Financial investment via ADRs in Mexico and South America

American depository receipts (ADRs) are dollar-denominated, negotiable instruments issued by a depository bank to represent ownership of a foreign security in the bank's possession. They are the primary method employed by Latin American corporations to raise equity capital in the United States. One flequently overlooked aspect about ADRs is that their investment performance provides a gauge not only on management's performance but also a measure of the foreign government's ability to provide a political, legal, economic and social climate that is conducive to international investment. This paper investigates the returns and risks associated with foreign investment in Mexico and South America. First, we show that the weekly returns to Latin American stocks are weakly correlated with the U.S. stock market which suggests that they can reduce the risk of a portfolio that is fully diversified within the U.S. market. Second, we find that ADRs from this region are more risky than U.S. common stocks. However, we find little evidence that foreign exchange rate risk should be a major factor in the investment decision. Third, we examine the effects of the devaluation of the Mexican peso and show that political factors can significantly increase the risk and reduce the return to foreign investment. Finally, the results show that investors do not pay a significantly larger relative transaction cost premium for investing in Mexican and South American equity vis-à-vis U.S. common stock. We conclude that ADRs provide the ability for the U.S. investor to realize potentially superior gains from companies located in these emerging economies. However, the willingness by the U.S. investor to disinvest means that politicians and managers have a powerful incentive to continue reforms that lead to improved standards of living for their citizens and employees.     

Transnational Capital,the US State and Latin American Trade Agreements

This paper examines the role of US-based transnational corporations in advancing trade, investment, regulatory and intellectual property rights provisions within NAFTA and DR–CAFTA. I explore the linkages between US firms, the US state and investment patterns in Mexico, Central America and the Dominican Republic in order to develop a framework for understanding the political economy of these regional trade agreements. I locate the timing of each of these agreements within the context of the goals of a transnational interest bloc that includes US-based transnational firms, US state officials and regional business interests and state bureaucracies in Latin America, with each trying to utilise regional agreements as a substitute for failed multilateral initiatives as well as a springboard for advancing a more aggressive set of protections for investors within bilateral investment treaties. In order to determine the extent to which transnational firms based in the USA have influenced these trade agreements, I explore three interrelated aspects of business influence: the extent to which transnational firms with investment interests in Mexico and Central America were involved in organisations that had regular access to key US policy makers; the historical development of a transnational interest bloc that has linked US firms and the US state to transnational capital and state bureaucracies in Mexico, Central America and the Dominican Republic; and the extent to which the same group of transnational firms has been attempting without success to advance a policy agenda in the WTO that incorporates many of the provisions of NAFTA and DR–CAFTA. The failure of this transnational interest bloc to effect substantial changes in WTO policies has led the bloc to rely on regional trade agreements to pursue its interests.     

Solving the security–democracy dilemma: the US foreign policy in Tunisia post-9/11

Abstract

Scholarly consensus postulates a sharp contrast exists between liberal values and realist interests in US foreign policy in the Middle East and North Africa (MENA) region, which finds its expression in the ‘security–democracy’ dilemma.? This means the US rhetorical determination to abide by the values of a ‘liberal’ foreign policy is neutralised by the ‘realist’ priority of maintaining US strategic interests, which requires support for friendly authoritarian rulers. Scholarship tends to apply this reasoning indistinctly to the entire region, providing an encompassing framework of analysis for understanding US foreign policy, which is valid across time and space. This study challenges this theoretical assumption and argues that while the US might indeed have a comprehensive regional approach in the MENA, the resulting foreign policy follows country-based trajectories that respond to national specificities and the perceived implications for US strategic interests. Exploring US foreign policy in the MENA after 9/11, the article demonstrates that while the US emphasis on liberalism crumbled when faced with security issues, the US liberal approach to Tunisia unfolded more consistently. Although the US continued formal cooperation with Ben Ali’s regime, it empowered at the same time a coalition of democratic opponents, solving the security–democracy dilemma and positively influencing the Tunisian democratisation.     

The Challenges for Developing Countries in International Tax Justice

Developing countries face three main challenges in international tax cooperation. The most widely known are the twin problems of tax avoidance by foreign investors and tax evasion by domestic actors, which have become a major focus of debate in international organisations and of civil society activism in recent years. The second problem, tax competition, incorporates a range of issues from the ‘prisoners’ dilemma’ facing countries competing for inward direct investment through to the harmful tax rules used by tax havens that enable tax avoidance and evasion. This article reviews four recent monographs that analyse these problems at an international level. While they contain much useful discussion of the problems and potential technical solutions, there remains a need for political economy research to understand why certain technical solutions have not been adopted by governments. A third challenge faced by developing countries, barely considered in the tax and development literature up to now, leads to a note of caution: international tax institutions tend to be designed in ways that place disproportionate restrictions on capital-importing countries’ ability to tax foreign investors.     

On the apparent benefits of higher productivity: An arithmetical illustration a comment

During the 1980s, like many other developing countries Nepal attempted actively to attract direct foreign investment. This article reports the results of a survey of the foreign‐owned firms in operation at the end of the 1980s. The motives of firms for their investment decisions in Nepal are summarised. The impact of foreign investment is assessed quantitatively using both financial and economic cost‐benefit criteria. In general, it appears that foreign investment has been beneficial to both the foreign investors and the national economy. Foreign investors from India have played a particularly important role. However, much of the national returns from foreign investment is derived from the payment of taxes, so that an excessively generous policy of tax incentives may not maximise national returns.     

An analysis of mergers and acquisitions in Mexico: 1985-1996

The recent devaluation of the Mexican peso and the resulting “Mexican syndrome” has opened up a world of opportunities for foreign investors. Mexico with all of its economic problems is still seen by many investors as a sound economy with the necessary ingredients to stage a strong comeback. Economic crises often lead to an escalation of corporate restructuring such as mergers, acquisitions and joint-ventures, both, domestic as well as cross-border. This paper examines the M&A trends in Mexico over the period 1985-1996.

The results indicate that cross-border M&A deals have increased during the nineties, with Europe being a major participant since 1995. As far as the industrial sectors are concerned, the study shows that very few M&A deals have been completed in the construction, transportation, and petroleum industries. The managers of multinational firms should take note of this and public administrators should attempt to attract foreign capital towards these sectors. A sound distribution infrastructure is very essential in order to attract much needed foreign capital to the country.

The study also finds that relatively few cross-border M&As have been completed with state-owned enterprises. With the aggressive reforms of the Zedillo government and the privatization of the transportation, electricity, and petroleum sectors, there is bound to be an increase in competition and opportunities for investments in these sectors.

Finally, managers of multinational corporations who are targeting Mexico, should be fully aware of the differences in culture and ownership status of target firms. This study shows that a large number of the deals have been done with privately-owned firms, and would therefore need good negotiation skills.     

Attempting developmental regionalism through afta : The domestic sources of regional governance

The asean Free Trade Area ( afta ) has conventionally been explained as a project of open regionalism adopted by the asean member governments to attract foreign direct investment to the region through the 'carrot' of the single regional market. Yet, when the same governments incorporated an investment liberalisation component programme within the afta project in 1998, they opted to accord full national treatment and market access privileges to foreign (non- asean ) investors at least 10 years later than to domestic or asean national investors. Although member governments removed this particular discriminatory clause in September 2001, the fact that a distinction between foreign and domestic investors was adopted and maintained for a three-year period is puzzling given afta 's acknowledged role as a magnet for foreign investment. Although afta is clearly a response to the pressures of globalisation, the available theoretical models of the relationship between globalisation and regionalism are unable to account for this empirical anomaly because they do not make a distinction between foreign-owned and domestic-owned capital. This paper advances the notion of 'developmental regionalism' as a way to incorporate domestic-owned capital in analysing the globalisation-regionalism relationship, which allows for a more robust explanation of the empirical puzzle outlined above.     

The Politics of Telecommunications Regulation: State–Industry Alliance Favouring Foreign Investment in India

This paper explores the political economy of three significant policy decisions of the Congress–United Progressive Alliance government between November 2005 and February 2006. These decisions improved the regulatory incentives for the smaller and efficient firms in the Indian GSM industry, which were heavily dependent on foreign investment for their expansion. India's telecommunications sector became more attractive to foreign investors as a result of these regulatory changes. This was a notable departure from the past when government policy had favoured large domestic investors using CDMA technology who were not dependent on foreign capital. A globalisation friendly policy change occurred after a Centre-Left United Progressive Alliance coalition came to power. The paper argues that these decisions, which promoted both competition and foreign investment, occurred due to the increased sensitivity of the Department of Telecommunications towards the needs of the relatively smaller GSM service providers, driven by considerations of efficiency. They were not driven by a crisis of private investment, foreign pressure, or stealth. The shift occurred in normal times when the Department of Telecommunications under a persistent ministerial stewardship took on a regulator, which was less interested in engineering this shift. This globalisation-friendly strategy depended to a large extent on the particular industrial sub-sector that the ruling party or coalition supported for spreading telecommunications in India.     

Firm-Specific Determinants of Corporate Lobbying Participation and Intensity

Abstract

Lobbying constitutes a major element in the political strategy of firms seeking favorable regulatory outcomes and is perceived as a source of a firm’s competitive advantage. Recognizing firms’ ability to influence their external environments through reactive and proactive political behavior, this paper analyzes the firm-specific determinants of corporate political activity and intensity. Results from US and Japanese firms indicate that firm size, diversification, and internationalization positively influence the likelihood of a firm being an active lobbyist. While firm profitability influences the "intensity" of lobbying activity, foreign nationality has a negative impact.     

The African ‘oil rush’ and US national security

The world's major oil-consuming nations, led by the USA, China and the Western European countries, are keenly interested in the development of African oil reserves, making huge bids for whatever exploration blocks become available and investing large sums in drilling platforms, pipelines, loading facilities and other production infrastructure. Indeed, the pursuit of African oil has taken on the character of a gold rush, with major companies from all over the world competing fiercely with one another for access to promising reserves. This ‘oil rush’ has enormous implications both for African oil producers and for the major oil-importing countries. For the producing countries it promises both new-found wealth and a potential for severe internal discord over the allocation of oil revenues (or ‘rents’); for the consuming countries, it entails growing dependence on imports of a vital substance from a region of chronic instability, with obvious national security overtones. Both these trends are reflected in US policy towards African oil. Desperate to procure additional supplies of foreign oil (to make up for the decline in domestic output), the Bush administration has made strenuous efforts to increase the role of US energy firms in African production. But because instability in Africa is an obstacle to such investment, it has sought to boost the internal security capacity of friendly African states and has laid the groundwork for direct US military involvement in Africa. At the same time Washington has become deeply concerned by China's growing interest in African oil, provoking an intense competitive contest between the two, with growing military overtones. In the end African societies will most probably suffer from this competition as an influx of arms bolsters the capacity of entrenched African regimes.     

Otherising Iran in American political discourse: case study of a post-JCPOA senate hearing on Iran sanctions

Using van Dijk’s critical discourse analysis, this paper attempts to analyse the ways in which the Islamic Republic of Iran is constructed as a security threat in US congressional hearings. The article is based on the case of the two-day congressional hearing on post-JCPOA (Joint Comprehensive Plan of Action) held by the US Senate Committee on Banking, Housing, and Urban Affairs, on 24–25 May 2016. The session was presumably held to examine ‘sanctions relief’ provided to Iran; however, the study reveals that through the use of discursive tools such as lexical style and argumentation, Iran is framed and evaluated as a security threat to (1) the US; (2) US allies, specifically Israel; and (3) the international community. This construction reflects the established political and ideological stereotypes and also orientalist clichés which have led to Otherisation and vilification of Iran. Therefore, by representing Iran as an ‘irrational’, ‘radical’ and ‘barbaric’ entity, the US discrimination against Iran through sanctions and other unilateral political decisions is legitimised and justified.     

Relevance of nationality in cross-border economic transactions

How relevant is nationality in global economic behavior? The aim of this paper is to scrutinize the relevance of nationality affiliations and nationality conceptions in cross-border economic transactions, using the case of foreign investment exchanges. In particular, I examine how nationality affiliations may shape the types of commitments that actors will want to realize through foreign investment transactions, and how nationality categorizations influence the evaluation of potential partners in economic transactions. I also stipulate when nationality affiliations and categorizations play a more- or less-salient role. To develop these propositions I use illustrations from cases of foreign investment attempts in which investors from the West try to acquire firms in post-socialist Slovenia. The analysis is grounded in economic sociology and advances a relational understanding of nationality, seen as interpretive codes embedded in actors' cultural repertoires, situationally invoked, and made relevant (or not) in interactions.     

Between willing and reluctant entrapment: CEE countries in NATO's non-European missions

The article focuses on Central and Eastern European (CEE) countries' experiences related to Afghanistan, Iraq and Libya, three non-European theatres of Western military operations, in predominantly Muslim lands, in the decade between 2001 and 2011. CEE countries readily became involved in two of these foreign missions (Afghanistan and Iraq) because of their deep ties to Western politico-economic structures, without direct security interests compelling them to do so, but not without normative convictions regarding what were seen by them as virtues of the two missions. In Libya, however, they were reluctant to join the Western intervention. In light of this, the article is interested in examining how political elites within the region relate to the generally constrained security policy agency that they have. A key argument advanced is that such agency may be located in how external hegemony is mediated in elite discourses of threat and legitimacy construction. This as well as the three case studies outlined in the article show that the seeming changes in CEE countries' behaviour in fact boil down to a simple set of rules guiding their behaviour. Having identified this “algorithm” as an implicit pattern of CEE foreign policy behaviour, originating in the intra-alliance security dilemma within the North Atlantic Treaty Organisation (NATO), the article formulates its conclusions about the alliance policy of these countries largely within a neorealist framework.     

Expanding the levels of analysis of fdi for improved understanding of policy issues: the case of mexico

Foreign Direct Investment (FDI) inflows are a key component of the restructuring and external integration now underway in many Latin American national economies. This paper suggests that understanding of policy issues concerning FDI can be enriched by two complementary shifts in the levels of analysis of FDI, each of which entails more detailed attention to the strategies and operations of multinational corporations (MNCs). At the macro-level, we show why it is beneficial to expand beyond the normal analytic concern with aggregate total FDI flows to focus instead on the separate, disaggregated components of those flows--that is, equity, reinvested earnings and other long-term and short-term capital flows between parent firms and their affiliates, as recorded in the national balance of payments capital account. The microlevel shift emphasizes the importance of focusing on varieties of types of FDI, not only across different foreign investors but within individual companies as well. It demonstrates the significance of switching from the usual concentration on firms as a whole to instead accentuating examination of individual projects and products--especially the dichotomy between market-access projects producing for the host country domestic market and production-efficiency projects producing for export markets, including the home country market. These two shifts in the level of analysis complement one another, and they interact in the sense that the mix of component flows can depend in part on the type of FDI. These analytic themes are developed using evidence concerning FDI in Mexico, with special reference to the automotive industry. Such improved comprehension of FDI is particularly germane for Latin American countries that are contemplating liberalization of foreign direct investment rules or have already undertaken them and witnessed the ensuing increase of inbound FDI.     

MNE Affiliation,Firm Size and Exports Revisited: A Study of Information Technology Firms in India

In this study we argue that the export performance of affiliates of multinational enterprises (MNEs) in developing countries is determined differently from that of licensees of foreign firms or of domestic firms. Our empirical results for the information technology sector in India show that exports of MNE affiliates are greater when they have larger foreign equity stakes that bring more tacit knowledge transfer and complementary FDI advantages and when they import more explicit technology from the purchase of licences. Standard export determinants such as firm size and capital intensity do not matter for MNE affiliates, but they do for licensees and domestic firms.     

How EU Integration and Legacies Mattered for Foreign Direct Investment into Central and Eastern Europe

This essay uses the case of foreign direct investment (FDI) in Central and Eastern Europe to stipulate how European Union (EU) integration affected the economic globalisation of the post-socialist region. Existing studies argue that expectations of impending EU membership had a direct effect on raising FDI inflows because they reduced perceived investment risks for potential investors. In contrast, I show that the EU accession process worked through an indirect effect on FDI: it influenced post-socialist states' efforts to promote FDI as a desirable strategy of economic development and the behaviour of firms. These state efforts, in turn, increased FDI inflows, net of conventional risk and return factors. Further analyses indicate that decisions about state FDI-promotion have been influenced not only by EU conditionality but also, and importantly, by particular legacies, namely the countries' initial choice of privatisation strategies, extent of reform during socialism and history of state sovereignty. Overall, the results suggest that EU integration and legacies of the past shape both the structural and the ideational context for domestic decision-making elites in Central and Eastern Europe, and may act not only as constraints but also as enabling conditions facilitating the global economic integration of the region.     

Whole-of-Government Approaches to Fragile States in Africa

For a number of years fragile states have been high on the foreign policy agendas of the USA and the EU. Both actors look upon fragile states with great concern and consider them as security threats. Officially they give priority to ‘whole-of-government approaches’ (wga) when addressing the threats from these states. However, there is a gap between the policy declarations and the policies implemented by the two actors. The missing link in the implementation of wga in Africa is explained by two variables: on the one hand, material interests in the continent and, on the other hand, the institutions in Washington and Brussels involved in policy making. It is the lack of a strong foreign policy priority for Africa that explains the inadequate US implementation of wga. In the case of the EU, it is the multitude of institutions and institutional interests that explains the lack of implementation, rather than a lack of European interests in the fragile states on continent.     

A Russia that can say “no”?

A rather consistent picture of Russian domestic politics and foreign policy in Putin's second presidential term emerges from the four works discussed. Elements of authoritarian rule, welcome or at least acceptable to large segments of a public weary of the political and economic disorder of Yeltsin's time, combine with Russia's growing energy-driven economic strength to provide a stable environment, and broad support for the regime. These strengths are expressed externally in a more assertive foreign policy, whose manifestations in both trade and security areas pose challenges for the US, and its EU and NATO allies.     

From CNOOC to Huawei: securitization,the China threat,and critical infrastructure

ABSTRACT

This article uses critical discourse analysis to examine how China has been constructed as an existential threat by the United States. Specifically, it explores how US reactions to the China National Offshore Oil Corporation (CNOOC) in 2005 created precedent for similar reactions to Huawei a decade later. It uses these case studies to demonstrate how the interplay between the China threat and security discourses of critical infrastructure has worked to successfully securitize China within broader American discourse. These examinations demonstrate a deliberate and protracted securitization of China by US elites, and they support more critical approaches to securitization theory that emphasize cumulative and incremental aspects over a securitized/de-securitized binary. Discourse analysis of key texts allows the reader to uncover how security issues are socially constructed, and discursive examinations of CNOOC and Huawei illustrate how concerns about national security are now employed in everyday American political discourse so that the China Threat Discourse has become the primary reading of China by US observers.     

The ambiguity of US foreign policy towards Africa

Since 9/11, the American policy towards Africa has been strongly influenced by national security interests and in particular by the fight against international terrorism and Islamic radicalisation. Traditionally, the American Africa policy has been the result of bureaucratic policymaking with the Pentagon and the State Department playing prominent roles. The paper argues that in the current century, evangelical Christian lobby groups have gained increasing influence on policymaking on Africa. Because policymaking has been influenced by a number of different actors, the American Africa policy may appear incoherent and ambiguous if judged narrowly on the expectation that it only aims to take care of US national security concerns and economic self-interests. The paper concludes that Africa was important to the United States during the presidencies of George W. Bush and Barack Obama because of the combination of strong security interests and strong domestic lobby groups that have pressured to place Africa on the US foreign policy agenda.