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International Finance

8. Di Giorgio International, a subsidiary of California-based Di Giorgio Corp., processes fruit juices and packages condiments in Turnhout, Belgium. It buys Brazilian orange concentrate in dollars, German apples in marks, Italian peaches in lire, and cartons in Dutch guilders. At the same time, its exports 85% of its production. Assess Di Giorgio International's currency risk and determine how it can structure its financing to reduce this risk.

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ANSWER. A key question is whether the supplies bought by Di Giorgio International (DGI) and the products it sells are priced domestically or internationally. The odds are that both inputs and outputs are priced at least somewhat in domestic terms because of the costs and time lags involved in arbitraging among markets. Thus, while DGI is exposed to exchange ...

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