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#Written by David Tam, 1999.           #       
#davidkftam@netscape.net Copyright 1999#  
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From tamda@ecf.toronto.edu Mon Jul 12 18:22:18 1999
Date: Mon, 18 Jan 1999 23:23:50 -0500 (EST)
From: David Kar Fai Tam 
To: APS 424S 
Subject: #5-01/19/99-"Markets continue to drop on Brazil's currency woes"


The Globe and Mail, Friday, January 15, 1999. B1, B2.

    The rest of the world is feeling the effects of Brazil's 
decision to allow its currency to devalue in the hands of the 
free market. Such an extreme move, in a world full of 
conservatives, caused many investors to worry about the side 
effects.  Markets in North America, such as the TSE, Dow Jones, 
NYSE all dropped by quite a bit.

    This means many things to many people.  First of all, since 
the real isn't worth as much in terms of the mighty U.S. dollar, 
foreign currency investors who invested in the Brazilian real 
lost money. This also means that many currency investors will cut 
their losses early and pull their money out, further worsening 
the problem.

    As for foreign investors in Brazilian corporations as 
opposed to just currency), their return on investment, which is 
in the real, will be worth less in terms of the U.S. dollar.

    Next, it means that Brazil is now competing against Canada 
for exports to the U.S.  Now that the real is worth less, 
American's will see that products from Brazil are cheaper.  This 
could have negative effects against Canada's exporters. In 
particular, areas such as metals and minerals could soon face 
tougher competition.

    Since much of Canada's growth has been associated with 
exports (and much of our GDP depends upon it), we may see less 
business activity in our nation. As well, banks who have loaned 
money to Brazil are being scrutinized by investors to determine 
the amount of exposure to Brazilian businesses.

    Such currency devalues generally have a negative effect on 
the economy. Corporations in other nations such as Canada and the 
U.S. face the possibility of a slower economy due to less trade 
flow of goods to Brazil. This is because Brazilians will be less 
likely to afford expensive U.S. imports.

    Some preventive measures for corporations would include 
targetting exports to a variety of countries. By avoiding heavy 
dependency on one country as a market, corporations will be 
practicing diversity, and reducing business risk.

    Source: geocities.com/siliconvalley/campus/9640/4thYear/Business

               ( geocities.com/siliconvalley/campus/9640/4thYear)                   ( geocities.com/siliconvalley/campus/9640)                   ( geocities.com/siliconvalley/campus)                   ( geocities.com/siliconvalley)