Outsorcing and Exchange Traded Funds - Essay Example

These reasons have been adduced as the causes of outsourcing by United States. It has therefore become a trend for developed economies to outsource their processes to emerging markets. Emerging economies are those economies with relatively cheap cost of labor. As a result of outsourcing their processes, multinational companies have to exchange their home currencies in the foreign exchange market in order to acquire the currencies in the countries of operations. Exchange rate is the price of one currency in terms of problems.

In this paper, the US dollar has been compared with Brazilian currency, the realm, over the last five years (Lydon, 2005). Business process outsourcing has been made in the information technology sector, financial sector, telecommunication sector and other after sales services. Brazil has become a preferred country for outsourcing since this has become one of the government strategies to create more employment opportunities and increase the gross domestic product. As a matter of fact, Brazil has become a preferred calling center.

The rate of exchange in the years has kept on varying depending on the forces of demand and supply in the various countries. The country is rated next to Mexico and Europe irrespective of the proximity of these states. The preference of Brazil has been favored by the time zone, strong government support, conformity of culture high rates of fluency and growing technology (Stouffer, 2011). With the increasing outsourcing in Brazil, 25000 direct jobs and 75000 indirect jobs have been created. One of the major sectors that have actually grown is the IT section where the country’s size is the 8th in the world.

The pooled skilled labor has enabled outsourcing in this country a preference. Outsourcing in the banking industry and the information providing areas has made Brazil increase it’s outsource capacity. The question that many ask is whether the fluctuating Brazil currency could be a hindrance to outsourcing in Brazil. When companies establish their operations in a foreign country, the challenge that must be met is the competition with the home companies (Casale, 2008). The history of the US dollar against the realm from 2006 is as follows.

In 2006 the realm per US dollar was 2.27 and 1.9 in the year 2007. As from the information, the realm gained against the US dollar and therefore any US firm that outsourced in Brazil had to incur additional cost for labor purposes (Lydon, 2005). In the year 2008 the exchange rate per US dollar was 1.63 and 1.95 kin the year 2009. The steadiness of the realm against the dollar therefore reduces the risk that is associated with operations in foreign countries. In the year 2010, the dollar was traded at 1.82. In as much as the rate has varied in the 5 years, it is worth realizing that the variation in the cost of the dollar has promoted the outsourcing to Brazil.

Indeed, Brazil may be ranked the second after the giant outsourcer which is India. The decreasing value of the realm compared to the dollar could be a reason as to why Brazil could be the second option for countries to outsource. A stable currency is necessary in instances that outsourcing decisions are to be determined. The real against the dollar has remained stable between 1.7 and 1.9 to the dollar and this has made the United States be a desired place to outsource. There are several strategies that any firm with off shore outsourcing must do to ensure that