Financing a plant in Latin America by the MNC is a foreign investment which requires important market or industry analysis. Market analysis or environmental considerations must start from understanding the legal or regulation of the market and political environment of the intended country of investment which in this case is Latin America. As much as people have failed to get the connection of legal and political environments to investment decisions, these tow environmental aspects clearly determines the economic stability of the economy. From the impacts of these two elements on economic stability of the economy, it is necessary for investors with the intention of foreign investment to be advised based on the specific economic factors which affect foreign business endeavors. For success financing of the plant in Latin America the company must consider the key factor like currency risk, need to hedge foreign exchange, government regulations which affects cash flow, appropriate information on economic issues like inflation and interest rates and the location of the plant.

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Foreign currency risk is one major consideration which the company must consider before financing the plant in Latin America. Foreign currency risk is described as the risk rising from the variation in value of one currency against the other. This is one element or consideration which this company must take note of before financing the plant in Latin America. In considering this, the investor company must keen analysis of the currency stability of Latin America. This drawn from the fact that some countries have a less stable currency which keeps on changing value which subject the company to unnecessary losses in its future operations. The political and legal systems and environments discussed before are some of the factors which influence currency stability hence the need to use them when trying to ascertain the foreign currency risk (Stephens, 2003).

Currency risk analysis is a consideration which the company cannot attain from the first instance. This is because it involves full analysis of the countries currency performance in the global market. It is, therefore, vital that the enterprise takes a comprehensive research on the currency performance of Latin America.

Like any other foreign investor, the company must find key foreign hedge strategies. Foreign exchange can be described as a way by many companies to eliminate any foreign exchange risks which mostly result from various transactions in foreign currencies. This company must make sure it develops key methods of foreign exchange hedge. The company should deploy cash flow hedge and fair value method. Foreign exchange hedging is one way of transferring foreign exchanging risk from the investor or company to the business that carries the risk such as banks. Foreign exchanging hedging must, therefore, be a major consideration as a way of ensuring the company does not under certain financial risks which are related to the transactions involving foreign currency. Based on the fact that plant financing is in a foreign country, foreign exchange risk can reduce or bring down the entire plan of plant financing. To ensure safety in its foreign operation, the company must lay down foreign exchange hedge prior to the plant financing to avoid being caught unaware.

International business or any other foreign investment is controlled by various regulations. This brings the need for the company to analyze the legal system since it charged with the responsibility of developing all the business regulations. The political and legal systems should be taken note of, however, due to the fact that both of these structures have the latency to affect the financial sector in positive and negative ways. The political system is one unique within the world; there is no written constitution, the political system is not logical, neatly centered in different boxes, or even always fully democratic, and any changes that take place within the government have been gradually accomplished and based solely on the majority consensus. However, it is necessary for the company’s management to observe the point that the political environment determines how regulations or legal structures are developed. Government regulations on foreign investment adopted by Latin America should be the priority of the company before can finally decide finance the plant. Some of the regulation which the company must take note of include the tax levied on foreign investors like the company. Apart from this, the company must also take note of the employment policies of Latin America (Attracting foreign direct investment: New trends, sources and policies, 1999).

Foreign business or investment is subject to key economic issues like inflation. Based on this the plant financing process must only be undertaken after clear attainment of Latin America’s ability and way of handling such situations. It is vital to notice this from the fact that some countries pass such costs to investors as a way of stabilizing the economy. If a new investors like the MNC were to meet such conditions, there no doubt the company might suffer huge economic blow which derail its success in the market.

The location of the plant is also another major factor which the company must consider. This is because some areas have proven expensive in terms of establishing any production or processing plant. From this, it is important for the company to do a cost benefit study to help ascertain the most viable area to establish the plant. Part of the considerations must operation cost. Foreign business endeavors require wide market analysis. This is because the losses that come from foreign investments are severe and come with long term effects hence the need to set controls.