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

It could be that the above God, Ganesh (the Elephant God), who is the Hindu patron of arts and sciences is having an influence on the populace.  Then again it might be another of the Hindu Gods or any number of them for that matter (there are over 300 million Gods recognized by Hindus).  But I think the primary influence is on the sciences (broadly speaking) because the people are going to school, getting good educations and then going to work.

Known for its huge outsourcing capabilities (as the recipient), it is not just call centers that are helping with economic growth.  Entrepreneurs seem to flourish in the laissez faire environment the government encourages.  In fact it seems they are pampered by the government.  But success is not an unusual story.

Not just little guys either.

Tata Motors, for example,  is well known globally and is most famous for the Nano –  a car that will sell for $2000 and get 62 mpg!  Think of what that will do for India productivity!  Hey, how soon can we import those little suckers??

The technology segment in India is big with a number of significant players and is growing daily thanks to the millions of programmers, web designers and other ‘technophiles’ being cranked by the excellent colleges and universities.  And then there are the outstanding hospitals and health care professionals that make India a prime destination for medical tourists seeking everything from transplants to knee and hip replacements.  At a fraction of the cost of the same care in developed countries.

India seems to have missed much of the trauma of the world-wide recession.  The Bombay Sensex market has doubled since the lows in March.  Unlike China and Russia the increase seems justified.  Indians, at least those that can afford to, are spending and don’t seem worried about the future.  Those that can’t join the consumer crowd are seeing the opportunities and working to get their children educated so that future generations will move up the economic ladder.

The opportunities in India are immense.  Infrastructure is not good and the government can spend decades and Billions of $$ bringing them into the 21st century.  That will create millions of jobs, require boatloads of engineers, architects and other professionals. The net result: a more efficient, educated and capable population.

This potential is not being lost on the government.  The Prime Minister, Dr. Manhoman Singh, the first Sikh in the office, seems to be a genuine leader who has the vast population in mind.  And it is no wonder given his history.  He was born into a village with no electricity and had to study by candlelight.  Yet, he went on to graduate from college.  He then went to England where he graduated from both Oxford and Cambridge.  As an economist with a Ph.D. he seems the perfect person to help India move forward.  Not too liberal and not too conservative.  He is putting the government’s resources to work.

The efforts are working.

The GDP of India is about that of Russia but there is a big difference besides the fact that it is still growing — India has no significant oil reserves and must rely and true manufactured exports and the skills of their work force.  But there are advantages in those differences . . . those 1.1 billion people provide an unlimited workforce and the life expectancy is ten years more for men than in Russia.  That means an added ten years of wisdom and experience–not a small thing for a nation growing as fast as India.

Then there is the fact that India is a true (and incredibly complex but workable) democracy.  The same 1.1 billion people make elections a challenge and then there are the hundreds of political parties.  Indians have been forced to learn how to compromise and resolve differences.  It is the only way to get things done there!  Americans could learn from them, believe me.  Their elections take about a month as polls are moved about the country . . . and they don’t have two years of preliminary electioneering either (another lesson for us).

I think India is for real.  It belongs in the BRIC but maybe only for another ten or so years.  I just don’t think that their progressive government will allow a damaging slow-down.  In the not too distant future India will be numbered among the ‘developed nations.’   Hopefully that progress will include losing the harmful vestiges of the cold war and a much improved Indian-American partnership will be the result.

I think it is cool!

Thanks to flickr’s exfordy for the pic

Much of this is smoke and mirrrors.  At least until we (the politicians) generate a bunch more confidence and get a handle on unemployment.

So, what gives?

The market this week was driven by three main stocks.  Goldman Sachs, Intel and IBM.  And you know what all of these have in common, and why you shouldn’t be raiding your mattress for $$ to throw at the market?  They have huge international components to their earnings.

If you take the time you can read all the press releases and you will soon discover that the gains are not a result of a change in perspective by the ‘all important’ American consumer.  These good earnings are a result of positive GDP (Gross Domestic Product — the value of all goods and services) in three of the so called BRIC countries.  Brasil, India and of course China.

These countries have a combined GDP of about $4.5 trillion.  The United States has a GDP of about $13 trillion.  But the U.S. is going to lose ground this year (negative GDP growth) and the BIC (BRIC less Russia) are going to have an average GDP growth of around 6-8%.  Their consumers are spending.  Their governments are NOT running up huge deficits (China even has a huge net SURPLUS — several $trillion).  Their governments are not trying to do too much with too little.

These countries have a population of around 2.6 billion people (the U.S. has 305 million) or about twelve times ours.  So they don’t ALL have to be buying computers, TVs and Toyotas.  But a bunch of them are.  Buying computers with Intel chips and IBM software or consulting.  Plus, because they are growing, the innovators in these countries are growing or starting companies and where do they get the money and financial savvy to do that?   Goldman Sachs and the boys.

DELL, the once dominant American PC company reported disappointing earnings and projections.  Starting to see the picture?

The bottom line:  The U.S. is not even close to being out of this recession.  Obama and his team of ghurus and knuckleheads have got to get a handle on unemployment and rising taxes.  Don’t expect this runup to continue.  If you have some good profits then consider taking some of them off the table in the next few weeks . . . you just might be able to get back in cheaper if and when the next wave of bad news hits (for the traders our there, and not the long-term investors . . . wait are there any of those left?).

By the way, historically the month of October seems to be when markets can take some awful hits–especially if things aren’t going well– and they aren’t and probably won’t be by then.

Too bad we are pumping out bad news all the time (i.e. full speed ahead with universal health care and damn the costs) and the BIC’s are pumping out real infrastructure projects, sensible energy policy (well at least Brasil), and actual economic growth.

Stay tuned.

This ain’t over yet baby!

thanks to epak at Flickr for the photo