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Useful information from the World Bank on the ease of doing business in many different countries
can be found at
www.doingbusiness.org/documents/Press_Releases_08/DB_08_Oveview_English.pdf.
Also see the Index of Economic Freedom at
www.heritage.org/research/features/index/chapters/pdf/index2008_execsum.pdf.
Lesson from China case: Even though the Chinese government has been very favorable to business
with its exchange rate policies and openness, there can be significant risks that should be considered.
These risks add to the rate of return required on any investment.
Local Partner: Robinson Investment Case
The Robinson Company is a U.S. firm that found a new way to process high-end coffee for use in
upscale restaurants. It is considering a joint venture with CCB, a Colombian firm that grows and
processes coffee beans. Robinson has a patent for its new coffee-processing method, and this is
motivating the company to expand beyond importing coffee. Robinson plans to invest $20 million in
the proposed joint venture (JV) project, which will help to finance CCB‟s production using the newly
patented process.
The Colombian government offers to guarantee that all profits, after tax, can be repatriated into U.S.
dollars, and it will guarantee that the exchange rate will be the same for five years as it was on the day
of the contract signing. Robinson and CCB have agreed that all profits will be divided equally
between the two companies.
The plan is to locate a new facility in the Free Trade Zone, which will make the venture free of
Colombian income taxes. Otherwise the corporate income tax rate of 35% would apply. There is a 7%
tax on dividends from subsidiaries to parent companies that will apply.
Robinson also pays a U.S. corporate income tax of 35%.
Robinson is aware that there is some political instability. The Central Intelligence Agency (CIA)‟s
World Factbook has the following publicly available information:
Colombia‟s economy has experienced positive growth over the past five years despite a serious
armed conflict. In fact, 2007 is regarded by policy makers and the private sector as one of the
best economic years in recent history, after 2005. The economy continues to improve in part
because of austere government budgets, focused efforts to reduce public debt levels, an exportoriented
growth strategy, improved domestic security, and high commodity prices. Ongoing
economic problems facing President Uribe include reforming the pension system, reducing high
unemployment, and funding new exploration to offset declining oil production. The
government‟s economic reforms and democratic security strategy, coupled with increased
investment, have engendered a growing sense of confidence in the economy. However, the
business sector continues to be concerned about failure of the U.S. Congress to approve the
signed FTA (Free Trade Agreement).