Capital Budgeting Techniques

Introduction about the topic Capital budgeting is the process by which companies appraise investment decisions, in particular, by which capital resources are allocated to specific projects. It requires firms to give account for the time value of money and project risk using a variety of more or less formal techniques. The decision to invest in fixed assets is one of the major decisions made by managers.Advertising We will write a custom research paper sample on Capital Budgeting Techniques specifically for you for only $16.05 $11/page Learn More Investments in fixed assets impact a firm’s operations for a very long time because they involve large capital outlays. As a result, a variety of quantitative and analytical techniques are applied by managers in the selection of projects to enable them to make good decisions in the area1. Capital budgeting comprises of a number of techniques based on various concepts emanating from projects and investments such as the concept of incremental cash flows. Accounting rules play a very important role in the basis of some particular techniques. The management control process requires the services of budgetary planning and control to provide necessary accounting information. Most of the important information is normally provided through variance reports availed by the accountants in charge. Capital budgeting decisions are influenced by certain factors dealing with economic, social, political, as well as cultural diversity2. There has been tremendous increase in the level of foreign direct investment (FDI) in the last two decades. This has been brought about by the spread of business investment activities across countries of the world. Multinational organisations have faced various challenges due to lack of reliable and accurate methods which could be used in making appropriate decisions within the market place. The paper comprises of various parts the first presenting both theoretical as we ll as practical overview of the given organisation. The second part of the reports gives the methodology, including data collection techniques as well as design of questionnaire. Then there are the findings from the research and finally conclusions and recommendations. However, capital budgeting techniques provide measures through which capital budgeting requests are analysed. Net Present Value utilizes the aspect of time value of money concepts, Payback period has been discovered to be deficient of time value techniques3. Introduction about the company Capital budgeting is applied in the company’s planning process to determine the status of the firm in line with long term investments4. The chamber is one of Saudi Arabia’s oldest and well-established organisations. The promotion of the private sector contribution to the economy is the cause The Chamber is most devoted to.Advertising Looking for research paper on business economics? Let's see if we can help you! G et your first paper with 15% OFF Learn More To that end, it has formulated a lot of services that have significantly helped in development and, especially, promotion with the attempt of giving all the possible support to the beginners of the private sector in such spheres of economy as industry, trade craft and services. The main aim of the company is to have an active and successful development of Eastern Province private sector activities and to be only one service provider and assistant for the business development in the Eastern Province. The main aim is to provide separate and qualitative services that meet all the requirements the expectation of the private sector, and successful association in the social and economic spheres of life. The Chamber aims to provide unique and high-quality services that meet the aspirations of the private sector, thus ensuring continuous development through the optimal investment in available resources, renewable technologies and effectiv e participation in the economic and social development of the region; thus realising the wishes of our members in light of the values and principles of our society. The advancement of the economic growth by means of the full mobilisation of the resources of the private sector to assist the economic development is its final goal. It aims at promoting the private sector’s origin by means of different steps that include detecting all existing possibilities for the business production, searching for all the possible solutions to different problems that may crop up in the process according to the rules of the system and government programs and working out the plan of the international trade in the attempts of getting the main goals. The branch expansion has also served as a tool of promoting membership. The Chamber’s products and services centres around provision of distinct products and services of added value to members, provision of unique preparation and training progra ms, excellence in the segments of research, studies and information for the purposes of supporting business sector within Eastern Province. Also, they indulge in supporting small and medium enterprises and encouraging innovation and creativity and the culture of self-employment.Advertising We will write a custom research paper sample on Capital Budgeting Techniques specifically for you for only $16.05 $11/page Learn More Within the last fifty years, the Chamber has been devoted to the private sector in such areas as contact between the business association and the government, promotional agency and of fellowship amongst businesspeople. Provision of a medium for the private sector, allowing them to perform social obligations as well as provision of information on investment opportunities and changes in economic and commercial policies. Purpose of Research The study seeks to examine the various capital budgeting techniques used in Saudi Arabia’s ch amber and the various factors influencing financial investment practices within the country. The focus is to find out how capital budgeting is used by Saudi Arabia’s chamber. Various techniques used in optimising the financial cash flows and at the same time, computation of effective financial rates are covered within the study. There is also the determination on the manner in which capital budgeting should be applied by the use of Net Present Value (NPV), Internal Rate of Return (IRR), and Profitability Index (PI). Research questions and methodology of collected data The use of an appropriate type of research design ensured appropriate resolution of the research problem and at the same time help in improving effective level of marketing research. The designs applicable in financial researches always focus on three types of research design which include exploratory research, descriptive research and casual research5. Exploratory research is applicable where general nature of the problem needs to be established. The alternative decisions need to be verified in consideration of relevant variables. The research methods are characterised by high flexibility and unstructured means granting application of clues concerning the problem situation. Descriptive research involves the use of speculative hypothesis making the relationships not to appear casual and then finally casual research, which seeks to reveal the relationship existing between variables used within the study6. The study involved the use of both descriptive and explanatory, whereby descriptive helped in identifying the value of capital budgeting within Saudi Arabia chamber. And on the other hand, an explanatory approach used to explain the contributions of capital budgeting towards development of corporations within the country.Advertising Looking for research paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The research problem can be solved using various methods such as induction and deduction. Inductive approach focuses on obtaining general conclusions from the observations obtained from empirical investigation. The deductive method, on the other hand, utilised the use of hypothesis and theories subject to testing within the empirical world. However, the more preferable way through this research was the use of abduction method. This method incorporates both empirical and theoretical measures. The study discussed much on theories and frameworks based on capital budgeting framework used in the analysis of the various corporations within the chamber. The study also required to establish and identify capital budgeting intangibles which need the application of observations from empirical studies for the purposes of deducing some assumptions. Hence most of the study focused on abduction method7. The following procedures were incorporated in the solution of the research problems involved. S econdary literature was obtained from books, journals, internet as well as electronic databases. This provided the required literature used in establishing a theoretical framework necessary for the study. The empirical study involved the use of mail survey, where the survey was conducted amongst various corporations within the private and public sector through the use of detailed questionnaire. This was done in order to establish the various methods of restructuring and work design the chamber uses for international markets 8. It is widely accepted that the best way to evaluate capital budgeting proposals are the discounted cash flow methods. More recent studies suggest that firms are increasingly adopting discounted cash flow analysis, although this was not always the case in the past. Much of the empirical research on capital budgeting practices adopted by corporate managers are always drawn from US data research based on different countries is also done by other authors. An appra isal in the application of the capital budgeting in the retail sector was undertaken in the Kingdom of Saudi Arabia as a basis for strategic capital budgeting for the purposes of developing this study. The focus of the study was to address the extent of use of capital budgeting in retail sector in the kingdom of Saudi Arabia in terms of using financial and accounting tools, sales forecast, external factors, benchmarking and feedback mechanism. It also sought to establish the extent to which capital budgeting is applied in retail sector in the Kingdom of Saudi Arabia. This further established employee empowerment, negative effect of branch sales, comparison and application of standard budget for new companies within the SA chamber. Sample Random sampling was used to obtain data, where both private and public companies within Saudi Arabia were chosen at random for the mail survey. Then the statistical analysis was used to analyse and interpret data from questionnaires. Empirical resul ts Capital budgeting of SA chamber presents one of the most important means of making decisions. Capital budgeting is necessary for the purposes of maximising shareholder wealth. The empirical results are presented, and the analysis is given based on the data obtained. The study provided participants from the chamber with relevant techniques allowing them to tick various importances of capital budgeting techniques from the questionnaire given. The companies from both private and public sector that were sampled added up to 124; however, responses were received from only 60 representing 48% response rate. Good percentage of the questionnaires was answered by intended respondents from the chamber. Table1: showing the response rate Number % Undeliverable surveys 10 8 Mail survey responses 54 44 Responses used 60 48 124 100 Respondents were found to be learned since they had considerable academic qualifications. This indicated that they had valuable information concerning the area of study. The size of the capital budget was also identified from each respondent and tabulated as below. The companies within private and public sector differ in terms of size hence vary in annual capital budget. Size of Capital budget Number Percentage R50 million 10 18% Between R50 – R100 23 38 Between R100-R 500 million 10 16% Between R500-R1 billion 14 23% Greater than R1 billion 3 5% 60 100% There were also responses on the frequency of the use of the various budgeting methods. These include; net present value (NPV), profitability index (PI), Internal rate of return (IRR), modified internal rate of return (MIRR) as well as payback. The results were as follows9. Table: Capital Budgeting Techniques Capital budgeting technique % Usage NPV 94% IRR 90% Payback 65% MIRR 50% PI 35% Other techniques 13% The results indicate that the techniques mostly used in evaluation of projects within Saudi Arabia Chamber are net present value and internal rate of return. This is clearly shown by 94% preferring the use of NPV, 90% of the companies use IRR in most occasions while 70% of the participants use payback period method. This reveals that NPV, payback period, IRR are the most preferred techniques with NPV and IRR forming the most popular methods. Table showing number of techniques used by companies within chamber Number of techniques applied for evaluating projects Number of companies using the technique % 1 14 22 2 11 20 3 15 25 4 18 28 5 2 5 60 100% The findings from the table revealed that most companies use multiple budgeting techniques in the process of evaluating their projects. The survey revealed that around 46% of the participants use less than three techniques while the rest utilize more than three techniques. Table showing significance differences of importance between Capital Budgeting Techniques Techniques Not applicable Less important Moderately important important Very importan t Number of participants NPV 3 2 8 30 57 60 IRR 20 1 15 35 29 57 MIRR 47 15 15 17 7 58 PI 43 18 17 16 8 55 Payback 20 15 26 22 17 53 Other 65 0 0 20 15 52 The table above represents ranking of techniques based on their importance value attached by the companies. The ranking places NPV, IRR and Payback at the top of the table showing their level of importance. The results reveal some significant differences between participants based on the importance of the capital budget techniques. Most of the companies rank NPV as the most important technique used in evaluating projects. Conclusion The objectives of the study were eventually met despite the shortcomings encountered. The results revealed the various capital budgeting techniques and how they are utilized by various companies. This gives vital information to companies concerning the best financial strategies applicable within the current market environment. Limitations and recommendations There were various limitation s to this study which included the sample group used in the survey which was only 60 companies within the Saudi Arabia Chamber. This means that more data is required so as to establish the exact trend from both lowly ranked and highly ranked companies in private and public sectors. This would enable adequate understanding on the nature of capital budgeting technique used and the associated impacts on Saudi Arabia chamber. There was high possibility that local meanings of the techniques were lost during the translation process. There were instances where some companies could not allow their capital budgeting practice to be published for the fear of being miss-interpreted. Based on the study’s findings, the following recommendations are proposed: the owners and management of retail family establishments should use these three elements in the preparation of capital budget; Financial statement or profit and loss statement, Cash flow and Balance sheet. They should also empower emp loyees to help them prepare estimates of their cash flow in terms of sales forecast using data gathered from other reliable sources. They should employ management tools such as the break-even analysis, payback analysis, net present value and internal rate of return. The organisation at the same time should consider external factors such as government regulations, price increases, stiff competition and customer’s needs. Multiple sales assumptions should be used along with a standard budget. Comparison of different projects within the organisation should also be done. References Adrian B, International Capital Budgeting, 3th edition, Simon, NY, 1996 Dayananda D, R Irons, J Herbohn P Rowland, Financial appraisal of investment projects. Capital Budgeting. Pitt, New York, 2002 Gray SJ, SB Salter LH Radebaugh, Global Accounting and Control: A Managerial Emphasis, John Wiley and Sons, London, 2001 Leedy, PD JE Ormrod, Practical Research Planning and Design. 8th ed. Pearson Prenti ce-Hall, New Jersey, 2005 Modigliani, F M Miller, â€Å"The Cost of Capital, Corporation Finance and the Theory of Investment†. American Economic American Economic Review, Vol 48 no3, 2003, pp 261–297 Footnotes 1 B Adrian, International Capital Budgeting, 3th edition, Simon, NY, 1996 2 SJ Gray et al, Global Accounting and Control: A Managerial Emphasis, John Wiley and Sons, London, 2001 3 D Dayananda et al, Financial appraisal of investment projects. Capital Budgeting. Pitt, New York, 2002 4 Ibid 5 PD Leedy JE Ormrod, Practical Research Planning and Design. 8th ed. Pearson Prentice-Hall, New Jersey, 2005 6 Ibid 7 Ibid 8 PD Leedy JE Ormrod, Practical Research Planning and Design 9 F Modigliani, M Miller, â€Å"The Cost of Capital, Corporation Finance and the Theory of Investment†, American Economic American Economic Review, Vol 48 no.3, 2003, pp 261–297 This research paper on Capital Budgeting Techniques was written and submitted by user Abbey Ramsey to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

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Venezuelan Economy Under Hugo Chavezs Presidency Economics Essay

Venezuelan Economy Under Hugo Chavezs Presidency Economics Essay Venezuela is located in the upper corner of South America and neighbors with Colombia, Brazil, and Guyana. It has been nearly 200 years since Venezuela first gained its independence from Spain (1811). From 1830 onwards, when Venezuela split from the Bolivarian Colombia (1819-1830), the country was governed mostly by military and despotic regimes. That military period lasted until 1958 when the current democratic spell started following the ousting of General Marcos Perez Jimenezs dictatorship.  [1]  Despite that long period of military dictatorships, the Venezuelan economy is considered to be a mixed economy where there is a mixture of command and free market elements  [2]  . These will be discussed in greater depth in the following text. Venezuela had until the 1980s a series of successful periods of economic growth  [3]  . The country had from there on and until 1999 a succession of economic and political crises. The government previous to the election of Hugo Chavez headed by Rafael Caldera was in power from 1994 to 1999. During this time in office he had to deal with high inflation rates and a financial crisis. Due to these severe problems, Caldera was forced to impose an exchange control in mid-1994. This was shortly followed by more stabilization actions that were enforced by the International Monetary Fund agreement. Due to these severe actions taken by the Calderas government (Convergencia) he became severely unpopular among the electorate. This did not help him win his reelection and set the stage for Hugo Chavez  [4]  . The purpose of this essay is to discuss whether or not Hugo Rafael Chà ¡vez Frà ­as regime is moving towards a planned economy due his anti- American stance. Moises Naim states that the rise to power of Venezuelan president Hugo Chavez is often seen as evidence of an impending backlash against globalization, American-style capitalism.  [5]  This statement reflects the change in the governments policies on the Venezuelan economic system. To further explain this transformation it is vital to define what a free market economy and planned economy are. Theoretical Background Hypotheses If the Venezuelan government is moving from a free market economy to a planned economy, one would expect to find evidence of this transition economy. Definitions are needed to be known before explanation of results. A free market economy refers to an economy in which markets, in other words the interaction of buyers and producers, determine price and output.  [6]  In addition, this economic system [relies] on free markets which permit people to engage in economic activities largely free from government control.  [7]  In other words the government must have a hands-off policy in regards to the economy. Therefore, all production is in private hands and companies are able to adjust their wages and prices according to the demand and supply curve. Furthermore individuals are able to make independent decisions regarding the price of products, amount of production, and retailing. The free market economy is one that allows for the best interests of both consumers and producers to be met  [8]  . Advantages of the free market economy include: resources are allocated by market forces and price mechanisms,  [9]  and the motivation of profits provides an incentive to reduce costs and be innovate.  [10]  As William Baumol points out, to some extent, innovation in the economy is important as it indicates the expansion of peoples creativities in businesses and therefore fosters productivity growth in the economy.  [11]  What this makes clear once again is that a lot of the power and decision making lie within companies and the market. Disadvantages can include resources being used up too quickly as firms seek to make high profits and to minimize costs.  [12]  Additionally, large firms can expand and dominate a particular industry; leading to higher prices, and results in excessive power. A planned economy is defined as an economy where decisions are made by the government on the behalf of the people, and in theory, in their best interests.  [13]  This indicates that the state has great ownership of resources in the economy and through this provides social welfare to the people. In this economy the government sets the price of resources. There are thought to be several advantages and disadvantages in a planned economy. The advantages are that the government can directly influence the distribution of income to make it more equal  [14]  . In addition the government determines which [types of goods] are to be supplied  [15]  . This necessarily gives the government the power to decide what goods are considered to be important in the society. A disadvantage of this economy is the government [s dominance which] may lead to a loss of personal freedom of choice  [16]  . Unlike the free market economy there is no incentive for individuals or firms to be innovat iveà ¢Ã¢â€š ¬Ã‚ ¦ goods are often of poor quality and usually a limited choice.  [17]  No competition in the economy and low profit (or absence of profit altogether) can lead to inefficiencies of resources. In short, it is the government, and not the consumers, who make all the decisions. A planned economy is an ideology often used by governments in communist states. Countries like Cuba and North Korea are currently using a planned economy system. An important concept of economic theory in describing a planned economy and free market economy is the understanding of economic growth. Economic growth is defined as an improvement in the standard of living (that) typically occurs when an economy increases its output of goods and services during an expansion  [18]  . This leads to economic development which refers to an improvement in living standards in an economy encompassing material consumption, education, health, and environmental concerns.  [19]  Therefore the use of a production possibility curve (PPC) is implemented to determine economic growth. Looking at the graph below (figure 1), one can see the theoretical downfall of the total goods and services (GDP) as the market moves from free market to planned economy. The PPC1 curve shifts downwards to PPC2 a level where planned economy would function. In moving from a free economy to a more planned economy orientated structure (transition economy), theoretically the output of the countrys total goods and services would decrease because of the inefficiencies. Overall the economic growth diminishes as the governments dominance in the economy increases. Figure 1 The PPC can also be used to better understand the change in government spending in a planned economy. This curve demonstrates the shifting of the government spending. The graph below (figure 2) presents public sector production and private sector production. The PPC curve represents the maximum amount of output possible given the available resources.  [20]  . At point A, there is an equal amount of production from the public and private sector. The total production at point A is on the PPC curve meaning that the maximum level of production is obtained  [21]  . As the government moves closer to a fully planned economy and it begins to invest in the public sector which include schools, health programs, housing, and so forth bureaucracy and inefficiencies increase and production moves to point B.  [22]  As we can see in figure 2, point B is no longer on the PPC curve but below it, signaling that the maximum level of output is not being achieved. Figure 2 Methodology Departing from the following hypothesis If the Venezuelan government is moving from a free market economy to a planned economy, one would expect to find evidence of this transition economy. This evidence would be found in several areas. One would expect to find more government bureaucracy and interferences in private enterprises. This could take the form of increased unjustified fines, paper work, restriction of all kinds, and control, which all result in reduction of business. One would also expect to find an increase in the nationalization of private companies; this could take the form of expropriation of private lands by the government. Further evidence of a movement towards a planned economy would be greater spending on social welfare. This would be clear in areas such as health, education, and housing. Finally, one would expect to find evidence of more interference in the economic structure exemplified by manipulation of currency exchange rates. To prove my hypothesis, this evid ence should be demonstrated as actually present in order to confirm the transition of Venezuelas economy. To prove or disprove my hypothesis I relied both on primary and secondary sources. In investigating primary sources, I met with two local business men  [23]  and one professor  [24]  in Venezuela. I then asked them specific questions  [25]  regarding their businesses in this transition economy. Furthermore, in October 2010 on a visit to Venezuela, I was able to make my own observations of the state of the country. In investigating secondary sources, I researched articles and books written by authors and journalists. In addition, I looked for statistics that represent the movement from a free-market to a planned economy. Results Analysis Evaluation More government interference on businesses When Hugo Chavezs government got into office in 1999, the government slowly imposed new regulations on all sizes of businesses. This policy mainly impacted negatively small businesses and employment. I interviewed one business man, Otto Horn, regarding the increased bureaucracy that his firm, Floritec  [26]  , encounters. In this interview he stated that It is harder to import and export raw materials and finished products abroad  [27]  . Many businesses are required to fill in extra custom paper work for SENIAT (the governments tax collection entity)  [28]  and face crippling fines for even a minor inconsistency in the eyes of custom agents. It gets harder by the day to keep small enterprises in business. This has led to higher cost for businesses as these bureaucratic obstacles force the firms to hire more labor to deal with these issues. As well, it is noticed that waiting for approvals from the government in so many newly imposed demands on small enterprises means los s of time and money which impacts the efficiency of these businesses. To put an example, the government has begun charging firms for the use of their own company logo on their own trucks. Otto Horn stated, If you want to put a company logo, you need to buy a license from the government and this raises costs.  [29]  These examples point to an increased level of government interference. Small businesses are mostly affected by these measures as they dont have enough capital to cover these new expenses. Big businesses have also been affected by these government interferences and even though they are better prepared to cope with it the uncertainty leads to less investment and further instability in the economy as a whole. In early 2009, the economy encountered high inflation  [30]  . This caused a surge in the prices of all products. The Venezuelan government, under Chavez, made several attempts in reducing this high inflation. One of the actions taken was imposing price controls on certain staple foods in an effort to make them more affordable to everyone. However, this action did not have the best outcome, [the] government [`s] attempts to impose price control has had limited effect as big food producers have cut back on production, food distributors have decreased shipments and even hoarded essential goods and retail sellers have traded on the black market  [31]  This control further damaged the food producers by cutting their profit which forced them to reduce the costs, which in one example was achieved by reducing the number of employees. Furthermore, Luis Carmona of Polar states, Forcing companies to produce rice at a loss will not resolve the situation, [and] simply makes it worse.  [32]  In addition, fewer goods could be established on the market. These price controls largely affects food producers and many food processing companies became bankrupt. Hugo Chavez and his government decided to sue or even nationalize dysfunctional companies if they do not follow the governments rules  [33]  . Hugo Chavez said he would take over the control of the food processing industries, as he said in one of his statements, I will expropriate them, I have no problem with that, and Ill pay them with bonds. Dont count on me paying with hard cash  [34]  . This suggests that the government is serious about making food available to the poor but on the other hand, private firms cannot cope with the price changes unless it cuts down on costs. This is all evidence of a planned economy. Government interference was evident in the conversation with another business man named Jorge Redmond, CEO of Chocolates El Rey  [35]  . Mr. Redmond initially wanted to merge his company with the world renowned company, Nestlà ©. He wanted to merge the company to avoid suffocating levels of governmental interference and bureaucratic hurdles brought upon the firm affecting its products exports mainly to its U.S customers. However the government blocked the deal between the potential mergers, as the government did not want more foreign presence in Venezuela  [36]  . The governments move against expansion of global assets limits the choices of private firms. This emphasizes the governments bureaucracy and interference on businesses. Government Nationalization Growing bureaucracy and government interference have led to a failure of private companies as they cannot maintain healthy profitability levels. This has given the government an excuse to nationalize private firms. Common examples are CA Nacional Telefonos de Venezuela (CANTV), the countrys telephone company and Electricidad de Caracas, the largest electric company in Venezuela  [37]  . These nationalizations were linked by Chavez to his pursuit of XXI century Socialism  [38]  . In July 2007, at the start of the high fuel prices, the government nationalized key infrastructures of the Venezuelan economy in an attempt to reach the goals of the government.  [39]   Also in 2007, the government stripped assets from two U.S. oil companies Exxon Mobil Corp. and ConocoPhilips.  [40]  The government seized control of the profits of both companies. In the following year, 2008, Hugo Chavez and his government ordered the nationalization of the cement industry, Cemex,  [41]  a Mexican owned company. Chavezs rationale was to prepare for future building in the housing sector. In addition, in 2008, the Venezuelan steel mill, Siderà ºrgica del Orinoco SIDOR, was nationalized. Chavez complained the companies do not put a high enough priority on supplying the domestic market  [42]  . In 2009, the government for the first time ordered the Venezuelan armed forces to take over a business, in this case a rice processing plant  [43]  . In October 2010 the government nationalized AGROISLENA, the countrys largest producer of goods and services for the agricultural sector  [44]  . According to The Economist, since Hugo Chavez got into power in 1999, almost 400 companies have been nationalized, the vast majority in the past two years.  [45]  This shows the governments movement to take over major industries in order to fix the prices of the goods. All the above actions taken by the government have been sweeping reforms throughout the nation with the aim of reducing the prices of products which would result in massive consumption of the products by the local economy. The nationalization of firms by the government points to evidence of a planned economy as the government begins to de-privatize companies, moving towards a greater control of how the economy functions. More Social Welfare Spending Hugo Chavez came to power by promising the people a reduction in poverty and an increase in quality of life for the masses. This spending was fueled by high oil prices in July 2007, crude had reached the remarkable world market price of $US 147 per barrel.  [46]   This increased spending in the public sector gives more evidence of the move to a planned economy. The graph (figure 3) below shows the statistics of government public expenditure  [47]  . The current regime under Hugo Chavez has increased public spending by a factor of 13 between 1999 (the year Chavez entered office) to 2008. Figure 3 The government has spent money on the educational, health, and housing sectors. With the increase profits from the oil rents and productions, the Ministry of Education has introduced mission programs, Robinson I and II are mission[s] focusing on literacy and primary education for adults, Ribas and Sucre target secondary and university education for individuals who never had the opportunity to attend or those who dropped out.  [48]  This missions are examples of increased spending on the public sector. Hugo Chavezs government has increased public spending on the health sector of the economy. The government has created new mission programs such as, Barrio Adentro [which] provides free health care to the poor through the assistance of tens of thousands of Cuban doctors  [49]  Internet correspondence with Guillermo Buhrkohl  [50]  , a political professor from Venezuela, confirms this in the following, The health programs known as Mission Barrio Adentro and Mission Miracle, are programsà ¢Ã¢â€š ¬Ã‚ ¦ aiming [at]à ¢Ã¢â€š ¬Ã‚ ¦ providing primary medical attention to the shantytown population; however the professor confirms the government is literally asphyxiating both health care provided by private hospitals and the traditional public health system, paradoxically the later is the place where the poor go when a very limited Barrio Adentro cannot cope. This proves that there has been an increase in government spending on healthcare which could be seen as detrimental to both priv ate and public sectors. The government promised the masses to increase the public social welfare to all. This would also include the construction of close to free housing for each family. From my own personal observation while visiting the country in October 2010, the use of the billboards to promote housing plans was clearly evident everywhere  [51]  . This evidence of increased spending in the public sector mostly for political purposes adds up to the motive of the planned economy. Manipulation of currency Hugo Chavezs government has interfered deeply into the currency market. The government has made severe adjustments to currency, starting with the introduction of strict exchange rate controls by pegging the exchange rate to the American dollar in 2005. In 2008, the government changed the numerical currency making 1,000 Bolivars equal to the value of one Bolivar Fuerte (strong Bolivar)  [52]  . This measure could be seen to minimize the perceived inflation due to government action. However, it does not address the inflation that the country faces. In January 8th 2010, the government announced the devaluing of the currency by up to 50%  [53]  . The government believed that the devaluation of the Bolivar would trigger an export boom as Venezuelas exports would become more competitive. In reality, the devaluation had little to no effect on the countrys exports, as can be seen in Figure 4  [54]  . Figure 4 As mentioned above, in 2005, Hugo Chavezs administration made extreme adjustments to the Venezuelan financial system. The governments control over the currency exchange rates is shown in a statement, The introduction of the exchange controls has meant that companies and individuals have to apply to the Comision de Administracion de Divisas (Cadivi, the official foreign exchange agency).  [55]  This is where the government fixed the currency rate at 2.15 to the dollar. This triggered an increase in imports from 2005 which can be seen on the graph above (Fig.3)  [56]  . On January 8, 2010, the devaluation has occurred; from 2.15 bolivars to the [US] dollar to 4.3 bolivars to the [US] dollar  [57]  explained above caused higher consumer inflation on goods thus affecting the total spending on imported goods like televisions. The devaluation of the currency and exchange controls has lead the Venezuelan economy to have extremely high inflation. Consumption in the Venezuelan economy has decreased and business production has lowered to meet their expenditures. For example, Movistar, [in Venezuela] a mobile phone company owned by Spains Telefonica, last month [August 2010] à ¢Ã¢â€š ¬Ã‚ ¦ suspended roaming agreements in 13 countries.  [58]  This indicated that the dollar squeeze is affecting the Venezuelan economy deeply. On the other hand, high inflation means that the government gets more Bolivars from a quick recovery of oil prices, and exporting oil to United States. This money allows the government to satisfy the needs of the Venezuelans to the best interests of the government, and this brings the role of the government into everyday lives as, that gives Mr. Chavez the chance to throw money around: pay rises for the army for example.  [59]  This manipulation of the currency gives solid evidence of interferences in economy by Hugo Chavezs government which adds a new element that confirms the hypothesis of a transition towards a planned economy in Venezuela. Conclusions In this investigation, I found information that supports the transformation to a planned economy from a free market economy in Venezuela. The evidence included: increased government bureaucracy, nationalization of the private sector, increased government spending in social welfare, and increased manipulation of the currency. This has led Hugo Chavezs government to gain greater control of the Venezuelan economic system since his election in 1998. The government is able to decide which goods and services are considered to be important for society. Such examples are the heavily subsidized food distribution firms (MERCAL and PDVAL) created by the government  [60]  . In this investigation, there are a number of difficulties that hinder the gathering of evidence. First, it was hard to gain true statistics regarding the economy. For example, the unemployment rate is hard to determine due to the fact that workers in the informal sector of the economy are included in the statistics which constitutes half of the countrys total workforce  [61]  . It was difficult to find statistical data to support the losses of business budget. Despite my attempts to access this information through internet sources, I was unsuccessful. Secondly there has been a strong political bias in many articles, books, and interviews. These biases affected my research and influenced me deeply, though I made every attempt to remain objective. In addition, it was often hard to separate politics from economics where both are closely linked together. These shortcomings together with a lack of time beg for further and more in depth research to formalize conclusions. Specifically, I would wish to focus on a significant number of concrete business cases where the governments interference in the economy has greatly affected their profitability. I would be interested in confirming the statistical data to support the hypothesis presented. However, the evidence and research presented here demonstrate that there are elements to sustain my hypothesis. It is clear that the government is seriously attempting to impose upon the country a planned economy of the Venezuela. Whether the government is able to complete a transition to a fully planned economy or not, this conclusion stands regardless. In my opinion, the move to the planned economy under Hugo Chavez can have a negative impact on Venezuela as it has negatively limited the freedom of Venezuelan businesses and increased government interference in the economy. Evidence can be found in articles discussing the current brain drain  [62]  ; the educated Venezuelans are more likely to leave the country. Many of these educated people whom are students, professors, doctors, business owners and so forth have either moved to Colombia or to the United States. References Bad news for Venezuelan economy. El Universal 24 May 2010: n. pag. Web. 22 Nov. 2010. . Baumol, Willam. The free-market innovation machine: analyzing the growth miracle of capitalism. Oxfordshire: Princeton University Press, 2002. Print. Blink, Jocelyn, and Ian Dorton. Economics: Course Companion. Oxford: Database right Oxford University Press, 2007. Print. The Bolivarian Brain Drain. Newsweek 1 July 2009: n. pag. Web. 22 Nov. 2010.

Sheltering Sky versus Blood Meridian Essay examples -- Paul Bowles Cor

Extreme circumstances bring about substantial changes in people. At least that is what Paul Bowles and Cormac McCarthy seem to be saying in the writing of their respective books, The Sheltering Sky and Blood Meridian. Both authors place their characters in difficult locations, dealing with difficult people and expect them to emerge changed, for better or for worse. In The Sheltering Sky, Bowles takes his American trio and places them in the desert lands of the African continent where the wide, dry impossibly desolate terrain takes its toll on their minds and bodies. Likewise, McCarthy takes his ragged bunch of marauders, most prominently the Kid, and has them wandering the massive expanse of the untamed west. This convention of forced growth is constant throughout both books, and the reader gets the unique opportunity to observe those changes from an objective point of view.   Ã‚  Ã‚  Ã‚  Ã‚  In The Sheltering Sky, we meet Port, Kit and Tunner initially as continental Americans on a sort of tour for spoiled expatriates. They seem oblivious to the fact that the area and the people who inhabit it are recently war-torn and decimated. The countryside has been ravaged by the war but the three of them seem to ignore that fact and continue through it in a sort of dazed, self indulged coma. The same, or a similar, situation is present in McCarthy's Blood Meridian, his characters, mainly the Kid, are making their way across the Old West, looking for money an adventure. They venture into Me...