The diversity of this nation permits interchanges to occur worldwide through Countertrade. Think of what the world would be like if one never experienced the opportunity to share the exchange of a diverse range of products from other countries through countertrade. In this paper, the author will define Countertrade, describe how countertrade is used in global financing operations and then explain the importance of managing risk. Define Countertrade
Countertrade is defined by Dan West (2002), writer for Business Credit Publication, as having the capacity to listen and meet the needs of the international customers assisting in areas of hard currency deficiencies, technology, management, credit shortages, and world market information (West, 2002). According to West, countertrade is used as a creative marketing device that is advantageous to everyone involved (West, 2002). Explain how Countertrade is used in global financing operations
Countertrade encourages the exchange of products and promotes good will between countries importing and exporting products. Hard currency can be generated through countertrade to aid in paying for products. Investopedia (2008) describes hard currency as currency that comes from a highly developed country, such as the U. S. dollar and the British pound. These currencies are accepted around the world and considered to be stable for a short-term.
Many countries choose to countertrade because they find difficulty in obtaining financing from banks and other financial institutions for trade. These institutions will not take risks in backing loans in unstable regions of the world. In many cases, countries have decided to facilitate their own deals between other companies. Countertrading allows a country entry into a new market. Additionally, the country that imports goods become a distributor, which creates assess for other markets. Product differentiation is also an advantage of countertrade, in that it allows...