YCLOAK

Mexico sees a serious risk the United States will withdraw from NAFTA and is preparing a plan for that eventuality, Economy Minister Ildefonso Guajardo said Tuesday, calling talks to renegotiate the deal a “roller coaster.”

U.S. President Donald Trump has threatened three times in the past week to abandon the North American Free Trade Agreement, revisiting his view that the United States would probably have to start the process of exiting the accord to reach a fair deal for his country.

Trump has vowed to get a better deal for American workers, and the lively rhetoric on both sides precedes a second round of talks starting on Friday in Mexico City to renegotiate the 1994 accord binding the United States, Mexico and Canada.

“This is not going to be easy,” Guajardo said at a meeting with senators in Mexico City. “The start of the talks is like a roller coaster.”

The need for a backup plan in case Trump shreds the deal underpinning a trillion dollars in annual trade in North America has been a long-standing position of Guajardo, who travels to Washington on Tuesday with foreign minister Luis Videgaray to meet senior White House and trade officials.

“We are also analyzing a scenario with no NAFTA,” Guajardo said.

In an interview published earlier on Tuesday in Mexican business daily El Economista, Guajardo said “there is a risk, and it’s high” that the Trump administration abandons NAFTA.

Responding to Guajardo’s comments, Canadian Prime Minister Justin Trudeau said his government would continue to work “seriously” to improve NAFTA.

What is ‘Plan B’?

Earlier this month, Guajardo told Reuters a “Plan B” meant being prepared to replace items such as the billions of dollars in grain Mexico imports from the United States annually.

To that end, and to seek openings in more markets, Mexico is hosting trade talks with Brazil this week. Trade officials are also discussing a possible replacement for the Trans-Pacific Partnership trade pact that Trump ditched after taking office.

Overlapping with the NAFTA talks, Mexico will participate in separate trade meetings with Australia and New Zealand in Peru, and President Enrique Pena Nieto travels to China this weekend.

Still, attempts to diversify trade will not be easy. Some 80 percent of all Mexican exports go to the United States, and economies such as Brazil and China often compete with Mexico.

Guajardo also suggested World Trade Organization tariffs that would kick in if NAFTA crumbled would be more favorable for Mexico, a view held by many Mexican experts who think trade with the United States would survive the demise of the 1994 deal.

“I don’t think it’s going to make that much of a difference in terms of the trading relationship,” said Andres Rozental, a former Mexican deputy foreign minister. “If we have to go to WTO tariffs, for us it’s fairly straightforward.”

Guajardo’s and Videgaray’s trip to Washington was announced after Trump not only threatened to pull out of the trade deal, but again said that Mexico would end up paying for the wall he wants to build between the two countries.

Mexico has refused point blank to pay for a wall. In January, after similar comments led Mexico to scrap a summit with Trump, the two sides agreed not to talk in public about it.
…

Brazil will seek China’s expertise and financing to complete its third nuclear power plant when President Michel Temer makes a state visit to Beijing on Friday, Brazilian government officials said Tuesday.

The Brazilian nuclear energy company Eletronuclear will sign a cooperation agreement with China National Nuclear Corporation (CNNC), signaling their intent to establish a partnership to finish the Angra 3 plant, the officials said.

Construction of the 1,405-megawatt reactor on the coast south of Rio de Janeiro has dragged on for three decades and its completion is now scheduled for 2023, but Brazil does not have the estimated 16 billion reais ($5 billion) needed to finish the job.

Russia is also interested in completing Angra 3 and Eletronuclear, a subsidiary of state-run electric utility Eletrobras, has held talks with the Russian nuclear monopoly Rosatom.

The Chinese corporation is expected to have the advantage in terms of abundant financial resources.

The head of Eletronuclear, Bruno Barretto, signed an initial memorandum with CNNC on the Angra 3 completion in Beijing in December when he visited Chinese banks that are potential financiers, Eletronuclear said in a statement.

Temer’s government has announced plans to privatize Eletrobras, Latin America’s largest utility. But Eletronuclear will be split off and remain in state hands under Brazil’s Constitution, which establishes that nuclear facilities must be government controlled.

Temer said on Tuesday he expects China to be a major player in Brazil’s plans to modernize its ports, airports and other infrastructure projects that will be offered to investors in private concessions.

He also hopes China will finance energy projects.

“China could be one of the big investors in our plans for concessions,” he said in a video message released after he set off for Beijing, where he will meet Chinese President Xi Jinping ahead of the BRICS summit in Xiamen.
…

Brazil’s government has revised a decree that stripped protections from a reserve in the Amazon after environmental groups criticized the original order.

The new decree announced late Monday still lifts the reserve designation from a gold- and copper-rich area larger than the Netherlands in two northern Brazilian states.

 

But President Michel Temer’s administration clarifies that mining will not be allowed in conservation or indigenous areas within the former reserve.

 

The government says the new decree will allow it to crack down on the illegal mining that was taking place in the reserve, while opening up legal mining.

 

The Brazilian branch of the World Wide Fund for Nature said in a statement that the new decree clarifies the need for protection, but the risk of environmental damage remains.
…

In Cambodia, the issue of land rights is a constant source of tension. The country’s biggest dam to date is set to go online in just weeks, adding 400 megawatts of power to the country’s critically overstretched grid. But the social and environmental costs of the project are huge, especially for minority villagers facing displacement. In rural Stung Treng province, some members of an indigenous group are taking a stand. David Boyle has this report.
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Peru expects a “very ambitious” free trade deal with Australia that covers goods, services and investments to be implemented as early as next year, Peru’s deputy trade minister said on Monday.

The two countries resumed free trade talks in Australia on Monday following a first round of negotiations in July in which “a lot of progress was made,” said Deputy Trade Minister Edgar Vasquez.

“This is going to be an agreement that we should be able to implement as soon as possible, starting in 2018,” Vasquez said by telephone in Lima. “That’s what we’d like to happen and what we think is viable.”

Peru and Australia are important global producers of minerals and their bilateral trade is relatively small.

Forging a free trade deal so quickly would mark one of the first steps toward reducing trade barriers in the Pacific region after U.S. President Donald Trump withdrew the United States from the 12-nation Trans-Pacific Partnership (TPP) trade agreement, which Australia and Peru had signed onto.

The remaining signatories to the TPP are in Australia this week discussing ways to salvage the deal. The 11 countries, which include Japan, Canada and Mexico, have a combined gross domestic product of $12.4 trillion.

Vasquez said the experience of negotiating the TPP had put Peru and Australia on solid footing for quickly hashing out a bilateral agreement.

“We also both have very open economies, so we’re really going to see a broad inclusion of sectors that will benefit from it – goods as well as services and investments,” Vasquez said.

Peru’s trade ministry said last month that rules of origin, migration and e-commerce were also under discussion and that Peru was eager to increase agricultural exports to Australia while spurring trade of mining and other professional services.

Australian trade officials were not immediately available for comment.

Peru’s exports to Australia amounted to $260 million last year, according to Peru’s trade ministry.
…

Mexico’s President Enrique Pena Nieto will travel to China next week to discuss trade and investment, as Mexico looks for ways to decrease its dependence on NAFTA, especially trade with neighboring United States.

He will hold a bilateral meeting with China’s President Xi Jinping and participate in a summit of the BRICS nations, a grouping that includes Brazil, Russia, India, China and South Africa, on Sept. 4 and 5, Mexico’s Foreign Ministry said in a statement.

Pena Nieto’s visit comes as U.S., Mexican and Canadian negotiators meet Sept. 1 to 5 in Mexico City for a round of talks to revamp the 23-year-old North American Free Trade Agreement (NAFTA).

Mexico is trying to increase trade with Latin America and Asia, and on Monday took part in the first of three days of talks in Australia aimed at reviving the Trans-Pacific Partnership trade agreement, disrupted by the withdrawal of the United States.

On Sunday, U.S. President Donald Trump renewed his threat to scrap NAFTA, which he has cast as killing jobs and exacerbating the U.S. deficit, and ripped into trading partners Canada and Mexico.

Pena Nieto is scheduled to participate in a dialogue on emerging markets and a BRICS business forum, “where over 800 business leaders are expected to discuss opportunities for investment, trade, connectivity, financial cooperation, development and the blue economy, or sustainable use of marine resources,” said the ministry.

On Sept. 6, Pena Nieto will visit the offices of Alibaba Group Holding Ltd, China’s top e-commerce firm and one of Asia’s most valuable companies.

Mexico’s government is working to get Mexican products and services, especially from small- and medium-sized firms, onto Alibaba’s platform.
…

The price of a pack of cigarettes has skyrocketed in New York City, while the number of places they are available for sale is set to fall.

New York Mayor Bill de Blasio on Monday signed a sweeping series of anti-smoking bills, part of a comprehensive effort to help reduce the number of smokers in the city by nearly 200,000 over the next few years.

“We are sending a loud and clear message that we will not let their greed kill any more New Yorkers without a fight,” de Blasio said at a bill-signing ceremony at a Brooklyn hospital. “These new laws will not only help reduce the number of smokers in our city, but also save lives.”

The minimum price for a pack of cigarettes will jump from $10.50 to $13, the highest base price for cigarettes in the nation, de Blasio said.

New York health officials hope that with brands forced to charge at least $13 for the cheapest pack, premium brands will also raise their prices to maintain separation from lower-tier smokes.

The planned price hike is one of seven bills aimed at pressuring the city’s 900,000 estimated smokers to quit.

Another new rule will reduce by half the number of retailers licensed to sell tobacco products. About 8,300 businesses now have a license. The numbers will be reduced through attrition, officials said.

Philadelphia and San Francisco have similar licensing restrictions.

Other laws will ban the sale of all tobacco products in pharmacies, require licensing of e-cigarette retailers, and require all residential buildings to have smoking policies that are given to all current and prospective tenants. Some residential buildings will be required to ban smoking in common areas such as hallways.

Opponents of the price increase say it may push many smokers into buying untaxed, unregulated cigarettes on the black market.
…

Kenya has become the latest African country to ban the use of polythene plastic bags, imposing stiff fines and even jail time for anyone found using, importing or manufacturing the bags.

In one of the biggest garbage dumping sites in Nairobi, it was business as usual Monday. Loads of plastic bags full of garbage were brought in, a testament to their widespread use in the capital.

But no more, says the government.

A new law went into effect Monday making the manufacture, sale and use of polythene plastic bags illegal. Offenders can get slapped with penalties up to a four-year jail term and a $40,000 fine.

The National Environment Management Authority, with the help security agencies, has been going around Nairobi to urge retailers and manufacturers to heed the new ban.

Geoffrey Wahungu is the director general of NEMA. He is promoting the “take-bag scheme,” basically calling on consumers to bring their own cloth bags or baskets from home.

“I hope soon we’ll start seeing people who are carrying out these recycling materials, or alternative bags, which are eco-friendly. All this is creating much more employment than is being lost,” he said.

Economic impact

Two plastic bag importers unsuccessfully challenged the ban before the High Court Friday. Kenya produces plastic bags for local use and export in the region. The National Association of Manufacturers has argued that the ban will cost more than 60,000 jobs and hurt more than 170 companies.

NEMA gave six months’ notice of the new ban, but it still appears to have taken many in Kenya by surprise.

Some large retailers have already switched to paper, but small traders are feeling the pinch.

Simon Njenga runs a grocery kiosk. He says he lost customers Monday.

He says “the ban pains me a lot because a customer wants to purchase vegetables, but he doesn’t have a bag and I can’t give him one, so they leave my kiosk without buying. The government has to bring back the plastic bags. My livelihood depends on it.”

 

Tanzania, Uganda, Malawi and Cameroon have announced similar bans on plastic bags, although the bans aren’t widely enforced. Rwanda is the only African country so far to both declare a ban and push people to follow the law.

Kenyan Environment Minister Judy Wakhungu told Reuters news agency that manufacturers and importers will be the ones initially targeted for enforcement of the ban.

Experts argue that polythene bags are bad for the environment and public health. The thin plastic bags have been blamed for polluting cities and shorelines and killing animals who eat them.

NEMA says the single-use polythene bags “never fully biodegrade, remaining in the environment as small or even microscopic particles, essentially forever.”

 

 

 

 

 
…

Fall armyworm has spread to Cameroon.  The pest has attacked crops in at least 24 African countries.  In Cameroon, the Ministry of Agriculture says it is particularly concerned about the impact of the fall armyworm infestation in the north and the east of the country. 

Minister-delegate Ananga Messina says fall armyworm has infested six of the central African state’s 10 regions.

She says the armyworms have been a serious threat to food security in Cameroon because cereals like maize, sorghum, rice and legume plants like cow-pea, peanuts and beans are increasingly being attacked every day.  She says the situation is particularly worrisome on Cameroon’s northern border with Nigeria where the population and 100,000 Nigerian refugees are already suffering from food scarcity due to the Boko Haram conflict.

The Ministry of Agriculture says nearly two million people are currently in need of food assistance in northern Cameroon.

Messina told VOA about half of Cameroon’s 23 million inhabitants and millions of livestock risk hunger in the months ahead.  She said the armyworms have extended to Cameroon’s eastern border, putting neighboring Central African Republic at risk, a country gripped by a severe humanitarian crisis after years of conflict.  

Cameroon has launched a task force to manage the infestation.

Some farmers have been using chemicals to kill the pests, but agriculture technician Anicet Mvondo says that is not the best approach.

“The problem is that the insecticide is not good for the health of the farmer,” said Mvondo. “It is not good for the environment.  It kills other organisms in the environment.  Using insecticides is not a good way.  We should try to look for other solutions because these insects on the field are also eaten by other organisms.”

The U.N. Food and Agriculture Organization reports fall armyworm was first detected in four countries in West Africa in early 2016.  It has since spread to at least 20 other countries. 

Experts say the fall armyworms can reproduce rapidly and can fly long distances in moth form, though it remains unknown how the pest spread to West Africa from South America.

The FAO is leading the regional response efforts in Africa, and it says it is drawing from lessons learned in the America’s on sustainable fall armyworm management.  FAO Subregional Coordinator for Southern Africa, David Phiri says methods like regular monitoring and hand-picking of worm larvae can be effective.

“Fall armyworm has a lot of natural enemies and we should enhance their use to control the fall armyworm … So the message is that fall armyworm has come here to stay and also that use of chemical pesticides should be reduced to a minimum,” said Phiri.

Staple crops like maize, sorghum, rice and sugarcane have been hit hard in Africa, though the fall armyworm can ravage more than 80 other plant species.  Losses for Africa are estimated at at least $13 billion.
…

Massive flooding caused by Tropical Storm Harvey along Texas’ refinery-rich coast could have long-standing and far-reaching consequences for the state’s oil and gas industry and the larger U.S. economy. The storm’s remnants left much of Houston underwater on Sunday, and the National Weather Service says it’s not over yet: Some parts of Houston and its suburbs could end up with as much as 50 inches (1.3 meters) of rain.

 

With the heavy precipitation expected to last for days, it’s still unclear how bad the damage will be, but there is already evidence of widespread losses. Key oil and gas facilities along the Texas Gulf Coast have temporarily shut down, and flooding in the Houston and Beaumont areas could seriously pinch gasoline supplies. Companies operating in the Gulf of Mexico have evacuated drilling platforms and rigs, crimping the flow of oil and gas.

Experts believe gasoline prices could increase as much as 25 cents a gallon.

Harvey’s toll on air travel in the U.S. is set to extend into Monday, with the tracking service FlightAware.com reporting that more than 1,400 flights already have been canceled. That’s in addition to more than 2,000 canceled over the weekend.

Economy watchers were looking to oil futures markets Sunday night and stock trading in the U.S. Monday morning for further indications of fallout.

 

Here’s what was known as of Sunday night:

Refineries

Nearly a third of U.S. refining capacity sits in low-lying areas along the coast from Corpus Christi, Texas, to Lake Charles, Louisiana. Beyond the shutdown of refineries at risk of a direct strike from high winds, there’s the threat of flooding and potential power outages for gasoline supplies.

 

Refinery outages continued to spread Sunday, with about 2.2 million barrels per day of refining capacity down or being brought down, according to analysts at S&P Global.

 

Valero Energy Corp., whose two big Corpus Christi refineries escaped damage, said it was working with federal and Texas agencies and its business partners to determine what infrastructure was needed to resume refinery operations.

 

Even before Harvey hit, the prospect of supply disruptions sent gasoline futures to $1.74 a gallon, their highest level since April, before they retreated to around $1.67 by Friday afternoon. At the pump, experts see gasoline increasing 10 cents to 25 cents a gallon.

 

Given the strictures faced by the refineries, “This is the dominoes starting to fall,” Patrick DeHaan, senior petroleum analyst for Gas Buddy, said Sunday. “This is sort of slowly turning out to be the worst-case scenario.”

 

Oil and gas

Companies have evacuated workers from oil platforms in the Gulf of Mexico. The U.S. Bureau of Safety and Environmental Enforcement said Sunday that workers had been removed from 105 of the 737 manned platforms used to pump oil and gas from beneath the Gulf.

The agency estimated that platforms accounting for about 22 percent of oil production and 26 percent of natural gas output in the Gulf had been shut down.

“After the storm has passed, facilities will be inspected,” the agency said in a news release. “Once all standard checks have been completed, production from undamaged facilities will be brought back on line immediately. Facilities sustaining damage may take longer to bring back on line.”

Shipping

The shipping industry also is expected to be disrupted by the worst hurricane to hit the Texas coast in more than 50 years. Shipping terminals along the Texas coast shut down as the storm approached. Port operations in Corpus Christi and Galveston closed, and the port of Houston said container terminals and general cargo facilities closed around midday Friday. Rates increased for carrying freight between the Gulf and the U.S. East Coast.

Travel

More than 1,400 flight cancellations are reported for Monday, according to FlightAware.

Houston’s two airports were closed to all flights except those connected to relief efforts. Houston Bush Intercontinental Airport was not expected to reopen Monday until noon at the earliest. Houston International Airport was scheduled to remain closed until Wednesday morning.

Airlines were offering customers the chance to reschedule trips that would take them to Houston, San Antonio or Austin from Friday through the weekend.

Utilities

                   Researchers at Texas A&M University estimated that the storm would knock out power for at least 1.25 million people in Texas. They said the hardest-hit areas will include Corpus Christi, which is on the coast, and San Antonio, which is about 140 miles (225 kilometers) inland.

Insurance

A firm that does forecasts for insurance companies expects wind-damage claims in the low billions of dollars, and possibly reaching as high as $6 billion.

 

Risk Management Solutions Inc. said storm surges and inland flooding could be an even bigger source of losses. If the firm is correct, that would put homeowners and the government-backed National Flood Insurance Program at risk.

The flood program is run by the Federal Emergency Management Agency, which owes the Treasury about $23 billion in funds borrowed to cover the cost of past disasters, according to a recent report by the U.S. Government Accountability Office.

Homeowner policies offered by insurance companies typically don’t cover flood damage, yet a relatively small percentage of homeowners have flood insurance through the federal program.

Property data firm CoreLogic estimated that insured losses for home and commercial properties, as of Friday, would be $1 billion to $2 billion from wind and storm-surge damage.

 

 
…

The head of the U.S. central bank says the financial system is safer now than it was before the recession, and urges Washington to make some adjustments in financial regulations, rather than trash them.

Federal Reserve Chair Janet Yellen says the recession of 2008 cost nine million American jobs and meant millions of people lost their homes. She says financial reform regulations were intended to make it less likely that big institutions would fail in the future and to provide an orderly way to resolve the debts of big financial companies that do fail without government bailouts.

She says financial firms, particularly very large ones that could hurt the entire economy if they fail, are now required to keep larger reserves. That way if one loan goes bad, the firm is less likely to have to hastily sell off other assets at bad prices to cover the losses. Low reserve levels prompted a downward spiral when many fragile firms ran into trouble all at once, all of them trying to sell assets and no one willing to buy them.

Yellen acknowledges that over-regulation could hamper the lending and risk-taking needed for economic growth, but she says some research shows the current level of regulation hurts lending, while other research shows it helps.

In a Friday speech to a gathering of top economic officials from around the world at a resort in Wyoming, she said Fed officials are looking at ways to simplify regulations for small banks that would not cause problems for the national economy if they failed.

Small banks complain the cost of complying with complex regulations makes it hard to make loans. Small banks are important because they are often the source of capital for small companies, and such small, growing firms are the source of most new jobs.

Yellen’s closely-watched speech at the annual gathering of economists at a resort in Jackson Hole, Wyoming, comes after criticism from Republicans and others that stricter regulation is hurting lending and economic growth.

President Donald Trump has called for repealing a key part of the regulations called “Dodd-Frank” named after the legislators who crafted the law.
…

South Korea this week pushed back against the United States’ demand to renegotiate the free trade agreement (FTA) between the close allies. 

U.S. President Donald Trump has repeatedly criticized the five-year-old Korea-U.S. (KORUS) FTA as a horrible deal that created a $27 billion U.S. trade deficit with South Korea last year, and has said his administration would either renegotiate or terminate it.

Agree to disagree

At Washington’s urging, an initial special session was held on Tuesday by video conference between South Korean Trade Minister Kim Hyun-chong and his American counterpart, U.S. Trade Representative (USTR) Robert Lighthizer, to negotiate amendments to the trade pact.

Afterwards the South Korea trade minister said the two sides disagreed on the need to amend the trade deal.

“We have found that the two sides have different views on the effects of the U.S. and South Korea Free Trade Agreement, the reason behind the trade deficit, and necessity for an amendment to the U.S. and South Korea FTA,” said Trade Minister Kim Hyun-chong.

South Korean officials maintain the bilateral trade deficit is not the result of the FTA, but of the underperforming South Korean economy, where demand for imports have declined, contrasted with the more robust U.S. economy.

“For the last 10 years, South Korea’s market economy was not good, so the U.S. did not get opportunities to sell its products (to South Korea). If South Korea’s economy gets better and the U.S. economy gets worse, we may face the opposite situation,” said Chung Sye-kyun, the speaker of the South Korean National Assembly on Thursday at an event organized by the American Chamber of Commerce in Korea.

KORUS supporters in Seoul also argue the FTA benefits the U.S. economy and American workers. Last year, Korean companies like the electronics giant Samsung and the automaker Hyundai, employed 45,000 Americans and contributed $138 billion to the U.S. economy, according to the American Chamber of Commerce in Korea.

‘Korea unique standards’

The USTR released a statement Wednesday saying it will continue bilateral talks to amend or modify the agreement and specifically identified the “burdensome regulations which often exclude U.S. firms or artificially set prices for American intellectual property” as a major issue of contention.

The auto industry accounts for nearly 80 percent of the bilateral trade deficit, as American car sales in South Korea have been slow, while Korean automobile sales in the United States have soared. The American business community has long blamed the deficit in part on non-tariff related “Korea unique standards,” often linked to environmental regulations or certification procedures that they say are imposed to protect the domestic market. Foreign companies are then forced to spend an inordinate amount of time and money to deal with these regulations that are often introduced without notice or clear explanations.

South Korean authorities have downplayed charges of unfair trade practices, saying most complaints have been resolved through negotiations without the need for amending the FTA.

The South Korean Trade Minister said while this week’s meeting did not reach any agreement on how to proceed, neither side talked about terminating the FTA. 

The Korea Times newspaper in Seoul on Friday published an editorial advising the South Korean government that “a good offense is the best defense” in any upcoming trade negotiations. It recommended Seoul press Washington to loosen its intellectual property rights protections and rules regarding disputes between investors and the state, and to threaten to reduce agriculture and energy imports if the situation becomes overly contentious.

The potential rift over trade comes at a time when Washington and Seoul have been emphasizing their close military alliance and joint support for increasing sanctions on North Korea to pressure the Kim Jong Un government to return to international denuclearization talks.

This week some 17,500 American and 50,000 South Koreans troops are participating in joint strategic military exercises that deal with how to respond to possible North Korean attack scenarios.

Youmi Kim in Seoul contributed to this report
…

South Korea this week pushed back against the United States’ demand to renegotiate the free trade agreement (FTA) between the close allies. 

U.S. President Donald Trump has repeatedly criticized the five-year-old Korea-U.S. (KORUS) FTA as a horrible deal that created a $27 billion U.S. trade deficit with South Korea last year, and has said his administration would either renegotiate or terminate it.

Agree to disagree

At Washington’s urging, an initial special session was held on Tuesday by video conference between South Korean Trade Minister Kim Hyun-chong and his American counterpart, U.S. Trade Representative (USTR) Robert Lighthizer, to negotiate amendments to the trade pact.

Afterwards the South Korea trade minister said the two sides disagreed on the need to amend the trade deal.

“We have found that the two sides have different views on the effects of the U.S. and South Korea Free Trade Agreement, the reason behind the trade deficit, and necessity for an amendment to the U.S. and South Korea FTA,” said Trade Minister Kim Hyun-chong.

South Korean officials maintain the bilateral trade deficit is not the result of the FTA, but of the underperforming South Korean economy, where demand for imports have declined, contrasted with the more robust U.S. economy.

“For the last 10 years, South Korea’s market economy was not good, so the U.S. did not get opportunities to sell its products (to South Korea). If South Korea’s economy gets better and the U.S. economy gets worse, we may face the opposite situation,” said Chung Sye-kyun, the speaker of the South Korean National Assembly on Thursday at an event organized by the American Chamber of Commerce in Korea.

KORUS supporters in Seoul also argue the FTA benefits the U.S. economy and American workers. Last year, Korean companies like the electronics giant Samsung and the automaker Hyundai, employed 45,000 Americans and contributed $138 billion to the U.S. economy, according to the American Chamber of Commerce in Korea.

‘Korea unique standards’

The USTR released a statement Wednesday saying it will continue bilateral talks to amend or modify the agreement and specifically identified the “burdensome regulations which often exclude U.S. firms or artificially set prices for American intellectual property” as a major issue of contention.

The auto industry accounts for nearly 80 percent of the bilateral trade deficit, as American car sales in South Korea have been slow, while Korean automobile sales in the United States have soared. The American business community has long blamed the deficit in part on non-tariff related “Korea unique standards,” often linked to environmental regulations or certification procedures that they say are imposed to protect the domestic market. Foreign companies are then forced to spend an inordinate amount of time and money to deal with these regulations that are often introduced without notice or clear explanations.

South Korean authorities have downplayed charges of unfair trade practices, saying most complaints have been resolved through negotiations without the need for amending the FTA.

The South Korean Trade Minister said while this week’s meeting did not reach any agreement on how to proceed, neither side talked about terminating the FTA. 

The Korea Times newspaper in Seoul on Friday published an editorial advising the South Korean government that “a good offense is the best defense” in any upcoming trade negotiations. It recommended Seoul press Washington to loosen its intellectual property rights protections and rules regarding disputes between investors and the state, and to threaten to reduce agriculture and energy imports if the situation becomes overly contentious.

The potential rift over trade comes at a time when Washington and Seoul have been emphasizing their close military alliance and joint support for increasing sanctions on North Korea to pressure the Kim Jong Un government to return to international denuclearization talks.

This week some 17,500 American and 50,000 South Koreans troops are participating in joint strategic military exercises that deal with how to respond to possible North Korean attack scenarios.

Youmi Kim in Seoul contributed to this report
…

When Ha Tran of Ho Chi Minh City shops for food, clothes or electronics, she avoids merchandise she can tell comes from Vietnam’s giant neighbor, China. It might not work, she said, and China is no friend of Vietnam anyway.

“China exports many low-quality products to Vietnam, but we know they don’t export products to other countries around the world (that are) that bad, so we try to avoid the products that are made in China,” said Ha, 24, a design company worker in the Vietnamese financial hub city. Vietnamese prefer to buy stuff from Japan or the West. “We’ve tried (Chinese goods) many times in the past but it turns out like they get broken very easily.”

Political ties between Vietnam and China are another “factor” discouraging purchases, she said.

 

Ha is hardly a shopping renegade. Consumers around Vietnam typically shun “Made-in-China” purchases to protest what they see as poor-quality goods from a country that already has a record of disputes with their country. The two sides dispute, for example, a tract of territory in the South China Sea east of Vietnam. Competing claims sparked naval battles 1974 and 1988. The two also fought a land border war in the 1970s.

Vietnamese feel China has an unfair upper hand in the maritime dispute by using its larger military to control the contested Paracel Islands.

Consumers make up a growing force in Vietnam, as the Boston Consulting Group forecasts more than a third of the country’s nearly 93 million people to be middle class or higher by 2020. Fast growth in export manufacturing has added to Vietnam’s wealth since 2012 by creating jobs.

“If they find a product that might be the same price, and they find out that one product is Chinese and another product is from Japan, Korea or anywhere else, you know which one they’re going to go for,” said Oscar Mussons, senior associate with the Dezan Shira & Associates business consultancy in Ho Chi Minh City. “Vietnamese people see them not as big brothers, but as rivals.

“This is also because of recent problems, like Chinese are hitting national icons like the islands in the South China Sea,” Mussons said. “For Vietnamese, this is something that cannot be accepted in any way, even through you don’t hear much about or the government doesn’t try to make much publicity about it.”

 

Vietnamese officials have tried to sideline political disputes with China since anti-Chinese riots of 2014 killed more than 20 people and threatened to scare off investors. China’s go-ahead to construct an oil rig in the disputed sea touched off the rioting.

But Vietnam still counts China as its biggest trade partner. Combined imports and exports came to $25.5 billion in the first four months of the year, according to Vietnamese media reports. Export manufacturers in Vietnam rely as well on China for raw materials.

On top of the political issues, Vietnamese consumers widely suspect China sends lower-quality merchandise to its shelves. Giant Chinese firms, often bigger than Vietnamese counterparts, can send over excess merchandise for sale at low prices because of their production run sizes.

“Generally amongst Vietnamese, China-made products are perceived to be of low quality. Some of this is fact, but some of this is also driven by social media posts and ensuing perceptions,” said Jason Moy, principal with the Boston Consulting Group in Singapore. Lower-income, less educated consumers are particularly prone to those perceptions, he added. “Hence, Chinese products are generally selected when they are the last or only option.”

Trade in shoes, toys and daily necessities along the land border particularly leaves cheap but possibly suspect Chinese goods in Vietnam, where lower-income people buy them for their low prices, said Le Hong Hiep, research fellow with ISEAS Yusof Ishak Institute in Singapore. Goods trucked across the border in some cases have “pushed Vietnamese merchandise out of their traditional markets,” Le said.

An organized boycott against Chinese goods after the riots of 2014 gained little traction because poorer people couldn’t afford merchandise from other places, he said.

Although Chinese smartphones are gaining a solid reputation, Ha said she once bought a made-in-China phone for her mother because it was all they could afford. It broke after “several months,” she said, so the family bought another phone.

Only Chinese thong flip-flops are worth the money, she said, because at about $1 per pair you can afford to scrap and replace a pair after a few uses.

“People are conscious of the kind of low standards, low quality of Chinese products,” Le said. “I think one of the reasons is that many of these products are consumer items and small items, and they are imported by border trade, not through official channels which normally have stricter regulations and inspections to ensure the quality.”

 

Shoppers with more money prefer Japanese products as top quality, especially ever-popular motor scooters and consumer electronics, Moy said.Korean food and consumer electronics are also gaining favor with consumers, he said. 
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The billionaire head of South Korea’s Samsung Group, Jay Y. Lee, was jailed for five years for bribery on Friday after a six-month trial over a scandal that brought down the president.

Lee had paid bribes in anticipation of favors from then president Park Geun-hye, according to a landmark ruling by a Seoul court, which also found him guilty of hiding assets abroad, embezzlement and perjury.

Lee, the 49-year-old heir to one of the world’s biggest corporate empires, has been held since February on charges that he bribed Park to help secure control of a conglomerate that owns Samsung Electronics, the world’s leading smartphone and chip maker, and has interests ranging from drugs and home appliances to insurance and hotels.

Lee denied wrongdoing.

One of his lawyers, Song Wu-cheol, said Lee would appeal the lower court ruling.

“The entire verdict is unacceptable,” Song said, adding that he was confident his client’s innocence would be affirmed by a higher court.

Under South Korean law, sentences of more than three years can not be suspended. The five year-sentence is one of the longest prison terms given to a South Korean business leader.

The Seoul Central District Court said Samsung’s financial support of entities backed by Park’s close friend, Choi Soon-sil, constituted bribery, including 7.2 billion won ($6.4 million) in sponsoring the equestrian career of Choi’s daughter.

In return for the contributions, prosecutors say, Samsung sought government support for a controversial 2015 merger of two of its affiliates, which helped Lee tighten his control of the conglomerate.

His lawyers had argued that the merger was done on business merits but the court did not accept that.

Park, who was forced from office in disgrace, is facing her own corruption trial, with a ruling expected later this year.

Prosecutors have argued that Park and Lee two took part in the same act of bribery so Lee’s conviction would appear ominous  for Park.

Hundreds of rowdy, diehard Park supporters rallied outside the court earlier in the day to demand Lee’s acquittal.

“The trials of former President Park Geun-hye and Samsung Jay Y. Lee go hand in hand,” said Son Tong-sok, 63, who heads a conservative group, holding a Korean flag.

Son said prosecutors had built their cases on circumstantial evidence and unsubstantiated claims reported in the media.  “Arresting these two innocent people are violations of human rights,” he said.

Samsung, founded in 1938 by Lee’s grandfather, is a household name in South Korea and a symbol of the country’s dramatic rise from poverty following the 1950-53 Korean War.

But over the years, it has also come to epitomize the cosey ties between politicians and powerful family-controlled business groups – or chaebols – which have been implicated in a series of corruption scandals.

South Koreans, who once applauded the chaebols for catapulting the country into a global economic power, now criticize them for holding back the economy and squeezing smaller businesses.

South Korea’s new president, Moon Jae-in, who replaced the Park after a May 9 election, has pledged to rein in the chaebols, empower minority shareholders and end the practice of pardoning corporate tycoons convicted of white-collar crime.
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Environmentalists are condemning a decree by Brazilian President Michel Temer allowing mining in the heart of the Amazon.

The measure strips protection from a national reserve between the northern states of Para and Amapa and clears the way for the private mining sector to explore the forest.

The gold-rich area is larger than the Netherlands, measuring roughly 18,000 square miles (47,000 square kilometers). It is also home to numerous indigenous tribes.

The Brazilian branch of the World Wide Fund for Nature says Wednesday’s decree will create conflicts between miners, indigenous peoples and conservationists working in the area.

The government says indigenous groups will be protected and the mining will attract foreign investors and create jobs.
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Stonehenge is dry and has been for too long — seven years too long. You can taste the dust well before you cross the cattle grids that cut the only road into town.

More than 1,700 kilometers (1,056 miles) northwest of Sydney, Australia’s Stonehenge could not be more different from its famous namesake, the World Heritage prehistoric monument of Stonehenge in England.

Stonehenge in England averages 10 days a month of rainfall and a maximum temperature of 22 degrees Celsius (72 Fahrenheit).

The town in Australia averages 325 sunny days a year and summer temperature of about 45C (113F), and forget regular rain.

How the town got its name is a mystery.

“In the mid-1800s, dingo [wild dog] trappers built a stone fortress which they used as a shelter, but no one is really sure,” said resident Judy Baldry as she drove along a dusty road on the outskirts of town.

Another possibility is the stony landscape, with rocks ranging in size from marbles to boulders scattered across the plains as far as the eye can see.

The stones lure tourists to an area known as “The Address Book” on the outskirts of town, where people create their names or love messages using stones, such as “Jim loves Kerry” and “Dan 4 Jan.”

Praying for rain

Stonehenge’s remaining 23 residents say they are struggling to survive one of the longest droughts in memory.

“Certainly, this is the worst drought I’ve seen in the last 28 years because of its longevity. It’s just gone on for so long,” said cattle and sheep farmer Tony Jackson.

Jackson’s Hill View Park Station property of more than 150,000 acres (60,000 hectares) is excellent wool country because of the stones. Less dirt means better quality wool.

He manages 800 cattle and about 6,000 sheep on the drought-hit property, but he fears he will have no feed or water if there is no rain by Christmas.

Jackson and his neighbors have spent hundreds of thousands of dollars on feed.

Debt levels for broadacre farms, which include cattle, sheep and crops, is estimated to have increased by 7 percent during 2015-16 to average A$560,500 per farm, the Australian government’s agricultural bureau said.

Other parts of Australia have seen the drought break, and farmers there are looking at a bright future. Cash incomes on cattle farms are estimated to be the highest in more than 20 years, at A$204,000 per farm, because of rising beef prices.

But the drought has a stranglehold on Stonehenge.

For the first time in more than 34 years, the main water supply, the meandering Thomson River, has stopped flowing.

Farmer Dick Smith says it has been seven years since the last decent rain filled the river.

“This is drought country. No one forced me to live here. We have to expect a drought, but this one’s gone on too long,” he said on the veranda of his home on the Depot Glen property.

Smith usually manages about 1,500 cattle but has destocked to survive and now has just 47 cows and calves.

He said that because of droughts over the past decades, he had “completely destocked three times,” and the potential for a fourth was high.

When the rains do come, the farmers of Stonehenge will struggle to pay for new stock at a time when cattle prices are at record levels because of demand for beef.

Hard on families

The drought has taken its toll on families, with the emotional and financial stress contributing to poor mental health, according to a study by the Australian National University.

The study examined 8,000 people living in drought and found that the more severe the drought, the more severe the impact on the mental health of a farmer and his family.

Sue Smith knows the burden. She runs Depot Glen alone for many months while her husband, Dick, is away driving a grader or fixing fences thousands of kilometers away in the Northern Territory.

“You really have to love your husband to live out here,” said Sue, a champion equestrian when she was young.

“We’re not isolated up here. We have bitumen roads, telephones, internet, but I do miss white sheets,” she said, referring to the groundwater that stains her sheets.

Stonehenge has suffered a huge loss of people because of the drought. The town many years ago boasted three hotels, and until just a decade ago, a population of 106.

Frank Irwin, who used to work on a farm, now runs the Stonehenge Hotel, a tin building with a bar crowned with empty beer bottles and rodeo memorabilia.

Stonehenge, like its English namesake, will survive, he said. “We just batten down the hatches until it does rain.”
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Experts at credit rating agencies are watching Washington’s political squabbling over budgets and spending closely, and they might make another cut in the U.S. credit rating if the Republican-controlled White House, Senate and House cannot reach an agreement.

President Donald Trump has promised to build a massive wall along the southern U.S. border in a bid to stop illegal immigration. Trump has said he will press Congress hard to fund the controversial measure, even if it stalls action on other budget issues and forces the government to shut down.

Some of Trump’s fellow Republicans who ran on promises to limit or cut government spending are reluctant to fund the measure, and most rival Democrats oppose the wall.

U.S. law provides for a “debt ceiling,” meaning the Treasury cannot borrow more money unless Congress agrees to raise the limit. That limit was reached months ago, and the federal government will apparently run out of cash by the end of September or early October if nothing changes.

The political situation is made more complex by the fast-approaching end of the budget year and the need for Congress to agree on next year’s spending priorities.

Congress and presidents have bickered over budgets in the past, and in 2011 a debt ceiling impasse prompted the Standard & Poor’s agency to make the first downgrade of the U.S. credit rating.

The Fitch agency Wednesday said failure to raise the debt ceiling in a timely manner would prompt a review of the nation’s credit rating. Fitch currently gives the United States its top rating.

Moody’s experts Thursday wrote that they expected Washington politicians to work out their differences, but that failure to reach an agreement could prompt the government to shut down, disrupting the economy more and more if the impasse drags on.

Moody’s noted that a previous government shutdown prompted lenders to demand higher interest rates, raising the cost of government by about $1.3 billion in just one year.

Moody’s and other experts have urged Congress to remove the debt ceiling because it does not restrain spending but does add “to the noise” around the budget process.
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President Donald Trump’s comments at a Phoenix rally that he will probably end up terminating the North American Free Trade Agreement brought cheers from the crowd but groans from the state’s top business group.

Arizona Chamber of Commerce and Industry President Glenn Hamer posted a video calling any termination a “terrible mistake” within hours of Trump’s remarks Tuesday night. Hamer is in Mexico on a trade mission with a bipartisan delegation of about two dozen state lawmakers.

 

“It would be a mistake that the administration would feel each and every day,” Hamer said. “And why would that be? The administration has set a noble goal of 3 percent growth. You can’t get there if your start unraveling trade agreements.

 

“You need good tax policy, you need good regulatory policy and you need good trade policy,” he said.

Trump hints NAFTA is done

Trump said at the campaign-style rally that he believes Mexico and Canada are coming out ahead on the 23-year-old trade agreement. Renegotiations began in recent weeks.

 

“Personally, I don’t think we can make a deal, because we have been so badly taken advantage of,” Trump said. “I think we’ll end up probably terminating NAFTA at some point, OK? Probably.”

Modernizing agreement

Republican Sens. Jeff Flake and John McCain have called for modernizing an agreement they say has brought huge benefits for Arizonans.

 

Flake has put on a full court press in recent months, launched an effort in May to highlight what he calls the agreement’s “huge boon to Arizona and the U.S.” He’s put out videos featuring people and businesses that have benefited from the trade pact.

On Wednesday, he said he won’t stop that effort.

“I will continue to speak up for the countless Arizonans whose jobs and businesses rely on the billions of dollars that NAFTA injects into our state’s economy,” Flake said in a statement.

 
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President Donald Trump said Tuesday that he was willing to shut down the government to get funding for a U.S.-Mexico border wall, complicating two must-pass measures Congress will take up in September: a spending package and raising the debt ceiling.

Here is what you need to know about both, and the potential for a shutdown of the U.S. government:

What is a shutdown?

Congress must pass annual spending bills around the end of the federal fiscal year on September 30 to fund much of the U.S. government. When disagreements prevent that, which is frequent, lawmakers often pass a temporary bill extending existing spending levels with no changes for days, weeks or months, while they work on a longer-lasting deal. When they cannot agree on either a new spending plan or a short-term extension, the government shuts down. That has happened many times since the 1970s, usually for a few days, and can rattle markets.

Congress will return from its long summer recess September 5. At that time, it will have only about 12 working days to approve spending measures to keep the government open.

What if Congress fails?

If spending measures are not passed before October 1, portions of the government will begin to shut down and nonessential employees will go without pay until an agreement is reached.

The government most recently shut down for about two weeks in October 2013 over funding for former President Barack Obama’s health care law. There were three shutdowns in the 1990s, the longest lasting 21 days. In the 1970s and 1980s, there were 14 shutdowns, some partial and most lasting only a few days.

What is the debt ceiling?

The debt ceiling is a legislative limit on how much money the federal government can borrow through debt issued by the U.S. Treasury. Once the limit is reached, Congress must raise it or the government cannot continue borrowing money and would default, or be unable to pay its bills.

The Treasury has said it wants Congress to increase the debt ceiling by September 29, although default most likely could be staved off until mid-October, thanks to “extraordinary measures” the Treasury put in place in March to delay a debt reckoning.

Legislation to raise the debt limit will need to be adopted, at the very latest, by early to mid-October.

What if the ceiling is not raised?

If the debt ceiling is not raised, the government would not be able to borrow more money or pay its bills, including payments on its debts, which could hurt the U.S. credit rating.

Political gridlock has never led to the United States reaching its debt ceiling and its bills going unpaid, but there have been close calls. An August 2011 standoff cost the country its top-notch bond rating from the credit rating agency Standard & Poor’s and caused the most jarring two weeks in financial markets since the 2007-09 global financial crisis.

How are the budget and debt ceiling related?

The two move on separate tracks, but are likely to get tangled together, with Republican opponents of a debt ceiling increase most likely demanding federal spending cuts. Some analysts say Congress may try to tackle both issues at the same time.

What are the politics?

Both the spending and debt ceiling bills can pass the Republican-led House of Representatives by a simple majority vote, but will need 60 votes to pass the Senate, where Republicans hold 52 of 100 seats, meaning they will need some Democratic support.

Trump made his U.S.-Mexico border wall a central promise of his 2016 presidential campaign. He also promised that Mexico would pay for the wall, but Mexico has steadfastly refused and Trump has largely stopped talking about that pledge.

Conservative House Republicans agree with the Republican president on the need for a wall and say funding for it should be a priority in any spending legislation. Some of them have already indicated they are willing to shut down the government to get it.

Moderate Republicans have called a shutdown unwise, and Republican leaders are determined to prevent one, fearing it would worsen doubts about the party’s ability to govern.

Democrats are uniformly opposed to Trump’s wall and say the responsibility for a shutdown would rest solely with Republicans.

The Trump administration reversed course earlier this month and said it would back a “clean” raising of the debt ceiling, meaning it would not be tied to other policy measures.

Democrats and moderate Republicans also support a clean debt-ceiling increase. But conservative Republicans, especially in the House, often use debt-ceiling legislation to insist on changes to spending, making them opposed to a clean bill.
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Just beyond the outskirts of Cairo on a desert road to the Suez Canal, a sprawling industrial zone is coming to life as Egypt’s leather industry leaves behind its ancient tanning quarters for modern workshops of Robiki Leather City.

The new complex is part of a major expansion drive of a sector Egypt considers as one of its most competitive. The trade ministry has set an official target for leather exports to reach over $1 billion a year in 2020, from about $200 million a year currently.

By mid-2018, Robiki should house the entire supply chain, from animal slaughtering to finished leather production, allowing global manufacturers to source materials and export final goods in a single location, said Mohamed El Gohary, chairman of a state firm marketing the site.

“The value added of our exports will increase five times when we reach the stage where we’re exporting final products like shoes and bags,” Gohary said.

Foreign investors can begin purchasing space in Robiki in 2018, and the zone has received strong interest from Italian companies, Gohary said.

Egyptian exports were given a boost when Egypt floated its pound currency last year as part of an International Monetary Fund loan program.

With projects like Robiki, Egypt hopes to pull back capital that fled after its 2011 political uprising. In the fiscal year ending in June, it netted $8.7 billion in foreign direct investment and is targeting above $10 billion this year.

Around 220 tanneries are being relocated to Robiki, said Mohamed Harby, head of a leather tanning industry group.

They are moving under the orders of the government, which is paying for the transfer of machinery, constructing subsidized housing for workers and facilitating low-interest loans for businesses looking to expand.

The tanners’ centuries-old home of Magra Al-Ayoon in Old Islamic Cairo, which runs along the city’s ancient aqueduct, will most likely be developed into a tourist site, though plans have yet to be finalized, said Omar Khorshid, a trade ministry adviser to the Robiki project.

There, workers dye animal hides in small, ramshackle buildings without infrastructure for absorbing hazardous waste byproducts.

“Egypt a long time ago was a leader in leather tanning, and for a period of time everyone wanted to expand, but there was just no space to,” Ahmed Al-Gabbas, managing director of Al-Rowad Tannery, said at his factory in Robiki.

Al-Rowad, one of the country’s three largest tanneries, will complete its relocation over the next month. Gabbas said the company was using the space to scale up and triple exports over the next year.
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Oil is the main revenue source in Alaska. This year, the trans-Alaska pipeline celebrated 40 years of service. From Alaska, VOA’s Natasha Mozgovaya looks at the history of North America’s largest oil field.
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Congressional Republicans, seeking to address the complaints of small businesses, are floating changes to their controversial proposal to eliminate business tax deductions for debt interest payments, business lobbyists said Tuesday.

A top U.S. Republican on tax policy acknowledged that modifications are in the works but did not provide details.

The debt interest proposal, long seen by Republican policymakers as necessary to help drive economic growth, is backed by large companies with ready access to equity financing that they could substitute for debt if eliminating the interest deduction made issuing debt too costly. Debt-dependent small-business owners, farmers and ranchers don’t have that luxury.

As Republicans in Congress and the Trump administration slog ahead with a push to overhaul the U.S. tax code, a key task is figuring out how to resolve conflicting groups’ priorities, with business debt interest a clear example.

The tax code has not been overhauled since 1986, partly because reconciling these conflicts can be so difficult.

“We’ve asked businesses large and small to look at that, test-drive it and give us back their feedback,” House of Representatives tax committee Chairman Kevin Brady said in remarks at an event in Louisville, Kentucky, on Tuesday, without offering specifics about the modified proposal.

His staff at the committee had no comment.

Businesses lobbyists said the panel’s lawmakers have quietly agreed to focus on exemptions for small businesses, including farmers and ranchers, and an exemption for land.

Interest deduction

Lawmakers have also discussed a possible partial elimination of the interest deduction, with an exemption for existing debt, or eliminating the deduction only for businesses deemed to have an excessive amount of debt, according to lobbyists.

Brady is one of the “Big Six” negotiators from Congress and the Trump administration who are guiding the tax reform debate.

At the Louisville event, he described rolling back the business interest deduction as a “trade-off” for another proposal to accelerate expensing, which would allow businesses to write off investments in plants and equipment more quickly.

He said net interest deduction is one of a number of tax breaks that lawmakers are looking to eliminate to help pay for lower business tax rates. Republicans say tax cuts will help drive annual U.S. economic growth above the 3 percent mark.

Independent analysts say that eliminating the interest deduction would raise more than $1 trillion in federal revenues.

Republicans want to cut the corporate income tax rate to 20-25 percent from 35 percent. But they have been hard-pressed to pay for such a cut since jettisoning a border-adjusted import tax that would have raised more than $1 trillion.
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Indigenous people living on Peru’s largest oil field concession have seized some facilities operated by Frontera Energy demanding that the government apply an indigenous rights law before signing a new contract with the Canadian company, a tribal chieftain said on Tuesday.

The so-called prior consultation law, passed in 2011, requires the government to seek input from indigenous people before approving any development plans that might affect them.

Tribal chiefs in Frontera’s Block 192 said the government has refused to carry out the consultation process even though it is negotiating a new contract with Frontera, whose 2-year contract is due to expire this month.

“If the government says it’ll carry out prior consultation, we’ll automatically end the protest,” Wilmer Chavez, chief of the community of Los Jardines, said in a telephone interview.

Chavez said that protesters from the indigenous community had taken control of oil drums and other facilities to curb output in Block 192.

Government offices tasked with oil drilling and indigenous rights did not respond to requests for comment.

Frontera, which produced some 7,500 barrels a day from Block 192 in July, said in a statement that it values community consent and that only the government could legally carry out prior consultation.

“Since our arrival to the area of Block 192, Frontera Energy has been working to gain the community’s trust and act as a mediator to ease potential tensions between the government, the industry and the community,” the company said in the statement.

Amazonian tribes in Block 192 want the government to sign new commitments for the clean-up of oil pollution and for access to health care and education in the remote region before awarding Frontera a new contract, said Chavez.

Four other chiefs, speaking to foreign media in Lima where they had traveled to meet with government officials, described similar demands in the 16 out of 20 villages they represent in Block 192 and vowed to stage their own protests unless prior consultation was applied.

Carlos Sandi, chief of the Corrientes River basin, told reporters that the government must fulfill its promises to clean up oil pollution that is sickening local residents.

U.S. oil company Occidental Petroleum Corp operated Block 192 for about 40 years before Argentine energy company Pluspetrol took over in 2001.

Frontera said negotiations with Peru on a new deal for Block192 were ongoing and that in coming weeks it should have a better idea of whether it will continue to operate there.
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