Case study

Traditionally bank debt is a very serious problem for economy of different countries, especially for developing ones. This is why the investments in the local currency traditionally aim at the improvement of the situation concerning the bank debt and the rate of national currency.
On analyzing the situation suggested, from the first glance it becomes obvious that the three countries are in quite a difficult situation and each of them need some additional investments in the local currency in order to keep sustain development and speed up the progress of national economies.
In order to better understand the cost of a $45,000,000 assembly plant investment in local currency and rank properly the countries, it is necessary to briefly analyze the situation in which the countries are supposed to be. Actually it should be pointed out that the situation is purely hypothetical because regardless different initial situation with the prices on Latin America bank debt, it is practically impossible to provide absolutely equal economic conditions, as well as political ones, for suggested investments.
Nonetheless, admitting that such a situation is possible, it is necessary to point out that the cost of the investment will directly depend on the situation with the bank debt in the threes countries. In other words, the lower the bank debt is the lower the cost of investments will be. In such a situation it is necessary to analyze the dynamic of the bank debt in each of the three countries in the context of the changes and development suggested.
Initially, Mexico seems to be in the best situation since the prices on its bank debt are 41.32. In a worse position is Venezuela with the prices on its bank debt constituting 54.25, while the position of Chile seems to be the worst since the prices for its bank debts are 70.25. Obviously the situation will change after the attempt of national banks of each of the countries mentioned above to redeem the bank debt. It is very important that the figures vary quite significantly from 45% for Mexico, 63% for Chile, to 75% for Venezuela of face value in a debt-for-equity swap, aiming at the improving the situation with the bank debt and strengthening national currency through additional investments.
On figuring out the changes that could occur after such measures undertaken by the central banks, it is obvious that the prices on the bank debt will change dramatically and in such circumstances if all other factors are equal the price on bank debt of Venezuela will be the lowest, followed by Mexican and Chilean ones for the redeeming of the bank debts by national banks leads to decreasing of prices and the higher the percentage the bank debts are redeemed the lower the price will be.
Consequently, taking into consideration the correlation and interdependence of the bank debt and cost of investments in the local currency the latter will be ranked correspondingly to the decrease of the bank debt. To put it more precisely, the lowest costs will be in Venezuela, than higher in Mexico, and the highest costs will be in Chile.

Bibliography:
1. Davidson, L.E. The Bank Debt in Developing Countries. New York: Touchstone, 2000.
2. Nichols, D.A. Economy and Investments. New York: Routledge, 1998.