Creditworthiness

I would evaluate the creditworthiness of the firms in the countries where I am doing business, namely Germany , Poland , Japan , Canada , Venezuela and China according to their bank credit. The country that I chose for doing trade is Germany One of the largest companies that has subsidiaries in Germany is Ford Motor company.

Ford Motor company has been doing business for many years in Germany and its cars were known under various names, staring in the 1930s.

When doing international trade with Germany , Japan and Canada the risks would be significantly lower than when doing business with Poland , Venezuela and especially China , because the more developed a country's economy is, the lower the risks. China , with its communist regime would present a higher risk not only because of its economy, but also because of its political system. If my firm sells regularly to these countries, the transactions are completed through the international banking systems. I can evaluate the creditworthiness of the firms based on the reliability of their banking system, because this is the way the buyers would submit their payments and how I would get it. Banks must assure me that I will be paid for the goods I sold. That is why the bank has to be reliable. If it is not, then I face the risk of not being paid. In less developed countries, banks are not particularly reliable because they face economic struggles. That is why for me firm it would be more risky to sell to China , Venezuela and Poland than to developed countries like Germany , Japan and Canada In developing countries like Venezuela and Poland it is very important that banks offer credit, because otherwise no economic transactions could take place and their economies would not evolve. That is why a proper and reliable banking system is a crucial factor that leads to economic growth. In developed countries, like Germany , Japan and Canada banks enable immediate payment of goods, namely I would be able to receive the money for the sales in a very short time. Consequently, I can evaluate the creditworthiness of firms according to the banks through which the international transactions take place. Both the United States and Germany have strong economies and that is why the German firms' creditworthiness is high. "The United States is Germany's second-largest trading partner US exports to Germany were $49.6 billion while US imports from Germany were more than $79.2 billion Major US export categories include aircraft, electrical equipment, telecommunications equipment, data processing equipment, and motor vehicles and parts. German export sales are concentrated in motor vehicles, machinery, chemicals, and heavy electrical equipment."(www.state.gov.com). The credit risk is evaluated by analyzing the buying firms' financial state or through credit checks performed by US or foreign credit reporting agencies. However, the data that would be provided about China , Venezuela and Poland could be inaccurate. The credit information could be more easily evaluated in Germany , Japan and Canada

Credit risks are higher in these three developing countries than in the three developed ones because of the risk of the firm not being able to pay for the goods or being unable to receive financing. Restrictions on bank credits may also apply. In China , credit risks are especially high because of the state's control over banks. Consequently, their banking system is weak, they have "bad loans, repeated fraud investigations and antiquated computer systems unchecked lending to state companies and lax internal controls. It takes two to three business days to transfer money from a Bank of China branch in Shanghai to one in Beijing "(www.iht.com). In addition, for China, Venezuela and Poland it could happen that currency controls make it difficult for them to exchange money to the foreign currency required to buy goods. This issue is not expected to happen in Germany , Japan or Canada I would consider selling to countries without a letter of credit, if I can make sure that there are no major risks involved in trade. With Canada , the risks are small because Canada has a developed economy. In 2006 US trade with Canada totaled 230,580 in exports and 303,416 in imports. The US and Canada have the largest trading relationships and they have been very active trading partners. In order to have free access to trade, the US , Canada and Mexico formed a free trade area, NAFTA. That is why I could sell them goods without a letter of credit. To Germany as well. In 2006, US trade with Germany totaled 41,319 in exports and 89,072 in imports. The US is Germany 's second largest trading partner. Besides trading relationships they share cultural ties as well. Germany trade luxury limousines to the US Famous brands traded by Germany are Siemens, Schering, Hochtief, DaimlerChrysler, Porsche, BMW, Volkswagen, Bosch, Hella, etc. I would not sell to Japan without a Letter of Credit, because they still face many problems in their trading relationships. Japan imposes many restrictions and is difficult to be penetrated by foreign firms because of their traditional culture. In 2006, US trade with Japan totaled 59,649 in exports and 148,091 in imports. I would also require a Letter of Credit for China US exports are very high because of China 's cheap labor. China is considered to be an emerging economy and is a very important trading partners to the US In 2006, US trade with China totaled 55,224 in exports and 287,772 in imports. The US is also a leading trading partner for Venezuela The United States is an important exporter to them. Trade, still involves risks because of its developing economy. That is why a Letter of credit would be necessary to avoid Venezuela 's inability of payment. In 2006, US trade with Venezuela totaled 9,011 in exports and 37,165 in imports. Poland is a member of the World Trade Organization and the European Union. "The United States and Poland have enjoyed warm bilateral relations since 1989."

(www.state.gov.com.). However, there is not a very large international trade between the two countries. In 2006 US exports to Poland totaled 1,960 and imports totaled 2,254. I would want in China, Poland and Venezuela the letters of credit to be confirmed by an American bank because in the case of countries that have government restrictions on foreign currency, have high debts and a bad balance of payments, the letter of credit would not be enough to ensure payment, or the foreign bank could be untrustworthy. In addition in case of legal action, it is better to appeal to an American bank.That is why a confirmation by an American bank would be needed to ensure that the foreign firm will pay. However, this is not the