Coin of the Realm

February 5, 2004

   In 2002, I marveled that getting around Madrid cost only €1, or less than 90 cents US. Now the fare’s €1.25 … and, based on current conversion rates, slightly more than $1.60.
   Subway rides won’t be the only thing that looks a bit pricey at the big Spanish stone event, either. If anything comes from the countries of the euro – France, Germany, Greece, Italy, Portugal and Spain, among others – the final bill keeps going up and up.
   The common continental currency looked very, very friendly when it appeared at the beginning of 2002. Now it looks like the U.S. stone industry’s nightmare that threatens to continue for a long time.
   At least that’s one way of looking at what’s happening with the U.S. dollar and a domestic stone industry that consumes far more imported products and supplies than it makes within the borders. It’s also a view that may be short-sighted in the near future, as well as throughout the decade.
   Anyone watching the exchange rate between the dollar and the euro knows that it’s been a very bad ride since Dec. 6, 2002. Many of us remember that day as a trudge through the snowy streets of Baltimore to StonExpo 2002, but it’s also the last time that the two currencies traded at an Interbank rate par, or 1-for-1. At the time, the position appeared to be equalization, where the prices on foreign goods would give more of an apples-to-apples comparison.
   Instead, the sinking feeling of a devalued dollar continued throughout last year, save for a couple of slight upticks. New Years Day 2004 dawned with the worst rate yet: $1 wouldn’t quite buy €0.80.
   The weak dollar leads to plenty of sharpened hindsight. If only I’d moved on a purchase a couple of years ago, I’ve heard, when I could get more than €1.15 for a dollar. Or even the deal would’ve been good around Labor Day at better than 90 cents for a euro. Now, the money’s gone for good.
   No, it’s not. Sure, as this is being written in mid-January, the exchange rate looks lousy. But does the business in your shop decline with the rate of exchange? Are you heading below break-even because you’re getting a little less for more with some of your stone and supplies?
   Or, are you spending money a bit more wisely, and reevaluating big-ticket purchases? Being fiscally conservative can keep margins steady – see, the money’s still there! – and being smarter about capital investments is about the rarest cause of business failure. If you need something with a euro-based price, you’ll pay for it … but you’ll make sure you need it.
   The heady days of the euro don’t exactly get high marks from the other side of the Atlantic, either. Complaints are high from European workers about a growing gulf between their wages and effective buying power. The high value of the euro also leads to fewer export sales, which bodes ill for European manufacturers looking to cash in on the U.S. stone boom.
   It’s also time that the eurowatchers in the U.S. stone industry keep an eye on other currencies around the world. For several stone-producing countries the news is better, if not downright brighter.
   Take Mexico, for example. A dollar bought 9.12 pesos at the beginning of 2002. At the start of 2004, $1 equaled close to 11.25 pesos; that’s a nice lift of more than 20 percent and runs well ahead of the U.S. inflation rate.
   In Brazil, meanwhile, a dollar traded for 2.39 reals at the beginning of 2002. Two years later, $1 bought R$2.90 – not as attractive as Mexico, but still a gain – and sharp-minded traders could get more than R$4 for every dollar in the autumn of 2002. And, while the 2004 dollar is roughly equal to its January 2002 value when exchanged with the Turkish lira, conditions last spring gave U.S. buyers 20-percent-more buying power.
   And then there’s China. Producing a chart on dollar-yuan renmimbi exchange rates makes for a dull graphic, since it’s been the same – 8.29 yuan for every $1 – for 730 days from the beginning of 2002 to 2004. (It dropped by one fen, or .01, on Sept. 20, 2002, and returned to 8.29 a day later.)
   Plenty of arguments rage over Chinese stone and supplies, but the biggest factor for influencing the U.S. market is the tight control over the yuan’s value by the People’s Bank of China. A stable exchange rate converts to predictable prices for U.S. buyers, and a comfort level that builds commerce.
   Euro-based countries can’t afford to lose ground in the U.S. stone trade because of more-attractive exchange rates. It may not be tomorrow, or next week, or next month – but either the lousy exchange rate will improve, or prices will be adjusted.
   Unfortunately, Madrid’s Metro probably won’t get any cheaper, but that’s OK. On the road from the United States to the Feria for PIEDRA, it’s the journey’s best bargain.