Monday, September 05, 2016

What is countertrade?

Countertrade is a resourceful way to arrange for the sale of a product from an exporter to a company in a country that does not has the resources to pay for it in hard currency.

The problem is usually with the importer but may also be with the country’s limited resources. Countertrade can be defined as: Any transaction involving exchange of goods or services for something of equal value. Sometimes cash is used to pay for any value differences. More and more developing countries are posing requirements of countertrade.

The reasons vary, e.g. shortage of foreign currencies and other financial problems, trade barriers of industrialized countries, difficulties in expansion of new markets and a need it involve exporters in developmental projects.

Countertrade offers numerous advantages, including accessing foreign markets that would be unable to be entered otherwise.

Since no cash is involved, that money is available for other uses. Also, the value of a countertrade can be somewhat arbitrarily set since no money is involved.
What is countertrade?

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