Rivalry between the US and China could benefit resource-rich countries like Brazil
According to a report by The Economist reproduced by Estadão, nations with oil and minerals could profit from the dispute between the two powers.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM ESTADÃO · 2 MIN
The dispute between the United States and China could open an opportunity for countries that sell raw materials. According to a report by The Economist reproduced by Estadão, Brazil is among the nations that can profit from the rivalry between the two powers.
According to the text, poor countries tend to have less sophisticated industries and smaller service sectors than rich countries. In this scenario, natural resources, such as oil and minerals, appear as a way to boost growth, attract investment and cover fiscal deficits.
The report recalls that finance ministers from poor countries remember the last commodities supercycle. During that period, Chinese demand raised the price of metals and fossil fuels. An example cited is Angola, whose oil sales helped to almost double its GDP between 2002 and 2008.
The Angolan case shows both the potential and the risk. Revenues that arrive in boom cycles can finance growth, but they depend on prices that the country itself does not control. In reading the editorial line of The X-Trader News, this is precisely where fiscal responsibility gains weight, because a government that spends as if the increase was permanent feels the blow when the cycle turns.
What is at stake is whether this demand becomes a lasting gain or a temporary episode. The facts found do not indicate how long this movement could last, and this article does not venture an estimate.
What changes for the investor
For those who follow commodities, the dollar and interest rates, the thesis suggests that the revenue of countries that export oil and minerals can react to the demand of large economies and the prices of these products. This effect tends to appear in currencies, in trade balances and in companies linked to these sectors. Still, gains from a supercycle do not replace balanced public accounts, and investors need to assess whether growth is sustainable. This article does not recommend the purchase or sale of assets or forecast prices.
Automatically translated from Portuguese.
