As food prices soar, the methods and approaches that different countries take to prepare are insightful and tells a lot about how their exchange traded funds (ETFs) might be affected.

In Brazil, the government is helping farmers finance new machinery and equipment to grow more, and has also reduced interest rates to help farmers pay off their loans.

Rising food prices are the ticket for many farmers around the world to reap as much profit as possible, reports Andrew Downie for The New York Times. Surprisingly, the agricultural powerhouses of Brazil and Argentina are reacting to their newfound windfall in opposite ways.

The idea in Brazil is to produce more while export prices are still high on world markets. Such a move should improve their economy and, in turn, the iShares MSCI Brazil Index (EWZ).

In Argentina, the president Cristina Fernandez de Kirchner is worried by the rippled wave of inflation going across the globe. She increased export taxes on crops in an effort to keep domestic prices low, and encourages domestic farmers to keep their selling domestic, even if they are rich with global profits. In other words, the government is trying to reap profit to subsidize other areas of their economy.

Brazil is adapting to what the world is doing right now, and they already have an advantage over the rest of the world. Brazil dominates the world exports of beef, soybeans, orange juice, chicken, sugar and coffee.

iShares S&P Latin America 40 Index (ILF) harnesses both approaches, as it holds 67% in Brazil and 3.5% in Argentina.

Tags: Agriculture, Argentina, Brazil, Emerging Markets, EWZ, ILF, Latin America

Share: Digg | Bookmark at Del.icio.us |