METHODS OF DOING BUSINESS WITH HPEs
METHODS OF DOING BUSINESS WITH HPEs
Thus far we have focused on differences in doing business with HPE enterprises. Yet in spite of these differences many firms have adjusted to the nuances. The following discussion highlights ways to deal with some major concerns.
Financial Arrangements
Although balance-of-payments problems in HPEs have inhibited their ability to buy goods in the West, sales may be financed in several ways. Exports may be sold for credit, cash payment in a convertible currency, or through some type of barter arrangement. Western banks such as Dresdner, Citibank, Paribus, and Bankers Trust are now well established in the HPEs. Vneshtorbank, the CIS Foreign Trade Bank, has correspondent relations with over 1300 banks in over 100 countries and owns banks in Western Europe. Through these networks, one can export by means of letters of credit or bills of exchange, which function substantially the same as the instruments used for trade with other Western countries.51
Many sales to HPEs are so large that long-term credit arrangements through domestic governmental agencies may be necessary. All Western industrial countries have some type of export credit insurance, which enables their exporters to raise the required credit funds from government or private sources. The United States has at times disallowed the Export-Import Bank to grant credit or credit guarantees to certain HPEs, but basically they are allowed for countries given MFN treatment. An unresolved issue at this writing is whether a state enterprise guarantee of repayment is equivalent to a state guarantee.
A Western exporter sometimes receives a cash payment in a convertible currency when selling to HPE customers. However, because of convertible currency shortages, HPEs frequently will try to pay Western firms through some type of barter or countertrade arrangement. These arrangements may be handled by the Western firm itself (internally) or by contract with another firm which will find markets for HPE products. For example, Combustion Engineering is paid in oil for its control system joint venture in the CIS.52 When faced by the prospect of inconvertibility, a group of large U.S. firms (Johnson & Johnson, RJR Nabisco, Eastman Kodak, Mercator, and Archer-Daniels-Midland) joined in a consortium with Chevron so that some of Chevron's dollar earnings from exported oil could be used to convert the other companies' ruble earnings. Basically the consortium serves as a holding company for each firm's separate CIS joint ventures.53
Thus far we have focused on differences in doing business with HPE enterprises. Yet in spite of these differences many firms have adjusted to the nuances. The following discussion highlights ways to deal with some major concerns.
Financial Arrangements
Although balance-of-payments problems in HPEs have inhibited their ability to buy goods in the West, sales may be financed in several ways. Exports may be sold for credit, cash payment in a convertible currency, or through some type of barter arrangement. Western banks such as Dresdner, Citibank, Paribus, and Bankers Trust are now well established in the HPEs. Vneshtorbank, the CIS Foreign Trade Bank, has correspondent relations with over 1300 banks in over 100 countries and owns banks in Western Europe. Through these networks, one can export by means of letters of credit or bills of exchange, which function substantially the same as the instruments used for trade with other Western countries.51
Many sales to HPEs are so large that long-term credit arrangements through domestic governmental agencies may be necessary. All Western industrial countries have some type of export credit insurance, which enables their exporters to raise the required credit funds from government or private sources. The United States has at times disallowed the Export-Import Bank to grant credit or credit guarantees to certain HPEs, but basically they are allowed for countries given MFN treatment. An unresolved issue at this writing is whether a state enterprise guarantee of repayment is equivalent to a state guarantee.
A Western exporter sometimes receives a cash payment in a convertible currency when selling to HPE customers. However, because of convertible currency shortages, HPEs frequently will try to pay Western firms through some type of barter or countertrade arrangement. These arrangements may be handled by the Western firm itself (internally) or by contract with another firm which will find markets for HPE products. For example, Combustion Engineering is paid in oil for its control system joint venture in the CIS.52 When faced by the prospect of inconvertibility, a group of large U.S. firms (Johnson & Johnson, RJR Nabisco, Eastman Kodak, Mercator, and Archer-Daniels-Midland) joined in a consortium with Chevron so that some of Chevron's dollar earnings from exported oil could be used to convert the other companies' ruble earnings. Basically the consortium serves as a holding company for each firm's separate CIS joint ventures.53
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