Q1. Identify three types of political risk evident in Chavez’s Venezuela and give an example of each.
Political risk is the political forces will provoke drastic changes in a country’s business environment and adversely affect the goals of business enterprise. There are three kind of political risk in the case “Chavez’s Venezuela”, macro-political risk, micro-political risk and legal risk.
After populist socialist president, Hugo Chavez took the office of Venezuela, he took many actions to control the country and enhance his own power towards the whole country which made the macro-political risk occurred. Macro-political risk is the changes to the general societal environment will affect the business context in a country. The National Assembly has controlled by the followers of Chavez, which is the powerful constitution in the presidency. Therefore, Chavez extend himself power on judiciary by making himself the right to remove and appoint Supreme Court justices. He also dominated the seaports and airports of the country were originally run by the opposition-ruled state government. The unemployment remained at a significantly high rate at 15-17 per cent and the poverty rate increased to over 50%of the population in Venezuela. These lead to a decreased in the political freedom and thus the mismanagement of the country, macro-political risk has arisen.
Chavez keep extending state control of private industry no matter foreign or domestic just to ensure those industry were producing price-controlled products during recession result to micro-political risk. Micro-political risk is the risk specific to a particular firms or industry as a consequence of adverse political action directed towards that firm or industry. An American company, rice plant belonging to Cargill was seized due to “food security” law. There also two rice plants of Empresas polar have taken over temporarily just to enforce it produce rice with price-controlled. A pasta factory, a...
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