The COVID-19 inflation episode: Lessons from emerging markets

I attended another pseudo-academic exercise @ Brookings, presentations of academic papers on post pandemic inflation. The event was hosted by Gian Maria Milesi-Ferretti, Senior Fellow – Economic Studies, The Hutchins Center on Fiscal and Monetary Policy @ Brookings.

Antonio Fatás, Professor of Economics @ INSEAD based in Singapore, presented a paper on how Asia was different in battling inflation when compared to other continents. Not surprisingly, China & India dominate, China is unique, & data coverage is uneven. Like many other places, reopening after the pandemic drove recovery. Fiscal policy was a bit unconventional, offering subsidies to offset increases in food & energy prices. Asian central banks were less transparent than others in implementing monetary policy, which ultimately led to significant depreciation of some currencies.

Prachi Mishra, Chief of the Systemic Issues Division, Research Department @ the International Monetary Fund critiqued the paper. She pointed out the heterogeneity within Asia, non-linearities, & asymmetries in responses.

Refet Gürkaynak, Professor of Economics @ Bilkent University in Turkey took a look @ inflation in emerging markets in Europe. He noted, you can’t apply the same analysis to emerging markets as you can the industrialized world. For example, Switzerland’s inflation is much lower because the value of energy as a percentage of the total market basket is lower than in emerging markets. These markets had common timing, either due to common external shocks or common policy errors. Opportunity costs are not the same for countries that produce their own energy vs. those energy sensitive countries that must import their energy resources. All of Europe was similar in that food inflation was driven by energy inflation & in some ways emerging Europe is not so different from wealthy Europe. Albania is an exception to other emerging markets because it’s an energy producer & exporter.

Isabel Vansteenkiste, Director General for International and European Relations @ the European Central Bank offered feedback & wondered if there might not be other factors at play, such as commodity prices, supply bottlenecks, pent-up demand, & fiscal-monetary policy interaction. She questioned if cross country differences in central banks, fiscal support, & inflation history, explained all of the variation.

Juan Pablo Medina, Associate Professor @ Universidad Adolfo Ibáñez in Santiago, Chile provided a Latin American point of view. Senor Medina pointed out that despite supply shocks being more extreme & intense in Latin America, Latin American inflation rates are converging with those in advanced economies. Monetary policy in the region was heavily influenced by expectations & US policy. Headline, food, & core inflation were above the world average in the region while energy inflation varied. The timings were off to change interest rates in monetary policy.

M. Ayhan Kose, Deputy Chief Economist @ the World Bank Group, Nonresident Senior Fellow – Global Economy and Development provided a 4 point rebuttal.

• The convergence may well be temporary because Latin American inflation targets are higher than those in advanced economies.
• Inflation drivers are explained by well-defined supply/demand external/internal shocks to commodity prices, interest rates, terms of trade, exchange rates, etc.
• Currency depreciation plays a role, which tracks with inflation
• The paper could be improved by focusing on fewer questions & models.

My take: there’s a lot to be learned from pandemic-induced inflation episodes, although it’s expected the stories would vary from place to place. Although it was noted Turkey has been an exception in dealing with inflation in the European example, I’m surprised this wasn’t addressed more directly. Turkey took a very contrarian approach by lowering interest rates at the direction of the president of the country to the central bank, which resulted in exacerbating the problem rather than solving it. Learning more about the ramifications of that would have been very interesting.

The rise and decline of venture capital in China

I sat in on this China VC webinar organized by the Peterson Institute for International Economics (PIIE), hosted by (PIIE)Senior Fellow Nicolas Véron, featuring Tech Buzz China founder Rui Ma & Josh Lerner Jacob H. Schiff Professor @ Harvard Business School.

To summarize, the Chinese venture capital industry took off after 2013, when the industry went from 0 to behemoth, but has fallen greatly since 2021. Fundraising has been declining since 2018, as foreigners have retreated from the market. US VC flows to China have dried up & they are scaling down their presence; Sequoia Capital is a prominent example. Different strategies all point to US dollars exiting the region: separating Chinese operations to make them independent, separating a set of limited partners, & other strategies. This raises issues:

• Is China a suitable market for US-sourced venture capital?
• Further, might Silicon Valley not be appropriate for emerging economies?

Quick History In 2001, it was a unipolar world, when Silicon Valley accounted for 85% of global investment. By 2010, the world had become bipolar, adding Chinese hubs. Today it’s now a multipolar world, adding Saudi Arabia & other places. It’s TBD how this dispersion will play out. China in the 2010’s was an unqualified success story in venture capital, when they did much right. The last 5 years have seen a less sure hand as government guided funds chased questionable deals. We don’t know government’s next priorities, so government interventions are a wild card. How much western VC investment is still invested in China? Probably more than US investors would like. There has been a steep decline in funds raised in US$-5% of funds raised in have been in US$, 95% in Chinese Renminbi. Those with SOE clients think twice before seeking US$ investments. It’s kind of like the song “Hotel California,” “You can check out any time you like, but you can never leave.”

US semiconductor sanctions hurt the Chinese, so Chinese investors have pivoted to hard tech: semiconductor companies are much easier to list there now. Most are approved by VC-backed investment & are still measured on liquidity. Deep dollars are going into semiconductors-27% of VC is pouring into semiconductors.

Although private investment is still most active, state influence is increasing in Chinese venture capital. Exit conditions are different in China, which must comply with local regulations. The Hong Kong exchange also requires 100% compliance. There is a bifurcation in venture capital in China between deals where the government is involved or not. The governmental role is understandable: there are implications for returns, which are much more about jobs & technical development than ROI. The Chinese state participates in 23% of deals & 6 of 18 deals were not part of state-owned-enterprises, (SOE), even if state funded deals can be run in a private enterprise way. In state-involved deals, there may be a certain amount that must go into local investment. They may be judged based on performance metrics, not just economic interests. VC money is moving because of political pressure, but public financing is not crowding out private funds. For example, Sequoia has many local funds. Local municipalities sought to provide funds for investments in local businesses, but historically local mandates are not inspiring. Returns to the US are better off in treasury bonds than greentech deals. It can be difficult to dis-entangle early vs later stage & infrastructure investments.

Events have been dedicated to make money outside of China, where there is less competition than in China. They’ve been going to more developed countries. Bytedance has been the most visible: abroad for them means Western Europe & the US, where there are best chance to make profits. The thought is if you can survive in China, you can survive in the US. So Chinese entrepreneurs are looking outside China for expansion. 2 years ago they were much less open & just cut & pasted their strategies from China: now they are localizing. Institutional investors want to see Asian returns, but are worried about Chinese exposure. They don’t want to follow the example of Russian pennies returned on dollar investments there. There is the potential of significant stranded capital. Singapore has become ground zero for US VC investments redeployed in the region. Many investors have an affinity for Singapore because many Chinese & other expats already live there. It’s been difficult for Chinese venture capitalists to invest in other countries. There are various offshore entities that help for tax reasons, but they still don’t advertise Chinese funding. The US government limits some flows & investments in other parts of globe are even more conflicted. Recipient countries are torn: they want to build a venture capital industry, but they’re hard to generate locally. Foreign governments are also responsive to US government messaging. 2023 startups are not seeking foreign exits.

Thus the Chinese economy is increasingly linked with the US & the west. In the golden era of Chinese venture capital, it benefited the US as well, because their returns were positive. Venture capital is decoupling more dramatically than other economic sectors, which has been on steroids on the way up & on the way down.

Trade in the Political Crosshairs-Implications for the Western Hemisphere and Asia

I attended this very interesting event @ American University’s School of International Service’s campus last week. I arrived a little late, so I missed the opening panel & keynote, but can summarize the activities for the rest of the day. Robert Koopman, Hurst Senior Professorial Lecturer, School of International Service, American University, served as Master of Ceremonies. Because this was a day-long event, I’ll just present the highlights. Feel free to contact the presenters for more details.

My 1st panel featured Adrián Nador, Deputy Chief of Mission, Argentine Embassy, Catalina Crespo-Sancho, Costa Rican Ambassador to the United States, & Gerónimo Gutiérrez Fernández, former Mexican Ambassador to the United States, & was moderated by Earl Anthony Wayne, Distinguished Diplomat in Residence, School of International Service, American University. They talked about Reconfiguring Global Trade: Relations Building and the Need for Cooperation. Argentina has a new President who is a proponent of free trade, but tries to stay out of the way of conflicts between China & the US. Costa Rica has a great story to tell of investments in semiconductor chips & production, & their ascension to the OECD. The former Mexican ambassador mentioned a refreshingly realistic portrayal of Mexican trade relations & related Latin America’s 4 biggest advantages as areas of interest to the US: demographics, geography, locality, & freedom. I asked about the lack of comprehensive regional trade agreements: the answer was this is because of a lack of leadership. All countries want access to foreign markets, but few countries want to open up to foreign competitors.

Just after lunch, Amb. Alan Wm. Wolff, Distinguished Visiting Fellow, Peterson Institute for International Economics & former deputy director-general of the World Trade Organization (WTO), spoke to Multilateralism in a Time of Increasing Fragmentation. Pointing towards the year 2050, it’s unsure where the WTO is headed. The ideal would be convergence of policies for many countries, but that is very much open to question. It’s more likely we’re simply headed towards co-existence. Agriculture will have to become more agile to provide adequate food security. Equitable care is a worthy goal for global health. The WTO is 1/2-way there on reducing subsidies for fisheries, but they’re far off for fossil fuels. Artificial intelligence will revolutionize trade. There was little backsliding at Ministerial 13 where the e-commerce tax moratorium was renewed, which deemed it a success. When I asked how the US should reengage with the WTO, the response was that the US will not be naming an appellate judge anytime soon.

We then moved into a more technical & company oriented discussion about Adapting to Global Supply Chain Shocks in IT, BioTech, and Manufacturing with Jason Oxman, President and CEO, Information Technology Industry Council, John McCown, Non-Resident Senior Fellow, Center for Maritime Strategy, Leila Aridi Anas, Director, Global Public Policy, Toyota North America, Stephanie Murphy, Vice President, Crop Science and Corporate Government Affairs, Bayer, & moderated by Han-koo Yeo, Senior Fellow, Peterson Institute for International Economics & former trade minister of the Republic of Korea. A couple of the results of the Covid 19 pandemic were the resiliency of industry & recognition of the need to produce vaccines close to the customer. Just-in-Time inventory rather than Just-in-case stocking still holds for Toyota & Toyota benefited from these strategies because their cars were most available during the pandemic. Containerized shipping changed trade, dropping shipping costs from 50% of product cost to 1%. The industry is now moving 4X as many TEU’s as in 1995. National security is becoming more important in strategic planning for biopharma. Toyota deals with changes by being clear on their goals, working with allies, & using multiple policy tools. The Biden administration has done very little in trade policy-they even balked at supporting the ecommerce tariff moratorium. The US has lost it’s path in trade, & our bad policies hurt Americans. Trade has not lifted all boats, as it was expected to do.

Next Anabel González, Vice President, Countries, Inter-American Development Bank, presented Rethinking Global Trade in the Western Hemisphere: The Dynamics of Multilateralism and Regionalization. Trade in services is increasing, while FDI in Latin America grew by 1/2 in 2022. To address it’s challenges & realize it’s potential, Latin America needs to implement supply side measures: pursue energy transition, address climate change, ensure food security, support digital services trade. To achieve these, they will need to improve infrastructure, human capital, & access to finance, & reduce energy costs to foster competition.

The last keynote offered Padideh Ala’i, Professor of Law, Washington College of Law, American University, who gave a nice history of US trade relations with National Security and Trade: Charting the Course for U.S. Trade Policy. When I asked about the period 1989-1994 when the world changed, but nobody noticed, she agreed someone should write a book about it, but I’m not sure if I’m the historian to write it.

The closing panel ended on a high note with representatives from a few think tanks pontificating on the future. Adam Hersh, Senior Economist, Economic Policy Institute, Inu Nanak, Fellow, Trade Policy, Council on Foreign Relations, and Mary E. Lovely, Anthony M. Solomon Senior Fellow, Peterson Institute for International Economics, moderated by Michelle Egan, Co-Director, Transatlantic Policy Center, School of International Service, American University talked to Shaping Tomorrow Together: The Future of Global Trade. The biggest challenge to global trade policy is fragmentation-there is little convergence on these issues world-wide. The US has retreated from multilateralism: it’s trade policy sans trade. Globalization’s benefits have been offset by new perceptions of risk: are current risks bigger? if so, by how much? in which sectors? how does China contribute (or not)?…The US has claimed economic security is a valid reason to ignore the rest of the world, but we are seeking economic security from what? for whom? with what tools?…We need to rethink classical gains from trade. The WTO is great but flawed. China has been a disruptor, but some Chinese companies get no subsidies, other countries are gaining from China’s losses, & we haven’t help create an alternative to China. We have to impose rules to make green trade policy viable. Companies are investing in decarbonization, but we don’t want to kill global supply chains while trying to improve them. When I suggested India might be a viable alternative to China as a manufacturing hub, I was informed India still is quite complicated & protectionist, enforces domestic content rules, & struggles to export. Another suggested the US withdraw from WTO, to which it was noted that China has complied with WTO rulings & it’s better to have both the US & China within the WTO rather than have either 1 or both outside of the rules-based order.

My take: It blows my mind that this generation’s globalization took place during the Clinton administration, because I don’t remember him ever really promoting that. As soon as he was inaugurated, then-President Donald Trump started breaking down the global trade order. My impression is Trump realized foreigners don’t vote in US elections, so he’s utterly unconcerned what they think about anything. The only use for anyone interested in anything not directly in support of US interests is to demonize them & make them scapegoats for all of America’s ills. Sadly, while Joe Biden has re-opened America’s arms to our partners, rather then turn our backs on them as Trump did, Biden has not contravened most of Trumps isolationist tendencies. So to address the title of this conference, I wouldn’t say trade is in the crosshairs. Alternatively I’d submit that it’s being categorically ignored, & thus withering on the vine, while US companies with global interests are suffering from a colossal lack of US government support. We are seceding our global leadership position in many areas, and democracy, freedom, and economic prosperity will suffer globally because of it.

Japan’s Vision for the Global South

As I contacted a number of business schools about teaching in Japan, I sat in with interest on thisWilson Center webinar hosted by Shihoko Goto featuring Noriyuki Shikata, Cabinet Secretary for Public Affairs, Prime Minister’s Office of Japan. He indicated 3 priorities of Japan in the global south to engage other like minded countries in the global south to confront China:

• to create a FOIP: Free & Open Indo Pacific, which includes 2 continents, including Africa
• Keep an AOIP: Asean Outlook on Indo Pacific, to highlight many projects throughout the region
• Foster a Japan-India special partnership: with examples like a connectivity project that links with Bangladesh & Memoranda of Understanding with Cambodia & Indonesia.

Meredith Potter, Managing Director for Policy (Indo-Pacific) @ the US international Development Finance Corporation, (DFC) stated President Biden’s Indo Pacific strategy: to keep a free/open, connected (quad), prosperous, secure, & resilient Indo Pacific region. The DFC finances private sector development with $40B in 100+countries. DFC offers debt financing, equity investment, feasibility studies, investment funds, political risk insurance, technological assistance, & more. They bring value to the private sector by imposing standards & having a positive impact in-country. DFC works with a number of Japanese organizations: JBIC Bank of International Cooperation, JICA-International Cooperation Agency, NEXI-Nippon Export Investment Insurance, etc. Examples of their work together in the region are a Telstra project, a private company in Australia, & TP Bank project in VietNam.

Ammar Malik is a Wilson Center China Development Finance Fellow. He tracks underreported financial flows @ www.aiddata.org who actually provided some real data. The true scale of Chinese development financing is $80B annually, which is twice that of the the US, although that is slowing down since 2021.
Risk profiles have changed. There are many flashing red lights: of repayments, 55% are due; 80% of these are in debt distressed countries. In terms of performance, there were 17 problem projects in 2000; there are now 1700. As for reputation, positive public opinion was 56% in 2019, which has dropped to 40% in 2021. The Chinese are now ramping down infrastructure lending while ramping up rescue loans. Only 25% of their financing is via policy banks. There has been a rise in syndicated lending whereby non-Chinese banks have taken on 80%, of which 72% is collateralized today, compared with 19% in 2000.
ESG safeguards are being put in place to 57% now. This has had no impact on delivery speed: they can deliver in 3 years, while the World Bank typically takes 6 years. They are improving infrastructure quality with soft power. Chinese losses are greater than American losses. 2/3 of their financing goes to toss-up countries, 1/6 to “moonshots.” China doubles down when incumbents are powerful, such as in Bangladesh, & lays low when facing headwinds, as in Zambia.

Q&A

Japan’s Prime Minister will be in DC-will he address Global South? He will discuss not only bilateral issues. Pres. Marcos from Philippines will be in town too. Last year’s Camp David summit engaged South Korean Pres. Yun too. There are increasing emerging projects across region.

How does the DFC look @ moonshot vs tossup countries? DFC doesn’t categorize countries that way. Partners chart own economic futures. Then DFC needs to hear what they need. For example, Bangladesh is on the upswing with a strong leader, but DFC is closing down Bangladesh because of a lack of workers rights.

How do the Chinese engage in syndicated loans with non-Chinese partners? In which countries & sectors? Syndicated loans are not a Chinese invention. The hubs are in London & New York, and dollars follow the returns. China is preparing projects for HSBC, Citi, & they have brokerages on the ground in Africa. They know the local conditions. China is a relatively young player in the market. It is hard to compete with Chinese development financing’s low rates. They mirror the free market & private enterprises & do what bankers do: look for bankable projects. If their dashboard has flashing red lights, the short cut is to create a syndicate with a lead arranger that assures quality.

How has Japan’s reputation changed? What are Japan’s challenges? They are working on ASEAN projects, installing quality infrastructure systems, such as subways/metros in Bangladesh, linking megacities in India, installing high-speed rail systems etc. They are addressing climate change too,
working bilaterally on the green transition. They have contributed to stable economic growth & recognize good practices in Africa, startups going to MEA, & collaborate with like-minded countries
contributing to the recovery of Ukraine.

How are US companies getting involved in infrastructure projects? Our visions are similar, but our tools are different. The DFC envies series A investors. They invest in small businesses that sometimes have little US nexus, so they can’t evaluate the appetite for infrastructure projects. They do look worldwide.

How do you see the Chinese economic slowdown? It’s not in GDP growth. China sits on $3T of forex reserves, which gives them lots of liquidity. Average Chinese people question foreign loans when they feel they need support @ home. The scale of debt collection is ballooning as loans go bad. The Chinese banking system might come under stress. Their strategy seems to be to bail out the right hand with the left hand.

My take: Japan can & should play a role in dealing with the global south. I’m not sure I know Japan well enough to say how & what role they should play. We could use Japan’s expertise in improving public transportation here. Additionally, not surprisingly, confronting China is as big an issue for them as it is for us, & as a closer neighbor, even more important.

Reimagining American Economic Leadership

The Council on Foreign Relations (CFR) is launching a new program called RealEcon, which will focus on Reimagining American Economic Leadership. I attended the launch event. It featured Jared Bernstein, Chair of the President’s Council of Economic Advisors as the keynote speaker. Introductory remarks were made by Matthew Goodman, Director of the Greenberg Center for GeoEconomic Studies of the CFR. President of CFR Michael Froman presided over the activities. Gillian Tett, member of the editorial board of the Financial Times, moderated a panel discussion with CFR Pres. Froman & Canadian ambassador the US, Kirsten Hillman. The event was attended by almost 100 in Washington, DC and a few hundred more online.

Goodman began by stating the basic premise of the RealEcon program is that much has changed since World War II & economic leadership does still matter. The program will consist of 3 elements:

• listening tours to different states & countries
• publishing essays which will point out the trade-offs with different choices
• expanding the Greenberg Center on trade, investment, development, & security.

Froman continued to note that, by way of background, democracy, liberalism, & market-based economies are all under fire. Efficiency is not the only objective in optimizing supply chains, especially when security is a concern. Some of the questions/tradeoffs they’ll be addressing:

• how to harvest the benefits of trade & investment
• do we have the appropriate tools necessary to succeed?
• how do we compete with China?
• what is the state’s role in all of these?

Bernstein continued with an endorsement of RealEcon to support President Biden’s worker-centered trade agenda. We need to confront authoritarianism with democracy to create positive economic outcomes, make it safe to invest, keep an independent central bank, & encourage economic growth with social outcomes.

Discussion:

Is the Phillips Curve dead? linearly-yes, non-linearly-no. The pandemic was unique & transitory as productivity accelerated.

Industrial policy issues

market failures are a result of lack of innovation & resilience

It’s uncertain if policy should change when supply chains fail. It’s OK for China to export deflation, but not OK for them to export deindustrialization.

We need more education & training to support the worker-centered policies.

Q&A with the speakers

Former US Trade Representative Carla Hills posed the question, “Can we pursue worker-centered goals without sacrificing trade?” The response was unclear to me.

Are we backsliding into protectionism? The tradeoffs are not explicit, so we need to make them explicit

How can we characterize Canadian/US leadership? The US is the world’s business leader as many US assets are the world’s best, but this doesn’t exist in a vacuum, so whatever we secede will be filled by others.

How has friend-shoring benefitted Canada? This has increased the resilience of Canadian businesses & has been mutually beneficial. The long-term benefits are worthwhile for both sides.

Friends can be fickle-Can the CFR define the relationship? Risk management means diversification. The private sector got complacent with this. There is no economic security without climate security.

Should we allow cheap Chinese solar panels into the North American market? They are so cheap, some are being used as garden fencing. Climate change has been a market failure-we don’t have years to invest in addressing this. We need to make the tradeoffs more explicit. Canadian companies are manufacturing solar panels too. The IRA is as unpopular in Canada as it is in Europe. The US innovates while Europe regulates.

Can all North Americans work with Trump? Ultimately we’re seeking the same goals. Canada-Mexico-US trade is setting records. Even a 10% tariff would make little difference because 99% of products are tariff-free.

Q&A with the audience

What happens if/when the US is no longer the top dog? We will become more polyamorous & relationships will become more complex with new coalitions of the willing.

What is the future of multilateralism & the WTO? It’s still an essential organization & necessary precursor of trade. It’s very difficult to get a consensus of so many diverse members.

Are democracies backsliding? We can’t solve all problems, so we need to talk them out & demonstrate that democracies deliver.

How can we be proactive to promote these values? Services trade is up & the rules of the digital economy are not up for debate. It’s come to the point where data center companies essentially negotiate trade agreements as conditions of their investments.

My Take: This Real Econ project can be very beneficial, depending on which way the November election goes. We are at a fork in the road, & the differences in each fork are clear. We have the choice to go in 2 very divergent directions. If Biden’s elected, we may continue down the same path we’re on now. If Trump’s elected, I think we’ll have to throw all of this out the window & regroup.

I do question the viability of a worker-centered trade agenda-trade & workers rights may not be compatible. It may be an either/or proposition.

Battle of Powers in Brazil

Oscar Vilhena Viera has written a book entitled “Battle of Powers,” published by the Brazil Institute of the Wilson Center, which details the political/legal institutional battles which took place 2013-2018, during the time I was posted with the US Dept. of Commerce in Rio de Janeiro. This summarizes the book launch event. Bruna Santos, Director of the Brazil Institute, moderated the discussion.

He presents an institutional perspective of a lawyer, not a political scientist. The premise is institutions matter, but how they behave is under attack in Brazil as a response to authoritarianism. Brazil’s constitution & the role of it’s supreme court was created in a time of distrust, so power was transferred to legal institutions, including the supreme court. Brazil’s court is unique in a number of ways:

• issues can go from congress to the court in 1 day
• anyone can bring a case to the supreme court
• congressional revisions can happen in real-time
• it’s responsible for criminal cases over politicians
• it has the capacity & final word to defend the constitution over anti-constitutional amendments.

The public lost confidence in the court & it’s power was diminished 2008-2017 because of scandals. Progressives appreciate the court’s defense of civil rights-conservatives (& those deferential to Jair Bolsonaro) trust it less. During the Covid-19 pandemic, Pres. Bolsonaro deferred to the court, & the court ruled in favor of the states on many issues. In 2020, there was a march against the courts & Bolsonaro made threats against it, so the court started an investigation of these threats, which resulted in many countersuits. As other agencies were not defending democracy, the supreme court maintained it’s jurisdiction. Bolsonaro was accused of 3 crimes:

• participating in the coup de’etat
• impeding the election
• (sorry I missed the 3rd 1)

By Jan. 8, 1000 were indicted, some were convicted, including former Army & Navy chiefs. Bolsonaro tried to delegitimize the 2022 vote & proposed a return to paper ballots, which created a confrontation between the military & the court. The court exerted it’s moderate power to prevail.

Q&A

A weak presidency (from all the indictments), a disrespectful congress, & court oversteps have weakened institutions. Does corruption invalidate the evidence? Brazil embellishes a functional model: all presidents must assemble coalitions to pass laws. Cardoso had 3 party collaborators, Dilma Roussef had 3, Lula now has 14, all of which creates a ripe environment for corruption linked to the financing of political campaigns. The car wash scandal embraced plea bargaining, which had an enormous impact.

Is there now a mistrust of institutions or was bad policy implemented? Violence against democracy is not tolerated. Lula changed Brazil’s environmental policies. Some policies are embedded in the constitution. Bolsonaro was in a weak position because he couldn’t change laws, so he made abusive decrees, made nominations of people who would not enforce mandates in divisions he didn’t like, similarly to Donald Trump (Bolsonaro has been called the “Trump of the tropics”).

Does the popularity of the supreme court matter? Every court measures it. The concept of reputational capital was developed in Chicago & Brazil lost a lot of that on both the left & right.

Was Bolsonaro convicted? Of the 3 cases:

• Abuse of power during election-he asked foreign embassies to call the election a fraud, & was penalized by not being able to hold political office for 8 years.
• He exposed the public to health hazards during the Covid 19 pandemic.
• He created a document to transfer power to the military, so he was deemed involved in the attempted coup on 8 Jan. 2023.

How much was all of this a battle of individuals? It was an institutional battle of powers. Courts play a role in defending democracy. Courts have failed in Hungary, Poland, South Africa, Turkey, Colombia because they haven’t been able to withstand authoritarian attacks. In Brazil, the courts stood up to Bolsonaro, but may have been cornered by the military, which has a history of intervention in Brazil.

In sum, playing hardball can be dangerous for democracy. If you have no reputation, you have nothing to lose. The US court has lost authority because it has become so politicized, but uncertainty is good for the law.

My take: as I was with the US Dept. of Commerce when I was in Brasil, defending democracy was the responsibility of the Dept. of State & not us. I did observe all that’s described and can confirm it all happened & his observations seem to be correct.

The question I wanted to propose but did not, was “What were the effects on trade & investment into Brasil?” I suspect the effects were negative but I’d be interested to see the numbers to evaluate the magnitude. I don’t question the importance of maintaining democracy, but the economic & financial consequences of maintaining democracy are just as important.

Can the WTO be saved? The way forward

 I caught a very interesting webinar on an organization vitally important to global trade “Can WTO be saved? The way forward” by the Peterson Institute for International Economics (PIIE). The event featured 2 speakers WTO Deputy Director General Johanna Hill, Andre Sapir of University Libre Brussels & was moderated by Cecilia Maelstrom of PIIE.

Johanna opened. This event comes on the heels of the Ministerial Conference 13, (MC13) which took place in Abu Dhabi, where despite a wave of subsidies, trade became greener. The WTO still sits at the center of global trade because countries still recognize the need for rules for trade. The question is how to restore the international trading system.

There were few reforms @ MC 13 because the WTO is like a race with different finish lines that move & the context of geopolitics, instability, persistent inflation, slowdowns, & conflicts create daunting challenges. This year ½ the world is going to ballot box, but there is cautious optimism: the WTO is adding 2 new member states & ag/fisheries issues advance on a single track, & there is hope for a 2nd wave for fisheries to narrow gaps in the issues. They did finalize investment protocols & extend the moratorium on taxation of e-commerce.

Another issue discussed was how trade is related to social inclusion. It provided an opportunity to exchange views that won’t be rolled back. Opponents fought, argued, & became close friends.

Andre offered his critiques. The WTO needs to hold line against backsliding on policies, but given the current context, not backsliding is not bad. Although trade is a + sum game & not a 0 sum game, it feels like a world of confrontation, which is central to how countries organize trade relations. MC 13 was not a ministerial of great progress, but not backsliding is underappreciated. 1 disappointment for him was that no material declaration mentioned climate. He worries about trade & climate, because the climate objectives in the Paris Agreement are paramount. We can’t make progress in climate without trade, & they are not mutually exclusive, rather they should reinforce 1 another. Dr Ngozi engaged with COPA participants, but the absence of a decision was not good news. A paper by Pascal Lami made a contribution by adding 3rd leg, development. There was some progress on complex topics, which is absolutely essential, despite difficult geopolitics. We need to put all of our efforts into convincing members that we need WTO rules now more than ever to advance the issues of the day.

Q&A

Could the WTO do more on plastics?

• Johanna:  Climate change is important & the WTO had a role @ Cop28.  The Secretary launched a toolkit for climate action which supports transition to low carbon economy. They are working at the multilateral, pluralateral, & secretarial levels on carbon pricing research, which they will share with WTO membership. There are already carbon pricing regimes, but the WTO can’t speculate on what members will do.  Sustainable development is being addressed. They don’t know how members will decide climate transition, but the WTO will build on that.
• Andre: The WTO needs a greater sense of urgency. Every country is adopting their own carbon policies, & some are having negative effects on trade flows, which is not in spirit of WTO rules, & perhaps not proper carbon pricing. We need to minimize/negotiate restrictions, greenwashing, protectionism. More technical work is needed on carbon pricing, content, to ensure compatibility with WTO rules. For example, some specifics are problematic in Europe, as carbon pricing has external implications. Some subsidies are excellent, but not all are, so it’s not complicated, but we can’t wait another 2 years for decisions.
• What about joint mapping with the IMF? There has been an avalanche of subsidies, both good & bad. Do they do no harm?
• Johanna: There’s been lots of work on subsidies. The negotiation function is important, & reaching agreement too, as is transparency. We also need to be able to access information for emerging economies, which is the value the role WTO has, especially re: subsidies.
• Andre: We need to reach out to the finance community too because even good subsidies can be costly. Agricultural subsidies can became financial problems too. We need to come to agreement @ the WTO on subsidies. Programs are needed but they can be costly, so we need to eliminate bad subsidies. Let’s build an alliance between trade ministers & finance ministers. Close relations with the World Bank & the IMF could create a vehicle for communications with finance ministers.
• Johanna: The Director General is active in communications with those organizations & finance ministers. They speaks directly & clearly on how to improve lives, with formal initiatives to map subsidies.
• What is the credible way forward on the settlement mechanism by end of year, or should we just start fresh?
• Johanna: MC 12 promised a commitment by end of this year. A lot of work has been done & the WTO welcomes member input & we should recognize what’s been done thus far. We do need to accelerate the discussion on appeals/reviews & maintain delicate balance.
• Andre: This is a tough 1 because the context is complicated by national security issues. Historically during the GATT (General Agreement on Trade & Tariffs) period, there were 2 political spheres, GATT vs the Soviets, which were not unified. There was no trade between the spheres, so national security was not grounds for actions. In the early WTO days, there were fewer geopolitical issues, global supply chains existed in a flat world, & all was rosy. Now that geopolitics came back with vengeance, there are 2 spheres again, but now markets are unified. It’s difficult to understand how to get to bottom of dispute settlement. It’s difficult to say how much to bring national security into decisions, solutions, etc.
• National security legitimizes all sorts of subsidies, etc. Is it difficult for the WTO to deal with it?
• Johanna: The WTO recognizes the difficulties. They’re trying to get members less focused on positions than interests. The WTO can’t predict outcomes.
• What do you think of the Tyranny of consensus? Not all have to join from beginning? Should there be a statute?
• Andre: I’m of 2 minds; on pluralateral, it’s very useful, with 162 members with huge diversity. On the other hand, it’s hard to make progress on consensus. An investment facilitation agreement must respect all conditions. Pluralateral can be used to deal with big problems, but it won’t work for agriculture. Complicated issues must be dealt with a minimum of countries-they don’t need to list key countries for solutions to smaller issues.
• Some countries do agreements on their own…
• Johanna: The WTO realizes it’s been difficlut to come to understanding. We need to allow for the process, & require it to bring into multilateral trading system. We need need to find common ground, & if done properly, it can be more inclusive & can withstand test of time. We need institutions to be strong over time.
• Conclusions -What can countries do to prepare for the next conference?
• Johanna: The WTO needs to balance the work; the ministerial can only can do so much in 5 days. Any 1 issue is very complex, so they need to continue to work in Geneva, & look @ new issues.
• Andre: I’ve not participated in the MC, but we can’t expect to deal with many issues, 3 max.
• Capitals need to be more involved-ministers need full mandates.
• Andre: Countries are members of WTO for a purpose. Don’t look negatively at the results. Countries continue to value the WTO. Issues with China are of capitals, not ambassadors. We need to find a way to bring them in, & this needs to be clearly defined. Not to discuss this because it’s too confrontational is not acceptable. The WTO is still a great forum for dialogue.

My take: the biggest issue in my mind is the US has hamstrung the dispute resolution mechanism by blocking the appointment of new judges to the WTO appellate body for years. It blows my mind that this wasn’t even mentioned. Maybe their thinking was it won’t be resolved, so they just ignored it, but I think to not even mention it was a glaring omission.

• You can view the session in its entirety at this link: https://www.piie.com/events/2024/2024-wto-ministerial-conference-whats-next

General Laura Richardson on security in the Western Hemisphere

Now that I’m freed from the shackles of working for the US government, I can return to many things that I couldn’t do while I was toiling for Uncle Sam, like writing for my blog. Since I’m in Washington, DC to sell my condo, my plan is to take advantage of all of the international policy events taking place here, so I’ll use them as blog fodder. I attended this virtual event last week, On the state of spyware: Mapping the risks and incentives of the market but didn’t find much to write about. I attended another event this morning: I was going to write a summary, but the Atlantic Council beat me to it:

US SOUTHCOM Commander General Laura Richardson told the Atlantic Council today, “US government activities to protect the homeland remain firmly in place,” emphasizing the ongoing efforts of the US government to safeguard the homeland against global espionage threats, particularly those posed by the People’s Republic of China. Her remarks were made at an #ACFrontPage event moderated by POLITICO’s Alexander Ward at the Atlantic Council headquarters in Washington, DC. 

General Richardson highlighted the significance of the proximity of potential threats, citing concerns over a Chinese spy base in Cuba. She emphasized the importance of vigilance, stating, “Proximity matters and 90 miles from our homeland—it matters. We have to be concerned about that.” She also addressed concerns regarding malign influence by Russia in Nicaragua. “We would like to get rid of that,” said General Richardson, adding “We want all countries in the region to be thriving democracies.”

In response to questions about the crisis in Haiti, General Richardson reiterated the US military’s preparedness for various scenarios. “The military always continues to plan and be ready for any possible situation. Certainly, what’s happening in Haiti is disappointing and is very concerning,” said General Richardson, noting that “an international solution that includes a Haiti perspective is very important. I don’t think a US-only solution is where we need to be going.”

Watch the full event or catch up on the highlights

All I’d add is:

• The US is supporting Guyana as Venezuela is amassing troops at the border.
• The US recognizes Argentina’s sovereignty, so the US is reserving comment on China’s investments in space exploration investments there.
• Although we can’t compromise national security for dollars, US companies must compete in infrastructure projects around the Panama Canal so that we don’t just accede these to the Chinese.
• She is joining US Secretary of Commerce Gina Raimondo on a trip to Costa Rica.
• We are asking Latin American partners to support Ukraine by requesting they send Russian-made equipment to the Ukranians, & upgrading this equipment at home with US alternatives.
• Development Finance Corp investment financing is helping to confront organized crime in Ecuador.

Turkish resources for U.S. organizations

I almost went to teach in Turkey in 2012, but they were so slow/bureaucratic that they ended up saying “Oh, don’t bother to come in the Fall. You can just teach the Winter semester…” which would have effectively cut my earnings in 1/2, so I ended up going to teach in South Africa instead…& now I wouldn’t want to teach there, for fear of being jailed.

how-to-do-business-in-turkey_trDownload

Commercial Service

US embassy

Turkish embassy in DC

American Chamber of Commerce

OECD

World Trade Organization

World Bank

International Monetary Fund

Transparency

Doing Business

Global Edge

World Factbook

Resources for U.S. organizations in Poland

I spent 7 months in Poland many years ago and saw a lot of presentations on Poland, so I’m warning you, I have a lot of info on Poland. Here goes:

Poland Your Business Partner-englishDownload

How to do business in Poland-unidoenDownload

Lodz

lodz-sez-presentation-usaDownload

Silesia

silesia-regionDownload

Starachowice

an-entry-declarationDownload

presentationDownload

partnersDownload

sez-offersDownload

human-resources-vi-2007Download

effects-31-12-2007Download

acts of law

commission-regulation-ec-1628-2006Download

regulamin-sseDownload

rozp.-zez-i-kontrDownload

rozp_o_sse_od_30_10_2007_angDownload

rozpmgprzetarg-od-07-12-2004_angDownload

ustawa-o-sse_ang-od-07-09-2006Download

zal-i_ang-0d-01-01-2005Download

Swietokrzyskie

informator_angielskiDownload

Miejsce Mocy (in Polish)

atrakcjeregionuswietokrzyskiegoDownload

informatorturystyczny_iDownload

informatorturystyczny_iiDownload

szlakipieszeczarneDownload

szlakipieszeczerwoneDownload

szlakipieszeniebieskieDownload

szlakipieszezieloneDownload

szlakipieszezolteDownload

szlakirowerowekielcpowkieleckiegoDownload

szlakiroweroweokolickonskichDownload

szlakiroweroweokolicopatowaDownload

szlakiroweroweokolicostrowcaswDownload

szlakiroweroweokolicsandomierzaDownload

szlakiroweroweokolicskarzyskakamiennejDownload

szlakiroweroweokolicstarachowicDownload

szlakrowerowyarchitekturyobronnejDownload

szlakrowerowyokolicwloszczowyDownload

tematyczneszlakiponidzianskieDownload

transwojewodzkiszlakrowerowyDownload

Warmia & Mazury

how to do good-business-englishDownload

good-climate-for-investment-englishDownload

export-opportunities-englishDownload

thousand-lakes-englishDownload

links as of 2021

Commercial Service

US embassy

Polish consulate in Chicago

Ministry of Economy

American Chamber of Commerce

Polish American Chamber of Commerce

European Union

Freedom House (the successor to the organization that took me to Poland many years ago)

World Trade Organization

OECD

World Bank

International Monetary Fund

Doing Business

Broadband resources for U.S. organizations in Latin America

My experience with broadband in Brasil (in Latin America) was good. I hadn’t fully gone wireless yet, and my broadband wired connection was fine in Leblon in Rio.

If I remember correctly my internet connection was through my cable TV, which was a bit frustrating because, like in many other places, I had no choice other than 1 provider. I don’t like supporting monopolies and would have preferred another provider, but unfortunately that was not an option. Regardless, my connection was consistent and stable.

btw-Brasil is a big user of broadband, and recognized as 1 of the top 4-5 countries in the world as users of mobile, broadband, social media, etc. However, connectivity is usually provided by local subsidiaries of foreign companies, for example Telefonica from Spain, which means they typically don’t develop a lot of the technology in-country. Ironically, these foreign markets like Brasil, in some cases are bigger than the home market, Spain, but they’re still just sales subsidiaries.

anuario-banda-ancha-ingles-EnglishDownload

anuario-banda-ancha-esp-SpanishDownload

resources for U.S. organizations in Kazakhstan

Never been there, but saw a presentation on the country, I believe during one of the Silk Road conferences that Harry Lepinske creates at the Central Asia Productivity Research Center.

country-profile-2007Download

Commercial Service

US Embassy

Kazakh embassy in DC

American Chamber of Commerce

US-Kazakhstan Business Association

World Trade Organization

World Bank

Doing Business

International Monetary Fund

Global Edge

Transparency

World Factbook

italian resources for U.S. organizations

How appropriate that the day after they win the European Cup, I put up resources for Italy. A trip to Italia was my 1st trip outside of Germany when I lived there many years ago. I took the overnight train to Rome Easter weekend and was blessed by the pope and a million of my closest friends. I then spent a few days in Florence, before I hit a European Thunderbird Reunion in Venice. It was quite a trip.

On the business side, for some reason, I was invited a number of times to dinner with the Italians in the penthouse of the Harold Washington Library during the International Machine Tool Show (IMTS), which is where these come from:

imts_2008Download

imts_2006Download

imts_2004Download

imts_2002Download

imts_2000Download

Italian Machine Tools, Robots, & Automation Manufacturers Assn.

Italian Machine Tools

Commercial Service

US embassy

Italian embassy in DC

American Chamber of Commerce

Italian Chamber in US

Italian Trade Commission

European Union

World Trade Organization

OECD

Doing Business

Global Edge

International Monetary Fund

Transparency

Indonesian resources for U.S. organizations

I only spent a short amount of time in Indonesia when I popped over from Singapore, but I enjoyed the time I was there.

indonesia-a-brief-guide-for-investmentDownload

procedures-approvals-licensesDownload

cost-of-doing-business-and-taxationDownload

batam-island-industrial-zoneDownload

business-fields-closed-and-open-to-investments-on-certain-conditionsDownload

fishing-industry-regulationsDownload

immigration-affairsDownload

industrial-zoneDownload

investment-application-procedureDownload

national-land-policyDownload

negative-listDownload

operation-of-tourismDownload

reservation-of-mining-areaDownload

reservation-of-miningDownload

selling-rate-of-electricity-by-private-sectorsDownload

supervision-over-fair-competition-in-telephony-servicesDownload

tariff-of-telephony-servicesDownload

technical-instructions-for-investments-20041Download

use-of-maps-and-clarification-of-boundaries-for-mining-concessionsDownload

visas-entry-permits-and-immigration-permitsDownload

wage-councilDownload

Regulations

regulation-on-buildingsDownload

regulation-on-import-duty-exemption-for-raw-materialsDownload

Decrees

decree-of-the-minister-of-marine-and-fisheries-no1.-10-year-2004Download

decree-of-the-minister-of-mines-and-energy-no1.-1895.k-year-1995Download

decree-on-non-government-consumer-protection-instituteDownload

decree-on-the-employment-of-expatriatesDownload

Laws

law-on-foreign-investmentDownload

law-on-industrial-designDownload

law-on-patentsDownload

law-on-regional-administrationDownload

law-on-regional-governanceDownload

law-on-trade-marksDownload

law-on-utilization-of-landDownload

Commercial Service

US embassy

Indonesian embassy in DC

American Chamber of Commerce

American Indonesian Chamber of Commerce

OECD

World Trade Organization

International Monetary Fund

Doing Business

Global Edge

World Bank

Transparency International

Resources for U.S. Businesses in Hong Kong

I don’t know if these will help, but I throw them out there in hopes that they will.

ihk_investment_guidebookDownload

forewordDownload

introductionDownload

conclusionDownload

usefulcontactsDownload

overview-2Download

o2-importanceDownload

o3-WTO, CEPADownload

o4-Trends/OpportunitiesDownload

o5-competitionDownload

jurisdictions-1Download

j1-Hong KongDownload

j2-MacaoDownload

j3-GuangzhouDownload

j4-ShenzenDownload

j5-DongguanDownload

j6-FoshanDownload

j7-HuizhouDownload

j8-ZhuhaiDownload

j9-JiangmenDownload

j10-ZhongshanDownload

j11-ZhaoqingDownload

factsfigures-1Download

f1-definitionsDownload

f2-summaryDownload

f3-populationDownload

f4-gdpDownload

f5-gdp/pcDownload

f6-industrial outputDownload

f7-value addedDownload

f8-intl trade & investmentDownload

f9-output by industryDownload

f10-transportation statisticsDownload

f11-financial marketsDownload

f12-tourismDownload

f13-comparisonsDownload

Commercial Service

US consulate

American Chamber of Commerce

World Trade Organization

Doing Business

Global Edge

International Monetary Fund

World Factbook

Invest Hong Kong

Hong Kong Trade Development Council

German resources for U.S. organizations

For one who lived there for a few years many years ago, you would think I’d be able to come up with more, but this will have to do:

investors-essential_ppt_iig_090130_csDownload

factsfigures_incentives-in-germanyDownload

Doing Business in Eastern GermanyDownload

energy-emp09_gesamt_091118Download

german-mittelstand-2012_bremer_gtaiDownload

workshop-chicago_friedrich_23-oct-2012_gtaiDownload

Invest in Mecklenburg-Vorpommern

Commercial Service

US embassy

German embassy in DC

American Chamber

German American Chamber of Commerce

European Union

OECD

World Trade Organization

Doing Business

Global Edge

International Monetary Fund

Germany Trade & Invest

Czech resources for U.S. organizations

Spent a wild weekend in Prag for a European Thunderbird Reunion the weekend OJ was cruising down the LA highway in his white SUV. It’s kinda funny the things you remember when you’re traveling. I stayed on a boat-el on the river, and the Budvar was pretty good.

Here are a bunch of files about trade fairs in Brno-more (up-to-date) info @ www.bvv.cz

arealDownload

dataDownload

data_tabDownload

planek_en-mapDownload

profilDownload

projekty-projectsDownload

sluzby-trade fair servicesDownload

Commercial Service

US embassy

Czech embassy in DC

AmCham

European Union

World Trade Organization

International Monetary Fund

Doing Business

Global Edge

OECD

World Factbook

Transparency International

Canadian resources for U.S. organizations

sred-presentation-pricewaterhousecoopersDownload

sred-presentation-ontarioDownload

sred-presentation-quebecDownload

sred-presentation-fasken-martineauDownload

I’m a little embarrassed this is all I have to show for Canada because I spent 4 1/2 years of my life working for the Canucks, but that was last in 2003, & I’ve spent most of my time since then exploring more interesting places. So here goes…

Commercial Service

US embassy

Canadian embassy in DC

AmCham

Canadian Trade Commissioners Service

OECD

World Trade Organization

Doing Business

Global Edge

(C)USMA

International Monetary Fund

Technology-investment

Resources for U.S. organizations in Croatia

I spent a lovely long weekend in Dubrovnik for a European Thunderbird Reunion and a night in Zagreb on the way out, but that’s all my direct experience.

apiu_investment_guideDownload

Commercial Service

US embassy

Croatian Embassy in Washington

AmCham

European Union

World Trade Organization

World Bank

International Monetary Fund

Doing Business

Global Edge

World Factbook

Corruption Index

Bulgarian resources for U.S. organizations

This is for my buddy Boris from Bulgaria: I hope you find I got ’em right.

us-bulgaria-roadshow-headerDownload

us-bulgaria-business-guide-roadshowDownload

bulgaria-general-presentation-april-2011Download

uscommercial_service_us_bulgaria_buildingbridges_2011Download

2011-doing-business-in-bulgaria_us-commercial-serviceDownload

doing_business_in_bulgaria_2010_ernst-youngDownload

amchamyearbook2011webDownload

magazine_jan-feb_116Download

magazine_march_117Download

magazine_april_118Download

amcham-microsoft-us-roadshow-2011Download

johnson-controls-sofia-center-presentation-2011-04-30Download

sofia-csc-inaugurationhoneywell_20-apr-2010Download

ernstyoungma_barometer_cee_p4_electronicDownload

tax_alert_jan_feb_2011_enernstyoungDownload

tax_alert_march_2011_enernstyoungDownload

honeywell-bg-csc-brochureDownload

kraft-bulgaria-us-road-show-2011Download

bulgarian_mining_industry_presentationDownload

colliers-international_company-informationDownload

colliers_industrial_review-h1-2011Download

colliers_office_review_h1-2011Download

colliers_residential_review_h1-2011Download

colliers_retail_review_h1-2011Download

US Commercial Service

US embassy

Bulgarian Embassy in Washington

American Chamber of Commerce

Bulgarian Chamber in U.S.

European Union

World Trade Organization

International Monetary Fund

World Bank

Doing Business

Global Edge

World Factbook

Brazilian resources for U.S. organizations

I’m actually kind of embarrassed that this is so meager, but I only attended a few events on Brasil before I actually lived and worked there, so here are the organizations I worked most closely with in Rio:

brazil-rail-briefing-bookDownload

US Commercial Service

US embassy

AmCham

Brazilian embassy in Washington

World Factbook

Mercosur

Technology

Education

Media

Tourism

Small Business Administration equivalent

Think Tank

Resources for U.S. companies in Bosnia Herzegovina

Here are a number of resources I’ve gathered from attending presentations on Bosnia Herzegovina and a few others I’ve uncovered:

Investment FAQ’sDownload

Sarajevo Economic Region Development Agency

US Commercial Service

American Chamber of Commerce

US Embassy

Bosnia Herzegovina embassy in Washington DC

World Bank

International Monetary Fund

Global Edge

World Factbook

Doing Business

European Union

Transparency International

European Bank for Reconstruction and Development

Resources for U.S. organizations in Belarus

doing-business-2014-ifc_wbDownload

belaz-presentationDownload

belgosstrakhDownload

borovtsovsalei-presentationDownload

development-bank-rus-engDownload

the-development-bank-of-the-republic-of-belarus_ny_2014_eng-17-09-2014Download

eximgarant-presentationDownload

intetics-reducing-investment-risks-in-it-sector-of-belarus-and-eastern-europeDownload

jnetworks-flyer-2014Download

about_the_companyDownload

US embassy in Belarus

Belarus embassy in Washington DC

International Monetary Fund

GlobalEdge

Doing Business

World Bank

World Factbook

Austrian resources for U.S. organizations

I’ve attended a lot of seminars on business in different countries, and been the recipient of many presentations, disks, and files, so I thought I’d share them. I’ll add what other resources I’ve found to be helpful as well.

Let’s start off with some info from Invest in Austria

automotive-industryDownload

business-location-austria-presentationDownload

business-location-austriaDownload

central-eastern-europeDownload

chemicalsplasticsDownload

environmental-technologies-renewable-energyDownload

headquarters-location-austriaDownload

hq-location-austria-facts-rankingsDownload

hq-location-austria-legal-fiscal-aspectsDownload

hq-location-austriaDownload

investing-in-austria-legal-aspects-preslmayr-8th-edDownload

it-telecomDownload

life-sciencesDownload

logisticsDownload

machinery-electronics-mechatronicsDownload

research-developmentDownload

starting-businessDownload

tax-aspectsDownload

tourismDownload

Commercial Service and Country Commercial Guide

American Chamber of Commerce in Austria

US embassy in Wien

Austrian embassy in Washington DC

Austrian Chamber of Commerce

Organization for Economic Cooperation and Development

International Monetary Fund

World Trade Organization

GlobalEdge

Doing Business

Business Culture

European Union

Here is some information and photos from Upper Austria Plastics Location: Innovative Austria: Strategies for US companies to conquer the European Market-the European and Austrian Plastics Industry and the Austrian Plastics Competence Center Model. www.Kunststoffstandort.at

tmg_brochureDownload

plastics-clusterDownload

plastics-location-ua-_brochureDownload

plastics-location-uaDownload

npe09_abstract-austriaDownload

090624-spic2ad_upper-austria_presentation_final-versionDownload

OK America, so what are we going to do about it?

At the risk of overstepping my bounds, I suggest Black Lives Matter is not thinking big enough.  Obviously racial violence against African-Americans inflicted by the police is a deadly problem, but in many ways, it’s simply a reflection of roles in society.  African Americans are not the political or  economic equal of European-Americans in the U.S., so these senseless killings just reflect those inequalities.  Black leadership needs to construct a plan to build bigger economic and political power bases. 

I endorse peaceful protests.  George Floyd’s murder is just one in a number of senseless racially-induced tragedies.   I was in New York when Eric Garner was strangled to death on Staten Island.  There were protests then too, but apparently nothing has changed. Protests are not enough unless they result in real change.  Leaders know protesters are pissed off, but they need to know what to do to change things. 

I offer a few proposals we need to implement to start making changes now: 

• Change election day from Tuesdays to Saturdays.    Government cannot be representative of its people if only a small percentage of people vote.  Participation is driven by availability.  Tuesday is a workday, and so for hourly-wage earners, they have to give up work time to vote, which provides a financial disincentive not to vote.  We can eliminate this disincentive by moving our voting day to Saturday. 

• The biggest shame in my mind is that America claims to be the land of opportunity, but the chances to take advantages of those opportunities are not fair.  There aren’t the same opportunities to get a good education, which is the basis of most opportunity.  We need to change our funding for education.  It’s ridiculous that such disparities exist between school districts within a few scant miles.  Dedicating local property taxes to fund education isn’t fair when it results in such disparities. We need to elevate funding to the county or state level, because it’s not working at the local level. 
• African Americans need to generate wealth accumulation to compete with European-Americans.  The top 1% doesn’t work: they invest, which takes advantage of financial to continue to increase their wealth at greater rates than wage inflation.  It’s this wealth accumulation that also leads to political clout.  Investing and entrepreneurship are the fastest ways to generate income quickly.  Black markets are significant in the U.S., so the possibility to sell in volume exists.  Again, education is required to activate these accelerators. 

I abhor racism.  I taught at Chicago State University (CSU), a HBCU for 3 years.  I learned what it’s like to be in the minority and it was not comfortable.  I was discriminated against and I was not happy with that, but I understood it.  At the same time, my some of my students at CSU inspired me like no others.  Students of mine at CSU were single parents working full-time jobs going to school full-and part-time: no school where I’ve taught came close to the percentage of students doing that.  I even had a few students who blew me away when they let me know they were pursuing their international business (the courses I taught) dreams by going to live and work abroad. 

Maybe I’m expecting too much.  My suggestions are by no means sufficient to solve our racism problem.  We just need to get things started with concrete actions that will bring tangible results, and if we can move in that direction and create some momentum and at least elevate this to the point where we’ll continue to pay attention to this over time, I’ll have done a small bit of good. 

another senseless killing…stop the madness!

I didn’t know Lola Gulomova well before she was shot and killed by her estranged husband Jason Rieff. She worked across the hall and increasingly came over to our office to encourage co-workers to apply for rarely-available positions.  Her death also upsets me a lot because they left 2 daughters who are now fucked-up for life.  At first I was bewildered, trying to understand how any human being could commit such a heinous crime, but I finally figured out that Jason was sick, and therefore it’s impossible to make any sense out of this.  No one in their right mind, could have done this, so my only conclusion can be that he was mentally ill, and there can be no rational explanation that explains what he did.  Now I’m still angry, sad, and confused, but want to try to do something to bring a a little bit of good from this horrible tragedy.

So to prevent this from happening again, we need 2 things:

1. gun control
2. more resources to address mental health issues

This was clearly a gun-enabled killing.  In other words, if it weren’t so easy to access a gun, both of these people   would still be alive today.  These stats pretty much sum up the gun problem:

• The U.S. gun homicide rate is 25 times that of other high-income countries.
• Women in the U.S. are 21 times more likely to be killed with a gun than women in other high-income countries.

These stats are an embarrassment when compared with the rest of the world, and there is no justification for them.  Anyone who justifies gun ownership by saying incidents like this are just collateral damage, or that more guns to defend oneself are the solution are misguided.  Fewer guns are the answer, not more guns.  I’m a Make Love, Not War kind of guy, but that doesn’t make me any weaker than many testosterone-infused gun-owners with an inflated sense of themselves because they’re packin’ heat.  Maybe Jason was a hunter, or Lola had the gun to defend herself and he turned it on her.  Maybe this was an accident, but she was shot multiple times, so I really don’t think so.  They both had high-level government security clearances, so I can understand how they were able to get a gun, but that simply means we need more checks and balances.  People who are going through a divorce shouldn’t be granted a gun permit, especially given the statistics cited above.  Guns are quick, easy, and efficient killing machines, which are great for winning wars, but horrible in homes.  I realize nothing can bring Lola back, but if there is anything positive to come out of this, please make a contribution to stop this senseless violence and get a few guns off of our streets.

I don’t think anyone saw this coming, which means Jason must have kept his mental illness carefully hidden.  Regardless, someone failed to recognize the severity of the problem and do something about it.  Personally I object to how people with mental illnesses are portrayed in the media.  Billy Bob Thornton was ultimately another mentally-ill killer in Slingblade.  Jack Nicholson was a sick obsessive-compulsive who drew lots of laughs in As Good as It Gets.  The only movie I can recollect that presented mental illness in a compassionate way was A Beautiful Mind, which portrayed John Forbes Nash, Jr. as a sick, brilliant, and ultimately positive person, and contributing member of society.  When the media jumps to the conclusion that every killer is mentally ill, it leads people to believe that the reverse is true too, i.e., that the mentally ill are dangerous threats to society.  My knowledge and experience leads me to the opposite conclusion, that the mentally ill are much more victims of violence than perpetrators of it.  They feel helpless, with little or no control over their own lives, which either leads them to lash out, or be taken advantage of.  The National Alliance on Mental Illness is trying to help.  I urge you to make a contribution so that we can provide better mental health treatment to address the root of these problems, rather than letting them fester until they boil up and result in incidents like this.

Thus when I say “Stop the Madness” I mean it literally as well as figuratively.  Devote more resources to fight mental illness, which will ultimately stop the madness…and get the guns off the streets to stop the madness of gun-stoked domestic violence.  This whole thing still makes me feel like Peter Finch as Howard Beale in the classic film Network

when he said,

“I want you to get MAD! All I know is that first you’ve got to get mad. [shouting] You’ve got to say: ‘I’m a human being, god-dammit! My life has value!’  I want you to get up right now and go to the window. Open it, and stick your head out, and yell: I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!  Go to your windows. Open them and stick your head out and yell – ‘I’m as mad as hell and I’m not gonna take this anymore!’ Things have got to change. But first, you’ve gotta get mad!…You’ve got to say, I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!  But first, get up out of your chairs, open the window, stick your head out, and yell, and say it: I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!”

I  hope that somehow, some way, this will save someone from the same fate.  No change means we accept the status quo, and that’s not acceptable.  I realize I won’t change the world, but if this takes one gun off the street or someone makes one donation to devote more money to improve mental health, I’ll have made at least a small difference.

RIP Lola.  Make a contribution here to support her daughters

A special thanks goes out to my sister Carol Muth, who provided the gun control info and pointed out that this shooting occurred on National Gun Violence Awareness Day.

triathlons in Rio

Now that I may have completed my last triathlon in Brazil yesterday, I think it’s time to file my race report for the race I’ve done the most times in my life.  I’ll try and be as objective as possible and not get too emotional about it.

Finding triathlons here has not been easy.  I have not found a centralized resource like trifind etc., so I’ve had to search for triathlons in different cities where I think they might take place.  Sao Paulo is bigger, so there are more races there, but I haven’t wanted to travel that far to race.  There are a number of places that I think would be great triathlon venues, like Buzios, Niteroi, and Petropolis, and many of them held races when Brazil was in major growth mode.  But when the economy crashed in 2015, they all disappeared.  Consequently, I’ve ended up doing the same race 8 times.

I’ve also looked for & found 30 triathlon clubs in the greater metropolitan Rio area, but found none that offer anything remotely social.  All the clubs here offer are different training regimens, usually early a.m. before the bad guys come out, & nothing more.  It makes me appreciate the Chicago Triathlon Club so much-the mix of workouts & social interaction I thought was great.  Maybe the Brazilians are so social on an ongoing basis, they don’t feel the need to be social with triathlon-buds.

Registering for a tri here is quite a bit more arduous than in the U.S.  It’s not until this year the race I’ve done even accepted credit cards, & they were so skeptical of foreigners, they had to call me to verify my identification before they accepted me into the race.  I’m not sure that a foreigner can even register for a race here because they require data that only locals possess (CPF number).

In their defense, packet pickup is just as much of a pain as it is with many other races.  I’ve had to drive 45 minutes-1 hour out to Recreio to pick up my race packet in about 2 minutes.  One race done at the same venue but put together by another organizer had packet pick-up at a sporting goods store only 1/2-way out there, so that was an improvement.

Getting to the race became a challenge when my GPS kept sending me back to a road that was closed for the race over & over again.  Because the street signs don’t actually contain the names of the streets, (they just point you in the general direction…Centro, Recreio, Barra, etc.), I’ve driven around in circles and had to show up late for races after they started because I went crazy getting lost the morning of a race. Now I know how to find my way there, but that’s just because I learned by trial & (lots of) error.

The transition area is pretty well situated, with numbered slots for all of the participants.  It’s on a bumpy cobblestone parking lot, but that’s workable.  You aren’t allowed to leave your bag with your bike, so you’re required to check in your bag with everything you won’t be using for the race.

Open water swims in the Atlantic Ocean leave you open to lots of variability.  The swim in the race I’ve done in Recreio takes place on either side of a peninsula: races have been on both sides.  On either side, at some point you end up swimming into the sun, which makes sighting much more difficult.  Yesterday the surf was the strongest it’s ever been, and thus I had my slowest swim ever, 28:40 for 750 meters.  I was thrown around like a rag-doll in the waves coming in & out near the shore-normally I take 10 minutes less than that.

The bike is flat, right along the shore, 20K for the sprint.  The only potential difficulty is the wind.  Yesterday it was at my back going out & in my face on the way back in.  My 1st half time was normal, 22 mins, but I lost about 6 minutes coming back, so my bike was slow too.

The run is flat & along the shore too, out & back for 5K.  My time was a little slow, but not as slow as I thought I’d be.  I’ve developed a parameniscal cyst on my left knee, which is a result of a slightly torn cartilage in my knee, so I knew I wouldn’t match prior running times.

Here’s where I need to divulge, for the 1st time in my tri-career, I was dq’ed.  My most egregious infraction was running on the grass next to the road for the run.  Apparently if I had asked permission before the race to save my knees by running on the grass, I would have been OK, but after doing this the 7 previous time, I didn’t know if was an issue.  I was also busted for 3 other indiscretions, but I’m still not sure what they were.  Between the bike and the run, they actually made me wait 1:30 in the penalty box, just as if I were in an ice hockey game.  Before the race, I was asked to remove the rack on the back of my bike when it was deemed a safety hazard if someone fell on it, but because no one had tools for me to remove it, I was granted an exemption.

Everyone gets a medal, and race winners even get prize money.  As an age-grouper, it’s been even more competitive here.  In the U.S., I usually come in in the upper 1/2 of my age group-here I usually come in near the bottom.  That’s OK, as long as I don’t lose too much time.  Until this race, I haven’t.  Post-race nutrition consists of a lot of fruits, bananas, watermelon, oranges.

On the whole, I’ve enjoyed my triathlons here.  I would just liked to have been able to do a wider variety of races.

demonstrations in LDC’s

I had my 1st “international incident” experience Friday night, & it left a deep impression. I was locked up in the consulate & forbidden to leave because it was too dangerous for me to go home. After finally finding my way home, I realized our security people were not kidding-this was serious, & they were correct for not allowing me out in it.

What happened was, the PT, or Workers Party (Partida dos Trabalhadores) planned a general strike on Friday to protest the imposition of 2 new laws: 1 to OK the outsourcing of work that had not been allowed in the past that will give Brazilian businesses the flexibility to contract out even core activities of their businesses, if they so choose, which was forbidden in the past; & 2. to change to the terms of the pension/social security system to eliminate benefits for some retirees, which are simply financially unsustainable. For example, judges, the military, & other public officials are given pensions covering up to 80% of their wages that can be transferred to remaining spouses and handed down to descendants for generations, which will end up costing the Brazilian government money that it can’t afford to pay in the future.

As I was sitting in my office @ ~5:30 p.m. surveying the evening’s musical choices, 1 of the marines came in & told me to check with their guard station before I leave. I thought that a little odd because I was never told to do that before. When I went to leave @ 6, I was summarily told that I was not allowed to leave, that it was too dangerous for me to leave the building @ that time. They showed me the footage from 1 of the security cameras that displayed some tires that had been set on fire outside the consulate. I returned to my office thinking, “These guys are paranoid.” I had walked past some demonstrations around Cinelandia in the past, & they were no threat to me, or anyone, as far as I could tell. I assumed this 1 would be no different. In the next hour I could smell the stench of the burning tires and heard what sounded like small bombs going off. When I returned to try to leave @ 7, I was told it still wasn’t safe enough to go out, so I went back to my office for another hour. I tried to leave again @ 8, but was still told “No go.” Then @ 8:15, they made an announcement that we were free to go.

What I encountered outside the consulate’s door was breathtaking. The windows to the banks Bradesco & Caixa had been smashed, & I’m told thieves had tried to steal the cash from the ATM’s. The metro stop @ Cinelandia was closed, so I had to walk to the next station @ Gloria, about a 20 minute walk away. As I approached Sala Cecilia Morrelles, a nice venue where I’d seen a number of concerts, I came across 9 burned out buses which had been set on fire. Walking a little bit further down the street, a few trucks filled with military police drove by, guns @ the ready, prepared to aim & shoot. When I finally got the Gloria station, my eyes started burning & I couldn’t breath because of tear gas that remained in the air. I realize it sounds trite to say “Tear gas is nasty stuff,” but you can’t realize how nasty it is until you experience it. Like when I visited the concentration camps when I was in Poland 20 years ago, it’s the smell that leaves as deep an impression on any of the senses…it’s inescapable.

Lesson learned: when the security guys say “sit tight” listen to them.  While they may seem overly protective at times, they know the risks & are only looking out for our own safety.

For more details check here http://www.bbc.com/news/world-latin-america-39753849

awe-inspiring paralympic athletes

I checked out the women’s paralympic triathlon & couldn’t help but write about it. These women are so inspirational, they are beyond description, but I’ll give it a try. I’ve done a lot of sprint triathlons in my day, but I haven’t overcome a fraction of what these women have. What I saw today blew me away.

Let’s start with the swim. The 1st race was for women who are physically challenged, so swimming with 1 arm or 1 leg is difficult, but do-able. The tough part is getting in & out of the water, so they had helpers get racers to their prosthetics coming out of the water. The 2nd race was for blind racers, so they had to do the whole race, swim included, tethered to a guide. That has got to be tough.

Then they move to the bike. This portion probably has the fewest differences between Olympic & Paralympic athletes for the physically-challenged. However, the blind racers rode on tandem bikes, so a strong guide could be a big advantage.

In the run, we get to the hard part. We have a long way to go to get prosthetics to work well. I don’t know how Oscar Pretorius did it-the prosthetics these women used didn’t allow them to run anything like a normal runner. Their gaits were very unbalanced, which puts lots of strain on the leg that does function normally. The breakdown over time must be very difficult to deal with & they must suffer from overuse injuries galore.

There was 1 runner who stuck out to me: Rakel Mateo Uriarte of Spain. She came in dead last @ 1:40:33-the distances were shortened from the “Olympic” distance, so this was essentially a sprint triathlon-but she was still a winner to me because she was the only athlete who had the impairment she did. The International Triathlon Union says she was in an accident in 2001 which left her left leg paralyzed.  She hadn’t participated in triathlon before her accident, but picked it up to keep moving. I didn’t see her come out of the water on the swim, but the result of her challenge was that she couldn’t pedal the bike with both legs, which meant she had to pedal the whole race with just her right leg.  To top it off, she did the whole run on crutches…& she did the race in about the same time I do my sprint triathlons.  Granted I’m a slow old man, but completing races with her challenges blows my mind.  The mental fortitude this woman must have must be incredible.  I can’t imagine the strength & endurance she must have to complete these races.

The USA did well.  American Grace Norman won the PT4 race.  The Americans swept the PT2 race, with Alyssa Seely winning the gold, Hailey Danisewicz taking the silver, & Melissa Stockwell bringing home the bronze.  The PT5 race was a heartbreaker for American Elizabeth Baker, who came so close to earning a medal, but just fell short, literally. She came out of the water 6th, then moved up to 4th on the bike.  Then on the run, with 100 meters to go, she had pulled into 3rd place, primed for a bronze medal, but then the Brit Melissa Reid overtook her, when Elizabeth unceremoniously fell, sealing her 4th place finish in the race, after Reid.  She might not have known that Reid was catching up on her.  She couldn’t see her because she’s blind, but I would bet her guide was keeping her fully informed along the way.  My heart goes out to her, & falling was the final indignity, but their exciting finish got the most applause of the day.

I realize these paralympic races are fodder for platitudes, but in this case, I think the praise is warranted.  I do these races, so I know how hard they are.  I can recognize the difficulties they must overcome to compete at the level they do.  These women have inspired me & I’ll keep their challenges in mind when I start to bitch & moan about my next race almost a month from now in October.

my $.02 on Rio2016

Now that the Rio2016 Olympics are done & the Olympians & fans are heading home, it’s time to reflect on how it worked out for Rio de Janeiro. When I arrived in Rio a year ago, the prognostications were not good. The Globo newspaper media empire spelled out 5 Grand (large) Obstacles:

1. Metro/subway-the new subway line which was being built to provide transportation to & from the Olympic park was planned for completion only a month before the games were to begin, a small window to correct problems, if required. Then a few months ago, that window was further reduced to just 5 days before the Olympics start, making any last minute changes of any consequence impossible. Remarkably, the subway opened, took passengers to the events, & was little problem @ all.
2. H2O-much has been made of the quality of the water in the lagoon and Guanabarra Bay where the rowing & sailing events were held, respectively. The goal was to clean 80% of the water by the time the games begin, but sanitation only advanced to clean 50% of the waste being dumped into the water supply. That’s much more than was in the past, but short of the goal of 80%. I only read of 1 Belgian Olympic sailor who became ill after falling in & possibly ingesting some water, hardly an epidemic, & arguably within statistical norms. While the water quality is still @ an unacceptable level, it didn’t result in any calamities @ the Olympics.
3. 4, & 5 Stadia for cycling, rowing, & track & field: were behind schedule, but completed on time without incident.

Since that article was published, a few other issues arose which impacted Rio2016 significantly:

• zika virus: despite not rising to the levels of recent past epidemics & being out-of-season by the time the Olympics arrived, zika was deemed a threat to the health of all who dared to come to Brazil to watch the games live. There was no outbreak & zika seemed to be a non-issue during the games.
• political crisis: President Dilma Rousseff was impeached, which created lots of political stability & the threat of uprisings, etc. during the Olympics. While Brazil will continue to be in a holding pattern until a new president is elected in 2018, there have been no major repercussions from this calamity.
• economic crisis: as a result of the political crisis, Brazil’s economy has taken a nose dive, as indicated by a fall in the currency, the Real, of 30% in 6 months, from R$3.2/US$ to R$4.1/$US. investment has fallen, & unemployment has spiked. This made financing the completion of the projects for the games questionable, but again, all venues were completed on time.

True to form, the Brazilians pulled it off, by cramming @ the last minute, but they got it done.  The question is “What will be the long-term outcome of the Rio2016 Olympic games?”  Will Rio become another economic success propelled by the Olympics, like Barcelona & Seoul, or create a lot of white elephants, as in Beijing or Montreal, or even worse, lead to an economic downfall, as has been hypothesized about Athens, Greece.  London took the Olympic opportunity to rehabilitate an underdeveloped part of town to rejuvenate it & make that area a desirable place to live.  When I lived in Munich, they left the Olympic housing as residences for college students.  Rio will leave a different legacy.  While the subway extension & rejuvenation of the Praca Maua port area will benefit all of the population, the Olympic village is being converted into luxury condominiums for sale to the highest bidder.  Many of the venues were temporary structures, probably being deconstructed already as we speak.  The economic development organization of the Rio city government, Rio Negocios, held a series of events highlighting different industries in & around Rio, but I think they were probably disappointed with the international level of interest in their events.  The aftermath of the 2014 World Cup does not bode well.  New stadia now stand empty & a number of infrastructure projects were never completed, in some cases creating risks with what does remain.

I enjoyed being in Rio while the games were taking place: see pix:

• Olympic Torch Relay: https://www.flickr.com/photos/36706621@N00/albums/72157671949161326
• Olympic Beach Volleyball:  https://www.flickr.com/photos/36706621@N00/albums/72157672031703466
• Olympic Truce Foundation event: https://www.flickr.com/photos/36706621@N00/albums/72157671258327330
• Rio Parque Olympique:  https://www.flickr.com/photos/36706621@N00/albums/72157671608415911
• Women’s Olympic triathlon:  https://www.flickr.com/photos/36706621@N00/albums/72157669608162033
• Presidential Delegation visit to Corcovado:  https://www.flickr.com/photos/36706621@N00/albums/72157669665308624

…& I hope that Rio recognizes many positive benefits as a result of hosting the games.  I’m just skeptical that enough change will have taken place for the rest of the world to appreciate what a beautiful place this can be.

Where is the global market heading?

Nouriel Roubini, a professor @ the NYU Stern School of Business presided over Keiko Tashiro, the Chairperson/CEO of Daiwa Capital Markets America Holdings, Inc. to discuss this topic @ the Japan Society in New York.

It’s been an anemic recovery, & the only change has been the decelerating growth in the emerging markets.  The question is how strong & resilient will they be?  The recovery has been so anemic because the crisis was brought on by extreme leverage.  The fiscal stimulus that was implemented to combat it has led to an accumulation of debt that will take 5-10 years to de-leverage.  Emerging markets need robust growth of 5% , not 1-2 1/2 % less their debt.

To get 1-2% stronger growth in the industrialized countries, we need:

• fiscal consolidation, except in Japan
• advance de-leveraging to create better balance sheets with lower debt ratios
• lower risk probabilities by keeping the Euro together, not falling off any fiscal cliffs, avoiding conflicts, etc.
• keep low inflation, as the velocity of money has collapsed as stocks are in search of markets.  There is still slack in the employment market, so there is no wage inflation.  Central banks can be less conventional.  The Fed won’t start tapering until 3-4 years from now.
• Japan needs to create a virtuous cycle with structural reforms, which should be a gradual process.  There is a risk with monetary easing in asset inflation creating a bubble.  The central bank has been able to keep bubbles @ bay by keeping inflation & interest rates low for now.

Emerging markets are devaluing their currencies to spur growth.  Internally, macroeconomic policies are granting excessive credit.  State capitalism causes them to move away from free markets.  The most fragile are China, India, South Africa, & Turkey.  With elections, growth falls.  Now the risks are much lower because of less currency mismatches, debt ratios are better, & Argentina, Venezuela, & Ukraine are now the problems.  China’s hard or soft landing is fragile.  Fixed investment is too low as is consumption.  Banks have made too many bad loans.  They’re lowering risks, but it’s open to question as to whether they can implement changes quickly enough.  Growth is decelerating from 7% to 6 %.

European economic update

The European American Chamber of Commerce organized an economic update which featured James Bullard, CEO/President of the St. Louis Federal Reserve Bank, Nicolas Veron, Visiting Fellow @ the Peterson Institute for International Economics & Co-founder/Senior Fellow @ Bruegel. The panel was moderated by Sassan Ghahramani, President/Ceo of SGH Macro Advisors.

Bullard stated 3% growth should be achievable for the US in 2014.  Unemployment of 6.6% is still too high, but the Fed won’t start raising interest rates until unemployment falls below 6.5% or inflation rises above 2%.  Normal unemployment will drive a more normal interest rate policy.

Veron maintained that the issue today is not what the central banks do, rather it’s which countries have the most dysfunctional political processes.  The EU crisis continues to test financial systems & architectures.  The tests for EU institutions need to be redefined.  Watch for EU parliamentary elections to see if citizens are dissatisfied & how the European Central Bank (ECB) is transforming EU banking, which will hopefully create an opportunity for trust to return to the system.

Panel Q&A

Because we work with seasonally-adjusted data, the weather does not affect risk, but we have no model to evaluate this past year’s weather, so it’s OK to be suspicious.  This hasn’t received enough attention.

The reduction to 6.6% unemployment is a dramatic reduction unexpectedly soon, so now we must adjust our thinking.  Labor force participation is a long standing trend of long-term structural decline.  The drop in unemployment is a good sign & was faster than anticipated, & is remarkable in an economy that’s only growing @ 2% per year.  It’s a result of state decisions, not data conditions.  Interest rates won’t move until unemployment has moved well beyond the threshold of 6%.  Normalization of policy dictates that qualitative policy & judgement shouldn’t be tied to a particular number.

The 2012 contagion was a result of a combination of factors.  Banking union is becoming more important.  Political evolution in Germany is key, not to allow any country exit the Euro.  If there is deterioration, the ECB will act.  There are no immediate legal developments, but the relationship between Germany & Europe counts. Germany’s jurisdiction over the German Bundesbank affects the ECB’s ability to work.  The Bundesbank has been clumsy in attacking the ECB’s autonomy, & thus the ECB won, while the Bundesbank lost.  The constitutional court was smarter in trying to avoid frontal conflict.

The Fed pursued the policies of the 7 faces of  peril & was the biggest advocate for flow.  It worked well with more analysis of interest rate policy.  Quantitative easing is a powerful tool & moved markets, so now we can taper back to normal.  We won’t see a normal economy until we raise interest rates.  The committee doesn’t address specific issues of quantitative easing.  The Fed will raise interest rates fairly quickly.  The alternative is to stay @ 0% longer & lift faster.  Global interest rates are still low & this is expected to continue.  Inflation is still a puzzle & wildcard, & could force the ECB’s hand.

There is still much disenchantment in the non-German Eurozones.  Germany imposes it’s decisions on others, but Germany is still pro-Euro & pro-integration.  Other countries have different foci (focuses?).  Spain is not all skeptical, but separatism sentiments continue in Catalonia.

Politically, although there are more anti-system parties as mainstream parties decline, not all Europeans are anti-EU & anti-Euro.  Not everything can be seen through the Euro lens.  Cooperation is changing as policy makers are getting more defensive.