Archive for the ‘world business’ Category

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demonstrations in LDC’s

Monday 1 May, 2017

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

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my $.02 on Rio2016

Monday 22 August, 2016

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:

…& 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.

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Where is the global market heading?

Monday 17 November, 2014

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 %.

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do big sporting events really help local economies?

Thursday 8 May, 2014

I checked out this event sponsored by NYU’s Sports & Society’s department @ the School for Continuing & Professional Studies “The Lasting Impact of Sports Greatest Events.” The panel contained a veritable who’s who: Lisa Baird, CMO of the US Olympic Committee; Greg Ballard, mayor of Indianapolis-“amateur capital of the US; Greg Carey, sports finance specialist @ Goldman Sachs; Richard Florida, author of “Who’s your City?”; Kevin Hallinan, SVP of security of Major League Baseball, Constantine Kontokosta, of the NYU Center for Urban Science & Progress; Mary Pilon, New York Times sports reporter; David Rousseau, who sits on the Salt River Project board in Arizona.  The panel was moderated by Arthur Miller, Chair of the Sports & Sociey department @ NYU.

Indianapolis used sports to build the city into the capital of amateur sports in America, in which the citizens have a great sense of pride.  Rockpoint analysis determined the General Fund Effect was $40M.  Phoenix feels it’s getting an amazing reward from similar investments. These things bring prestige, like luring a major symphony orchestra.

The motivations for these things have changed, to achieve global city status.  The 1984 Olympics in LA made it an economic development game, but now the temporary economic impact doesn’t justify the long-term investment any longer.  The question is the impact on infrastructure.  Sports have become an excuse to do what should already be done.  For example, after the Olympics, what are they going to do with the bobsled run in Sochi?  There is little talk of what happens afterwards.

The Olympics are all about the athletes.  Sebastian Coe left a legacy in London, having built up the west side & put the para-Olympics on the map.  He’s created social good, while the economic impact hasn’t been measured yet.

There is a lot of ego involved, & differences between who embraces sports & those who do not.  The downside can be displacement.  These projects have to be about more than the game because stadia (stadiums) now cost a lot more:  San Francisco’s cost $1.3B.  Now security is primary & drives up costs, as Atlanta’s Olympics proves.  Terrorism & gay rights could have been issues in Sochi.  The Dept. of State was assuming safety would prevail.

Goldman Sachs actually invests in sports infrastructure & is bullish about this business, but admits these are not always good investments for cities.  The key is whether the investments are in good or bad infrastructure & whether it’s public or private investment.  Rio is building lots of infrastructure for it’s Olympics, but it’s been disaffecting & the security challenges will be unbelievable.   Public safety & public works are the highest priorities.  Cities must look @ expanding their tax bases & the opportunity costs of making other comparable investments.  Indianapolis did it right.

Baseball’s world series is a nightmare for security because the sites aren’t known until a few days before the series starts.  When Pres. Bush attended a game, an extra umpire was actually a Secret Service man. At the 1st Mets game after 9/11, there was a line almost all the way to Manhattan to get in & all the fans said “Thanks for being safe.”  The Super Bowl in New York attracted lots of prostitution, which reflects the best/worst, good/bad these events bring out.  There is a distinct relationship between the Super Bowl & sex traffic.

The economic benefit of the Super Bowl being held in New York/New Jersey was estimated to be $600M, but is actually complete BS.  The hotels are normally only @ 50% capacity, but were full for that week, but there is also a crowding out effect of others who stay away, called displacement tourism.  Theatre attendance is down 20%.  The merchants on Super Bowl Blvd. were dying.  Super Bowls are better held in warm climates, although Minnesota is getting 1.

There is a developmental economics aspect to all this.  Rio is building infrastructure which is building capacity.  The downside is the IOC requires moral obligations, but the city may be stuck with the bill.  Athens is still paying the debt for their Olympics.  Montreal just paid off their debt for the 1976 Olympics.

Sponsors get involved for different reasons, such as branding, ROI, relationships developed as long-term investments, i.e. Coke has been an Olympics sponsor since 1928.  LA changed the model when it was the 1st Olympics to show a profit in 1984, but even it had very few high-priced sponsors.  To stage sustainable games is a tough task.

Different games have left different legacies.  Barcelona used the Olympics as a tool.  Seoul, Sydney, & Montreal had a plan, but the Athens Olympics may have started the crisis there.  It’s definitely not 1 size fits all.

Arizona had to pay the NFL $30M in obligations to get the Super Bowl, which was paid by local corporations.  They will sell their local competitive advantages; good weather & a positive business climate.  But there are unintended consequences too.  To magnify the legacy:

  • you must know who you are
  • focus on branding (London was the 1st games where every country had at least 1 woman on each team)
  • security partnerships help
  • share lessons learned
  • get away from gigantism

 

 

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doing business in South Africa

Friday 18 April, 2014

The Greater New York Chamber of Commerce in conjunction with the South African Consulate General hosted “Doing Business in South Africa” @ the South African consulate.

Consul General George Monyeymangene introduced Simon Barber, the US country manager for Brand South Africa, which promotes the country of South Africa as a brand. He works with stakeholders both inside & outside of government to craft a value proposition for South Africa.  South Africa is celebrating 20 years since it’s 1st open & free election.  The South African brand is embodied by Madiba, or Nelson Mandela, who exudes the essence of Ubuntu, among other things, looking out for the collective good.  In the last 20 years:

  • GDP has grown from $136B to $335B
  • inflation has fallen from 14% to 6%
  • employment has grown from 9M to 14M
  • reserves have risen from $4B to $50B
  • the LSM (Living Standard Measure) has increased from 13M to 23.5M
  • electricity has gone from serving 58% to 95% of the population
  • water grew from being available to 61% to 73% of South Africans.

Additionally, South Africa has:

  • politically stable democracy
  • free media
  • independent central bank
  • high tax compliance.

According to the World Enterprise Fund Global Competitiveness Index, South Africa ranks:

  • #1 in auditing standards
  • #1 in securities regulations
  • #2 in financial services
  • #3 in banking
  • #3 in minority shareholders

On the down side, it ranks

  • #120 as a favorite
  • #116 in terms of imposing a burden.

Former treasury minister Trevor Manuel agreed with & adopted a National Development Plan written by Goldman Sachs.

The keynote address was offered by Frank Savage, Wall St. financier & CEO of Savage Holdings, who offered the perspective of an institutional investor.  He was early to enter South Africa in 1994 when he created a $125M fund there which earned 39.4% ROE.  He met Nelson Mandela with US Secretary of Commerce Ron Brown.  Although income inequality, education, & unemployment are problems, he remains optimistic.  The African National Congress has selected Ramiposa, a successful entrepreneur, which brings the party credibility & speaks volumes about their intentions.  The government has responded well to the Goldman Sachs report.  It’s well-balanced, but tough.  They must focus on difficult social problems.  Only15% participates in the formal economy, which leaves growth on the table.  All of Africa needs South Africa to reach it’s potential.  Civil unrest & instability can’t happen.  They need to rededicate themselves to their original principles & ideals.  He feels comfortable investing in South Africa.  Foreign Direct Investment magazine named South Africa the country of the future.

Q&A

  • South Africa will aim to protect it’s unique culture.
  • A free trade agreement is bringing together a market of 600M in Africa.
  • There is a plan to establish, promote, & implement Special Export Zones.
  • The ANC is not all powerful, as there are 3 tiers & power is shared among them.  It’s power is evolving & maturing as competitors are moving out of the ANC.
  • Infrastructure development is the driver of economic development.  The Infrastructure Coordinating Committee seeks to plot it’s future.
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US-China-Japan trilateral relations

Friday 4 April, 2014

I attended this event organized by the Japan Society;  The US-Japan-China triangle: building a path to trilateral cooperation which featured a panel discussion with Gerald Curtis of Columbia U., Jia Qingguo of Peking U., Alan Romberg of the Henry L. Stimson Center, & Yoshihide Soeya of the Woodrow Wilson International Center for Scholars & Keio U.  The panel was moderated by Donald Zagoria of the National Committee on American Foreign Policy.  I arrived late & missed Jia’s talk.

Soeya put today’s situation in historical context.  In 1971-2, China asserted itself while Japan avoided the issue.  During the 1980’s, Japan invested in China to modernize the country.  Deng Xiaoping then made courageous reforms.  Recently Japan’s Abe made an exception in visiting the Yaksun Islands.  In an interview in the  June-July issue of Foreign Affairs, he said it was not a big deal & that they were entitled to a right of self-defense, exerting a nationalistic tendency.  But he can’t carry out this policy with his current agenda.

Romberg called trilateral cooperation wildly unrealistic, & perhaps impossible.  There is no resolve to manage the dynamics.  China & the US have positive & negative effects which offset each other.  Their external behavior is erratic;  while they seek peace, they will also respond if challenged.  Aggression is in the eye of the beholder.  Japan is skeptical of China’s methods.  The US-China relationship is broader & deeper.  Their national interests differ.  For example, China sees the US & Japan as limiting the opportunities to bring China’s poor out of poverty.  There are no prospects for peace if these problems can’t be resolved.  Talks should lie ahead, but won’t.  Abe won’t visit the shrine again as PM.  The US seeks to lower the heat, but won’t mediate.  US/Japan alliances are alive & well.

Curtis addressed 4 issues:

  1. The islands are a dominant issue in Chinese/Japanese relations.  No 1 wants to go to war, but accidents do happen.  Japan must recognize the dispute & be willing to talk.  The Chinese must withdraw during such talks.  There seems to be no resolution because neither side expresses a willingness to compromise.
  2. China is conducting a nonsensical propaganda campaign against Abe, but that may be backfiring.  Both sides need to back off.
  3. Yaksuni is a sensitive issue.  Abe’s visit was not in the national interest.  Visiting the shrine resulted in sending a political message.  The hope is Abe will get this over with & foster better relations.
  4. After America’s pivot to Asia, we are stronger, but relatively smaller.  Obama is weak & doesn’t support Japan-the republicans do.  The world & the US have changed & we can’t go back to the way the world existed before.

Panel Q&A

If Japan acknowledges the Sekuka Isles, they can at least start negotiations.  Japan wants China to reduce it’s patrols in the area.  The solution could be the transfer of property rights by both of them.  The fishery agreement between the 2 is a recognized issue & related.  China will continue to assert itself until stopped.

Open Q&A

Japan is different from Germany after World War II in that the Japanese never apologized for the atrocities they inflicted on others, while the Germans did.

There is a poisoned atmosphere between China & Japan, which isn’t surprising.  They need to solve these problems to build trust.

Transferring property rights to the UN is not an option because that would be viewed as surrender, which is unacceptable.

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China takes the reins…of APEC

Friday 28 March, 2014

The Asia Society organized this event APEC Briefing 2013-14: China Takes the Reins & I was there to attend.  The moderator Tom Nagorski was a no-show, but otherwise everyone else made it.  China’s year of taking over the reins of APEC has been anticipated because each change brings new priorities & potentially new partnerships.

Robert Wang brought the US diplomatic perspective.  Strong new Chinese leadership wants to work closely with the US.  They have 3 priorities:

  1. regulate economic integration
  2. promote innovative development
  3. strengthen connectivity & infrastructure development

They held a 1-day symposium & wanted to discuss all 75 regional/free-trade agreements (FTA’s), how to work together, & FTAP, an FTA of the Asia/Pacific.

Ann Weeks of Underwriters Labs (UL) brought a standards orientation to the proceedings, which affects 80% of all trade as technical regulations have replace tariffs while improving public safety.  UL serves 65K manufacturers in 100 countries, of which 21 are in APEC.  40% of UL’s revenues come from outside the US.  They focus increasingly on food safety & green buildings.

Peter Petri zoomed in on the TransPacific Partnership (TPP), which includes APEC+China, the 12 countries which are in negotiations now to weave together the architecture of Latin America together with the Asia Pacific.  This is a crucial year to put this trade bill up for a vote.  There could be big benefits to both America & Asian economies as they create a template for future agreements.   China has held conferences on TPP but is not currently in negotiations.  This is generally changing, as China has changed lots of positions in the last 6 months.  The main issue is regional economic integration.  APEC is now just a forum to discuss issues-participants aren’t yet ready to make commitments, which can still play a useful role in negotiations, sharing, joint projects, etc. making TPP & FTAP now much more realistic.

Curtis Chin addressed how involved Barack Obama should be in this process.  He is on a large stage, but should he have left during the shutdown?  It matters, but not that much, since no major decisions were made.  No 1 event matters among many.  Abe was welcomed with open arms, but the engagement of the US is key.  How will China address the media?

  • each host determines the capacity
  • China’s focus is on supply chains with the goal of reducing costs by 25% by 2015
  • they are doing peer reviews for fossil fuels
  • they’ve set a goal to double renewables by 2030

Open Q&A

  • Clinton raised this to the Head of State level
  • China has been flexible in dealing with other APEC countries:  they’ve listened & changed.
  • Lots of work has been done on HR development issues to address labor rights-it’s been a sea change.
  • Work groups have been formed around small businesses, health, & food security
  • China will actually hold an anti-bribery conference together with the OECD to enforce a code of ethics.
  • Social media freedom is not yet a focus-it’s only being addressed on a bilateral basis.  The focus is still on building out internet infrastructure.
  • TPP is down to landing zones, so they’re getting close, but since it requires trade promotion authority, there could be repercussions if fast track authority is not granted.  TPP is already absorbing rules on labor & the environment.