International Financial Corporation

In 1956 the International Financial Corporation (IFC) was established to promote privay enterprise within countries. Composed of a number of member nations, the IFC works to promote economic development through the private rather than the government sector. It not only provides loans to corporations but also purchases src thereby becoming part owner in some cases rather than just a creditor. The IFC typically provides 10 to 15 percent of the necessary funds in the private enterprise projects in which it invests, and the remainder of the project must be financed through ofther sources. Thus, the IPC acts as a catalyst, as opposed to a sole supporter, for private enterprise development projects. It traditionally has obtained financing from the World Bank but can borrow in the international financial markets.

International Development Association

The International Development Association (IDA) was created in 1960 with country development objectives somewhat similar to those of the World Bank. Its loan policy is more appropriate for less prosperous nations, however. The IDA extends loans at low interest rates to poor nations that cannot qualify for loans from the World Bank.

Bank for international Settlements

The Bank for International Settlements (BIS) attempts to facilitate cooperation amond countries with regard to international transactions. It also provides assistance to countries experiencing a financial crisis. The B's is sometimes referred to as the "central banks' central bank" or the "lender of last resort." It played an important role in supporting some of the less developed countries during the international debt crisis in the early and mid-1980x. It commonly provides financing for central banks in Latin American and Easten European countries

Organization for Economic Cooperation and Development

The Organization for Economic Cooperation and Development (OECD) facilitates governance in governments and corporations of countries with market economics. It has 30 member countries and has relationships with numerous countries. The OECD promotes international country relationships that lead to globalization.

Regional Development Agencies

Several other agencies have more regional (as opposed to global) objectives relating to economic development. These include, for example, the Inter-American Development Bank (focusing on the needs of Latin America), the Asian Development Bank (established to enhance social and economic development in Asia), and the African Development Bank (focusing on development in African countries).

In 1990, the European Bank for Reconstruction and Development was created to help the Eastern European countries adjust from communism to capitalism. Twelve Western European countries hold a 51 percent interest, while Eastern European countries hold a 13.5 percent interest. The United States is the biggest shareholder, with a 10 percent interest There are 40 member countries in aggregate.

How International Trade Affects an MNC's Value

An MNC's value can be affected by international trade in several ways. The cash flows (and therefore the value) of an MNC's subsidiaries that export to a specific country are typically expected to increase in response to a higher inflation rate (causing local substitutes to be more expensive) or a higher national income (which increases the level of spending) in that country. The expected cash flows of the M\C's subsidiaries that export or import may increase as a result of country trade agreements than reduce tariffs or other trade barriers.

Cash floes to a U.S.-based MNC that occur in the form of payments for exports manufactured in the United States are expected to increase as a result of a weaker dollar because the demand for its dollar-denominated exports should increase. However, cash flows of U.S.-based importers may be reduced by a weaker dollar because it will take more dollars (increased cash outflows) to purchase the imports. A stronger dollar will have the opposite effects on cash flows of U.S-based MVCs involved in international trade.