Posted On: March 07, 2011
The strong real is having an impact on the bottom lines of export-dependent companies in Brazil, the head of Volvo Construction Equipment's Latin American operations has said.
Yoshio Kawakami noted at a March 3 press conference that the real's appreciation is rendering Volvo CE's Brazilian unit - which makes backhoes, loaders and other heavy machinery for the South American market - less profitable.
"Because of the exchange rate, production costs in Brazil have grown," Dow Jones Newswires
quoted Kawakami as saying. "It's not that we can't compete, but it's not as favorable as it was before."
The real has risen nearly 40 percent since the beginning of 2009. In the wake of the financial crisis, investors began pouring money into Brazil in search of high yields - and the country's currency has appreciated sharply as a result.
There's little companies like Volvo CE can do about investor sentiment - and the pace of the Brazilian economy's growth is also out of their control. But by ensuring that their currency risk exposure is visible, firms in Brazil - and those outside the country that are exposed to the real - can mitigate their losses.
Category: Industry News
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