Important Aspects For Financial Integration

Important aspects for financial integration

Introduction

An important aspect of globalization is its financial integration. Financial integration seeks that markets be integrated, stable and sustainable. So that everyone has the same opportunities, terms and benefits. How financial globalization affects global companies? What positive or negative aspect does financial globalization have? How can this affect us? Let’s define important concepts of financial aspects. Exchange rates is the price of one currency in terms of another, (Sabino). Actions prices is the nominal value of the shares is the representation of a “portion” of the value of a company. 

When the shares are issued, the simple formula of the nominal value is the value of the divided company. The amount of shares issued. This results in the unit and nominal price of an action (the price of shares and stock markets, 2018). The bonds are certified issued by a government or a corporation, public or private, with promise to return to those who acquire the money taken to loan. The word is used in practice, more specifically, to designate the public debt titles issued by the State Treasury. 

Developing

The bonds, generally, accrue a fixed interest and are issued in the long term, although there are a large number of variants about it (Sabino). Actions are a title that establishes the proportional participation that its holder has in the capital of a company. As such, the action makes its owner and capitalist partner of the firm in proportion to the amount of shares that it has signed.

To the same extent he gives him the right to vote in the general assemblies of the company and to receive the dividends that correspond to him, to the profits obtained (Sabino). 

A financial instrument is a contract that leads, simultaneously, to a financial asset for a company and a financial liability or capital instrument in another company (Pereira, & Grande). An exchange rate is the price of one currency in terms of another. Exchange rates are important information that guides international transactions of goods, capital and services. The relationships between almost all the most used currencies are made public daily, showing the values for which they exchange with each other, although there is almost always a more important currency that is used as a reference to measure the value of the remaining.

Rodríguez Castellanos, Urionabarrenetxea Zabalandikoetxea & San Martín Albizuri, using a Suzuki appointment, “the integration of all nations would lead to globalization, so it would be correct to use the terms of international financial integration and financial globalization indistinctly;The latter is a total financial integration, to its maximum, worldwide ”. We must prepare for globalization. Like everything in life, nothing is perfect. Financial globalization has positive and negative aspects. What would be the positive and negative financial aspects of globalization? 

A positive aspect of financial integration is "the financial (and commercial) openness weakens these power groups, because external agents press the national financial system to better perform their functions" (Tovar García). When you separate national political pressures, you can have a more critical eye, on financial matters. Because politicians depend on campaign alliances and promises. Many of these promises are not financially viable. To Tovar García, talking about financial globalization “will destroy the privileged information of interest groups (which helps maintain their hegemonic condition).

The financial system will tend to modify and throw all the information available, given the confrontation and new demands of external economic agents, not subject to said interest groups … on the contrary, external financial agents may not be interested in competition,but in collusion and cooperation with local interest groups, to perpetuate and increase their power and favor market structures closer to oligopoly or monopoly, where they would always obtain exclusive information ”. In this case it will depend on the intention of external agents and their economic vision.

Another point that we can touch is "financial globalization is feasible that the best practices and techniques of financial supervision are extended by the globe, in such a way that corporate control is improved" (Tovar Gracia). Tovar García citing Shleifer and Vishny “On the contrary, Shleifer and Vishny argue that the liberalization of the stock market can weaken corporate control, because it reduces the incentives of the holders of titles, under the auspices of greater liquidity, to supervise the borrowers andadministrators ". Another aspect that brings tovar grace, “financial globalization favors risk diversification.

This is very obvious worldwide, because national and external agents can participate in many financial markets and share risks with many other agents. On the contrary, if there is an important market with preference for domestic assets of non -tradable durable goods and high transaction costs associated with international trade of goods and assets, incentives for international risk diversification could be considerably reduced ”. Also another aspect that Tovar García mentions is “the option that capitals flow freely through the globe favors the mobilization and meeting of savings on a global scale. 

The possibility of bringing domestic savings abroad in search of better yields favors that within each country financial agents work more efficiently at the meeting and mobilization of internal savings. Also, external savings are not supposed to replace internal savings. On the contrary, if financial liberalization provides better protection against uncertainty, it could in fact reduce the needs to save for the future and you could have a better stock market without an increase in savings (Devereux and Smith, quoted by Nioneur, Ghazouaniand omran) ". 

The last aspect that we can take into account about financial integration is "financial globalization aminora. I think this is the most important aspect of financial globalization, the reduction of costs in financial transactions. Global business operations are affected by financial, economic and geographical influences. How can we define financial influence? Financial influence in terms of financial management.

“It is an indispensable dimension in the business world and therefore the management of personal finances have the potential to positively impact performance in the company. The direction of this ability, by the financial manager, allows for good development in investments and business decision making, seeking greater financial benefit, for the primary objective of the entity ”(Chen, Dowling and YAP). Domestic financial systems perform their basic functions with different levels of efficiency, but thanks to financial globalization, which allows interaction with external financial agents.

It is possible to import the best financial practices through a Catching UP process, and thus favor not only financial deepening but also the development of the national financial system ”(Rodríguez Castellanos, Urionabarrenetxea Zabalandikoetxea & San Martín Albizuri 2008). The most important thing about financial influence is to develop a stable and sustainable financial system. So that it can impact the performance of companies and add efficiency to financial processes.

Global businesses are subject to the economic situation in countries that are found. These situations influence management decisions and the effective cost of operations. Global business operations are also affected by geopolitical conflicts. Causing changes in the cost of operation. Conflicts in the Middle East cause the increase in oil barrel. The so -called commercial war between the United States and China, which caused the increase in tariffs in both countries. We can define geographical influence, such as “the area of influence allows identifying the geographical space that the population that uses one or more services of an establishment inhabits”.

(Definitions of area of influence and area of responsibility). But, for Giraldo Oliveros & Esparragoza in his book Marketing Management tells us, “The culture of a country is learned, it is shared, it is intrinsically conservative and continuous. From the perspective of a multinational, cultural variables (including religion, language, values) serve to identify and define the target markets, plan income strategies and design the types of marketing (Sandhusen) ””. I understand that everything is based on the environment. Global companies have to adapt to the geographical and cultural environment.

The anecdotes listening to American companies of "Fast Food" have had to adapt to the palate and tastes in China. Where Kentucky Fried Chickn has been in the Asian country for more than 30 years. He had to vary his menu to stay in China. In Giraldo Oliveros & Esparragoza, he mentions two curious cases where companies had to adapt, to have sales and capture the public;"In Taiwan Pepsi he translated his motto" Relive with the Pepsi Generation "for" Pepsi will bring your ancestors back from among the dead ". The North American General Motors company launched Chevy Nova in South America;The company does not notice the meaning of "does not go" in Spanish. 

With the above, the company changed the name because the sales are scarce. The name they gave him was Caribbean ". Financial institutions have tried to influence nations with their neoliberal policies. According to Chonchol, the recommendations of “international financial institutions in addition to traditional stabilization measures such as reducing budget deficits, limiting the amount of money in circulation to reduce inflation, increase incentive for exports and reduce imports. Apply deflationary economic policies including salary restriction, set the exchange rate to an adequate level.

They demanded reforms such as the following: drastically reduce barriers to foreign trade, exposing local producers to competition with foreign producers;reduce or abolish subsidies and price controls, in order to eliminate so -called distortions to local prices of goods and services;withdraw controls on capital movements;privatize state companies;favor foreign private investment, withdrawing existing controls and minimizing state intervention. Not only in the administration of the economy but also to the provision of social services ”. Each of these neoliberal strategies will help strengthen the economy. 

Each of these recommendations are not nice, for many sectors. Due to the fact that they would be greatly affected. These strategies do not take into account that in developed countries they have protectionist laws. Let’s look at the case of the United States and Mexico, tariff tax. “The economic policy that Donald Trump has implemented collects well -paid employment demands, he awards such problems to the commercial treaties that the United States has signed. That according to him they have been poorly negotiated and led to the foreign trade deficit, to deindustrialization, low growth and the lower employment generation. 

Hence the protectionist policy, such as the flexibility of fiscal policy and financial deregulation, waiting for such policy(Huerta González). Not to mention the commercial war between the United States and China. This war has caused the fall of international markets. But, China has not stopped in its ambition of influence globally and possessing as the economic power of the world. If we look at the World Bank performance, the International Monetary Fund, the World Trade Organization.

We will find positive and negative points. The World Bank, the International Monetary Fund, the World Trade Organization has had detractors. Some “Human Rights activists affirm that the World Bank and the International Monetary Fund support governments that allow exploiting and enslaving workplaces and pursue policies that bring out public officials at the expense of local economies. In simple terms, an annoying feeling of injustice and frustration has emerged about commercial policies that ignore the concerns of the environment, to US workers and international work standards ”(Carbaugh). 

Those discomforts, has been a disagreement of the critics of these world organizations of finance. On the other hand, according to Carbaugh, "a failure of the international monetary system is that in recent years the large monetary crises have been quite common". These crises have allowed distrust in world financial institutions and bringing more voices against globalization. Since these crises have caused more inequality, which go against the purposes of these organizations, fight world poverty. “The World Bank and the International Monetary Fund were established at the United Nations Monetary and Financial Conference held in Bretton Woods.

 New Hampshire in July 1944. Developing countries consider these institutions as sources of funds to promote economic development and financial stability ”(Carbaugh). A World Bank role, the International Monetary Fund, the World Trade Organization, according to Carbaugh. "Among the institutions and policies that have been created to support developing countries are the World Bank, the International Monetary Fund and the Generalized Preferences System". There is no doubt that this support that emerging economies, such as China, India, Brazil, South Africa, among others;They have helped these countries their economic and financial growth. 

conclusion

The emerging economy is “from this perspective, the emerging qualification can be applied to those economies of the capitalist periphery that, depending on the progress of their restructuring efforts, have managed to establish the necessary conditions for their insertion in globalized dynamics and extract benefitsof it ". In other words, they are nations that have left underdevelopment and are in the process of development.  That have benefited the support of these financial institutions, to strengthen the growth of their economies. Globalization brings economic and financial integration. Although it has positive aspects, it also has negative aspects. 

We must be aware of this. If we want to take advantage of the benefits of globalization. In financial aspects we have to put their advantages into practice. There are financial, economic and geographical influences that affect global business operations. We must remember that economic activity will be subject to governments’ legal policy. The World Bank mission, the International Monetary Fund and the World Trade Organization is to reduce inequality and promote a global economic and financial system that is sustainable.