This paper therefore aims to link the newly defined phenomenon of regionalization with trends in the narcotics industry in Bolivia. The correlation or relation (if any is identified) between these two variables will prove to be of great importance in identifying the consequences of developments in current policies on the criminal economy and hence determine their success.

The main aim of this paper is thus, as identified above, to identify (if possible) the correlation between the neoliberal regionalization of Latin America (taking Bolivia as a case study) and trends in the criminal economy (focusing specifically on the narcotics industry). To be able to tackle this problem most efficiently, however, I first break the problem up into several sub questions that will aid in finalizing the analysis. The following sub questions will be considered:

a) How did the criminal economy develop throughout the region over the past three decades? Here the impact of Neoliberalism on the state is identified as well as the trends noticeable within the criminal economy over this same period.

b) How has the wave of Neo-liberalism affected Latin America economically? This will describe trends in levels of poverty, unemployment, polarization, and so on that can be attributed to the economic restructuring due to the rise in neoliberalism.

c) How have prospects of joining regional organizations changed the regulating policies of states with regard to the criminal economy? The role of Mercosur, the Andean community and the US among others are identified here in changing Bolivian policy towards controlling the narcotic industry. The efficiency of the policies will also be covered here.

The global criminal network has devastating effects on the world as a whole. The vast sums of money moved from place to place in short time spans with the hope of legalizing it (generally known as money laundering) increases the chances of destabilizing financial economies . The criminal economy also incorporates other activities such as the illegal weapon industry, prostitution, kidnapping, extortion and so on - all of which further destabilize the state, civil society and hence increases insecurity. The sale of illicit drugs has also been linked to increased levels of inequalities (between and within states) as well as decreases in economic development . In short, the criminal economy effects the state and its legitimacy, financial markets, civil society and thus indirectly also democracy.

The purpose for engaging in all of these activities is to benefit from the short-term financial profits that are produced. With the global trade in drugs amounting to some US$500 billion (larger than the global trade in oil) the goal of this paper is to analyze the effects of regionalism (a current phenomenon) on this lucrative market to be able to predict future stability on a financial and social platform.

The theoretical basis on which this problem lies can be said to be threefold. The first of the three is based on the idea that current levels of globalization has led to the weakening of the state therefore making it easier for criminal organizations to maneuver. The second theory describes a connection between the global instability (both social and financial) of the global criminal economy and increases in the information technology and globalization itself. The third and last theory argues that regionalism is but a counter-reaction against globalization by the state in an attempt to control the problems taking place within their territorial borders. In this section I will go into a little more in depth on each of these theories.

According to (what I personally term) the weakened state approach there are two main transformations taking place simultaneously both weakening the state, namely an economical and a political transformation. The economic element argues that since the emergence of increased globalization, coinciding with the liberalization of financial markets, states have lost control or rather autonomy on macroeconomic activities occurring within their geographical borders. The political dimension describes how globalization diminishes the sovereignty of states. This loss in sovereignty is a result from the highly encouraged growth of regulatory activities through nonofficial bodies (such as NGO’s for example). It is further diminished through the displacement of public sector governance from state levels to both substate and suprastate authorities and therefore becoming more multilayered. The state has thus lost its predominance as a site of governance . This has not removed the state from being the main actor within its territorial borders but it has significantly weakened its position. The demise of the westphalian international system can thus be said to correlate with a rise in globalization.

The second theory relevant to this paper is that of globalization’s perverse connection. What lies central here is the notion that increased globalization (with its state weakening effects) facilitates the movements of global criminal organizations and hence increases the insecurity in a wide array of areas. Among others, increased globalization is believed to lead to increased inequality, poverty, social exclusion and insecurity as well as an overall increase in the instability of international financial markets. Due to the vast amounts of money circulating in the international money laundering operations, linking up the criminal economy to the formal economy, the international financial framework is left unstable . All these activities further have an adverse effect on the political stage. Globalization is thus believed to facilitate criminal activity on a global scale as they grow and diversify faster than state controls can manage.

The third and final theory employed is the notion that regionalization is a counter-process or rather a political corrective for the growing globalized world disorder. Here it is argued that along with increasing globalization there will be those who will attempt to bring these globalization processes under some form of political-territorial control . Regionalism is thus seen as the political ambition of protecting the region from the negative effects or rather the growing disorder that coincides with globalization.

In order to produce a worthy historical report on the subject matter, I must focus on two processes, to be precise the historical processes of both regionalization and the narcotics industry within Latin America.

After disappointing results from former (post war) regional initiatives, regionalization programs in Latin America seemed like a something of the past. The collapse of the regional economy, after the Mexican debt crisis of 1982, along with the resulting economic restructuring necessary, made future prospects of regional projects only less likely.

The early 1980’s were characterized by economic structural reforms that put an end to the Import Substitution Industrialization (ISI) approach as well as the regional integration schemes that supported it. As Latin America opened up (and liberalized) its economies to the rest of the world it simultaneously started to deregulate them thus attempting to motivate more activity within their respective private sectors. Taking a closer look at the tariffs on trade within the region over this period acts as a simple illustration of this. Whereas tariffs were as high as 40 percent in the 1980’s it was a mere 12 percent by the mid 1990’s . These structural reforms were accompanied by some 30 regional initiatives since 1990, of which the NAFTA and MERCOSUR are the two broadest in scope. The opening of the region increased its economic growth to just below 11 percent, thus managing to exceed the world’s trade growth of that period of 6.6 percent . The 1982 debt crisis can therefore be said to have ended the ISI approach along with its regional initiatives and was replaced by a new economic approach (a liberal free trade approach) along with new regional schemes to support it. The new regionalism in Latin America thus complimented the structural reform, taking place in the region, promoting an open and competitive private market-base economy.

What is new about this wave of regionalism are its objectives. Among others (see problem question) new regionalism aimed at attracting foreign direct investment (FDI) and thus make their local private sectors more active. Countries hoped that increases in FDI would lead to improved export networks as well as spillovers in technological know how over to local industries thus modernizing national institutions. The importance of entering bi- or multilateral agreements and more so with the “North” seemed more valuable than ever.

The historical process of the narcotics industry for the purpose of this paper also begins in the 1980’s. The narcotics industry in Latin America is centered around the production of cocaine. Having become the central element in the production of cocaine, the demand for coca leaves had skyrocketed (mainly from the United States) making the coca leaf one of the most (if not the most) profitable crops for export throughout the 1980’s . The main contributors towards the production of this drug within Latin America were Peru, Bolivia and Columbia – due to the increased demand and price of the coca leaf, cultivation within these countries also increased rapidly over this period .

Bolivia, which ranked second after Peru in the cultivation of coca leaves, was specialize in the manufacturing of cocaine base paste while generally leaving the final refining of this, resulting in the finished product, mainly to Columbia . It is worth noting that virtually all of the necessary chemicals for the production of the illicit drug were provided from within the US.

As the Bolivian government, among other states, began to pursue an economic adjustment policy throughout the 1980’s, thousands of people were left unemployed which were virtually absorbed by the informal economy. It is no coincidence therefore that Bolivia’s cultivation boom is identified in the mid 1980’s . The actual trafficking of the drugs was often mainly done via Columbia’s based cartels, transporting the final product in small planes towards the US eager markets. Bolivia often acted as a transit state whereby the cocaine was often routed through Brazil and Argentina towards other destinations around the world.

Throughout the 1990’s, production trends began to change. Although the major production level had stayed relatively the same, the level of involvement had dramatically changed. Where as the Andean states did not really have a priority towards the increased cultivation of the illicit drug, the US had clear approach in mind. Tackling mainly the supply-end of the industry rather than the more local demand side, the US began to urge states in the region to pursue eradication programs. The motivation for these states to comply was fairly simple, namely the US “certification ultimatum”, no action towards eradication would mean no financial aid or loans . Whereas some states were more intimidated than others, Bolivia (having been “decertified” since 1987) and Peru began to implement a thorough eradication program with the financial backing of the US government through the Drug Enforcement Administration (DEA) - which further trained the national narcotic police force and military on tackling the problem. The four part strategy has been extremely successful in eradication, interdiction and alternative development and somewhat less so in prevention/rehabilitation . These new initiatives proved to be very successful from 1992 – 2000 although they were not met without resistance on behalf of the coca-cultivating farmers - who earned more money from the cultivation of the illicit crop than licit alternatives. Looking closer at the actual cultivation figures of the region, however, it becomes increasing clear that cultivation simply shifted towards Columbia rather than being completely wiped out of the region.

As stated in the initial problem question, in this paper I take Bolivia as my case study. I apply the problem question on Bolivia for the simple reason that it is located in the heart of the Andean region (the main coca cultivating area within Latin America) that is under scrutiny in this paper. Apart from its mere geographical location it has also fully participated in the cultivation of coca and thus directly in the narcotics industry. Regarding Bolivia’s regionalization connection, Bolivia became an associated member of MERCOSUR along with Chili in 1996, allowing analysis of the influence of regionalism on narcotics industry within the country since then. As explained in the historical context, Bolivia’s eradication policy has been influenced from several angels. On the one side we can identify the influence from the international community, most notable the US and to a certain extent MERCOSUR, on the other side we can also recognize the influence from within the country, namely the affected farmers in the coca cultivating region of the country. This section of the paper will take a closer look at current developments in the economy, government and the coca cultivation within Bolivia in recent years.

The economic aspect of the country seems fairly bleak continuing one of the poorest countries in Latin America with an estimated 70 percent of the total population living in poverty . Although remaining one of the poorest countries, the country has made considerable progress towards the creation of a market-oriented economy over the years. Economic growth in recent years has begun to slow down after years of heightened growth levels. In 2000 economic growth was held down to 2.5 percent after major civil disturbances had broke out throughout the year. The global economic slowdown the following year resulted in no growth at all for the South American country.

Having indicated the poor economic situation in which Bolivia finds itself highlights why the current President, Sanchez de Lozada, is having difficulty rooting out corruption within the country. The economic performance further illustrates why farmers decide to grow coca seeing as their standards of living is considerably increased by doing so. Although licit agricultural products in the Chapare region (one of the major coca cultivation areas in Bolivia) increased the annual family income from US$1706 in 2000 to US$2055 in 2001, the economic recession of Bolivia along with the economic crisis in Argentina have led to a 67 percent decrease in value of licit produce leaving the region . Such reductions in value may ultimately prove to result in decreases in annual incomes leading farmer to consider entering the informal economy for increased returns.

In august 2001, President Banzar resigned from office after being diagnosed with Cancer. Banzar’s Vice President, Jorge Quiroga, led the transition administration completing Banzar’s final year of term. The elections, held in 2002 announced former President Gonzalo Sanchez de Lozada, of the Nationalist Revolutionary Movement (MNR), as President of Republic of Bolivia for the coming five years. The runner up in the 2002 elections, Evo Morales an infamous cocalero leader, demonstrated unsatisfaction on behalf of the Bolivian population with regards to the coca eradication programs.

According to figures produced from the International Narcotics Control Strategy Reports of 1999, the eradication program in Bolivia seemed to be operating effectively (since 1996) demonstrating eradication figures for the year of some 43 percent nationwide . Bolivian law authorizes the cultivation of up to 12,000 hectares of coca for traditional use, it is therefore quite astonishing that from the 48,100 hectares of coca cultivation in 1996, a mere 14,600 hectares were left by 2000. A more recent report, however, demonstrates how this downward trend has come to a halt indicating a general increase in coca cultivation since 2000 . The cultivation increase in 2002 can be traced back to worsening economic prospects, the transition government administration, as well as the run-up to the 2002 presidential elections (where-by Evo Morales, the cocalero leader ended runner up). Along with further violent opposition on behalf of the coca cultivators, the government has been hesitant to conduct forced eradication in particular areas, especially the Yungas (one of the currently leading areas of coca cultivation within Bolivia). Although eradication programs within Bolivia have proven to be successful over the past, Bolivia currently remains to trail Columbia and Peru in the production of coca base in Latin America.

Another noticeable trend taking place within the Andean region is Bolivia’s growing importance as a transit state for Peruvian coca base destined for its more vulnerable neighbor states such as Argentina and Brazil . Trafficking patterns demonstrate that Peruvian cocaine crosses into Bolivia in the lake Titicaca region and continues towards Brazil. From there a large portion of the lower quality is consumed in Brazil and indications have led to believe that some is consumed in Europe, Mexico and the US. Peruvian cocaine is also destined through Bolivia for Argentinean, Chilean and Paraguayan markets .

Now that I have explained a little more about what it is I intend to do in this paper and a brief introduction to the trends taking place within the covered region, I now go into more detail on these trends and analyze them in relation to eachother to determine the relation (if any) between them. The following chapters will therefore cover the material summarized above in more depth and focused mainly on Bolivia as this is the case study chosen for the purpose of this paper.

Or due to external factors which are factors that are caused by policies of countries that are directly related to the Australian economy or global or regional markets

The RBA “Reserve Bank Board” major responsibilities are to determine the banks monetary and banking policies. However, since banks are considered a key player in money exchange within the economy that is due to the facts that majority of businesses and people deposit at banks and so with those deposits, the banks overall behavior can influence the quantity of deposits in the economy and there for the money supply. So the RBA major job is to determine monetary policy for the banks and the overall banking sector.

What monetary policy means is the management by the central bank of liquidity conditions in the economy. That is the price and availability of funding for the economy’s expenditure. The objectives of monetary policies are to contribute stability of the currency, the maintenance of full employment, and the economic prosperity and welfare of the people of Australia.

The long-run objective of monetary policy is to influence the rate of growth in the economy and the level of prices. When the overall economic growth is too fast, this put pressure on prices so the RBA will implement a tightening of monetary policy to slow the economy. But when the economy is experiencing slow growth, the RBA will implement expansionary monetary policy.

However, the RBA influence the liquidity or the amount of cash in the economy by buying and selling government securities. If the RBA decides to change the amount of cash in the economy, it can either purchase government securities from financial institutions or sell them to financial institutions in the nation’s bond market.

Such policies like monetary policy the RBA conducts within the economy, this is considered an important cause to the strength of the overall dollar power within the economy and overseas markets. When the RBA control the liquidity of money within the economy, that for sure would increase the credibility of the overall Australian market and so that would attract overseas investments that is due to the stability within the economy and the country currency.

Fiscal policy is the use of government taxing and spending powers to affect the behavior of the economy. The economy’s total output, income and employment levels are directly related to total private and public spending or aggregate demand. Private pending consists of purchases of goods and services by consumers, by businesses for investment, and net exports (exports minus imports). For their part, governments raise revenues from taxes such as the income tax, sales taxes and payroll taxes, and from other sources to spend on such things as health care, education, pensions, social assistance, and defense. So when any government implements such policy like the fiscal policy, the overall market will keep on being managed to maintain stability.

Australia’s continuing growth is considered a good sign of overall growth within the Australian economy. A strong housing cycle which is caused by the Australian government first home owners’ scheme whereby first home owners were awarded grants between AUD 7,000 -14,000 to purchase homes.

The current explosive expansion of house building and buying is happening because of the fact that any person can borrow as much as he like – provided that he can afford to pay the interest rates. However, over the last decade, the ratio of household debt to household annual disposable income has gone from 56 per cent to 125 per cent.

What did most to faster the remarkably extended boom in lending for housing and house prices was the return to low inflation. This permitted Australians households roughly to double their borrowing without mortgage payments getting more burdensome.

For decades Australians had wanted to borrow more for housing, but couldn’t do so because of the limits on bank lending and because nominal interest rates were too high. And so with such a boom in borrowing or lending money from banks and financial institutions, the building industry will boom too and exporters for products that are needed will benefit and most important this will reflect how the over all domestic growth within the economy is high and so that would attract overseas investments and so that would help to give the dollar a push.

One aspect of Australia’s recent economic performance that has received favorable comment is the behavior of the exchange rate. When the American crisis erupted, the exchange rate fell so that at its low it had fallen by a very significant amount. Unlike a number of countries in the region, interest rates were not raised to defend the exchange rate.

The Australian dollar is strengthening against most currencies, but the most watched currency is the US dollar. The Australian dollar hasn’t been so much out performing; rather the US dollar has been under performing, which is consistent with the US domestic economy.

The Australian economy has outperformed the US economy, but with the Australian economy being so small, there are other factors at play.

The major factor is the yield differential between the two countries. Australia’s official interest rate is 4.75 per cent, whereas in the US it is 1 per cent. That is a 3.25 per cent interest rate difference, which creates demand for the Australian dollar.

The fact the Australian Reserve Bank did not cut interest rates increased the demand for Australian dollars. Investors are choosing to invest in Australian fixed income securities as they are giving a higher return than their US counterpart. Also Australia offers economic and political stability, which should support the Australian dollar at this level.

We have tended to exaggerate the size of the fall in the Australian dollar by looking only at the Australian dollar/US dollar rate. At least half of the story was that the US dollar strength rather than Australian dollar weakness.

What has been the impact on the Australian economy and which industry sector have been affected most and why?

Australia’s economic performance is expected to keep as one of the strongest economies of the developed world in 2003 and 2004.

Despite a very weak and uncertain international economy, the Australian economy is expected to grow by a 3 per cent in 2003.With such high expectations compared to other advanced economies such as the US the European Union and Japan, the over all performance of the economy would appear in a good form. First quarter figures from the Australian Bureau of Statistics shows how the Australian economy performed well during the first quarter of this year despite the weak economic conditions worldwide.

Figures show that the economy expanded by 0.7 per cent compared to 0.4 per cent in 4th quarter of 2002. However, annual growth slowed to 2.9 per cent from 3.0 per cent
Australian GDP grew by up to 3.0 per cent over the year 2002. However when comparing GDP between Australia and the US would show how the Australian economy is as strong as the US whose GDP is currently at 2.9 per cent.

However, there are many factors that affect the overall GDP result. In Australia, the net exports have affected the over all economic growth within the country that is exporters have suffered from a weak world economy and the rise of the Australian dollar exchange rate. Meanwhile Australian imports have grown quickly due to the strong domestic economy

The Australian economy has attracted a fair bit of favorable attention because it has performed so well during the global financial crises. This is because the good performance of the Australian economy is not just a recent event, but something that has been unfolding over the past decade.

Companies and businesses that are highly dependable on their exports are most affected. The cheap Australian dollar has been an important contributor to most of Australians exporters. The value of exports rose 21% in 2000-01, to 152.4billion. Exports of primary products rose 29%, exports for manufactures rose 16% and exports for services rose 16%.

With such high currency of the Aussie dollar, exporters expect less income and local companies expects higher competition from importers.

Australia is a major exporter of agricultural products, minerals, metals, and fossil fuels. Commodities account for 57% of the value of total exports, so that a downturn in world commodity prices can have a big impact on the economy. The government is pushing for increased exports of manufactured goods, but competition in international markets continues to be severe. And so local manufacturers that exports their good are expected to gain less market share overseas due to the high exchange rate of the Australian dollar and so that will for sure affect the way these companies explore the international markets which would be different than when the dollar was week.

The effect of big exporters is hard to assess. Big exporters are operating on long term contracts and use currency hedging would be highly affected with any fluctuation of the dollar currency so their earnings. With the higher value of Australia’s dollar, exporters will suffer more because major commodities’ prices are set in US dollars.

A strong Australian dollar is considered a real threat for the overall tourism industry. While many industries will be affected adversely by the strong Aussie dollar others will gain more profits from such high dollar like companies that export their products overseas.

Tourism plays a key role in the Australian economy, employing six percent of Australia’s workforce and accounting for $21 billion or 4.5 percent of Australia’s gross domestic product (GDP) in 2001-02.

In 2002, the number of international visitors to Australia totaled 4.8 million, representing a 0.3 percent decrease compared to 2001.

For people coming to Australia a weak Australian dollar presents a real opportunity for the overall truism industry that is international visitors can get better value fro their dollar. But with such strong dollar with a high exchange rate, international visitors are less likely to come to Australia due to the low value there local currency can be changed with the Aussie dollar.

In 2003, international travel to Australia is forecast to fall by 5.3 percent to approximately 4.6 million visitors, the lowest since 1999. A number of factors have caused the decrease in international travel demand to Australia, including the terrorism events of September 11, high aussie dollar, the October 2002 terrorist bombing in Bali ,the Iraq war and SARS.

What effects has a strengthening dollar had on the ways in which public companies market their products overseas?

For an exporter a weak dollar means that the price of the Australian products is more competitive. On the other side a strong dollar means that the exports became more expensive and thus impact on a country’s competitiveness and profitability. Exporters in different industry sectors have been impacted by the recent strengthening of the Australian dollar. Parker says that “whatever the cause (of the strengthening of the dollar), the currency’s relative strength is bad news for exporters. Anecdotal evidence, however, indicates that few exporters depended on weak dollar for a profit margin; it was seen as bonus rather than a prerequisite. Nevertheless, exporters will begin to suffer if the climb continues.” Australia Industry Group adds that “for over one in three exporters (36%) the dollar appreciation has contributed to a lowering of competitiveness. As a consequence, many of these firms have suffered deterioration in export volumes, with 27% of exporters experiencing a decline. The fall reflects on the combined impact of weaker global demand and appreciating currency”. This has forced many of the companies to change the way they market the products overseas in the way they promote their products, price, and have even expanded the places they sell. We are going to look at comments made by different market leaders in different industries regarding their marketing strategies.

AAP wrote in their finance news that out of “930 companies, including 560 exporters, surveyed about the impact on them by the Australian dollar’s gains against its United States counterpart. Companies most at risk of losing exports - and suffering lower profits as a consequence - were those exporting food, beverages and basic metals The report added that some of the exporters more prone to negative effects of the rising dollar were looking to source more of their supplies from overseas in order to maintain their profits”.

Sustainable farming economic news (2003), says that “during May, the only thing preventing a much larger fall in the Westpac-NFF rural commodity index was a 12% increase in wheat prices,” NFF Economics Committee chair Charles Burke said. The index fell by 0.4 % during May, as the strengthening Australian dollar continued to put prices under pressure. The higher dollar offset a large increase in wheat prices. Meanwhile, all other prices in the index (cotton, sugar, canola, beef and wool) fell in value. Mr Burke said the large increases in the Australian dollar over the past months had hit farmers hard. “The Australian dollar has increased by 27 % since September 2001, unwinding the benefit of the low dollar for farm incomes,” he said.

Wool prices”have fallen marginally due to the decreased demand from the Chinese and European buyers, the rising AUD and the increased supply (with more than 75,000 bales being offered for sale nationally) were identified as the reasons for the general slide in prices… The decline in sales has forced the government to open up to more trading contracts with different countries example Uruguay, Chinese food group.”

In the wine industry reduction in the price of the wine overseas has became a current trend to help the companies stay competitive at an international level “Australian vintners are selling more wine overseas but making less money from it, according to new figures from the Australian Wine & Brandy Corporation”. Australian wine producers are stepping up their marketing push in North America and Europe in a race to reach $3 billion in exports by December…The Australian Wine Export Council said growth in Britain was slowing and the focus was shifting toward the US.

The chief economist at the Australian Trade Commission, Tim Harcourt, suggests a higher-value dollar should not deter exporters from pursing offshore sales, at least in the medium term…“Exporting is a difficult process that relies on patience, trust, commitment and the building of relationships with suppliers and customers in overseas countries, Australia’s export success can’t depend on exchange rates alone” ” he said.

Phil Rosser, senior manager of Trade Development at Sydney Ports believes the growing imbalance between imports and exports will turn out to be more significant for Australia. “The economy is strong so we’re drawing in imports like crazy – and exports have dropped off,” he said. “This is more than just the effects of the drought. Some export lines have fallen because there has been a drop in demand from overseas, like cotton. Cotton plantings were being reduced even before the drought set in because there was a lack of demand.” It’s a welcome move away from simply exporting commodities and concentrating, instead, on processing food products and value-adding, from everything I’ve seen, that trend is holding up” he said.

Australian exporters could survive the higher exchange rate if they pursued quality and productivity, an economist said. Tim Harcourt, the chief economist with AusTrade, said the higher Australian dollar was certainly making life difficult for many exporters. “While it is tough for some at the moment, Australian exporters have shown their resilience through thick and through thin,” he said.” And their capacity to build export markets, nurture relationships and find new ways of creating value and improving productivity will continue even if it means living with a higher dollar.” But he said there were opportunities, particularly in countries with young populations such as China and Indonesia, for Australian exporters. Customer service standards, product quality, brand building, marketing, management ability, levels of education and training and the capacity to build long-term relationships with overseas clients, customers and business partners are all factors that have helped Australian businesses to achieve export success on a sustainable basis,” he said. “All of these factors require long-term commitment, whatever exchange rate fluctuations maybe occurring in the financial markets in any given day”.

In South Korea recently, after a visit to Japan, Meat and Livestock Australia (MLA) managing director Mark Spurr said ongoing promotions in both countries had been critical to positioning Australia as a supplier of quality beef. Over the past 12 months in Japan a major MLA promotion program (funded with support from the Australian Government, processors and industry) has involved more than 4,000 in-store demonstrations, trade seminars, retail promotions and consumer awareness campaigns. He said the strength of consumer demand in Japan was evident in the stronger export prices for our beef to Japan. In Korea, the Hoju Chungjungwoo brand launched last year – promoting the clean, natural and safe attributes of Australian beef – already enjoys 30 percent brand awareness.

From all the above comments we see that exporters are doing their best not to be dragged out of market by the exchange rates movements. Emphasis is being paid to the products being distributed and the customers (building relationships).

What strategies are required during times of adverse currency movement to cushion volume/profit volatility?

Currency risks can affect the growth and profitability of a company. If a company is exporting as seen above the strengthening of a currency can mean low competitiveness, low profits and negative growth. If a company is exporting a weak currency means the same implications as above. It is therefore important to manage or cushion the risk associated with currency movements. This can be done though the use of several strategies which we shall discuss in depth. During this discussion we are going to assume the position of an Australian agricultural company that specialises in both imports and exports of agricultural commodities and equipments.

Strategies used:
Forward rate agreement: This is a contract to buy or sell currency at an agreed upon exchange rate at a specific date in the future. This allows the exporter or importer to contract with another party to assume the risk of adverse currency movements (Price, 2000). This is done by a financial institution mostly banks. The company gets contracted by an overseas market to export a certain bales of wool to a Chinese market at a set later date; the amount contracted may be in a Chinese currency. In this case the company can sell this currency at the present time to a bank or financial institution. These two negotiate a price and come to a standardized agreement. The negotiated amount maybe AUD 2 million. If the exchange rate has moved against the exporting company between the date of contract and the settlement date the company is thereby protected. On the other hand the company foregoes the potential windfall of favourable exchange rate movement. This kind of strategy protects the growth of the company by preventing the large gap between huge profits and huge loss at different times due to currency movements. The company is assured of what to expect in the future and can be able to make other growth decisions or facts basing on this.

Exchange-Based futures: In this strategy the company can “eliminate exchange risk (“hedge”) by using a futures contract to offset the risk involved in receiving foreign currency as payment for an overseas sale”. Currency futures contracts are used primarily as price-setting mechanisms rather than for the physical exchange of currencies. The contract is cash settled; that is, following the final trading session (on the last business day of the month prior to the futures contract month), one last mark-to-market and cash adjustment takes place.By taking this short position the exporter will make a profit if the value of the currency falls, which will offset the currency related loss of the product sale. An example of this can be illustrated in the import of agricultural equipments, our company makes a contract with Japan and the contracted amount (in Japanese Yen) is to be paid in a 30 day period, the rate specified is the exchange rate at the day that the contract is made. If we pay before the end of the 30 day period, we can buy the Yen in that day exchange rate to pay the amount it would cost in Japanese Yen. If the Aus dollar is higher we make profit if it is low, we might as well wait for the payment date.

Future hedging between companies: In this kind of hedging unlike the one mentioned above does not involve a financial institution. It is a contracted agreement between two trading partners. During the wheat of season our company might decide to enter into a contract promising to sell a certain amount of wheat for a certain price in Aus dollar to Saudi Arabia. At that particular time none of the parties know the exchange rate but a decision is reached when the two partners negotiate and reach an agreed rate. At the time the actual exchange occurs if the Aus dollar is high we make a loss if it is high we profit. This way we protect ourselves from unexpected huge losses.

Options: Financial Insurance: Foreign Currency Options can provide a fixed exchange rate for a future date if rates move adversely, but also provide the added flexibility of being able to use the prevailing spot rate if rates have moved favourably. If you buy a foreign currency option, you get the right to choose, on an agreed future date, whether you want to exercise the option and transact at the option’s exchange rate or not. If the spot rate is more favourable than the option’s exchange rate, then you will choose to transact at the spot rate. However, if the spot rate is less favourable you will use the option. This can be illustrated in a case where our company decides to sell dairy products to Japan at 5million Yen on a 60 days terms. If the value of the Aus dollar rises in this period, the value of sales falls and therefore our company makes a profit, if the value of the dollar falls, our company has the financial insurance (option).

One strategy that can be used to protest against surging in growth due to adverse currency movements is: when a country decided to open up companies in other country to serve the domestic market it important to invest with the countries currency rather than your own. For example for every country that our company has opened up a dairy produce outlet all the products are sold in the local currency. This way each country is given its own growth standards.

In an exports level however it is advisable to use one currency to make sales. Example: use of the Aus dollar regardless of the country of buyer. This buffers the risks associated with dealing with too many currency exchange rates.

You may write a microeconomics essay on a real organization; however, most colleges do not want you to use any information from organizations that are not normally permitted for sharing with stakeholders or other people. This is true of most information that includes loan amounts, organizations that have loaned the firm money, and information regarding exact fixed costs or even variable costs. Most often your microeconomics essay must relate information that is not accurate – as it will most likely be made up to suit the purpose of your school.

Finally, there are three considerations while writing your microeconomics essay – first, does your essay flow carefully from one topic to another? Do the topics clearly state their objective and their place in the overall scheme of things? Is there a beginning, middle, and end to your paper? Remember that it is common for instructors to share the rubric of the project – allowing you to have plenty of information regarding the requirements of the project. Additionally, your instructor will most likely grade you based on your ability to communicate these sources of information in an online atmosphere. This is because many business courses are now available in an online environment.

You may select to gather information from your library to develop your essay, which is a great idea as long as you are careful not to use outdated information. When you find a particular piece of information, evaluate it to be certain the information provided is still viable in today’s changing environments. Select information that you can verify through other sources, and check your textbook to determine if there is other information that should be applied to the information you have gathered.

Finally, most macroeconomic essays evaluate the macroenvironment in hopes to discover or uncover essential keys to what the future will look like. These are established through baselines and comparisons and contrasts with other influences throughout the years; however, your textbook may provide you with guidance on which factors are most appropriate to apply. In addition, your paper should demonstrate clear and concise thinking strategies that have evolved from the course materials your instructor has provided. Your paper can be the best paper if you are able to successfully develop your research and topic.

When you are considering a topic to write your research paper on, you must look through the library database and be sure, you are able to find information on the topic. Pick a single term or phrase from your learning materials and then look for it in your library. There are a number of conditions that are needed for all qualifying research, including where the source is from and when the source was developed. It is usually a bad idea to use sources that are more than 10 years old unless you are demonstrating how the theory has changed over the years.

When you consider potential ideas consider how they are applicable to your studies and to the current business environments. Every research paper you write for your Economics course should demonstrate clear thought and arrangement of the research you develop to support your idea or topic. Developing ideas can start as simple as reviewing your course work and your instructor’s lectures; however, make certain the idea that you selected is based on information that is important to economics in the world today. You can develop an economics research paper on things such as global conditions in economy and organizational development of sustainable strategies for money management.

Any number of great ideas can be developed for economics essays; however, you must be certain that your topic is directly related to your course work. For example, if you course work is primarily focused on world events and economic conditions, you will want to maintain that same goal. Every economics essay must demonstrate application of information to the other situations that you may later encounter while not in school. In this way, you will want to select a topic not covered in your class, but your course materials can answer that. You may even be able to do this using information from your own work experience or even a company your school has designed for developing essays.

After you have selected an Economics related topic, gather some research that includes theories and definitions of terms. Your research can be used to further define your thesis topic and to further pull it all together in the form of your topic statement. Be sure to make your topic statement a problem and solution statement that focuses on how you will present the problem and how you will resolve it. Some thesis statements are exclusively problem statement solution development; these are easier to do than they look.

You may say that you want to solve the problem of economic operations within the organization or city through implementation of best practices (list the best practices) and that these will allow the organization or city to accomplish goals previously set forth by the entity. Additionally, when using research remember that a number of micro and macro elements and environments influences economics, in some cases, this can allow you to use research from interdisciplinary sources. Your selection of research will enable you to demonstrate your points, so choice wisely. Well, now you know exactly how to write a good and effective Economics thesis paper.

Economic Impact of Government Fiscal Policy
Over the course of the last few years there has been much discussion regarding the state of the U.S. economy and what the “right” approach is to stimulating economic growth and prosperity. As the 2004 election approaches, there is significant discussion by Democratic presidential candidates about the Clinton economy verses the Bush economy, as they compare and contrast the two administrations fiscal policies (Berlau, 2003). Even the media contributes to the debate regarding which administration’s fiscal policy is responsible for the current challenges faced by the U.S. economy.

Still the question remains, does the Keynesian activist approach serve the nation better in stimulating economic growth and prosperity, or would the nation be better served to follow a more Classical “laissez-faire” non-activist approach? The debate will undoubtedly continue for many years to come. But what is important to this discussion is how fiscal policy might influence the economy in hopes of jump-starting growth.

Fiscal policy is a deliberate change in government taxes or spending to stimulate or slow down an economy (Colander, 2001). It can take one of two forms. It can either take the form of an expansionary policy or that of a contractionary one. As an expansionary policy it acts to decrease taxation and increase spending. As a contractionary policy it does the opposite. It increases taxes and decreases spending.

A determinant as to which policy approach used hinges on how the government views current economic performance based on a number of economic indicators. One key indicator of productivity and growth in the economy is Gross Domestic Product (GDP). GDP represents the market value of all finished goods and services produced in the economy as stated in the prices of a given year (Colander, 2001). When considering the health of the economy the government focus is on how this overall production compares to the overall consumption or expenditures. In macroeconomics this is viewed as the aggregate performance.

Aggregate production is the total of all goods and services produced, while aggregate expenditure is the total of consumption (C+I+G+(X-M). What is most important in this comparison is how aggregate production compares to aggregate expenditure in relationship to aggregate income. If aggregate production outpaces aggregate expenditure than aggregate income is said to be above target income and the government might institute a contractionary fiscal policy. If the reverse is true than the government might institute an expansionary fiscal policy. It is important to note that target income is achieved when planned expenditures equal production. In economic terms this is viewed as equilibrium.

In the current U.S. economy it would appear that aggregate production and expenditure are such that an expansionary fiscal policy is in play. That is the government has instituted a fiscal policy aimed at reducing the tax burden on both individuals and businesses while concurrently increasing spending. Albeit some of the increase in spending is a result of the catastrophic events of September 11, 2001, and the following conflict in Iraq. Still, the hope is that such a fiscal policy will stimulate increased consumption (spending) by both individuals and business. The theory being that by placing more money in the pockets of those that feed the economy, the economy will be the benefactor of added growth. Specifically, that consumers will spend more on available goods and services, and businesses will invest in growth related initiatives leading to increased employment opportunities.

The article by Berlau does support an increase in retail sales, indicating a 12.1 percent rise for June, July and August 2003. However, investment by business has not necessarily followed suit, and new job creation continues to lag. Still the article points out that Brain Wesbury, chief economist of Griffin, Kubik, Stephens and Thompson, a brokerage firm in Chicago, is optimistic that the economy is getting stronger. In fact, he shares that Joseph Lisanti, editor of Standard & Poor’s The Outlook, states, “We’re seeing very good indications of GDP growth. Right now, we’re looking at third-quarter (Q3) growth to surge to about 6 percent, and possibly as much as 8 percent…. Attributing this growth and future economic growth to the Bush fiscal policy.

What may be an interesting factor to consider regarding growth in jobs is whether the impact of technological advances, leading to increased efficiency, has played a role in slowing employment growth and hence a stronger U.S. economic recovery. Take the telecom industry for example. There have been signs of economic recovery in the telecom industry. BellSouth reports profits up 46% in third quarter (Miami Herald, AP, 2003). Yet it has really been a “job-less” recovery. We do see telecom providers investing in infrastructure technology to meet the anticipated demand for new emerging technologies such as Voice over Internet Protocol (VoIP), while continuing to reduce their workforce. To further complicate economic matters on the job front, while these investments in emerging technologies should lead to increased employment opportunities in the U.S. Information Technology (IT) sector, many firms are outsourcing IT/Hardware related functions offshore to locations such as India.

Clearly there is evidence that pro-active government fiscal policy can contribute to increased economic growth. This is evidenced by the average U.S. consumers’ willingness to increase spending on retail goods and services. Still there are indications that other economic factors, particularly in the business arena, must be considered when looking for sustained economic growth. Government fiscal policy can and often does stimulate growth but such a policy is only one in a series of economic stimulus to be considered.

Germany went through a lot of ups and downs in their economic cycles in the Interwar years. There were a lot of economic crashes and booms in these twenty odd years. There were many factors that contributed towards these economic instabilities. Through this report we take a look at how the German economy pulled through in some of its toughest times and managed to stabilize its economy. To observe how the German economy worked through the pre-war years, we have to take a look at it through its different stages. Firstly there was the period between the First World War all the way up to the Great Depression in 1929; from there we look at Germany from the 1930’s to World War 2 and Adolf Hitler’s contribution to their economy. Finally the German economy must be compared to the world during this time period.

Germany’s defeat in World War 1 left the country in shambles. The Treaty of Versailles was a major contributor to the collapse of the German economy. The Paris Peace Conference was a meeting to decide the fate of Germany; thirty-two states representing 75% of the world’s population attended this one-year conference (Versa, par. 1). The five major powers that attended this meeting were the United States, Britain, France, Italy and Japan; each of them came out with a treaty for Germany. These were combined and came to be known as ‘The Treaty of Versailles.’ This harsh treaty put many restrictions on Germany: Germany was forced to surrender all its colonies, the Rhineland a huge source of German income was to be demilitarized, The Ruhr a major economic sector was to be placed under control of the League of Nations for 15 years, Germany had to pay reparations of ?6,600 million, Germany and Austria were not allowed to merge, Germany had to accept full guilt for war, their army was limited to 100,000 men with very strong military restrictions, and the German navy was limited to vessels under a 100,000 tons with no submarines (Versa, par. 3). The treaty caused an enormous burden on the German economy. The total cost of the war to Germany was calculated to be about 164 billion marks. This consisted of about 93 billion marks in war loans and 29 billion marks from the Treasury Bills. Four years after the end of the war, Germany had failed to come up with even one reparation payment to France. By January 1923, Germany was behind in its reparation payments by 24 million gold marks. In late 1922 when the German Government asked the Allies for a monatarium on reparation payments, they were refused. Because of this Germany stopped all shipments of coal and timber to France. The French with their economy also in turmoil was in great need of these reparations. Read also Economics essay samples.

In January 1923, French and Belgian troops occupied Ruhr. The Ruhr was a major economic sector in Germany; it produced 80-85% of Germany’s coal, 80% of Germany’s steel and pig iron and 70% of Germany’s goods and minerals (Germ, “Interwar”, par. 1). Enraged by this attack, the German government funded a strike in the Ruhr causing thousands of workers to protest (The Great, par. 1). All this excess spending by the German government caused the already instable economy to collapse.
There was a great increase in the circulation of currency and by November 1923 it reached almost 92 trillion marks. The economy was so dire that one U.S dollar was equivalent to 4 billion German marks (The Great, par. 1). Even with an amazing food harvest that year, there was a lot of starvation. The devastated currency forced shops to use the barter system. Banks were closed down and many middle working class people lost their life savings. Economists believed in two reasons for this fall in the currency; the fall in the foreign exchange value of a currency and a large budget deficit (The Great, par. 2). A falling exchange rate increases the costs of imports and through that the cost of living; this in turn causes higher wages and therefore more expensive goods. A large budget deficit is caused when the government is in so much debt they can no longer obtain more loans, they are required to print more currency. Workers present their old bank notes in exchange for the new ones (The Great, par. 2). The scale at which the currency was being circulated caused prices to be very unstable and constantly rising.

There was a sharp turn for the better in the German economy when Gustav Stressemann was elected from the Republican Party. He called for a halt in the resistance within Ruhr. The rentenmark was introduced; it based the German currency on the staple rye, rather than Gold (The Great, par. 3). This new economy replaced the old and was exchangeable at one billion old marks to one new mark and a U.S dollar was now worth 4.2 marks (The Great, par. 3). The market was slowly taking a leap for the better. The government now had control over its budget and the economy now become dependant on Wall Street.

Another factor that helped strengthen the economy was the Dawes plan. In April 1924, Charles G Dawe published a report that proposed a plan for instituting annual payments of reparations on a fixed scale. It recommended the reorganization of the German State Bank and increased foreign loans (Dawes, par. 2). This plan stabilized the economy and decreased unemployment. It allowed Germany to borrow $39 billion in the next 5 years. Several politicians though did not like this plan as it gave other countries more control over the German economy and it did not decrease the total reparations.
Since Germany’s economy was dependant on the stock market, it along with most of the world fell into the Great Depression in 1929 when the stock market crashed. Most countries wanted to be reimbursed with all the money they lent out to other countries. As the US output fell by half in just two years, the German economy, previously dependent on US credits, slumped until a full third of the population were unemployed. There was huge turmoil and the government lost control. Owen D. Young was sent by the Allies to investigate the stock market crash on the German economy. He came up with the Young Plan suggesting that: the total amount of reparations should be cut by three quarters and that Germany should make annual payments on a sliding scale up to 1988 (Young, par. 2). The right wing politicians in Germany such as Adolf Hitler opposed this plan.

As the German economy had just improved itself, the Great Depression in 1929 caused a huge plunge in economies around the world. In 1931, Germany was forced to stop payments of reparation because of their rising unemployment; by this time, Germany had only paid one eighth of the amount they owed.

At a time of economic turmoil and poverty it was easy for a man like Adolf Hitler to take power. This evil dictator brought stability into the German economy during troubled times. Due to the state of the economy, the German people were annoyed and frustrated. They were tired of the way democracy was running in the country and wanted a change. The democratic government at the time was greatly influenced by the Allied powers. All this made it easier for Hitler to take control. Although very powerful, Hitler had an unsuccessful revolt that caused his imprisonment for 5 years (The Rise, par. 2). He was a member of a strong right wing party known as ‘The National Sozialistiche Duetsche Arbeitpartei’ or more commonly known as the Nazi Party (The Rise, par. 1). In 1921 he became the leader of this party; he then created a group of soldiers known as the Storm trooper who were like his personal bodyguards. In 1929 after the stock market crash, Hitler saw his chance to seize control. He lost the 1932 elections but was named Chancellor of Germany on 3rd December 1932 by Hindenburg (The elected Chancellor) (The Rise, par. 5). He banned all political parties and made people swear oaths of loyalty to him.

As the Chancellor of Germany, Hitler made most of his intentions very clear. He started rearmament of Germany and paid for it through a series of loans. In a year he increased the military budget so much so that it could not all be spent on military alone. The excess money was spent on building highways across Germany. He built factories to produces weapons and machinery (Case, par. 4). Although this money went against the treaty of Versailles and strengthened the German military, it almost wiped out unemployment. The money being put into Germany strengthened the economy. He was preparing for war and making it very obvious, he broke the treaty of Versailles again by putting troops into the Rhineland; he also made alliances with other countries such as Japan.

The German economy during the interwar years went through many ups and downs. The state of Germany and its economy could be compared to that of France and the United States. Since most of World War 1 was fought over France, when the German troops retreated they burned and flooded most of the French industries. Therefore after the war, Germany’s factories were all left intact, yet France had lost a lot of its industries. This caused France to fall into an economic depression. Most of the reparations Germany paid were directed to the rebuilding of France. France was forced to take many loans from different countries.

The United States had a booming economy most of the while between World War 1 and World War 2. They made most of their money by giving loans to other countries and supplying them with arms and ammunitions. After the Great Depression, the U. S government put forward many steps to control the economy and revive it. It was easier for farmers and public workers to get loans. New acts were passed to have tighter inspections on banks and regulate their progress.

The interwar years were a troubled time for Germany. Its economy went through many fluctuations. With proper leadership though, Germany was able to pull through and stabilize its economy overcoming all its obstacles. They overcame their troubles after World War 1 and the treaty of Versailles and managed to stabilize their economy up to the Great Depression. How the economy was re-stabilized between the Great Depression and World War. We must also look at the German economy and compare it to other countries at the time to see how it fared. Germany an oppressed country between the interwar years managed to persistently stabilize its economy and outcome the damage from the treaty of Versailles.

Airlines are an oligopoly in the United States. Oligopolies are market structures where a few firms distribute a product, either standardized or differentiated. Entry into this market is often difficult, and a firm has limited control over product price because of mutual interdependence, and there is typically non-price competition. There are a few large airlines that get most of the traveling business, and differentiation is limited. Since September 11 however, business has been slow, with most people opting not to travel by airplane. As a result, many airlines, including United Airlines, have been close to bankruptcy.

Airlines have tried lowering prices to get business. Price leadership, one firm announcing a change in price, resulting in other firms announcing similar changes, is prominent however, and it was difficult to get business. As a result, United Airlines and United Machinists’ Union has decided to cut wages. As the article explains, other airlines such as Delta, recently proposed cost cuts. This move is similar to price leadership, except dealing with wages.

United Airlines recently had the highest unit-labor costs of all airlines. Since United won concessions from workers however, Delta Air Lines, who now has the highest unit-labor costs, topped them. Unit-labor cost or the cost per unit of output effects how much the business spends and as a result, the amount of revenue they bring in. United Airlines is not presently in the position to spend a lot, and as a result, needed to bring down their unit-labor costs. See also: Economics research paper information.

United Machinists’ Union is a craft union, organized on the basis of occupations and skills. A union’s main goal is to increase wages for union members, however United Machinists’ Union’s goals do not end there. For example, they want to raise the standards of and increase recognition of all their members. Also, they work for better benefits, working conditions, and respect for all members. While voting for the concessions, 70% supported them. Although the union members do not want wage cuts, etc, they know that they must help out the business for job security. “Immediate action was needed to ensure the survival of” the “airline”.

Many of the union members also voted for the concessions because of the present threat of a representation takeover by the Aircraft Mechanics Fraternal Organization. This union is similar to the United Machinists’ Union, and there will be a vote for all union members at United to choose which union they would like to be in.

The United Machinists’ Union has greatly aided United Airlines by agreeing to wage concessions. As Glenn F. Tilton, chief executive of United said in a written statement following the voting, he “appreciates the tough choices and sacrifices all” the “employees are making to help ensure United emerges from bankruptcy and succeeds for the long term.” Unions do not only seek benefits for themselves, but also consider what is best for the business.