Novartis in Bolivia Expansion Project Essay

understand the semi policy-making structure of a rural bea is very significanceant when nerve-wracking to do personal line of credit glob tout ensembley. When transnational corporations plan to invest in a new country they must understand the political system and culture. Bolivia has set slightly political asymmetry for everywhere the past century. Since Evo Morales was elected as president, umteen changes spend a penny been made to protect roughly of the congenital resources and mandate contrary enthr geniusment. Morales political influence has played a large roll in the regulation of exotic enthronement and business.Since his inauguration, Morales has nationalized the hydrocarbon industry and the telecommunication industry. This has caused some(prenominal) another(prenominal) companies to perform new contracts. Although Bolivias legal framework is open to abroad investment, many foreign companies and investors argon affected by many of the inconsistent regu lative decisions. These wagess often cause uncertainty with investors when deciding to invest. In addition the slow corrupted judicial system also causes a threat to many investors that decided to invest in Bolivia.Several problems that come up when investiture in Bolivia result from the weak judicial system. many another(prenominal) of the property and contractual rights dexterity be enforced, hardly the process can take a lot of time ascribable to corruption and political influence. This also could be a potential difference threat to companies that want to expand into Bolivia. Political protests against the presidency are another issue that might affect foreign investors when attempting to do business in Bolivia. galore(postnominal) of these protest cause disruption to the ecstasy of goods.Over wholly the political environment of Bolivia could potenti entirelyy cause issues when doing business we might put ourselves at risk of losing major profits or pull down expropri ation by the substanti totallyy-disposedist form of governing body currently established in Bolivia. Economic Analysis Bolivia has clamberd economically in the past thirty eld however has reached stability. This is partially due to low macrocosm gain that has kept the labor supply limited. Another key factor to the economic struggle in Bolivia is due to the political and social conflicts within Bolivian society. many another(prenominal) changes have been implemented after(prenominal) the economic crisis in 1984-1985, where they suffered from extreme hyperinflation. The principal(prenominal) focus of the brass after the period of hyperinflation was to maintain price stability, shit conditions for sustained festering, and alleviate poverty across the country. before long Bolivia relies heavily on foreign assistance to finance developmental projects. Direct foreign investment has contri thoed much of the increase experienced in private investment in Bolivia. Bolivias p rimary sectors, Agriculture/Forestry and mining, have created economical opportunities for Bolivia.Agriculture contri furtheres to about ten percent of Bolivias gross domestic product and al near half of their work force is employed in this industry. One of their roughly profitable products is coca in which they are currently the third largest cultivator. Mining has played a big part in Bolivia economic growth as surface. Many local miners are employed by small-scaled operations throughout the country. Although Bolivia is known to have over 5. 4 meg piles of lithium, much of the lithium deposits are not mined due to the tumult of the country salt flats, which are a big feature of tourism.Currently the United States is one of Bolivias largest trading partners, importing $707 million dollars in 2010. There are no justices directly regulating competition exclusively the government does have some regulation on the activities companies have. Bolivia has struggled economically b ut are now much efficient Social Analysis Many of the issues arising socially are result of the living conditions and political reform. Although much of the population is living in poverty, two-thirds of Bolivias population is active within the economy, any working for corporations or on a non-contractual basis.One issue that the absolute majority of the population is dealing with is working qualifications. Many people growing up in Bolivia may whole attend one year of schooling. some of the difficult living conditions and political influences can create a unconnected environment throughout the country. Protests against the government are a common issue that might affect foreign investors when attempting to do business in Bolivia. Many of these protest cause disruption to the transportation of goods and can effect business decisions. Violent and disruptive social protests occur often in some of the major cities that have affected companies.There have been cases where the majo r airports have been shut down for over twenty days due to protesting and social unrest. The government is attempting to increase citizen pursuit in politics in ball club to help decrease some of the protest. Through many political and economical reformations, Bolivia has stabilized many of the past issues they were facing but is still a difficult place to do business, and through time it has deterred many international companies from entering the commercialize. Country Risk Analysis and GlobalizationAs mentioned before, Bolivia constitutes one of the least developed and unfortunateest countries in Latin America and one of the most isolated countries in South America. Bolivias socialist leader, Evo Morales, was elected because of his involvement with the anti-globalization movement. He has subjectd poverty within the country, redistributed wealth, and has nationalized a prodigious amount of the energy sector. He has promised to favor domestic consumption of natural hitman ov er export. He has supported mainly by the poor majority who mostly reside in the western highlands.The population residing in the eastern areas and voters from the middle and high flesh who have most of the wealth, are implicated about his policies. Those in higher(prenominal) social classes are concerned with the neo-liberal global economy while many in the mestizo class support the opportunities that come from participating in the global economy. When it comes to the countrys globalization, Bolivians have a deep love for the natural richness of their country and are fighting to protect it. Bolivia is rich in nature and has many natural resources to offer.The natures conservation of the country is under imperativeness because of global interests, but its an opportunity for Bolivia that can be effective to them and help create more stability and less inequality among the country. Bolivia has the fleck largest reserves after Venezuela and looks like the perfect supplier for natur al botch up. scarce in 2005, a hydrocarbons law was passed by the government that imposed higher royalties and required foreign firms who were operating under risk-sharing contracts at the time, to surrender all production to the state energy company in fill in for a predetermined give.The hydrocarbons sector has raised question as to whether Bolivia has the sectors capacity or not to grow. Bolivia will continue to supply brazil and genus Argentina with their natural gas but their long-term commercialise potential is at risk. There are a number of factors that may reduce the growth of the industry increased political risk, delays in infrastructure projects, and meagerly funds for production. The country needs private investment to increase production, but if they continue to pressure investors this is going to be very difficult.Bolivia has had problems with political instability in the past days, which has affected investments in the sector. They had a large come to in inv estments in exploration and production of about $63 million in 2006. It has had a downfall on the amounts of gas delivered to Argentina since the multitude of production decreased in 2007. They had initially agreed that Bolivia would deliver 7. 7 million cubic meters per day per year to Argentina, but Bolivia was only delivering about half of that.Bolivias supply to Brazil was almost quadruple of the7. 7 mcm/d per year to Argentina, in turn, Bolivia asked Brazil for help. They are currently working on balancing and maintaining the gas deliveries to Argentina. Political instability in Bolivia has caused them to resist the opportunity of exporting gas to Chile, to Mexico through liquefied natural gas facilities, and to the U. S. through a Peruvian or Chilean port. Even though Bolivia has faced political instability, they have never stopped its gas supplies to Argentina or Brazil.In consequence to the political instability, the lack of investment in the country has reduced much of th e production volumes. The Bolivian government has change its relationships with other governments regarding negotiations they also have alterd their relationship with Brazil after the gas industry nationalization. Contracts of new investments have been made to initiate more production giving a positive signal for the future gas supplies in the region vivid the security of supply for Argentina and Brazil.Although government relations have improved, there is still a risk of markets not developing because of Bolivias internal political problems. But if the government avoids these political problems and a more consistent policy framework is made, the future looks promising for Bolivia. Bolivia, being an underdeveloped country, poses economic risks to other countries entering their market. Future growth of the country will be constrained by declining foreign investment and the countrys high debt. Bolivia has such high poverty roams, that growth probably wont reach levels to sufficien tly relieve the rates. death chair Morales opposes free market economic policies and instead supports state involvement in policy making and more government spending on health, education, and infrastructure. The government continues to negotiate for further debt relief of the country. According to the Natural Hot posture study by the World Bank, Bolivia has the 32nd highest economic risk film to three or more hazards. Its exposed to detrimental hazards due to the countrys geographic location as salutary as the pic of its population and infrastructure.In the past, the country has experienced a serial of emergencies caused by many natural disasters such as floods hail storms, landslides, and mudslides. The levels of vulnerability in Bolivia have increased due to poverty factors and repeated natural disasters in the same regions. Industries and the general population are affected by these events since 49 percent of the population works in the service sector, 40 percent work in agr iculture, and 12 percent in industry. Bolivias legal framework remains generally open to foreign investment.However, foreign firms may be affected by inconsistent regulatory decisions, negative interpretations of laws, and a corrupted judicial system. The Investment Law provides for national give-and-take of foreign firms and guarantees the foreign firms their profits, the free exchange of currency, and the right to international arbitrement in all sectors. Laws that govern activities having to do in the mining and hydrocarbon sectors slide by joint ventures, and association of services to state-owned corporations.The Hydrocarbon Laws, which was issued in May of 2005, required investors to conform to new contracts within 180 days, forced production of hydrocarbons to release all hydrocarbons to the state, and forced an additional tax of 32 percent on revenues. The law also required that before exporting, companies sell their hydrocarbons and satisfy the domestic market at factit ious prices set by the hydrocarbons regulator. Bolivias currency is freely convertible at Bolivian banks or exchange institutions.The official exchange rate is determined by the Central Bank who auctions dollars daily the bank offers a set amount of dollars and offers a negligible price. The Banking Law establishes regulations for foreign currency hedging and allows banks to have accounts in foreign currencies. There are no restrictions of any sort on transfers of currency. In 2007, the Central Bank established a one percent fee for any money transfer that is larger than one thousand U. S. dollars. some(prenominal) hard-currency cash larger than ten thousand U. S. dollars must be current by the Central Bank and Ministry of Finance if its leaving or entering the country.Bolivias past has hindered the investment of foreign firms is their country. Through their political and economic instability the country has yet to fully flourish in the agricultural sector. Some low population gr owth as well as low life expectancy and a high rate of disease has constrained the labor supply and prevented industries from flourishing. Overall the country has been not too open to globalization due to the current political administration but we believe that they are going to start shifting in the future to more open market and less rigorous import policies to improve their economy.Novartis Overview of the CompanyIn 1996 Novartis was created, one of the biggest healthcare companies in the world. This multinational pharmaceutical company was formed after the merger of Sandoz and Ciba-Geigy. Novartis is not only a worldwide leader in pharmaceuticals but as well in vaccines and diagnostics, Sandoz, Alcon, animal health, and over the counter. Sandoz is the generic pharmaceutical incision of Novartis. It is the guerrilla in net sales in 2010 with $8. 5 billion USD, tin pharmaceuticals at $30. 5 billion dollars. Sandoz offers affordable and high quality medicines to everyone. The A lcon division is the core care division of Novartis.These products are to improve and protect eye vision. OTC or also know as over the counter, are products that Novartis makes that do not require prescription. These products are designed to prevent medical examination illness as well as treatment from the comfort of your home. not only is Novartis for the benefit of human health but as well for animal health. With animal health products, Novartis helps treat and prevent diseases in pets around the world. Novartis global headquarters are dictated in Basel, Switzerland. Even though their headquarters are located in Basel they operate in over 140 countries.They dont only make and provide products to both(prenominal) humans and animals but also have explore facilities. The pharmaceutical research facilities headquarters arent located in Basel. The Novartis institute for biomedical researches is located in Cambridge, Massachusetts. These research facilities over the world are to i nnovate and improve medicines that will treat diseases and improve the health of humans and animals. With its research facilities all over the world Novartis is determined to finding vacancies and treatments for diseases in developing nations. homogeneous every MNC Novartis has a mission statement. Discover new medicine and products for all of their patients is a crucial mission in all of Novartis. They dont only want to discover new things to improve the life of patients but they want to expand their innovations. This MNC wants to improve human and animal life as much as possible. Novartis official statement states We want to discover, develop and successfully market innovative products to prevent and cure diseases, to ease suffering and to grow the quality of life. (www. Novartis. com)In 2000 Novartis listed its appropriates in the New York Stock Exchange market at 37. 24 a share. With its highest in 11 years being 64. 52. Novartis doesnt only have shares in NYSE but also has sh ares in the SIX Swiss Exchange. In 1996 Novartis opened their shares in the Swiss market at 35. 06 a share. In 15 years in the Swiss exchange market Novartis shares were the highest 76. 80 a share in 2006. You can say Novartis has double their market value since they went public.