Country risk
1. Analyze what is disclosed
2. Analyze the measurements from formal company sources
3. Analyze disclosures and measurements from informal company sources
4. Verify the disclosures and measurements through third party sources
5. Re-evaluate what was disclosed in step 1

1. Analyze what is disclosed PPC sells nature by-product of US operations to international markets including Mexico, CIS and Far East. With significant operations and assets located in Mexico, PPC faces country risk, which results from currency exchange rate fluctuations, foreign law and policies governance and trade barriers. PPC acknowledges a crucial risk resulting from import restrictions and trade protection regulations. In the beginning of 2008, Mexico revived the tariffs of importing chickens from US because Mexico chicken processors claim that US producers sell chickens below their cost of production. Also, Anti-dumping policies of China will impede Chinese importer purchasing US chickens.
PPC also specifically discloses their measures to tackle foreign exchange rate fluctuations related to Mexico operations. PPC manages foreign currency risk primarily by minimizing the net amount of Mexican pesos and using derivative financial instruments. PPC includes gains or losses from derivative financial instruments in cost of sales. In order to reduce risk from potential exchange rate fluctuations, PPC will reinvest cash flow from Mexican subsidiaries into Mexican operations rather than convert into US dollars. 2. Formal measurement: In 2012, Mexico sales generated $871,897 of PPC’s total sales $8,121,382 and increased $114.9 million, or 15.2%, from Mexico sales in 2011. Increased sales are the consequences of increasing customer demands, which improve unit sales volume by $60.0 million (7.9%) and the increase in sales price, which contributed $54.9 million (7.3%) to the revenue increase. The increase in sales price is due to reduced supply, resulting from production cuts. Cost of sales incurred by the Mexico operations during 2012 was $768,676 of PPC’s total cost of sales $7,685,550 and increased $30.4 million, or 4.1%, from cost of sales incurred by the Mexico operations during 2011. Increased feed costs contributed $108.7 million, or
14.7 percentage points and increased sales volume contributed $48.3 million, or 6.5 percentage points, to the increase in cost of sales. Decreased overhead costs and foreign currency translation partially offset the increase by $81.6 million and $44.9 million, respectively.
PPC does not disclose a specific measure to evaluate country risk. However, PPC does disclose foreign currency gains and losses. Foreign currency gains and losses refer to the change in U.S dollar value of the net monetary assets of Mexican subsidiaries. Foreign exchange resulted in a gain of $4.9 million in 2012, a loss of $12.6 million in 2011 and a gain of $0.1 million in 2010. Gain in 2012 was due to the devaluation of peso, the average exchange rate of which increases from 12.39 pesos to 1 U.S. dollars to 13.16 pesos to 1 U.S. dollars. Also, as the future Mexican peso movements are unpredicted, PPC assumes that direct and indirect impacts of foreign exchange rate fluctuations, including foreign countries’ economic recession, are unable to estimate. There exists bias in the valuation of foreign currency gains and losses. PPC does not disclose how it calculates the average exchange rate between U.S. dollars and pesos, nor does it indicate the valuation of net monetary asses in Mexican operations and facilities. Allowances for accounts receivable, for example, could leads to valuation bias of net monetary assets.
PPC also demonstrates that Mexico restrains the differentiation of products importing from America to protect domestic chicken producers.

3. Informal disclosure and measurement
PPC has found increased mortality rate of the breeder flock at one of its operation sites in Mexico. In order to protect