Brazil has been described as a slumbering economic giant waiting to awake. It is the fifth largest and most populous country in the world, the ninth largest economy (in terms of purchasing power), and the largest market in South America, accounting for up to 60% of South America’s total Gross Domestic Product (GDP) during the 1990’s. Brazil is highly integrated in the global economy. The country is among the world’s top three exporters of tobacco, sugar, orange juice concentrate, soy, beef, chicken, iron, and tin.
Much of Brazil’s trade was done with the United States, and Brazil was a larger trade partner to the U.S. than Italy, Spain, or India throughout the 1990’s. Despite its impressive accomplishments, many commentators argue that Brazil has failed to fully realize its potential. “Brazil is the country of the future,” as the old joke goes, “and always will be”. Annual growth in GDP averaged a modest 2.5% between 1980 and 2000 versus 10.2% for China, 7.8% for South Korea and 5.7% for India.
Brazil’s progress in recent decades has tended to come in jubilant bursts, including president Juscelino Kubitchek’s “Program of Targets” (1956-1961), the “Economic Miracle” years (1968-1973), and more recently Fernando Henrique Cardoso’s “Golden Years” (1993-1997). Each growth spurt, however, has been followed by a period of slow growth.
Latin America should embrace India trade – InterAmerican Development Bank
Latin America sends only 0.9 percent of its exports to India, a commodity-hungry country that should be a major growth engine for the region, the Inter-American Development Bank said in a report on Tuesday.
The IADB bemoaned the lack of direct shipping services between Latin America and the South Asian nation of 1.1 billion people and said punitive import taxes were stifling the potential for closer ties at a pivotal time for the global economy.
Economic output from China and India together is expected to be up to 10 times larger than Europe’s total gross domestic product by 2040, according to the Washington-based regional lender, whose 48 members include China but not India.
While China receives 3.8 percent of Latin American exports, India is “not yet on the radar” of the region’s businesses and politicians, said IADB President Luis Alberto Moreno, calling in the report’s preface for more attention to India.
“We are starting to see what the century of Asia will look like and Latin America cannot afford to be absent,” he said. “The region cannot afford to continue to ignore the implications of (India’s) emergence.”
Unlike in the case of China, there are no direct shipping routes between India and Latin America, the IADB report said. Goods are sent via Singapore or Europe, increasing both freight rates and shipping times — by as much as nine days in the case of Brazil, it said.
“A 10 percent reduction in freight rates would likely boost imports of Indian goods by as much as 46 percent and 47 percent in Chile and Argentina, respectively,” the IADB said.
Incidents of theft of copper cable in the UK are on the rise as the world prepares itself for a shortage of the very useful metal.
The expansion of infrastructure in developing companies like China, India, Brazil and Russia means that, all in all, it’s just another BRIc in the wall.
Copper (periodic ticker number 29) is a ductile metal with high thermal and electrical conductivity. According to a study by Yale University two years ago, all of the copper in ore and all the copper currently in use are likely to be exhausted to bring the developing nations to a level the advanced nations currently enjoy.
That means that the extremely useful Cu may turn out to be more valuable than the not-so-useful Gold (Au).
When Paper Currency Dies, Food is reborn as Money
As it happens, another book from the 1970s entitled “When Money Dies: the Nightmare of The Weimar Hyper-Inflation” has just been reprinted. Written by former Tory MEP Adam Fergusson — endorsed by Warren Buffett as a must-read — it is a vivid account drawn from the diaries of those who lived through the turmoil in Germany, Austria, and Hungary as the empires were broken up.
Near civil war between town and country was a pervasive feature of this break-down in social order. Large mobs of half-starved and vindictive townsmen descended on villages to seize food from farmers accused of hoarding.
Grand pianos became a currency or sorts as pauperized members of the civil service elites traded the symbols of their old status for a sack of potatoes and a side of bacon.
The winners were those who — by luck or design — had borrowed heavily from banks to buy hard assets
A simple bowl of white rice sits on a conference table inside the Seattle headquarters of global-health nonprofit PATH. What looks and tastes like ordinary rice is actually the product of two decades of research and development.
For every 100 grains of rice, the bowl contains one grain of Ultra Rice. It’s actually not rice at all, but pasta fortified with vitamins and minerals and squeezed through a rice-shaped mold. The manufactured grains are made from a mixture of rice flour, nutrients and binding agents derived from seaweed.
Ultra Rice is now being produced and tested around the world as a potential solution to malnutrition. Governments in Brazil and India are serving it in school-lunch programs.
About 2.5 billion people consume rice as their main source of food. Many of them suffer from deficiencies of iron, folic acid, vitamin A and other essential nutrients.
Adding nutrients to rice can reach millions of people without asking them to change basic shopping, cooking or eating habits, says Dipika Matthias, who directs the Ultra Rice project at PATH in Seattle. The challenge: making pasta that smells, tastes and looks like rice, but packs a powerful combination of calcium, zinc, folic acid, thiamin and iron inside, can withstand heat and humidity in storage, and doesn’t wash away or break down when cooked.
Why Investors Are Planting Their Assets in Agriculture in Latin America
The long-term fundamentals looks rather promising for agribusiness, along with related agriculture ETFs that tracks the sector. The human population is still expanding and demand for high-protein sustenance is increasing from a growing middle class in the emerging markets.
Food security remains a major issue, writes Richard Barely for The Wall Street Journal. Prices for basic crops spiked before the financial crisis, which triggered riots in some countries, and millions around the world are still undernourished.
If countries like China and other developing countries switch to more meat consumption, grain production would have to keep up to feed livestock and better technology would have to be implemented to boost crop yield. Additionally, biofuel production will reduce the land available for food crops.
Corn futures rallied as hot weather persisted in the corn belt, pushing past $4 a bushel for December deliveries, reports Ian Berry for The Wall Street Journal. Wheat futures prices jumped more than 6% on concerns about the how the weather may affect crops in Europe and Russia.
via Seeking Alpha
TWO OF AMIT WADHWANEY’S passions are international stocks and ethnic restaurants. That he is an avowed value investor is no surprise, given that Third Avenue Management, his employer, was founded in the mid-1980s by famed bargain-hunter Marty Whitman. Wadhwaney’s duties include running the Third Avenue International Fund (TAVIX). Barron’s recently caught up by Wadhwaney by phone.
Although investors in other parts in Latin America have started investing in Colombia, there is very a long way to go. On the plus side, there is a lot more de-risking that is taking place in Colombia on the ground level in terms of security, which is resulting in the opening up and starting up of new businesses. Consider, for example, the world of resources. Exploration in Colombia over the years for things like hydrocarbons, base metals, precious metals and coal was nonexistent. You didn’t dare do it because you wouldn’t come out of the bush alive. Now, on the other hand, there is a whole industry building—and not just because of the better security. It’s also because of the tremendous legal infrastructure that is in place to protect foreign investors—something lacking in many other countries in the region.
Is agriculture the next big investment thing? Yes, and Latin America poised to profit from it
rolling out its World Agriculture fund for small investors who, it says, can profit from the long-term increase in food prices as rising affluence in China, India and Brazil dramatically changes dietary habits.
BlackRock is not alone in seeing agriculture as a potential new goldmine. Last year, Baring launched a global agriculture fund which is already more than £100m in size and has given its earliest investors a 30% gain. Both groups see their funds as appropriate investments for British pensions and Isas over the long term.
Should you be tempted to? Or, by doing so, are you simply exacerbating speculation in food that has seen products such as cocoa spiral by 150% in the last 18 months? And are the claims of the fund managers robust? Is food really that likely to be a good investment over the next 10–20 years?
WDM campaigner Kate Blagojevic aims her fury not so much at longer-term investors, but at short-term speculators who, WDM claims, have made commodity markets more volatile than ever. “Population growth, increased demand and climate change are all contributing to a long-term gradual rise in the price of food.
“But we feel speculators are taking these trends and exacerbating them, creating such price instability that it’s having a devastating impact on farmers. Let’s say you are a cocoa farmer. Prices are at a 30-year high. How much do you grow next year, when the price might fall as suddenly?”
But haven’t commodity prices always swung violently? The WDM report, The Great Hunger Lottery, argues that during the 1990s and early 2000s, aggressive lobbying by bankers led to weaker regulations covering speculation in agricultural contracts. “Over the past decade, the world’s most powerful financial institutions have developed ever more elaborate ways to package, re-package and trade a range of financial contracts known as derivatives … destabilising and driving up food prices.”
Indeed, even small investors can now play the commodity markets through “Exchange Traded Funds” (ETFs), synthetic indices which match price movements in things such as wheat, corn and soybeans, and where you can start speculating with as little as a few pounds.
But BlackRock and Baring both deny they are at the speculative end of the market. Firstly, their agricultural funds don’t buy underlying commodities, but trade in the shares of companies involved in agriculture.
And BlackRock fund manager Richard Davis is not even basing his case for investment on an explosion in food prices. He reckons that, over the long term, food prices will trend higher, “but they’re not about to go through the roof”. Instead, there will be a “supply side response,” with the fund, he hopes, benefiting from higher profitability among farmers and the companies that supply them as they expand production and reduce unit costs.
Jonathan Blake is the manager of Baring Global Agriculture, and says the fund is about “three Fs”: food, feed and fuel. This planet currently supports 6.5bn people, but by 2050 that is projected to grow to around 9.2bn. That’s an awful lot more mouths to feed, and it means the long-term price pressure on agricultural products is going only one way – up.
In 1950, there were 0.5 hectares of arable land per person in the world, but it has already fallen to just over 0.2 hectares. BlackRock estimates that global food production needs to rise by more than 70% by 2050 above 2005-2007 levels to cope with rising food demand. Feed is all about the fact that, as consumers in emerging markets start to earn more, one of the first behavioural changes is a shift from a vegetarian diet to a more meat-based diet. That means the demand for animal feed will rocket over the coming years. After all, it takes over 8kg of grain to produce just 1kg of beef.
BlackRock’s Davis adds: “We think it’s going to be a slow process. We don’t think everyone in China is suddenly going to start eating steak – what you tend to see is that it starts with fish and poultry – but it is a process which China has started on.”
Indeed, there is some evidence that dietary changes in Brazil, China and India are happening more rapidly than in Japan and Korea during their development phases. If the Chinese match the diets of modern Koreans, it will mean a 3.7% fall in global demand for rice, but a 27% increase in global consumption of meat and fish.
The impact of biofuels is another core reason to buy agricultural equities, say both fund management firms. As recently as 2000, the global land use for ethanol production was around 10m hectares, but it is projected to rise to 120m hectares by 2015. On the one hand, it will reduce the acreage available for other crops, and on the other, it will directly affect the demand for sugar, corn, and oilseed rape for bio-diesel.
The short answer is yes. And Latin America, especially the Mercosur countries – Brazil, Argentina, Uruguay, and Paraguay, will see a flood of investment in the agribusiness sector over the next decade.
India’s top software service exporter, Tata Consultancy Services Ltd (TCS), sees Latin American sales more than doubling by 2015 as the company targets one of the world’s fastest growing regions.
TCS, which is owned by India’s biggest industrial conglomerate, provides IT, consultancy and outsourcing services in Mexico, Argentina, Chile, Uruguay, Brazil, Ecuador and Peru.
“We have a very aggressive growth project in Latin America for the next five years, we want to more than double our sales to over USD 1 billion,” Alejandro Valenzuela, manager for Peru, Chile and Ecuador, told Reuters in an interview.
“Latin America is really relevant to TCS because it has one of the fastest rates of economic growth,” Valenzuela said.
The region will grow up to 5% this year, according to the International Monetary Fund (IMF).
via MoneyControl
India may face a coal shortfall of 189 million metric tons a year by 2015, about 50 percent of the power sector’s expected demand, leading to a twofold increase in imports, KPMG said.
Electricity generators are likely to add 75 gigawatts of capacity, which will require an additional 375 million tons a year of coal, only half of which will be met by domestic production based on current trends, said Arvind Mahajan, executive director at KPMG Advisory Services Pvt. The world’s third-fastest growing major economy generates more power from thermal coal than any other fuel.
Imports may rise to as much as 150 million tons per year, he said. That would be 250 percent above the amount India was estimated to have imported in the fiscal year ended March 30 by N.C. Jha, a director at Coal India Ltd., the nation’s monopoly producer.
India has traditionally looked to Indonesia for imports. Rising domestic demand there and the large volumes involved are prompting Indian companies to look further afield at mines in Mozambique, Botswana and Australia, Mahajan said.
Private power companies, including Tata Power Co., Reliance Power Ltd., GMR Infrastructure Ltd. and JSW Energy Ltd., have acquired coal assets overseas in Indonesia and South Africa. NTPC Ltd., the state-run utility and country’s biggest generator, plans to buy mines overseas to source 67 percent of its imports, Chairman R.S. Sharma said by telephone on July 14.
South Africa and Colombia, which last year were the biggest exporters of steam coal to countries with ports on the Atlantic Ocean, are also boosting shipments to India where they get better prices.
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