Shortage and high prices of imported components are challenges for companies, CFOs highlight

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Brazil's economy is showing some resilience amid political uncertainty and the pandemic. However, social isolation, which is reducing global industrial activity, is increasingly bringing challenges to companies. The high cost – and even absence – of some imported production components tends to increase the price of products for the end consumer, point out the CFOs and CEOs who are part of the Board of Directors of IBEF-SP .

China's movements during the pandemic – Before the start of the traditional peru phone number list round, Luis Carlos Cerresi, 1st Vice President of IBEF-SP, invited Kelly Luostarinen, Director of Exchange at PwC in China – Brazil's largest trading partner – to provide an overview of the business environment in the country.

“We saw an increase of over 30% in M&A (mergers and acquisitions) in China in 2020, to US$734 billion, driven mainly by domestic transactions and Private Equity,” said Kelly. The movement reflects the Chinese government’s effort to include in its strategic planning mechanisms to strengthen the economy amid the pandemic.

She recalled that in April last year, China's leaders revised the country's infrastructure project plan, called "New Infrastructure," initially presented in 2018. Now, these investments are specifically directed to seven priority segments, such as extensive 5G coverage, electric cars, Big Data and Artificial Intelligence, among others. "This state movement has attracted a lot of capital from within China itself."

From the perspective of global investments, China invested US$120 billion in Latin America between 2010 and 2020, and according to Kelly, half of this amount is in Brazil. “In the early years, we observed that these resources were directed especially to the energy and infrastructure sectors. In recent years, there has been an increase in the diversification of these investments to agriculture and technology.”

Supply chain on alert – The executives of the Board of Directors reinforced the warning already given in previous meetings: the scenario of shortage of some raw materials and components imported for the production lines remains. When they manage to buy the items – which are already at inflated prices due to the dollar at R$5 – the price is even higher. The biggest challenge in this scenario is to avoid passing on the costs to the end consumer, since the country is going through a period of income stagnation and high unemployment.

Volkswagen Latin America’s VP of Finance and IT, Ciro Possobom, highlighted that in automobile production there are some items missing, such as tires, and, mainly, semiconductors are in short supply. This acute restriction of items can lead to cars being assembled without some items at first and then realigned later. “When we align the purchase of parts and pieces, the items are increasingly expensive and scarce. Some international semiconductor suppliers seem to be directing their supply to other sectors, such as cell phones, which have a higher margin,” he said.