Remember all the fuzz earlier this year when German politicians suggested that Greece should sell a few islands to pay off its debt? Well, in Qatar they obviously like the basic idea; according to Reuters, the wealthy emirate is now in talks with the governments of Argentina and Ukraine to but parts of the land – for cereals production…
“Food is becoming a big business.”
Mahendra Shah
Qatar is in preliminary talks with the governments of Argentina and Ukraine to buy farmland for cereals production, the head of the Gulf Arab state’s national food security programme, Mahendra Shah, says in an interview with Reuters.
The deals would be worth “$100 million-plus each”, Mahendra says.
The acquisitions are part of Qatar’s drive to secure its food supplies by investing in agricultural projects abroad, Reuters reports .
Qatar imports 95 percent of its food and has only two days’ worth of water reserves.
It relies on imports, and is constantly looking at options to gain additional food and water resources through Hassad Food, the agricultural arm of its sovereign wealth fund.
Have Already Bought Parts Of Brazil And Australia
“We have done deals in Brazil and Australia and now we are in negotiations with Argentina and Ukraine,” the director of Qatar National Food Security Programme says.
“These are countries that are willing to sell their land to grow cereals,” he adds.
As criticism has mounted over the past two years of so-called “land-grab” deals, where rich food-importing countries buy land in poorer nations, Qatar had focused on richer countries with more abundant land and stronger legislation, where its investments would be less controversial, according to Shah.
Zimbabwe For Sale?
He also says that Qatar is keen to develop partnerships with target countries, which would foster their development and improve the livelihoods of local farmers.
“I think a lot of countries are rethinking their strategy. If you are being criticized for transferring food insecurity from your own country to another one, then you may want to go where there is less criticism,” he says.
“On the other hand, the countries that really, desperately need agricultural investment are in Africa.” he points out.
Big Shock – Big Business
Hassad Food was established in 2008 by the Qatar Investment Authority with $1 billion capital, as a spike in food prices led the rich oil states, as well as countries like China and South Korea, to look for additional food supplies and farmland abroad.
In 2010 Qatar plans to invest between $500 million and $700 million in agricultural projects.
However, Mahendra Shah says that there is “flexibility” to increase” its financial war chest.
With international prices of wheat, maize and rice rising over the past few weeks on the back of drought in Russia and flooding in Pakistan, he says Qatar’s strategy have been proved to be far-sighted.
“Food is becoming a big business. We had the first shock in 2008 and now what happened over summer proved that this kind of shocks will be repeated and that we were right,” Mr. Shah says.
The Investment Of The Future
Shah says Qatar is also studying a project on how to raise sheep for meat production in Sudan, where last year it created a joint venture to cultivate up to 250,000 acres of land for wheat, corn and possibly soya.
Shah was speaking on the sidelines of a high-level intergovernmental meeting of the UN’s Committee on Food Security in Rome, where land rights and sustainable agricultural investments is on the top of the agenda.
He says Qatar wants to seal partnerships with the host countries, under which not more than 40% of the food production would be shipped back to the Gulf Arab state in order to promote local development and help farmers.
The Investment Of The Past
However, this kind of agreement is really not a completely new thing.
In 1978 the Korean Overseas Development Corporation bought 20.894 hectares of pampas some 1.000 km northwest of the Argentinian capital, Buenos Aires.
The Korean government paid $2,115,000 for the land.
The Koreans sent 300 farmers to Argentina with the visions of building a Korean village in South America.
Well, there’s a slightly difference between both soil and the climate on the two opposite parts of the Earth.
Something the Koreans forgot.
In summer it was sizzling hot with temperatures soaring over 40 degrees Celsius. In winter there were severe temperature swings and many mornings of frost.
The biggest problem was that the land contained salt. (The fact that a small river flowing through the area is called “Salado,” meaning salty, might have been a little hint..).
The project ended in failure, and the land has remained neglected for more than 30 years.
Still, the Korean government has been sending $12.000 to Argentina every year for management costs and taxes.
A New Trend?
So, if buying foreign land will be the next great investment opportunity remains to be seen.
But it may be something we’ll see more of in the years to come.
In the recent proposal for the 2011 National Budget, the Norwegian Finance Ministry announced the establishment of a new Strategy Council. The Strategy Council has been asked to write a report on the long term investment strategy of Norway’s SWF (Government Pension Fund Global) and present this no later than 1 December 2010.
Meanwhile, the big Sovereign Wealth Funds are putting their money where the money is – of course.
In the financial sector that is – of course.
Data from our Sovereign Wealth Fund Transaction Database shows that almost 30% of the SWF investments over the last four quarters have been in the financial sector.
(Source: Sovereign Wealth Fund Institute)
And more than 60% of all SWF investments are now in the financial industry. (Still no green shots?)
And the total amount invested by Sovereign Wealth Funds seems to be significant lower this year compared to 2008 and 2009, the figures suggest.
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What’s next?
Related Articles
- Behind Greece’s Courting of Foreign Investment (time.com)
- Qatar Companies Sell Debt for Expansion as Borrowing Costs Fall (businessweek.com)
- Carnegie Learning Signs Deal with Qatar-Based Learning Centers (eon.businesswire.com)
- Qatar Telecom sells $1.25 bln notes in 2 parts-IFR (reuters.com)
- Santander to Sell 5% Stake in Brazil Unit to Qatar Holding (businessweek.com)
EconoTwist's 
China To Invest In Nassim Taleb's Bear Fund
It’s a pretty strong signal: China’s Sovereign-Wealth Fund is in talks with Black-Swan-author Nassim Taleb’s Hedge Fund, Universa’s Bearish Wagers, The Wall Street Journal reports. China is said to be willing to invest between 6 and 10 billion dollar in the fund that gives a payout of 60% if the market drops 20%. Some of the world’s biggest investors are planning to do the same.
“Stocks are not a robust investment. Make sure you have a garden that bears fruits.”
Nassim Nicolas Taleb
The famous author, philosopher and Wall Street trader, professor Nassim Nicholas Taleb was in his native northern Lebanon last week, thinking about instability in the pricing of goods and services. He suggests that investors around the world strap in for a wild ride of deflation and inflation. And says it therefore makes sense for him to pour money into farming, especially olives, which are indispensable to the Mediterranean world.
The mathematical finance scholar who lectures at New York University and wrote the 2007 book “The Black Swan” says he is as pessimistic as ever about the prospects for sustained global economic recovery.
He suggests that investors around the world strap in for a wild ride of deflation and inflation. And, therefore, he said, it makes sense for him to pour money into farming, especially olives, which are indispensable to the Mediterranean world, The Wall Street Journal writes.
“Healthy investments are those that produce goods that humans need to consume, not flat-screen TVs,” Mr. Taleb says over the phone from near his family’s ancestral home in Amioun.
“Stocks are not a robust investment. Make sure you have a garden that bears fruits.”
In For A Wild Ride
Nassim Nicholas Taleb also says investors around the world should strap in for a wild ride of deflation and inflation.
Some of the world’s biggest investors are planting the same seeds, according to WSJ.com.
Specifically, sovereign-wealth funds are willing to pay the firm in the hopes that if the market dives, at least some part of their portfolio will profit.
Panic is a profit-driver for Mr. Taleb, who has gained renown for his pessimism, a viewpoint that proved prescient in the market collapse of 2008.
The interest from the likes of the Chinese and Middle East funds, which control some of the world’s biggest pools of money, suggests more mainstream adoption of Universa’s bearish conviction.
The outcome of the talks isn’t certain, according to a person familiar with the matter.
But if the investments materialize, they likely would boost the Universa fund’s client assets from $6 billion to about $10 billion, two people familiar with the matter says.
CIC didn’t respond to a request for comment by the WSJ.
Read the full post at The Swapper.
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Tagged as Black Swan, Financial Markets, Health and Environment, Hedge fund, International Econnomic Politics, Middle East, Nassim Nicholas Taleb, New York University, Sovereign wealth fund, Views, commentaries and opinions, Wall Street, Wall Street Journal