Have you been looking at the PMI numbers out of China? Pretty strong lately actually. I think predictions of them stopping their huge infrastructure buildout are sorely misplaced in the short and medium term. The fact is, China's economy is *so* much larger than 3-5 years ago now that a much smaller GDP growth % indicates insanely high commodity demand. We also have India ramping up its own economy-base quickly which we will start to feel as a commodity-demand driver going forward -- A number of bulk shipping companies are already talking about this.
The last time the Real got that weak against the dollar was during the Financial Crisis. Other than that, when was it the last time it got that cheap? I would be shocked if we saw 2.44 exchange rate (I don't think we hit that during the financial crisis!). It doesn't impact me whatsoever though because the money I have in Brazil companies (aside from OGX) is all in Brazil anyway and thus no currency risk ;). Those clients/family-members of mine all live/spend in Brazil, so thats not a worry I have.
The fact is, PBR sells oil which is a global commodity and thus Real exchange rate changes really should NOT impact that company (It only does because they end up importing gasoline and selling below cost due to government price fixing but you have offsetting COSTS like wages which are all in Real too).
Banco Do Brazil is super cheap and has a great ROE. Yes you could try to time the currency but frankly my only suggestion would be not to do what you did late last year when the stock market dropped to 1100. Waiting for the 'perfect moment' and never jumping in is just as big a mistake as jumping in at tops.
Regarding OGX, I pray to god the Real gets cheaper. They have alot of money offshore in Dollars right now, their commodity is Oil which will go up in real-terms if the currency goes down, many of their costs are in Reals which will go down in 'dollar terms' if the real gets cheap... So I don't see a currency risk of owning OGXPY. Oil price risk sure, but not currency. Just glad they don't have the problems PBR does with its refinery/government-control/etc.
Dip your toe, get a 25-50% position size. That way if your right you get to buy a great company insanely cheap...If your wrong you make lots of money too. At least thats my take on it.
-Fernando
AI
