Archive for the ‘trade’ Category
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.
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.
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.
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.
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.
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?
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.
Mary O’Grady reports on the AFL-CIO’s attempt to obstruct the Central American-Dominican Republic Free Trade Agreement (CAFTA-DR):
Big Labor’s Yanqui Imperialism
The U.S. trade representative is trying to deny due process to Guatemala in defiance of free-trade agreement rules.
The action, according to the USTR, was born of an AFL-CIO petition—filed with six Guatemalan workers groups—which makes the same allegation. USTR says it, along with the Departments of Labor and State, analyzed the AFL-CIO claim and decided to pursue it because it “appeared” to be correct.
This is what they demand (emphasis added)
One of the U.S. demands is to add 100 labor inspectors to the government payroll immediately. Mr. Velásquez says that while Guatemala is willing to comply with the increase, the estimated cost, in the millions of dollars, is not in the current budget. Guatemala has said it will add the inspectors next year but that’s not good enough for Uncle Sam.
A second demand is to force all exporters to indemnify their workers against a company failure by buying a bond. Mr. Velásquez says that Guatemala’s constitutional court has said no to this because singling out exporters would be discriminatory. He also notes that U.S. exporters are under no such obligation.
Finally, and perhaps most egregiously, the U.S. wants Guatemala to give labor inspectors the authority to close a plant deemed to be in violation of the labor code. The trouble is, Mr. Velásquez points out, inspectors are not judges and the accused has the right to have the case heard in a court of law. Otherwise, he says, “we would turn our inspectors into emperors.” It is passing strange that the U.S. is trying to undermine Guatemala’s frail democracy in favor of the kinds of practices that occur in dictatorships.
More broadly, the AFL-CIO-inspired demands would raise costs for Guatemalan exporters and even drive them out of business.
Free trade? Not if the AFL-CIO has any say on it.
Gaddafi patronizes the POTUS:
‘To my Dear Obama, our son’, says Gaddafi, defending attack on rebels
Defending his decision to attack rebel cities, Gaddafi told Obama, “Al-Qaida is an armed organisation, passing through Algeria, Mauritania and Mali. What would you do if you found them controlling American cities with the power of weapons? What would you do, so I can follow your example.”
Congress was not broadly consulted on the decision to intervene in Libya, except in a Thursday afternoon classified briefing where administration officials explained the diplomatic and military plan. Rice was already deep in negotiations in New York.
Obama’s Tuesday night decision to push for armed intervention was not only a defining moment in his ever-evolving foreign policy, but also may have marked the end of the alliance between Clinton and Gates — an alliance that has successfully influenced administration foreign policy decisions dating back to the 2009 Afghanistan strategy review.
Article 1, Section 8 of the US Constitution states,
The Congress shall have Power…To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;
Heritage yesterday asked Five Questions Obama Has Not Answered on Libya
Here are just some of the fundamental questions the Administration has failed to answer as our military stands on the brink of a new and costly commitment:
So far, the only firm commitments are a naval blockade, AWACS for air traffic control, and signal-jamming aircraft. U.S. officials said that it would probably take several days for a full operation to be undertaken and that President Obama had not yet approved the use of U.S. military assets. Will he? Will the U.S. be using military force against Libya?
If establishing a no-fly zone in Libya is so vital to U.S. national security, why did the Administration waste a week getting approval from the U.N.?
Imposing a no-fly zone entails substantial costs for U.S. armed forces and risks diverting scarce U.S. military and intelligence assets. Will the vital missions in Afghanistan, Iraq, Yemen, and the Horn of Africa suffer?
Are the rebels free of terrorist elements, and what precautions will we require them to take to ensure that weapons we supply are not sold or diverted to other groups?
Will we rule out supplying arms (“Stinger” anti-aircraft missiles, for example) that could pose a potent threat to U.S. forces if they end up in the hands of terrorists?
Obama’s in Brazil, taking a trip that should have been scheduled two years ago. I am glad he’s finally gone to Brazil.
His weekly address touched on the topic,
Obama should be creating a much more business-friendly environment for trade with Latin America, and instead of giving lip service, can easily approve the free trade agreements with Colombia and Peru, and possibly one with Brazil. That would increase America’s competitiveness within the hemisphere.
He and Dilma did not hold a joint press conference, just a press announcement, because Dilma doesn’t take questions:
a press officer in the Brazilian foreign ministry says Rousseff just doesn’t take questions. “It’s not her way. She didn’t do it with the prime minister of East Timor either,” the press aide said.
Hundreds of miles away, Brazil Sends Forces to Jirau Dam After Riots
Brazil’s federal government Friday authorized the presence of national security forces in the Amazon state of Rondonia after riots at the Jirau dam site halted construction on the 3,450 megawatt dam.
Sen. Marco Rubio (R-Fl) writes,
An unacceptable consequence of America taking our Latin American neighbors for granted is that China, among other nations, has capitalized on our complacency, signed their own deals, and made great strides to surpass America as the region’s leading trade partner.
Losing our competitive advantage to China is a particular concern. As Senator Lugar’s report points out, “In South America, China has replaced the United States as Brazil’s largest trading partner. … Today, China is Colombia’s second largest trading partner after the United States. The [Private Sector Competitiveness] Council predicts that China will supplant the United States as the leading trade partner within 10 years if current trends continue without a U.S.-Colombia FTA.”
America’s trade complacency is unacceptable. We should be an indispensable friend to our Latin American neighbors, but instead we are being replaced as their leading trading partner and most reliable ally.
In the 21st-century economy, America cannot effectively compete with China and other nations if we don’t aggressively move to open new markets to American products and services. We simply cannot accept an American trade policy that is a fool-proof plan to lose American jobs, alienate our friends, and allow America to be diminished.
Unfortunately, the current administration in Washington appears to want America to be diminished … permanently.
Oh lordy. That would be the worst of both worlds.
The Wall Street Journal has a must-read on the subject,
The Yuan Scapegoat
The U.S. establishment flirts with a currency and trade war with China.
The battle concerns China’s decision to peg its currency, the yuan, to a fixed rate of roughly 6.83 to one U.S. dollar. To hear the American political and business establishment tell it, this single price is the source of all global economic problems. The peg keeps the yuan “undervalued” in this telling, fueling China’s exports and harming the U.S., Europe and everyone else. If the Chinese would only let the yuan “float,” it would soar in value, China’s export advantage would fall, and the much-despised “imbalances” in global trade would end.
President Obama has picked up this theme, calling last week for Beijing to adopt “a more market-oriented exchange rate” that “would make an essential contribution to that global rebalancing effort.” Less diplomatically, 130 Members of Congress sent a letter to Treasury this week demanding that unless China lets the yuan rise in value, the U.S. should impose tariffs on Chinese goods. Just what the world needs: a trade war.
At the core of this argument is a basic misunderstanding of monetary policy. There is no free market in currencies, as there is in wheat or bananas. Currencies trade in global markets, but their supply is controlled by a cartel of central banks, which have a monopoly on money creation. The Federal Reserve controls the global supply of dollars and thus has far more influence over the greenback’s value than any other single actor.
A fixed exchange rate is also not some nefarious economic practice rare in human affairs. From the end of World War II through the early 1970s, most global currency rates were fixed under the Bretton-Woods monetary system created by Lord Keynes and Harry Dexter White. That system fell apart with the U.S.-inspired inflation of the 1970s, and much of the world moved to “floating rates.”
But numerous countries continue to peg their currencies to the dollar, and with the establishment of the euro most of Europe decided to move to a fixed-rate system. The reason isn’t to get some trade advantage against their neighbors but to gain the economic benefits of stable exchange rates—and in some cases a more stable monetary policy. A stable exchange rate eliminates a major source of uncertainty for investment decisions and trade and capital flows.
The catch is that under a fixed-rate system a country yields some or all of its monetary independence. In the case of euro-bloc countries this means yielding to the European Central Bank, and for dollar-bloc countries to the U.S. Federal Reserve.
This is what China has done with its yuan peg to the dollar. By maintaining a fixed yuan-dollar rate, China has subcontracted much of its monetary discretion to the Fed in return for the benefits of exchange-rate stability. For more than a decade, this has served the world economy well, leading to an explosion of trade, cheaper goods for Americans that have raised U.S. living standards, and new prosperity for tens of millions of Chinese.
Read the entire article, with special attention to how a market solution may be the answer to the problem,
China’s build-up in dollar reserves is contributing to the world’s anger at China, and it represents a huge misallocation of global resources. Instead of letting its dollar reserves find their best private investment use, China uses them to buy U.S. Treasury bills or Fannie Mae securities.
One solution would be to make the yuan convertible, and let capital and trade flows adjust through private markets rather than the Chinese central bank. This is how Germany recycles its trade surplus. A one-time small revaluation to, say, 6.5 yuan to the dollar accompanied by convertibility would help with global adjustment while avoiding the perils of Japan-like deflation.
The Chinese government resists open capital markets because it fears less political control. At least at first a convertible yuan might also lead to a surge in capital outflows from China as Chinese companies and individuals diversified their currency holdings and investments. But over time, and probably quickly, markets would adjust and reach a new equilibrium. Convertibility would also increase the domestic pressure for China to further liberalize its financial system.
This is where the U.S. should put its diplomatic pressure, rather than on the exchange rate. Even better would be a joint U.S. Treasury-Chinese declaration on behalf of such a policy shift, which would give credibility to the new monetary arrangement.
It would be interesting to see the effect of a surge in capital outflows from China on the economies of our hemisphere, since the Chinese have been investing heavily in producers of raw materials, mines, and commodities. The dangers of volatility and political risk are holding back a lot of investments, but would the increase in outflow make investors less risk-adverse?
Either way, the answer does not lie in Keynesian-type solutions.