Page 23 - Countertrade

Pros & Cons of Countertrade

Pros

The primary advantage of countertrade is that it allows a firm a way to
finance exports when other means are not available. Consequently, a
firm that insists on being paid in hard currency by its trading partner may
lose its contract.

Avon, Colt Industries, and Grumman International are examples of
companies following a company advantage policy. Avon uses
countertrade to release blocked funds; they build plants in various
countries and export part of the production in order to generate hard
currency. These made in developing countries are then exported to
other developing countries, rather than to industrial countries.

Colt Industries defence divisions in order to compete with foreign
defence firms limit their countertrade obligations to sourcing or
counterpurchase; they do not buy back or export products related to the
original sale. These counter purchases are liquidated through trading
companies.