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Philippine Canning Corporation Case Essay

I. Issues that Azucena Inalis must take into consideration.

There seems to be two major issues that PCC must tackle in its ‘corned beef venture’; 1) where should PCC get its raw materials? (beef) and 2) Where does PCC source its debt? When it comes to the outsourcing of beef, PCC is considering Argentina, Australia, and/ or India. There are a number of concerns that must be addressed when it comes to importing raw materials from any one of these countries:

1) Political and Legal Considerations

2) Economic Performance and Management

3) Government Protectionist Policies

The matter of sourcing debt is relatively simple because there are only two options being deliberated; 1) Denomination in Philippine Pesos, or 2) denomination in US Dollars.

II. Evaluating the Issues

1) Political and Legal Considerations

Argentina is widely considered to be one of the most corrupt countries in the world. Argentina scored 35/100 on the Transparency International rating as of 2011. 0/100 would be extremely corrupt while 100/100 would be clean. Crime rates as well as poverty are known issues. There is high risk as far as the political considerations in Argentina are concerned. India scored 36/100 on the Transparency International rating as of 2011. 0/100 would be extremely corrupt while 100/100 would be clean. Australia is would be considered in a low risk bracket, there is a strong legal system in operation and there is high confidence in government Australia scored 85/100 and they are well recognized for their efforts to stymy and eventually eradicate corruption and poverty altogether.

2) Economic Performance and Management

Taken from Teadingeconomics.com(2013) | Instituto Nacional de Stadista ^

The latest reported inflation rate for Argentina is 10.5% for this month. It has been steadily decreasing from a high of 11.1% in early February (Instituto Nacional de Estadista, 2013) but it has been forecasted to increase to 10.8% by mid-October.

Taken from Tradingeconomics.com(2013) | Ministry of Comerce and Industry ^

India’s latest reported inflation rate is 4.86%. It has also been decreasing but in a more rapid rate compared to Argentina. From 10% in late 2011 to a sudden drop to7-8% in early 2012, and a gradual decrease to 6.68-7.5% in late 2012 and early 2013.

Taken from Tradingeconomics.com | Australian Burau of Statistics ^

Inflation in Australia From 2010-2012, Australias inflation has been in the 2.1% (low) to 3.6% (high) region. Inflation went as low as 1.2% in the mid-2012, and gradually increased back to 2.5% through late 2012 and the first quarter of 2013. In the second quarter of 2013 however, inflation is back down to 2.4%. As far as inflation is concerned, the Australian economy is outperforming both Argentina and India by the proverbial mile.

Let’s take a look at economic management.

Indian Central Bank Base Interest Rates (Historical)

Retrieved from Global-rates.com (2013)

The current base interest rate is 7.25%. It has fluctuated in recent years from 5% in 2010 to 8.5% in early 2012- probably to control inflation; it was during this period that India’s inflation rate suddenly dropped frombeen on the decline from a high 8.5% in early 2012. This may be an explanation as to why India’s inflation dropped from 10% to 7+%.

Retrieved from: Tradingeconomics.com (2013)

11.38 is the current base interest rate for Argentina. It has been moving in the 9-12% range since early 2012

3) Government Protectionist Policies

Transparency International (2013) The Global Coalition Against Corruption; Corruption by Country/ Territory. Retrieved from: http://www.transparency.org/country#ARG_DataResearch

Trading Economics (2013) Inflation Rates. Retrieved from : http://www.tradingeconomics.com/argentina/inflation-cpi

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