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This post was edited by abramicus at 2014-8-27 20:33|
This time, China plays host to another old friend, Mugabe, president of Zimbabwe, whose country has been experiencing, not mismanagement, but a foreign-instigated embargo on investments, opposing its attempt to ensure that corporations exploiting the natural resources of the country have at least a majority equity interest in the hands of Zimbabweans. This is being portrayed as "hostile" to foreign capital. The alternative, is to give away the farm, it seems.
One possible approach to solving this problem is for China to invest in Zimbabwe, whose total foreign direct investment volume has been declining in the past few years. But the best investments in Zimbabwe have already been taken by Western countries. So, there is less for China to invest in that would earn a reasonable return, compared to alternative investments, say in South Africa, or elsewhere. Nevertheless, the amount of FDI of 1.3 billion dollars, year to date, is nothing to sneeze at. Zimbabwe is nowhere undergoing any economic collapse.
What China could do to stimulate investment by domestic and foreign sources, and at the same time improve Zimbabwe's trade balance is to simply execute a futures contract with Zimbabwe, to purchase a certain amount of its products, including platinum, for example, that has both industrial and monetary usefulness, at a certain price, or better yet, give Zimbabwe an option to exercise a put on China for such commodities, at a certain price, by a certain date. This may yet be the first time that one country aids another by giving away a put option to a needier country, but for all the evils of derivatives, this may be just one thing good left of them that mankind may benefit from. Naturally, the volume of the underlying commodity in such a put option, such as platinum, has to be significant to make any difference. However, if China has to make preparations to process such an import and deploy it for various purposes, then it deserves a guarantee of delivery from Zimbabwe as well, which then becomes a futures contract that is binding on both the buyer and the seller to deliver the money and the goods respectively, at a specific date, of a specific quality and quantity, to a specific location. In either case, China would not have to deal with the intricacies of making an investment, but can stimulate other countries to invest in Zimbabwe, by assuring the products made will have a market. One such contract could be very well the entire platinum production of Zimbabwe at a reasonable futures price for two or five years. China needs not rasie the price it pays to benefit Zimbabwe, as the promise to buy at a specific price close to the market is enough support to keep its mnes open, and its people gainfully employed.