Kirk LaughlinSource: Uncommon Wisdom / Tony Sagami
This column is devoted to Asian investment opportunities, but it doesn’t mean you or I should ignore the rest of the world. That is especially true when companies in other regions are making big profits by doing business with China.
In fact, one of my long-running, consistent investment themes has been to urge you to get ‘long’ whatever the Chinese are buying. In most cases, they are buying the strategic natural resources it needs to fuel its future growth, which includes popular consumer goods for the country’s growing, affluent middle class.
The Chinese have been blitz-buying everything from oil reserves to Louis Vuitton purses, from copper to iPhones, and from soybeans to Yum Brand pizzas. China’s government is using sovereign wealth funds and state-owned enterprises to buy up economic assets. One place where it is spending a mountain of money is Latin America.
Latin America is blessed with a wealth of natural resources, such as natural gas, tin, oil, copper, nickel and fertile farmland. Those riches haven’t escaped China’s notice, and it has secured DECADES of natural resource supplies Venezuela, Brazil and Argentina.
In fact, China invested $15.6 billion in Latin America over the last 12 months, according to Deloitte Consulting. That’s a 300% increase over the previous 12 month period. Heck, China is even loaning money — a whopping $32 billion — to Venezuela, which is obligated to pay back this debt with oil. “Viva China! I’m in love with China,” shouted Venezuela dictator Hugo Chavez.
Even often-overlooked Ecuador is cashing in. Chinese oil company Petro China loaned $1 billion to state-owned Petro Ecuador in exchange for oil deliveries. Plus, China Development Bank loaned $1 billion last year to Ecuador’s government to be repaid not with cash but with future oil shipments!
China’s focus has been on energy and industrial minerals — during the last three years, more than 70% of China’s investment in the region went into those two categories — but China is also locking up agricultural assets and food supplies. China understands that it can’t produce enough food to feed its citizens, so it is aiming to fill its bowls from foreign fields.
The price of commodities is surging along with Chinese demand. For example, over the last five years, the price of gold increased more than 150% and oil has gone up 87%. High commodity prices are music to the ears of many Latin American companies.
There is no shortage of Latin American stocks that are making a bundle selling to the Chinese. Here is a short list of Latin American natural resource stocks that are traded on the NYSE and Nasdaq.
Cresud Inc. (Nasdaq:CRESY) owns almost 700,000 acres of farmland, primarily in Argentina, and produces beef, milk, wheat, corn, soybean, and sunflower, and sorghum.
Compania de Minas Buenaventura SA (NYSE:BVN) is primarily a precious metals company but it also produces a significant amount of zinc, lead, and copper.
Gruma, SAB (NYSE:GMK) is a Mexican company that produces rice, oats, corn flour, and wheat flour.
Petrobras Argentina SA (NSYE:PZE) engages in the oil exploration and production activities in Bolivia, Ecuador, Peru, and Venezuela as well as Argentina.
Tenaris SA (NYSE:TS) produces seamless and welded steel tubular products and related services for the oil and gas industry.
Petroleo Brasileiro SA (NYSE:PBR) is an oil and natural gas exploration, production, and refining company.
BRF Brasil Foods SA (NYSE:BRFS) produces 40% of Brazil’s pork exports.
Vale SA (NYSE:VALE) engages in the exploration, production, and sale of basic metals — iron, copper, nickel, and aluminum — in Brazil.
Those are just some of the ADRs (American Depositary Receipts), so if you’re savvy enough to not limit yourself only to the U.S. exchanges, there are DOZENS of other fantastic Latin American energy, mining, and agriculture stocks to consider.
Lastly, please keep in mind that I’m not suggesting that you rush out and buy any of these stocks or ETFs. As you know, timing is everything when it comes to investing, so you should do your own homework and wait for stocks to go on sale before jumping in.
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