Kids Style
Political, Governmental, and legal variables
When it comes to creat a service industry there are some variables that all companies have to take in count, this are the legal gornmenta, and legarl varibles. This are very important because this are the one that regulate and are valued by the government, and are the one that all people have influence with.
Government regulations or desregulations
A regulation is a series of rules or conditions that a company have to do according to the government to maintain an order and an armory with all factors inside the country and avoid problems and fines. There are different types of regulations in the service industries depending of the kind of service for example, a health industry service have to take care of regulations of the Health department, or if the industry uses chemicals in their process they have to take care of the environmental regulations. On the other hand deregulations are the regulations that the government decide to take away or avoid to some businesses and this help to make the process quicker and better, this happen in some service industries, “The only important and current threat to the continuity of deregulation is a consequence of the collapse of Enron: the threat of uncertain regulation of accounting, corporate governance and marketplace values" (William Niskanen, “Regulatory change over the Past Quarter Century) All this have a big influence in the government, that’s why industries have to take care of this aspects.
Changes in tax laws
A tax law is a payment that all businesses have to pay for the performance of it; Colombia had some changes in law taxes that all businesses in all industries have to take care about. “Nonresidents, domestic or foreign individuals, foreign companies and foreign entities also would be subject to the new wealth tax. The tax would be applied to equity held directly in Colombia and equity held indirectly through permanent establishments (PEs) or branches.”(Global Tax Alert, EY Building a better working world, 2014) A factor to take care of this is that this tax will be progressing depending of the amount of money that the company, individual, etc. work with, this can affect the service industry because if this in tax law is implemented this industry have to take care of it and adapt to it.
Special Tariffs
A special tariff in the taxes that some entities with no profits are allowed to pay a tariff lower that companies that work for money. This special tariff do not affect our industry because it works for profit.
Political action committees
The political actions committees are groups of people that try to solve some problems of society that are very common and that have influence in some problems of society. There are groups for protecting the environment, for poverty, etc. This groups are some groups that service industry have to take care about, but not have a huge influence in this industry. Some of this groups is UNICEF .
Voter participation rates
Voter participation rates is the way to show how Colombians are involve with the decisions and the future of the country. Colombia is a democratic country where people have the right to vote for the people that they want to be represented by, in the last years Colombia had a percentage of people that didn’t vote, in the last elections for president. The participation rates don’t affect directly the service industry.
Taken from: Colombia.com, elecciones presidenciales 2014 (http://www.colombia.com/elecciones/2014/presidenciales/)
Taken from: DANE, Dirección de Regulación, Planeación, Estandarización y Normalización (https://www.dane.gov.co/files/investigaciones/ecpolitica/informe_ECP_07.pdf)
Number, severity, and location of government protest
Colombia is a country that by law people have the right to protest for their rights without harm other people. In the last few years there have being a number of protest that are response of some actions that the government had implemented as “El paro agrario” one of the biggest protest of the last years, where service workers protest about new alliances that the government had been implemented. On the other hand, other protest have been implemented towards the government for not pay attentions to aspects like health, inequality… “Las protestas se encuentran a lo largo y ancho del territorio nacional. En Bogotá D.C. gravita un número significativo de estas luchas sociales, aunque parte de los conflictos que se expresan no se desarrollan en la capital” (Cinep, La protesta social, 2014) This can affect the service industry, because some of this are towards the industry, and the influence that this protests can influence in the work of it can give a lot of trouble, legal, political, economic, and also social.
Number of patents
A patent is a document that is given to the investors where the money that is in inverted is protected by the government and is ready to be commercialized in the market. This is something that all industries have to take care about, is very important because is one of the first steps that need to be implemented in order to create a new business. Colombia is a country where this patents are growing year after year, and this can impulse the economy.
Taken from: El espectador, Colombia, el pais de las patentes, 2015 (http://www.elespectador.com/noticias/nacional/colombia-el-pais-de-patentes-articulo-418418)
Changes in patent laws
How is already mention this laws are investment projects that are realized by the government, this can be allowed or not. In Colombia there are not of changes of this patents, just that now the investor can make only one first investment and then give the solicitude to the government, years back investors can make 2 or 3 changes in the credit and then solicit the patent. This affect the industry in the way that investors of each project have to show the government that is a solid project that will bring good thing to the country.
Environmental protection laws
In Colombia and around the world there are many environmental protection laws for different kinds of business that have to be implemented otherwise companies will be punish. In Colombia this laws protect all different kinds of nature, natural recourses, national treasures and different kinds of natural pieces of the country.
Level of defense expenditures
Level of defense expenditures are all the expenses that are related to protection of the country, for example military, arms, nuclear weapons etc. that the government invert for protection of the country. This did not affect the industry, because is something that is a part of the industry, but Colombian government implement some money for the ARMY of Colombia.
Legislation of equal employment
A legislation of equal employment in Colombia is a law that protect all people saying that all community have to have the same opportunities of work, and living regardless of the gender, economic conditions, age (with some conditions), race, etc. The law 1495 of 2011, says that all people have to have the same salary payment, and there are some mechanisms to avoid discrimination.
Level of government subsides
A subside is when the government help the citizens with some elements that are crucial for leaving, Colombia government have different kinds of it: home, health, educational, inter alia. This is not related with the service industry, because there is no relation between subsides and a private enterprise.
Antitrust legislation
The antitrust legislation according to “The finance weblog”, is a rule which is the one that implement the prices in the market, this are intended to regulate the commerce and avoiding commercial restrictions, and trying to benefit the consumers, business, and all economy. This is very important in all industries, this is a rule that is very important to follow very carefully so all economy stay stable and keep benefiting businesses, people and commerce.
Relationships between Colombia and China
The relationship betwen these countries started 35 years ago and these relationship is be described various sources and the Ministry of foreing affairs itself as a very positive and benefitial relationship. China has a market of aprox. 1.400 millon people. There is currently a defitic in trade between the two countries, Colombia is exporting 46 tariff headings, and importing 942. Not because of trade bariers from the contry, but beacuse of the supply in terms of numbers. Colombia’s economy hasnt been able to take advantage of this huge market. The same happens for investment, China has been investing in Colombia and now accounts for hundreds of multinationals in the country. The two govermets are currenty studyng the posibility for a free trade agrement. All of this factors represent both and opportunity and a threat for the services sector. It is a huge opportunity for the country to enter this vast market, but the offer of colombian products and services hasnt been big enough. It represents a threat as well, because of all the big companies, including services, challenge colombian enterprises and products to become more competitive.
Relationship between EU and Colombia
EU and Colombia account for an optimal political relatioship. Colombians will be exempt of Visa to enter the European Union by the second half of 2015. Colombia-EU tarde is currently on surplus by € 2.351,2 millon, acording to the Delegation of the European Union in Colombia. Regarding investment, Colombia has invested in the EU USD5.13 Billon, accounting for 17% of the stock of FDI of Colombia. Major investments happened in the United Kingdom and Luxemburg. This is a very good opportunity for the services industry in Colombia, but the major issue has been, and as the Delegation of the EU for Colombia has stated: “Untill now, colombian investors have very little knowledge of bussiness ventures and investment in the EU, however Colombians will be able to entrer unexplored markets utill now, with the implementation of the comercial aggrement, celebrated in August 2013.” Colombians investors have the opportunity to enter this extrely diverse market of several countries, that represent 500 millon people, and a per capita income of € 25.700, four times the colombian per capita income, USD7.800, as 2013.
Relationship between Colombia and Rusia
Relationship between Colombia and Africa
According to Portafolio: African economies represented the biggest growing rates in the last 4 years. North african countries grew 4.7%, and South Saharan countries gre 3.1%. Their economy grew faster than their population, which implies better life quiality. Portafolio states: Colombian entrepreneurs need to ask the goverment to subscribe free trade agreements and assit to bussiness rounds with african countries, a very unexplored country by colombians, commercialy speaking, which is starting to potray as a consumer of foreing products and services. The balance of trade is favorable for Colombia, accounting for USD 183 millon and surplus of UDS18 millon indeed, the importance of Africa for colombian entrepreneurs. Colombia has established relatioships with certain states as Ghana, Egypt, South Africa, Kenya, Argelia, Morroco, among others, and has been encouraging relationships with Botsuana, Etiopía, Mozambique, Namibia, Tanzania y Zambia. Colombian experience has been given to several states regarding dismantling, desmovilizantion and reintregration such as Liberia, Somalia, Eritrea, Burundi, Uganda, Ruanda, and Angola
Import and Export of services regulations
According to Dinero, despite Colombia is a net importer of services, US$10 Billon against 5.1 Billon of exportations, several colombian enterpises in the services sector have had a succesfull internationalization process in the last years. Examples of this are EPM’s operations in Central America, ISA’s operations in Chile, Brasul, Ecuador, Peru and Bolivia, Grupo SURA’s adquisition of Holland’s ING in Chile, Uruguay, Peru and Mexico, Grupo Aval’s adquisition of BAC Credomatic in Central America, Bancolombia’s adquisition os HSBC’s operations in Panama, among others. According to OMC, OIT and UNCTAD, people employed in services accounted to 44%. Colombias service sector growth has been 10% year since 2010. Only 5 countries account for 55% of worlwide services export: UK, Germany, France, China and US.
Goverment fiscal and monetary changes
Fiscal and monetary policy changes are mecanisms used by the goverment that could affect a sector if the coutry is trying to drive the economy to archieve certain goals. Banco de La Republica defines: “Policy that the public sector persuits regarding decisions about spending, taxes, and debt. The main objective of this policy is to facilitate and encourage good performance of the national economy to archeive acceptable or optimum levels of growth, inflation and unemployment, among others.” Currently inflation rate in Colombia is 3.8%, which is inside the acceptable range for the country.
Regarding Monetary policy in Colombia, Banco de la Republica also states: Monetary policy in Colombia is governed by a scheme of inflation, its porpuse is to mantain inflation low and stable, and achieve a growth in product according to the potencial capacity of the economy. This means that the ovjectives of the monetary policy combine the goal for price estability with the maximun sustainable growth of product and employment. While inflation goals are believable, this objectives are compatible. Food, health and trasportation increasted the cost of living on Colombia for January 2015. The overall performance of these policies incentivates large and small businesses in all kinds of sectors, specially regarding interest rates.
Political conditions on foreign countries
Political stability, the philosophy of a goverment, and their attitudes toward capitalims are a key variable that benefits or threatens any business. Democratic states, where the political power is in the hands of people, electing representatives to rule for them, are goverments that provide free market conditions, little or no intervention or power of desicion in economic activities, and protection to private property are the optimal environments to start business ventures. Examples of these coutries are United States, Canada, Australia, Sweden, Norway and UruguayIn the other hand, countries that are not considered pluralistic, tend to by autoritarian,like Rusia and China, but still have protection toward private property and have a mixed market. In the most extreme cases, states become totalitarian, such as North Korea, Iran, Saudi Arabia and Cuba. In goverments like this, risks for entrepreneurs are very high, because the political power resides in very few hands, in some cases, just one person. The economic activity and production is extremely regulated and dictated by the goverment to benefit a few, so there is not free market. Individual rights are not ensured, and there is no protection for private property, threatening businesses from criminal activities and the goverments themselves, these countries tend to be more hostile to foreign investment and represent huge risks for investors. A business needs to learn to adapt to the environment of each country to ensure survival, long term stability and profits.
Special Local, state, and federal laws
Key laws that are very important to focus on, that affect international bussinesses are: Intellectual property laws, comercial laws within countries, environmenttal, foreign countries antitrust laws and cyber laws, according to L. Graham. International marketing and Kristiaan Helsen, Global marketing management. When resolving conflicts, the legal issues are resolving having on account: “Clauses on contracts, where a contract was entered into, and where the provitios of the contracts were peformed” According to various sourcer, This as a consequence that there is not such a thing like an international legal system.
Lobbying activities
Lobbying activities refer to the influence on certain laws through a congressmen that may affect a bussiness or a business comminity. This activities are postive for commerce, according to various sources, because through them, the interest of a group of people are passive represented to the goverment. Lobbyg allows congressmen to actually perform informed desicions regarding certain topics, because lobbying groups or individuals against and in favor of a law present informed and objective reason of their side to the congressmen to decide. Semana states that Colombia is one of the countries that invest the most on lobbyng in the United States, spending 116 millon dollars on lobbyng firms. Coffee sector is the one that invests the most in lobbying.
Goverment Budgets
Keynes stated that “when the economy was s in a downturn and unemployment of labor and capital is high, governments can spend money to create jobs and employ capital that have been unemployed or underutilized.” Keynes's theory has been the rational behind the current federal stimulus spending: “it is needed to boost economic output and promote growth.” However public spending in the private sector can be used to merely perpetuate or benefit political power in different regions, according to Thomas Stratmann and Gabriel Lucjan Okolski form George Mason University. This is unproductive spending from the goverment. They explain that taxes finance the goverment spending, this means that and increaste of goverment unproductive spending results in an increaste of taxes rates on citizens, either in the present or the future, which leads to reduction in private spending and investment. This also leads to reduce savings, thus increase in interest rates. Goverment spending may result positive while the goverments and policy makers are well informed about the effect of the spending on production, unemployment and capital.
World oil, currency and labor markets
This three markets and changes in them deeply affects the global economy, depending on changes affect certain countries more than another, having impacts on the economic performacne of a country, politics, spending, investing, profits and wages. For example, changes in oil prices affect income, spending, interest rates and the performance of several bussinesses in a lot of countries, but this affects energy exporting countries very deeply, affecting directly ther GPD, the profits, spending and the growth of the economy. In money markets, for exmaple, changes in the prince of the dollars compared to other currencies change prices for exports and imports in countries, altering spending, costs, people’s incomes and the economy. Changes in the offer and demand of the labor market similarly affect consuming, prices, demand and supply of products and services, performance and welfare of the economy, bussinesses and consumers.
Location and severity of terrorism activities
Terrorism has a direct effect of damage to the economy of the region of the country where it happens, and “also secondary consecuences” according to the US Council of Foreing Relations. As the Council says, the primary effects are the inmediate damage on material (private and public property) and inmaterial damage (lives). The secondary consecuences are: “A push toward recession, growing risk aversion, investment, impact on insurance companies, spike in the goverment Budget on defense and military, reconstruction, money markets, among others.
Local, state and national elections
Brian Jacobsen, Chief portfolio strategist of Wells Fargo states: “They matter a lot(elections), not only as investors but also as citizens obviously. But for investors you can think of an election as a time when the entire political landscape can change. The effects on corporate profits and on economic growth in the outlook for the entire economy can change with an election.” According to several media, there is a common belief that teh election of a president is not related to the economic growth of a country or region. Jacobsen says: I think presidents do affect the economy. The president can really set the tone for how people view the future, and expectations of the future play a very important role in determining what gets done today.