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Commodities to Power Emerging Markets Higher

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Copper will be a key driver.

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In the 10-year period ending in 2010, Brazil's exports to China grew by more than 35%. During this time, Brazil's GDP grew at an average rate of over 3.5%. Going forward, Brazil is positioned to strengthen its relationship with China and should see continued growth.

Key companies in Brazil, including Petrobas, are undergoing exploration initiatives that are uncovering more oil reserves and adding to Brazil's economic position. One such discovery occurred in 2006, when Petrobas discovered the Tupi oil field. The Tupi oil field contains between 5 billion and 8 billion barrels of oil and is the second largest field discovered in the past two decades. It is perhaps the most important discovery to Brazil's economic development in this century. The Tupi oil field will increase Brazil's oil reserves by over 60% and push it into a premier oil-exporter. By discovering the Tupi oil field and other small fields across the country, Brazil has gained bargaining power it previously did not have with China.

Being in a stronger position is allowing Brazil to benefit from the Chinese demand without sacrificing its own economic initiatives or position. In January of this year, Brazil President Dilma Rousseff and Chinese Prime Minister Wen Jiabo came to terms on an agreement that will expand the trade relationship and joint-investments between the nations.

The agreement, called a "Common Agenda of Investments in the Mining, Industrial, Aviation, and Infrastructure Sectors," will encourage commerce between Brazil and China and establish the framework for trade and direct investments into each country. The agreement will promote trade between the countries and allow Chinese companies to directly invest into Brazil's oil and manufacturing sectors. This next phase of Brazil-China relations will act as an additional level of support for Brazil's growth in the coming years.
No positions in stocks mentioned.
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