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Invest While the Dollar Is Strong

Invest While the Dollar Is Strong

The Dollar is strengthening against many currencies, yielding a great opportunity to build capacity in the developing world.  Thanks to China’s move to devalue its currency, many countries dependent upon exports to China and Chinese funding are watching their currency value slip as well.  More importantly, the lack of a solid market based value for the Yuan (though China says that the adjustment is a move toward a market based currency value) also should give many countries pause about their dependence upon trade with China.  This can be seen in Africa in particular.  The Chinese saw opportunity in Africa to obtain inexpensive resources, and build their sphere of influence, while the U.S. largely ignored trade with Africa.  We are accordingly late to the game.

However, the Dollar will go a long way in Africa today.  More importantly, the African continent as a whole has a growing middle class of consumers, an abundance of natural resources, and a relatively inexpensive workforce.  There is an opportunity to expand business relationships with African suppliers, and for American companies to expand the sale of moderately priced goods and services into Africa.  The benefits of such expansion into Africa are clear for African countries and their citizens as well, since providing decent, stable and sustainable work ultimately has a large impact on community and economic stability.

The same can be said of expansion of manufacturing into Latin America.  While the Dollar is gaining steam, real effective costs for materials and lower tier manufactured goods that are necessary to a manufacturer’s assembly process here in the U.S. have decreased for goods sourced in Latin America.

Countries that have substantially increased their trade dependence upon China must seek to diversify their trading partners.  This provides an opportunity for U.S. based companies to enter the mix, at a time at which the real cost of taking this step is lower than it has been in quite some time.

Additionally, entrepreneurs in the developing world are finding niches in their home country markets, seeking out ways to build products needed in their communities in order to avoid heavy costs related to importing goods.  Venture capitalists can find appropriate investments overseas, which permit lower costs of entry, but which at the same time can provide higher rates of return, and certainly allow for a higher degree of control than the U.S. market will bear.  Money is harder to borrow and borrowing costs more in the developing world, and accordingly, venture capitalists hold even more power overseas.  With proper vetting, investment opportunities abound.

Now is the time to expand into the developing and emerging world.