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Fresh from clinching an updated North American commerce pact, U.S. President Donald Trump on Monday criticized Indian and Brazilian trade tactics, describing the latter as being “maybe the toughest in the world” in terms of protectionism.

Addressing reporters at a White House event to celebrate the agreement of an updated trilateral trade deal between the United States, Mexico and Canada, Trump added India and Brazil to a growing list of countries that, he argues, treat the world’s top economy unfairly in terms of commerce.

“India charges us tremendous tariffs. When we send Harley Davidson motorcycles, other things to India, they charge very, very high tariffs,” Trump said, adding that he had brought up the issue with Indian Prime Minster Narendra Modi, who he said was “going to reduce them very substantially.”

Modi’s office could not immediately be reached for a request for comment. India’s government has become more protectionist in recent months, raising import tariffs on a growing number of goods as it promotes its ‘Make in India’ program.

After criticizing India, Trump turned to Brazil, the second-largest economy in the Americas behind the United States.

“Brazil’s another one. That’s a beauty. They charge us whatever they want,” he said. “If you ask some of the companies, they say Brazil is among the toughest in the world – maybe the toughest in the world.”

Brazil is one of the world’s most closed major economies, and in recent months has tussled with the Trump administration over trade in sectors such as ethanol and steel.

After Trump’s comments, Brazil’s Foreign Trade Minister, Abrão Neto, defended the relationship, saying it was “very positive.” He added that over the last 10 years, the United States has enjoyed a trade surplus with Brazil of $90 billion in goods, and of $250 billion in goods and services.

Neto pointed out that the United States was Brazil’s second-largest trading partner, behind China, and that the two countries had a “complementary and strategic” commercial relationship that could, nonetheless, be improved.

Trump’s “America First” trade policies, particularly his escalating trade war with China, are aimed at boosting U.S. manufacturing, but they have spooked investors who worry that supply lines could be fractured and global growth derailed.

There are now U.S. tariffs active on $250 billion worth of Chinese goods, with threats on additional goods worth $267 billion.
…

The economy should grow at a healthy pace this year and next, though the Trump administration’s trade policy will likely act as a drag, a group of business economists said. 

Growth should reach 2.9 percent this year, according to a survey of 51 economists by the National Association for Business Economics, released Monday. That would be up from just 2.3 percent in 2017. And growth is forecast to be 2.7 percent in 2019, the survey found. 

Overall, the economists are slightly more optimistic than they were when last surveyed three months ago. Buoyed by solid consumer spending and a healthy increase in business investment, the survey respondents expect the economy will overcome any negative impacts from higher tariffs. 

Just over half of the respondents expect that the next recession won’t arrive until 2020 at the earliest, while one-third said it wouldn’t occur until 2021. 

Inflation should remain in check, the survey found, rising to just 2.5 percent this year from 2.1 percent last year. Yet price gains will then likely moderate to 2.3 percent in 2019, the survey said. 

Still, worries over trade policy have darkened the outlook for many. Nearly 80 percent of the economists surveyed cut their growth forecasts for next year by up to one-half a percentage point, the NABE said, because of trade concerns. The Trump administration has slapped tariffs on most steel and aluminum imports and on nearly half the imports from China.

And one-half of the respondents have increased their inflation forecasts because of the import taxes.

More economists cited “trade policy” as the greatest risk to future growth, the NABE said, than any other issue. Higher interest rates and a large drop in the stock market were tied as the second-most likely risk, while just a few economists cited rising inflation and “labor shortages” as risks to growth. 

 

 
…

After less than two years and a precipitous decline in the share price at General Electric, John Flannery is being ousted as chairman and CEO.

 

Flannery took over for longtime CEO Jeff Immelt in June 2017 with the company trying to re-establish its industrial roots, albeit a high-tech version of itself.

 

However, as Flannery has restructured the multinational conglomerate, its value has dipped below $100 billion and shares are down more than 35 percent this year.

 

GE warned Monday that it will miss its profit forecasts this year and it’s taking a $23 billion charge.

 

The company said Monday that H. Lawrence Culp Jr. will take over as chairman and CEO immediately.

 

Shares of General Electric Co., based in Boston, surged 9 percent before the opening bell.

 

 
…

After intense last-minute discussions ahead of a self-imposed midnight deadline, U.S. and Canadian officials announced late Sunday they reached a trade deal, allowing a modified three-way pact with Mexico to replace the nearly quarter-century old North American Free Trade Agreement. 

The U.S.-Mexico-Canada Agreement (USMCA) — underpinning $1.2 trillion in annual trade — is expected to be signed in 60 days by President Donald Trump and his Canadian and Mexican counterparts. 

Trump hailed the “wonderful new Trade Deal” on Monday and calling it a “great deal for all three countries” that “solves the many deficiencies and mistakes in NAFTA.”

 
Trump had made criticism of the North American Free Trade Agreement (NAFTA) a centerpiece of his successful 2016 election campaign. 

“The worst trade deal maybe ever signed anywhere, but certainly ever signed in this country,” Trump had termed NAFTA, blaming it for the loss of American manufacturing jobs since it went into effect in 1994. 

The U.S. Congress is likely to act on USMCA next year. Its fate in the hands of American lawmakers remains far from certain, especially if the Democrats would take back control of the House of Representatives in the November midterm elections. 

“USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region,” said U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland in a joint statement. “It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.”

The U.S. agreement with Ottawa will boost American access to Canada’s dairy market — with some concessions on its heavily protected supply management system — while shielding the Canadians from possible U.S. auto tariffs. 

Steel and aluminum tariffs imposed by Washington, will remain, however. Canada had demanded protection from Trump’s tariffs on imported steel and aluminum.

The metal tariffs discussions are on a “completely separate track,” according to a senior U.S. official. 

In a big victory for Canada, NAFTA’s Chapter 19 dispute resolution system will remain intact. 

Leaving a Sunday night 75-minute Cabinet meeting, Canadian Prime Minister Justin Trudeau only said it was “a good day for Canada.”

The Trump administration had imposed a midnight Sunday deadline for Trudeau’s government to reach agreement on an updated NAFTA, or face exclusion from the treaty.

“This deadline was real,” according to a senior U.S. official. “We ended up in a good place that we ultimately think is a good deal for all three countries.” 

U.S. officials, in recent weeks, had been adamant that the text for a new deal — whether it would only be with Mexico or also include Canada — to be released by September 30 to meet congressional notification requirements and to allow outgoing Mexican President Enrique Pena Nieto to be able to sign the deal before he is succeeded by Andres Manuel Lopez Obrador, a left-wing populist. 

Canada’s government had faced strong opposition to elements of the revised pact from the country’s dairy farmers. Voters in Quebec, home to 354,000 dairy cows – the most of any province — head to the polls for provincial elections Monday, which cast a shadow over the last-minute negotiations. 

The National Association of Manufacturers (NAM) in the United States declared itself “extremely encouraged” by initial details of the new three-way pact. 

“As we review the agreement text, we will be looking to ensure that this deal opens markets, raises standards, provides enforcement and modernizes trade rules so that manufacturers across the United States can grow our economy,” said NAM President and Chief Executive Officer Jay Timmons. 

“This administration is committed to strong and effective enforcement of this agreement,” a senior U.S. official told reporters. “This is not going to just be words on paper. This is real.” 
…

After lengthy delays, an $8.2 billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush has become a test of Pakistan’s ability to rethink signature Chinese “Silk Road” projects due to debt concerns.

The rail megaproject linking the coastal metropolis of Karachi to the northwestern city of Peshawar is China’s biggest Belt and Road Initiative (BRI) project in Pakistan, but Islamabad has balked at the cost and financing terms.

Resistance has stiffened under the new government of populist Prime Minister Imran Khan, who has voiced alarm about rising debt levels and says the country must wean itself off foreign loans.

“We are seeing how to develop a model so the government of Pakistan wouldn’t have all the risk,” Khusro Bakhtyar, minister in Pakistan’s planning ministry, told reporters recently.

The cooling of enthusiasm for China’s investments mirrors the unease of incoming governments in Sri Lanka, Malaysia and Maldives, where new administrations have come to power wary of Chinese deals struck by their predecessors.

Pakistan’s new government had wanted to review all BRI contracts. Officials say there are concerns the deals were badly negotiated, too expensive or overly favored China.

But to Islamabad’s frustration, Beijing is only willing to review projects that have not yet begun, three senior government officials have told Reuters.

China’s Foreign Ministry said, in a statement in response to questions faxed by Reuters, that both sides were committed to pressing forward with BRI projects, “to ensure those projects that are already built operate as normal, and those which are being built proceed smoothly.”

Pakistani officials say they remain committed to Chinese investment but want to push harder on price and affordability, while re-orientating the China-Pakistan Economic Corridor (CPEC) — for which Beijing has pledged about $60 billion in infrastructure funds — to focus on projects that deliver social development in line with Khan’s election platform.

China’s Ambassador to Pakistan, Yao Jing, told Reuters that Beijing was open to changes proposed by the new government and “we will definitely follow their agenda” to work out a roadmap for BRI projects based on “mutual consultation.”

“It constitutes a process of discussion with each other about this kind of model, about this kind of roadmap for the future,” Yao said.

Beijing would only proceed with projects that Pakistan wanted, he added. “This is Pakistan’s economy, this is their society,” Yao said.

Islamabad’s efforts to recalibrate CPEC are made trickier by its dependence on Chinese loans to prop up its vulnerable economy.

Growing fissures in relations with Pakistan’s historic ally the United States have also weakened the country’s negotiating hand, as has a current account crisis likely to lead to a bailout by the International Monetary Fund, which may demand spending cuts.

“We have reservations, but no other country is investing in Pakistan. What can we do?” one Pakistani minister told Reuters.

Crumbling railways

The ML-1 rail line is the spine of country’s dilapidated rail network, which has in recent years been edging toward collapse as passenger numbers plunge, train lines close and the vital freight business nosedives.

Khan’s government has vowed to make the 1,872 km (1,163 mile) line a priority CPEC project, saying it will help the poor travel across the vast South Asian nation.

But Islamabad is exploring funding options for CPEC projects that depart from the traditional BRI lending model — whereby host nations take on Chinese debt to finance construction of infrastructure – and has invited Saudi Arabia and other countries to invest.

One option for ML-1, according to Pakistani officials, is the build-operate-transfer (BOT) model, which would see investors or companies finance and build the project and recoup their investment from cashflows generated mainly by the rail freight business, before returning it to Pakistan in a few decades time.

Yao, the Chinese envoy, said Beijing was open to BOT and would “encourage” its companies to invest.

Rail mega-projects under China’s BRI umbrella have run into problems elsewhere in Asia. A line linking Thailand and Laos has been beset by delays over financing, while Malaysia’s new Prime Minister Mahathir Mohamad outright cancelled the Chinese-funded $20 billion East Coast Rail Link (ECRL).

Beijing is happy to offer loans, but reticent to invest in the Pakistan venture as such projects are seldom profitable, according to Andrew Small, author of a book on China-Pakistan relations.

“The problem is that the Chinese don’t think they can make money on this project and are not keen on BOT,” said Small.

Off-book debts

During President Xi Jinping’s visit to Pakistan in 2015, the ML-1 line was placed among a list of “early harvest” CPEC projects that would be prioritized, along with power plants urgently needed to end crippling electricity shortages.

But while many other projects from that list have now been completed the rail scheme has been stuck.

Pakistani officials say they became wary of how early BRI contracts were awarded to Chinese firms, and are pushing for a public tender for ML-1.

Partly to help with price discovery, Pakistan asked the Asian Development Bank (ADB) to finance a chunk of the rail project through tendering. The ADB began discussions on a $1.5-2 billion loan, but China insisted the project was “too strategic”, and Islamabad kicked out the ADB under pressure from Beijing in early 2017, according to Pakistani and ADB officials.

“If it’s such a strategic project then it should be a viable project for them to finance on very concessional terms or invest in?” said one senior Pakistani official familiar with the project, referring to the BOT model.

China’s foreign ministry said Beijing was engaged in “friendly consultations” with Pakistan on the rail project.

Chinese companies participated in BRI projects in an open and transparent way, “pooling benefits and sharing risks,” it said.

Analysts say Pakistan will struggle to attract non-Chinese investors into the project, which may force it to choose between piling on Chinese debt or walking away from the project. In 2017, Pakistan turned down Chinese funding for a $14 billion mega-dam project in the Himalayas due to cost concerns and worries Beijing could end up owning a vital national asset if Pakistan could not repay loans, as occurred with a Sri Lankan port.

Khan’s government chafes at several Chinese intercity mass transport projects in Punjab, the voter heartland of the previous government, which now need hundreds of millions of dollars in subsidies every year.

They also fume about the risk of accumulating off-books sovereign debt through power contracts, where annual profits of above 20 percent, in dollar terms, were guaranteed by the previous administration.

With the ML-1 line, there are also those who harbor doubts closer to home, including the previous government’s finance minister, Miftah Ismail, who said his ministry had always had concerns about its viability.

“When people say it’s a project of national importance, that usually means it makes no sense financially,” he said.
…

Tesla Chief Executive Officer Elon Musk and the electric car company have agreed to pay a total of $40 million and make a series of concessions to settle a government lawsuit alleging Musk duped investors with misleading statements about a proposed buyout of the company.

The Securities and Exchange Commission announced the settlement Saturday, two days after filing a case seeking to oust Musk as CEO.

The settlement will require Musk to relinquish his role as chairman for at least three years, but he will able to remain as CEO.
…

Canadian Foreign Affairs Minister Chrystia Freeland postponed her U.N. speech Saturday as free-trade talks between the U.S. and Canada intensified.

Freeland had been scheduled to deliver Canada’s address to the General Assembly in New York, but Canada exchanged the slot with another country. Freeland may or may not give the speech on Monday.

A senior Canadian government official said they were making progress in the talks but that it wasn’t certain that they would reach a deal soon. The official, who spoke on condition of anonymity, said Canada would sign only a good deal.

Canada, the United States’ No. 2 trading partner, was left out when the U.S. and Mexico reached an agreement last month to revamp the North American Free Trade Agreement. The U.S. and Canada are under pressure to reach a deal by the end of the day Sunday, when the U.S. must make public the full text of the agreement with Mexico.

U.S. President Donald Trump has said he wants to go ahead with a revamped NAFTA, with or without Canada. It is unclear, however, whether Trump has authority from Congress to pursue a revamped NAFTA with only Mexico, and some lawmakers say they won’t go along with a deal that leaves out Canada. 

Dairy tariffs

Among other things, the negotiators are battling over Canada’s high dairy tariffs. Canada also wants to keep a NAFTA dispute-resolution process that the U.S. wants to jettison.

U.S.-Canada talks bogged down earlier this month, and most trade analysts expected the Sept. 30 deadline to come and go without Canada’s reinstatement. They suspected that Canada, which had said it wasn’t bound by U.S. deadlines, was delaying the talks until after provincial elections Monday in Quebec, where support for Canadian dairy tariffs runs high.

But trade attorney Daniel Ujczo of the Dickinson Wright law firm, who follows the NAFTA talks closely, said the United States put pressure on Canada, contending there would “consequences” if it didn’t reach an agreement by the end of the day Sunday. Trump has repeatedly threatened to start taxing Canadian auto imports. Ujczo put the odds of a deal this weekend at 75 percent. 

Relations between the two neighbors have been strained since Trump assailed Canadian Prime Minister Justin Trudeau at the Group of Seven meeting in June, calling him “weak” and “dishonest.” Canadian leaders have objected to Trump’s decision to impose tariffs on Canadian steel, citing national security.
…

U.S. consumer spending increased steadily in August, supporting expectations of solid economic growth in the third quarter, while a measure of underlying inflation remained at the Federal Reserve’s 2 percent target for a fourth straight month.

Economists said Friday’s report from the Commerce Department should allay fears of the economy overheating and likely keeps the U.S. central bank on a gradual path of interest rate increases. The Fed raised rates Wednesday for the third time this year and removed the reference to monetary policy remaining “accommodative.”

“Growth is solid and inflation pressures modest,” said Chris Rupkey, chief economist at MUFG in New York. “This is exactly the environment the Fed needs to move interest rates up at a gradual pace as further rate hikes start to look like tightening.”

Consumer spending

The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3 percent last month after an unrevised 0.4 percent gain in July. Spending last month was driven by outlays on health care, which offset a drop in motor vehicle purchases.

August’s increase in consumer spending was in line with economists’ expectations. When adjusted for inflation, consumer spending rose 0.2 percent after climbing 0.3 percent in July.

The report came on the heels of data Thursday showing a decline in orders for key capital goods in August and a further widening of the goods trade deficit, which prompted economists to downgrade their gross domestic product growth estimates for the third quarter to as low as a 2.8 percent annualized rate.

Third-quarter GDP growth forecasts were previously as high as a 4.4 percent pace.

Economic growth

The economy grew at a 4.2 percent rate in the second quarter, powered by robust consumer spending. Economists said data in hand suggested that consumer spending was on track to grow around 3.6 percent in the third quarter, close to the 3.8 percent pace set in the April-June period.

Consumer spending is being driven by a tightening labor market, which is starting to boost wage growth, as well as higher savings. It is also being supported by robust consumer confidence.

A separate report Friday showed the University of Michigan’s consumer sentiment index at a six-month high in September. A survey earlier this week from the Conference Board showed consumer confidence hitting an 18-year high in September.

The Conference Board places more weight on the labor market.

The dollar was trading higher against a basket of currencies, while U.S. Treasury yields fell. Stocks on Wall Street were little changed in late afternoon trade.

Eyes on tariffs

In August, spending on goods increased 0.3 percent, likely lifted by higher gasoline prices. Spending on goods rose 0.5 percent in July. Outlays on services advanced 0.4 percent, with spending on health care accounting for much of the increase.

There was a moderation in monthly price gains in August. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components was unchanged. That was the weakest reading since March 2017 and followed a 0.2 percent gain in July.

August’s flat reading left the year-on-year increase in the so-called core PCE price index at 2.0 percent. The core PCE index is the Fed’s preferred inflation measure. It hit the U.S. central bank’s 2 percent inflation target in March for the first time since April 2012.

Economists say inflation could slightly overshoot its target amid concerns an escalating trade war between the United States and China could lead to price increase for a range of consumer goods.

Washington on Monday slapped tariffs on $200 billion worth of Chinese goods, with Beijing retaliating with duties on $60 billion worth of U.S. products. The United States and China had already imposed tariffs on $50 billion worth of each other’s goods.

Walmart Inc, the largest U.S. retailer, said last week it might hike prices because of the duties on Chinese imports.

“With this $200 billion increase, you are effectively tripling the amount of goods subject to a tariff and that has potential to influence prices,” said Tim Quinlan, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

JPMorgan estimates that the tariffs could add 0.2 to 0.3 percentage point to core inflation.

In August, personal income rose 0.3 percent after increasing by the same margin in July. Wages jumped 0.5 percent, the biggest gain in seven months, after rising 0.3 percent in July.

The saving rate was unchanged at 6.6 percent last month.
…

Tesla without Elon Musk at the wheel? To many of the electric car maker’s customers and investors, that would be unthinkable. But that’s what government securities regulators now want to see.

The Securities and Exchange Commission has asked a federal court to oust Musk as Tesla’s chairman and chief executive officer, alleging he committed securities fraud with false statements about plans to take the company private.

The agency says in a complaint filed Thursday that Musk falsely claimed in an Aug. 7 statement on Twitter that funding had been secured for Tesla Inc. to go private at $420 per share, a substantial premium over the stock price at the time.

The SEC is asking the U.S. District Court in Manhattan to bar Musk from serving as an officer or director of a public company. It also is asking for an order enjoining Musk from making false and misleading statements along with repayment of any gains as well as civil penalties.

Ousting Musk, who has a huge celebrity status with more than 22 million Twitter followers, would be difficult and could damage the company. He’s viewed by many shareholders as the leader and brains behind Tesla’s electric car and solar panel operations.

The stock market shuddered at the prospect. Shares slid more than 12 percent to $269.52 in Friday morning trading after a number of analysts either downgraded the stock or issued negative notes.

Citi analyst Itay Michaeli downgraded Tesla Inc. shares to Sell/High Risk from Neutral/High Risk, telling investors in a note that the SEC case raises the risk of Musk’s ouster.

“There’s little question that Mr. Musk’s departure would likely cause harm to Tesla’s brand, stakeholder confidence and fundraising — thereby increasing the risk of triggering a downward confidence spiral given the state of Tesla’s balance sheet,” Michaeli wrote.

​’Reputational harm’

He also told investors that Musk could stay on, but “the reputational harm from this might still prevent the stock from immediately returning to ‘normal.’ ” Michaeli set a $225 one-year price target for the stock.

Tesla shares have a $130 “Musk premium” due to future business driven by Musk as a disrupter of multiple industries, but that could go away if Musk is ousted, Barclays analyst Brian Johnson wrote in a note.

“Should the SEC be successful in barring Mr. Musk from serving as an officer or director, investors would focus back on the value of Tesla as a niche automaker,” wrote Johnson, who reiterated an “Underweight” rating and set a price target of $210.

CFRA analyst Garrett Nelson downgraded the stock from “hold” to “sell” and reduced his price target to $225. “Despite Musk’s recent erratic behavior, we think most investors want him to remain with the company and they value shares at what we view as extremely lofty multiples given the potential for Musk’s vision to drive future growth,” he wrote. “Given uncertainty about Musk’s role going forward, we think a lower valuation is justified.”

Musk, in a statement issued by Tesla, disputed the SEC’s claims. “I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way,” the statement said.

According to a person knowledgeable about talks between Tesla and federal securities regulators, Musk rejected a settlement that would have allowed him to pay a small fine and stay on as CEO of the electric car company if he agreed to certain conditions, including restrictions on when he could release information publicly.

The person, who asked not to be identified because the negotiations were private, said Friday that Musk rejected the offer because he didn’t want a blemish on his record.

The SEC complaint alleges that Musk’s tweet harmed investors who bought Tesla stock after the tweet but before accurate information about the funding was made public.

No license in ‘celebrity status’

“Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders,” Steven Peikin, co-director of the SEC’s Enforcement Division, said in a statement. “An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”

Peter Henning, a law professor at Wayne State University and a former SEC lawyer, said it’s the first fraud case involving use of social media by the CEO of a public company. Musk and Tesla didn’t fully disclose details of the plan in the Aug. 7 tweet or in later communications that day as required, he noted.

“You can’t make full disclosure in 280 characters,” he said, referring to the length limit of a tweet.

Joseph Grundfest, a professor at Stanford Law School and former SEC commissioner, said Musk will likely want to settle before trial so that he could conceivably stay on as CEO, with some constraints such as prohibiting him from making public statements without supervision. But Musk also could agree to step down as CEO and instead take another title, such as chief production officer.

Grundfest also said that the challenge for the SEC is to “appropriately discipline Musk while not harming Tesla’s shareholders.”

According to the complaint, Musk met with representatives of a sovereign investment fund for 30 to 45 minutes on July 31 at Tesla’s Fremont, Calif., factory. Tesla has identified the fund as Saudi Arabia’s Public Investment Fund, which owns almost 5 percent of the company.

Fund representatives expressed interest in taking Tesla private and asked about building a factory in the Middle East, Musk told the SEC. But at the meeting, there was no discussion of a dollar amount or ownership stake for the fund, nor was there discussion of a premium to be paid to Tesla shareholders, the complaint said. Musk told the SEC that the lead representative of the fund told him he would be fine with reasonable terms for a go-private deal.

No specific terms

“Musk acknowledged that no specific deal terms had been established at the meeting and there was no discussion of what would or would not be considered reasonable. Nothing was exchanged in writing,” the complaint stated.

The SEC alleged in the 23-page complaint that Musk made the statements using his mobile phone in the middle of a trading day. That day, Tesla shares closed up 11 percent from the previous day.

The statements, the complaint said, “were premised on a long series of baseless assumptions and were contrary to facts that Musk knew.” Later in the month, Tesla announced that the go-private plan had been scrapped.

In its complaint, the SEC said that Musk’s statements hurt short sellers, who are investors who borrow a company’s stock betting that it will fall. Then they buy the shares back at a lower price and return them to the lenders, pocketing the profit.

In August, more than $13 billion worth of Tesla shares were being “shorted” by investors, the complaint said, as the stock was under pressure due to questions about Tesla’s finances and Musk’s erratic behavior.

Mark Spiegel, a short-seller and constant Musk critic, applauded the SEC for pursuing what he predicted would be easy for the government to prove.

Tesla’s board said in a statement Thursday night that it is “fully confident in Elon, his integrity, and his leadership of the company.” 
…

Italy’s stock market fell sharply Friday after the new populist, euroskeptic government announced a sharp public spending increase that will push the budget deficit to 2.4 percent of gross domestic product next year, risking a collision with the European Union.

The benchmark FTSE MIB dropped 2.2 percent early Friday, hours after the government announced its first financial targets since taking office three months ago. 

Italy’s government partners, the 5-Star movement and the League, pressed for money to fulfill campaign pledges, namely a basic citizen’s income for job seekers and a flat tax. Finance Minister Giovanni Tria, who is politically unaligned, had wanted to keep the budget deficit capped at no more than 2 percent.

The leader of the 5-Star Movement, Luigi Di Maio, called the document approved early Friday by the Cabinet “a maneuver of the people.”

“The historic measures are a victory,” Di Maio said. “It is not the government that wins, but citizens. It is a maneuver that allows us to relaunch investments and growth.”

The 2019 deficit target is a significant jump from the 2018 target of 1.6 percent, set by the former center-left government, but still remains within the 3-percent ceiling set by the EU. The European Union has been pressing Italy to address its deficit in a bid to reduce the country’s debt, the second largest in the EU after Greece. 

The spending targets contained in the document calls for spending of 27 billion euros, including blocking an increase in value-added tax, launching the 5-Star Movement’s basic income scheme, undoing pension reforms and introducing a flat tax.

 

To pay for the new spending, the government has pledged a tax amnesty, a spending review and possible changes to tax breaks.

 

The government must submit a draft budget to the EU by Oct. 15.
…

Puerto Rico Gov. Ricardo Rossello flew to New York this week on a mission: convince potential tourists that the hurricane-ravaged island was ready for their return.

But Puerto Rico’s recovery from last year’s Hurricane Maria has been a “mixed bag,” Rossello told Reuters on Thursday, acknowledging that the bankrupt U.S. territory, while improving, was far from out of the woods.

Puerto Rico has received only a small fraction of the federal funding it needs to get back on its feet, Rossello said in a 75-minute interview, and getting access to the rest could take more than a decade.

$4 billion or less

His administration estimates that fixing Puerto Rico fully will require $139 billion, but the federal government has earmarked only about $60 billion to $65 billion for the recovery, he said. Of that, only about $3 billion to $4 billion has actually flowed into the island’s coffers. 

Obtaining the remainder could take 10 to 11 years, he said, adding that his team was lobbying Congress for more money.

Compounding the problem is Puerto Rico’s bankruptcy in U.S. federal court, where it is trying to restructure $120 billion of debt and pension obligations. There are also ongoing spending disputes between the government and a federally appointed fiscal oversight board.

In the year since Hurricane Maria, Rossello has at times been diplomatic regarding the federal government’s response, while at other times — especially lately — he’s been more critical. He has also been criticized for sticking with an estimated death toll of 64 early on, when  strong evidence suggested it could be higher. A government-commissioned study by researchers at George Washington University eventually pegged the toll at around 3,000.

When asked whether his administration’s messaging strategies have been tied to an effort to maintain good relations with President Donald Trump, Rossello said a “critical part” of the island’s recovery “is making sure the federal  government responds to our petitions.”

“So ,yes, I have opted for a path that involves dialog, that involves collaboration,” Rossello said, adding that he has not been afraid to be critical.

If Trump does not sign the island’s request to extend the federal  government’s 100 percent coverage of repair costs, “I’ll be the first one to fight it,” Rossello said, “and I’ll be the first to point out that action, or lack of action, is one of the main obstacles to our recovery.”

Rossello said Puerto Rico still has as many as 60,000 homes with temporary tarp roofs. It also has hundreds of thousands of informally constructed homes with many owners lacking title to their property.

Rebuilding will require that the current ranks of about 45,000 construction workers to grow to 130,000, according to Rossello, who recently signed an executive order increasing the minimum hourly construction wage to $15 despite opposition from the oversight board and the private sector.

Power shift

The island’s government is still considering initiatives that could make the its troubled electricity grid more resilient, Rossello said. Ultimately, the island hopes to generate 40 percent of its electricity from renewables and steer away from fossil fuels. The shift would require a new regulatory policy, approval by the bondholders, and, potentially, investment from outside companies or organizations.

“We have received 10 to 12 unsolicited proposals for generation,” he said, while acknowledging the government has yet to find a private operator for the power utility’s transmission and distribution operations.

But changes at the electric agency known as PREPA, which Rossello called one of the most troubled organizations in modern history, will be gradual. The governor said he was working with a search firm to identify outside board members for the utility, after nearly the entire board quit in an uproar over appointment of a new chief executive.

Limited electricity was a major problem for the island’s small-business sector, according to a Federal Reserve Bank of New York report on Thursday. A survey of more than 400 businesses with fewer than 500 employees found 77 percent suffered losses as a result of Hurricanes Irma and Maria.

Broader effort

Meanwhile, Rossello is trying not only to restore tourism, but to expand it in such a way that it incorporates hundreds of square miles of seaside and mountain communities that are largely unvisited. Puerto Rico’s tourism is small compared with that of other Caribbean locales and tends to be centered in San Juan.

The island’s visitor lodgings hit a 2017 high of 204,025 in July, but fell to just under 30,000 in October following the hurricanes, according to Puerto Rico Tourism Company data.

Persuading tourists to leave the capital, though, will require easier travel. “Puerto Rico should be a multiport destination,” he said, discussing plans to beef up airport capacity in the south and west of the island.

He emphasized the possibility of capitalizing on Puerto Rico’s near-constant spate of community festivals. “We have flower festivals, orange festivals, plantain festivals, coffee festivals, music festivals,” he said.

Rossello pointed to so-called chinchorreos as a possible draw, events in which Puerto Rican foodies move from one inexpensive eatery to the next.

“A bar crawl for food — that’s the best way to put it,” the governor said, “and the island is small, so you start in one place and you’re on a beachfront, and 15 minutes later you’re in the mountains.”
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