Archive for the ‘trade’ Category

Latin America: Free trade vs. Mercosur

Saturday, January 4th, 2014

David Lhunow writes on The Two Latin Americas
A Continental Divide Between One Bloc That Favors State Controls and Another That Embraces Free Markets

In 2014, the Pacific Alliance trade bloc (consisting of Mexico, Colombia, Peru and Chile) is slated to grow an average of 4.25%, boosted by high levels of foreign investment and low inflation, according to estimates from Morgan Stanley. MS +1.55% But the Atlantic group of Venezuela, Brazil and Argentina—all linked in the Mercosur customs union—is projected to grow just 2.5%, with the region’s heavyweight, Brazil, slated to grow a meager 1.9%.

Related: Is 2014 Latin America’s “big year”?


Mary O’Grady takes Joe Biden to the woodshed

Tuesday, June 11th, 2013

Everything’s coming up roses!

Last week Joe Biden, after decades of blocking it, sang the praises of free trade as if he had been championing it all along. Mary O’Grady lets the record stand on Joe Biden’s Free-Trade Epiphany
He discovers Colombia’s decades-old export of cut flowers—and credits the Obama administration.

By April 2007, when the Bush administration sent the U.S.-Colombia free-trade agreement to Congress for ratification, the cut-flower export industry was thriving. One reason was preferential access to the U.S. market granted by Congress. Mr. Biden certainly is familiar with ATPA since he voted against its reauthorization in August 2002.

That year is memorable for Colombians because the country was being overrun by FARC terrorists, and Mr. Uribe was elected president. Over the next eight years the former governor of Antioquia, whose father had been murdered by the FARC, worked tirelessly and at great personal peril to restore order. As Mr. Biden notes in his op-ed, the road from Bogotá to flower farms was “impossibly dangerous ten years ago,” though he doesn’t give Mr. Uribe or the Colombian military the credit they deserve for that reversal of fortune.

In late December 2010 I had numerous conversations with Colombian officials who were sweating it out because a modified version of ATPA (called ATP-DEA) had not yet been renewed. The Obama administration was refusing to send the free-trade agreement to Congress for a vote, and Valentine’s Day—a crucial holiday for flower growers and by extension the economy—was less than two months away. An estimated 200,000 Colombian jobs were tied to the industry and a roughly equivalent number in the U.S.

Mr. Obama eventually signed the U.S.-Colombia free-trade agreement in late 2011 after sitting on it for 3½ years. A Colombian official told me last week that he believes it was only completed because Mr. Uribe—whom Mr. Obama’s international-socialist friends hated—was no longer in office. There were two other crucial developments, he said. Congressional Republicans insisted that it be voted on together with the pending Panama and South Korea free-trade agreements, and Sen. Max Baucus (D., Mont.) pushed for it in conjunction with the stipulation that Colombia would expand laws raising the cost of labor.

Mr. Biden voted against the U.S.-Chile free-trade agreement in 2003 and the Central American free-trade agreement in 2005. Mexican trucks still don’t have unfettered access to the U.S., in violation of the North American Free Trade Agreement, because the Teamsters and therefore Democrats won’t allow it. Mr. Biden doesn’t explain any of this.

He never will.


Mexico: Retailers Descend on Mexico

Friday, June 7th, 2013

Compare and contrast: Retailers pay millions of dollars to leave Argentina, while they’re descending on Mexico

Spurred by Relaxation of Tariffs on Clothing, Youth-Oriented Stores Head South, among them H&M, Zara, and Gap, all aimed at the younger consumer (I do shop at Zara for its classic, yet updated, style)

Encouraging the retail newcomers is the relaxation of steep tariffs on imported clothing. For more than a decade, Mexico applied antidumping duties as high as 533% on Chinese-made apparel to bolster its domestic garment industry. But in December 2011, the country eliminated the last of those transitional duties on Chinese clothing, lowering that barrier to entry. Currently the top tariff is a more palatable 25%.

“Because Mexico is a huge aspirational market, the removal of import tariffs for apparel may well be the single most-important retail event in the country in the past few years,” says a report by analysts at Credit Suisse, CSGN.VX -3.34% which estimates that clothing in Mexico was previously at least 50% more expensive than clothing in the U.S.

It’s all part of Mexico’s market-friendly policy by decreasing trade barriers.

In Silvio Canto’s podcast

Wednesday, May 29th, 2013

live now, talking about US-Latin America: Free trade agreements with Jim Roberts.

You can also listen to the archived podcast at your convenience.

Pacific Alliance vs. Mercosur

Saturday, May 18th, 2013

The Economist has a must-read article on Latin American geoeconomics
A continental divide
The region is falling in behind two alternative blocks: the market-led Pacific Alliance and the more statist Mercosur

Obama in Costa Rica

Saturday, May 4th, 2013

After visiting Mexico and giving a speech, President Obama went to Costa Rica where he vowed to Shift Focus on Central America to Economy:

Obama arrived in Costa Rica yesterday from Mexico, where he said the U.S. relationship with Latin America must be focused on fostering economic growth on both sides of the border. He said it was time to set aside stereotypes of the region as a source of illicit drugs and immigrants fleeing to the U.S.

The president’s visit comes as Costa Rica is pressing to join negotiations for the Trans-Pacific Partnership trade accord that now include the U.S., Mexico and nine other nations.

it remains to be seen as to whether he believes that this fostering of economic growth on both sides of the border should be accomplished through private enterprise or through more government intervention.


Obama heads to Mexico

Thursday, May 2nd, 2013

Key issues on Obama’s Mexico trip: Trade, immigration and drug war.

On immigration, Obama

To sell his immigration overhaul back home, he needs a growing economy in Mexico and a Mexican president willing to help him secure the border.

On trade

Border crossing takes so long in large part because of inadequate infrastructure and inadequate staffing for the amount of traffic, she says. It also results from significant bureaucracy – duplicate customs forms and other procedures.

The capacity of the border entry points to clear trade traffic into the USA has not kept pace with the increase in trade in the border region. In addition, the 9/11 attacks in 2001 prompted added security measures, which slow things down and raise expenses for businesses.

Among the ideas to improve commercial traffic are better use of shipper screening programs that allow low-risk shipments and carefully investigated shippers faster access over the border, say analysts, and should be on the agenda of the two presidents.

On drugs, Mexico’s Curbs on U.S. Role in Drug Fight Spark Friction

shortly after Mexico’s new president, Enrique Peña Nieto, took office in December, American agents got a clear message that the dynamics, with Washington holding the clear upper hand, were about to change.

“So do we get to polygraph you?” one incoming Mexican official asked his American counterparts, alarming United States security officials who consider the vetting of the Mexicans central to tracking down drug kingpins. The Mexican government briefly stopped its vetted officials from cooperating in sensitive investigations. The Americans are waiting to see if Mexico allows polygraphs when assigning new members to units, a senior Obama administration official said.

In another clash, American security officials were recently asked to leave an important intelligence center in Monterrey, where they had worked side by side with an array of Mexican military and police commanders collecting and analyzing tips and intelligence on drug gangs. The Mexicans, scoffing at the notion of Americans’ having so much contact with different agencies, questioned the value of the center and made clear that they would put tighter reins on the sharing of drug intelligence.

Peña Nieto’s focusing on managing the violence, rather than on confronting the cartels.

Tomorrow Obama will visit Costa Rica, returning to the US on Saturday.

Argentina: The high cost of not doing business

Thursday, April 25th, 2013

Ralph Lauren Corp., which closed its Buenos Aires shop last year over economic and currency issues (at a cost of US$3million in severance pay and lease expenses), self-reported to the US DOJ and the SEC, and agreed to pay

$882,000 penalty as part of an agreement with the U.S. Department of Justice and $734,846 to the Securities and Exchange Commission

over bribes company employees allegedly paid to

Argentine customs officials with dresses, perfume and cash to accelerate the passage of merchandise into the South American country…

The bribes, allegedly paid via a customs broker, were labeled as “loading and delivery expenses” or “stamp tax/label tax” on invoices in order to disguise the payments, according to U.S. authorities.

The Justice Department alleged that the bribes were paid in order to improperly obtain the paperwork necessary for goods to clear customs, to permit the clearance of prohibited items and to occasionally avoid inspection entirely.

With a system of rampant corruption, the local employees probably figured it was the only way to get the merchandise to the store. Otherwise the cargo would sit in customs until a substantial part of it went “missing” – and you’d still have to pay off someone.

RLC didn’t admit or deny the allegations in its agreement with the SEC, and this is the first time the SEC has entered a nonprosecution agreement in a Foreign Corrupt Practices Act matter.

Peru’s definitely not Cyprus

Saturday, March 30th, 2013

Last Tuesday in Rick Moran’s podcast I mentioned that the flight of capital from the EU might make emerging markets very attractive.

Well, look at Peru:
Peru intensifies currency fight (emphasis added)

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For the eighth time in 10 months, Peru’s central bank has raised deposit requirements on dollar-denominated accounts to stem the flow of hot money into its fast-growing economy and dampen currency appreciation.
With the sol approaching a 16-year high, Peru’s central bank said that as of April 1, the reserve ratio will rise 0.25 percentage points. The bank, which has ruled out Brazilian-style capital controls, has also been aggressively buying dollars in the spot market to slow the trajectory of the sol.

So far, its strategy has worked, with the sol weakening 1.33 per cent against the dollar this year, after appreciating 5.7 per cent in 2012.

The Peruvian bank’s struggle to rein in its currency is shared by fast-growing neighbour Colombia, which last week said it was willing to double its spending on dollars, to $10bn, this year to take some of the steam out of the peso.

Both countries are enjoying the fruits of years of prudent economic management – but rapid economic growth and low inflation have come hand-in-hand with the kind of current appreciation that makes exporters squeal.

Hmmm. . . Prudent economic management.

Are you listening, Paul Krugman?


Panama: “Deepen the port of Savanna”. Is Washington listening?

Saturday, March 23rd, 2013

This blog’s mission, if you want to call it that, is to highlight the intersection of American and Latin American news and events.

The expansion of the Panama Canal is a crucial event that, for the most part, has been ignored by the American news media. It’s going on right now, and expected to be completed in April 2015. It will enable super-large ships, called “Post-Panamax,” to cross, but it necessitates that ports around the world, and especially in the Gulf states are deepend to accomodate them.

Roberto Roy, Panama’s Minister for Canal Affairs and Georgia Tech graduate, met with Georgia governor Nathan Deal,

“It is a critical issue for Georgia and for Savannah,” Roy said in an interview outside the governor’s office. “The reason is that the shipping fleet is totally changing. It is not only a matter of the ships being bigger. The key is that the most important variable is the fuel costs.”
Roy said the new ships can carry more containers, which makes them more energy efficient with significantly lower fuel costs per container.
“That is the game changer,” Roy said.

Georgia already has received the necessary federal approvals for the project, but it will need hundreds of millions of dollars in order to complete the deepening of the port. Reed has been working with state leaders to build support within President Barack Obama’s administration and other Democratic leaders for the project.
“Georgia needs to do a hard lobbying in Washington to get approval for this dredging,” Roy said. “The message is the fleet is changing, and we are already late.

Let’s hope the bureaucrats in Washington are listening. An infrastructure project of this magnitude should have already started in the US ports, instead of those so-called “shovel ready jobs” that wasted the stimulus money.