Morris

3143 Words Mar 4th, 2012 13 Pages
Case 19 | Morris de Minas | By Ian H. Giddy |

Vijak Pongtippun Viwan Wongviriyawong Wenyu |

Introduction In August 1984, Morris Mini Mainframe Computer Company in New Jersey was looking for the most desirable financing alternative for Morris de Minas Ltda, its Brazilian affiliate, in the working capital needs of 82,650 million cruzeiros or US $39,320,000; at the exchange rate of 2,102 cruzeiros per US dollar. David Albuquerque, the vice-president of finance for the Latin American Division, was in charge of exploring possible financing arrangements and preparing a financing alternative plan. Albuquerque believed that Brazilian expected inflation rate and tax legislation, and the future exchange rate would play major roles
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However, the economy recovered rapidly during 1968 to 1973 with averaging over 10 percent per annum. The GDP also increased at a rate above 5 percent per annum between 1974 and 1980, except for 1978 (see Exhibit 2). However, Brazil had incurred an extremely high level of indebtedness due to the support of this massive development program. The high interest rates on dollar funds and the unwillingness of foreign lenders to advance additional loans caused a deep economic recession in Brazil. Interest rates directly affect the credit market (loans) because higher interest rates make borrowing more costly. As a result, Brazilian government who aimed to balance the payment had to ask the International Monetary Fund (IMF) for funds.
Exhibit 2: Morris de Minas, Brazil’s Gross Domestic Product | 1979 | 1980 | 1981 | 1982 | 1983 | Total (CR $ billions) | | | | | | At Current Prices | 6,239 | 13,104 | 26,833 | 53,150 | 130,805 | Real Increase (%) | 6.8 | 7.9 | -1.9 | 1.4 | -3.3 | Per Capita (CR $ thousands) | | | | | | At Current Prices | 54 | 110 | 220 | 425 | 1,021 | Real Increase (%) | 4.2 | 5.4 | -4.1 | -0.8 | -5.4 |

As the export performance of Brazil

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