Michael Moffett
Thunderbird School of Global Management (TB0049-PDF-ENG)
November 15, 2008
Just when John Penman thought that Nodal Logistics Corporation (NLC or “Nodal”) was ready to move to Brazil, a new roadblock was put in his way. Just a few days ago, on December 11, 2007, he finally received approval from the US company’s board of directors to invest $ 45 million in an 800,000-square-meter industrial property project in São Paulo, Brazil. But that was before the legal call yesterday. Nodal’s legal department had received confirmation from its São Paulo-based employee that Brazilian law requires commercial real estate contracts to be in Brazilian reais. One of Nodal’s basic business practices that had been so important to its international success was writing all industrial real estate contracts in US dollars. This posed a serious problem as most industrial leases lasted between five and more than twelve years and it was a very long time to be exposed to the Brazilian currency. John now had to deal with the multitude of strategies and derivatives that could allow the company to manage currency risk; otherwise the deal was dead.
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