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News Link • China

The next trend for Chinese investors

• Sovereign Man

April 4, 2011
Santiago, Chile

I have a little secret that I’m going to let you in on, it’s one of the ways that I meet people and get networked while traveling internationally. Over time, I’ve found that, if you want to connect with influential insiders, you have to go where influential insiders are.

Country clubs are not my scene… they’re stuffy, formal, and usually take too much time to acquire a membership. Health clubs, on the other hand, are a great place to make contacts.  Gyms are partly social by design, a place where people naturally gather and shoot the breeze in between sets, or before/after demonic spinning classes.

It’s also a place where you can interact with people out of their element– the big powerful CEO is just another sweaty fat guy in tight shorts, and it’s much easier to approach and strike up a conversation with him at the gym’s water cooler than trying to work your way onto his office calendar.

Exactly for this reason, I tend to seek out the most expensive gyms in town when I travel… it’s not because I have particularly fancy tastes (I don’t), but because I go where they go.

Here in Santiago, it’s a place called O2 in Las Condes. I get a twofer because it’s part of the W Hotel complex, so I end up mingling with the well-to-do foreigners who come into town.

Yesterday that happened to be members of several of the bands who appeared at this weekend’s Lollapalooza music festival– Flaming Lips, Killers, Jane’s Addiction, etc.  You may recall this networking concept of ‘the open door’ from our Network Infiltration Report.**

What I’ve noticed over the last few months, though, is that there is an emerging trend of wealthy foreigners coming to Chile from Asia, specifically mainland China.  The two obvious reasons they’re here are copper and lithium, of which Chile has the largest reserves in the world.

Both of these metals are critical for continued production, and companies from China are sending over their purchasing managers to lock up supply.

(I suspect that, in time, the two countries will begin settling their cross-border trade in pesos and renminbi instead of increasingly worthless dollars. In fact, QE3 may be the catalyst which ends the US dollar’s reign as the prime currency for cross-border trade settlement.)

The other reason there are so many Chinese here is that they’re looking for property, specifically farmland. Topsoil is being destroyed at an alarming rate in China, whether due to environmental and weather factors, rapid urban development, or soil depletion.

The agrarian lands in northern and western China are engulfed in a dust bowl that dwarfs the 1930s dust bowl in the United States… and compounding the problem is the country’s growing water crisis.

It’s been no secret that the Chinese have been scooping up cheap resource-rich property and assets across Africa’s corrupt nations.  On a risk-adjusted basis, however, Latin America is a much better investment, and the number of boots on the ground here shows that they’re starting to realize that.

Comparatively speaking, Latin America lacks the political risk of Africa. Sure, there are a few left-leaning big mouths down here… but this is a negligible risk for people coming from Beijing. And in terms of price, Latin American property is some of the cheapest in the world.


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