Term Paper

International business communication

October 19, 2002

Guayaquil – Ecuador


Eritrea was given to Ethiopia in the year 1952 and they had a constant war until 1991, in 1993 there was a referendum that gave Eritrea their independence from Ethiopia.

After this in 1998 a new war rose up between Eritrea and Ethiopia until the UN auspices in the year 2000 a peace treaty and a way to solve the limits on their territories.

The attack prevented planting of crops in Eritrea\'s most productive region, causing food production to drop by 62%.

The cessation of Ethiopian trade, which mainly used Eritrean ports before the war, leaves Eritrea with a large economic hole to fill.

Conditions of Eritrea’s economy. –
Eritrea has huge illiteracy, not enough education opportunities and many problems as all the African countries depending on agriculture and herding.

Eritrea\'s economic struggle has been complicated this year by the shortage of food as a result of unusual seasonal rains. This has forced Eritrea to use limited foreign exchange reserves to purchase food.

Ethiopia the biggest external buyer with about 67% of all the exports of Eritrea goes to them.

Now with the new currency, the Nakfa, it has created an uncertainty of the Ethiopian government and are pushing Eritrea to pay them with dollars because they are certain that the Nakfa is going to devaluate and is not going to be useful in the future, even though they are trying to increase other markets like the US market that is at the moment 3% of the market, not enough to replace Ethiopia. An 80 % illiteracy rate and low levels of education in important technical areas from computer literacy to industrial skills are fundamental problems.

One big problem in the educational field is that women are totally excluded from education and is really difficult for them to be a contribution to the economy.

There’s a lack of diversification of jobs having more than 80% of the existing jobs in the agricultural field.

Food purchases are a huge spend on Eritrea\'s foreign exchange reserves. Eritrea requires 600,000 to one million metric tons of cereal grains annually. In a good year, Eritrea is able to meet one fourth of its food needs; imports from Ethiopia fill much of the rest of the deficit of food. The heavy rains this year destroyed much of the harvests in both countries, however, and Eritrea will meet only about 20% of its food needs this year. To make up for lowered imports from Ethiopia, Eritrea has purchased wheat and sorghum from the U.S., Europe and other places.

Eritrea as I said before is needed of Ethiopia to maintain its economy and in moments of conflict Ethiopia created bigger relations with Djibouti making all their exports pass through them and forget Eritrea.

Conflict Eritrea - Ethiopia.

“The war is the result of a large-scale Eritrean military invasion of Ethiopian territory. Eritrea has recently announced claims on these territories that were being peacefully administered by Ethiopia. But international law forbids the use of force to change the status quo. A country which has territorial claims on areas peacefully administered by another country must not resort to force; it has to bring the issue to international mediation. The Eritrean invasion which took place on May 12, 1998, violated this fundamental tenet of international law. After the invasion the Eritrean government stated that it had "brought under its control large swathes of territory."

Eritrea claims that Ethiopia provoked the invasion because of a clash on May 6, 1998 between Ethiopian police and Eritrean army units in Badime.”[1]

The war that was happening in the horn of Africa ,Ethiopia was being supported by Russia and Cuba, Eritrea also planned that they would be an export-based manufacturing and financial service center for the region . However, Eritrea\'s plans conflicted with Ethiopia\'s intention to develop its own manufacturing capacity and to process its own raw materials rather than simply export them to Eritrea.

Eritrea had a bigger commercial expansion and GDP growth than Ethiopia at the moment of the adherence of the country to Ethiopia and many of the companies had to be moved to Addis Ababa the capital of Ethiopia were later on were made a part of the Ethiopian state. “The US-Rwanda peace plan was developed after three-week diplomatic efforts and consultations with both