But China's impact on Brazil is certainly not limited to the aircraft industry. Figures just out last week show that, in the first 11 months of 2006, Brazil was China's largest trade partner in Latin America. Meanwhile, bilateral trade between China and Latin America as a whole seems to be doubling every five years: It was $50 billion in 2005. It will hit $80 billion this year. And it should easily reach $100 billion by 2010.

For the past several years, new Sino-Brazilian ventures and deals have been in the news almost daily. Just last week, for example, Chinese investors rushed to join Farias, a major sugarcane group in northeast Brazil, to build new ethanol mills. In recent months, Asian investors, like Japanese trading companies Mitsui and Itochu and India's sugar giant Bajaj Hindustan, have been scouting out Brazil's ethanol sector. So Chinese investors, loathe to be left behind, are trying to jump ahead of their Asian competitors.

Three major factors are driving this:

First, the time is right. Escalating tensions with Iran are already driving up world oil prices. And even before the new price surge, there's a sustainable, pressing demand for alternatives to crude as long as crude holds over $40 per barrel.

Second, the place is right. Brazil is the world's number one producer and exporter of sugar. It's the world's number one producer of sugarcane-based ethanol. And this kind of ethanol is the world's least costly to produce.

Third, the technology is right. Just recently, in the neighboring state of Mato Grosso, Brazil's president, Luiz Inácio Lula da Silva (Lula), inaugurated the world's first plant that makes not only ethanol from sugar cane and biodiesel from soybeans, but also electricity from bagasse.

Suddenly and unexpectedly, Brazil burst on to the scene as the world leader in ethanol technology. That's why Lula and President Bush are putting their muscle behind their joint proposal to export Brazilian ethanol technology to Central America and the Caribbean.

Ever since Lula was first elected president five years ago, he has implemented the most disciplined fiscal and monetary policy the country has seen in half a century. He has boosted Brazil's currency by 69% since he took office in January 2003, transformed a massive trade deficit into a massive surplus, and paid off 100% of Brazil's debts to the International Monetary Fund.

Now, in Lula's second term which began three months ago, he's got a firm enough financial foundation in place to go for big growth. With that goal in mind, the Bank of Brazil has already slashed its benchmark interest rate 14 times. And sure enough, the economy is responding: Retail sales have just jumped 8.5%. Capital goods production has jumped 18%.
And the ETF tied to Brazil's leading stock index, the iShares MSCI Brazil Index (EWZ), has risen 50% since January of last year.

"Today, Brazil's currency is one of the strongest in the world. Forty years ago it was one of the weakest in the world. Brazil will someday become a major energy exporter. It hasn't happened yet, but it will. Investing in Brazil is as easy as buying a U.S. blue-chip stock. Thirty-eight years ago, unless a resident of Brazil, it was extremely difficult to invest in Brazil. Today, not only are there many companies like Embraer that trade on U.S. exchanges, but EWZ, the exchange traded fund linked to Brazil's major stock index, can be bought as easily as any U.S. stock," explains Dr. Weiss.

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