Cisco Sees Brazilian Expansion Opportunity in Currency PlungePeter Millard
Cisco Systems Inc., the biggest maker of networking equipment, said it is expanding in Brazil at a time when currency volatility and a slowdown in Latin America’s largest economy discourage some of its competitors.
Based in San Jose, California, Cisco opened an innovation center in Rio de Janeiro today to boost sales and services to government and corporate clients, including energy and mining companies, Robert Lloyd, head of development and sales, said in an interview.
“In challenging times, or rocky periods, that’s when you can actually make your biggest gains,” Lloyd said at Cisco’s office in downtown Rio. “We’ve been through these things many times in our 30-year history and we adapt and adjust to the fluctuations in currencies.”
Brazil’s real has weakened 16 percent against the dollar in the past three months, the biggest decline among emerging market currencies tracked by Bloomberg. For Cisco, the weaker real makes its imported equipment more expensive in Brazil while reducing the cost of its investments in the country, Lloyd said. Cisco uses hedging to minimize the impact of currency moves in the countries where it operates, he said.
Brazil’s gross domestic product expanded 0.9 percent last year, the worst performance since 2009. Analysts surveyed weekly by the central bank have cut 2013 economic growth forecasts by more than one percentage point so far this year.
The slowdown in Chinese growth has affected Cisco’s sales in other regions, including Brazil and India, that export to China, Lloyd said. Still, Cisco had about $50 billion in cash at the end of June and is looking for investment opportunities outside of the U.S., he said.
“Slower growth right now is the reality, and we’re committed because you have an amazingly good long-term story here,” Lloyd said. “It’s a time when people pull back and it’s a time when we play to win.”