The Smartest Thing China Could Do Right Now: Invest US$ 200 Billion in Brazil.

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November 13, 2007

SouthAmerica: I did all I could do at this point regarding my economic development plan for Brazil in partnership with China.

I did send a copy of all the information to the China Sovereignty Fund - the fund responsible to make these investments on behalf of China.

I did send a copy of all the information to all senators and deputados federais in Brazil.

I also sent the information to various members of President Lula's cabinet.

The ball is on their court and let's see if at least a bunch of these people have the foresight and get interested in following up on my economic development plan.

I know that thousands of people are reading my 4-part series of articles on Brazzil magazine.



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Important - Must read articles about Brazil, China and the future.


If you are interested in Brazil and China then you should read the following articles and join the discussions and comments following the articles.

On March 2, 2007 Brazzil Magazine
“Here Is Why Brazil Should Adopt the New Asian Currency”
Written by Ricardo C. Amaral

http://www.brazzil.com/content/view/9821/80/

These investments should be viewed from China's perspective not just as another investment to maximize its returns on invested amounts. It should be viewed by China as a matter of national security and long-term survival for its people.

Then as a follow up to the above article I wrote a 4-part series of articles detailing a plan for China’s $ 200 billion dollars investment in Brazil.

The Smartest Thing China Could Do Right Now: Invest US$ 200 Billion in Brazil - Written by Ricardo C. Amaral

Monday, 01 October 2007 - Part 1 of 4
http://www.brazzil.com/content/view/9977/80/

Friday, 05 October 2007 - Part 2 of 4
http://www.brazzil.com/content/view/9979/80/

Thursday, 11 October 2007 - Part 3 of 4
http://www.brazzil.com/content/view/9983/80/

Tuesday, 16 October 2007 - Part 4 of 4
http://www.brazzil.com/content/view/9985/80/

Note: So far there are almost 800 comments from the readers following these articles. Please feel free to join the discussion.

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Quote from vectors101:

Why would they hold US dollar when is crashing against all other currencies.
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Sorry - I just noticed the response. But the point is that it's not crashing. It's slowly dwindling. Changes in currency are the in the single digits but China's export trade is in the double or triple digits and the money going into Party officials' pockets is probably unimaginable on an individual level...

Yes, they're losing 5 or 10% on their dollars. But at the same time they're doubling or tripling their earnings and sales. All they care about is keeping that customer with the deep pockets happy and alive.
 
Quote from southamerica:

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October 4, 2007

SouthAmerica: Reply to ShoeshineBoy

China does not have to sell the foreign exchange reserves that they are already holding - which it is more than $ 1 trillion dollars. If China starts reducing the $ 1 trillion dollars they have that would cause the dollar to go down even further. (By the way, that would affect Japan as well since they also have a ton of US dollar in foreign currency reserves.)

China has a constant inflow of billions and billions of new US dollars from current cashflows – these are the US dollars that China would use over a period of time to invest in Brazil. I did not suggest that the transaction must be made in a matter of days or months. The $ 200 billion dollars would be invested in Brazil over a period of years as the new money is needed to continue the various projects.

The rest it is just a matter of internal bookkeeping on how China move around on their books their total US dollar holdings over a period of time.

A lot of the money would go back to China anyway as Brazil buys the necessary materials needed to implement many of these projects – China’s investment would generate business for both countries it is a win, win situation.

In the last 7 years China and Japan have been taking a beating on their US dollar foreign exchange reserves as the value of the US dollar has been declining against the euro and also against the price of gold.

I have been watching every day CNN’s Lou Dobbs program on television – and almost every day they find something to bash about China. And it is laughable that they are afraid of China’s military when the US is spending year after year 10 times the amount that China is spending with their military.


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Sorry - just noticed the response.

I agree that an investment in Brazil would be wise. Brazil has a good overall outlook:

http://www.economist.com/countries/Brazil/profile.cfm?folder=Profile-Economic Data

In fact, from all I see, their economy is on a more sound footing than the US, wouldn't you agree?
 
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November 14, 2007

SouthAmerica: Yes, Brazil is in the best financial position the country has had in the last 100 years.

In my opinion, Brazil looks fantastic with great prospects for the future.

And now with the latest oil findings in Brazil the prospects for the future it looks even greater. Petrobras is expecting that the latest oil finding on the Tupi oil field it is just the tip of the iceberg - they expect to find many times over that amount of oil in the coming years.

Lately I realized that my future is in Brazil and not in the United States. For the first time since I moved to the United States I am thinking about returning to Brazil.

If Al Gore had been running for president of the United States I would consider staying here because he is the only American politician that can turn this country around at this point.

As Al Gore stick with his slide show and he doesn't have the guts to jump into the 2008 presidential race in the meantime - in my opinion, this country is going down the toilet.

I don't understand why the American people can't see that Al Gore is the best choice available to become the next president of the United States.

I thought Al Gore was a man of vision, but he has disappointed me in a big way - I thought Al Gore was going to be the next FDR of the United States.

The best candidate from the current bunch that it is running for president is Ron Paul, but he does not have a chance to win.

I know a number of people who had been living here in the US for 20 years or longer and all of them have one thing in common they gave up on the United States and moved to other countries.

Regarding my economic development plan for Brazil - now we have even a bigger incentive for China to invest in Brazil since the Chinese economy is so dependent on imported oil and in a few years Brazil will be a major oil exporter.

One thing to keep in mind - the US$ 100 dollars price for a barrel of oil it will affect the economy of many countries around the world - but it will not affect as much the Brazilian economy because Brazil is energy self-sufficient.

I just have one thing to say: Brazil is looking better by the day and very soon people will realize that Brazil is not that country of the future anymore because the future has arrived for Brazil - and what a great future.....

If the Chinese can't recognize that it is a better bet right now and in the coming years to invest in real assets in Brazil than fund an American War in the Middle East then they deserve to be taken to the cleaners by the United States.


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Excellent Commentary.........As Usual........

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With the latest oil find....you may very well see a 1:1 Brazilian Real to Dollar ratio.....

The Caribbean...and South America..and China are in an interesting position....

After witnessing the incredible inefficiencies mainly caused by corruption in Latin governments....I hope that the success of the Chinese stockmarket spills over to the region....in that the poverty can be aided by the increase in asset valuations that an electronic stock market can offer....

This is where Chavez has it wrong...Capitalism and electronic stock exchanges offer the highest values ....and thus more money to spread around...

This is the key...spreading it around...by stock shares ownership by workers...to induce efficiency..and so on...

The US in in a state of more economic balancing...with the rising economies...
 
Quote from southamerica:

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Lately I realized that my future is in Brazil and not in the United States. For the first time since I moved to the United States I am thinking about returning to Brazil.
More...

I don't know if this is part of what you're talking about, but if we ever have a major terrorist attack in this country - and we've apparently had some near misses - everything will change. You'll definitely be glad you were in Brazil. It's just a matter of time imho before we lose a lot of our freedoms. I've got a wife from another country and when all this happens, I might want to do the same thing! In my case not renounce my citizenship but just live overseas. But we'll see...
 
Quote from southamerica:

Reply to thermactor

You are a computer technician from California according to your bio.

You should stick with computer games.

Probably you are a frustrated part-time would be actor.

The subject of my article is above your head anyway.

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:D :D :D
 
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November 29, 2007

SouthAmerica: Today The New York Times published an article about the China Investment Corporation and its US$ 200 billion dollar pool of money available for investment – this article makes absolutely no sense to me.

First, the purpose of the fund was to invest around the world to find long-term investment opportunities just like a pension fund to help fund the pension needs of the Chinese government in decades to come.

Second, the Chinese Central Bank still have over US$ 1.2 trillion dollars in foreign exchange reserves on hand and a stream of new dollars that still coming in by the hundred of billions and the Chinese government has plenty of money to invest on the Chinese banks that are in financial trouble on its domestic market.

After the dust settles I am sure that we are going to find out that this article published by The New York Times about the investment activities of the China Investment Corporation it is not accurate.

It doesn’t make sense to me.



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$200 Billion to Invest, but in China
By KEITH BRADSHER
The New York Times
Published: November 29, 2007

HONG KONG, Nov. 28 — As governments in the Middle East take big stakes in American companies, China’s state-run investment fund has quietly shifted its focus from overseas deals to bolstering the country’s troubled banking system.

The fund, the China Investment Corporation, plans to spend roughly two-thirds of its $200 billion assisting Chinese banks, according to a person familiar with the company’s decision making.

In contrast to other sovereign wealth funds — like the Abu Dhabi Investment Authority, which invested $7.5 billion for a 4.9 percent stake in Citigroup this week — the Chinese have no immediate plans to take a large stake in any foreign company.

The remaining third of the fund, roughly $70 billion, that is not committed to shoring up banks with needed cash has been parked in very short-term money market instruments, this person said, with the exception of two previously announced investments: a $3 billion stake in the Blackstone Group, taken in June, and a $100 million stake in the state-controlled China Railway Group, which plans to go public next month.

“We don’t have any more significant investment plans,” said the person knowledgeable about the fund, insisting on anonymity because the government tries to restrict public comment on its policies. Despite China’s keen interest in natural resource companies, the fund does not plan to bid for Rio Tinto or BHP Billiton, two primarily Australian mining companies currently sparring over a possible merger.

Though the China Investment Corporation is still drafting a strategic plan, it intends to largely pursue a portfolio approach — making many small purchases of equities, bonds and other investments, rather than big-ticket acquisitions, the person familiar with the fund’s decision making said.

Some of the differences between the Chinese investment strategy and those of Arab region funds are a function of their relative size and experience.

The Abu Dhabi Investment Authority, for example, started in 1976. It occupies its own skyscraper, with three trading floors and total square footage equivalent to a third of the Empire State Building. While many ruling families in the region relied on one or two investment advisers a generation ago, today their own, often Wall-Street-trained sons and daughters invest their swelling oil profits.

By contrast, the China Investment Corporation has only been active for six months. It has fewer than two dozen employees, mainly people who have transferred from China’s central bank and have little familiarity with equity investments. Indeed, the fund is seeking senior managers willing to move to Beijing to help it invest the nearly $70 billion it wants to commit to opportunities abroad.

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End of above NYT article.



… The dismal performance of China Investment in Blackstone has also encouraged a tepid approach. The fund paid $29.605 a share for the private equity firm, just as credit markets began to turn against risky deals; it has since lost almost $1 billion of its $3 billion, setting off criticism even on Chinese Internet sites. Blackstone shares closed at $21.47 on Wednesday.

The person close to the China investment fund defended the Blackstone purchase. “The decision to invest in Blackstone,” he said, “was cautious and focused on much longer-period returns and not about the share price over six months or a year — we do not worry about it.”

But the biggest source of pressure on the Chinese state fund lies in the continuing need to strengthen the chronically weak Chinese banking system as the economy continues to grow 11 percent a year.

Chinese and Western bankers agree that banks in this country fall short of Western standards in assessing the creditworthiness of borrowers and in controlling fraud. Nonperforming loans as a percentage of total loans at Chinese commercial banks have dropped steeply, to 6.2 percent in September from 12.4 percent in March 2005, according to the China Banking Regulatory Commission. But this is mainly because banks have stepped up their lending, actually increasing their exposure to bad debt if the economy slows and recent borrowers default.

China Investment plans to inject roughly a third of its assets into the Agricultural Bank of China and the China Development Bank, two state-owned institutions preparing for initial public offerings in the next year or two. The exact amount of those investments has not been set and will depend on a continuing assessment of the extent of the banks’ nonperforming loans.

The fund plans to spend one-third more to buy the Central Huijin Investment Company from China’s central bank.

As the central bank has spent foreign currency reserves acquiring large stakes in the Bank of China, the Industrial and Commercial Bank of China and the China Construction Bank over the last three years, it has parked those stakes in the Central Huijin Investment Company. They will now be transferred to China Investment.

The person familiar with the dealings of the fund said the details of both transactions still had to be worked out. Another person with broad knowledge of Chinese financial policy making described the plans as “a done deal.”

Source: http://www.nytimes.com/2007/11/29/business/worldbusiness/29yuan.html?_r=1&oref=slogin


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December 9, 2007

SouthAmerica: This is not happening by chance – you can bet on that.



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China, Brazil hold first strategic dialogue

http://news.xinhuanet.com/english/2007-11/30/content_7176756.htm


BEIJING, Nov. 30 (Xinhua) -- China and Brazil hold the first strategic dialogue on Nov. 29, according to the sources with the Chinese Foreign Ministry on Friday.

Chinese Vice Foreign Minister Li Jinzhang and his Brazilian counterpart Roberto Jaguaribe Gomes de Mattos presided over the dialogue.

The two sides agreed that both China and Brazil are the developing and major powers of the world, and the strategic dialogue will promote mutual understanding and the bilateral ties and play an important role in enhancing south-south cooperation and peace and prosperity of the world.

They said the dialogue is fruitful, and the two sides will realize the agreement of the leaders of the two countries to push forward the long-term, healthy and stable strategic partnership between the two countries.

The two sides also exchanged views on major international and regional issues. Chinese Foreign Minister Yang Jiechi met with Brazilian Deputy Foreign Minister Roberto Jaguaribe Gomes de Mattos on Friday.


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