Global Financial Flows and Developing Countries Quiz

Global Financial Flows and Developing Countries

• FPI, or Foreign Portfolio Investment, is akin to stock investment and offers ease of access but lacks control over actuarial firms.
• Remittances, or money sent from developed countries with higher wages, provide stable financial support for families in developing countries.
• Joint ventures involve partnerships with equal control between domestic and foreign entities to invest and operate companies in developed countries.
• The case of Argentina highlights high inflation and interest rates, leading to IMF intervention and subsequent political upheaval.
• In the case of Korea, excessive bad loans led to a restructuring process that involved painful repayment efforts.
• China carefully manages Foreign Direct Investment (FDI) to focus on high-growth industries and technology spillover, while Venezuela failed to benefit due to a lack of caution.
• The balance of payments is achieved when the sum of the current account, capital account, and cash account equals zero.
• Developing countries have experienced mostly negative current accounts and a shift from strongly positive financial accounts to less positive or negative accounts over the last 30 years.
• The 1980s debt crisis was triggered by excessive borrowing, rising interest rates, oil shocks, and protectionism in developed countries.
• Mexico's response to its debt crisis in 1982 involved halting capital investment and causing a contagion of fear of default, leading to currency devaluation and increased demand for the US dollar.
• The IMF's solutions to the 1980s debt crisis included debt restructuring, concessional terms, and the imposition of stabilization measures such as the Brady plan.
• The IMF, World Bank, and WTO play pivotal roles in stabilizing currencies, providing financing, and addressing trade barriers but face critiques for their profit-focused policies and lack of allowance for growth.