International Political and Legal Environments

Doing business abroad is risky. Political risk Economic risk Commercial risk Regulatory risk Legal risk Financial risk Cultural risk Shipping risk + Sovereignty Go Home Foreigners

Assessing the Political Environment Political risk indicators  poor economy  Government repression  Divisive political decisions  Government/leader instability  Extreme nationalism Political risk reducers  Free Trade Agreements – NAFTA  Common Markets – EU, Mercosur  Monetary Unions – “Euroland”

The saga of Miller Beer in Mexico… “Selling beer is fun. Mexico is a fun country. But selling beer in Mexico is definitely not fun” Miller spokesman NAFTA (~ 0% tariff on beer) 99% of Mexican beer market: Modelo, Femsa Bribes are legal Political issues: border delays, strange label requirements, proof of tax payment Luhnow, D. (2003, January 17). Why Corona is big here, and Miller is so scarce in Mexico, The Wall Street Journal, B1, B2.

International Legal Environment International Laws Home Country Laws Host Country Laws International Law  World Court or Int’l Court of Justice (United Nations)  bilateral treaties guaranteeing fair treatment  patent and trademark protection

Home Country Legislation CORRUPTION LAWS  Prevent multinational corporations from using unethical means to obtain competitive advantage in a particular market  U.S. Foreign Corrupt Practices Act makes it illegal to bribe politicians

Prohibits payment of bribes to a foreign official, political party or candidate for purposes of obtaining, retaining or directing business. Bribe - payment of money or anything of value by a person seeking illegal/unfair advantage or favor. Lubrication - payment of money to facilitate lawful performance of a business activity Foreign Corrupt Practices Act of 1977

Legal Systems Common law –historical precedence Code law –codes, or rules of law (most countries) Theocracies – e.g., Islamic Law; God established a natural law that embodies all justice

Disputes are of 2 varieties: Company to government Company to company Which country’s laws govern? Jurisdictional clause included in contract; otherwise  Location of contract agreement - the country in which the contract was signed  Location of contract performance – the country in which the contracted activities take place

International Dispute Resolution Conciliation – 3 rd party mediates; private & non- binding Arbitration – select/hire disinterested 3 rd party; arbitrator’s decision is private and legally binding Litigation – settle dispute in public courts; public and binding

Protection of Intellectual Property Common law - “first use” or “first to invent” Code law - “first to file”

What to investigate in Mexico’s International Legal Environment Common or code law Jurisdiction Bribery & Foreign Corrupt Practices Act (applies even if Mexico allows bribes) Dispute reconciliation Protection of intellectual property