Is State Tax in Usa Deductible for Europeans by fpo11654

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									   Welcome
from the CIPS
    Family

Please open your books and
  read the Course Overview
     before class begins
 EUROPE
And International
  Real Estate
 Those Who Benefit
Experienced
International
Professionals




                 European
                Real Estate
                Financer’s
       Getting Started
•   Networking is a #1 priority
•   Stand up
•   Take out business cards
•   Circulate for 3 minutes
•   Meet as many people as you can
•   Exchange cards
•   Can you help one another?
•   READY?......GO!!!!
    What 3 events
facilitated unification?
How many countries in
  European Union?
Is Turkey an EU
    member?
Turkey’s major obstacle
 to EU membership?
What is the population
     of Turkey?
Who is the Global Real Estate
   Business Facilitator?
 What is the Major
Fear of Unification?
Course Objectives

                   Assess
              market opportunities


                    Develop
               a business network


                    Identify
              promotion techniques
                   Course
                  Objectives




    Discuss           Discuss
     social,          history,         Identify
   economic,          purpose,        Important
  political and         and             market
 geographical     economic impact   characteristics
characteristics        of EU
Class Notes
•   Turn off cell phones
•   Scheduled breaks
•   Lunch break
•   Activities
•   Task groups
•   Final exam
•   Let’s get started!
Globalization
Globalization Impact
   Investor movement
Globalization Impact
 60% invest in countries
   outside their own
Globalization Impact

     A 12% increase in
  global investment (2004)
 Globalization Impact
• International investors expect real estate
  professionals to have thorough
  knowledge:
     Markets
     Economies
     Business and social cultures
     How to successfully compete
        Capital Flow
• Underlying forces
  - Supply and demand
  - Investment return
• German economy performing poorly
  - Investors going outside Germany
  - Until German economy improves, German
    capital will continue moving elsewhere

Capital flow impacts international transactions
Currency
     Exchange Rates
• Provide insights
  – Country economic performance
  – Country financial performance
• Influenced by trade deficits
  – Higher deficit = negative impact
Strong and Weak
   Currencies
                      Demonstration
As the Euro gets stronger
                               1 euro costs 1.30US$
It’s exchange rate goes down
It takes LESS euros                    US$ temperature
to buy 1 US$                           [exchange rate]
                                          goes UP

    1 euro = 1 US$             1 US$ = 1 euro
        Euro temperature       As the dollar gets weaker
         [exchange rate]
                               It’s exchange rate goes up
           goes DOWN
                               It takes MORE US$
1 US$ costs .766 euro          to buy 1 euro.
 Investors
• A WEAK dollar makes US real
  estate more attractive.

• A STRONG dollar makes
  foreign real estate more
  attractive
    Market Assessment
•   Political stability
•   Population equilibrium
•   Free market philosophy
•   Social harmony
•   Democratic institutions
•   Adequate infrastructure
•   Underlying economic strength
       Additional Points
•   Cultural Influences
•   Core cultural values
•   Client expectations
•   Client needs
•   Conducting business
•   Experienced banks
•   International differences
   Foreign
Currencies and
  Measures
Three Conversion Steps

Currency
   Area
       Time
         Reciprocals
• Exchange rates reported in two forms
  – Foreign units equaling one domestic unit
  – Domestic units equaling one foreign unit
• These numbers are reciprocals
• Reflect both sides of currency value
• Reciprocals are 1 ÷ conversion factor
                       [exchange rate]
         Conversions
If you are converting: The exchange rate is:
    US$ to euros            US$1 = €.81
    Euros to US$           1€ = US$1.23

If you are converting:   The reciprocal is:
    US$ to euros         1 ÷ €.81=US$1.23
    Euros to US$         1 ÷ US$1.23 = €.81
  Conversion #1

Convert 850 euros to US$

€850 X US$1.23 = _________
                 1045.50
    Conversion #2

Convert US$15.30 to euros


                  €12.39
US$15.30 X €.81 = __________
       Conversion #3
  Two years ago the exchange rate was
      US$1 = €.924 or 1€ = US$ 1.082
What would a $300,000 house cost in euros?
    US$ 300,000 X _____ = €_________
                   .924     277,200
 What would the same house cost in euros
                   today?
  US$ 300,000 X ________ = € _________
                 .81          243,000
How much difference did the exchange rate
                   make?
   €___________ or in US$ ___________
    34,200                 42,066
        Conversion #4
   Use same conversion rates for a
        €650,000 office building.
What was the value in US$ 2 years ago?
€650,000 X __________ = US$ __________
            1.082             703,300
   What is the value in US$ today?
€650,000 X __________ = US$ __________
           1.23              799,500
How much difference did the conversion
     rate make in these examples?
            US$__________
                 96,200
  Converting Square Meters to
          Square Feet
       The Conversion Factors are:
1 square meter (m²) = 10.7639 square feet
   1 square foot = .0929 square meters


     Converting m² to ft² = MORE ft²
     Converting ft² to m² = LESS m²
Square Meters to Square Feet
              Formula:
       Square meters X 10.7639

Mr. and Mrs. Schmidt want a 250 square
              meter home.
    How many square feet will it be?
 250 meters X 10.7639 = ______ sq. ft.
                        2690
 Square Feet to Square Meters
              Formula:
   Square feet X .0929 (1÷ 10.7639)

How many meters in 20,000 square feet?
  20,000 sq. ft. X .0929 = __________m²
                           1858 m²
 Convert Price Per Unit of Area
                Formula:
 Price/Unit of Area X Area Conversion
                  Factor
 Apartment rents for €1000/m²/month
     Calculate rent in square feet
   €1000 X .0929 = €92.9/sq.ft./mo.
[Price/m² X Meter to Sq.ft. Conversion Factor(.0929)=
                  Price per sq.ft./mo.]
Convert the Time Period

   Price Per Month X 12 =
       Price Per Year


    Price Per Year ÷ 12 =
      Price Per Month
      Putting it Together
Exchange Rates          US$ = €.81
                        €1 = US$1.23
Conversion Rates        1 sq. ft. = .0929 m²
                        1 m² = 10.7639 sq. ft.
                   Currency:
       €70.83 X 1.23 = US$87.12/m²/mo.
                     Area:
    US$87.12 ÷ 10.7639 = US$8.09/sq.ft./mo.
                    Time:
   US$8.09/sq.ft./mo X 12 = US$97.13/sq.ft./yr.
        Key Point Review
•   Economic affects of globalization
•   How culture influences transactions
•   Expertise in market assessment
•   Currency and area conversion skills
•   Strengthening and weakening of
    currencies.
  The
European
 Union
  Europe as an
Economic Region
             Europe
Four Significant Events

                   Integration of the EU

                   German Unification

                     Democratization

                     Monetary Union
    Maastricht Treaty--1992
•   Common foreign and security policy
•   Cooperation on immigration and asylum
•   European police intelligence agency
•   EU citizenship and a central bank
•   Development of poorer EU countries
•   One currency European market
  Copenhagen Criteria
1. Democracy, rule of law, human
   rights and protection of minorities
2. Functioning market economy
3. Accept obligations of membership
EU Constitution Concerns
•   Dwindling national identity
•   Rapidly expanding EU
•   Integration
•   Shrinking economies
•   Islamic radicalism
•   Distrust of powerful bureaucrats
Euro Issue Requirements
            • Price stability
            • Sustainable
              government finances
            • Stable exchange rate
            • Convergence in long
              term interest rates
              EURO Coins
•   Common side           • Germany has five
•   National side           mints
•   Must have 12 EU stars • Mint Codes
•   Greek coins may be      – A Berlin
    made outside Greece     – D Munich
    – E—Spain               – F Stuttgart
    – F—France              – G Karlsruhe
    – S---Finland           – J Hamburg
European Union Goals

   Support democracy
        Rule of law
       Human rights
     Individual liberty
Promote prosperity and social
         progress
European Union Goals

     Safeguard peace
Promote international security
    Reinforce role of UN
European Union Goals

Sound world economic policies
      Sustained growth
         Low inflation
      High employment
  Equitable social conditions
           Stability
European Union Goals

  Promote market principles
     Reject protectionism
 Expand and open multilateral
       trading system
European Union Goals

 Help developing countries
  toward economic reforms
European Union Goals

Support nations of Eastern and
         Central Europe
   Encourage participation in
 international trade and finance
                            EU
                   Institutional System




     Executive                        Council of
    Commission                        Ministers
    [Executive Branch]                    [Senate]




     European
                                   Court of Justice
     Parliament                       [Supreme Court]
[House of Representatives]
Areas of Concern
            Terrorist attacks

  Weakening of Executive Commission

 Admission of former communist countries

       Passage of EU Constitution
The EU and Eastern Europe
• Established programs to accelerate the
  reform process to EU membership
• These agreements provide:
  – Preferential trade treatment
  – Guidelines for adaptation of local laws to EU
    legislation
  – Free movement of capital
    EU, Mediterranean and
         Middle East
• Allow one-way duty-free exports of
  Industrial products
• Agricultural concessions
• Grants and loans to EU markets
     Euro-Arab Dialogue
• 20-year economic contact
• Topics under discussion:
  – Technology transfer
  – Investment incentives
  – Trade
  – Labor problems
  – Establishment of free-trade area
  – Cultural exchange
     Cotonou Agreement
• Replaced Lome Convention June 2000
• 20 year agreement with 77 ACP states
• Poverty reduction is principal objective
  – Political dialog
  – Development aid
  – Closer economic and trade cooperation
        Impact on
International Real Estate
                      Increased use and
New Regulations        understanding of
On International   International standards
 Transactions           and regulations


 Competition
                         Creation of
  Domestic              International
 employment           Investment Rules
    Trade
   Integration Concerns
  Increased worker and industry mobility

New real estate opportunities due to supply
                and demand

    Increased international investment
                opportunities

  Decrease of exchange rate fluctuations
Country of Origin Principle
• Encourages reciprocity
• Problematic due to:
  – Some states protect property title, access to
    and work within real estate profession
  – Some control only access to profession
  – Some regulate access but not practice of real
    estate
  – Some member countries control nothing
• National planning and policies unlikely
Ownership Attitudes
    Common Law
     Civil Law

          Nature of
         Commercial
           Leases


                 Ownership
                 Motivation
      Land Registration


•   Comprehensive title registration is rare
•   Some countries have full cadastral system
•   Land registry in others is proof of title
•   Former Communist countries claims are
    problematic
VAT Taxes
              • VAT
            reductions
              and low
              interest
            rates have
                kept
             European
              housing
               market
               robust
                Financing
• Integration is:
    – Liberalizing capital movement and financial
      services
    – Should increase money supply for property
•   Sources are varied
•   Some builders provide own funding
•   Equity financing common in UK
•   Debt financing common on continent
International Professional
         Networks
       Key Point Review
•   Four significant European developments
•   Present state of unification
•   Understanding the European market
•   Challenges ahead for EU
                          A. United Kingdom
                          B. June 23, 2000

1. Transparency           C. Twenty-five

2. Land Registry System   D. Registration
                          considered proof of
3. VAT                    ownership
4. Balloon Mortgages      E. Laid groundwork for
                          single EU currency
5. Contonou Agreement
                          F. Encourages real
6. Zero Coupon Bonds      estate reciprocity
                          among EU countries.
7. Country of Origin
                          G. Ability to understand
8. Countries in EU        and apply

9. Maastricht Treaty      H. Value-Added-Tax
                          I. Germany
Exercise #2
Economic and Real
  Estate Trends
         Objectives
 Analyze European real estate trends

      Discuss FDI investment by
         European countries

       Review status of REITs
            in Germany

Assess economic trends and markets in
     Eastern European countries
                Germany
                2002       2003      2005
Population          83.3     82.42     82.43
GDP [billion]    2,174.0   2,271.0   2,446.0
GDP/Capita      26,200.0    27,600    29,700
GDP Growth           .06     -0.10          .80
Inflation           2.40      1.10          2.0
Unemployme          9.40      10.5      11.6
nt
              Germany
• Europe’s largest, most populous
  economy
  – Slow growth expected through 2006
  – Budget deficit above 3% EU Stability Pact
    limit
    • 4th consecutive year
  – Inflation around 2%
               France
• Third quarter 2004:
  – GDP fell
  – End user consumption fell
  – Investment fell
• Modest growth of 1.75% expected in
  2005
• Inflation above 2%
• Budget deficit around 3% for 2005-2006
       United Kingdom
• Slower consumer spending in 2004
• UK reduced growth to 3.1%
• Expected to continue through 2005-
  1006
• Inflation expected to rise to 2%
• Interest rates should be at their peak
• Tax increase may be necessary
                   Italy
• Slow, steady growth in 2004
• Projected increases in 2005 and 2006
• Growth aided by low inflation/interest
  rates
• Exports expected to improve
  – Provided no further appreciation of the
    euro against the dollar
               Spain
• Best performer of larger Euroland
  economies
• Growth of 2.75% in 2005-2006
• Steady consumer spending
• Increased investment
• Increased exports
• Inflation above average
• Strong euro hurts their competitive
  position
          Netherlands
• Slow growth due to:
  – Strong euro
  – Weakening external demand for goods
  – Tighter fiscal policy
• Expected increase in 2006 to 2.25%
             Sweden
• Strong investment is growing the GDP
• Growth to 3% in 2005 and 2.75% in 2006
• Increased consumer spending good
  sign
• Labor market improvements aid growth
• Low inflation helps maintain low
  interest rates
            Switzerland
• Hard hit by:
  – Decline in world trade
  – Turmoil in financial services sector
• Decline reflected in low GDP growth
  – .2% 2002
  – 1.8% 2004
  – 1.75 in 2005 and 2006 expected
              Belgium
• Slow domestic demand kept inflation
  low
• Increased exports
• Improved competitive position
• Concerns:
  – Weakness in trading partners
  – Large appreciation of the euro
• GDP for 2005-2006 expected at 2.5%
                Austria
•   Strong economy during 2004
•   Robust export growth
•   Domestic demand remained weak
•   GDP for 2005 expected to be 2.25%
•   GDP for 2006 expected to be 2.5%
•   Investment expected to increase as
    exports moderate
                Ireland
• 5% GDP expected for 2005
• 4.75% GDP in 2006
• Irish economy exposed to any renewed
  downturn in international economic activity
                Greece
• Economy expected to grow to 2.75% in 2005
• 2006 growth expected at 3%
• Strength of economy could bring inflationary
  pressures
  Future Growth of EU
• Depends upon:
  – Stability of global economies
  – Controlling inflation
  – Restructuring market and welfare
    programs
  – Consumer spending
  – Demand from the USA and Asia
• Strong euro
  – Buy foreign goods for less
  – Make euro-based exports cost more
    Changes in Real Estate Markets
• Global debt crash in 1998
• Global credit crunch in early 1900s
• Introduction of euro and its strength
• Radical changes in currency exchange
  rates
• New national tax laws
• Global reforms in private property
  rights
           Europe as
 Attractive Investment Market
• Huge market with potentially high
  yields
• Broad range of investment
  opportunities
• Diverse range of categories
• Governments privatizing municipal
  facilities
• Easing tax barriers encourage foreign
  investment
    2005 European
Housing Market Reviews
                Austria
•   Static 2003-2004
•   Renewed activity expected for 2005
•   High owner occupied rate [50%]
•   Low taxes
•   Capital gains exempt after 3 years
              Belgium
•   Housing boom continues
•   80% higher than 8 years ago
•   Low interest rates
•   Favorable tax system
•   High exchange costs
•   Mortgage interest relief on taxes
•   Commercial lease terms 3, 6, 9 years
           Denmark
• Optimistic housing market
• Price increases of 14.8%
• Low interest rates
• Building incentives
• 4.9% growth in residential investment
• Owner-occupied mortgage interest
  relief
• 25+ year loan terms
             Finland
• Favorable mortgage rates
• Tax deductible mortgage interest
• Capital gains tax free after 2 years as
  principal residence
• Loan periods 17-18 years
• 7.6% housing growth expected in 2004
• Housing prices decreasing
             France
• Housing boom strengthened in 2004
• Prices up 16% for existing and 10% new
  construction
• Housing “price bubble” of concern to
  lenders
• Low interest rates
• Market shifting to ownership
• No mortgage interest tax relief
• Capital gains exempt
          Germany
• Housing market flat in 2004
• East Germany has an oversupply
• Prices falling for a decade
• Low level of ownership [40%]
• No mortgage interest tax relief
• Israel and USA strong commercial
  investors
• Germans may now invest more outside
  EU
            Greece
• Housing prices remain low
• New housing investment remains
  strong
• Low interest rates
• Strong economy
• High ownership rate [74%]
• 1.75 million second homes [highest in
  Europe]
• Heavy migration from rural to urban
  living
           Hungary
• Highest home ownership in Europe
  [90%]
• Average dwelling size 75m²
• Quality housing is hard to find
• Only 71% meet official comfort
  standards
• Maintenance is a major issue
• High interest rates
• No more state subsidy
              Ireland
• Rise in housing prices is subsiding
• High level of investing in rental
  property
• Housing prices near peak
• Mortgage interest tax relief with caps
• New housing units down from 2004
• New construction tripled in 10 years
  from 1994-2004
                Italy
• Smallest EU housing stock at 30%
• Financial and economic conditions
  shifted to ownership
• Tax breaks favor ownership
• New rental laws make private renting a
  poor investment
• Low interest rates
• Mortgage interest tax relief
            Netherlands
•   Economy at a standstill
•   Low interest rate sustains high demand
•   Long-term, fixed rate mortgages
•   Housing supply is tight
•   Home ownership at 54%
•   Income tax deducible mortgage interest
•   No capital gains tax, high transaction
    costs
               Poland
• Private ownership at 55%
• 1.5 million unit housing shortage
• Average floor area 67m²
• Poor building quality
• 7.5 million homes need extensive
  repairs
• Interest rate caps imposed in 2002
• Mortgage market is small
               Portugal
•   Low interest rates
•   Growing consumer confidence
•   Property tax of 0-6%
•   Average size of new dwelling is 83m²
•   Mortgage interest tax relief is small
•   No capital gains exemption
              Spain
• Housing boom beginning to slow
• Price growth 15.7% from 17.1%
• 100,000 mortgage transactions/month
• Easy borrowing, low interest rates
• Loan terms 25-30 years
• Mortgage interest tax relief with
  exceptions
• Capital gains exemption
               Sweden
•   Strong economy
•   Low interest rates
•   Affordability becoming a problem
•   Huge decline in housing subsidies
•   Land supply at a premium
•   30% mortgage interest tax relief
•   15% capital gains tax
•   25% VAT tax on new housing
        Switzerland
• Interest rate increases expected
• Home ownership as increased to 35%
• Few owner benefits
• Fixed mortgage rates fixed for 5 years
  or less
• Possible loss of mortgage interest
  deductibility by 2008
• Partial capital gains exemption
      United Kingdom
• Interest rate hikes have slowed market
• House purchase takes 3-6 months
• Variable rate mortgages have no cap on
  rate
• Interest rate changes can be made at
  any time
• Housing quality is high, supply is low
• 69% of Britons are homeowners
      Proposed REIT Regimes
• Germany
  –   Expected January 2006
  –   REIT would be fully tax exempt
  –   Individual investors taxed at individual rates
  –   Non-resident investors subject to German
      withholding tax of 25% on dividends
• Issues remaining unclear
  – Publicly traded corporate REITs and private?
  – Included in investment tax law of 2003?
  – German corporate tax law or specific REIT tax
    law?
         Rental Rates
• High front-end expense
  – VAT taxes
  – Government taxes on every level
  – “Keymoney” may be significant
• Past 5 years increases in rents and
  values
• Increases mark gains from unification
• Strict planning and regulation of new
  construction
        Housing Costs
• European home ownership very expensive
• Modest 4 or 5 room single-family home in
  Europe exceeds $345,000
• Average home price in US $218,000
• Apartments expensive at $300+ per sq. ft.
• Modest 2 bedroom unit would cost $300,000
• Prices are increasing at slower pace
• Investors should consider cross-border
  taxes and interest deductibility, not just
  mortgage rate
     Space Availability
• Major market space hard to find
• “New” space virtually impossible
• High concern for tradition, environment
  and preservation
• Users locating in outer business parks
  and non-center high-rises
• As prices rise, marginal users moving
  voluntarily
       Use of Agents
• Northern Europeans use agents more
• Southern Europeans use agents less
• UK, Ireland, Scandanavia agent-
  assisted transactions
• More mobile economies use agent
  services
• As economies modernize, demand will
  increase
 Eastern European Economies
• Goals since fall of the Berlin Wall
• Decentralize and privatize industry and
  agriculture
• Move from heavy industry to other
  productive sectors
• Repair the environment
• Re-capitalize and modernize factories and
  infrastructure
• Introduce free market supply and demand
• Restore individual freedoms
         Eastern Europe
       Real Estate Markets
• Regional developments
  – Democracy and free-market economics
  – Renewed awareness of land value
  – Struggle for identity and power
  – Guidelines for competition
  – Need for retail space
• Continued growth and expansion of
  free market economies
Globalization of Real Estate Trade
          Organizations
• International Real Property Foundation
  – NAR and US Agency for International
    Development
  – Conduct training
  – Help create real estate professional
    associations
• NAR Cooperating Agreements
  – 50+ nations
  – www.realtor.org/international
  – Listed in Appendix
     Key Point Review
• Europe major source of international
  real estate investment
• Most economies have increase in value
  and sales
• European economy affects FDI in other
  countries
• Eastern Europe great opportunities and
  high risk
• Trend to increased trade group
  interaction
Discussion Questions
How To
 Look
 At a
Country
                               Objectives


• Identify social, economic and political
  characteristics of a country that shape its
  potential for investment
• Discuss business culture characteristics
• Analyze a sample country
 International Market
• Market knowledge helps get the listing or buyer
• International transactions yield long-term business
• Travel and exposure to different cultures


               • Knowledge necessary to:
                  –   Advise outbound investors
                  –   Advise outbound users
                  –   Work with inbound foreign investors
                  –   Network effectively
    In-Depth Information
•   Sources of capital
•   Government structure and attitudes
•   The economy
•   Market landmarks
•   Local business and social culture
  Do Your Homework!
• Learn necessary data
• Each culture different
  – Business
  – Social
• Don’t try to transplant current
  business model to international
• History, economy, customs
Business Culture
  Overviews
Austria
• Punctual
• Great sense of humor
• Direct approach to negotiations
• Slow decision-making
• Classical music, opera, art and winter
  sport good conversation topics
• Avoid money, religion, anti-Semitism,
  WWII
Belgium
• Want to know you first
• Appreciate hard facts
• Business cards
  – One side English
  – Other side French or Dutch
• Assure client you will meet deadlines
• Safe topics: cycling, soccer, food, beer, art
• Avoid: Belgium history, politics, Germans
Czech Republic
•   Don’t use first names
•   Maintain eye contact
•   Speaking loudly considered impolite
•   Remove shoes entering a home
•   Joined NATO in 1999 and EU in 2004
•   2.7 million internet users in 2003
             Denmark
• Punctuality extremely important
• Write day, month, year [27.05.05]
• Freely express opinions, very tolerant
  and pro environment
• Consider compliments inappropriate
• Business stability important
• July/August vacation months
Finland
• 76% of Finland is forests and
  woodlands
• Population is 93.4% Finns
• Excel in high tech exports
• Don’t talk with hands in pockets
• Punctuality important
• Less than 60% own primary residence
France
•   Make appointments
•   Spirited debates common
•   Avoid politics or personal inquiries
•   Learn basic French phrases
•   Want firm personal relationship
•   Logical, analytical, don’t like hard sell
•   Will examine every detail
•   Reluctant to take risks
              Germany
•   Make appointments and be punctual
•   Informal dress unless in banking
•   Avoid conspicuous wealth
•   Compliments not used
•   Avoid: personal questions
•   Avoid: WWII
•   Good: Soccer, travel, beer
                Greece
• Often expressive in greetings
• Indicate ‘no’ by tilting head backward or
  side to side

            • Indicate ‘yes’ by nodding head
              forward slightly
            • Impolite to leave table before
              everyone is finished
            • Capitalistic economy
            • Tourism provides 15% of GDP
               Hungary
•   Greet with firm handshake
•   Woman extends her hand first
•   Hands kept above table when eating
•   Impolite to leave food on plate
                 Ireland
•   Family top priority
•   Casual attitude about time
•   Prefer direct eye contact
•   Proud of their history
•   Like to haggle/negotiate
•   Transactions move slowly
•   Avoid: Catholic church
                  Italy
• Need well-connected contact for
  introductions
• Punctuality not high priority
• May need translator, translate business card
• Use titles and degrees, slow decision-making
Netherlands
 Punctuality essential

Value efficiency
Contacts vital
Avoid boasting
• No need to translate business card
• Like concrete facts, statistics, hard data
• Respect honesty and straightforwardness
                  Norway
                       • Joined NATO in 1949
                       • Rejected joining EU in 1972
                         and 1994
                       • $0 external debt


• Water pollution/acid rain damaging forests and lakes
• Oil and gas production account for 1/3 of exports
• Government is privatizing
                 Poland
•   Proud home of John Paul II and Lech Walesa
•   Very rich culture and history
•   Member of NATO and EU
•   Democratic, fast developing
•   Population 96.7% Polish
•   8.9 million internet users in 2003
•   Punctuality important
•   Be patient. Decision making is slow
 Portugal
• Lunch is key business
  activity
• Punctuality not high priority
                                  • No respect for deadlines
• Do no like confrontation
                                  • Signed document 1st
• Good: home, family, soccer
                                    step in negotiation
• Avoid: religion, money
                                  • Don’t put all cards on
• Short term outcome more           table
  important than long term
                                  • Truthfulness flexible in
  benefits
                                    negotiations
Russia
•   Appointments hard to get
•   Be punctual
•   Client may be late
•   Affection for children
•   Titles are important
•   Translate business card
•   Do not use plastic cups
Slovakia
•   Joined NATO and EU in 2004
•   Air pollution presents human health risks
•   Acid rain is damaging forests
•   Landlocked country
•   Population is 85.8% Slovak
•   Business-friendly 19% flat tax
•   Privatization nearly complete
•   Internet users in 2003 were 1,375,800
                   Spain
•   One of least punctual countries in Europe
•   Modesty valued above assertiveness
•   Good: travel, Spanish wines, traditions
•   Avoid: Franco, religion, Gibraltar, WWII
•   Business cards English/Spanish
•   Personal contacts important
•   Be patient/decision-making slow
•   Feelings more important than
    objective facts
                                       Sweden
                           •   Never be late
                           •   Observe vacation times
                           •   Accept silence with ease
                           •   Signed contract, that’s it

•   Avoid: compliments, high cost of living
•   Good: travel, hockey and nature
•   Do not send mums, white lilies, red roses, orchids
•   No need to translate business card
•   Short, concise, easy to understand information
    Switzerland
• Meetings by appointment
• No pretentious displays
• Polite conversationalists
• Good: world affairs and
  winter sports                •   Extremely punctual
• Avoid: neutrality, money,    •   Very private
  banks, WWI, WWII             •   Good listeners
• Business serious, no humor   •   Be clear and concise
                               •   Keep accurate records
                                   for negotiating… they
                                   will!
United Kingdom
• Common law legal system
• Punctuality appreciated
• Quality, conservative dress
• Tolerant, open-minded, reserved
• Multi-cultural, multi-racial society
• Avoid: Northern Ireland, monarch, EU,
  euro. Middle East, personal questions
• Blunt/direct, masters of understatement
    Country Assessment
          Model
                Real
Geography      Estate       People


               Model         Other
Culture                     Factors
             Components
Government                Infrastructure
              Economy
 Sample Analysis
of a Country Profile

Netherlands
Group Exercise
Conversion Exercise
                                 4-39


Convert 150 m² to square feet

        10.7639 1614.59
 150 X __________ = __________
Conversion Exercises
                   4-39

       Convert euros to US$
  Conversion factor 1€ = 1.19 US$
 €14 X __________ = __________ US$
          1.19         16.66
€14.5 X __________ = __________ US$
          1.19         17.26
€16.5 X __________= __________ US$
          1.19         19.64
 €13 X __________ = __________ US$
          1.19         15.47
 €25 X __________ = __________ US$
          1.19         29.75
€100 X __________ = __________ US$
          1.19        119.00

								
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