Topics in Emerging Financial Topics in Emerging Financial Markets: Direct InvestmentMarkets: Direct Investment

Presentation to Acer Group, Inc.Presentation to Acer Group, Inc.

Alan Jaffe • Yelena Leyderman

Alex Raytburg • Elina Stunis

Alan Jaffe • Yelena Leyderman

Alex Raytburg • Elina Stunis

Hourly Compensation Growth: Historical TrendsHourly Compensation Growth: Historical Trends

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Taiwan Mexico Portugal Sri LankaTaiwan Mexico Portugal Sri Lanka

Hourly Compensation Growth: Other FactorsHourly Compensation Growth: Other Factors

Projections Methodology

Compound Growth Rate Calculation

Comparison with the United States

In 1998 US Labor Cost was $18.56

By 2003 it will rise even higher

Exchange Rate Issues

Union Strength, Labor Specialization

Logistics

Labor Productivity: “Real Wage Rate”

The Next 5 Years

Growth 2003 Wage

Taiwan 11.80% $9.15

Mexico 0.96% $1.92

Sri Lanka 2.28% $0.53

Portugal 5.56% $7.18

Economic Statistics: Competitiveness RankingsEconomic Statistics: Competitiveness Rankings

* These rankings are based on counties’ infrastructure, education, and technological progress

** The overall ranking is based on the country’s economic conditions, such as government savings rate, reliability of banking sector and the overall stability of the economy.

Notes

Portugal 29 33 27 26 29

Mexico 34 39 31 32 32

Sri Lanka 50 43 48 39 48

CountryMICI Ranking *

1999 1998Competitiveness Ranking **

1999 1998 1997

Economic Statistics: At a GlanceEconomic Statistics: At a Glance

Sri Lanka

Portugal

Mexica

Agriculture Industry Services Agriculture Industry Services

Growth Rates (%)

Portugal Mexico Sri LankaPortugal Mexico Sri Lanka

Trade policies in Portugal are likely to be brought in alignment with the common EU rules.

Trade policies in Mexico follow NAFTA policies.Notes

Exchange Rates: A Time Series AnalysisExchange Rates: A Time Series Analysis

Since 1990, the situation was very different for the four sample currencies.

Rate

Mexico experienced a significant devaluation in 1994-95 Portugal joined the European Union and has hitched its hopes to the Euro Taiwan tracked Portugal rather closely throughout the period And Sri Lanka has steadily eroded relative to the USD

Notes

50.0

150.0

250.0

350.0

1990 1993 1996 1999

MXN: Currency

Crisis

MXN: Currency

Crisis

PTE/XEU

TWD

SLSSLS

Rating (10/98)

Taiwan 50 75 100 67 84 75

Portugal 84 67 100 84 100 75

Mexico 50 84 58 33 84 75

Sri Lanka 67 84 25 50 17 50

Country CorruptionSocioeconomic

ConditionsInternalConflict

Law &Order

EthnicTensions

BureaucracyQuality

80

91

68

59

Political Risk: RankingsPolitical Risk: Rankings

In Sri Lanka, “…The Tigers have been waging a bloody guerilla campaign to establish a homeland for the island Tamil Hindu minority. This conflict has claimed 61,000 people and displaced more than a million of the country’s 19 million inhabitants…”

Political Risk: RankingsPolitical Risk: Rankings

Political Risk (Continued)Political Risk (Continued)

Degree of political stability (elections, party agendas)

Civil wars or guerilla activity

Respect for law and order (functioning court system)

Strong tradition of civilian government (no juntas in recent history)

Anti-foreign feelings

Overall “feel” of the nation...

Numerous Factors Have to Be Weighed ProperlyNumerous Factors Have to Be Weighed Properly

TradeBarriers

Corruption

Wage Growth

Productivity

EconomicFactors

PoliticalRisk

Infrastructure/Communications

Investment Investment DecisionDecision

Investment Investment DecisionDecision

Key Objectives:

Safety of Investment

Returns on the Investment

Long-Term Future of the Investment

Analysis of the Various Aspects of the DecisionAnalysis of the Various Aspects of the Decision

Decision Factors Breakdown

Wage Growth

Productivity Growth

Population Growth

Labor & Productivity

Domestic Tranquility

Corruption

Faith in Government

Foreign Policy

Political & Social

GDP Growth

Trade Barriers

Financial Markets

Ties with Clients

Economic &Financial

~50%~50%~25%~25%

~25%~25%

And the Winner Is…And the Winner Is…