Changes In Business Plan Due To Venezuelas Accession To Mercosur Essay

Changes In Business Plan Due To Venezuelas Accession To Mercosur - Essay Example This business plan will look at the response of a coffee manufacturer as a result of Venezuela's acceptance as associate member in Mercosur. The first part will look at the benefits and drawbacks of the acceptance to the whole country. The next section will be looking more closely at the micro level by examining the results of Venezuela's accession to a local coffee manufacturer. Venezuela is expected by other MERCOSUR member nations to make "limitless contribution [to MERCOSUR] in the economic, commercial, cultural and political fields" (Bolduc 2006). Venezuela is currently one of the largest producer and exporter of oil globally. It should be noted that the petroleum industry accounts for almost one third of the country's gross domestic product and almost 80% of export revenue (Venezuela 2006). The trading partners of Venezuela will gain from the company's resources. It should be noted that MERCOSUR's goal is the reduction of trade barriers between member nations. Thus, Venezuela is expected to lower its tariff on oil which will boost the demand for its commodity. However, doing so will reduce the revenue of the government in the form of tariffs collected. It can be seen that the acceptance of Venezuela will facilitate the inflow and outflow of goods as trade barriers are reduced and even eliminated. Venezuela will enjoy the influx of lower priced commodities from its trading partners like Brazil. For instance, it should be noted that in order to support the higher demand for poultry products in the local market, Venezuela imports a huge portion of its poultry supply from Brazil. Trade liberalization also brings in more choices for local customers. The inflow of commodities is expected to give a higher level of utility to Venezuelans. However, trade liberalization is a double edged sword. Aside from providing the aforementioned benefits, trade liberalization can also harm the local industry as it creates more intense competition in the market. It can be seen that the flow of more competitive commodities from its trading partners local manufacturers by capturing their current market. For instance, lower priced bags from Argentina can easily capture the price sensitive segment in Venezuela to the detriment of the local bag manufacturers. Changes in Business Plan From being one of the highest coffee producers in the world, Venezuela's coffee production now slumped to only 1% of the world's total. This, together with the inefficiencies in the agricultural sector makes the prices of coffee beans to skyrocket. It should be noted tat Venezuela has been experiencing shortage of manufactured coffee in supermarkets and specialty shops because of the extremely high prices (Morsbach 2006). The acceptance of Venezuela in the MERCOSUR posts challenges and opportunities for a local manufacturing industry. It should be noted that the high price of coffee beans exacerbated by production inefficiencies disable local coffee manufacturers to produce higher quality and more competitively priced commodities. With the trade liberalization, coffee manufacturers can now source their coffee beans from other coffee producing countries like Brazil. It should be not