Monday, July 9, 2012

Brazilian Agricultural Production Continues to Set New Records

Forecast Crop & Meat Production Growth
Brazil's agriculture sector is expected to grow strongly
In a previous post, I outlined how Brazil has become a major global agriculture powerhouse. From Research I've done, it looks like Brazilian agriculture is continuing its rapid expansion.  Additional acreage is coming on line, and Brazil's agricultural exports have grown from $16 billion in 2001 to to $80 billion in 2011, a five fold  increase.

Brazil currently has 62 million hectares of and under agricultural production, and that number could rise to anywhere from 70 million to 100 million acres by 2021.  As the graph on the right from the USDA and the Brazilian agriculture ministry shows, Brazil's forecast meat and crop production growth will likely far outstrip that of the US.

Much of Brazil's agriculture exports have been led by soybeans, sugar and meat.  China in particular is a major buyer of Brazil's soybean crop, and China's demand will only continue to grow.  Below is a graph providing an overview of which crops have been leading Brazil's export growth in the last decade.  The future appears to look quite bright indeed for Brazilian agriculture.
Brazilian Agricultural Exports By Commodity
Brazil's Agriculture Exports by Commodity

Sunday, June 10, 2012

Brazil's Oil Boom: The Challenge of Offshore Pre-salt Deposits

As I discussed in a previous post, Brazil is rapidly turning into a major oil superpower.  Much of the oil production has been offshore, and while it will take time to develop these deposits, Brazil could easily end up emerging as the fourth largest oil producer in the world by 2020.

I recently came across an article on the site Seeking Alpha that discussed possible ways investors could benefit from Brazil's offshore oil boom.  The article does note the challenge of accessing oil deposits deep beneath surface in what are called "pre-salt" deposits, and the image below from the article provides a nice overview of the location of the major oil finds in Brazil's offshore waters as well as what the pre-salt deposits are.  The article notes the following:
"The extraction of pre-salt oil requires an offshore rig with a special drill bit able to bore through several thousand feet of salt to reach the treasure below." 
I found the article very interesting, and if you are interested to read it here it is:
Brazil's Emergence As A Major Oil Producer

Brazil's Offshore Oil Fields Located Deep Below the Ocean in Pre-Salt Deposits

Wednesday, May 2, 2012

Brazil - An Agricultural Powerhouse

Brazil's agriculture commodities in world markets
In additions to its now well known oil discoveries, many may not realize that Brazil is also an agricultural powerhouse as well.  In the middle of the 1980s, Brazil was actually a net food importer, but within less then 20 years the country grew into a huge exporter of agricultural commodities and Brazil became a key component in international food security/  Today, modern Brazil leads the world in the production of a variety of agricultural commodities from corn to soybeans.  

What is interesting is that Brazil became an agricultural powerhouse not through government subsidies or import quotas, but by enthusiastically applying modern scientific techniques and processes across its entire agricultural sector starting in the mid-1980s.  Brazil's farms are also massive in size, and enjoy tremendous benefits in scale.  In that regard, Brazil's entire farming and agriculture industry has been designed to supply massive amounts of food to world markets.  

Finally, while there has certainly been some negative affect upon the precious Amazon from Brazil's agricultural development, the vast majority of the country's agricultural revolution has taken place in the flatlands of the cerrado, hundreds of miles away from the Amazon.

For those interested in reading a good overview of the Brazilian agricultural miracle, here is an excellent summary article from the Economist.

Monday, April 30, 2012

Brazil's Oil Set to Change International Energy and Geopolitical Situation

Location of Brazil's Offshore Oil Fields
As noted in the previous post, it looks as though Brazil massive recent oil finds is set to turn that country into a major energy superpower.  The New York Times had an excellent article a few months ago analyzing how this might affect the global geopolitical situation.

The Times article notes that by 2020 Brazil could end up as the fourth largest oil producer in the world, trailing only Saudi Arabia, Russia and the United States.  New oil technologies in the area of offshore and horizontal drilling and fracking are set to unlock huge previously inaccessible oil reserves throughout the Americas.  As this occurs, it is natural that the influence of current OPEC producers such as Iran, the UAE, Kuwait, Venezuela and others will shrink, and as the United States and the West becomes less dependent on Middle Eastern oil, significantly more attention will be put on the relationship with Brazil.  The Brazialian national oil company Petrobras will still need significant foreign capital and expertise to unlock Brazil's oil riches, but Petrobras has shown itself much more willing to work with foreign partners than national oil companies in the Middle East and in such countries as Mexico and Venezuela.

For those interested, do read the full article from the New York Times.

Saturday, April 28, 2012

Brazil - The Next Oil Superpower?

Massive Discoveries of Offshore Oil Near Brazil

In addition to Brazil's fast growing economy based on its extraordinary taming of inflation I mentioned in my previous post, the country is also on the verge of becoming an oil superpower.  There have been a number of huge oil discoveries recently in the waters off of Brazil, including several by British Gas in 2009, as well as the 2010 discovery of the massive 15 billion barrel Libra field 114 miles offshore from Rio de Janeiro.   Its no wonder that former Brazilian President Luiz InĂ¡cio Lula da Silva declared that 'God is Brazilian!' in 2007 as the evidence of Brazil's oil potential began to be clear.
In the next post, we'll take a look at the affects of Brazil's huge oil resources both internally as well as on the country's stature in the world.

Friday, April 27, 2012

When Brazil Defeated Hyperinflation

Brazil hyperinflation graph
Brazil's Cardoso Defeats Hyperinflation

One of the keys to Brazil's emergence as a growing economic power was the country's defeat of hyperinflation in the 1990s.  While many people associate hyperinflation with Zimbabwe, in the late 1980's and early 1990's, Brazil routinely had inflation of 2,000% - 3,000% per year.  

The key to defeating inflation was the ascendancy of Itamar Franco to the Presidency of Brazil in 1992.  Franco selected Fernando Enrique Cardoso as his finance minister, and together Franco and Cardoso introduced a new currency called the "Plano Real" that replaced the country’s old currency, the cruzeiro.  The real was introduced in 1994, and along with government efforts to control spending, inflation dropped from over 2,000% in 1994 to 22% in 1995 as the chart to the left demonstrates.  Since 1995, inflation has continued to largely trend steadily downward.  Cardoso moved on to serve two terms as Brazil's President himself, and by the time he left Office in 2002 the economic and financial reforms he had established were firmly in place, and were largely carried on by Cardoso's successor as President Luiz Inacio Lula da Silva.   For those interested in learning more about Mr. Cardoso, his interview with the Financial Times of the UK is quite worthwhile.

Thursday, April 26, 2012

Brazil is the Country of the Future - and the Future is NOW

Brazil GDP
Growth of Brazil's GDP - the size of its economy is now over $2 trillion.

There is an old saying about Brazil that sums up its mixed history:  "Brazil is the Country of the Future - and Always Bill Be".  Luckily though for Brazilians, the future is increasingly now.  Consider its economy.  After long lagging behind most of the developed world despite its huge size, Brazil's economy recently passed Britain's to become the sixth largest in the world and will likely move past France's economy by 2016.  It now has a GDP of over $2 trillion.

Brazil is a huge country, with a continental landmass the size of the United States, and a large population of nearly 200 million people.  While the country still has many issues - including a large gap between rich and poor - its economy is set to continue to grow faster than developed world nations' economies, and Brazil has become an agricultural powerhouse and continues to improve the quality of its manufacturing sector while its financial markets also continue to mature.  While China and India get most of the attention among the so-called "BRICs" (Brazil, India, Russia, China), any analysis of the future of the global economy must include Brazil.