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SOVEREIGN MAN

The next trend for Chinese investors

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.

I’ve written before about property that sells for as little as $25/acre. Certainly, the titles aren’t as crystal clear as what westerners are used to in North America and Europe where records can date back to the 1600s. But for Chinese investors who are used to dealing with gun-toting 13-year olds in Africa, such deals are a sound investment.

Best of all, many countries in Latin America like Uruguay and Argentina still transact property deals in US dollars, so Chinese investors who are sitting on a pile of hot potatoes have a willing seller who will accept their worthless paper for something of value. Bonus.

Here in Chile, I’ve seen land in the remote south of the country for $200 to $2,000 per acre, depending on the size, distance to infrastructure, and carrying capacity. It’s more expensive than in places like Ecuador or Paraguay, but the rule of law is stronger in Chile, and I suspect that the Chinese are willing to pay a bit more for extra protection.

As I am looking for property myself down here, I expect to find out more about what they’re buying, and where… and I’ll report back what I learn.

** Speaking of ‘open doors’ don’t forget about our Atlas 400 information teleconference, tomorrow, Tuesday April 5th at 3:00pm Eastern Time. You can sign up to receive the call-in instructions here.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • ice nine

    “djent” music is the new grunge

  • http://twitter.com/MichaelPorfirio Michael Mason

    “I’ve written before about property that sells for as little as $25/acre.”

    Donde?

  • Mooka

    Greetings Simon. I am new to your site but I have spent the last few days backlogging through your excellent and informative posts. I did not see much in regards to 2nd Citizenships/Passports from the West Indies. My question specifically – Are there any advantages (i.e., taxes, banking, lifestyle, business, privacy, protection from U.S. BureaucRATS etc.) to having a Citizenship/Passport from Barbados or Trinidad & Tobago? These two countries have Citizenship By Descent Programs; although I am U.S. citizen my parents were born there and the process seems straightforward.

  • Goldybear293

    Hi, I really like reading this valuable info, but I have a question regarding silver. If I buy Chinese panda silver coins with face value 10 yuan, is that in your opinion a diversification in currency as well in prec. metals?
    Keep up the good work, greetings from Belgium
    Pascal

    • R.

      It really doesn’t matter what the face value of the silver coin is.
      Only two things matter:
      1) Net weight of silver in the coin
      2) Recognizability of the coin (and this may not be nearly as important as #1)

  • Devocean

    “As I am looking for property myself down here, I expect to find out more about what they’re buying, and where…”

    Did I miss something along the long & winding road of your travels Simon?

    Are you looking just for yourself, or did you mean to say – for the Community Project that, I assume, is still being planned?

    What IS going on with that? Anyone?…Anything?…Bueller?…Bueller?

  • DAVEG

    LOL.

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