Tag: Business and finance

THE message to markets could not have been clearer. On the morning of May 4th, following a run on the peso, Argentina’s central bank raised interest rates by 6.75 percentage points, its third hike in a week. The interest rate now stands at 40%, up from 27.25% on April 27th.

Across town Nicolás Dujovne, the treasury minister, told reporters that Argentina’s budget deficit, which was 3.9% in 2017, would be brought down to 2.7% this year, rather than the previously stated target of 3.2%. After the announcements the peso strengthened by nearly 5% against the dollar.

The combined measures slammed the brakes on what was looking like the start of an escalating crisis. Argentina’s peso had fallen by a fifth against the dollar since the beginning of the year, making it the worst-performing emerging-market currency. But the measures also harm the prospects of growth—and of Mauricio Macri, the president.

The problems began in January, following the central bank’s…Continue reading

WHEN the Gulf carriers trumpet a new route, it tends to be one that goes to a major city with an international reputation. The big three—Emirates of Dubai, Etihad of Abu Dhabi and Qatar Airways—usually put on a good show to celebrate new flights to places such as  London, New York or Beijing. And so many brows were furrowed when on May 1st Akbar al Baker, Qatar Airways’s chief executive, arrived with his jamboree in Cardiff to make noise about his airline’s first flights to Wales’s capital.

Those who know British geography well know that Cardiff is the very opposite of a great metropolis. Although it is the capital of Wales and its biggest city, with just 360,000 inhabitants it is overshadowed by London’s 9m 150 miles to the east. Last year its airport handled less than 1.5m passengers, a fraction of the 8m or so who went via Bristol Airport, its main rival just across the River Severn. Cardiff Airport has struggled commercially in recent years. In 2013 it was…Continue reading

“DON’T panic yet,” advises the sandwich king of Ohio. Robert Grote is chief executive of JE Grote Company, a family-run firm in Columbus that is a global manufacturer of pizza-preparation machines, bacon-slicers and automated sandwich-makers. Since about half of its $60m or so of annual sales comes from outside America and his firm buys speciality steel from Europe, he is closely following President Donald Trump’s recent efforts to upend the global trading order. Though European executives he knows are alarmed, he says his American peers believe Mr Trump’s threats are probably negotiating tactics and are willing to “let it play out”.

Mr Grote’s relaxed stance might seem reasonable. The Trump administration first caused shock waves on March 8th by unveiling a 25% tariff on imported steel and a 10% tariff on imported aluminium, but quickly granted temporary exemptions to countries responsible for most of America’s imports of those metals. These exemptions were due to expire…Continue reading

So last season

NEAR the end of the antitrust trial over AT&T’s $109bn acquisition of Time Warner, Richard Leon, the presiding judge, asked Randall Stephenson, chief executive of AT&T, what the pay-television market would look like in seven years’ time. Mr Stephenson mused in his folksy Oklahoma drawl that seven years ago his predictions for today would have missed “so hard” when it came to the decline of pay-TV and the rise of competition from Silicon Valley.

The exchange sounds self-deprecating but it highlighted what AT&T argued was a crucial weakness in the government’s case. The Department of Justice, which is seeking to block the deal, has chiefly looked back to the past, not forward to a video and advertising market increasingly shaped by Netflix, Google and Facebook. Many analysts agree, and are cautiously optimistic about AT&T’s chances of a favourable settlement or ruling in time for the deal’s closing deadline of June…Continue reading

SWEEP past the cash machines at the Sumitomo Mitsui bank in Tokyo’s Sangenjaya shopping district and instead enjoy the personal service. Uniformed concierges welcome every customer with a bow. A dozen tellers are watched over by a manager who leaps up to meet elderly patrons. Transactions are concluded with carved signature seals stamped on paper contracts, and another round of bows.

Japan’s high-street banks are not just overstaffed. They are also overbranched. According to the World Bank, high-income countries have on average 17.3 commercial-bank branches per 100,000 adults. Japan has 34.1. If you include branches of the post office, a popular place for people to save, the Bank of Japan (BoJ) reckons the country is the world’s most overbanked.

Retail banks across most rich countries struggled to make money after the financial crisis. But Japan has been close to or in deflation for most of the past two decades. The result, according to a report last year by the BoJ, is…Continue reading

WARFARE has been transformed by drones. Using pilotless aircraft armed with precision weapons America can kill its enemies—in, say, the Hindu Kush or Syria—with a click of a mouse. There is a similar shift in economic diplomacy, where Uncle Sam has perfected new weapons that exploit its power over the world’s financial plumbing and over the brainiest parts of the tech industry. In April these weapons were used in anger on big, important firms for the first time. The targets were Rusal, a Russian metals firm, and ZTE, a Chinese electronics company. The results have been devastating—and alarming.

In 1919 Woodrow Wilson called international sanctions a “silent, deadly remedy” and over the next 70 years America deployed them about 70 times, reckons Gary Hufbauer of the Peterson Institute. America achieved its geopolitical objectives only a third of the time, he says. But there was little doubt that it could meet its narrower goal of inflicting pain by halting trade with other countries and by…Continue reading

IN 2013 Codere, a Spanish gaming firm, owed money it could not repay. Its bonds were trading at just over half face value. Blackstone, a private-equity firm, offered it a cheap $100m loan. But there was a catch. Blackstone had bought credit derivatives on Codere’s debt that would pay out about €14m ($19m) if Codere missed a bond payment. So Codere delayed a payment by a couple of days to prompt a “technical default”. Blackstone got its payout; Codere got its loan and stayed afloat.

On the satirical “Daily Show”, Jon Stewart, the then host, likened the scheme to the insurance fraud in “Goodfellas”, in which mobsters insure a restaurant before blowing it up. But that missed an important point. Blackstone did not blow Codere up—quite the opposite. As it said at the time, it “provided capital when no one else would, which allowed the company to live and fight another day”. The investors who sold Blackstone credit-derivative contracts had in effect bet that Codere would…Continue reading

Blue-skies regulation

AS BRITAIN’S prime minister between 2010 and 2016, David Cameron championed financial transparency, targeting anonymous shell companies as the getaway cars of tax-evaders and money-launderers. On his watch Britain became the first G20 country to commit to a publicly accessible register of company owners. Mr Cameron tried to make British territories with big offshore financial centres do likewise. The arm-twisting stopped when he stepped down in 2016. But campaigners, led in Parliament by Labour’s Margaret Hodge, vowed to keep going. This week their persistence paid off.

Ms Hodge and Andrew Mitchell, a Conservative MP, had tabled an amendment to an anti-money-laundering bill, which was designed to force “overseas territories” in the Caribbean and Atlantic, among them the British Virgin Islands (BVI), Bermuda and the Cayman Islands, to set up public registers, if they had not already done so, by the end of 2020. Faced with defeat in…Continue reading

A CYNIC, says one of Oscar Wilde’s characters, is a man who knows the price of everything and the value of nothing. But, as philosophers have long known, assigning values to things or situations is fraught. Like the cynic, economists often assume that prices are all anyone needs to know. This biases many of their conclusions, and limits their relevance to some of the most serious issues facing humanity.

The problem of value has lurked in the background ever since the dismal science’s origins. Around the time Adam Smith published his “Wealth of Nations”, Jeremy Bentham laid out the basis of a utilitarian approach, in which “it is the greatest happiness of the greatest number that is the measure of right and wrong”. In the late 19th century Alfred Marshall declared the correct focus of economics to be the “attainment and…use of material requisites of well-being”. Or, as his student, Arthur Pigou, put it, “that part of social welfare that can be brought directly or indirectly into…Continue reading

IN THE mining world the bout has the drama of a heavyweight title fight. In one corner is Ivan Glasenberg, billionaire boss of Glencore, the world’s biggest commodities-trading firm. In the other is Dan Gertler, an Israeli billionaire accused by America of corruption related to his dealings with Joseph Kabila’s government in the Democratic Republic of Congo (DRC).

The prize is a battery mineral, cobalt, which Glencore produces in the DRC and whose value has almost tripled since the electric-vehicle revolution accelerated at the start of 2017. It will be a tough fight. In the DRC Glencore is currently facing the potential loss of one of its biggest mines and sharply higher mining levies, as well as a costly lawsuit. “It’s a shakedown of Glencore,” says an analyst in London.

The clash between Messrs Glasenberg and Gertler, two former business partners, dates back to December, when the American government slapped sanctions on Mr Gertler, accusing him of amassing hundreds of…Continue reading