Otto responded, “My friend, I actually do have other activities scheduled, but let me move a few things while you hold for a moment, so I can visit for a while.” Otto put the phone down and quickly rescheduled a few things on his calendar and then stated, “Okay, I moved a few things, but can you net this out for me so we don’t have to revisit the last six hundred years of history to get to your issues?”
Thiago chuckled slightly and allowed, “Point taken, Otto. How well you know me. Where to begin?
“For years we, in Brazil, have tried to build a business portfolio that operated on the different cycles of commodities, up or down. Our energy holdings, mining operations, and, of course, shipping businesses have come close to being an ideal model until recently. We were about to sink several offshore oil wells here in Brazil, when we watched the floor pricing buckle under the oil oversupply problem. We were also planning to sign a deal with the Chilean government to launch a new copper mine, when that commodity’s price began to flat-line as well.
“With no raw materials or oil to ship, I now have so much excess shipping capacity that I am going to have to do layoffs and idle my shipping fleet.”
Otto listened sympathetically to Thiago and offered, “My friend, we both know that business cycles come and go. I’m sure you are not overstating your position, but in every business there are ebbs and flows for products, whether finished or raw materials. I am confident that we can provide some useful guidance on how to weather this business storm, as well as be properly positioned during the next upturn.”
Thiago countered, “Otto, I was fairly sure that this would be your position on the matter. Before calling, I and my staff played a little game of let’s pretend to be Otto so we can see what our options are. Now what we found as a result of that exercise is really what I’m calling about.”
Otto, somewhat perplexed, responded, “Please, Thiago, go ahead. I’m decidedly interested in hearing how the Otto Game went.”
A slight grin blossomed, transforming Thiago’s initial scowl. He explained, “We began digging into our numbers, trying to understand how we missed the oversupply issue of both oil and copper, when we discovered something I can’t explain.
“In each commodity area where we were planning to invest, we had diligently analyzed each of our competitive producers. We came up with a figure that simply doesn’t match what is being stated on the world markets. We even discovered that production figures from my organization are being advertised as well, even though none of what is being attributed to us is in fact accurate.”
Otto did a double take and had an astonished look as he asked, “Thiago, how is that possible? You seem to be suggesting that your intended commodity production values are being input into the world commodity markets, but you in fact did not physically have the materials up for sale.
“Hold on there! If your materials were being listed in the commodity markets and a sale was transacted, then it stands to reason that you had revenue coming in but no corresponding out-flow of goods. Wouldn’t that show up on your corporate books?”
Thiago grinned a little more and continued, “Ah good, we are tracking to how the pretend Otto would think. We reasoned that as well, but, alas, no free money. I come to you with this issue to see if you can make any sense of it.
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