POLITICAL ECONOMY ISSUES

According to Hill (2014, p.80), 'the benefits, costs, and risks associated with
doing business in a country are a function of that country's political, economic
, and legal systems'. Hence, in determining whether Myanmar or Chile should be t
he export destination of its FrutyMix product, a key question FruGenix will cons
ider is which country's political, economic and legal system more favourably inf
luences the benefits, costs and risks of doing business in that country? Hill (2
004, p.86) suggests that the guiding principle FruGenix can apply in navigating
this 'benefit-cost-risk trade-off' between Burma and Chile is as follows:
other things being equal, the benefit-cost-risks trade-off is likely to be most
favourable in politically stable developed and developing nations that have free
market systems and no dramatic upsurge in either inflation rates or private-sec
tor debt. It is least likely to be favourable in politically unstable developing
nations that operate with a mixed or command economy or in developing nations w
here speculative financial bubbles have led to excess borrowing.
Examining Myanmar and Chile against the above principle reveals important simila
rities and differences between the political and economic systems of the two pot
ential export destinations. Comparatively speaking, both countries are currently
'politically stable' to an acceptable degree from FruGenix' point of view thou
gh under different political systems, both having come from under dictatorships
or 'command economies' in the past, Burma more recently. As to whether either co
untry is seeing a 'dramatic upsurge in either inflation rates', both the IMF a
nd the World Bank have reportedly warned against 'runaway inflation' in Myanmar
which has 'doubled over the past year' despite the country's bright economic pro
spects (Htike 2014, Mahtani 2014). Htike blames Myanmar's increasing inflation o
n macroeconomic mismanagement by the government, quoting a local independent eco
nomist as saying that 'the government recently took some actions that could have
caused primary food prices to go up. This can accelerate inflation and make poo
r people poorer' and, citing a local price index adds that ' the prices of meat,
fish, vegetables, fruit and other basic foods have increased by about 20pc' in
a certain month (Htike 2014)', exemplifying the 'economic' and 'political' risks
that Hill (2014, p.82) warns 'can harm the profit and other goals of a particul
ar business enterprise'. Unless FruGenix can retail FrutyMix at a low price , t
his inflation situation in Myanmar could likely impede its overseas sales and pr
ofitability goals.
Conversely, the 'average inflation of Chile in 2014 is 4.14%' (Inflation.eu 2014
) which is in keeping with one analyst's prediction that 'Chile will continue it
s...low inflation growth in 2014' (Mallen 2014). Because Chile has been more dem
ocratic for a longer time than the recently reformed Burma, FruGenix is less lik
ely to have to pay off 'politically powerful entities' there than in Burma which
has only recently come out from under decades of military rule, since 'the need
to pay what are essentially bribes is greater in closed totalitarian states' (H
ill 2014, p. 81) reducing the costs of doing business in Chile relative to Myanm
ar.
FruGenix Inc. will also need to rely heavily on contract law in all the export a
greements and strategic alliances neccessary for entry into either Chile or Myan
mar. This brings up the matter of 'legal risks' which arise 'when a country's le
gal system fails to provide adequate safeguards in the case of contract violatio
ns' (Hill 2014, pp.82-83). In Chile 'contract enforcement takes 480 days, costs
28.6% of the value of the claim and requires 36 procedures' (World Bank Group 2
014a, p.79) compared to '1160 days, 51.5% of the value of the claim and 45 proce
dures' in Myanmar (World Bank Group 2014b, p.79). So on the legal front, compara
tively speaking, Chile will likely present less legal challenges than Burma as a
starting point to FruGenix' efforts to globalize its enterprise.