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An American View of Brazil’s Economic Future

October 29, 2012 | By Tekoa Da Silva

    Here’s the english version of an inspirational piece prepared for my fellow countrymen and women in Brazil…

    –

    When I was a teenager living in the United States (about 14 years ago), I visited Brazil for the first time. During the trip to my father’s country, I met family members I never met before, ate delicious churrasco and coxinha, and fell in love for the first time; and her name was gold. I received a gold bracelet as a gift from a cousin, and the sparkling yellow and orange blend triggered in my heart what American’s call, “gold fever”–which is an irrational addiction to all things gold. That addiction only grew when I returned home, manifesting itself into new relationships, experiences, and it has ultimately, brought me back to Brazil–with the conviction that Brazil has a golden economic future, one that if prepared for properly, can provide the next generation with far higher standards of living than what are experienced today.

    Returning home to Boston from my initial visit to Vitoria, I began investing in both gold and silver. My family thought it was strange and uncommon for a teenager to so this, but I loved it. I started with coins and as the years passed, began learning about gold and silver mining companies–the groups who search for the metals in the ground and remove them for a profit. Around 2008, I decided to leave the bleachers and step out on to the field–I began calling the most successful mining companies and investors in the world, to ask them questions about investing. The telephone calls turned into interviews, which I then produced into online radio shows. What I discovered after speaking with founders of billion dollar companies and investors who manage hundreds of millions of dollars of capital–is that there is a worldwide rush going on today, to secure and extract natural resources from the ground. This includes gold, silver, oil, gas, and agricultural commodities. The most exciting part I discovered, is that Brazil, my father’s wonderful country, is at the center of this rush for resources –and not only are the world’s most successful investors looking to invest in those “in the ground” resources, but they’re looking to invest in the country of Brazil in a number of other ways as well.

    When looking at resource and commodity businesses, one might not think they’re very exciting—one might even consider them to be boring! However, the fact that major pools of money have been moving into these areas for investment may potentially mean very exciting things. Firstly, “a rising tide lifts all boats.” Capital moving into a town or city pushes up land prices, and if the capital is put into productive use, it can create many jobs. Property price increases benefit property owners more than laborers initially, however, the greater need and opportunity is in the successful “attraction” of money by human resource talent. Simply put, foreign investors cannot survive in Brazilian markets without local partners–individuals skilled at managing and protecting assets, and treating money as the special golden goose that it is.

    For example, I recently had the opportunity to interview a legendary investor based in England, named Ian Watson.  Watson is a former executive committee member of Burns Fry Ltd.–which assimilated into BMO Nesbitt Burns, a Canadian banking and money management firm which handles over $538 billion in assets.

    During the interview, Watson explained that Genagro, an agricultural company to which he directs, recently invested $189 million dollars in the development of cerrado in Western Bahia. However, he needed an outstanding Brazilian leader for the company, and had to conduct an exhaustive national search using a head hunting firm. He ultimately, “Found a manager which met all of our criteria,” he told me.

    When asked about the brightest areas for future growth and return on investment, Watson remarked, “There are two industries that are exceptional both short and long term–gold mining and agriculture.” In regards to Brazil’s agricultural production capacity, he added that, “Brazil has the potential to supply the demand for protein that’s being driven by the Asian market. Brazil has more potential to do that than any other country in the world.”

    Watson’s investment into Bahia also attracted the attention of other legendary Western investors, such as Jim Slater, and Jim Rogers–who co-founded the Quantum Fund with Billionaire George Soros. Soros is also investing in Brazilian agricultural projects, through publically traded company, Adecoagro.

    In a recent interview I conducted with legendary Canadian money manager Don Coxe, Global Portfolio Strategy Advisor to BMO, Coxe also commented on the agricultural story, adding that, “In a space of three decades, roughly two billion people [Asia and other emerging markets] in this world are going to move from poverty and subsistence, to a middle-class type society. It’s never been done on a scale like this before, I’m glad to be alive to see it happen, because historians 20,000 years from now will be writing about this. The interesting thing is that commodities are the way in which you can best measure all of that, because these people need more commodities to progress.”

    Coxe further added that this middle-class emergence led by China will result in a “commodities boom”, the type in which, “All [commodity]prices go up—gold prices go up, copper prices go up, wheat prices go up, corn prices go up, and of particular interest to us, soybean prices go up.”

    Now why should all this be of interest to Brazilians? Because Brazil produces a significant and growing portion of the world’s commodity and agricultural supply. According to the Secretaria de Comercio Exterior, Brazil’s total exports since 2002 have increased from US $60.4 billion, to over US $256 billion in 2011—which is more than a 400% increase! This number should be expected to continue higher in the future as new projects come online and national production increases.

    While many Brazilians still dream of going to the Unites States of America, the “land of opportunity”, one Canadian billionaire is urging the opposite for North American youth. Tommy Humphreys, a friend and financial journalist located in Vancouver, Canada, recently interviewed Kevin O’Leary, a star from the hit U.S. business TV program, “Shark Tank”. During the interview, O’Leary recommended that young Westerners should, “Get on a plane and go to Brazil,” due to his expectation of high Brazilian economic growth in the years ahead. O’Learly’s capital management firm has been allocating significant funds into Brazilian electrical utilities, due to their, “High yield and low debt leverage” characteristics, and he is overall very optimistic about the future of Brazil.

    So now that an optimistic case on Brazil’s economic future has been laid on the table, backed by action and opinion by major investors and industry builders worldwide–what do we do about it? How do we participate in this future without letting the golden goose slip from our hands?

    In my opinion there are two strategies: the first is to prepare through philosophy, and second, to prepare through action.

    When I speak of preparing through philosophy, I simply mean one thing: Excellence–excellence in thought, excellent in communication, excellence in speech, and excellent in attitude. By focusing on excellence and becoming our best, we will attract the best people, the highest salaries, the best opportunities, and ultimately, the best quality of life. Late American motivational speaker and business philosopher Jim Rohn said, “Success is not to be pursued; it is to be attracted by the person you become.”

    So how do we execute on a philosophy of excellence? By simple following another of Rohn’s teachings, which says, “Work harder on yourself, than you do on your job.” This means taking the extra class, learning the extra language, and developing within yourself, the persistence needed to attract world-class people and opportunities.

    The next important step is to translate this thinking and action into strategy. I feel there are two major areas in which people can stand directly in front of where the greatest quantities of money will be flowing: employment in commodity and commodity supporting businesses, as well as assisting in the packaging and preparation of assets which may be acquired by foreign individuals and entities.

    The specific positions and varieties of employment opportunities are too numerous to point out here, but all we need to do today is open the newspaper to find out, because we’re already waist-deep into this historical change and opportunity.

    The simplest way in my opinion to reap the greatest of today’s and tomorrow’s economic opportunities, will be to embrace a philosophy of excellence, combined with action and strategy.

    The most exciting aspect of all, is visualizing the “New Brazil” which will be created for the youth of the future. Many of the world’s great capitalists investing here won’t be able to see and taste the ultimate sweet fruit of their labor –but rather, the next generation of Brazilians will enjoy a more prosperous country, a higher standard of living, and an even more abundant future–as long as we begin preparing for it today.

     

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