A presentation that offers a general perspective of one of the more important topics related with the foreign entry modes.

1. COUNTERTRADE
Jordy Steve Mancilla Castillo
Juan David Ocaña Oviedo
Course:
International Business I
Head of the Course:
Luis Gerardo Pachon
Project Due:
17th/09/2012

2. ¿COUNTERTRADE?
• Means exchanging goods or services which are
paid for, in whole or part, with other goods or
services, rather than with money.

3. HISTORY OF MODERN
COUNTERTRADING
• Throughout history countertrading occurred
whenever there was a shortage of money, or
before money even existed.
PRE THE
WORLD COLD
WAR II WAR
POST
COLD
WAR

4. NECESSITY
• Countertrade also occurs when countries lack
sufficient hard currency, or when other types of
market trade are impossible.
• ¿WHY COUNTERTRADE?
Elderkin & Norquist, in their book "Creative
Countertrade," say that companies countertrade in
order to:

6. REPATRIATE CLEAN UP BAD DEBT
BLOCKED FUNDS SITUATIONS
KEEP FROM LOSING GAIN FOREIGN
MARKETS TO CONTRACTS FOR
COMPETITORS FUTURE SALES
FIND LOWER-COST
PURCHASING
SOURCES

7. USES
• Main reasons why countertrade is used:
• MONEY:
• SOME PEOPLE CANNOT PAY IN THE CURRENCY YOU WANT.
1.
• "TO GAIN A COMPETITIVE ADVANTAGE OVER COMPETING
SUPPLIERS."
2.
• THE POLITICAL ENVIRONMENT :
• LOCAL JOBS AND INDUSTRY.
3. • RULES AND REGULATIONS TO PROTECT THE HOST COUNTRY.

8. TYPES OF COUNTERTRADE
• countertrade can be a lot of things depending
on who is involved .
• There are six main variants of countertrade:

9. BARTER
• Exchange of goods or
services directly for other
goods or services without
the use of money as means
of purchase or payment.

10. SWITCH TRADING
• Practice in which one
company sells to another
its obligation to make a
purchase in a given
country.

11. OFFSET
• Agreement that a company will
offset a hard - currency purchase
of an unspecified product from
that nation in the future.
• There are two distinct types:
Direct
Indirect

12. COUNTER PURCHASE
• Sale of goods and services to
one company in other
country by a company that
promises to make a future
purchase of a specific
product from the same
company in that country.

13. BUYBACK
• occurs when a firm builds a
plant in a country - or supplies
technology, equipment, traini
ng, or other services to the
country and agrees to take a
certain percentage of the
plant's output as partial
payment for the contract.

14. COMPENSATION TRADE
• is a form of barter in which
one of the flows is partly in
goods and partly in hard
currency.

15. PROS AND CONS
• Counter-trade offers three major benefits:
• Countertrade has its pros and cons. A major
benefit of countertrade is that it facilitates
conservation of foreign currency. Other
benefits include increased
employment, higher sales, better capacity
utilization and ease of entry into challenging
markets.

17. • Counter-trade also involves significant risks:
• A major drawback of countertrade is that the
value proposition may be uncertain, especially
in cases where the goods being exchanged
have significant price volatility. Other
disadvantages of countertrade include
complex negotiations, potentially higher costs
and logistical issues.

19. COUNTERTRADE STRATEGIES
DEFENSIVE. PASSIVE.
REACTIVE. PROACTIVE.

20. REFERENCES
• Countertrade. (2005) London countertrade round table, Available:
http://www.witiger.com/internationalbusiness/countertrade.htm
Last accessed 9th September 2012.
• Definition of countertrade. (2012) (I) Investopedia, Available:
http://www.investopedia.com/terms/c/countertrade.asp#axzz260E
nBRns Last accessed 9th September 2012.
• Pros and cons of countertrade. (2011) Impexpedia blog, Available:
http://impexpedia.com/blog/2011/09/09/pros-cons-counter-
trade/. Last accessed 9th September 2012.
• The History of Countertrading (2012) eHow.com, Available:
http://www.ehow.com/facts_7151203_history-
countertrading.html#ixzz260LkXGsE. Last accessed 9th September
2012.