Abu Dhabi's Mubadala Development is planning to make a splash in Brazil with a wave of potential investments, latching on to strong economic growth in a country rich with natural resources.
Mubadala sets its sights on Brazil
Any investments in Brazil's energy, aluminium, aerospace and agriculture sectors would be the first in Latin America for Mubadala, a strategic investment company owned by the Abu Dhabi Government.
Waleed al Muhairi, the company's chief operating officer, travelled with a delegation to Brazil last week to discuss Mubadala's plans there.
At present, Mubadala has no major investments in the Bric markets of Brazil, Russia, India and China.
Its strategy in its formative years has revolved around partnerships with established companies in the developed world. The company was founded in 2002 but only recently became Abu Dhabi's primary economic diversification vehicle.
"If we look at growth over time, we expect most of those markets that will yield us the best risk-reward formula will be those emerging markets," Mr al Muhairi said in a recent presentation to investors. "So we're looking at markets such as Brazil, India, China and others."
As economic growth rises, developing world investors from across the globe have changed tack. Brazil, where the IMF estimates growth was 7.5 per cent last year, has already emerged as a big target for Gulf investors. In 2009, Aabar Investments, a company owned by the International Petroleum Investment Company of Abu Dhabi, invested US$328 million (Dh1.2 billion) in the Brazilian arm of Spain's Banco Santander.
The Abu Dhabi Investment Authority, the emirate's main sovereign wealth fund, invested two years ago in Brazilian property. Dubal, an aluminium smelter in Dubai, has invested in Brazilian alumina refining.
Brazilian media reported that Mr al Muhairi met Fernando Pimentel, the country's minister of development, industry and foreign trade, and said Mubadala had billions of dollars available for investments across a variety of sectors.
"Mubadala is regularly invited to visit international markets to explore opportunities," the company said. "As part of this series of ongoing international meetings, we met [Mr Pimentel] last week.
"The conversations were of a preliminary nature covering a number of important industrial sectors of interest to Abu Dhabi. The size of any potential investment by Mubadala was not discussed."
Robert McKinnon, the chief investment officer of Asas Capital in Dubai, said emerging markets abounding with natural resources were enticing for GCC investors looking for a hedge on rising global commodity prices.
Brazil has some of the world's biggest stocks of farmland. It also has precious metals in abundance and reserves of bauxite, the source mineral for aluminium. And its labour force is generally better educated than in other major emerging markets, Mr McKinnon said.
"Agriculture investment has been a strategy that's been talked about quite a bit over the past few years to ensure the food supply," he said. "A lot of GCC investors are looking to South America to try to own a stake in that. Brazil's got a huge land bank and cheap land. There are issues with deforestation in Brazil, but for the most part they're friendly to foreign developments."
Mubadala's interest in Brazil comes just weeks after it unveiled plans in a bond prospectus to increase spending this year to about Dh60bn. Much of that new spending is to go towards semiconductors as the company takes control of the Advanced Technology Investment Company (Atic), which bought the chip-making operations of Advanced Micro Devices in 2009. Through its Globalfoundries subsidiary, Atic is building several new chip-making facilities and plans $5.4bn of capital expenditure this year.
Mubadala last month reported Dh1.1bn of profits for last year, down 76 per cent from 2009.