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COUNTERTRADE
   Jordy Steve Mancilla Castillo
     Juan David Ocaña Oviedo
             Course:
     International Business I
       Head of the Course:
       Luis Gerardo Pachon
           Project Due:
          17th/09/2012
¿COUNTERTRADE?

• Means exchanging goods or services which are
  paid for, in whole or part, with other goods or
  services, rather than with money.
HISTORY OF MODERN
         COUNTERTRADING
• Throughout history countertrading occurred
  whenever there was a shortage of money, or
  before money even existed.


      PRE              THE
     WORLD            COLD
     WAR II           WAR




              POST
              COLD
              WAR
NECESSITY

• Countertrade also occurs when countries lack
  sufficient hard currency, or when other types of
  market trade are impossible.
• ¿WHY COUNTERTRADE?
Elderkin & Norquist, in their book "Creative
Countertrade," say that companies countertrade in
order to:
REPATRIATE      CLEAN UP BAD DEBT
 BLOCKED FUNDS         SITUATIONS



KEEP FROM LOSING     GAIN FOREIGN
   MARKETS TO       CONTRACTS FOR
  COMPETITORS        FUTURE SALES


          FIND LOWER-COST
             PURCHASING
              SOURCES
USES
• Main reasons why countertrade is used:
           • MONEY:
           • SOME PEOPLE CANNOT PAY IN THE CURRENCY YOU WANT.
      1.

           • "TO GAIN A COMPETITIVE ADVANTAGE OVER COMPETING
             SUPPLIERS."
      2.

           • THE POLITICAL ENVIRONMENT :
           • LOCAL JOBS AND INDUSTRY.
      3.   • RULES AND REGULATIONS TO PROTECT THE HOST COUNTRY.
TYPES OF COUNTERTRADE

• countertrade can be a lot of things depending
  on who is involved .
• There are six main variants of countertrade:
BARTER


• Exchange of goods or
  services directly for other
  goods or services without
  the use of money as means
  of purchase or payment.
SWITCH TRADING

• Practice in which one
  company sells to another
  its obligation to make a
  purchase in a given
  country.
OFFSET

• Agreement that a company will
  offset a hard - currency purchase
  of an unspecified product from
  that nation in the future.
• There are two distinct types:

           Direct

           Indirect
COUNTER PURCHASE
• Sale of goods and services to
  one company in other
  country by a company that
  promises to make a future
  purchase of a specific
  product from the same
  company in that country.
BUYBACK
• occurs when a firm builds a
  plant in a country - or supplies
  technology, equipment, traini
  ng, or other services to the
  country and agrees to take a
  certain percentage of the
  plant's output as partial
  payment for the contract.
COMPENSATION TRADE


• is a form of barter in which
  one of the flows is partly in
  goods and partly in hard
  currency.
PROS AND CONS

• Counter-trade offers three major benefits:
• Countertrade has its pros and cons. A major
  benefit of countertrade is that it facilitates
  conservation of foreign currency. Other
  benefits           include           increased
  employment, higher sales, better capacity
  utilization and ease of entry into challenging
  markets.
• Counter-trade also involves significant risks:
• A major drawback of countertrade is that the
  value proposition may be uncertain, especially
  in cases where the goods being exchanged
  have significant price volatility. Other
  disadvantages of countertrade include
  complex negotiations, potentially higher costs
  and logistical issues.
COUNTERTRADE STRATEGIES

DEFENSIVE.    PASSIVE.


REACTIVE.    PROACTIVE.
REFERENCES

• Countertrade. (2005) London countertrade round table, Available:
  http://www.witiger.com/internationalbusiness/countertrade.htm
  Last accessed 9th September 2012.
• Definition of countertrade. (2012) (I) Investopedia, Available:
  http://www.investopedia.com/terms/c/countertrade.asp#axzz260E
  nBRns Last accessed 9th September 2012.
• Pros and cons of countertrade. (2011) Impexpedia blog, Available:
  http://impexpedia.com/blog/2011/09/09/pros-cons-counter-
  trade/. Last accessed 9th September 2012.
• The History of Countertrading (2012) eHow.com, Available:
  http://www.ehow.com/facts_7151203_history-
  countertrading.html#ixzz260LkXGsE. Last accessed 9th September
  2012.

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C.slideshare

  • 1. COUNTERTRADE Jordy Steve Mancilla Castillo Juan David Ocaña Oviedo Course: International Business I Head of the Course: Luis Gerardo Pachon Project Due: 17th/09/2012
  • 2. ¿COUNTERTRADE? • Means exchanging goods or services which are paid for, in whole or part, with other goods or services, rather than with money.
  • 3. HISTORY OF MODERN COUNTERTRADING • Throughout history countertrading occurred whenever there was a shortage of money, or before money even existed. PRE THE WORLD COLD WAR II WAR POST COLD WAR
  • 4. NECESSITY • Countertrade also occurs when countries lack sufficient hard currency, or when other types of market trade are impossible. • ¿WHY COUNTERTRADE? Elderkin & Norquist, in their book "Creative Countertrade," say that companies countertrade in order to:
  • 5.
  • 6. REPATRIATE CLEAN UP BAD DEBT BLOCKED FUNDS SITUATIONS KEEP FROM LOSING GAIN FOREIGN MARKETS TO CONTRACTS FOR COMPETITORS FUTURE SALES FIND LOWER-COST PURCHASING SOURCES
  • 7. USES • Main reasons why countertrade is used: • MONEY: • SOME PEOPLE CANNOT PAY IN THE CURRENCY YOU WANT. 1. • "TO GAIN A COMPETITIVE ADVANTAGE OVER COMPETING SUPPLIERS." 2. • THE POLITICAL ENVIRONMENT : • LOCAL JOBS AND INDUSTRY. 3. • RULES AND REGULATIONS TO PROTECT THE HOST COUNTRY.
  • 8. TYPES OF COUNTERTRADE • countertrade can be a lot of things depending on who is involved . • There are six main variants of countertrade:
  • 9. BARTER • Exchange of goods or services directly for other goods or services without the use of money as means of purchase or payment.
  • 10. SWITCH TRADING • Practice in which one company sells to another its obligation to make a purchase in a given country.
  • 11. OFFSET • Agreement that a company will offset a hard - currency purchase of an unspecified product from that nation in the future. • There are two distinct types: Direct Indirect
  • 12. COUNTER PURCHASE • Sale of goods and services to one company in other country by a company that promises to make a future purchase of a specific product from the same company in that country.
  • 13. BUYBACK • occurs when a firm builds a plant in a country - or supplies technology, equipment, traini ng, or other services to the country and agrees to take a certain percentage of the plant's output as partial payment for the contract.
  • 14. COMPENSATION TRADE • is a form of barter in which one of the flows is partly in goods and partly in hard currency.
  • 15. PROS AND CONS • Counter-trade offers three major benefits: • Countertrade has its pros and cons. A major benefit of countertrade is that it facilitates conservation of foreign currency. Other benefits include increased employment, higher sales, better capacity utilization and ease of entry into challenging markets.
  • 16.
  • 17. • Counter-trade also involves significant risks: • A major drawback of countertrade is that the value proposition may be uncertain, especially in cases where the goods being exchanged have significant price volatility. Other disadvantages of countertrade include complex negotiations, potentially higher costs and logistical issues.
  • 18.
  • 19. COUNTERTRADE STRATEGIES DEFENSIVE. PASSIVE. REACTIVE. PROACTIVE.
  • 20. REFERENCES • Countertrade. (2005) London countertrade round table, Available: http://www.witiger.com/internationalbusiness/countertrade.htm Last accessed 9th September 2012. • Definition of countertrade. (2012) (I) Investopedia, Available: http://www.investopedia.com/terms/c/countertrade.asp#axzz260E nBRns Last accessed 9th September 2012. • Pros and cons of countertrade. (2011) Impexpedia blog, Available: http://impexpedia.com/blog/2011/09/09/pros-cons-counter- trade/. Last accessed 9th September 2012. • The History of Countertrading (2012) eHow.com, Available: http://www.ehow.com/facts_7151203_history- countertrading.html#ixzz260LkXGsE. Last accessed 9th September 2012.