FINC 667 Case Assignment -Multiquimica do Brasil

( Source/ Cases in International Finance pp.73-80)

Background

Managing foreign exchange risk involves many levels of complexity for a firm which is active in international business. This complexity is magnified by the extension of a firm's business to direct overseas operations. The issues involved in trade are combined with the issues of international investment. Judgements are required about the prudent and equitable tradeoffs of risks and benefits for the parent company and for the overseas subsidiary. In locations in which currency instability is pronounced these questions are magnified further.

"Multiquimica do Brasil 1999" provides an excellent example of these dilemmas for a sizable American company active in international business. With international sales in over 50 countries the U.S. parent company, Multichemical Industries, is a good example of the potential of trade in business expansion and of the resulting problems. The Brazilian operation represented a modest part of the company's international business making an evaluation of the situation accessible.

Reserves of foreign exchange and gold ca

Foreign Exchange (CNBC World)

Money in a bag from the nordic foreign exchange co...

But modest size is not necessarily the source of simplicity in terms of management issues. The case provides a realistic understanding of the relationships and perspectives in foreign exchange management for a company's head office and for the view of its offshore subsidiary.

Factors

The case focuses on three primary participants:

The U.S. Parent Company - Multichemical Industries

Subsidiary in Brazil - Multiquimica do Brasil

Competition in Brazil- Hoffman et Cie

Three aspects of the company's situation are highlighted:

Parent/Subsidiary international relationship

Company exchange management programs

Competitive issues in Brazil

Assignment

The case will be examined in a Group presentation involving a thorough powerpoint review and a written report.. Other students may submit an individual report or participate in a Group Report without presentation.. It is anticipated that there will be contrasting views on the...