A $200 Billion Sovereign Fund From Brazil

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Brazil says it will launch a $200 billion sovereign fund with the money from all the oil it has found off-shore. Of course, none of that oil has been brought to the surface, but that is a detail.

The FT writes that Brazil’s finance minister said “The fund will start small but once the oil begins to come in it will grow quickly, to $200bn or $300bn in three to five years."

The sovereign fund business is now so good that countries pre-announce their plans to get into it years in advance of having the money. It is akin to a large company saying what its profits will be half a decade out.

What is for certain is that Brazil’s new pool of money will make the same mistakes as the current funds from Asia and the Middle East. It can invest in failing US banks and brokerages and watch the money go down the drain. But, with oil as the source of the wealth, it will not matter. There is plenty of capital to go around.

Douglas A. McIntyre