Finance of Foreign Trade

EENI- School of International Business

Subject: Finance of the international trade. Country risk. Syllabus:

  1. Introduction to the international trade finance
  2. Finance of the export and import transactions
  3. Pre-shipment finance
  4. International risk: payment, foreign exchange, counterparty, and delivery
  5. Country risk
  6. Sovereign risk
  7. Credit ratings
  8. Evaluation and classification of the Country risk
  9. Corruption perceptions index
  10. Export credits (OECD)
  11. Case Study
    1. The case of Thailand and South Africa
    2. Introduction to the Islamic Banking
  12. FOREX
  13. International Bonds and Guarantees

The aims of the subject “Finance of the international trade” are the following:

  1. To familiarise the student with the various methods of finance both for exports and imports
  2. To understand the risks associated with foreign trade operations
  3. To know how to manage pre-financing and export financing
The subject “Finance of the international trade” is studied...
  1. Masters (e-learning): International Business, Foreign Trade and Marketing
  2. Diploma in International Trade
  3. Course Payment methods

Languages of study English or French Financement Spanish Financiacion Portuguese Financiamento

Credits of the subject “Finance of the international trade”: 4 ECTS/2 AC.

Area of Knowledge: Foreign trade.

Sample of the subject- Finance of the international trade:
Finance of the international trade

Description of the Subject: Finance of the international trade

There are two basic forms of finance of the international trade transactions:

  1. Import finance
  2. Export finance.

Both can be performed in the currency of the exporter (for example, Euros) or any other fully convertible currency agreed by both parties.

In the second case, the company assumes certain risks as the difference in the exchange rates. However, it can also profit from trading in another currency if there is a rise in the value of the foreign currency.

The financial transactions in the foreign trade can be performed in the currency of the exporter, in the currency of the importer or a third currency.

In many cases, the export companies must facilitate the finance for their clients mainly due to the requirements of the market. In the Foreign Exchange Market, dealers trade in currencies. Exports of products and services, foreign direct investment, and foreign loans forms the currency supply whereas currency demand consists of imports, foreign direct investment and other factors.

These operations stimulate the buying and selling of currencies in a market governed by supply and demand. If a payment for a service provided or for the products delivered to a foreign client is in a currency other than in which the exporter usually operates, the exporter is exposed to the risk of exchange rate fluctuation.

In any exporting or importing transaction there is a range of risks to be considered including:

  1. Payment Risk
  2. Performance Risk
  3. Foreign Exchange Risk
  4. Interest Rate Risk
  5. Counterparty/Bank Risk
  6. Country Risk
  7. Delivery Risk

The underlying commercial contract should clearly state the description of the products, the delivery terms, when and by what means the payment is to be made, the documents required, which will allow the importer to obtain the delivery of the goods and to arrange clearance through customs, the currency in which settlement is to be effected and any specific requirements attaching to the shipment.

Country Risk

Country risk is caused by political (unwillingness to repay) or economic (inability to repay) events in a particular country. Normally, the country risk is measured as transfer risk or cross-border risk, which is another terminology used to describe country risk. The central element of transfer risk is the possibility that the borrower may not be able to secure foreign exchange to service its external debt due to the economic or political risks of a country, despite the accessibility of local currency.

The Sovereign risk is the risk of the Government or Government-related entity making payment. The Country risk embodies both govern and commercial risk.

The Corruption perceptions index measures the perceived level of public-sector corruption in 180 countries economies.

Corruption Perceptions (TI)

U-EENI UniversityPeace, Not Terrorism