Why do they invest in Brazil if importing seems so cheap right now?

Competition breeds innovation and attracts new challengers.

That’s the clear message the Chinese and Indian rivals are sending to the big leaders such as Caterpillar, Komatsu and Volvo in the civil construction field.

A little piece of news on this Wednesday’s Wall Street Journal brought to light that Liugong¸ a Chinese enterprise that count’s itself “as the largest global supplier of wheel loaders, typically used for loading materials into trucks.”, is starting to invade Caterpillar’s Backyard.

That is not all. Liugong is planning to invest in Brazil too.

I have the privilege of advising them in Brazil, and can say they have an elegant and clever international structure (currently counting with 13,000 employees and a factory in India, and expanding).

Why they invest in Brazil if importing seems so cheap right now?

Some may think Liugon’s decision is only based on the sure boom the sector is experiencing due to the World Cup and the Olympics.

But that is not the whole story. Many other companies, such as Motorola and Foxconn, are following the same strategy, and that can’t be explained by the Olympics alone.

Half the world knows that the Brazilian Real is way too appreciated right now. This is not going to last forever. (Some anticipate an exchange rate crisis somewhere in the next 3 years).

So, building a company in Brazil to prepare for when the exchange rates go through the roof again is good planning.

You should think about it, too. The Asians sure are.