1. The Forbes global 2000 is top 2000 public companies ranking published by Forbes magazine every year. Companies from The People’s Republic of China and United States of America comprise forty percent of the ranking list. American business organisations are numbered 565, while companies from China and Hong Kong are 263. Most of the companies in top 25 belong to financial sector predominantly from the banking sector.
Banking is a service industry that deals with cash, credit and other financial transactions. Banks provide a safe haven to store extra income and give interest to the holder. They offer services like savings accounts, certificates of deposit and checking accounts. Banks use these deposits to give loans and invest in other sectors. These loans include home mortgages, business loans and car loans. In simple term, Banking is defined as a business activity of receiving and sheltering money owned by other individuals and entities, and then lending this money in order to earn profit.
The rise of purchasing power around the emerging economies have fast-tracked the growth of banking service sector. Out of top ten, six belong to banking and financial sector like Bank of America, JP Morgan chase, industrial and commercial bank of china, agricultural bank of china.
From the second half of 20th century, the banking business started increasing exponentially. If all the assets and securities created by banking services to be calculated, it would be as large as the entire GDP of USA. During this time, the profitability ratio of banking services grew even faster. Banking represented almost fifteen percent of all corporate profits during the late 1970. By 2007, it represented thirty percent of all the profits. The largest banks grew the fastest. The ten largest banks share of all bank assets increased from 26 to 45%. Their share of deposits also grew during that period, from 17 to 34%. The ascent of online banking and investment banking gave a new direction to the banking sector and changed the functioning of banks as whole. Banks became primary source of income for large businesses and even various governments. To promote and expedite growth and development in developing world, multilateral financial assistance groups like world bank and international monetary fund was established.
The growth of an economy plays a vital role in the financial stability of that economy. Let’s compare the case of India and Japan. The economic position of Japan is shaky as the country recently came out of recession. The banking sector has taken the major hit during this period. The interest rate offered by Japanese banks are less than 2-3% and surcharge levied of services are high. The scenario is exactly opposite in India. Due to fast growth rate and high purchasing power, there is sort of competition within the banking sector to attract maximum deposits for themselves. The interest rate in India is 8-9% to even double digit.
2. Latin America stretches from northern borders of Mexico to the southern tip of south America. The three major countries of Latin America are Mexico, Brazil and Argentina.
MEXICO
Mexico is one of the emerging countries most open to foreign direct investment. Mexico is the world's fifteenth largest FDI recipient. FDI to the country fluctuate strongly depending on the arrival and departure of large international groups. Foreign direct investment plays an important role in globalized economies, especially export-oriented ones like Mexico. Foreign investment is particularly important to Mexico because of the ‘maquiladora’ sector, or manufacturing plants that assemble goods for export. These manufactured exports are critical to Mexico’s position in the global economy. With 12 free trade agreements signed with 44 countries, Mexico is one of the most trade-liberalized countries in the world. More than 90% of Mexican trade flows under free trade agreements. As an example of their market strength, when considering U.S. imports of textiles and apparel, Mexico ranks as the third largest supplier behind Vietnam and India. In recent years, Mexico's competitiveness has suffered from the rise of organised crime and lack of reforms in the energy sector and tax regulations. Corruption and administrative inefficiency have also been major issues.
Mexico’s strong points include:
– With labour costs comparable to Asia-based manufacturing, extensive trade agreements and a strategic location between North and South America, Mexico is well-positioned for those looking to break into markets or expand their supply chains in the Americas.
– The Government is very positively oriented to foreign investment (economic reform efforts, new investment opportunities, etc.).
– Young, skilled labour force.
– Extensive natural resources, allowing for the development of all types of industry at competitive rates.
– The country is the eighth most popular tourist destination for global travellers and home to more than 30 UNESCO World Heritage Sites.
Mexico’s weak points include:
– Despite growth in the banking sector, interest rates still remain comparatively high for many SMEs.
– Mexico's economic stability is highly tied to the well-being of the U.S. economy.
– Socioeconomic stratification will present a challenge to the long term growth potential of the country.
– Violence involving criminal organisations presents a risk in parts of Mexico (particularly some of the areas along the U.S.-Mexico border).
– Some sectors are reserved exclusively for the Mexican State or Mexican nationals.
– The large size of the country may present some distribution or supply chain challenges.
BRAZIL
Brazil remains the largest recipient of FDI in Latin America and the eighth largest recipient in the world. The country is currently the fourth largest investor in emerging markets and the largest investor in Latin America. The main investors in Brazil are the United States, Spain and Belgium. Key sectors attracting foreign investment include finance, beverages, oil and gas and telecommunications. The plan of concessions (airports, sections of highways) launched by the Government is likely to attract investors. The investment regime in Brazil is liberal, allowing foreign investors to have a majority share in the creation of their company.
Brazil's strengths include:
– Extensive raw materials, a large pool of workers at all levels of education, a large domestic market and a diversified economy.
– Export sectors, particularly in industry, could provide investment opportunities, as the weak real can make Brazilian products cheaper for foreign buyers.
– After recent corruption scandals, there may be more interest at local and national levels in cracking down on corruption and crony capitalism, which could benefit investment in the long-term.
Brazil’s weaknesses include:
– Despite being open to world trade, several administrative barriers cripple international trade; labour laws are very onerous, involving substantial costs to foreign companies and keeping a good part of the local business in the informal sector.
– Foreign investments are restricted in several sectors, such as insurance, aviation and media.
– Some foreign investors have encountered obstacles engaging with regulatory agencies, underlining the high level of regulatory risk.
ARGENTINA
Argentina ranks fifth amongst the South American countries in terms of FDI stock (after Brazil, Chile, Colombia and Peru) and FDI influx. The three main investors in Argentina are the United States, Spain and the Netherlands. Argentina has definite assets: its natural resources are considerable (copper, gas and oil) and its workforce is highly skilled and competitive. Foreign investors are able to invest in all sectors of the economy on equal footing with national investors. The current investment regime is a liberal one.
Argentina's strong points include:
– The country is rich with natural resources.
– Deep and broad middle class with strong purchasing power.
– Highly literate and educated population.
– National infrastructure is in deep need of renewal, which creates new opportunities for sales to or contracting with government in areas such as rail, telecommunications, electricity, etc.
– Government is oriented towards pro-market reforms.
Argentina's weak points include:
– A fragile and undercapitalised banking sector.
– Investments in electricity have proven insufficient.
– High rate of inflation.
– Limited access to international financial markets as a result of bond default.