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Commodities to Power Emerging Markets Higher


Copper will be a key driver.

In Latin America, Brazil leads as a natural supplier of copper and crude oil, which it is now able to extract and export on competitive terms. Nations rich with natural resources perform well during times of global economic expansion. In particular, countries rich with industrial commodities tend to outperform those without.
While the European debt crisis and slow growth in the US has decreased demand in these economies, global demand is still strong due in large part to high growth rates in China and developing economies. Latin America also benefits from a lower unit labor cost helping to lower total production costs, coupled with a more relaxed regulatory infrastructure and low-inflationary environment.
The combination of a natural supply and low cost is driving demand from countries like China into Latin America. The natural result is Latin America's own economic expansion.

For the next few years, China will continue to grow between 6% and 8%, as less developed emerging economies, such as Vietnam, are likely to expand by more than double that rate. It is the strong growth in these markets that will drive demand for the goods and services of Latin American countries for the next five to ten years.

The height of US demand for copper and other industrial products occurred during the US housing boom from 1997 to 2006. During the boom, copper consumption in the US more than doubled, topping out at 7.660 billion pounds in 2005. With a strong housing market driving economic growth, the US economy grew GDP at an average rate of 3.3% during this time, and the leading exporter of copper to the US, Chile, experienced GDP growth at an average of over 4%.
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