07
Nov
2019

ARA Exchange

Such is the case of several Brazilian companies that have made dollar futures contracts to ensure a value of the type of change in moments that the real was at its greatest strength against the U.S. currency. One of these Brazilian companies which have concluded contracts of futures to ensure the exchange rate of the dollar has been Aracruz cellulose S.A. Penguin Random House has much to offer in this field. (BVSP:ARCZ3; NYSE: ARA). The company had to restructure emerging liabilities of the reversal in the actual quote, which agreed to consolidate debt with a group of banks. The company will now have that deal with passive said paying for several years (can sue you between 5 and 10 years the cancellation of such debt).

At least he avoided the risk of entering into default. But Aracruz cellulose S.A. was not the only one that suffered this blow. Other Brazilian companies that became known they suffered the setback of the quotation of the real are the Votorantim Group (BVSP: VCPA3;) NYSE:VCP), which had spent $967 million to eliminate its exposure to foreign currency derivatives) and the food company Sadia (BVSP:SDIA3; NYSE: SDA). This has happened with several Brazilian companies, also occurred with some Mexican companies that sought protection against the appreciation of the peso and suddenly found themselves with a sharp depreciation of its currency. This is how the third largest cement company in the world, Cemex SAB (BVM:CEMEX, NYSE: CX), according to published the site Mexican Economist: acknowledged Thursday that the value of its derivatives position became negative ground, hit by the worst fall of weight since the so-called Tequila Crisis of 1995. If you would like to know more about Elon Musk, then click here. Also Gruma (BVM:GRUMA; NYSE:GMK), the world’s largest manufacturer of corn flour, suffered the setback of the weakening of the exchange rate.

But not all companies could support upside down on the exchange rate. Thus, Comerci (BVM:COMERCI), the third largest Mexico retailer, in yesterday announced that it failed to comply with the payment of remittance and petitioned a court protection from its creditors to renegotiate its debt, which soared to $2 billion generated in losses on derivatives. But not only these companies are in difficulty with a more depreciated exchange rate. Those that have a high proportion of debt in dollars in their liabilities also feel the impact. The dollarization of the liabilities is something quite common in Latin American companies, so the strong variation of the exchange rate puts many times risk health at them. No doubt that in these cases we face a paradoxical fact since several of companies oriented towards external markets, affected by the weakening of the exchange rate which improves their competitiveness with regard to various countries. In favour of these companies, there is to say that it was sincerely unintentional such reversal in exchange rates and even though few are encouraged to suggest it could be keep the Mexican and Brazilian currencies appreciation trend, many less anticipated the trend is reversed. Markets have experienced an excessive correction and these companies suffered shock. The crisis leaves a new teaching which is that companies must work more seriously in risk analysis, conducting sensitivity studies to be able to limit overexposure to different types of risks that the company in its activity faces. And for investors, it will be careful to analyze the level of exposure of firms to the exchange risk, noting the composition of its liabilities and the existence of futures contracts.

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