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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (69011)	12/3/2010 9:45:50 AM
From: Chas.	Respond to of 218043

No problem...thanks for the advice. Chas

To: TobagoJack who wrote (69011)	12/3/2010 10:00:36 AM
From: elmatador	Respond to of 218043

China and Brazil: A one-stop shop for food and industrial commodities By Jonathan Wheatley Published: November 14 2010 23:31 \| Last updated: November 14 2010 23:31 When Charles Tang set up the Brazil-China chamber of trade and industry in 1986, he remembers, “nobody was interested”. “Brazil was a closed economy and China was very poor.” Things have changed. “Now,” he says, “everybody wants to know.” Since the turn of the decade, exports to China have increased 18-fold. The Asian giant now buys more than 12 per cent of Brazil’s exports and in 2009 overtook the US to become its biggest single market. Chinese investment in Brazil is growing even more quickly. According to Mr Tang, it totalled just $396m to the end of last year. So far this year, he says, it is more than $27bn, including Sinopec’s $7bn purchase of 40 per cent of Spanish-owned Repsol Brasil. The deal is emblematic of what lies behind the surge in China’s interest. As Beijing scours the world for sources of the industrial and food commodities essential to feed its rapid growth, Brazil offers something of a one-stop shop. It is the world’s biggest exporter of iron ore and of a host of agricultural products, including coffee, sugar and – of special interest to China – the “soya complex” of beans, oil and meal. It is also set to become a big exporter of petroleum. By some estimates, recently discovered deepwater oilfields put its reserves on a par with Kuwait and Russia. But in spite of the recent rise in bilateral trade and investment, China is still a long way from fulfilling its potential as a driver of Brazilian growth. As Sebastian Briozzo and Joydeep Mukherji of Standard & Poor’s, a credit-rating agency, point out in a paper published this month*, Brazil remains a relatively closed economy, with exports equal to only a little more than 10 per cent of gross domestic product. Even the very fast recent growth of exports to China has had little impact on GDP growth – in fact, the authors point out, quite the opposite: “In China ... net exports still contribute significantly to GDP growth. Conversely, in Brazil, net exports only made a positive contribution to GDP until 2004. After that, investment growth (and its corresponding impact on imports) diminished the importance of the external sector. Net exports have actually had a negative contribution to GDP growth ever since.” Nevertheless, they say, trade with China has been extremely important for some sectors, including iron ore and soya producers. But this too, has its downside. Between 2002 and 2009, manufactured goods fell from 55 per cent to 44 per cent of Brazil’s total exports, while primary and semi-manufactured goods grew from 43 to 54 per cent. Many commentators fear that rising commodity prices and the steady strengthening of the real are eroding the competitiveness of Brazilian industry and its manufacturing base risks being replaced by low value-added commodity production. Mr Tang at the China-Brazil chamber says Brazil faces a choice. “The country has to decide what it wants to be, which is precisely the question that did not emerge during the election campaign,” he says. “Either it can be a high-cost, non-competitive country, in which case it can still be successful as a commodity exporter. “Or it can lower the custo Brasil [the term for the extra it costs to do business in the country – the structural issues that erode competitiveness] to stimulate industrial production based on lower costs. “And this has nothing to do with the Chinese.” Yet rather than considering far-reaching reforms to cut public spending and allow interest rates to fall, or addressing other complex fiscal issues, such as public sector pensions, the incoming administration seems likely to be content with trimming public spending. This will leave it with little option in tackling the strengthening real than to turn to currency controls. In the global “currency war” between the big economies, Brazil has tended to align itself with China in criticising the US’s expansionist monetary policies, and has avoided frequent public criticism of Beijing. “This has more to do with politics than foreign exchange,” says Rubens Barbosa, a former Brazilian ambassador to London and Washington. “Brazil is moving closer to China than to the US and Europe.” Investing political capital in China at the expense of traditional partners has its risks. For one, Brazil is likely to run a growing trade deficit with China. But as the Standard & Poor’s paper notes: “The economic benefits of Brazil’s and China’s trade relationship remain high. Brazilian exports do not compete with Chinese exports in many markets ... Increasing exports to China could continue to provide additional resources to Brazil, helping ease both external and fiscal constraints.” How Brazil balances its relationship with China, the US and Europe will be one of the biggest challenges for the incoming government.