Cisco: FX volatility a concern, but LatAm is prepared
US giant Cisco is wary of market volatility and exchange rate pressures in Latin America, particularly in countries such as Argentina.
Despite these economic headwinds, the company says it remains committed to long-term investments in the region and believes that Latin American economies will be able to eventually overcome the situation without significant shocks.
"If there's any region that is used to these crises and prepared to deal with them it's Latin America," Cisco Latin America president Jordi Botifoll said in response to a BNamericas question during a press conference in São Paulo.
In May, during a conference call with investors, CEO Chuck Robbins said that the rise of the dollar and the depreciation of other currencies, particularly in emerging markets, along with macroeconomic and geopolitical risks were the greatest concerns for Cisco.
Botifoll echoes those sentiments.
"Currency volatility brings a series of risks to virtually any market. Strong swings may lead to extreme measures involving deficit controls and reduced investment by the public sector, which could lead to a slowdown cycle in the economy and, ultimately, to a recession," he said.
According to Botifoll, however, the digital transformation trend powers on regardless of the economic scenario, and the need of companies and governments for digitization projects tends to counteract recessive forces.
Cisco does not break down financial figures by country. Cisco Brasil president Láercio Albuquerque projects sales in Brazil, one of the 10 largest markets for Cisco, will grow in the double digits this year.
The company's Brazil plant recently received investments to increase production capacity and supply the local market. According to Albuquerque, 50% of all Cisco products sold in Brazil are now locally manufactured, up from 15%.
By manufacturing locally, Cisco benefits from tax breaks granted under the Lei do Bem federal program, helping the company to invest in other initiatives, such as training and R&D, said the Brazilian executive.
"The factory, of course, relies on some imported components, but the fact that we're adding ever more locally manufactured products to our sales offsets initial FX pressures."
IoT, CYBERSECURITY
In terms of verticals, Cisco bets on demand for projects related principally to cybersecurity and internet of things (IoT), among others.
Albuquerque praised Brazil's national IoT plan, which has yet to be signed into law, but said that the taxation of sensors remain a major "thorn in the side" for the development of the IoT industry.
He said Cisco has not seen a reduction in sales even in the public sector, which is traditionally affected by the electoral calendar. Brazilians vote on October 7 for president, governors and legislators.
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