Brazil improves ties with China but fortunes are linked to commodities

Increases in exports of soy beans and iron ore helped China overtake the US as Brazil's largest trading partner.

But the strength of the link with China may not help Brazil during 2010 as the Chinese tighten their monetary policy and rein in their levels of commodity stockpiling. Brazil is commodity-rich and self-sufficient in oil so the fortunes of its economy are intrinsically linked to commodity prices. A price decline in commodities, widely expected during 2010, will do nothing for the Brazilian economy. The Bovespa index of Brazilian equities has a 17% weighting to the energy sector and a 32% weighting to the materials sector, which gives some indication of the reliance of the economy on its c...