Archive for the ‘business’ Category

Puerto Rico: Countdown to the Greecespot

Tuesday, June 30th, 2015

If you didn’t see this coming, you haven’t been paying attention.

From Drudge:

NEXT GREECE MAY BE IN USA…

Lurking debt threatens cities, states…

Reality hits San Juan streets amid Puerto Rico debt woes…

Businesses shuttered…

Residents living day to day…

Fallout Will Hit Florida…

Investors scramble to avoid losses…

Can’t say we didn’t see it coming: From the October 26, 2013 Economist, Puerto Rico
Greece in the Caribbean
Stuck with a real debt crisis in its back yard, America can learn from Europe’s Aegean follies

Like Greece, Puerto Rico is a chronically uncompetitive place locked in a currency union with a richer, more productive neighbour. The island’s economy is also dominated by a vast, inefficient near-Athenian public sector. And, as with Greece, there are fears that a chaotic default could precipitate a far bigger crisis by driving away investors, and pushing up borrowing costs in America’s near-$4-trillion market for state and local bonds.

I have yet to find any moves by the Puerto Rican government towards structural reforms that would stimulate economic growth, reduce bureaucracy (and the accompanying red tape), and foster a business-friendly environment. Instead, the governor tells bondholders to “share the sacrifices.”

Welcome to the Greecespot.

Brazil: Dilma wants U.S. investment

Tuesday, June 30th, 2015

Dilma Rousseff is visiting Pres. Obama today, and she’s saying she welcomes U.S. business . . . while keeping Brazil’s protectionism:

Brazil’s President Seeks Investment During U.S. VisitBusiness friendly environment is needed to attract investors and restore growth, Rousseff says

Her visit comes amid a widening investigation into alleged price-fixing and corruption surrounding government-controlled oil giant Petróleo Brasileiro SA, or Petrobras. Several Brazilian companies are being investigated in connection with the scandal. Some are cooperating with investigators; some have denied wrongdoing. Some of those executives who have made plea deals have alleged that Ms. Rousseff’s campaign received some of the illegal funds.

Her party created the Foro de Sao Paulo  (initially named Meeting of Left and Anti-imperialist Parties and Organizations of Latin America) in 1990.

UPDATE
Obama: We Have Common Values with Brazil; Similar History – “Similar history”?

Argentina: The tissue’s race to the bottom

Thursday, June 18th, 2015

Tissue World Magazine reports on Argentina: the impact of inflation and price controls on tissue.

Missing all the strength consumers need, with the softness they want* (emphasis added):

For many consumers, waiting for the crash has become something of a national pastime, with tissue consumers perhaps even being forced back to the bidet, the now little-used convenience still found in the corner of most Argentinian bathrooms. While it is typically rare for consumers to trade out of tissue, the situation in Argentina appears so precarious that for many this is becoming a very real prospect.

In the absence of a sensible combination of comfort, absorbency and value**, Argentinians console themselves by repeating the mantra,

ON THE BRIGHT SIDE – ‘WE ARE NOT VENEZUELA’
While things are bad, consumers have by all accounts tended to remain quite sanguine as the situation is far worse in Venezuela

H/t Iowahawk’s Twitter feed,



Mexico: House Votes to Remove Country-of-Origin Labels on Meat Sold in U.S.

Friday, June 12th, 2015

House Votes to Remove Country-of-Origin Labels on Meat Sold in U.S.Washington seeks to prevent a long battle over the labels with Canada and Mexico. It’s not just meat,

Wednesday’s 300-131 vote repealing the country-of-origin labels for meat follows a series of rulings by the World Trade Organization finding the labeling discriminates against animals imported from Canada and Mexico.

Canada and Mexico won a final WTO ruling in May, and are now seeking retaliatory actions valued at a combined $3.7 billion a year. Canada has threatened trade restrictions on a range of U.S. products, including meat, wine, chocolate, jewelry and furniture.

I can understand why tracking Canadian and Mexican imported animals slaughtered in the U.S. is expensive and inefficient; however, I have qualms when it comes to chicken from China.

UPDATE
Linked to by Pirate’s Cove. Thank you!

Ecuador: Hotlanta PR doesn’t come cheap

Friday, June 12th, 2015

The government of Ecuador has paid at least $867,000 to Miren LLC, based in the Suwanee suburb of Atlanta, an American public relations firm run by a former high-level government official, reports Lachlan Markay:
Documents Reveal Ecuadorian PR Efforts in Suburban AtlantaEcuador’s attorney general has paid at least $867,000 for PR services

Miren is owned by Tomas Peribonio, Ecuador’s former Minister of Commerce and Industry. According to a U.S. public relations consultant with whom he has worked, Peribonio served as an adviser to the attorney general, Diego Garcia, while being paid for PR services in the United States.

The attorney general’s expenditure reports say the payments were for “for media services, public relations, and imaging of [the Attorney General] and the Republic of Ecuador in major U.S. cities.”
. . .
A Justice Department spokesman confirmed that neither Miren nor Peribonio is or ever has been registered as an agent of a foreign government.

Compared to the $6.4 million contract between the government of Ecuador and Brooklyn-based MCSquared, the $867,000 is chump change.

Uruguay: De facto dollarization

Saturday, June 6th, 2015

When currencies plummet, people are turning to the dollar. It’s happening in Venezuela, and it’s happening in Uruguay.

La “dolarización cultural” de Uruguay
La debilidad del peso no permite dejar atrás la tradición de comerciar con la moneda estadounidense
(Uruguay’s “cultural dollarization”
The peso’s weakness doesn’t allow leaving behind the tradition of trading in U.S. currency
)

Magdalena Martinez’s report lays it on the line:

En realidad, el billete verde sigue siendo una protección contra la inflación, un mal endémico para muchas economías latinoamericanas. Cada mes, a un ritmo del 7% u 8%, el avance de los precios se come el poder adquisitivo en pesos de los uruguayos.

My translation, emphasis added:

In practice, the greenback continues to be a safeguard against inflation, an endemic ailment of many Latin American economies. Every month, at a rate of 7% or 8%, the rise in prices eats away the Uruguayans’ peso purchasing power.

Martinez’s article quotes an economist who says that back in the bad old days inflation was 100%. I don’t know if he meant 100% per month, but if he can’t figure out that a monthly inflation rate of 7% to 8% compounds to an annual rate well exceeding 100%, maybe he ought to go back to school.

Steve Hanke has pointed out that dollarization allowed Ecuadorians

to import a vital element of the rule of law — one that protects them from the grabbing hand of the State.

Not surprisingly, Uruguayans took notice.



Ecuador: Hasta la vista, dollars!

Tuesday, June 2nd, 2015

Dollarization brought great benefits to the Ecuadorian people, as Steve Hanke (who 14 years ago was the chief intellectual architect of Ecuador’s switch to the dollar) points out,

Ecuadorians know that dollarization has allowed them to import a vital element of the rule of law — one that protects them from the grabbing hand of the State. That’s why recent polling results show that dollarization is embraced by 85% of the population.

Prof. Hanke also knows that going off the dollar will have dire consequences for Ecuador’s economy:

“If you go off, the fiscal deficit gets bigger, the level of debt gets bigger, inflation goes up and economic growth goes down. All the economic indicators just go south.”

So pres. Rafael Correa is attempting to de-dollarize, but not blatantly. How so?

Ecuador Mandates Bank Participation in National E-Money Initiative

Ecuador’s e-money initiative, which kicked off earlier this year after the country outlawed bitcoin, is about to see wider institutional involvement following a government directive.

The country’s banks were ordered late last month to adopt the payment system within the next year, according to a report by Pan-Am Post’s Belén Marty. The pace at which the banks are required to add support for the initiative, which is a digital representation of the US dollar – Ecuador’s official currency – depends on their size.

So it’s not even bit-coin, but it’s compulsory:

The nation’s central bank has given them 360 days to get on board, with a mandate inResolution 064-2015-M, released on May 25 in the official register.
. . .
The resolution gives a sweeping and vague definition of “macroagents” for adoption: “companies, organizations, and public or private institutions; financial institutions of the popular and cooperative system; that maintain a network of establishments available for clients and are capable of acquiring mobile money, distributing it, or converting it into varieties of money.”

Additionally, the Central Bank of Ecuador (BCE)’s crypto-currency transactions carry no privacy.

The dollar is taken out of the picture, and protection from “the grabbing hand of the State” is erased. Hasta la vista, baby!

Why the University of Alabama won over the Ivy League

Friday, May 15th, 2015

The exceptionally smart Ronald Nelson makes the right decision: read my article on Why the University of Alabama won over the Ivy League

Puerto Rico: The great debt scam

Tuesday, May 5th, 2015

Moody’s downgraded Puerto Rico’s general obligation (GO) rating to Caa1 last January, on par with Argentina, a notch (a very small notch) above Venezuela, but worse than Bangladesh.

Now the government of Puerto Rico doesn’t want to pay up.

We all know what Louis would say,

Mary O’Grady writes on Puerto Rico:

Puerto Rico’s Debt-Relief GambitThe island’s political class wants to stiff its creditors. Congress shouldn’t go along.

A group of institutional bondholders—including Franklin Advisors and Oppenheimer Funds—representing 40% of the outstanding bonds and more than 500,000 individual bondholders have offered the company a restructuring plan to avoid receivership. It includes a new, $2 billion capital commitment to modernize power-generation equipment and cut costs. If Prepa [Puerto Rico Electric Power Authority (Prepa)] can improve its operational efficiency, the group believes that its proposal can lower the electricity rate to the range of 22 cents per kilowatt-hour from the 28-cent range of recent years.

This intervention is unlikely to appeal to Puerto Rico’s political class, which uses Prepa as a populist honey pot. The company has a dismal collection record and one of the most notorious deadbeats is the government. A Nov. 15, 2014, report by FTI Capital Advisors found that the company had “over $200 million in accounts receivable from public corporations, of which approximately 70% is over 120 days old.”

Making them pay is the right thing to do; it’s just not the Puerto Rican thing to do.

What works

Friday, May 1st, 2015

Readers of this blog are familiar with my nagging asserting repeatedly that Communism doesn’t work. John Mauldin and Stephen Moore have come up with A Six-Point Plan To Restore Economic Growth And Prosperity. In brief, the 6 are:

  1. Streamline the federal bureaucracy.
  2. Simplify and flatten the income tax.
  3. Replace the payroll tax with a business transfer tax of 15%, which will give lower-income workers a big raise.
  4. Provide certainty by keeping tax rates low through a tax-limitation constitutional amendment that would require future tax increases to be passed by 60% of the Congress, in combination with a balanced-budget amendment.
  5. Roll back the regulatory state.
  6. Drill for America’s domestic energy and use the royalties on federal lands to retire the debt and/or fund needed infrastructure repair instead of raising taxes.

While these are specific to America, countries in our hemisphere would benefit from similar incentive structure measures, if their institutions would also ensure a framework of rule of law and true commitment to ending corruption.

Mauldin and Moore address the real source of economic progress: the incentive structure. Read their full article here.