What are blocked funds? How can a corporation structure its foreign affiliates to mitigate problems with blocked funds?

What will be an ideal response?

Blocked funds arise when the government of a foreign country makes the nation's currency completely inconvertible. Foreign exchange controls that impose unattractive foreign exchange rates can also constrain a firm. One technique is for the parent to lend to the affiliate with a fronting loan, which is explained in the answer to Question 10 .
If the profits from the local affiliate cannot be repatriated, the local managers should be given the power to invest in any zero net present value investments. These investments include the commercial bonds and the equities of other firms. If none of these investments appear to be attractive, the firm can engage in additional direct investment in the country by purchasing local real estate, either land or buildings. The firm can also pursue other real investments, including commodities, either for export or to add to its existing inventory, or it might construct additional facilities. Another way for a multinational corporation to use its working capital is to have a local affiliate contract with other firms operating in the country to supply goods or to perform services for the parent or its other affiliates. For example, an architectural firm in a country with blocked funds could be hired to design a factory slated to be built by the parent.