Novartis in Bolivia Expansion Project

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Novartis’ Expansion Project in Bolivia

08
Fall

Manoella Talavera
Carolina Perez
Marcos Echeverri
Jorge Quintana
Alexandria Guerra
Walter Leon Fleming
International Business
Fall 2011

Bolivia’s General Socioeconomic and Political Framework
Due to the political, economical, and social instability, Bolivia is a difficult and tremendously risky place to do business as an outsider company. Political Analysis
Understanding the political structure of a country is very important when trying to do business internationally. When multinational corporations plan to invest in a new country they must understand the political system and culture. Bolivia has faced political instability for over the past century. Since Evo Morales was elected as president, many changes have been made to protect some of the natural resources and mandate foreign investment. Morales’ political influence has played a large roll in the regulation of foreign investment and business. Since his inauguration, Morales has nationalized the hydrocarbon industry and the telecommunication industry. This has caused many companies to negotiate new contracts. Although Bolivia’s legal framework is open to foreign investment, many foreign companies and investors are affected by many of the inconsistent regulatory decisions. These issues often cause uncertainty with investors when deciding to invest. In addition the easily corrupted judicial system also causes a threat to many investors that decided to invest in Bolivia. Several problems that come up when investing in Bolivia result from the weak judicial system. Many of the property and contractual rights might be enforced, but the process can take a lot of time due to corruption and political influence. This also could be a potential threat to companies that want to expand into Bolivia. Political protests against the government are another issue that might affect foreign investors when attempting to do business in Bolivia. Many of these protest cause disruption to the transportation of goods. Overall the political environment of Bolivia could potentially cause issues when doing business; we might put ourselves at risk of losing major profits or even expropriation by the socialist form of government currently established in Bolivia. Economic Analysis

Bolivia has struggled economically in the past thirty years but has reached stability. This is partially due to low population growth that has kept the labor supply limited. Another key factor to the economic struggle in Bolivia is due to the political and social conflicts within Bolivian society. Many changes have been implemented after the economic crisis in 1984-1985, where they suffered from extreme hyperinflation. The main focus of the government after the period of hyperinflation was to maintain price stability, create conditions for sustained growth, and alleviate poverty across the country. Currently Bolivia relies heavily on foreign assistance to finance developmental projects. Direct foreign investment has contributed much of the growth experienced in private investment in Bolivia. Bolivia’s primary sectors, Agriculture/Forestry and Mining, have created economical opportunities for Bolivia. Agriculture contributes to almost ten percent of Bolivia’s gross domestic product and almost half of their work force is employed in this industry. One of their most profitable products is coca in which they are currently the third largest cultivator. Mining has played a big part in Bolivia economic growth as well. Many local miners are employed by small-scaled operations throughout the country. Although Bolivia is known to have over 5.4 million tons of lithium, much of the lithium deposits are not mined due to the disturbance of the country salt flats, which are a big feature of tourism. Currently the United States is one of Bolivia’s largest trading partners, importing $707 million dollars in 2010. There are no laws directly regulating competition but the...
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