Asian smelters to benefit from Doe Run Peru shutdown

Doe Run Peru shut down its lead and zinc smelter on June 2 after the company ran out of money and credit, therefore rendering it unable to buy the raw materials being produced at near by mines.

According to this Bloomberg article, guess who's stands poised to benefit from this? You guessed it Asia's smelters, who despite the global slow down remain hungry for
more.

Alex Emery in Lima down in Lima writes:

Glencore International AG, the world's biggest commodities trader, and Trafigura Beheer BV are benefiting as suppliers of Doe Run Peru's shut lead and zinc smelter seek international traders to sell their concentrates.

"We're looking for more clients abroad, particularly Asian smelters," to buy the extra production, Glencore's Peruvian manager Fernando Cafe said in a July 3 interview.

Cia. De Minas Buenaventura SA, Pan American Silver Corp. and about 30 other miners in the central Peruvian Andes have had to seek alternative buyers after the Renco Group Inc. unit smelter ran out of cash and halted all operations on June 2...

To read the complete article please visit the complete Bloomberg article.

[Commodities] -- Is the rally over?

Commodity Rally May Falter on Supply, Speculators

June 29 (Bloomberg) -- Commodities, heading for the first quarterly advance in a year, may struggle to repeat their gains in the next three months as supply expands and speculators sell.

Nickel may average 29 percent less in the third quarter than now, crude oil 16 percent, copper 14 percent and gasoline 10 percent, analyst estimates compiled by Bloomberg show. Hedge funds and speculators cut their bets on higher prices by 23 percent in the two weeks ended June 23, the first back-to-back drop since March, based on an index using U.S. Commodity Futures Trading Commission data. The World Bank said June 22 the global recession will be deeper than it expected three months ago.

“Commodities have gotten a little ahead of themselves,” said Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. “As long as there’s uncertainty about growth, that’s going to be headwind commodities won’t be able to overcome.”

Commodities rose 14 percent this quarter, led by nickel, oil and sugar, after three consecutive declines, according to the Reuters/Jefferies CRB Index of 19 raw materials. This year’s 57 percent advance in oil costs, combined with widening budget deficits, may cause another global slump, said Nouriel Roubini, the New York University economics professor who predicted the financial crisis.

Click here to access the full article from Bloomberg

China's Minmetals makes a new offer for Australian miner OZ Minerals -- Reuters Video

Mar 31 - China's state-owned Minmetals made new offer for Australian miner OZ Minerals, as the world's No.3 economy continues its push for resource acquisitions.

China makes a new offer for Australian miner OZ Minerals excludes Prominent Hill while OZ hopes to seal debt extension by early Wednesday.

Kitty Bu of Reuters reports

Jim Rogers says Geithner is smokin the rock'

Jimmy tells it how it is...

The Latin American zinc association (Latiza)

I didn't even realize this organization existed until I stumbled upon a interesting "in depth" piece that BNAmerica's did on it.

The Latin American Zinc Association (Latiza) is a regional branch of the International Zinc Association, which comprises both zinc producers, miners and refiners. Latin America, if you did not know produces roughly 23% of the global output of zinc, a very commonly used base metal.

If you're interested in learning more about Latiza and can read Spanish you should definitely check out their home page at:

http://www.latiza.com/primero.html

Peru-China to Sign FTA Agreement on April 15th

China and Peru will be officially sign their Free Trade Agreement on April 15th, according to this El Comericio article, a Lima based newspaper.

Li Chang Chun Alan Garcia

Jose Garcia Balaunde, Peruvian Minister of Exterior Relations announced the agreement would be signed in the "capital of the Asian giant," his words not mine...

Negociations had been under way for quite some time, concluding on November 19, 2008 during the APEC summit which Peru hosted.

"Show me the Mao's!" China goes shopping

Since the inception of this site a major goal has been to inform and sometimes personally analyze China's growing commodity demand and increasing cooperation with emerging markets (particularly South America).

If your interested in the topic Andy Hoffman, of Canada's, Globeandmail wrote a good article today worth your time. Below I've copy and pasted a few paragraphs from the article to summarize it. You can Click here or scroll to the end of this post to access the full article from the Globeandmail.

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Flush with cash at a time when most countries and corporations are struggling to gain access capital, the Asian economic superpower has spent nearly $60-billion (U.S.) in less than a week in a series of deals that will secure a long-term supply of iron ore, copper, zinc and oil.

"Cash is king and China has lots of it," said Egizio Bianchini, global head of metals and mining at BMO Nesbitt Burns, which in the past, has represented state-owned Chinese firms in several mining deals.

"China is looking and saying 'We don't have a lot of competition here and we have ready cash.' [For almost everyone else] there is no public debt market and no public equity market," he said.

Desperate for financing amid stalled capital markets and investor abandonment of the sector, resource producers are turning to China for a commodity it has in spades: ready money.

Yesterday, Brazil signed a deal to supply China with 100,000 to 160,000 barrels of oil a day in exchange for billions of dollars of investment. Under the agreement signed in Brasilia, state-owned China Development Bank will provide financing to Brazil's state-run energy company Petrobras to develop its massive oil reserves.

Click here to access the full article from the globeandmail

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Links to recent posts on this topic from
ChinaSouthAmerica: News and Analysis

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China's metals move a bright spot for sector -- Feb 13

China-South America -- China pursues Latin America ties -- Feb 9

China-Mexico: Sinopec competes against Schlumberger Ltd and Halliburton Co. for drilling contracts in Mexico - Feb 5

News line: commodities in focus - Feb 2

Emerging Markets' Presence Grows at Davos Economic Forum - Jan 30

China goes shopping for commodities - Jan 7

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Commodities in focus: Investment, Production Forecasts, New Discoveries and Project Cancellations from South America

The commodity market is having a mid-recession crisis. This is especially troubling for the major commodity producers in South America. Forecasts of when the global economy will recover from the current financial crisis to range from the 2nd half of 2009 into 2010.


Investing your rainy-day fund from the “boom years” and what it means for Chile

For a country like Chile, which has roughly $22 billion of saved reserves from the four-year boom in copper prices (Chile is the world's #1 producer of copper), recession is going to mean tapping into those savings in order to invigorate demand.

Chile has earned a reputation for being a very efficiently managed economy in South America. This, combined with the fact the country has saved for bad times has created a sense that the Chile is in the best position to weather the global recession.

Fund managers and analysts at Scotiabank Sud Americano SA and Santander are of this opinion and emphasize that so far, Chile's Ipsa Index is the best preforming Latin American benchmark, with a gain so far in 2009 of 5.1%.

(click here to read more on this topic from James Attwood's article on Bloomberg)



New Investments & South-South Cooperation: Brazil-Bolivia

In other commodity news, there is a new example of growing South-South Cooperation to report, this time between Brazil and Bolivia. Brazilian oil conglomerate Petrobras has announced plans to invest $1.1 billion in natural gas projects in Bolivia.

Brazil’s state oil company “has made the commitment to invest $1.1 billion in the coming years,” Lula said at a press conference late yesterday in the Brazilian town of Ladario, which borders Bolivia. “We need gas and we will act with the Bolivian government to fulfill that need.”

(click here to access the full article from Bloomberg)

Bolivia is proven to have the second-largest natural gas reserves in South America after Venezuela. Much like Venezuela, foreign investors are quite concerned with the political situation and as a result the flows of FDI in Bolivia have taken a serious hit in recent years.

However, with energy demand holding steady in Brazil and Argentina, Bolivia's current inability to meet supply contracts with the two nations, this is a smart and strategic move on Brazil's part. Furthermore, with ongoing issues concerning the the price Brazil pays for electric power generated by the Itaipu dam (the world's largest hydroelectric plant, located on the Parana River along the Brazil-Paraguay boarder), it is wise of Brazil to secure its energy needs from a additional source in the region.

(click here to access a recent article concerning this issue between Brazil and Paraguay, courtesy of La Presna Latina)


Exploration / New discovery in Brazil

Moving on... discoveries / exploration continue. Spanish company, Repsol has made a oil discovery offshore Brazil. Repsol announced this weekend, it had found “traces” of hydrocarbons at a deep water well being drilled off the Brazilian coast.

Exploration work was headed by a consortium of companies of which Repsol has the largest stake in. Brazil's Petrobras and Australia's Woodside Petroleum Limited are the other two partners.

It's good news to see companies continuing with resource exploration. When the global economy recovers, which it eventually will—commodities will be back in the headlines. The companies which have managed to brave the recession will find themselves rewarded as consumption increases and buyers line up, ready and willing to pay a premium.

(Click here to read more on this discovery from MercoPress)


Production in 2009 – Copper & gold production set to rise in Peru

Peruvian news agency, Andina has reported Peru's mining companies will produce more copper, gold and silver this year in a bid to offset slumping prices, according to Finance Minister Luis Valdivieso.

In the world, Peru ranks as the third-largest producer of copper, zinc and tin. The fifth largest producer of gold, and the number one producer of Silver. None the less, Peru is confident that by raising output it will be able to cope with the global downturn.

However, if the global economy does not recover as quickly, Peru may find increasing output was not the best method to deal with the situation in the long term. If other producers in the world economy do the same, the market will hypothetically be flooded with supply.

With base metal prices down roughly 25-40%, gold and silver down 14% and 43% respectively, this does seem the most logical path for Peru to take at the moment. The ideal situation I assume the big shots making decisions down in Peru can hope is that the global economy does pick up in the 2nd half of 2009, so that prices do not fall to levels in which mining production becomes economically inviable.

(click here to access Andina's article on this topic)


Baosteel and Vale cancel steel project due to lack of credit – BNAmericas

Cia Vale do Rio Doce and Baosteel have canceled their steel project in the Anchieta complex, in the Espirito Santo state of Brazil, the groups announced.

The companies blamed the global economic crisis, which has seen leading steelmakers worldwide cutting their steel production. As result of the global cut in demand, Baosteel proposed the cancellation of the project and the liquidation of Companhia Siderúrgica Vitória (CSV).

(click here to access the full article from BNAmericas)

Commodities in focus: Sector outlook

Gold -- To hold gold or not to hold gold...? That is the question.

Gold is a funny metal in the commodity family. Despite its functional use in areas such as filling cavities, gold is also a very fickle metal in the sense that a variety of other macro-conditions ultimately play a big role in determining the price of gold.

The price of gold has held up reasonably well, remaining in the $800/t oz. Range despite a short dip into the $700's/t oz in October and November. Reasons to favor gold right now come predominantly in the form of using it as a hedge against future depreciation of the US dollar vs. the Euro and other major currencies. With all the money the US Government is printing and spending, plus historically low interest rates, most analysts estimate that the currency will weaken in the coming quarters.

Kitco - 6 month gold spot

On the other side of the equation, demand is falling from major consumers like India. Second, if stock markets do witness a sharp rebound, investors may have reason to turn away from gold and return to stocks which are at historical valuations. Chandrashekhar of the Hindu Business Line, a Indian news site says “In the short-term it could come under pressure amid a deflationary environment or during bouts of dollar strength.”


Base Metals – Copper futures jump 5% limit in Shanghai trading, but outlook still remains dim

Li Rong, chief analyst at Great Wall Futures in Shanghai told Bloomberg (in this article), “Chinese consumers took advantage of lower overseas prices to stock up ahead of the Chinese New Year.”

Chandrashekhar had the following to say about base metals.

In case of copper, market fundamentals, especially the demand side continues to deteriorate. This metal may have the furthest downside potential from current levels. According to experts, copper prices are still above production costs and miners still make money. Therefore, there would likely be cost-related cutbacks in production. On the other hand, aluminum, zinc and nickel prices have all fallen very close to weighted average production costs. There is growing risk that copper could dip near to this level at $2,100/t (click here to access the full article from the Hindu Business Line).


Crude Oil / Energy -- Bounce back?

At the moment the financial crisis and the recent political tensions in the Middle-East and Eurasia (Russia) have created a sense that oil prices may have come too low. Additionally OPEC has just announced large production cuts will be hitting the markets in the coming months to bolster oil prices.

When the global crisis appears to have been brought under control and demand returns to markets, the price of a barrel of crude may well spike back above $50 a barrel. Further dollar deterioration and escalation of political tensions may also contribute to higher prices.

China goes shopping for commodities

If you have kept up to date as I try to do with China's oversea investments in the commodity and energy sectors you're probably aware of the fact China has been shopping for commodities in emerging markets.

Africa and to a lesser extent South America where the main benefactors of China's spending spree from 2000-2008. The two continents are home to abundant supplies of natural resources China needs to sustain economic growth. The two continents are also home to various countries that are hungry for foreign direct investment in their commodity sectors which until recent had been the main fuel behind their respective economics booms.


China also had a edge up on their western counterparts in many of these countries. Some countries in Africa and South America intimidate traditional western investors due to political instability. Others have such a horrendous human rights record that many western firms are morally inclined not work in them.

With the global slow down in full swing, cash rich Chinese companies and investment groups now find themselves in a different position. Frozen credit markets, plummeting commodity prices, depressed stock market prices and a cloudy horizon in the future have led many mining companies from developed countries to search for long-term investors with the capital to keep their operations running until the global economy improves.

China has shifted its attention away from Africa, instead focusing on possible investment opportunities in Canada, Australia and South America. Keith Spence, president of Global Mining Corp, a China-focused resource investment company was quoted in a great piece published in the Financial Times yesterday.

"The Chinese realize there are massive opportunities in the market. A year ago, they were going to Africa to acquire early-stage development assets. But now they are looking for larger tonnage, longer life, later-stage assets. There is less of an emphasis on emerging markets, because now there is choice."

Last month China's largest zinc producer, Zhongjin purchased 50.1% of Australian zinc miner Perilya for $32 million usd. Chinalco, a Chinese aluminum company has suggested it may increase its stake in Rio Tinto to nearly 15%.

(click here to access the full article on this topic from the Financial Times)

I must say it is interesting to see that although China finds itself in a more lucrative buying position that it has not shunned South America. Evidence to suggest the Chinese may perceive South America as more than simply another commodity rich area in which to extract untapped resources.

Rather it may be that South America has come to represent a region that has well developed assets, worthy of purchasing for the long-term. China is forging much closer ties with fellow APEC members Chile and Peru. China is quickly working with Peru to finalize a Free Trade Agreement and already has one with Chile. China is increasing its investment in agricultural commodities in Brazil and Argentina and hopes to continue easing visa restrictions for many of its citizens on travel to the region.

Below I've included a chart of Chinese investments / cooperation with Latin American countries. I assembled this chart about 6 months ago for my independent study / thesis. If you know of any other instances of Sino-Latin America interaction please by all means let me know and I'll update this chart.

Analysis: Peruvian economy grows 10.3% during the 1st half of 2008

The Peruvian Central Bank raised its benchmark interest rate on Thursday (September 11th) by 25 basis points to 6.5%.

On the surface international investors are increasingly starting to view Peru as a safe region for commodity plays and “alternative investment strategies.”

- Standard & Poor's and Fitch Ratings upgraded Peru's foreign debt to one level below investment grade. (click here for article)

- In May Peru entered talks with the Paris Club to re-nogciate its foreign debt and for the first time, Peru's international reserves are expected to exede foreign debt. (click here for article)

- Peru has achieved relative political and economically stability, successfully passing power from one democratically elected president (Toledo) to another (Garcia) and producing healthy economic growth the past few years.

- Generous macro-economic incentives have helped to attract FDI from abroad, particularly in Peru's mining and energy sectors.

- According to this article from MercoPress, which quotes the INEI: Peru's National Institute of Statistics (click here to visit) the Peruvian economy grew at a rate of 10.3% in the first half of 2008, making it the fastest growing economy in the region.

Lets think about this for a second...

Until the recent retreat/collapse/correction in commodity markets, for the majority of 2008, commodity prices have been sky-rocketing, setting records as arguably one of the strongest bull markets the commodity sector has ever experiences.

Peru, a major producer and exporter of copper, zinc, and other metals has naturally benefited a great deal from soaring commodity prices. However, now that commodity prices have come back down to reality it will become increasingly more difficult for Peru to produce such great numbers. The bright side is commodity prices may rise once again once global growth and confidence pick up, but with the recent developments in the US financial markets it is looking as if the global economy has a long way to go until recovering from the recent credit and banking crisis.

Investors should always research the bad and the good. Some factors which come to mind are as follows:

- The recent replacing of Finance Minister Luis Carranza with Luis Valdivierso, who aside from a more impressive resume having worked for the IMF... is really not much different that Mr. Carranza. It's a pity the main reason Carranza even stepped down was for “family reasons.” Stating, as the Minister of Finance he was over-worked, had little family time and could not adequately support his family.

- Protests and strikes from local communities and unions will remain a obstacle for many companies operating in the remote regions of Peru.

- The population and satisfaction of the Peruvian people with their current president Alan Garcia, and other Peruvian politicians whom are not of the radical left such former presidential candidate Ollanta Humala, have whitnessed their approval ratings shrink a great deal in the past 1-2 years... Meanwhile Humala has managed to remain in the spot light, maintain his friendship with Hugo Chavez and will probably will run for President once again in Peru's next election. Expect great changes if he wins.

Commodities in focus: Lead and Zinc producers cut production in China to help slumping prices

With commodity prices heating up around the world, emerging markets have finally began to show signs of slowing demand. The latest metals making headlines are two primary base metals; zinc and lead.

A meeting of 27 major Chinese Lead and Zinc producers took place in Shanghai yesterday. The producers agreed in Shanghai "the move would help improve the supply-demand relation so as to curb further price fall," as reported by the China Mining Association (CMA).

In Chinese yuan, the price of lead ingots has fallen 34% from 26,500 yuan/ton ($3,887 usd) to 16,500 yuan/ton ($2420 usd). Zinc ingots meanwhile have plummeted in price, falling by 53% from 33,360 yuan/ ton ($4,890 usd) to 15,650 yuan/ton ($2300 usd).

China's Nonferrous Metals Industry Association estimates domestic lead consumption shrank 50,000 tons in the period January-May, but stated new projects set to begin in Shaanxi, Hunan, Yunnan and Gansu provinces would help re-invigorate demand.

China has been expanding at such a rapid pace it was almost necessary for a price correction in commodities. Add to the recent trend of investing in commodities as a safe heaven or hedge against other currently more risky investments and you get a situation where commodity prices have risen beyond sustainable levels.

Despite China's robust economic growth and ever increasing demand for raw materials, Chinese demand alone is not enough to keep commodities at their current prices. However, as the largest contributor to global GDP in 2007, Chinese demand is a very important factor.

What to make of all this? A temporary correction in commodity prices at best... and by temporary I do mean a few months or a year at most. Zinc and lead will remain in high demand due to the fact a slowing global economy is not going to bring all projects in China or other emerging markets to a stand still. Second if prices continue to decline, supply will probably remain constrained because some miners will put off exploration or development of new mines due to lower prices which make them economically less viable. This will create a similar situation in the long term when demand recovers and the market realizes there is once again insufficient supply. Economics 101 teaches you when there are too many people chasing the same good, the price of the good will rise, and this will be the case with zinc and lead.

As commodity prices decline, China's miners and smelters may suffer, but government projects and domestic urbanization plans become cheaper. As noted above, prices have declined and new projects are being planned in certain provinces.

The provinces mentioned above are all relatively poor regions in China, lacking infrastructure and in desperate need of investment. Shaanxi is a poor region about 6 hours by bus from Beijing and is at the heart of coal production in China.

Yunnan is a province in South China which boarders Myanmar and is populated by over 20 of China's ethnic minority groups. One of China's strategies for keeping ethnic minorities happy is to ensure the regions where they live experience the benefits of China's economic growth. In recent years Yunnan has also emerged as a popular tourist destination. As the influx of both domestic and foreign tourists increase, so will investments in infrastructure and services.

Gansu is a province in western China and is home to a wide variety natural resources. There is extensive mining in iron, lead, nickel, zinc and other metals. Additionally, two of China's most important oil fields, Yumen and Changqing are located in this region.

Hunan province is located along the Yangtze River and is home to the industrial cities of Changsha, Zhuzhou and Xiangtan. All three cities are major centers of production which account for roughly 40% of the regions economic growth. Currently the three cities are in major need of improvements in their infrastructure and will need to import in the materials necessary to furnish the improvements because of a severe lack in local resources.

If you've been following China's development plan since the 90's, it is clear the central government has chosen a selective development strategy-- focusing on important economic zones and leaving others behind. This is all very important because it shows capacity for growth and development in China remain. This is especially true for the regions described above which until recently have been over-shadowed by the wealthy coastal regions where China's export and manufacturing centers are focused.

The recent earthquake in Sichuan Province, rising disparities between Eastern China and Western China, and the need alleviate pressure on major city centers will prompt Beijing to begin paying more attention to the regions it previously ignored. When this happens, Chinese commodity demand will rise and so will prices.

Zinc and Lead began their bull markets in late 2005 / early 2006. At their respective peaks, both had more than doubled in price in just a few years time-- see LME price charts from 2002 - 2008 below.

London Metals Exchange: Zinc ($US/tonne)





London Metals Exchange: Lead ($US/tonne)

Despite being primary metals used as a economic input in production of goods and services, many industry experts felt the rise in Zinc and Lead prices in late 2005 was uncalled for. The two metals had relatively static performance from 2000-2005. However, by late 2005, it seemed the world had suddenly realized surging demand from Asia would create a new demand dynamic, causing prices to rise.

Zinc and Lead suddenly had become hot commodities. In 2003, Peru, the world's number 3 producer of lead and zinc, exported $201.3 million worth of Lead and $528.7 million worth of Zinc. By 2005, Lead exports had risen $312 million and Zinc exports to $805 million.

Below I have included two charts of the major sectors in which Lead and Zinc are used in.

As readers can see both metals are used in a variety of industries. Even if Lead and Zinc have a tough 2008, demand for the base metals will not fade. Consider this correction an overdue dose of medicine to cool a surge in prices which in reality was far from justified.

Macro-economic frenzy... expecations, natural disasters, inflation, union strikes? what more?

Couple headlines that have grabbed my attention in recent days.


1) Unions strikes

Unions representing truck drivers are striking across the globe from Spain to England to South Korea, in protest of rising fuel prices, eroded purchasing power of their salaries, and feeling generally marginalized in society.
http://www.allheadlinenews.com/articles/7011212516
http://english.chosun.com/w21data/html/news/200806/200806100014.html
http://www.bloomberg.com/apps/news?pid=20601102&sid=a_EyvKsmJHSM&refer=uk

Peru-- LATAM fastest growing economy in 2007, just recently became the #1 global producer of silver, stands as the #2 producer of copper next to its neighbor Chile, and is the #6 producer of gold in the world. Peru in other is booming thanks to demand for copper, fish meal, and other commodities from Asia, and, second from countries and investors seeking to use metals like gold as a hedge vs inflation. This morning Peru's unhappy workers, currently in protest, due to the government failing to pass a resolution which puts ceilings on the level of profit sharing allowed. 28,000 miners from Peru's biggest mining union have postponed their strike in various mines until June 30-- many silver, copper, zing and gold (Dow newswire, accessed via Resource Investor).
http://www.resourceinvestor.com/pebble.asp?relid=43447

2) Asia plummets
A string of disasters in what susposed to be a continued boom year for the Chinese economy have crippled and done a great deal of damage to the new emerging super power of the world. First with the worst snow storms in 60 years which hit Southern China earlier this year-- where most of the countries economic activity is conducted, then with the anti-china/pro-tibet protests which hit the world stage during their Olympic torch rally, and last--the recent horrendous earth quake that hit Sichuan province. China's exchanges where down almost 5% yesterday at night one point, however it did not lead to the crash of Feb/March 2007, when Chinese market corrections led the way in a short global correction in stock markets. It seems the financial systems of the world has priced in the downside of this years problems in China and general difficulties which will face Asia in the wake of rising food and energy costs.

3) All over the world countries are concerned about inflation. Worse, speculation on metals and other commodities isn't helping the $, still the most circulated currency on earth rally, which would ultimately be helpful to the global economy as a whole. Its scary to see fed officials from the US and even the EU coming out and making comments on inflation. What action will they take? What ramifications will it have?
http://www.foxbusiness.com/story/markets/bernankes-inflation-comments-push-futures-lower/
http://money.cnn.com/2008/06/10/markets/stockswatch/?postversion=2008061008
http://glickreport.blogs.foxbusiness.com/2008/06/10/intervene-already/

What to make of all of this? Well i'm going with the plan of finding a few equities I feel are not still over-valued and are in a good position to retain market position and keep earnings expectations due to their unique business and or market niche. Follow emerging markets and where they head-- as the olympics get underway I'm still confident Asia will have a rally, but if the general health of financial systems of the globe don't improve before then it will be a short lived rally. Follow the price of energy and forecasting the future of emerging markets and the general global macroeconomic health of the world economy will be easier to follow. Inflation in food stuffs is also key... Rising oil and energy prices may hurt everyone-- especially the poor, but when even food is sky rockets in price, the people of the emerging world will feel it extra hard, potentially leading to further slow downs and social instability in countries.

Welcome to China-south America Trade and Finance Blogs -- Dedicated to exploring the growth of these two regions and the implications of cooperation

As it stands, a “new economic order” is emerging as a global re-balancing of international economic power and influence occur. This “new economic order,” to be described in this working paper can be largely attributed to the increasing importance and presence of emerging markets in the world economy and inter-emerging market cooperation. Accounting for only the populations of the four largest developing nations; Brazil, Russia, India and China (BRIC countries), roughly 2.7 billion economic agents have become active competitors in the global economy. This research study focuses on the growth and cooperation of the emerging markets of China and the South American commodity exporting countries of Peru, Chile, Colombia, Brazil, Argentina and Venezuela, and, how to understand their cooperation the ramifications in the field of international investing..

Chinese expansion in the fields of trade and investment in South America, the general growth in Sino-South American relations and in particular, the countries of focus in this paper, has greatly altered the expectations of many economist and investors around the world. Economists and international investors have responded through creating new international models for their respective fields. For instance, many within the investment community have developed alternative investment strategies and portfolio diversification strategies with a international focus. Strategies, typically consider international factors such as market volatility, political risks, growth forecasts, and or advancements in technology—all of which are important indicators which help investors identify a strategic mix of investments in which to construct an international portfolio.

A unique aspect behind China's emergence as a global economic power, is that China remains (by western standards) a developing country, home to over 350-400 million people living below the international poverty. Never the less, China has managed to achieve global recognition while still being classified as an emerging market. With hundreds of millions in China yet to benefit, the country's economic growth and development is far from complete. Furthermore, China's recent materialization as the world’s second largest economy (in PPP terms) provides a clear message; no developed or developing country can afford to ignore or marginalize the affects of China's rapid economic growth (Colombia Futures Group; 2005). Referred to by many as; “the work shop of the world,” China has is now a major center of economic activity with ample capacity to further expand its influence and position.

Emerging markets such as China and India, both of which have over a billion people, evolve and become new engines of global growth—much like North America and Western Europe. Additionally, in light of globalization and ever increasing levels of international commerce and production matrices, emerging market cooperation has developed into its own respective engine of growth for developing countries—facilitating the rise of commercial exchange between regions which may have previously had little or no connections with one another, as China and South America have (Estevadeordal; 2006).

In response to the ever-increasing interconnectivity of economic activity in the world economy, emerging markets have managed to develop both their domestic capacities and establish significant levels commercial exchange with other emerging markets. When the global credit crises of late 2007-2008 emerged, it led to world-wide market corrections in developed countries real estate, banking, and financial sectors. The developing world, including the countries in this research, in part, where able to use their domestic and regional economies to compensate for the adverse effects of economic slowdown or recession in the US.

Despite problems which need to be addressed in the global economy, emerging markets discussed here show signs they will achieve favorable growth in 2008 and for the next few years to come. The countries of focus in this research all managed to achieve very positive growth rates in 2007. GDP growth rate data from 2006 and 2007, has been adquired from Bloomberg L.P reports. China achieved avg GDP growth of 10.7% over 2007. While, in South America GDP growth were calculated as: Peru 9%, Chile 5.2%, Colombia 7.8%, Brazil 4.8%, Argentina 8.7% and Venezuela 8.4%.

In 1970, two-way trade between China and all of Latin America, which includes Central America and the Caribbean region, was reported to be a meager $150 million. Additionally the majority of this exchange occurred between China and Cuba, largely because of ideological. In 1980, the figure had begun to change drastically, increasing 1000% o ver ten years to $1.5 billion (Li; 38-39). From 1984-2004, Chinese commodity imports from Latin America surged by a factor of 20. By 2005 two-way trade between the regions had increased another 900%, growing to over $50 billion. Trade data from 2004, provided by the International Monetary Funds direction of trade statistics estimates the total value of Chinese commodity imports at $200b USD (Santiso; 2007).

This blog will be a resource for all those interested in participating in exploring this new dynamic relationship.

Up to date news and relevant developments from reputable news agencies will be posted when they pertain to this growing cooperation and the emerging markets of South America and China.