Page 19 - Countertrade
P. 19
Counter Purchase
Counter purchase is a transaction which is based on reciprocity. Here
one firm agrees to purchase a given amount of materials back from a
country to which the sale has been made. For example, if a U.K. firm
sells its products to Russia it is paid in hard currency by Russia but the
U.K. firm agrees to spend some of the sale proceeds on the purchase of
Russian commodities. In this way the UK firm is immediately part-paid in
hard currency and part-paid in Russian credits which will be spent some
time in the future. But these credits must be used against a specified list
of commodities.
Although Russia, in this exchange, has had to reduce its foreign
exchange reserves it nevertheless knows some of these reserves will
flow back as the counterpurchase arrangement takes place. However,
for the U.K. firm its reciprocal purchases may be subject to time and
availability constraints.
Counterpurchase
Goods and/or services
Payment in Cash
Seller Buyer
Goods and/or services
Payment in Cash
