Archive for the ‘business’ Category

Today’s TPP roundup

Thursday, October 8th, 2015

Julia Hahn defines Obamatrade:

Obamatrade collectively refers to Trade Promotion Authority (TPA), which is the controversial fast-track mechanism for ramming trade treaties through Congress with minimum scrutiny, and the three major trade deals that would be guaranteed these “fast-track” protections before a page of them had been made public: the Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (T-TIP) and Trade in Services Agreement (TiSA).

And the reason we can’t find the text of the agreement? (emphasis added)

Because TPP is a “living agreement,” it can be changed subsequent to its adoption. This means that a group of twelve nations– and any new nation member that gets added to the partnership– would be empowered with, what Sen. Sessions has described as, “a sweeping new form of global governance. TPP calls this new global authority the ‘Trans-Pacific Partnership Commission.’”

Hillary backtracks: Hillary Clinton: I Totally Oppose That Trade Agreement I Negotiated In 2012.Despite referring to it as the “gold standard” for trade agreements in 2012, Hillary Clinton says she now opposes the Trans-Pacific Partnership, or TPP.

Moe Lane points out that

She’s just coming out against it this publicly because Barack Obama is publicly in favor of it.
. . .
Also, let’s be honest: Barack Obama only supports the TPP because it’s his trade deal.

Hillary Comes Out Against TPP, Pleasing Her Left Flank

Hillary’s not alone: China and Europe may team up to snub TPP, and the director of the Sierra Club says Congress Should Oppose TPP on Environmental Grounds

How TPP cements Obama’s corporatist legacy

The disagreements over the TPP’s provisions are nuanced and complex. But the theme is not. Indeed, the TPP could well be President Obama’s most enduring legacy, because it gives his corporatism its biggest stage yet. It captures the central idea of his presidency — that when big government and big business make policy, the result is good for average Americans, even if it reduces their political freedom, or even their political participation. ObamaCare laid that marker down domestically, triggering a lightning round of health industry consolidation that turned the “big five” insurers — and their $346 billion yearly revenues — into a “big three.” The math is simple: When everyone has to buy the products dominant corporations sell, dominant corporations win. From a liberals’ standpoint, TPP takes the idea global — allowing powerful international corporations to further disadvantage American workers through a complex set of legal, financial, and economic privileges. As Rep. Rosa DeLauro (D-Conn.) put it: “The administration has put big business first, [and] workers, communities, and small businesses last.”

Back to Hahn,

Fast track authority lowers the 67 votes required to pass a treaty to a mere simply majority, it surrenders the 60 vote filibuster, and it forfeits individual senators’ ability to add amendments or changes to the trade deals negotiated by the president. It also allows the President to sign the agreement before Congress even votes.

With that, and the Republicans never finding “a hill to die on,” $5 says TPP is a sure thing.

We talked about the TPP in last night’s podcast,

The TPP and the two unknowns

Wednesday, October 7th, 2015

Donald Rumsfeld famously defined the two unknowns (emphasis added):

There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.

Read about The TPP and the two unknowns.

This just in: TPP signed

Monday, October 5th, 2015

The LatAm countries are Mexico, Peru and Chile (which in turn are members of the Pacific Alliance):
U.S. Reaches Trans-Pacific Partnership Trade Deal With 11 Pacific Nations. Trans-Pacific Partnership created after bitter fights over automobile industry, intellectual property rights and dairy products. China is not included since it did not meet criteria. The TPP is yet to be approved by Congress,

But Mr. Obama faces a steep challenge in the months ahead to win approval for the deal in a deeply divided Congress. Only a handful of Democrats support Mr. Obama’s trade policy, and Republican support is unpredictable in the 2016 election year, depending on the stance of presidential candidates and new leadership in the House. As it is, the deal can’t go to a vote before Congress until early next year.

Ian Bremer commented on the TPP on Facebook – now on YouTube,

Brazil: U.S. fast food chains expanding

Friday, September 4th, 2015

Anyone fighting the red tape has earned my admiration.

Brazilians Welcome U.S. Fast-Food Chains in Slow TimesU.S. restaurants see opportunities among middle-class consumers despite Brazil’s economic downturn

Banking on better times ahead, U.S. companies are taking advantage of the down market to woo new franchisees, snag bargain leases and expand while many local operators are pulling back. The draw: a Brazilian middle class estimated at more than 100 million people, many of whom love to eat out and have an affinity for U.S. brands.

No Chipotle?

Yes Chipotle!

“A churrasco in a burrito at a price you can afford!”

Chile: Bachelet’s proposal for failure

Tuesday, September 1st, 2015

Following Michelle Bachelet’s proposed labor reforms, companies are leaving the country and employers are laying off workers. Hana Fischer explains why:
Bachelet’s Labor Reforms Have Already Failed, in Uruguay
Empowering Unions a Sure Path to Economic Doom

The proposed labor reform currently being debated in the Chilean Senate presents several issues that are a concern:+

  • Inter-company unions will be in charge of collective bargaining for all workers.+
  • Employers will be prohibited from granting union benefits to non-unionized workers.+
  • Union leaders will be allowed to disrupt a company’s activities, because employers will be banned from replacing workers on strike.+
  • The reform would deny an employee the option to return to work, on an individual basis, after 15 days on strike, and consequently his right to continue working.+
  • Employees would be prohibited from censuring union leaders during a strike.+

52% of Chileans oppose the proposed law.

$5 says Bachelet will still go ahead.

Brazil and other fallen BRICs

Friday, August 28th, 2015

All in all you’re just another brick in the wall.
Pink Floyd

Brazil never learns from its boom-to-bust cycles, which are tied to commodity cycles. John Lyons and Paul Kiernan of the WSJ write,
How Brazil’s China-Driven Commodities Boom Went Bust

Developing nation’s big bet on China turns sour as China’s appetite for exports dims; ‘looking at a lost decade’ As the title explains, the phenomenon is not exclusive to Brazil, but repeats itself in the whole of Latin America.

Brazil fell under what some economists call the “resource curse,” a theory describing how countries with abundant natural resources sometimes do worse than countries without them. The idea is that the money from commodity sales can lead to overvalued currencies and shortsighted policy-making, leaving such countries badly exposed when the resource boom finally ends.

Read the whole sad story, which ends with,

Even now, Brazil is looking to China for help.

In that, again, the hemisphere is never learning. Even Chile, Colombia and Peru, who have free-trade deals with the U.S. and EU, are now looking at moves that hinder their economies.

Sing it, guys!

Puerto Rico: Don’t expect payment anytime soon

Monday, August 24th, 2015

Mary O’Grady describes,
Puerto Rico Plays Chicken With Its Creditors

Failure to negotiate in good faith could cost the island the help it seeks from Washington.

On Sept. 1 the state-owned Puerto Rico Electric Power Authority (Prepa) faces a deadline for restructuring more than $8 billion in debt. If it can’t come to an agreement with creditors, a previous forbearance agreement will expire and the company will face default.

On Sept. 1 the state-owned Puerto Rico Electric Power Authority (Prepa) faces a deadline for restructuring more than $8 billion in debt. If it can’t come to an agreement with creditors, a previous forbearance agreement will expire and the company will face default.

In that event, bondholders could be expected to go to court to begin the process of receivership, as the bond contracts stipulate.

This high-stakes negotiation comes when Puerto Rico is asking Congress to give its municipalities and public agencies access to the chapter 9 bankruptcy protection the 50 states have. A Prepa default would be disruptive and possibly increase the odds that Congress will agree.

But failure on the part of the utility to negotiate in good faith also could backfire and jeopardize support in Washington for giving Puerto Rico chapter 9 protection. It could also reduce sympathy on the mainland for the write-down of other Puerto Rico debt issues—which total some $63 billion—that Gov. Alejandro García Padilla says he needs to get the island growing again.

Read the whole article.

The thing is, the governor has little to lose by defaulting.

  • I have stated in the past  that you can be assured the Puerto Rican government will continue to spend like crazy because 20% of the workforce is in government jobs, which gives the ruling party a built-in constituency. As I have pointed out before, it’s in the governor’s best interest to keep them happy, even if it means to default on all debt in order to meet payroll.
  • If the U.S. refills the ATM, García Padilla will claim credit for it; if the U.S. doesn’t, he has someone to blame.
  • People who don’t agree with the economic policy are exercising their right to move to places where the U.S. economy is brighter, thereby removing a large number of what would be opposition votes.
  • High debt-high spending make the island less appealing for statehood status.

Bottom line: No improvement in the horizon.

Bond roulette: Puerto Rico, Venezuela

Thursday, August 13th, 2015

Which Puerto Rico Bond Defaults Next? 46% Yields Provide a Clue Bloomberg lists the most recent trading prices of bonds that aren’t insured against default:

Puerto Rico defaulted for the first time on Aug. 3, when a little-known agency, the Public Finance Corp., paid investors just $628,000 of the $58 million they were owed.

The Finance Corp. is only one of the 17 arms of the U.S. territory that have sold tax-exempt bonds, according to the Government Development Bank. Unlike debt typically issued by countries, the securities carry varying degrees of risk because they’re backed by different sources of funds and legal safeguards.

So as the island burns through cash, there’s the obvious question: which bonds could be next?

By Insurer’s Calculation, Puerto Rico Debt Burden Is Lowest, but I’d listen to Moody’s,

Excluding the island’s utility bonds and adding the U.S. debt to each state based on their population, Puerto Rico has a lower debt-to-income ratio per capita than even Maryland or Virginia, which have top credit ratings, National [Public Finance Guarantee Corp.] said.

The analysis is in stark contrast with data from Moody’s Investors Service, which gives Puerto Rico the third-worst credit rating and says its net tax supported debt per capita is the highest among U.S. states and 11 times greater than Virginia’s. Moody’s projects recovery rates from 35 percent to 80 percent on commonwealth bonds.

VENZ/PDVSA: The Mixed Martial Arts of Bond Trading

To be clear, trading VENZ is to normal bond investing what mixed-martial-ats is to thumb-wrestling. It’s a crazy, high-risk world where a good day in the WTI oil market, or a couple of anodyne bureaucratic announcements, are enough in to set off a mad bull-rush, with venny traders tripping over one another to snap up paper.

For the rest of us, it’s all gambling. I could only find this scene dubbed in French – lay down your bets, ladies and gentlemen,

Colombia: Concepcion, the no-cash town

Monday, August 10th, 2015

The Small Colombian Town That Stopped Using Cash

Concepcion is the first place in Colombia where the vast majority of transactions involve electronic banking via mobile phones, staying well ahead of even northern Europe.

The mayor of Concepción has himself come to illustrate the comparative safety of this online system. “I went to the district of Rionegro to claim a significant sum of money from the town, and some thieves thought I had the money in the car,” he recalls. “But they couldn’t take any, as it was in the cell phone. They did take the phone, but the money stayed in the bank.”

The key word is, comparative safety.

Brazil: File this under “Lie down with dogs, wake up with fleas”

Thursday, August 6th, 2015

Inside Royal Bank of Canada’s Latin Misadventure

Dilemma surrounding RBC’s star Brazilian client highlights regulatory risks of potentially lucrative emerging markets (emphasis added)

As Royal Bank of Canada mounted an aggressive campaign to reel in business from Latin America’s growing class of superrich, a Miami-based banker made a big catch: Gilberto Miranda Batista, a former Brazilian senator with a $500 million fortune, three houses, four farms and a Rolls Royce.
. . .
In 2013, Mr. Miranda’s accounts attracted the attention of a U.S. banking regulator, the Office of the Comptroller of the Currency, which that year deemed RBC’s anti-money-laundering controls unsatisfactory, according to people familiar with the matter.


RBC moved to close down this business late last year after facing government investigations in several countries, including the U.S., Uruguay, and France. Just as it was unwinding its operations, RBC was contacted by the Department of Justice and by the Department of Homeland Security about separate Venezuelan accounts, according to people familiar with the matter. Those people said the Venezuelan accounts had, like Mr. Miranda’s, been previously flagged by internal compliance officers.

This is a huge problem, as the prospective clients may likely attained their financial status by being involved in “troublesome” transactions.