2006: Would Berkshire invest in South America?

AUDIENCE MEMBER: My name is Luisa Loredo (PH). I’m a student at University of Kansas, and I’m originally from Brasilia, Brazil.

My question is for both Mr. Buffett and Mr. Munger.

The stock market in South America has been growing quickly in the last few years. What do you think about investment opportunities in South America, given the political environment and underlying risks?

WARREN BUFFETT: Yeah. We would — our problem in many markets is that we have to put a lot of money to work to move the needle at Berkshire. We’ve got a market value of 135 billion or something like that.

So we are looking to put out hundreds and hundreds of millions of dollars at a minimum when we look at marketable securities. And that really narrows the field in terms of countries or in terms of businesses within those countries.

But, you know, we made an investment about three years ago in PetroChina. Now, PetroChina is one — probably one of the — well, it is one of the five largest oil companies in the world — and, yet, we were only able to — even there — to get 400 and some million dollars into it, which fortunately is worth a couple of billion now.

But here it’s a country the size of China, largest company in that country, and even there we only got 400-and-some million dollars in, although we would have liked to have gotten more.

But we weren’t afraid to go into China. We wanted to get paid more for going into China, and we did, because we don’t know the game as well there. We would feel the same way in Brazil.

I mean, we — a great beer company down there that a friend of mine ran, and, you know, we should have been in that. We knew he was a great manager, and he was going to do a great job with it.

So, Brazil would not be off limits at all, but we’d have to be able to get a lot of money into a business we understood at an attractive price.

We would want it to be cheaper than if it were in the United States. We wouldn’t understand the tax laws as well, the nuances of governance, a whole bunch of things. But after allowing for that, at a price, we would do it.

We’re unlikely to put a lot of money into — Brazil is a big country, but we’re unlikely to put a lot of money into really small economies because we can’t get enough money into them. Charlie?

CHARLIE MUNGER: No more.