Obama, Brazil & China interactions: Obama was in Brazil’s capital today and will be in Rio (the old capital and still HQ for many of Brazil’s largest firms) Sunday, 20 March11. Brazil wants (and has) Obama’s support for a permanent UN security seat. (Some economically lesser and much smaller countries have permanent seats.) Obama wants more trade and oil but he may be several years too late and quite a few dollars short to get much. China passed the US as Brazil's main trading partner a few years ago. In 2010 trade with China was 56 vs 45 billion with the US and the China trade soared up 53% YoY! For examples of what China is buying (in addition to iron ore): Three years ago China gave 10 billion dollars to PetroBrass (to be repaid by 200,000 brls of oil / day on average for 20 years to be sent to China). More recently, Sinopec paid 7.1 billion to Spain’s Repsol for their 40% share of an important new “pre-salt” oil field / claims and Sinochem paid 3 billion to Norway’s StatOil for their 40% of the “peregrine” field, less than a month ago. – I.e. more than 20 billion has already locked up for decades much of Brazil’s oil production. And China is locking up decades of supplies of food too, especially now with food prices rising so rapidly: Page B14 of today’s O Estado de S. Paulo reports Chongqing Grain Group will build in state of Bahia* a 4 billion dollar soy to oil plant with initial capacity to process 1.5 million tons /year making 300,000 tons of soy oil. The plant will employ 300 people and consume ½ of all Bahia’s current soy production. (Probably all after expansion in a few years). This complex to also include, at not disclosed additional cost, storage for 400,000 tons of soy beans for steady year round production (between harvests). Also at more cost, not disclosed, will be a fertilizer factory and new railroad spur to the Bahian port, Porto sul. My paper is quoting a Chinese paper as stating that 200,000 hectares have been acquired at 1.5 billion dollar cost to assure a supply of 500,000 tons of soy annually. Thus China will need to buy only a million tons of soy or 1/3 Bahia's current production so will be able to hold farmer's prices down. There are currently no soy to oil processors in Bahia, my paper implies. It looks like Bahia will be a Chinese agricultural colony in a few years - labor cost there are significantly lower than in China as is true of all profitable colonies - ask India. China seems increasingly desperate to spend dollars from reserves and is even buying gold despite being world’s largest producer. Also China is encouraging its citizens to open the new bank “gold holding accounts,” first made legal in December 2010. More than one million Chinese did so in their first three months of existence, buying on average $550 of gold. (12 tons total). China is also encouraging the population to buy and hoard 20 gm silver “Panda bars” (about $22 of silver in each but more expensive as beautifully packaged and engraved (actually stamped) works of art displaying a panda). Having the population put some of its money in precious metals removes it from circulation and fights inflation in a very intelligent way plus China can always quasi confiscated the gold as the US did. The Panda bars are in sealed plastic packages, very suitable for hiding in the ground. ----------- * Bahia is a moderately larger but poor agricultural state with little industry, but China plans to change that with continued billion dollar investments. PS today's paper had simple but very clever main cartoon: It shows Brazil's first woman president large in lower left corner / side looking up at tiny plane approaching down from top right. Caption is: "Guess who is coming for dinner?" Unstated answer of course is: "America's first black president." - The times they sure are "a changing!" A-typically for my age, I am very pleased by that as I worked hard one summer to make part of these changes. BTW, more on post 380: Brazil also increased it banks reserve requirement to 20% on most deposits today. Like China, to fight the exported inflation coming from the USA as dollars flee to higher returns / better investments /etc in Brazil & China.