Daimler says Brazil investments depend on forex http://today.reuters.com/news/articlebusiness.aspx?type=CARMFG&storyid=2006-11-24T172032Z_01_N24359120_RTRIDST_0_BRAZIL-DAIMLERCHRYSLER.XML&from=business
Fri Nov 24, 2006
SAO BERNARDO DO CAMPO, Brazil, Nov 24 (Reuters) The chief executive of DaimlerChrysler AG (DCXGn.DE: Quote, Profile , Research) joined a growing chorus of manufacturers on Friday who have complained that Brazil's strong currency will pinch profits and may cut future investments in the country.
Though Dieter Zetsche praised Brazil as a longtime success story for the German automaker, he said the exchange rate was limiting DaimlerChrysler's ability to increase exports from the South American country.
"We will not stop exporting from this country," Zetsche said at a ceremony commemorating the company's 50th anniversary in Brazil. "But certainly it would facilitate more investment here if the exchange rate were more competitive."
The Brazilian real <BRBY> has rallied 70 percent against the U.S. dollar over the last four years to about 2.15 per U.S. dollar, causing an outcry among exporters who complain their products are becoming less competitive in foreign markets.
Since Brazil abandoned a currency peg and floated the real in 1999, it has gained over the past several years on high interest rates and surging exports.
Though the central bank buys dollars on the foreign exchange market to build up reserves, it does not target a specific exchange rate -- a stance that frustrates some manufacturers.
Global automakers, several of which use their Brazilian plants as platforms to export to other countries, have been hit especially hard by the exchange rate. Volkswagen's Brazilian unit is currently offering a voluntary retirement program to cut its labor force, in part because the strong real has hurt profit margins.
General Motors' chief executive in Brazil has also been a vocal critic of the exchange rate, saying it is crimping export growth and forcing the company to focus more on the domestic market.
DaimlerChrysler (DCXGn.DE: Quote, Profile , Research)(DCX.N: Quote, Profile , Research) ships vehicles and components to more than 50 countries from its three plants in Brazil, where it ranks No. 1 in the commercial truck and bus markets. This year it expects to export about 18,500 vehicles from Brazil. Zetsche, who speaks Portuguese, said he thought Brazil had made significant strides in stabilizing its economy since he worked here for Daimler in the late 1980s. But he added the country needs to speed economic growth or lose out on investment to faster growing emerging markets like China and India. A crucial step, he said, would be to invest heavily in infrastructure to avoid bottlenecks.
"The potential of this country cannot be developed because of the shortage of infrastructure," he said.
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