Sebastián Piñera President of Chile

Sebastián Piñera

Sebastián Piñera

On Charlie Rose, was talking about China.

Among the major exports of Chile is copper. SCCO Souther Copper is the ticker I usually use. What he said was rather interesting. China is now their largest trading parter, no longer the USA.

He spoke at some length about their trade, and it basically comes down to a lot of raw materials being locked up for China and some bidirectional trade in manufactures, along with Chile providing agricultural goods. He asserted a similar pattern was forming in other Latin American countries.

There was some time spent on the Daddy Bush proposed Americas Free Trade Zone that “we are still waiting for”. It was also discussed that Obama has basically ignored South America.

Why does this matter?

First off, it means we in the USA are increasingly irrelevant to Latin America. Neither as customer nor as supplier. This will make it harder for the USA to compete. Cars made in China and electric motors made in China will get first bite at the apple on Copper in Chile.

Second, it means that Latin America has a trading partner with a growth rate between 9 and 12% that has increasing quantities of cash and wants to buy.

OK, Latin American stocks get a Plus Rating, USA gets a Minus…

Not only are the regional Asian Tigers an indirect play on China, and not only is Australian mining an indirect play on China, but the whole of Latin America; agricultural goods to minerals to specialized manufactures. And through them, that implies the utilities, transports, and real estate as well.

And The Chart Says?

This chart compares two Chile funds with the S&P 500 ETF “SPY” and with two miners. SCCO does copper and SQM is a major lithium miner.

ECH, CH Chile funds, SPY S&P 500, SCCO and SQM miners

ECH, CH Chile funds, SPY S&P 500, SCCO and SQM miners

ECH  -  iShares Chile Fund
CH   -  Closed end Chile Fund
SPY  -  S&P 500 USA stocks ETF (benchmark)
SCCO -  Southern Copper  (copper miner)
SQM  -  Sociedad Qufmica y Minera de Chile S.A. (lithium miner)
EWZ  -  Brazil ETF (Latin Benchmark)

Rising nicely lower left to upper right. Looks like a nice ride to me.

Sabastian impressed me as a very competent and centered manager, who happened to also be a politician. Someone who clearly understood the way things are, economically, and was going to manage his country for success.

Looks to me like a lot of things are pointing in the right direction for Chile.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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7 Responses to Sebastián Piñera President of Chile

  1. Cold Lynx says:

    Take a close look on Africa too.

    Chinese investment and knowledge have, from very low level, start a process of steady and sometime two digit growth rate to the region that are mostly unknown in US and EU.

  2. Larry Geiger says:

    Are we using less copper because of fiber? Wireless? I know that we just pulled out miles of large (3 in diameter), copper, lead covered, cables out of the ground here at KSC. It’s being recycled. Almost all comm is now fiber. I hear that BellSouth almost has fiber to my house. Wireless is already at my house :-) Just curious.

  3. E.M.Smith says:

    We’re using somewhat less in the USA, but it’s still heavily used in electrical wiring. The growth of electric cars and hybrids promises to make the demand higher than it was before (at least until enough is ‘in the fleet’ for recycle to cover the need.)

    The big jump is in places like India and China as they start to have electricity, telephones, TVs, computers, etc.

    One Example: As China got wealthy enough for a significant number of folks to move from plain bikes to electric motor assisted bikes, there was a spike in lead LD demand and prices. If little batteries for bikes does that much to a metal, what happens when they start getting e-cars? … Then add a microwave oven and home electrical wiring…

    Overall, demand ought to be rising for quite a while. Copper supply is a significant limit on the rate of e-car and hybrid adoption.

  4. Larry Geiger

    Are we using less copper because of fiber? Wireless?
    Trouble is that YOU are becoming wireless not your computers. :-)

  5. Tim Clark says:

    Looking better all the time.

  6. Muthamizh, India says:

    Great Leader

  7. David says:

    Hi E.M. I hope your trip goes well. I have a homework request for you and your posters here. This is the nearest thread I could find as it is about South America and economics.

    This http://meritariskmanagement.com/archives/category/exim
    Independent ( not sure what that means ) Federal agency has made a 2 billion dollar loan to Brazil to aid in their offshore oil development in exchange for agreement to use some US companies to assist in supply and transport of materials.

    They have also loaned a billion or so to Mexico and almost one billion to India to develope a coal refinery.

    Is it possible to determine if this is a misallocation of resources, let alone the obvious contradiction of the administrations refusal to develope our own fossile fuel resources, which I would think produce more bang for the buck in terms of Jobs and long term economic prosperity?

    Please note I know you are a busy man and this is only a request which I extent to your most ecellent posters as well

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