Globalization Or Regionalization : Financial Flows and Business Practices in Central Europe and Latin America

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Globalization Or Regionalization : Financial Flows and Business Practices in Central Europe and Latin America University of Massachusetts Amherst ScholarWorks@UMass Amherst Masters Theses 1911 - February 2014 1997 Globalization or regionalization : financial flows and business practices in Central Europe and Latin America. Daniel Arthur Carter University of Massachusetts Amherst Follow this and additional works at: https://scholarworks.umass.edu/theses Carter, Daniel Arthur, "Globalization or regionalization : financial flows and business practices in Central Europe and Latin America." (1997). Masters Theses 1911 - February 2014. 2546. Retrieved from https://scholarworks.umass.edu/theses/2546 This thesis is brought to you for free and open access by ScholarWorks@UMass Amherst. It has been accepted for inclusion in Masters Theses 1911 - February 2014 by an authorized administrator of ScholarWorks@UMass Amherst. For more information, please contact [email protected]. GLOBALIZATION OR REGIONALIZATION Financial Flows and Business Practices in Central Europe and Latin America. A Thesis Presented by Daniel Arthur Carter Submitted to the Graduate School of the University of Massachusetts Amherst in partial fulfillment of the requirements for the degree of MASTER OF ARTS May 1997 Department of Political Science © Copyright by Daniel Arthur Carter 1997 All Rights Reserved GLOBALIZATION OR REGIONALIZATION: Financial Flows and Business Practices in Central Europe and Latin America. A Thesis Presented by Daniel Arthur Carter Approved as to style and content by: VA » ^ - ’PgAors. MJ Peterson, Chair 'fz* Vincent Ferraro, Member Eric Einhorn, Department Head Department of Political Science Acknowledgements This thesis was possible through support from many friends and colleagues. I would like to especially acknowledge and warmly thank my father, Mr. Albert G. Carter, whose love and intellect have shaped me profoundly. I thank Professor MJ Peterson for her insightful assistance. Grateful thanks are due to Dr. Reimund Becker and Mr. Jens Tonn of Citibank for extending resources and sharing their knowedge. Finally, I thank the excellent libraries in which this thesis was written: Universitat Mannheim, Universitat Frankfurt, Documentation Franchise, Northwestern University, and the University of Chicago. IV TABLE OF CONTENTS ACKNOWLEDGEMENTS LIST OF TABLES viii LIST OF FIGURES Chapter I. INTRODUCTION II. METHODOLOGY 1Q A. Dependent Variables ^3 1 . Globalization -^3 2 . Regionalization 13 B. Independent Variables 13 1. Financial Flows -[3 a. Portfolio Investment 14 b. Foreign Direct Investment 18 c. Bank Loans 22 2. Business Practices 23 a. Stakeholder Value 24 b. Shareholder Value 28 III. CENTRAL EUROPE 36 A. Overview of Central Europe 36 1. Foreign Direct Investment 40 2. Portfolio Investment 45 3. Commercial Bank Lending 49 B. Czech Republic 50 1. Financial Flows 50 a. Foreign Direct Investment 50 b. Portfolio Investment 55 c. Bank Loans 55 2 . Business Practices 56 a. Economy 57 b. Firms 60 c. Banks 63 C. Poland 66 1. Financial Flows 66 a. Foreign Direct Investment 66 b. Portfolio Investment 69 c. Bank Loans 70 2 . Business Practices 72 a. Economy 72 b. Firms 73 c. Banks 74 D. Hungary 77 1 . Financial Flows 77 a. Foreign Direct Investment 77 b. Portfolio Investment 82 c. Bank Loans 84 2 . Business Practices 85 a. Economy 85 b. Firms 88 c. Banks 90 IV. LATIN AMERICA 92 A. Overview of Financial Flows in Latin America 92 1 . Foreign Direct Investment 99 2 . Portfolio Investment 106 3 . Bank Loans 115 vi B. Argentina 118 1. Financial Flows Hg a. Foreign Direct Investment 118 b. Portfolio Investment 120 c. Bank Loans 122 2. Business Practices 124 a. Economy 124 b. Firms 127 c. Banks 128 C. Brazil 129 1. Financial Flows 129 a. Foreign Direct Investment 129 b. Portfolio Investment in Brazil 133 c. Bank Loans 135 2. Business Practices 136 a. Economy 136 b. Firms 140 c. Banks 144 D. Mexico 146 1. Financial Flows 146 a. Foreign Direct Investment 146 b. Foreign Portfolio Investment 153 c. Bank Loans 157 2. Business Practices 158 a. Economy 158 b. Firms 160 c. Banks 161 V. CONCLUSION 163 BIBLIOGRAPHY I 82 vii LIST OF TABLES 1. Table Page Financial Flows to Emerging Markets in USD Billions 12 2. Recourse to International Capital Markets by Emerging Markets in USD Billions 15 3. Number of International Emerging Market Funds, 1981-1995 17 4. Asset Value of International Emerging Market Funds, 1981-1995 in USD Millions 18 5. Comparison of Stakeholder & Shareholder Models 32 6. Macroeconomic Investment Rates m Central Europe .40 7. Composition of Private Capital Flows .41 8. Size of Selected Financial Markets, 1994 .46 9. International Equity Issues by Selected Countries and Regions (USD Millions) .47 10. Value of New Equity Issues in Selected Countries and Regions (USD Millions) .47 11. International Bond Issues by Currency of Denomination (in USD Millions) .48 12. International Bond Issues in USD Millions .48 13. Credit Ratings at June 1996 .49 14. Composition of Private Capital Flows to the Czech Republic .51 15. Top Ten Investors in the Czech Republic, as at Ql, 1996 ..54 16. Debt Stocks Ex-Czechoslovakia USD Millions ..56 17. Prague Stock Exchange ..58 18. Composition of Private Capital Flows ..66 19. Top 10 Investors in Poland ..69 20. Poland's Credit Ratings at June 1996 70 vni 21. Polish Debt Stocks in USD Millions 71 22. Poland. Selected Macroeconomic Indicators 72 23. Warsaw Stock Exchange 73 24. Poland's National Investment Funds (NIF's) 76 25. Composition of Private Capital Flows to Hungary 77 26. Top 10 Investors in Hungary gQ 27. FDI Position at year-end Hungary by Sector 81 28. FDI position at year-end Hungary by source 82 29. Hungary: Debt Stocks 34 30. Budapest Stock Exchange 85 31. Market-determined Reforms in Selected Latin American Countries (at mid-1993) 32. National Financial Accounts, Argentina, Brazil, and Mexico (in USD Millions) 98 33. Regulations on FDI in Selected Countries of Latin America through 1994 101 34. European Investment in Latin America, 1985-90 (in USD Millions) 103 35. U.S. Direct Investment in Latin America, 1994-95 Comparative Regional Trends ($m) 104 36. US Investment Trends and Earnings by Country in Latin America in USD Millions 105 37. Non-manufacturing US Income in Selected Categories 105 38. US Manufacturing Income in Selected Categories from Direct Investment Abroad in Latin America 106 39. Equity Flows to Latin America (in USD Billions) 108 40. Latin American Emerging Market Funds, 1981-1995 109 41. Pan-Latin American Funds 110 42. Value of New Equity Issues in Selected Countries I ll IX 43. Public equity offerings for Latin American companies in the USA i n 44. ADR Trading in 1995 ^ 45. International Bond Issues by Currency of Denomination (in USD Millions) ^ 46. International Bond Issues in USD, Millions 114 47. New Medium- and Long-Term Commitments (USD Millions) 116 48. Debt Stocks in Latin America yyj 49. Direct Investment Abroad by Country into Argentina (USD Millions) 119 50. Argentina. Portfolio Investment 120 51. Argentine ADR Programs in 1994 121 52. Argentine Debt Stocks 122 53. Trading Volumes 125 54. Buenos Aires Stock Exchange 126 55. Some of the Mam Acquisitions in Brazil during 1996 131 56. Direct Investment Abroad to Brazil 132 57. Brazil. Financial Account, 1989-94 134 58. Brazilian Debt Stocks 135 59. Brazilian Stock Exchanges 139 60. Mexico. Foreign Direct Investment, Flows by Country 149 61. Mexico. Foreign Direct Investment, Stocks by Country 150 62. Mexico. Foreign Direct Investment, Flows by Industry 151 63. Mexico. Foreign Direct Investment, Stocks by Industry 152 64. Mexican Portfolio Investment (in USD Millions) 153 65. Examples of Recent Mexican ADR Stock Issues 157 66. Mexican Debt Stocks 158 67. Bolsa Mexicana de Valores, S.A 159 68. Mexican Pension Funds & Partners ..160 69. A Regionalization of Financial Flows ..164 70. A Globalization of Business Practices ..166 71. Wal-mart v. Poland ..175 72. Selected Multinational Investment in Emerging Markets ..177 xi 1 LIST OF FIGURES Flgure rage 1. Total Capital Flows to Developing Countries, 1990-1995. $1,640 Billion 8 2. Comparison of FDI in Central Europe and Latin America 21 3. FDI Flows, 1985-1992 in USD Millions 22 4. Cumulative Flows from Major Investors 37 5. GDP Growth Rates in Percent 39 6 . Foreign Investment in the Czech Republic 50 7. FDI by Sector, Czech Republic 5 -^ 8 . Cumulative FDI in Poland, 1990 - 1995 67 9. Investment in Poland by Country of Origin at Dec. 31 1995 68 10. Cumulative FDI Flows into Hungary 79 11. Distribution of FDI Flows to Mexico by Country 1985-94 147 12. Issues of Mexican Stock as a Percentage of International Stock Issues, 1995-1993 154 XI Chapter I Introduction No one doubts that the world economy is undergoing transformation. There is, however, considerable disagreement about the ultimate shape of this transformation, with some anticipating the emergence of one seamless global economy and others anticipating instead segmentation into regional associations. The shape of this transformation will affect all human lives in virtually all areas because it will determine who will have which opportunities, which jobs are available to whom, how income will be distributed, and what will be consumed. The transformation of the world economy has been a subject of debate for political scientists and economists concerned with the consequences of this change on the distribution of power among states and definitions of sovereignty. For the business and investment community, this transformation represents a threat to current operations and strategy and at the same time new opportunities for growth and innovation. Given the scope and depth of this issue, the transformation of the world economy is one of the most fascinating economic, social and political issues of the 1990's. In this thesis, I postulate that the world economy is becoming simultaneously more regional and global, but in different ways. It is becoming more regionalized in terms of both trade and investment flows, but more global in the sense of developing greater similarity in the organization of economic activity.
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