Feeding the “Dragon” with Iron Ore

The CBS program 60 minutes run an interesting special on Brazil this past December 12, 2010 (http://www.cbsnews.com/video/watch/?id=7143554n).  The program, interesting in itself, brings a very important subtle aspect: the existing trade between China and Brazil.  Both members of the BRIC group (Brazil, Russia, China, and India), Brazil and China are by far the most active of the four in international trade.  China, the “dragon”, is hungry for foreign natural resources to leverage its necessary growth.  With limited natural resources, and the need to continue feeding economic prosperity at the risk of losing power, the communist Chinese government has turned to the largest provider of iron ore in the world: Brazil.  By far the world’s largest consumer of iron ore, China is draining “energy” (the iron ore, among other commodities) to sustain its development.  Interestingly, this topic brings together all three items of this blog: Energy, Economy, and Politics.  Energy can be seen as a generalization of the basic raw materials – the “fuel” – needed for China’s growth.  Economies are affected: not only Chinese and Brazilian, but also the world’s economy.  The artificially low Yuan-Dollar exchange rate has prompted the Brazilian government to recently propose a different currency (either the Chinese Yuan or the Brazilian Real) to be used as the basis currency for drafting contracts (observe this topic has been an agenda topic in the recent G-20 meeting in France – http://www.nytimes.com/2011/02/15/business/global/15group.html).  This would alleviate, for Brazil and for China, the uncertainties behind the current US-China foreign exchange war.  Politics: without the Brazilian raw material, China’s government would not be able to maintain economic growth.  The Chinese government is smart enough to foresee the toppling of the communist regime if economic growth is hindered: it happened to the defunct Soviet Union faster than one could blink, and without he help of Facebook and Tweeter!  So, two growing powers helping each other without American, European and/or Japanese interference … or so we believe.

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Stormin’ Norman

In reading the biography of retired General Norman Schwarzkopf, Jr., I found out that he lived in Iran with his father and the rest of the family, during the mid 1940′s. His father is said to have been instrumental in the coup d’etat deposing the democratically elected Iranian government at the time, to instead put in the government 26 years of dictatorship under Mohammad-Rezā Shāh Pahlavi. During this period, the US and England benefited the most from Iranian oil. In particular, the US has helped the dictator Pahlavi to keep the power by providing arms and helping his secret police. This part of history can explain why middle easterners, especially Iranians, have such a high animosity toward Americans.

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Foreign Policy

The US has given billion of dollars in “help” to Egypt, every year, since the Camp David accords with Israel in the late 1980′s. Why did the US helped this foreign dictator for so long? President Mubarak was a dictator to his people, leaving a legacy of over 75% of Egyptians in poverty. Egypt was never a democracy under Mubarak; nevertheless, the most democratic and most powerful country in the world – the US – helped his regime for decades, at the expense of his people. Not a “proud American” moment.

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