Will Mitsubishi Outdo Boeing in Jetliners?

♠ Posted by Emmanuel in , at 10/25/2014 01:30:00 AM
The next Japanese "threat" to US domination?
Mitsubishi needs no introduction as a Japanese conglomerate that has heavy industries for nearly everything under the sun aside from diversified interests from banking to brewing. Mitsubishi also has a measure of notoriety for building the A6M Zero fighter plane used for kamikaze attacks towards the end of WWII. During the postwar years, its sophisticated manufacturing facilities allowed it to produce F-15 fighters under license as well.

I bring up this bit of history since the Japanese are supposedly embarking on another episode of outdoing their American counterparts. Having long since consigned Detroit to oblivion, the Japanese are allegedly at it again, this time in aerospace as Mitsubishi builds its first jetliner for regional (read: short hop) use, the Mitsubishi Regional Jet (MRJ). What strikes me as curious about this Japan's-eating-America's-lunch story is that it comes 30 years after the heyday of Japan-bashing Stateside. Still, the parallels may be there in the US being unguarded about technology transfer. Just as American automakers laughed off Japanese "competition" way back when, the likes of Boeing and others in the aerospace field may be too lax:
Now history seems to be repeating itself – this time in America’s ultimate manufacturing stronghold, aerospace. The politico-economic dynamics are déjà vu all over again. The industry is officially “targeted” by the Japanese government. And U.S. corporations seem  to be playing their allotted role to a T – as condescending, complacent buffoons. Specifically Boeing has been transferring key technology to Mitsubishi Heavy Industries (MHI). The “heavy” in MHI’s name reflects  the company’s nineteenth century origins in shipbuilding but is a misnomer  these days in that the company is one of the  most formidable behind-the-scenes players in aerospace.

MHI’s hitherto most important claim to fame is as supplier of the wings for the Boeing 787. [I'd argue it's making Zeros and F-15s, but anyway.] The 787 is the most sophisticated passenger jet ever flown and its made-in-Japan wings are its unique selling proposition: they are among the world’s strongest and lightest and thus ensure that the plane achieves almost unheard of fuel efficiency.  Much of the basic  technology was transferred to Mitsubishi by Boeing. Now that  that technology has been improved on by Mitsubishi, the Japanese will almost certainly outclass Boeing  going forward.

This weekend brought further news of Boeing’s folly. Mitsubishi has launched its long awaited regional jet, which is available in both 70- and 90-seater versions. If press reports are to be believed, Boeing has helped Mitsubishi develop the plane. Certainly the new plane poses immediate, potentially lethal competition for existing leaders in regional jets such as Bombardier of Canada and Embraer of Brazil. Mitsubishi is claiming a  20 percent advantage in fuel economy and its planes will also provide passengers with more legroom thanks to better seat design. Longer term it can be assumed that just as the Toyota Lexus emerged to challenge the Cadillac, full-size Mitsubishi jets will emerge to  challenge even Boeing’s super-advanced 787.
Speaking of Bombardier and Embraer, note that this segment is tightly contested, too. Like Airbus and Boeing going at it at the WTO, the Canadians and Brazilians also had their own WTO case with the Brazilians eventually prevailing in court.The thing about Mitsubishi entering this business so late is that it at least avoids the arguably more competitive A320/737-sized market dominated by Airbus and Boeing. The author also neglects to mention Airbus for a curious reason: are the Europeans chopped liver? Honda too has a much-hyped private jet. Still, I do not automatically predict Japanese domination of world markets for the main reason that we're talking about the Japanese.

Remember, Mitsubishi has barely made a dent in the global automobile industry, so I don't see why it should dominate the market for jetliners anytime soon. 

US Plan to Strangle China's World Bank Rival, Pt 2

♠ Posted by Emmanuel in ,,, at 10/24/2014 01:30:00 AM
Today the Asian Infrastructure Investment Bank (AIIB) was born.
This is a continuation of a previous post on the US wanting Chinese competition in development lending to just go away despite the likes of the World Bank and Asian Development Bank lauding the developmental benefits of competition. You know, when it comes to actual competition in development lending, the usual American BS, posturing and hypocrisy rear their ugly head. How will China's Asian Infrastructure Investment Bank survive? Depending on your point of view whether this is a good or bad thing, the US has largely succeeded in discouraging developed countries from pledging any funding to the PRC's brainchild. When th1e signatories gather tomorrow, not a one is going to be a developed country. Australia which the PRC courted is playing dumb, for instance:
U.S. officials have attempted to sway countries not to join, publicly raising concerns about China’s ability to ensure international standards of governance at the institution. No developed countries will be present on Friday, according to an Indian government official. India will sign the agreement—a step toward the later formal establishment of the bank—along with roughly 20 other countries from across Asia, the official said.

Beijing was betting on the participation of Australia, a major trade partner which relies on Chinese demand for its natural resources and is currently negotiating a trade pact with China. An Australian government official said the country hadn’t decided whether to join and was unaware of the agreement to be signed Friday.
The Americans and their lackeys naturally express doubts and pooh-pooh the effort in demanding US-style conditionalities and whatnot:
U.S. Treasury Secretary Jacob Lew , at a conference earlier this month in Washington, raised concerns about whether the bank would adhere to international lending norms such as those followed by the World Bank. “The critical question is, ‘Do they follow the same kinds of practices that are working to help economies grow and to maintain strong and stable foundations?’” Mr. Lew said.

A Japanese finance ministry official said the country wouldn’t join because it sees no need for an alternative to the Asian Development Bank, which is dominated by Tokyo. Japan also has concerns about governance and transparency issues at the new bank, the official said. South Korea hasn’t decided whether to join and is still “looking at the governance and decision-making process” as well as the “economic benefit,” a government official said. 
That said, Southeast Asian nations with the exception of Indonesia have signed up to the program These include Philippines and Vietnam which have heated territorial disputes with China. Apparently, the lure of increased infrastructure funding with fewer strings attached was too hard to resist for these countries with large and growing infrastructure needs:
India will be the only large economy to sign up to the Chinese initiative at the ceremony in the Great Hall of the People in Beijing on Friday morning, according to people familiar with the matter. It will be joined by Mongolia, Uzbekistan, Kazakhstan, Sri Lanka, Pakistan, Nepal, Bangladesh, Oman, Kuwait, Qatar and all of the Association of Southeast Asian Nations except Indonesia. Indonesia excused itself from being involved at this stage, saying the newly installed government had not yet had time to consider Beijing's proposal. 
Money talks, I guess, and more than a few are willing to give China a chance if it really is opening up its wallet. Speaking of "governance," the irony is that the Chinese are establishing their own development lender with a catchy refrain on infrastructure development precisely because the West and countries friendly to it (read: Japan) have refused to accommodate changes in the world economy since the turn of the millennium. As for China, the interesting thing to watch is whether there will be real participation allowed among the other countries signing up to this venture as opposed to being National People's Congress-style rubber stampers. Alternatively, they may be treated like Hong Kong administrators--serfs in all but name.

UPDATE 1: David Dollar (no relation to Eddie Money), formerly of the World Bank, lauds the creation of the AIIB in a New York Times op-ed. He too harps on the value of competition:
But as the new bank will also try to be leaner and faster than the existing banks, it will provide some healthy competition. And hopefully the success of the bank will encourage more rapid reform of the old institutions [i.e., the World Bank and ADB]. That would be the best global outcome of all. If we want China to buy fully into the existing institutions, then we have to give it the seat at the table that it deserves. 
UPDATE 2: More on today's event in Beijing--who was there who was not:
But other than China, among Asia's 10 largest economies only India and Singapore signed the AIIB memorandum, with three of the top five--Japan, South Korea and Indonesia--notably absent. The Japanese head of the Asian Development Bank, another regional lender, said Thursday that questions remained over the AIIB's structure and it needed to adhere to international standards. "Our position about AIIB is first that it is understandable because there is a very big financing need in the region," ADB President Takehiko Nakao told reporters. But he said he was still awaiting details about the bank such as membership, shareholdings, the location of its headquarters and who will head it.

Territorial Disputes & PRC Travel Warnings on Philippines

♠ Posted by Emmanuel in ,,, at 10/23/2014 01:30:00 AM
Good luck finding these sorts of wedding photo ops back in the PRC.
An area of study in international relations that nobody has looked at is this one: countries locked in disputes engaging in travel warnings against each other. Since most countries today are WTO members, using discriminatory measures against others' products and services is more difficult to do than in the per-WTO period. So, how are you going to get back at the offending party? Try travel advisories warning that the country in question is some kind of godforsaken hellhole where terrorism is rampant and the rule of law is an illusionary concept.

As it so happens, China has been a particularly avid user of travel warnings against all and sundry transgressors of the will of the Chinese people (or at least the Communist Party). Locked in territorial dispute with the Philippines over its, ah, expansive claims to huge swathes of the South China Sea, the PRC is hitting the Philippines where it hurts. You see, the Philippines is targeting 10 million visitors by 2016 and is using its "It's More Fun in the Philippines" campaign to ramp up foreign interest in it as a tourist destination. Anyway, back to the killjoys...
In its advisory, the Chinese Ministry of Foreign Affairs cited a "worsened security situation in the Philippines" that may see Chinese nationals targeted. It followed an alleged bomb plot against the Chinese embassy, the kidnapping of an 18-year-old man in the southern Philippines and general concern about criminal gangs.

The Philippine military has since dismissed the alleged bomb plot, noting that the man arrested was a fringe politician whose bombs were merely firecrackers, and the Chinese embassy has yet to determine if the kidnapped man was indeed a Chinese national.

Aileen Baviera, a professor who specialises in Philippine-China relations at the Asia Center of the University of the Philippines Diliman, said it seemed hard to justify the advisory. "There are so many Chinese in the Philippines, they're all over the country. So these are really isolated incidents," she said.
As you would guess, the reasons cited are, well, specious. The real reason, most commentators would agree, is to get back at the Philippines with minimal international repercussions over this tinpot banana republic taking it to court over territorial disputes. So, trade-related measures are out, but travel warnings are certainly fair play:
But the advisory was issued amid high tensions between Beijing and Manila over territorial disputes in the South China Sea and is widely seen in the Philippines as going beyond Beijing's security concerns for its tourists. "Hyping up the danger to their own nationals in the Philippines is one way that they [Beijing] put subtle pressure on the government," Ms Baviera said.
There's no doubt about it: the Chinese are playing hardball given the suspect timing:
China issued a similar travel advisory in 2012, at the height of a stand-off at the Scarborough Shoal - a reef claimed by both Beijing and Manila. That time, it cited a protest planned outside the Chinese embassy in Manila. Of the 1,000 protesters expected by the Chinese embassy, only about 200 showed up, and anti-Chinese violence did not materialise.

The new fall in tourists has already had an economic impact. China is the fourth largest source of foreign tourists in the Philippines, after South Korea, the United States and Japan. Chinese tourists spent 6.46bn pesos (£89.5m; $144.7m) in the country between January and August 2014, according to a report by the Philippine Department of Tourism.
Welcome to geopolitics, Asian style. 

PR Stunt or Third World Solidarity? Cuba & Ebola

♠ Posted by Emmanuel in ,, at 10/22/2014 01:30:00 AM
Next stop for Cuban doctors: the Hot Zone.
 Despite Cuba's (largely US-imposed) isolation from the rest of the world for the sin of being Communist...at least in the Americas when the US has long since cottoned up to the likes of China, Vietnam, and other so-called Reds, its medical system has remained one of the world's best against all odds. The World Health Organization (WHO) lauds it as being a model for the world, while even citizens of its oppressor nation say it is "unreal" in care being free yet of high quality. So much so that it has exported doctors in exchange for petroleum.

I am of two minds about Cuba. While I do believe that the US has unfairly singled it out for sanctions in an age where it no longer views being socialist as grounds for isolation, Cuba's leadership has a lot to answer for in keeping the country in a time freeze (medical care aside). That said, it does what it can to take up an international role--especially among developing countries. The brothers Castro chaired the Non-Aligned Movement from 1978 to 1979 and again from 2006 to 2009.

Naturally, a way Cuba has built its international influence is by sending medical missions abroad. Heck, there's even an entire Wikipedia post on "Cuban medical internationalism" detailing instances of such aid being sent when crises occur abroad. Always being in touch with the times in this regard, we now have the superannuated Fidel Castro vowing to dispatch Cuban medical professionals to the Hot Zone itself during the current Ebola outbreak. With characteristic Latin brio, he writes that "the hour of duty has arrived" as the UN has called on Cuba to make a contribution to the Ebola containment effort:
The medical professionals who travel to any location whatsoever to save lives, even at the risk of losing their own, provide the greatest example of solidarity a human being can offer, above all when no material interest whatsoever exists as a motivation. Their closest family members also contribute to such missions what they most love and admire. A country tested by many years of heroic struggle can understand well what is expressed here.

Everyone understands that by completing this task with maximum planning and efficiency, our people and sister peoples of the Caribbean and Latin America will be protected, preventing expansion of the epidemic, which has unfortunately already been introduced, and could spread, in the United States, which maintains many personal ties and interactions with the rest of the world. We will happily cooperate with U.S. personnel in this task, not in search of peace between these two states which have been adversaries for so many years, but rather, in any event, for World Peace, an objective which can and should be attempted.
In an op-ed, the New York Times notes it is partly self-aggrandizement and grandstanding driving the Cuban effort, but at the end of the day, there is no denying that Cuban medical professionals are knowingly placing themselves in grave danger, and that the US should at least acknowledge the risks they are taking by offering support:
It is a shame that Washington, the chief donor in the fight against Ebola, is diplomatically estranged from Havana, the boldest contributor. In this case the schism has life-or-death consequences, because American and Cuban officials are not equipped to coordinate global efforts at a high level. This should serve as an urgent reminder to the Obama administration that the benefits of moving swiftly to restore diplomatic relations with Cuba far outweigh the drawbacks.

The Cuban health care workers will be among the most exposed foreigners, and some could very well contract the virus. The World Health Organization is directing the team of Cuban doctors, but it remains unclear how it would treat and evacuate Cubans who become sick. Transporting quarantined patients requires sophisticated teams and specially configured aircraft. Most insurance companies that provide medical evacuation services have said they will not be flying Ebola patients.

Secretary of State John Kerry on Friday praised “the courage of any health care worker who is undertaking this challenge,” and made a brief acknowledgment of Cuba’s response. As a matter of good sense and compassion, the American military, which now has about 550 troops in West Africa, should commit to giving any sick Cuban access to the treatment center the Pentagon built in Monrovia and to assisting with evacuation.

The work of these Cuban medics benefits the entire global effort and should be recognized for that. But Obama administration officials have callously declined to say what, if any, support they would give them.
As ever, I am in favor of immediate US removal of antiquated sanctions against Cuba dating from the Cold War. While they are partly to blame for their isolation, a certain neighbor has deepened and prolonged it beyond reason.

To paraphrase Fidel via Moses, let my people go.

Re-Trying Carlos the Jackal, Celebrity Terrorist

♠ Posted by Emmanuel in , at 10/21/2014 01:30:00 AM
bin Laden is dead and gone, but Carlos rambles on.
Whereas Osama bin Laden struck me as a po-faced fanatic, Venezuelan Carlos the Jackal always had an ironic streak to him. At the height of his infamy, his pseudo-socialist leanings gave lie to his high living nature as a self-styled "professional revolutionary." The contradictions inherent in Carlos the Jackal are what make him interesting in a manner that eluded bin Laden. The latter was simply a blowhard, whereas the former always had a nudge and a wink ready. As he jetted from one America-hating safe haven to another the world over in between (attempted) acts of terrorism against the West, his actual threat was well-exceeded by his inflated self-image. This was a guy caught, after all, after France effectively bought off the Sudanese. For all that, I hardly think anyone is going to make a five-and-a-half-hour biopic of Osama bin Laden. (And, unlike the movie actor, the real Carlos was always on the chubby side.)

Recently, Carlos the Jackal resurfaced again as his French captors made him stand trial for another terrorist incident in France from long ago. He isn't so young anymore, but he displayed some of the panache that made him the world's most famous terrorist--which he ironically is once more after the killing of bin Laden--wearing a Russian ushanka hat with the flaps tied up while appearing in court late last year. (He didn't get expelled from the Soviet-era Patrice Lumumba Friendship University for nothing.) Now, he's back:
An investigating judge specialising in anti-terror cases had ordered the latest prosecution, French newspaper Le Figaro reported on Tuesday. Ramirez, 64, had admitted carrying out the 15 September 1974 attack on the Drugstore Saint-Germain in an Algerian newspaper five years later, French media said. He has already been given a life sentence for killing 11 people and wounding another 150 in four attacks dating back to the early 1980s:
  • In March 1982, a bomb exploded on a train between Paris and Toulouse, killing five people and wounding 28
  • A month later a car bomb attack was mounted on an anti-Syrian newspaper in Paris, with one passer-by killed and 60 injured
  • On New Year's Eve 1983, a bomb on a TGV fast train between Marseille and Paris killed three people and wounded 13
  • A bomb at a Marseille train station killed two
Ramirez has also been linked to several other attacks outside France.
bin Laden's successors at the Islamic State in Iraq and the Levant (ISIL) are even more pointlessly bloodthirsty than he ever was. Carlos the Jackal was from a different age when targets were more Western ones and socialist fervor was more the cause. That is, the "international workingman" was a broad church where people of different ethnicities could work against bourgeois oppressors. With the fundamentalists, it's simplified into a "you're either with or against us," Muslims against infidels struggle.  

Watch Out, Evita: Imelda Marcos, the Musical

♠ Posted by Emmanuel in ,, at 10/20/2014 01:30:00 AM
Sometimes 2000 shoes just ain't enough.
David Byrne should be familiar to 80s music fans as the Talking Heads frontman of "Burning Down the House" fame. Together with Fatboy Slim, they have turned their 2010 double concept album Here Lies Love loosely based on the life story of Imelda Marcos into a London musical. (I've listened to the album and it's far from an audio biography of the Imeldific one's life story.) Never far away from the headlines, Mrs. Marcos recently returned to the limelight when the Philippine government seized artworks allegedly by Picasso, Gaugin and others. (She recently denied they were purchased using money looted from government coffers.)

Fortunately, the musical makes itself clear on being about Imelda Marcos by adding a number of biographical details which plot her rise from obscurity to global icon and the downfall which came. To be sure, some details do not quite ring true as you'd expect from two rich white guys envisioning what happens in a poor country, but they're close enough. I've been following the development of this musical for some time, including the casting call in Manila for additional actors. Even musicals, however, are subject to innovation: Melding Mrs. Marcos' love for disco dancing and Filipinos' penchant for Catholic religiosity was bound to have interesting consequences, and the musical seems to deliver on this front. Imagine, then, Philippine history as dancefloor extravaganza:
It takes Imelda and Ferdinand Marcos – for a while, the Asian Kennedys, then more akin to the Ceaucescus in their tyrannic corruption – from Imelda's 1950s rise from the humiliatingly poor side of a family of consequence through to the moment in 1986 when – after 14 years of Martial Law and a short entirely peaceful People Power Revolution – the couple were airlifted out of the country by US marines.  The rescue is realised here in a juddering frenzy of white light: Close Encounters crossed with a berserk parody of Pentecost. Imelda's epic partiality to shoes was only discovered subsequently (1060 is the attested number found) and it's typical of the strange, admirable rigour of the piece that its makers have forborne to make capital of the phenomenon.  
As for the political economy of it all, how does Here Lies Love compare to the benchmark for these things, Andrew Lloyd Webber's Evita? At this point there is no real standout number like "Don't Cry for Me Argentina," but the newer production may benefit from being more attuned to historical circumstance and observation of power dynamics in the rise and fall of Imelda. (Perhaps "Rose of Tacloban" gains resonance after the devastation wrought on Imelda's hometown during Typhoon Haiyan.)
The inescapable comparison is with Evita.  Here Lies Love is, to my mind, politically cannier and sharper about the queasy, telling  overlap between manipulative-diva worship on the musical and on the political stage.

And it moves to its devastating conclusion through the artfully deployed metaphor of disco – one of Imelda's passions in her spendthrift sojourns in the Big Apple.  Overhung by a vast glitterball (she had one in her New York townhouse), the Dorfman [Theatre] has been transformed into a churning, thumping miniature Studio 54.

The packed punters on the ground level are chivvied and manouevred by a live DJ and his helpers around adaptable acting areas: among them, a squatly cruciform central platform, handy for preening photo-ops
I've attended a fair number of musicals. In none of them have they asked you to, well, get up and dance. As a production in a capitalist economy, audiences are in constant need of novelty. Why not be part of a live disco act about Imelda Marcos replete with DJs in full Studio 54-style pomp? It's an intriguing concept that may herald more musicals eliciting more active audience participation.

Interesting stuff. When Mrs Marcos' days on earth come to and end, her tombstone will read, "Here Lies Love."

Manchester United: From AIG to Chevrolet Killer Cars

♠ Posted by Emmanuel in , at 10/18/2014 01:30:00 AM
Chevrolet is "Like a Rock"? Man U makes itself into a global punch line (again).
 When I contemplate the largest follies of sports sponsorship, one name immediately comes to mind, "Manchester United." It takes the cake by some margin even if the competition has become more intense. I have written at some length about the dastardly activities of the Ameriscum Glazer clan which saddled this once-solvent sports team with boatloads of debt after they bought it via leveraged buy out (LBO). They say that misery loves company, and one of the "benefits" the Glazers have brought to Manchester United are American shirt sponsors of the equally dodgy sort.

In a world infested by hellishly daft shirt sponsors, Manchester United took the cake by having fellow American--let me repeat that for emphasis--American Insurance Group (AIG) as shirt sponsor when it imploded spectacularly because of its nefarious activities involving the sale of credit default swaps (CDS) as the US subprime crisis went into full swing. As defaults on subprime real estate-linked assets AIG's London subsidiary sold protection on collapsed, it took down the US mothership. So, the football team was made into a laughingstock as they could not remove AIG from its kit since the deal to sponsor AIG was still in place despite the firm collapsing.

He was smart enough to leave Man U to save the embarrassment of wearing this shirt.
Fast-forward a couple of years later and Manchester United's owners decided to take on another Yanqui laughingstock. In the years between they took AON, a respectable political risk insurer. Not having learned their lesson from the AIG, however, they subsequently took on the General Motors brand Chevrolet. When it comes to corporate social responsibility (CSR), what's worse? AIG underwent the largest government bailout in US government history, wasting colossal amounts of taxpayer money. Meanwhile, the newswires are now plastered with stories about various lawsuits against GM amounting to billions for customer injuries and fatalities. So, Manchester United's penchant for bad press has indeed moved on--from corporate collapse over dodgy dealings to, well, killing the customer:
At least 27 people have died and 25 people have been seriously injured in crashes involving General Motors cars with defective ignition switches. Attorney Kenneth Feinberg, who was hired by GM to compensate victims, updated the totals Monday. Feinberg says he has received 178 death claims since August. Of those, 27 have been deemed eligible for compensation payments. 
Twenty-five of the 1,193 injury claimants have also received compensation offers.
GM knew about faulty ignition switches in Chevrolet Cobalts and other small cars for more than a decade but didn't recall them until February of this year. The switches can slip out of the "on" position, which causes the cars to stall, knocks out power steering and turns off the air bags. Feinberg will accept claims until Dec. 31.
Tragic as it may be, you can't make this stuff up. If you need some ugly Americans, I've got some of the ugliest for you right here as they all flock to a British football team for some strange reason. 

Race Over: Why Venezuela Should Default

♠ Posted by Emmanuel in ,,, at 10/17/2014 01:30:00 AM
Supposedly paying Lotus $40m/year for a non-competitive drive is only the start of Venezuela's folly.
Amidst the wider economic turbulence worldwide, among the very first to get hit are energy exporters with very high production costs for obvious reasons. Dependence on energy revenues amidst an oil rout ensures that state coffers are being depleted--especially when your breakeven price is high. The poster child for national mismanagement--dwindling production, inefficient technology, and politicization of oil funds is, of course, Venezuela's state-owned oil companny PDVSA which features all these things and worse. For a supposedly socialist nation, the ultimate bourgeois folly is sponsoring F1 driver Pastor Maldonaldo at the enfeebled Lotus which currently lies 8th of 11 in the constructors standings. In the pit paddock, ol' Pastor has a reputation for being a nutter, and the leader who bankrolls him is no different.

Economists Carmen Reinhart and Ken Rogoff wading into the fray has sparked another round of debate on Venezuela's fate. Their colleague, Venezuela-born Harvard economist Ricardo Hausmann--he of "deficits don't matter since dark matter makes US deficit disappear" infamy--actually seems to offer a less fantastical analysis of his home country. Apparently, deficits seem to matter in Venezuela, or he was at least chastened by the global financial crisis that came after his "dark matter" flight of fancy. Don't ask me to explain; it's a Venezuelan thang. Anyway, here are Hausmann's colleagues coming to his defense:
It is unclear whether Maduro, who called for Venezuela’s authorities to take unspecified “action” against Hausmann and Santos (both Venezuelan citizens), was more offended by the suggestion that his government should default on external debt, or by the authors’ list of all the other ways it has already defaulted. These include the government’s $3.5 billion unpaid bill for pharmaceutical imports, payment arrears of more than $2 billion for food, and nearly $4 billion owed to airline companies. Oil production has more than halved since 1997, in no small part because the state-owned oil company has repeatedly defaulted on suppliers and joint-venture partners.
Predicting a Venezuelan default in the near future and actually encouraging this course of action has not endeared Hausmann to the bus driver taking Venezuela down the highway to hell, Nicolas Maduro:
The suggestion that the country stop servicing its bonds comes a month after Harvard colleagues Ricardo Hausmann and Miguel Angel Santos wrote that Venezuela should consider defaulting given that it was piling up arrears to importers. Venezuela owes about $21 billion to domestic companies and airlines, according to Caracas-based consultancy Ecoanalitica...

“People are beginning to see that a sensible strategy for the government is to default,” Joaquin Almeyra, a Miami-based bond trader at Bulltick Capital Markets, said in an e-mailed response to questions. “And oil below $90 complicates things.”  
If you like financial adventure, buy some Venezuelan sovereign debt:
Venezuelan debt is the riskiest in the world, yielding 16.07 percentage points more than Treasuries, according to data compiled by JPMorgan Chase & Co. The cost to insure the country’s bonds against default with credit-default swaps is also the highest for any government globally. “Given that the government is defaulting in numerous ways on its domestic residents already, the historical cross-country probability of an external default is close to” 100 percent, Reinhart and Rogoff wrote in their article. 
What is Maduro's retort to Hausmann? His predictably feeble-minded response is to dub the Harvard economist a financial "hit man" after a really bad conspiracy theory book. But alas, the day of reckoning is nigh since crammed into the end of 2015 is a logjam of payment dates that should deliver Venezuela to the gates of insolvency:
President Nicolas Maduro dubbed Hausmann a “financial hit man” and “outlaw” and instructed the attorney general and public prosecutor to take “actions” against the Venezuelan-born professor for seeking to destabilize the country...
 
There is little risk of an immediate default in Venezuela, Sebastian Briozzo, director of sovereign ratings at Standard and Poor’s, said today in an interview at Bloomberg headquarters in New York. Last month, the ratings company lowered Venezuela’s credit rating to CCC+, which implies at least a 50 percent chance of default over the next two years.

“Once we get closer to the end of next year, the situation could become more difficult,” Briozzo said. The government is prioritizing debt payments because it needs foreign investment to expand oil production, he said. 
I do not quite understand the logic of the leftist nutter Maduro. Why is he out to attract foreign investment from foreigners in hopes of boosting production? Can't the great socialist people of Venezuela be inspired by the great Simon Bolivar to sort the matter out for themselves instead of relying on the capitalist imperialists? Moreover, if he really wanted to stick it to these dumb foreigners who think they know better, he should screw them over ASAP by paying them nothing, nada, zip, zilch, Argentina style.

Viva la revolucion! Viva Nicolas Maduro! Viva Pastor Maldonaldo too while we're at it! If nothing else, a guy who recklessly drives into other cars week in and week out is nothing if not an excellent representative for Venezuela's crash wreck of an economy.

Russia Sues EU Over Sanctions on Gazprom Funding

♠ Posted by Emmanuel in , at 10/17/2014 01:00:00 AM
Hot on the heels of Russia intervening in the currency markets to no real effect, we receive word that it is using legal maneuvers to resume being able to obtain financing from Western capital markets which have been closed to the country ever since a new round of sanctions were implemented by the European Council (the "upper house" of European Parliament composed of EU heads of state) in the wake of the downing of the Malaysian Airlines jetliner. The troubles in Ukraine continue to roil, especially if the Russian state-owned enterprises are unable to roll over their debts coming due at the end of next year:
The EU bans, with similar measures adopted by the US, have all but frozen Russian companies and banks out of western capital markets, at a time when they have to refinance more than $130bn of foreign debt due for redemption by the end of 2015. Rosneft filed a case against the EU’s European Council in the general court under the European Court of Justice on October 9, requesting an annulment of the council’s July 31 decision that largely barred it and other Russian energy companies and state banks from raising funds on European capital markets.
Russia is counting on the precedent of ECJ rulings that have rolled back sanctions against the likes of Iran and Syria. That said, those countries hardly have become welcome participants in European capital markets--not by a long shot. In this vein I'd say it's more like a speculative ploy to obtain some breathing room as Russian finances get shot:
The challenges follow verdicts that have gone against the council in relation to similar measures imposed on Iran and Syria. In particular, the court has ruled that in implementing sanctions, European states have been too reliant on confidential sources, which impair the targets’ ability to mount an effective defence.
Rosneft seeks to "liberate" a grab bag of crony capitalists, mostly state-owned banks that provide it with working capital:
Rosneft’s request was filed on behalf of the company itself and other unidentified parties.
The capital markets sanctions that the company wants overturned also affect Russia’s biggest state lenders Sberbank, VTB, VEB, Gazprombank and Rosselkhozbank, as well as Gazpromneft, the oil arm of the state gas monopoly, and Transneft, the state-owned pipeline monopoly. Rosneft, Rosselkhozbank and Sberbank declined to comment. VTB said it had not made a final decision with regard to legal action over the sanctions. “We are carefully studying this issue and taking legal advice,” the bank said.
As the song goes, Russia has now sent the lawyers in after dabbling with guns (military adventurism in Ukraine) and money (feebly trying to staunch ruble devaluation). I guess these self-styled tough guys who can "stick it to the West" are not as badass as they portray themselves to be, having withdrawn massed forces on Ukraine's border and now resorting to legal chicanery in the interest of economic survival.

As I said earlier, it turns out that the West has Russia by the balls and not the other way around as energy prices drop precipitously. $400+ billion in reserves can go quite quickly when your burn rate is as phenomenal as Russia's at the moment. 

Meet America's #2 Real-Estate Buyer, Norway

♠ Posted by Emmanuel in , at 10/16/2014 01:30:00 AM
Where Monopoly money comes from.
As far as Europeans go, Norway has a maverick, independent streak. It is not a member of the European Union, let alone a user of the euro. Unlike most of its neighbors, it has a petroleum-based economy. The latter has given rise to a fairly sizable sovereign wealth fund (SWF) officially known as the "Government Pension Fund Global" as oil proceeds have been saved over the years. Depending on the source quoted, its holdings range from $820 billion to a cool $890 billion--supposedly worth $178,000 for each Norwegian. [Can I retire as a Norwegian?] As you would expect from these smart, non-subprime-loving folks, it is a well-run SWF to boot.

Critics, however, point to its preference for investing mostly in the developed world where returns are rather lower. You can see this from the nifty interactive map on the SWF's site. However, this criticism has not dissuaded it from buying more blue-chip properties all over the world in accomplishing their version of "diversification." Take, for example, the United States:
Norway has vaulted to the top ranks of foreign U.S. commercial real estate buyers as its $870 billion sovereign-wealth fund, the world’s largest, acquires buildings from New York to San Francisco. The country has spent more than $3.2 billion on U.S. real estate this year, including the assumption of debt, according to research firm Real Capital Analytics Inc. and statements from the wealth fund. That makes it the biggest international buyer after Canada. The total is more than double the amount spent in all of 2013, when Norway ranked No. 6 for property purchases.

Norway, which has a smaller population than New York City, is spending billions of dollars on properties globally as its wealth fund seeks to meet a target to invest as much as 5 percent of its assets in real estate. In the U.S., prices for top-quality buildings in major markets are being driven up by foreign funds that often are willing to accept lower yields than domestic buyers in return for a safe place to put their money, according to research firm Green Street Advisors Inc.

“There’s an element of perceived safety in a hard asset in the United States, in New York City, that is harder to replicate in other alternatives,” said Michael Knott, a managing director at Newport Beach, California-based Green Street. Investors such as the Norwegian fund “have the ability to hold indefinitely and probably not be troubled at all by a low going-in yield.”
In a sign of the times, Norway is even buying prime London properties from Singapore's SWF:
Norway’s sovereign wealth fund, the world’s largest, agreed to buy the Bank of America (BAC:US) Merrill Lynch Financial Centre in London for 582.5 million pounds ($944 million) as it expands its bet on the U.K. capital.
The fund acquired the 585,000 square-foot (54,000 square-meter) office complex at King Edward St. from GIC Pte, Singapore’s wealth fund, Oslo-based Norges Bank Investment Management said today in a statement. GIC bought the property from Merrill Lynch & Co. Inc. in 2007 for 480 million pounds.
Norway’s $860 billion wealth fund formed a new real estate group in July to speed up its property investments and is seeking to invest almost $10 billion annually over the next three years. The fund owns properties on Times Square in New York and the Avenue des Champs-Elysees in Paris, as well as in Boston, San Francisco and Zurich. 
Gemany, too, has seen Norwegian investment as of late:
Norway's $840-billion sovereign wealth fund purchased a 94.9 percent stake in several firms that own two office buildings in Munich's Lenbach Gärten quarter, the fund said on Tuesday. The fund purchased the stakes from AM Alpha GmbH for a total consideration of 176.1 million euro, including 75 million euro of third-party debt, it said in a statement.The buildings have 29,000 square meters of total leasable area and are primarily leased to McKinsey & Company Inc. and Condé Nast Verlag GmbH.  

I've been to Norway twice and had a Norwegian boss to boot.  They are easygoing but highly focused folks, so I'm sure their real-estate investments have been thought through. In this day and age, investors for the long haul are to be welcomed like the Norwegians.