court system of which at the highest level is the supreme people's court, then local people's court and court of special jurisdiction lso known as special court. All these level of court systems ensure fairness in all the legal proceedings at china. The legal system of Guatemala follows a more of standard European prosecutorial model which implies providing evidence to the judge in an open public court so as to enable him to take decisions based on the evidence presented. As the decisions taken by the judge based on the evidence results into correct deci sions, this implies the fairness of the Guatemala's court system (Legal system of Guatemala). The corporate laws and regulations has been formulated in China as well as the Guatemala with an intention to protect the legitimate rights and interests of companies, shareholders and creditors (Company Law of the People's Republic of China, 2005). In order to comply with the world trade organization agreement on trade related aspect of intellectual property rights, China has strengthened its legal framework and has also amended its intellectual property rights. Counterfeiters and pirates has been the most in Chinese economy, as a result it is essential to have a better intellectual property right environment in china. Although the commitment from the central government official to tackle the problem is quite high but it has not been appropriate to deter the major IPR infringement. The intellectual property right is also not secure in guatemala due to the increased pirated related activities, hence government needs to take necessary action in order to solve such crucial problem. A trade union act has been formulated in accordance with the constitution to protect the positions of trade union which ultimately leads to the development of china's socialist movements. This act protects the legal rights of the employees. The activities of the union in the Guatemala has been pathetic. It has been increasingly violated after the enactment of Dominican republic central America trade agreement. The steps taken by the government becomes ineffective in addressing this concern (Labor Rights in Guatemala). Infrastructure: The transportation facility in China is improving as the government of china is investing huge funds in the development of roads, highway and expressway. Similar is the condition in vase of Guatemala where government is actively participating in improving the transportation facilities. The port of Tianjin is an international trading port in china of whose the land area is more than 20 km. Vessels of 70000-80000 dwt can sail in on the tide. Its through put was around 57. 87million tons. A notice on the management of foreign trade in free trade zone has been issued by the ministry of commerce and the general office of the general administration which clarifies the way through which foreign trade and distribution rights can be obtained by the operators inside the zone. In Guatemala also, there are various free trade zones along with many industrial parks which results into competitive advantage for the investors (China: Trading in Free Trade Zones, 2006). The banking, environmental and the educational factors are somewhat similar in both the countries. The banking in china has undergone lots of changes and it has remain in the hands of the government even after banks has given more autonomy. The educational activity on the part of the government is increasing in Guatemala as the education budget accounted for 15. % of the central government budget. The environmental issues in Guatemala are in relation to soil erosion, acid rain, water pollution etc. , whereas excessive growth has also raised various environmental issues in china. References: Company Law of the People's Republic of China, 2005. Retrieved April 24, 2010 from http://www. chinadaily. com. cn/bizchina/2006-04/17/content_569258. htm China: Trading in Free Trade Zones, 2006. Retrieved Apr il 24, 2010 from http://www. hg. org/articles/article_1191. tml China's current-account balance 1982-2009. Retrieved April 24, 2010 from http://www. chinability. com/CurrentAccount. htm Guatemala Economic Statistics and Indicators, 2010. Retrieved April 24, 2010 from http://www. economywatch. com/economic-statistics/country/Guatemala/ Legal system of guatemala. Retrieved April 24, 2010 from www. oas. org/juridico/Mla/en/gtm/en_gtm-int-description. pdf Labor Rights in Guatemala. Retrieved April 24, 2010 from www. ghrc-usa. org/Publications/factsheet_LaborRights. pdf