Blog: Dave LeggettBrazil - between a rock and a hard place

Dave Leggett | 28 January 2004

I wasn't too surprised to hear that GM has decided to invest in its Brazilian manufacturing operations. Throwing good money after bad? Not really. Manufacturers are faced with a stark choice down there I think. They either take the view that they've over-egged the pudding and the South American market will never support the capacity they've installed - logical conclusion, remove capacity. Or they decide to invest more and use Brazil as a large-ish volume, low-cost base for global markets and Brazil shapes up quite well on cost grounds due to its cheap currency. GM's investment is for a model to be exported from 2006 and it follows similar export oriented moves in Brazil by Volkswagen. But investing down there does mean biting the bullet at a time when other parts of the world are competing hard for companies' available finite capital.


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