Chinese firms have been investing in Latin American economies such as Brazil, and the commodity-rich nations of the continent have strong attractions for China. This article sets out why Brazil is a favourite of Chinese investors.

Brazil has risen dramatically in a short time. Just five years ago inflation roared at 17 percent and it looked as if the country would default on its foreign debt.

But the Latin American giant has paid back its loans to the International Monetary Fund and its foreign reserves now exceed its foreign debt. This clearly enhances its status as a safe place to invest.

In September 2004, the Bovespa index of Brazilian equities was around 22,000 points. Since then, it has nearly tripled in value along with gross domestic product. The Brazilian reai has appreciated by 26 per cent this year against the dollar and is now the best performer amongst the sixteen most traded currencies this year, trading at 1.83 per US dollar, having almost doubled in value since 2003.

Clearly, Brazil seems to be avoiding many of the mistakes made in North America.

It has achieved this through diversification of its export markets and large range of products. It also boasts a well-regulated financial system and major companies like Petrobas and Vale that are the largest in the Americas.

Brazil is also energy independent with a proud record of using alternative energy. Having introduced biofuel back in the 1980s, the country is mass producing bio fuel from sugar cane.

Ironically, this move was not inspired by patriotic fervor but by the military during the 1970s to reduce its dependence on Middle Eastern petroleum during the oil crisis at that time.

Brazil is now an oil exporter whereas 30 years ago, it imported more than 85 per cent of its oil. Petrobras said last week that it had discovered even more oil in the offshore Campos basin.

This makes Petrobras one of Brazil's most important companies. Last year, Petrobras was responsible for 96 per cent of Brazil's daily production of oil and natural gas.

Another giant in the commodities sector, Vale is the world’s largest iron ore producer. Brazil is the largest exporter of iron ore worldwide and the third largest supplier to China. Brazil is looking to secure its position and further benefit as China's demand for iron ore is set to increase 380 per cent from now until 2020.

Soft commodities are another important area of growth for Brazil and as you might have guessed China is the world's largest importer of soybeans. Brazil and Argentina together account for more than half of China's total soybean imports.

According to the US Department of Agriculture, world soybean trade is projected to rise rapidly; climbing more than 27 million tonnes during the next decade and China is expected to account for 80 per cent of the world's growth in soybean imports over the next 10 years.

Brazil is planning to maintain its position as the world's leading exporter of soybeans.

So will China's commodity boom last? Various studies suggest that China will remain hungry for commodities over the coming 15 years.

Additionally, China is continuing to invest significantly in Latin American companies and the country wants to retain its ability to be self-sufficient in food; it has 40 per cent of the world’s farmers but just 9 per cent of the world's arable land.

It is therefore looking to buy farmland abroad, with Latin America being one of its prime targets.

The above points clearly demonstrate Brazil's ability to emerge strongly from the global financial crisis and points to continued growth with special emphasis on its strategic commercial alliance with China.