GMS 400 Lecture Notes - Lecture 8: Foreign Exchange Controls, International Financial Institutions, Inter-American Development Bank

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Open account: the exporter provides credit for a specified number of days (e. g. 30), after which payment for the goods must be made. Irrevocable lc: the foreign bank cannot withdraw the lc (this is the international standard) if the terms of the contract are followed. Confirmed lc: confirmed by exporter"s bank (the exporter"s bank agrees to pay should the foreign bank fail to do so. ) Why: not all banks are scrupulous (honest, may be a new government policy or alteration of exchange controls in the buying country, foreign bank may run short of hard currency. Provides buyer financing for capital equipment and services: lends money to the importer of cdn goods but actually pays the cdn exporter directly and then the foreign purchaser pays back edc. Provides insurance for canadian exports: country risk insurance, foreign receivables insurance (not available from your domestic bank) will guarantee up to. Provides foreign investment insurance: political risk protection for new canadian investments abroad.

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