• YOUR COMPANY: Ho Quang Tri Private Enterprise (Gao Ong Cua)

• YOUR PRODUCT: Gao Ong Cua ST25 (ST25 Rice)

• YOUR COUNTRY: Brazil

• YOUR STATE: Soc Trang

• YOUR BUYER: Carrefour

GM-Challenge 3: Payment/Financing Considerations

To: Manager

From: Group 2 Trade Specialist

Date: May 26, 2024

Subject: Payment/Financing Considerations

Dear Manager, at your request to evaluate payment and financing options for the pending
transaction, we have gathered the necessary information and completely addressed the
requirements assigned. The following is my summary answers to your request:
1. What is the currency of YOUR COUNTRY. What is the abbreviation for that
currency? Provide the current exchange rate between the Vietnam Dong (VND) and that
currency.
Use the xe.com website to determine the currency’s abbreviation and current exchange rate
for one VND.
Regarding the currency of Brazil, the following data is obtained:
For Brazil, the currency is: Brazilian Reais
Its abbreviation is: BRL
The current exchange rate: 1 VND = 0.00020110682 BRL (The exchange rate may change at
your time of verifying)
https://www.xe.com/currencyconverter/convert/?Amount=1&From=VND&To=BRL
2. The company is trying to consider how much foreign exchange rate risk there may be
with the sale. They want to know how the foreign exchange rate between the VND and the
currency of YOUR COUNTRY has changed over the last year. Display and discuss that
change.
For illustrating exchange rate fluctuations, I used the chart tool on “xe.com” to analyze the
exchange rate history between VND and BRL over the past year (from May 25, 2023, to May
25, 2024). The exchange rate has shown some volatility, with both appreciation and
depreciation of the VND against the BRL.
On May 25, 2023, the exchange rate was 1 VND = 0.000203021 BRL. By May 25, 2024, the
rate is about 0.000203024, meaning that the exchange does not change much during this time.
However, the trend analysis indicate the contradictory: The exchange rate experienced notable
volatility, reflecting various economic and political factors influencing both Vietnam and
Brazil. Key factors include changes in trade policies, global economic events, shifts in
commodity prices, and the economic recovery post-COVID-19 pandemic.
High and Low Points: The highest rate was recorded on June 1, 2023, with 1 VND reaching
0.000216593 BRL. The lowest rate occurred on Dec 27, 2023, with 1 VND at 0.000197104
BRL.
https://www.xe.com/currencycharts/?from=VND&to=BRL&view=1Y

https://www.xe.com/currencycharts/?from=VND&to=BRL&view=1Y
Implications: These fluctuations indicate a moderate foreign exchange rate risk for
transactions involving Brazil. The volatility may impact the pricing strategy and
financial forecasting for our exports.
3. To help make the foreign exchange rate risk more real, provide an example. If
an export sale valued at 300 Million in the currency of YOUR COUNTRY had
been completed 90 days ago with payment received today in VND, how much
more (or less) VND would our client have received?
Indicate the exchange rate between the VND and YOUR COUNTRY’s currency 90 days
ago and now. Show your calculations.
To better help you understand the currency risk for our operations, we’ve come up with
the following example:
90 days ago was: February 29th, 2024
At that time: the exchange rate 1 VND = 0.000201323 BRL
Current exchange rate: 1 VND = 0.000203015 BRL

https:/

/www.xe.com/currencycharts/?from=VND&to=BRL&view=1Y

https://

www.xe.com/currencycharts/?from=VND&to=BRL&view=1Y
Sale value: 300 million BRL
+) Export sale amount in VND on February 29th 2024
Sale value∈Brazil 300 000 000
= Exchange rate∈ February 29 th 2024 = 0.000201323 BRL /VND

≈ 1,490,142,705,999.81 VND
+) Current export sale amount in VND
Sale value∈Brazil 300 000 000
= Current exchange rate = 0.000203015 BRL /VND

≈ 1,477,723,320,936.88 VND
+) Difference in amount:
= Current export sale amount in VND – Export sale amount in VND 90 days ago
≈ 1,477,723,320,936.88 − 1,490,142,705,999.81
≈ − 12,419,385,062.93 VND
Thus, the client has incurred a loss of 12,419,385,062.93 VND
4. To help the client assess country-specific risks, are credit reports or other similar
resources available for firms in YOUR COUNTRY? Any info on the cost and time
involved for report delivery would be helpful.
A. The US Department of Commerce has an International Company Profile service HERE that
can provide background check info on a specific foreign company to help a company assess its
creditworthiness. In addition, Coface for Trade, Export Insurance Services, Inc and FCIB
are some of the private companies offering US companies credit info on foreign buyers.
Check whether the services are available for firms in YOUR COUNTRY at the companies'
website HERE, HERE and HERE.
To assess country-specific risks for firms in Brazil, we can refer to the following sources for
providing credit information and risk assessments on Brazilian companies or agencies:
1) U.S. Department of Commerce - International Company Profile (ICP) Service:
The trade.gov website of the Department of Commerce provides a market overview of Brazil
with sections such as economic overview, business environment, market opportunities, and
major industries. However, there is no specific information on credit ratings for individual
companies in Brazil.

https://www.trade.gov/knowledge-product/brazil-market-overview?section-nav=1851
2) Coface:
Coface provides a Country and Sector Risk Barometer through regular updates. In the
Q3/2023 update, Brazil received a significant risk rating of B. Additionally, their Country
Risk Assessment Map places Brazil in the fairly high-risk category (colored red).

https://www.coface.com/news-economy-and-insights/business-risk-dashboard/country-risk-
map
3) Export Insurance Services, Inc:
Their website does not provide specific information on credit assessments for companies in
Brazil. It appears they only provide reports when specifically requested by clients.
4) FCIB:
FCIB provides Country Risk Maps but there are no clear details on how they assess risks for
specific companies in Brazil. They focus more on country-level risks.

https://fcibglobal.com/country-risk-maps/
5) SystemDay:
This company specializes in providing company credit reports across various countries,
including Brazil. On their website, they outline the process for requesting reports and fees for
company reports in Brazil.
https://www.systemday.com/company-credit-reports/
In summary, based on the available information, Coface and SystemDay appear to be
potential sources that could provide credit ratings and risk assessments for specific companies
like Carrefour in Brazil. The other sources mainly provide country-level risk assessments
rather than evaluations of individual companies.
B. Discuss how/where to get the process started (e.g., if FCIB has credit reports for firms in
YOUR COUNTRY, how can your client get such reports? What is the procedure? How long
do they have to wait? How about the costs to access those reports?). Provide the needed
contact information.
The following part is the instructions for the process of how the client can get the report.
1) For Coface, on their website they provide an “ECONOMIC STUDIES” section, when
customers click on it, they will ask the country they want to receive the report from. In this
case, we will choose Brazil (our country) as the country that we study. The website will
immediately display a report on the Brazilian market economy and risks.
https://www.coface.com.br/Estudos-Economicos

https://www.coface.com.br/Estudos-Economicos/Brazil
Clients can contact Coface Brazil via their information:
Location: Pça. João Duran Alonso, 34 10th Floor Brooklin Novo
Tel.: +55 (11) 5509 8181
Email: faleconosco.brasil@coface.com
2) For Export Insurance Services, on their website, they offer the “Other Services” section, when
a client clicks on the “Credit Report” the website will show a notification that the client has to
contact them in order to buy the report. Clients can contact Export Insurance Services via their
information:
P.O. Box 211837 - Augusta, Georgia 30917-1837
Telephone: (706) 210-4379
E-mail: info@exportinsurance.com
http://exportinsurance.com/creports.htm
3) For FCIB, the process of obtaining a business report involves following three specific steps:
Step 1. Visit the FCIB website (www.fcibglobal.com) to learn more about their services, which
include networking opportunities, educational materials, and credit reports.
Step 2. Access the services and worldwide network of credit specialists by becoming a member
of FCIB.
Step 3. Utilize their contacts and resources to find out about trustworthy trade credit insurance
companies and receive suggestions based on your requirements.
PRS Country Reports are at a special rate of $250 per report when ordered through FCIB. This is
a savings of $49 per report.

Contact: Rocky Thomas at rockyt@fcibglobal.com or 410-707-2699

https://fcibglobal.com/worldwide-credit-reports/
4) With SystemDay, on their website, they offer the form “Order Company Credit Reports”,
therefore, clients can get business reports after filling out the necessary procedures and making
the required payment.
Contact: +44 1372 750800
E-mail: home@systemday.com

https://www.systemday.com/brazil-company-credit-report/

Brazil Credit Report Costs Duration

Company

Credit Report £160 10-14 days

Company Credit Report – £220 5-7 days

Urgent

5. The client needs some information with regard to export financing options. Many banks
in Vietnam have support programs available for VN exporters. Check two banks’ websites
to explore the programs that are available for VN companies exporting to YOUR
COUNTRY.
Regarding financial support from banks to exporters, the following information is obtained:
1) VPBank (Vietnam Prosperity Joint Stock Commercial Bank):
- General information: VPBank has a program to support export L/C discount services
for customers in need.
- Conditions: The customer is a business that needs to use export L/C discount service.
- Benefits: VPBank commits to customers' high discount rates, simple and fast
procedures that can be performed at all VPBank branches nationwide.
- Hotline: 1900.5454.15

https://www.vpbank.com.vn/en/trang-chu_doanh-nghiep-lon/dich-vu-tai-tro-xnk/dich-
vu-chiet-khau-lc-xuat-khau
2) SHB (Saigon-Hanoi Commercial Joint Stock Bank)
- General information: SHB's support program creates conditions for businesses to
borrow short-term capital at interest rates lower than normal lending rates.
- Conditions: The customer is an enterprise operating in the export sector (or entrusted
with export) and needs to borrow working capital to serve the signed export contract.
- Benefits: SHB commits to a lower interest rate than usual, from only 2.35%/year for
the first 3 months.
- Hotline: 1800.5888.56
https://www.shb.com.vn/chuong-trinh-chung-suc-cung-doanh-nghiep-xuat-khau/
6. Export letters of credit are the payment method of specific interest. The client is
considering this option and would like to know more.
- Choose one financial institution that offers LC and explain the procedure, documents,
and fees in using LC as a payment method at that institution.
For more information about export letters of credit, we have gathered the following
additional information with Santander Bank as the example:

https://www.santanderbank.com/
Procedure:
- Establishing a purchase contract with Carrefour, agreeing that an L/C will be the payment
method, should detail the terms, including the list of documents required for payment.
- Submitting an application to Santander to issue an L/C including transaction details, a list of
required documents (like invoices, transport documents, and other relevant commercial
documents), and additional conditions.
- Santander issues the L/C and transmits it to Carrefour's bank (usually electronically), ensuring
that Carrefour's bank knows the terms and conditions under which payment will be made.
- Once Carrefour delivers the goods/services as agreed, they compile and present the specified
documents to their bank, the bank then forwards the documents to Santander for verification.
- Santander reviews the documents to ensure compliance with the L/C terms, if the documents
meet the requirements, Santander makes the payment to Carrefour or commits to paying at a
future date as per the L/C terms, and if there are discrepancies, Santander contacts us to decide
whether to accept or reject the documents.
- Upon making the payment, Santander sends the verified documents to us. We are then
responsible for reimbursing Santander for the payment made to Carrefour.

https://www.santander.co.uk/content/dam/sites/santander-uk-cb/resources/documents/finance/
import_documentary_letters_of_credit_factsheet1.pdf

Documents:

- Commercial Invoice

- Transport Documents
- Insurance Documents

- Certificate of Origin

- Packing List

- Quality certificates

Fee: Specific fees for using LC as a payment method depend on customer needs and the value of
the consignment. The basic costs will include:

- Issuing an import letter of credit: 0.4%, min. PLN 350 = $89.16 (in the current exchange rate)

- Other changes in the terms and conditions of a letter of credit: PLN 300 = $76.42

- Payment under a letter of credit: 0.20%, min. PLN 350 = $89.16

- Endorsing documents issued in favor of the Bank or issuing an authorization to collect goods:
PLN 200 = $50.95

- Sending correspondence in relation to security import letter of credit: PLN 50 = $12.74.

Thus, the minimum fee the client pays for an import letter of credit would be around $318.43.

https://www.santander.pl/regulation_file_server/time20230605081229/download?
id=159132&lang=en_US
https://www.santander.pl/regulation_file_server/time20230605081229/download?
id=159132&lang=en_US

- In addition, provide contact information for the institution and the person in it (if a specific
person can be identified).

The institution information is as follows:

Name: Santander Group

Address: Santander Group City Av. de Cantabria s/n 28660 Boadilla del Monte MADRID-
SPAIN

Phone from Spain: 902 11 22 11

Phone from abroad: +34 912890000

https://www.santander.com/en/landing-pages/contact

For more specific, you can contact the following person:

Name: Carlos Berastain

Position: Director of Investor Relations and Market Intelligence

LinkedIn: https://www.linkedin.com/in/carlos-berastain-886843/
https://www.santander.com/en/shareholders-and-investors/general-information/shareholders-
contact/shareholders-relations-team

- Discuss whether the client should use letters of credit in their case or not.

The client should use letters of credit because:

- Firstly, it is an international trade between Vietnam and Brazil, two countries located on two
continents halfway around the world. In this case, the L/C will facilitate payment and help
minimize risks associated with cross-border transactions, such as non-payment or non-delivery.

- Secondly, importing goods from a country as far away as Vietnam shows that customers are
considering long-term cooperation. Therefore, using letters of credit is extremely necessary to
manage risks associated with international trade, such as currency fluctuations, political
instability, or economic instability.s