CapitalistMarks

Brazil rising!

Posted on 04. Sep, 2009 by scott in Social commentary, economic daydreaming

Many people would look at sugar cane fields like the one above and see a poor country.  But, when you look at it in the context of Brazil, the final BRIC nation I’m going to write about, they would be wrong.

Sugar cane is representative of Brazil as a whole.  Seen as a poor nation crop (whoa, buddy, what about sugar hitting an all time high on the commodities markets? is it because most of Brazil’s goes to ethanol) in Brazil it is seen as the harbinger of national energy independence.

And it is working.

Brazil does not allow cars in the country unless they are capable of running on the cheap and plentiful ethanol that is made from the millions of acres of Sugar cane harvested every year.  You see, sugar cane ethanol is much better than the corn ethanol made in the U.S. — it takes less energy to make and is more efficient.

And if that is not good enough, Brazil has discovered what is perhaps the largest offshore oil-field ever (at record depths though).  Future deep-drill wells will provide billions upon billions of delectable barrels of the black stuff.  The discovery is so valuable (but technically difficult to retrieve) that China is going to invest billions of $$ to help with the process . . . and get a guaranteed % of the oil that is recovered.  Apparently Brazil’s ethanol program is so successful that much of the future oil can be exported.

Does this sound like a forward looking nation at work.  Using others money to ‘mine’ there own resources?  You bet.  Intelligent and lucky — what more could you want?

Much of this is due to the street smart mind of President Luiz Inacio Lula da Silva.

Like India’s leader (Prime Minister Singh) Lula da Silva was born to poverty.  Unlike Singh though Silva did not pursue education (in fact he quit school after 4th grade).  Silva wenty to work at 12 years old shining shoes. At fourteen he became a lathe operator in a factory . . . seemed like the ‘golden grail’ of jobs to him then.  But his hard work and commitment to the other workers got him a job in the union — eventually landing the position of union leader.

Now as President Silva is focusing on the millions of Brazilians who need education and jobs.  Natural resources are being intelligently (some would say) utilized.  Infrastructure is being added and/or improved.  Efficiency is improving.  Exports exceed imports.  And like the rest of the BRIC countries the stock market there is up around 99% since the first of the year.

Brazil is a democratic nation with the largest military in Latin America and the only one to operate an aircraft carrier (take that Hugo Chavez!).  The economy is also the largest in Latin America and ranks tenth globally.  GDP is about the size of Russia and India and is expected to have only a small decline in 2009, although I believe that it will end up being positive (which would leave Russia as the only BRIC country to have negative GDP growth this year).

Until 2005 the economy and banking system was seen by many economists as a disaster, but with the repayment of  a $30 billion IMF loan that year (repaid a year early) financial and economic stability has been widely recognized.  Brazil is the leader in Latin America: economically, politically, and militarily (it is all relative though).  Bush made big mistakes in ‘the south’ over his 8 years and the U.S. has not been seen as a ‘friend’ for years.  Obama is making efforts to improve relations (Cuba is a good example) and hopefully we can establish not just good but great interaction with Brazil.  We need to!

Brazil is rising in global views . . . rightfully so.

Hopefully with the discovery of oil offshore, more of the sugar cane harvest will go back into exports and the price of sugar will retreat from the awful all-time highs.  Then you (and I) will be able to enjoy our Butterfingers and Nestle Crunch’s without paying an arm and a leg.

Bottom line:  the BRIC’s should really be known as the BIC’s (you got that right ‘click with the BIC’s’).  Russia doesn’t belong.  It is not a democratic and capitalist society (admittedly China is not democratic — yet — but with 1.3 billion people and no true western colonial history to jump start it, democracy could take a few more decades).  Those are factors that almost everyone would agree help economic growth and stability.

Pay attention to the BIC’s because they are all rising and gaining importance in world markets.  But . . . any investment in Russia is no better than going for ‘all down’ on red in Vegas.

Don’t say I didn’t tell you so.

Thanks to flickr’s xajondee for the photo

Tags: BIC's, brazil, BRICs, deep-well drilling, sugar cane, sugar ethanol