Key reasons why a multinational corporation might decide to borrow in a country

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Determine the key reasons why a multinational corporation might decide to borrow in a country such as Brazil, where interest rates are high, rather than in a country like Switzerland, where interest rates are low. Provide support for your rationale.
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Multinational corporations consider inflation, interest rates, and exchange rates when making decisions to borrow. Inflation rates impact future production costs. Inflation also has a major effect on interest rates and exchange rates.

The currency in countries with higher inflation rates than the United States will depreciate over time against the dollar. This has occurred in Brazil. In contrast, the currency in Switzerland has appreciated against the dollar due to lower inflation rates (Ehrhardt, 1). Inflation rates affect interest rates.

The interest rates in Brazil and Switzerland are impacted by inflation rates. As a result, countries such as Brazil with higher inflation rates have higher interest rates. In countries such as Switzerland with lower inflation rates, interest rates are lower (Ehrhardt, 1).

It may be appealing for multinational corporations to borrow in Switzerland due to lower interest rates. This is not always the best plan. The interest rates today may be lower due to lower inflation rates, but the currency will likely appreciate in the future leading to the possibility of debt (Ehrhardt, 1). Comparably, multinational corporations should not avoid borrowing in Brazil because of high-interest rates. The currency will likely depreciate in the future which would make borrowing relatively inexpensive (Ehrhardt, 1).

 

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came to power, he began to implement reforms in order to improve the Soviet economy. Despite these efforts, they ultimately led to the collapse of the Soviet Union. The desire for economic reform surfaced from the growing economic inequality within the Soviet Union. Wealth became focused within the elite, while the majority of Soviets were suffering; the standard of living in the Soviet Union was one third of the standard of living level in America and less than half of West Germany and France (Johnson & Raynes, 1984, page ii). Low standards of living generally guarantees unrest with populations because people are likely unsatisfied with their economic situation. The downfall of the Soviet Union is evidence of the fact that governments are unstable when their preferred system of economics is not capitalism.

Capitalism supports equality in nations, because capitalism supports equal opportunity vice versa. Capitalism is sustainable because it is often accompanied with socialist political policies. Equal opportunities give more people the means to support themselves. Though there may be economic inequality in capitalist states, there isn’t widespread poverty at the same level as in communist nations. This is because the people who are motivated enough to sustain themselves will find a way to achieve what they want.

Major financial support is provided under communist governments. Theoretically this is a beneficial policy, but realistically it isn’t as beneficial as it is intended to be. At least 20 percent of Soviets lived in poverty compared to 14 percent of Americans in 1988 (Fein, 1989). The average Soviet only has to dedicate 6 percent of their income to paying rent, whereas Americans dedicate 26 percent of their income to living expenses (Fein, 1989). The Soviets denounced the existence of poverty in their country up until Gorbachev’s leadership, and instead claimed that poverty was only brought on by capitalism. The large number of people who were experiencing economic hardships sought for change in the USSR. Despite Soviet officials claiming that the poverty was caused by laziness, many believe that poverty was brought on by the economic state of the USSR. The economy under Gorbachev suffered immensely, causing over 20 million people to live impoverished lives (Fei

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