The Wall Street Journal published last Thursday this piece on the ever-increasing currency wars.
Brazilian finance minister Guido Manteiga was extremely direct towards the United States:
“The main culprit is the lagging behind of the recovery by the advanced countries and this prompts them to practice monetary policies that are much too expansive,” Mantega said. “While the advanced countries are not totally recovered from the crisis, we’ll have a dispute for markets, particularly for manufactured goods,” Mantega said. Companies should be able to hedge their currency exposure, but derivatives volumes are well above transaction levels, which “is speculation, it’s not hedging,” Mantega said.
The smart players are using this moment to import machinery and set up local production in Brazil:
1. Apple and Foxcon announced they are setting up an assembly plant in Sao Paulo for the production of iPhones, iPads and Apple Powerbooks. Currently an iPhone cost double the price of what it costs in Europe, which didn’t prevent 400.000 Brazilians form buying one in Brazil. Imagine what the market potential is with local production. The exact financial taxation of the Apple products assembled in Brazil are still being discussed, at this very moment Dilma is in China and has a visit to Foxcon’s CEO Terry Gou on her agenda. Assembly in Brazil could start as from November on.
2. BMW announced last week that it is studying an assembly plant in Brazil. Just a matter of time then before Audi follows-suit.