Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

One great way to make money ... Trade Between China and Brazil

Stock-Markets / Analysis & Strategy Feb 13, 2007 - 02:15 AM GMT

By: Money_and_Markets

Stock-Markets

One great way to make money is to scour the globe ... find a unique point where two powerfully positive forces come together ... and then choose the investments that are most likely to convert those forces into profits.

That's what I've done. And I'm going to give you some of the results this morning.


The two forces:

#1. China's virtually insatiable demand for natural resources — driven by the world's largest population and fastest growing economy.

#2. Brazil's vast, rapidly evolving capacity to export precisely what China needs — including the world's largest, untapped, arable farmlands and largest, richest iron ore reserves.

To see the intersection of these forces with your own eyes, just visit the Panama Canal.

You'll see an endless flotilla of cargo ships ... laden with Brazilian iron ore, zinc, and other raw materials ... squeezing through the buoyed entrance channel in the Gulf of Panama ... traveling eight miles to the Miraflores locks ... passing under the Bridge of the Americas ... and slipping into the Pacific for the long trek to China's ports of the Yangtse River Delta, now the busiest on Earth.

But the feverish activity at the isthmus of Panama is just one symptom of the mindboggling facts:

* Overall, Latin America's exports to Asia have surged to $47.5 billion, growing by a breakneck pace of 20% per year since 2000.

* Brazil's trade with China, which was under $20 million in the mid-1970s, has now grown by over one thousand times, to nearly $20 billion. And it's still skyrocketing. With no slowdown in sight.

* The value of Brazil's iron ore exports have tripled just in the last six years — from $2.9 billion in 2001 to at least $10 billion this year. And most of that new growth is driven by China.

Ironically, this trade boom between China and Brazil is still in its infancy.

But already, the volume is so large — and a massive bottleneck at the Panama Canal so likely — China is now considering the construction of a second Inter-Oceanic canal in Nicaragua.

In the meantime, Chinese interests are seeking to gain control over existing facilities.

Hutchinson Whampoa, for example, owned by Hong Kong mogul Li Ka-shing, controls the Panama Ports Company, the operator of the Cristobal and Balboa ports at each end of the Canal. And more penetration by Chinese-owned companies is likely in the near future.

Most people might miss the importance of this new development. But most historians wouldn't.

They know that Teddy Roosevelt's successful completion of the Panama Canal in 1914 was a key factor that helped transform America into a world economic power in the 20th century.

And they know that a newer, wider, more modern canal could play a similar role for China in the 21st century.

Why China's Inroads into Latin America
Have Caught Most of the World by Surprise

Most economists in the Americas, Europe and even Asia had no inkling this was coming. Even those with some level of awareness thought China could take a century to achieve goals that are now being reached in a decade.

Why? Because they missed three non -economic factors that most economists don't usually deal with:

First, China is operating virtually unchallenged by competing powers.

During the Cold War, for example, China competed head-to-head with the Soviet Union for economic and political influence among Third World and non-aligned nations.

But after the Cold War, China has had that space virtually to itself ... moving in with remarkable deliberation and speed ... forging new friendships in Southeast Asia where it was formerly feared ... making major inroads into Latin America and Africa, where it was formerly ignored.

Even the U.S. is falling behind China in Latin America. Sure, it's firmly entrenched with old business. But it's falling behind China in generating new deals.

Second, unlike other world powers, China is strictly business.

When China is operating abroad, it routinely ignores corruption and human rights abuses. It uncouples commercial goals from military support. And it rarely attaches conditions to loans. This policy may return to haunt China in the future. But right now, it's viewed mostly as a broad strategic advantage.

With few exceptions, all that China does is offer money, cut deals , and buy assets — to build infra-structure, extract resources, and get them shipped to China.

Third, unlike Japan, China is not tip-toeing around the giant to the north, the United States.

Back in the early 1970s, when Japan was the biggest Asian player in Latin America, the Japanese hesitated to go all the way.

I know because I personally visited Japanese-run enterprises in the southern industrial state of São Paulo and in the Amazonian state of Pará. I also saw similar situations in Peru.

Everywhere, Japanese companies were seeking to secure new sources of raw materials — from soybeans to iron ore. And much like the Chinese today, they were helping to build the needed infrastructure.

But unlike the Chinese, they did not put the pedal to the metal. They didn't want to step on the U.S. dominance in the region. They took it slow.

To promote goodwill, they even sponsored a dozen new colonies of postwar Japanese immigrant families throughout Latin America.

Despite these hesitations, Japan's economy challenged America's economic leadership in the world, and its trade with Latin America — especially Brazil — grew by leaps and bounds.

Now, China is poised to repeat that feat, but with much greater speed and in far larger volume.

Unlike Japan, China is going for the gold. No hesitation. Virtually nothing to slow it down.

Just two years ago, for example, China's Hu Jintao signed 16 agreements with the Cuban government, including a 10-year extension to pay back Cold War era loans.

He cut major deals with Peru, Venezuela and Argentina.

He looked to Uruguay as a potential hub to penetrate Mercosur, South America's common market, helping to launch new joint ventures with Chinese auto manufacturers.

And most important, he locked in massive trade and joint venture deals with Brazil, China's largest trading partner in Latin America.

After Jintao toured Brazil, Lula reciprocated by taking an entourage of nearly 500 business entrepreneurs to China. Since then, trade between the two countries has skyrocketed.

The Biggest Single Beneficiary
Of the Brazil-China Boom

Some Brazilian companies are being hurt by Brazil's trade boom with China. They can't compete with cheap Chinese imports flooding into their economy.

And they've been trying to resist China's penetration ... but to little avail: The trade boom is continuing to accelerate, and the Brazilian companies that feed it are making out like bandits.

Case in point: Companhia Vale do Rio Doce, easily the biggest single beneficiary of the rapidly-emerging China-Brazil boom.

From 2001 to 2006, the total return to its shareholders (including dividends, currency appreciation and stock appreciation) was an average of 42.7% per year.

And since October of last year, the stock has been on a moon shot, up from less than $19.76 per share last September to $33.27 this past Friday. (That's even after a minor correction that began on Wednesday.)

We first looked at “Vale” (pronounced much like “Valley” in English) in the 1970s, when it was a state-owned company mostly unknown outside of Brazil. Today, Vale is ...

  • The largest mining company in the Americas
  • The second largest mining company in the world
  • The world's largest producer and exporter of iron ore and pellets
  • The world's largest producer of nickel, manganese and ferroalloys
  • One of the lowest-cost integrated producers of aluminum copper, potash and kaolin.

It's operating on five continents. And it's the most immediate and direct beneficiary of the Brazil-China trade boom.

My brother's son, who got his bachelor's degree in mineral engineering in the U.S., visited the company's Carajás mine nearly two decades ago.

At the time, it was just about beginning production. Today it's a huge mining complex, producing everything from iron ore to gold, set to undergo still further expansion this year.

Just last month, Brazil's president announced a $250 billion investment and reform package for the next four years, and a substantial portion of that is going to wind up at Vale or its subsidiaries.

Meanwhile,

  • Vale has established a strategic alliance with Nippon Steel, one of the world's largest metal groups, to produce iron pellets, make iron alloys, and embark on new coal and iron ore projects.
  • Vale has just taken over Canada's largest copper mining company, INCO.
  • Vale has signed a deal with Shanghai's Baosteel Group to buy its iron ore with a hefty 9.5% price hike, a sales agreement which is likely to set the basis for similar contracts for the rest of the year.

The outlook is not all roses. Vale bought INCO's copper mines near peak prices for the metal. We're wary of some legal actions in Brazil's courts seeking to annul the privatization process, claiming it was a give-away. And more downside in the stock would come as no surprise.

But if you want to jump on the China-Brazil trade boom, I think this an investment you can't ignore.

Just remember: Like all stocks, it can also go down in value. So invest with moderation, while keeping a good portion of your money safely tucked away in cash-type investments like Treasury bills or a Treasury-only money fund.

Good luck and God bless!

By Martin Weiss

P.S. Our free, live teleconference, “The Easy and Hassle-Free Way for Reaping Windfall Profits in Foreign Markets,” is coming this Thursday, February 15. But it's nearly booked up! So if you want to attend, you'd better register immediately .

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.MoneyandMarkets.com

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Trade101
18 Feb 07, 22:13
Re: One great way to make money ... Trade Between China and Brazil
China is way overbought and due a correction.

And brazil GDP growth is low at around 4% so not the same as another China, maybe if they reform the economy so more, but not yet.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules