Macro-political risk is the changes to the general societal environment will affect the business context in a country.
The National Assembly has controlled by the followers of Shaved, which is the powerful constitution in the presidency. Therefore, Shaved extend himself power on judiciary by making himself the right to remove and appoint Supreme Court justices. He also dominated the seaports and airports of the country were originally run by the opposition-ruled state government.The unemployment remained at a significantly high rate at 15-17 per cent and the poverty rate increased to over 50%of the population in Venezuela.
These lead to a decreased in the political freedom and thus the mismanagement of the country, macro-political risk has arisen. Shaved keep extending state control of private industry no matter foreign or domestic just to ensure those industry were producing price-controlled products during recession result to micro-political risk.Micro-political risk is the risk specific to a particular firms or industry as a consequence of adverse lattice action directed towards that firm or industry. An American company, rice plant belonging to Cargill was seized due to “food security/’ law. There also two rice plants of Empress polar have taken over temporarily just to enforce it produce rice with price-controlled. A pasta factory, a tuna-canner and monitors other food manufacturers have also been controlled to price- controlled product.Besides of political attack and price control, Shaved has also seized the large rural farms and ranches since it were insufficiently productive. These policies by Shave’s Venezuela formed to micro-political risk.
Due to the continuous economic growth, Venezuela faced its recession in 2007-9, lead to the private sector had been attacked by the ongoing socialist policies therefore legal risk arose. Legal Risk is the risk that the legal system adversely affects the conduct Of business.Shaved started to increases the controlling power of the state by expropriate the major components of strategic industries like energy, utilities, telecoms and banking. Not only the major components, but also the oil projects, he gave the state-owned oil many a majority position and reduce the ownership stakes held by foreign companies. Nationalizing the properties right result to legal risk since the country has already failed to provide adequate safeguards for the conduct of business. SQ. To what extent could the political system in Venezuela be labeled a democracy?To a slightly extent, the political system in Venezuela can be labeled as a democracy. In democracy, the government should be by the people, exercised either directly or through elected representatives.
Although Shaved as elected by citizens of Venezuela, it cannot be labeled as a representative democracy since after he took the office, his followers controlled the National Assembly and also changed the elected system so that he can be the president for a longer time by extend the term of office of the president.Therefore, the citizens cannot elect periodically to represent themselves or form a government. However, Shaved and his follower have controlled everything in Venezuela; citizens had no chance to represent themselves. It is failed in a government by people, thus Venezuela could be labeled as a necromancy in a slightly extent. SQ. What actions taken by Shaved are likely to discourage future foreign investment in Venezuela?As legal risk and micro-political risk have occurred in Venezuela, The expropriation of companies’ assets and price controls by Shave’s radical policies discouraged the future foreign investment by private sector.
For legal risk, Shaved has expropriate the major industry and physically attacked the foreign company by increasing the state power in terms of recover the recession in Venezuela, but these actions had put Venezuela in to a high legal sis country, an international business will hesitate to enter into a long term contract which discouraged future investment in Venezuela.