We all think that the low US$ FX rate makes US manufactured goods cheaper. Wishful thinking. The Apple pricing strategy is well known: rates are the same in Euros and US dollars. Which means that Europeans pay a premium of nearly 35%. Still fair deal compared to the Dell pricing strategy. Dell charges nominally more in Euros than US dollars. Utmost irritating...
Example: a Dell 2407WFP screen costs 766,73 EU in Belgium and 699 US$ in the US. This means that exactly the same screen costs 475,98 EU in the US, nearly 300 EU less expensive.
Imagine how happy I was when I discovered Borderlinx in the bthere inflight magazine while flying to Budapest. José Zurstrassen, one of the Belgian entrepeneurs I have in my 10-most-respected list, is an investor in this brainchild of Hans Wackwitz. Hans was the man who drove the investment of Baripas in Interxion back in 1999... 
The concept of Borderlinx is simple. You pay 5 EU and you get an official address in the US. Not PO Box, but a real address. You start shopping a-gogo in the US and have your goods delivered to your US address. Borderlinx keeps all your goods during 30 days and you decide when you have them shipped to Belgium. To the shops you only pay local shipping fees and Borderlinx will ship all your goods together in one shipment at the best rates. Of course you will pay customs when the goods arrive in Belgium. But even then you are making a very fine deal. This weekend I've been shopping at Design within Reach and Etsy. On Etsy we bought goods from bossybootsdesign, orchardstreetgoods, Aptrick, Morgan Creatures, Vital Industries, Anna Laura and Apak Shop Shopping on Etsy is a sheer delight. The contact with the buyers is absolute heartwarming. More on Etsy in another post. And I did buy 3 of those Dell screens, in the US. I'll have Borderlinx send the goods from Etsy and Design within Reach in one shipment and a second shipment with the 3 Dell screens.
Everything is on it's way to our US address. Once all the goods arrive here in Belgium I'll write a detailed summary of our first experience with Borderlinx and of course the detailed financials. For now only one disadvantage: Some shops (1 out of 10) doesn't allow you to ship goods to a different address than the billing address of your credit card. A solution is to have a US, Brazilian or South African credit card. But that would take me to another (long post). But as I said, this isn't a real problem. In those 10% cases paying through Paypal is in most cases already a quick solution. Once we did the Borderlinx to Europe experience; we'll also do trials to South Africa and Brazil. With the low South African Rand this can prove to be less interesting, but in Brazil the experiment will be the more interesting.
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Feb 17 2008
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Feb 9 2008
You've probably all seen Laços by now, the movie by Flavia Lacerda and Adriana Falção, which won the Youtube short movie competition.
When I was reading about Mark Bowness new project 'Have you got the Nerve', I realized how wildly popular this would be in Brazil. If it was not for Mark being a tatooed promotor of Christian evangelism and Britain at the same time.
Who will be the one to launch a similar project which will unleash the true potential creativity of the Brazilian Youtube generation? -
Jan 15 2008
While things are starting to look grim in Europe, the situation in South Africa also gets somewhat cloudy. Remax in South Africa predicts that 17% of the South Africans could loose their house this year. In the US the mortgage crisis currently affects 2 million households. With an average of 3,6 Americans per household, this makes 7,2 million Americans and on a population of 200 million represents (only) 3,6% of all Americans affected.
And for the next two quarters, South African should brace itself for even harder months ahead. The consumer price index excluding rates on mortgage bonds was hovering at 7,9% year on year in November instead of between 3 and 6% as targeted by the SA Reserve Bank. At the end of this month the Reserve Bank will determine whether to impose another interest rate hike. It has already raised the interest rate four times in the past two yearts because inflation is not coming down. If raised, the interbanking prime rate would go beyond 15% !
However, for a variety of reasons I see light in the South African tunnel. Consumer debt is slowing since the introduction of the National Credit Act and the economic output is projected to keep growing at figures between 4 and 5% and the bulk of emplyment would remain relatively secure. With regards to growth and job security (South) Africa is much more resistant to the impact of this crisis in the long run than Europe is. The key question in both continents is how middle class will keep it's buying power in the coming decennium. -
Jan 9 2008
Brazil in the news last week:
> Mercopress: Brazilian economy at its best in 25 years
> Bloomberg: Brazil Bovespa's gain is Most in Four Years
> Bloomberg: Brazil's GDP-to-debt ratio falls to lowest since 1998
> Mercopress: Record investlments boost Brazilian growth to 5,2% in 2007
More worrying is that Brazil won't see a tax reform any time soon; something which is very much needed for making these announcements future proof. -
Jan 8 2008
Luc tipped me to watch the Dutch VPRO program “Tegenlicht” (click on the orange “bekijk uitzending")
He was my first boss at PING back in 1995. I have learned a great deal from him and still vividly enjoy reading his posts and talking to him. One of the things we differ on: Luc is a big fan of the US(A) and I would not be surprised if he’d announce tomorrow he's moving to Carifornia. I on the other hand feel at home in Brazil. I don't see Luc spending 3 months in Brazil -if I'm mistaken, Luc, we're leaving for 5 days with a group entrepeneurs end March-, just as I couldn’t stand living 3 months in the US. The reasons why I’ve always felt uncomfortable in the 'American society' are the same which are bringing the country to its knees. The VPRO video clearly illustrates the phenomenon. It’s a fake country, with fake people and fake figures. When the shit hits the fan, the masks fall. Brazilians on the other hand have flexed their muscles in a chaotic mix of cultures and economical tornado’s which makes the quote “Courage is grace under pressure” from Hemmingway far more appropriate on them than on the gringos.
Take for example the two main topics of discussion when people refer to the current economical context:
1. Will the US enter a recession?
2. What is inflation? Yes, what is inflation is a huge topic of discussion of I read through all the economical opinions these days. -
Jan 4 2008
Brazil is kicking off 2008 with hypo press coverage:
>"Brazilian economy is finally coming of age"
> "Brazil's now hot commodity"
> "US equities shudder on economy fears. Emerging markets getting the love"
> "Brazil seeks formula for continued growth"
The real challenge of Brazil will be Lula's abilities to deal with Hillary Clinton. Lula managed to find Bush's G-spot, but Bill can testify that this endeavour is a far more complex matter in Hilary's case. Especially with Hillary's frigidity on global trade. -
Jan 3 2008
I start my daily routine listening over a cup of coffee to the daily news sessions of Miriam Leitão and Mauro Halfeld on CBN radio. Miriam analysis the macro economical context of Brasil, whereas Mauro focuses on the Brazilian stock market. Today Mauro talks about the Brasilian stock market in 2008. As I previously wrote, the Brazilian stock exchange market is no place for the weak-of-heart in 2008. A lot of juicy picks to make, but only if you have deep insights.
Mauro thinks especially the food sector in Brazil will score high. I fully agree with him. Not only for stock pickers, but also for entrepeneurs, the Brazilian food industry is full of opportunities. You pay 3 EU in a Belgian supermarket for juices made of Brazilian fruit pulp; the Acai juice in Delhaize even goes for 4,95 EU a liter. And at the same time you can buy that pulp (pure fruit, the nutritional values are actually better than the imported fres fruits you find in the Belgian supermarkets in winter) at Brasfrut for a fraction of that price. Not hard to put 1 and 1 together. Especially when you know that delicious fruits like Caju, Cacau, Siriguela, Tamarindo or Umbu are not known (yet) in Europe. But you can also explore chicken or ready-made food segments; not to mention the huge potential of the diary segment in Brasil.
I also strongly recommend reading Ricardo Pereira's 2008 insights on Dinheirama. -
Dec 27 2007
Since February 2006, the South African Rand is in freefal. This year, the currency has been constantly drifting downwards. I was in South Africa early December and I was stunned how cheap life in South Africa has become when you calculate back to Euros. A Big Mac Meal in Cape Town costs SAR 16,75 or 1,67 EU. Last year I would pay 2,5 EU for that same Big Mac Meal in Cape Town. According to this Big Mac index the Rand is seriously under valuated. And this is exactly the strange thing, the interest rate in South Africa is high, but still much lower than what it has been in the past; the growth rate is on track (4,8% GPD growth this year) and things are looking good for the ecoomy in 2008 (5,2% estimate for 2008). But still the rand falls.
While the Brazilian Real keeps scoring records; the slide of the South African Rand is continuing on a daily basis. Economists are clueless. They think the reason is a mix of more emotional factors: the Zuma factor, the politicians and their position with regards to AIDS, the situation in Zimbabwe. But none of these can justify the movement of the currency. The slide now has a momentum of its own. This is the time to enter the South African market or take a stake in a South African exporting business. The South African central bank is trying to dam panic and avoid inflation impacts by raising the interest rates -another reason to enter with money into South Africa-
My advice: wait until the SAR drops to 0,093 against the EU -very soon, a matter of weeks- and wire some money into South Africa and let it yield a healthy 11% on a Money Markets account until the currency takes up again by the end of 2008. Or better even: take a stake in a South African exporting business which is independent from importing machinery or raw materials.
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Dec 22 2007
As follow-up on the post of last Wednesday: Jacob Zuma has indeed been elected as new president of the ANC Party. Below is an overview of the press-reactions:
December 19: The Economist: Zuma comes out on top
“Whatever happens, the relationship between the government, dominated by Mr Mbeki's faithful, and an ANC led by Mr Zuma will be awkward. The next few months could see either a patching-up of the rift over the succession or a purge inside the party of Mbeki loyalists. There are even questions over whether Mr Mbeki will finish his full term as the country's president, although Mr Zuma has said that he sees no reason for his early departure.”
December 19: UBS analysis: Jacob Zuma won leadership of South Africa’s Ruling ANC Party
“Looking at ZAR and equity levels before and after the announcement, it appears that the markets have not priced in a big political risk premium on South Africa, despite Zuma's background in trade union politics, legal wrangles (prosecutors to decide about charges soon), and less than clear stance on free market policies. Zuma did pledge not to change the country's economic policies if elected as president. It seems the market views him in the same vein as Lula in Brazil, the Congress coalition in India and PM Fico in Slovakia, all of who were initially feared to be populist, but eventually stuck to free market policies in practice. We think this is a reasonable base case view for Zuma as well, but we would not get complacent on this, and point to one big risk. Lula, Fico and India's communist backed coalition have governed through times of strength in the economic cycle. By contrast, the next ANC leader may find himself at the helm of a slowing South African economy, and potentially also facing more tricky international credit conditions. In our view, this increases the risk of populist policies.” -
Dec 21 2007
One of the annoying things in Europe and America is the misrepresentation of Latin America in the English, French and Dutch speaking press. Personally I prefer relying on what I see and hear personally than what biased journalists want me to believe. One of those reliable sources is the yearly survey the Chilean polling firm 'Latinobarometro' publishes every year.
In 2007, 20.000 people from Latin America have been surveyed. The surveys were performed by reputable local polling companies such as Gallup and MORI. The study was published mid November. But strangely enough, no English speaking media has published an article on this important snapshot of Latin American views and opinions. When reading the 112 page long report of the survey, you’ll understand how fundamentally different the democracies in Latin American are becoming from the United States and most European countries. If we would plug in the answers from Belgian citizens in the charts of the report, we would quickly understand that the basis of the political crisis in Belgium is actually not a political crisis but a crisis of its citizens and their belief in the kind of democracy Belgium has become.
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