A US based computer manufacture produces and sells laptops in South America through two manufacturing facilities: one in Argentina and the other in Brazil. The following applies:

	Argentina	Brazil
Investment price	200 million US$	200 million US$
Cost per Laptop	900 pesos	600 reals
Price per Laptop	1200 pesos	800 reals
Projected Annual Earnings	150 million pesos	100 million reals
Exchange Rate	Pesos 3 / US$	Reals 2/US$

If Brazil real depreciates 20% against the US$, if both manufacturing facilities can sell in each other's countries, in which statement is true?

		Argentina may have to cut prices to remain competitive
		Brazil may have to cut prices to remain competitive
		Both have to cut prices
		The competitive dynamics remain the same