Political Risk, Legal Issues in Global Economy

            Political Risk, Legal Issues in Global Economy   [Name] [Institution]     The political culture of a company is essential to investors and businesses, as it dictates the political environment under which business, local or foreign, will operate. Political risk, an element of a country’s political culture, would be one of the factors affecting the operation of businesses, and even more significantly, foreign investments. In the political culture also would be legal issues that again affect commerce (Keegan & Green, 2015). This discussion, therefore, explores Brazilian political risks, and legal aspects affecting global trade. Brazil has, in the past, had several political events that significantly could influence how a business runs out in the country. Over the last decade, the country has experienced political crises such as Operation Carwash, Petrobras, and Odebrecht (Garvey & Cox, 2019). Despite the country's attempts towards reforms, these events have left memories amongst investors, that potentially keep them off the nation. Operation car wash, for example, left Brazil exposed to the whole world of the depth of corruption running inside the country. Additionally, the scandal caused lots of crises, involving billionaires and prominent companies as well as presidents (Watts, 2017). While the scandal finally cleared with the help of a dedicated police officer, the exposition would scare away investors. The Brazilian government has made efforts to clear off the unpleasant past, yet its owes are not over. Brazil Having realized the deficit, the nation is facing for development, Brazil auctioned in 2019, four of its deep-water oil assets. The auction did not go well as only two of the assets received bids, which were nevertheless of meager prices (Garvey & Cox, 2019). The attributable factor to the poor performance of the assets was simple: investors were still not confident on how the economy would evolve (Garvey & Cox, 2019). That event was ident of the assertions by Financial Times that public opinion and economic vents in a nation as much significance on investors' decisions (Financial Times, 2015). Besides political unrest, however, there are other legal issues related to global commerce. To start with, taxes in every nation do affect worldwide trade and business. While fees are used by governments to earn the nation revenue, they too can cause political unrest, and deter foreign investors (Keegan & Green, 2015). In Brazil, for example, the tax system is discouraging investors from flocking the country. There are numerous taxes in the country, under different government spheres, and this causes complexity in the nation (Sottovia, 2018). While high taxation provides a platform for a corporation to engage in cash transactions, it often leads, in the long run, to a liquidity squeeze, which in turn could lead to employee underpayment. In the end, political unrest may arise, viciously affecting the business (Keegan & Green, 2015). Another legal aspect that affects international markets is the seizure of assets by some host governments. A host government may decide over some factors, to seize the assets owned by a particular foreign company, crippling the company’s operations in that country (Keegan & Green, 2015). Laws on the seizure of property take different forms, where a government can expropriate a company's capital by disposing of the company (Keegan & Green, 2015). There is compensation provided, but times slowly. A government may take over part or all of the foreign business enterprises and providing adequate compensation to the business. The process is known as Nationalization (Keegan & Green, 2015). In any case of seizure of property, foreign global investment in that particular country is adversely affected. In summary, there are political, legal factors affecting foreign investment. In Brazil, the current political unrest, which traces roots to some years back, is a potential deterrent to foreign investors, despite the nation's efforts to correct the errs. Other legal aspects to global business have been identified to include taxation and seizure of property on foreign investors, by the governments. References Financial Times. (2015, July 1). How can companies navigate political risk? | FT Business [Video]. YouTube. https://www.youtube.com/watch?v=xeSFxXlLnZg&feature=youtu.be Garvey, M., & Cox, W. (2019, November 26). Brazil's political risk for infra investors. IJGlobal | Infrastructure Journal and Project Finance Magazine. https://ijglobal.com/articles/144189/brazil-political-risk-for-infra-investors Keegan, W. J., & Green, M. C. (2015). Global Marketing (8th ed.). Pearson. Sottovia, M. (2018, March 19). Top challenges of doing business in Brazil. TMF Group. https://www.tmf-group.com/en/news-insights/articles/top-challenges/doing-business-in-brazil/ Watts, J. (2017, December 21). Operation car wash: The biggest corruption scandal ever? the Guardian. https://www.theguardian.com/world/2017/jun/01/brazil-operation-car-wash-is-this-the-biggest-corruption-scandal-in-history  
Date 13 Aug, 2020