Whew! EU-Canada FTA [CETA] is a Go

♠ Posted by Emmanuel in , at 10/30/2016 12:45:00 PM
In this year of Brexit 'n' Trumpism, the globophobes have been defeated. Wonders never cease.
Perhaps the Europeans are not dead in the FTA negotiation sweepstakes after all: After the Walloons in Belgium held up the Comprehensive and Economic Trade Agreement [CETA], this EU-Canada FTA is set to go ahead after all after the Walloons were assuaged. It is only a matter of hours before the Canadian PM Justin Trudeau arrives in Brussels to finalize the deal:
After several rounds of talks late into the night Belgium formally gave its endorsement on Saturday morning. Smaller than the U.S. state of New Jersey, Wallonia region blocked the deal between more than 500 million EU citizens and 35 million Canadians for several weeks. Politicians there argued the deal would undermine labor, environment and consumer standards and allow multinationals to crush local companies.

Read more here: http://www.charlotteobserver.com/news/business/national-business/article111456727.html#storylink=cpy
There was a lot of uncertainty until the end, with tiny Wallonia hijacking the wishes of nearly half a billion Europeans and the Canadians:
The European Union and Canada were set to sign a landmark trade pact on Sunday, ending days of drama after a small Belgian region refused to endorse the agreement and deeply embarrassed the EU. The long-delayed Comprehensive and Economic Trade Agreement was bedeviled by yet another hold up early in the day when Canadian Prime Minister Justin Trudeau's plane had to return to Ottawa because of mechanical issues.

The two-hour EU-Canada summit was rescheduled to start in Brussels at 1100 GMT (7:00 EDT.) Trudeau will sign the pact with European Council President Donald Tusk, EU Commission President Jean-Claude Juncker, and Slovak Prime Minister Robert Fico, whose country holds the EU's rotating presidency. "This is an important day for the EU and Canada too, because we setting international standards which will have to be followed by others with whom we are in negotiations as far as free trade is concerned," European Commission President Jean-Claude Juncker said.
Maybe the US-EU FTA, the Transatlantic Trade and Investment Partnership, is not dead in the water yet?
Read More

Mrs Clinton's New E-Mail Investigation Hits Mexican Peso

♠ Posted by Emmanuel in , at 10/28/2016 09:35:00 PM
There's an interesting article on MarketWatch on how the FBI issuing a recent statement that it would look further into Hillary Clinton's e-mails--here we go again--has affected various markets. Earlier in the day, it looked like US stock markets would end a three-day losing streak, but the uncertainty reintroduced into the American presidential elections put paid to that as understandable fears of a Trump presidency returned.

More interestingly from an international perspective, the Mexican peso hit the skids once more as "Build a Wall" Trump and his NAFTA-canceling xenophobia were given a lifeline:

Just when you thought it was all over...
Read More

Duterte and the "People's Republic of the Philippines"

♠ Posted by Emmanuel in , at 10/23/2016 03:55:00 PM
Duterte claims the Philippines is now in the PRC's ideological flow. Take it with a whole heaping of salt.
Friends abroad have asked me how to make sense of the bombastic and oafish Philippine President Rodrigo Duterte. My answer is always the same: Watch what the Philippine government does and not what he says since the latter is a completely unreliable guide to national policy. A case in point is his most ridiculous statements yet during a state visit to China. Apparently overwhelmed by the welcome granted to him that tinpot dictators the world over have also been given, Duterte began rambling incoherently as is his habit:
In a state visit aimed at cozying up to Beijing as he pushes away from Washington, the Philippine President announced his military and economic "separation" from the United States.
"America has lost now. I've realigned myself in your ideological flow," he told business leaders in Beijing on Thursday. "And maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia. It's the only way."
If only that were so. The aftermath of Duterte's quite frankly idiotic statements is that two things nearly always happen. First, he backtracks on them--Trump-style it must be noted--as to lose most of the original force:
Philippine President Rodrigo Duterte said he’s not cutting the nation’s cord with the U.S. and that maintaining ties would be in his country’s best interest, stepping back from his “goodbye” America comments made during a four-day state visit to China.

“It’s not severance of ties,” Duterte said in a televised briefing in Davao city around midnight Friday, after returning from Beijing. “It’s in the best interests of my country that I don’t do that,” he said. On Thursday, he told Filipino and Chinese businessmen and officials in a China forum that “in this venue, I announce my separation from the U.S.”

Back in the Philippines, Duterte said the comments refer to a foreign policy that doesn’t “dovetail” with America. “What I’m really saying was separation of foreign policy, which in the past and until I became president, we always followed” the cue from the U.S., he said.
Second, his cabinet members and other surrogates downplay the gravity of what he's said:
Duterte’s cabinet members, who have often sought to tone down his statements, followed a similar routine this time. Hours after the president’s “separation” remarks, Finance Secretary Carlos Dominguez and Economic Planning Secretary Ernesto Pernia said the Philippines will maintain relations with the West. Duterte is “rebalancing” foreign policy and broadening the country’s alliance and not separating from the U.S., they said in a joint statement.
Bottom line: Duterte's "word" is as good as nothing. Discount it fully. Pay attention to what the Philippine government does rather than what Duterte says is your best guide to what's happening in the "People's Republic of the Philippines."
Read More

Venezuelan Oiler PDVSA: Debt Swap or Bankrupt

♠ Posted by Emmanuel in ,, at 10/19/2016 04:25:00 PM
"Delay when we need to pay you back...or we'll default on Oct. 28!" Investor relations, Venezuela-style.
When oil prices were at $100 or higher, Venezuela was flying high, using oil revenues to fund "socialist" PR stunts such as selling subsidized heating oil for poor Americans. As the price of oil tanked, however, the Venezuelan government has been less able to mount such extravagant displays of "generosity." After years and years of low oil prices, we instead have a situation in which state-owned oil company PDVSA is now threatening its creditors with default by next week if they do not accept the swap of bonds due in 2017 with new ones instead due in 2020:
Venezuela's government-run oil giant -- the country's largest source of cash -- is warning that it could default on its bonds as early as next week. Petroleos de Venezuela S.A., or PDVSA, failed to get investors to agree on a deal to push back debt payments by three years. The company said it is extending its deadline for a third time so investors can accept a deal by Friday night. This time, it warned that things could get messy. "If the exchange offers are not successful, it could be difficult for the company to make scheduled payments on its existing debt," PDVSA said in a statement Monday night.

PDVSA owes $1.6 billion in principal and interest on October 28 and another payment of $2.9 billion is due on November 2 for a separate bond. It's unclear if PDVSA may actually default or if it's trying to strong arm investors to take the deal. "I don't think they've prepared themselves for a default, I think it's mostly just a threat. The concern is that they're starting to talk about it," says Siobhan Morden, head of Latin America fixed income strategy at Nomura Holdings.

In total, Venezuela is asking investors to "swap" $5.3 billion of bonds due in 2017 with bonds due in 2020, essentially allowing the government to push back payments. But PDVSA hasn't been able to lure enough investors to accept the offering. It's led Standard & Poor's to cut its rating on PDVSA in mid-September to two notches above default.
What does PDVSA matter to Venezuela? Pretty much everything in terms of generating foreign exchange:
PDVSA represents much more than just an oil company. It is Venezuela's lifeline. Oil shipments make up over 95% of the country's export revenue -- that's cash the government badly needs to pay for imports of food and medicine, which are in short supply. Things have been so badly mismanaged that Venezuela's oil production hit a 13-year low over the summer after oil services provider such as Schlumberger (SLB) dramatically reduced operations earlier this year due to unpaid bills.
PDVSA has been used as a government piggy bank, but it's almost run out of funds. Also consider that the PRC, which has given Venezuela an estimated $60B, is no longer willing to give more:
After pouring billions into Venezuela over the last decade, China is cutting off new loans to the Latin American nation. It's a major reversal of relations between the two nations, experts say. It also comes at the worst time for Venezuela, which is spiraling into an economic and humanitarian crisis.
"China is not especially interested in loaning more money to Venezuela," says Margaret Myers, a director at Inter-American Dialogue, a Washington research group that tracks loans between China and Latin America.
But barter trade--China was being repaid in oil--doesn't quite work when PVDSA is so poorly run that its output has fallen to multi-year lows that there's not much left to barter:
Since 2007, China's state banks loaned Venezuela $60 billion, according to the Inter-American Dialogue. That's more that it loaned to any other Latin American country. China is considered Venezuela's most important creditor. Of that, Venezuela still owes China approximately $20 billion, experts say, and there's no sign that it can pay back the amount amid its crisis.

Venezuela pays back the vast majority of its loans to China with oil shipments. Last year, Venezuela's state-run oil company, PDVSA, shipped about 579,000 barrels of oil per day to China, according to the company's financial audit.
Without Chinese aid--and assuming oil prices don't spike back above $100 anytime soon--you can see the endgame in sight for PDVSA.
Read More

From Busan to LA, Bankrupt Hanjin Hits World

♠ Posted by Emmanuel in at 10/18/2016 04:18:00 PM
"Busan, we have a problem."
The oversupply of shipping vessels in the wake of world trade slowing down in recent years has resulted in the bankruptcy of one of Korea's most venerable firms, Hanjin Shipping. For years it has brought Korean-made goods to the rest of the world, but that didn't stop it from declaring bankruptcy earlier this year as its financial position became untenable. Its ships have not been able to dock at the world's major ports--those large enough to accommodate these large ships--over legal complications. What's more, shipments meant for the Christmas season have been stranded at sea together with these vessels:
With South Korea's biggest shipping company filing for bankruptcy protection, the vessels, sailors and cargo of Hanjin Shipping are stuck in limbo, stranded at sea. Ports, fearing they will not get paid, refuse to let them dock or unload...

Not only are ships not allowed to unload, containers waiting to be picked up are also being held back by the ports as collateral over unpaid bills. And even if the ports did allow them in, Hanjin would probably not as the vessels could expect to be immediately repossessed by the firm's creditors.

Beyond the ships and containers, there is of course the cargo within those containers - in many cases part of a tight chain of supply and delivery. By September, the global shipping industry is already into what is its busiest time of the year ahead of the Christmas season.
Busan is better known worldwide as the home of a US Navy base. However, it too has been Hanjin's main port for the longest time. As goes Hanjin, so goes the port city of Busan, and things aren't going too well at the moment:
A group of companies in South Korea’s port city of Busan said about 11,000 jobs are at risk if the troubled container line Hanjin Shipping Co. isn’t rescued.

With no Hanjin ship berthing at its terminal in Busan, the world’s fifth-busiest port, the city’s shipping industry is headed for a crisis, Lee Seung Kyu, chairman of Busan Port Development Association said. About 1,000 tractor drivers are unemployed, and many contractors may be forced to shut down their businesses, said Choi Chul Hee, a port executive. Hanjin handles about 50 percent of the facility’s container volume, he said, dealing a blow to an industry that accounts for 30 percent of the city’s economy.

“The lost volume will find its way to China and Busan will lose its competitiveness,” said Choi. “The economy of Busan will be hit if Hanjin Shipping fails.” Some companies that provide services to Hanjin Shipping and their workers haven’t been paid a total 42 billion won ($39 million), while about 10 percent of the 10,000 workers at the port haven’t received their wages for about three to four months, according to Kim Young Deuk, president of Eastern Marine Service Co. and also the head of Busan Marine Industry Association. Hanjin Shipping declined to comment.
At the other end of the world, the port of LA is clogging up with empty Hanjin containers that will  not be making a return trip to Busan:
As Hanjin Shipping Co. vessels drop off containers after weeks stranded at sea following the company’s bankruptcy, ports are dealing with a new problem: what to do with the empty boxes they leave behind.

Since the South Korean ocean carrier filed for bankruptcy five weeks ago, roughly 15,000 Hanjin containers have trickled in through the Ports of Los Angeles and Long Beach, often weeks after they were due to arrive. Now emptied of their goods, many are cluttering warehouse yards and parking lots across Southern California. With Hanjin’s ships no longer making the trans-Pacific trip, the company’s containers aren’t needed to carry goods back and forth.
While the stranded containers themselves are a nuisance, logistics companies say the bigger issue is that many are still attached to the wheeled trailers that trucks used to get them off the docks. These pieces of equipment, known as chassis, are vital to port operations, and putting thousands out of commission can delay the container deliveries for all shipping companies—not just Hanjin—people in the industry say.
The interesting thing to ponder is Hanjin's fate alongside that of Korea, Inc.: Is the problem particular to this company only and not the larger Korean export machine? Certainly it's an important cog whose demise may raise shipping costs for producers. Given the potentially vast spillover effects, will the Korean government bail it out...or ask another company to help shore it up? Or, will an erstwhile competitor like Hyundai Merchant Marine be encouraged to purchase part of its operations? For the rest of Korea Inc., the show must go on.
Read More

Yo Blair! Can ex-PM Tony Save Britain from Brexit?

♠ Posted by Emmanuel in at 10/11/2016 03:35:00 PM
Him again? Blair, Labour, and preventing a "hard Brexit."
There was an interesting story which came out over the weekend concerning former British Labour Prime Minister Tony Blair returning to (presumably) Parliament due to his concern over the UK's imminent decline in its global standing from Brexit. In particular, Blair is wary of the danger of a so-called "hard Brexit" being favored by the current Conservative PM Teresa May--a nasty divorce from all EU institutions. Being out of office giving Blair little voice in the whole sordid business, there appears to be only one recourse...
Former Prime Minister Tony Blair could return to a frontline role in British politics to try to prevent Theresa May's Conservative Party from destroying the country with a so-called "hard Brexit", he said in an interview.

The only Labour prime minister to win three general elections, Blair was hugely popular during the start of his 10 years in power but his support for the U.S.-led invasion of Iraq severely tarnished his reputation.
 
In an interview with Esquire Magazine, Blair said it was a "tragedy" that Britons were left with a choice between a Conservative Party intent on a hard Brexit and a Labour Party that he described as "ultra-left" and stuck in the 1960s.

"I don't know if there's a role for me," he said. "There's a limit to what I want to say about my own position at this moment.
 
"All I can say is that this is where politics is at. Do I feel strongly about it? Yes, I do. Am I very motivated by that? Yes. Where do I go from here? What exactly do I do? That's an open question."
My personal misgivings about Blair concern his decision to go along with the Iraq invasion. On economic matters, I do not really have significant qualms about the "third way." On having a cosmopolitan vision of the world economy, I am actually on board with him. Yes, the current Labour leader Jeremy Corybn is a warmed-over 60s/70s-era socialist. The question is, can the "third way" currently chart a course between the Conservative Brexit crowd and his party's current infatuation with Communistic throwbacks like Corbyn?

First elected last year on a wave of enthusiasm for a new type of politics, [Current Labour Party leader Jeremy] Corbyn was forced to compete again for his job. Although he was returned as leader with a higher mandate than before, he still lacks the backing of the centrist members of his party.

Blair said Corbyn offered a "mixture of fantasy and error". As a result, he said Britain was a "one-party state".

"The reason why the position of these guys is not one that will appeal to an electorate is not because they're too left, or because they're too principled. It's because they're too wrong," he said.
Unfortunately, the honest truth may be that Blair circa 2016 is even more unsaleable than Corbyn due to supporting the aforementioned Iraq invasion. People remember. We'll see; he can certainly try. As an anti-Brexit voice, I am not waiting for Blair to "save" the UK from it. Rather, it will be a coalition of like-minded incumbents from whatever party who muster enough courage to prevent May's xenophobic version of it from coming true.
Read More

Worst Branding Deal Ever? "Trump Tower Manila"

♠ Posted by Emmanuel in at 10/08/2016 09:25:00 PM
Is getting your private parts groped part of the deal if you buy a unit at this Trump-branded Manila condo?
In psychology, there is a term "colonial mentality" referring to those living in former colonies adopting an inferiority complex towards their former colonizers. This phenomenon is particularly acute in the Philippines, where American-sourced things are typically regarded as superior to their local equivalents. If it has a whiff of the US, then it must be better by virtue of the association. Yippee, America #1!

Philippine developer Century Properties certainly exudes this thinking by pandering to American celebrities. While Paris Hilton is derided as an airhead heiress in her home country--the archetypal dumb blonde--she actually has a branding arrangement for a beach club in the Philippines with them. Amping the inferiority complex further, Century Properties negotiated branding for a "Trump Tower Manila" with The Donald in 2011 [!] The press blurb claims:
I've always loved the Philippines. I think it's just a special place and Manila is one of Asia's most spectacular cities. I know that this project will be second to none.
Now, this statement would of course be more believable as having come out of the [tic tac-loving] mouth of Trump were it not for his vile racist attacks on the Philippines. Apparently, even Filipino-Americans--all 3.4 million of them--he's suggested deporting due to their association with this terror-infested country:
More recently, he decided to stop using the word "Muslim" as he called for halting immigration from countries with high rates of terrorism, although he has yet to say which countries that would include.
At a rally in Portland, Maine, on Thursday afternoon, Trump provided a lengthy explanation of why he thinks the United States needs to be skeptical of immigrants from many countries, even if they follow the legal process. Reading from notes, Trump listed nearly a dozen examples of immigrants, refugees or students who came to the United States legally -- often applying for and receiving citizenship -- and then plotted to kill Americans, sometimes successfully doing so. The countries that he referenced in these examples: Somalia, Morocco, Uzbekistan (he asked the crowd where it was located), Syria, Afghanistan, the Philippines, Iraq, Pakistan and Yemen (which he pronounced "yay-men"). Trump's staff has yet to confirm if there are countries from which the nominee wants to limit immigration.
To be fair, The Donald is bashing foreign countries in this election cycle to play to fears of a white xenophobic audience Stateside. Way back in 2011, Trump's name was not yet so associated with racism, xenophobia, misogyny, business failure and what else have you. Still, he is a man of no scruples who will say what sells. It's just that sometimes, his messages are contradictory selling to different audiences.

Century Properties ends up with the mother of all bum deals. It's paying good money to Trump to use his name, when lately his name has been associated with so many unsavory things. That he alludes to deporting 3.4 million Filipino-Americans while deriding the Philippines as a terrorist haven makes buyers of "Trump Tower Manila" fit the typical profile of his customer base: chumps.

When the scum of America is regarded as a "luxury" brand in the Philippines, it's colonial mentality at its worst. Aside from that, enjoy your condo.

10/11 UPDATE: To be fair, there are other Trump branding deals with other nationalities he has greatly offended through his racist remarks. See, for instance, the Muslim-basher's licensing arrangements in the Middle East in a recent Newsweek article. 
Read More

The Never-Ending Quest to Replace GDP

♠ Posted by Emmanuel in at 10/03/2016 07:19:00 PM
Maybe the Bhutanese show us the way by adopting "Gross National Happiness"?
I've often featured these sorts of articles concerning how we would be better off moving past gross domestic product (GDP) as a measure of economic welfare. But, what is becoming interesting is that many of today's mainstream economists seem to be agreeing instead of the left-leaning crowd which dominates this discussion.

Take former IMF chief economist Olivier Blanchard:
“The single focus on GDP or GDP growth in many policy discussions is misleading,” Olivier Blanchard, a former International Monetary Fund chief economist who’s now a senior fellow at the Peterson Institute for International Economics, wrote this month. “Distribution effects, or distortions that affect the composition rather than the size of output, or effects of current policies on future rather than current output, may be as important for welfare as effects on current GDP.”

Blanchard’s exhibit 1: the increasing discussions around inequality in America. Exhibit 2: China’s shift from investment toward consumption.
The Americans and the Japanese also warn that GDP readings--which are prone to significant revisions--may give an inadequate description of where economies stand at various points in time:
In the U.S. last week, Federal Reserve Bank of Atlanta President Dennis Lockhart questioned whether official data that showed growth of just 1.2 percent in the three months through June represented a true reflection of activity on the ground. “If you look beyond the troubling headline GDP growth number for the second quarter and study real final sales, a more consistent picture of economic momentum emerges,” he said...

In Japan, a new analysis by the central bank found that rather than contracting in 2014, the economy actually enjoyed robust growth. The contradiction between the government’s data comes as the Bank of Japan steps up its efforts to get better readings, such as by starting its own consumption index. Governor Haruhiko Kuroda has called for better numbers.
The same idea goes for the UK, EU and India:
In the U.K., an independent review in March by former Bank of England policy maker Charles Bean recommended a transformation of the nation’s data. “We need to take economic statistics back to the future or we risk missing out an important part of the modern economy from official figures,” Bean said in a press statement accompanying the report’s release in March.

It’s a similar story around the world. Yves Mersch, a board member of the European Central Bank, warned of the impact of technological change in a February speech. The New Zealand government has a well-being framework, while the European Commission has had a project for almost a decade to look beyond traditional GDP measures.

India’s outgoing central bank chief Raghuram Rajan has warned of the difficulty in measuring growth in the face of aging populations. GDP numbers there have come under scrutiny since a new methodology last year showed a booming economy outpacing China. Ruchir Sharma, head of emerging markets and chief global strategist at Morgan Stanley Investment Management, says such readings demonstrate “incompetence because the statistics bureau there is applying a new methodology not having tested it well.”
So far, though, the problem has been that nobody has come up with a workable replacement to GDP despite everyone criticizing its inadequacies. Replacing it with a new measure will be difficult, and getting the international community to adopt a new system of national accounts for compiling economic data will require much cooperation besides.

Still, why stick with something nobody is particularly fond of just because it's been hard to come up with something better?
Read More