YCLOAK

Aid money urgently needs to be redirected to the poorest countries in order to reach the United Nations’ goal of ending extreme poverty by 2030, according to a report.

The London-based Overseas Development Institute (ODI) says middle-income countries receive more aid than the 30 poorest nations. It also warns that at least 400 million people will still be living on less than $1.90 a day, despite government pledges to eliminate all extreme poverty.

In northern Ethiopia, teams of workers dig irrigation channels through orchards and grain fields. Such projects have turned arid plains into fertile farmland, which has quadrupled agricultural production.

The report from the ODI credits Ethiopia’s “Productive Safety Net Program,” launched in 2005, with lifting 1.4 million people out of extreme poverty. It also enabled Ethiopia to avoid another famine during severe droughts in 2010 and 2015.

In contrast, neighboring Uganda has seen extreme poverty levels rise recently, after a rapid reduction in previous years.

“One of the reasons is because climate change is starting to have an impact in that country,” said Marcus Manuel, author of the ODI report. “Now in Ethiopia, they’ve managed, with a lot of support partly from the U.S., to have programs that support farmers when a sudden climate or weather event happens. In Uganda, they didn’t. So when they had a drought, that led to a real increase in poverty. So it’s a matter of having the right systems in place.”

Ethiopia’s program, the largest of any low-income country, pays beneficiaries to work on public works projects such as irrigation, roads, schools and health clinics, which helps to create long-term poverty relief.

Such programs are vital in ending extreme poverty, according to the ODI report. The report says there is an annual funding shortfall of $125 billion in the three core sectors of education, health and what it terms social protection transfers, or welfare.

“You need to do economic growth to do part of things, and you also need investment in the social sectors,” Manuel said. “You need to have both sides of the coin to make this work. Donors are investing both in growth and in social sectors, but they’re not investing it in the right countries to nearly the extent that’s needed. And, in particular, in this report we’ve identified 29 countries which can’t afford the investment needed in the social sectors and donors are not giving enough money to that group of countries.”

The statistics show middle-income countries receive more aid than poorer countries, whose share of global aid has fallen over the past six years from 30 percent to 24 percent.

In addition to better aid allocation, the report says more donor nations need to reach the U.N. goal of allocating at least 0.7 percent of gross domestic product to aid budgets. Without urgent action, the authors warn the goal of eliminating extreme poverty by 2030 will remain out of reach.
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U.S. media reports said Friday that President Donald Trump has instructed aides to proceed with tariffs on $200 billion more in Chinese products.

Citing sources familiar with the matter, Bloomberg and Reuters said the president wanted to move forward with the additional duties even though Treasury Secretary Steven Mnuchin is trying to restart trade talks with Beijing.

The reports sent stocks falling Friday and led to a drop in the Chinese yuan.

The White House did not immediately comment on the reports.

Bloomberg reported that Trump met Thursday with his top trade advisers to discuss the tariffs, including Mnuchin, Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer. The meeting was not on Trump’s public schedule.

Before Thursday’s meeting, Trump said on Twitter that he felt “no pressure” to make a deal with Beijing, saying “they are under pressure to make a deal with us.” He also raised questions about whether new talks between the United States and China would happen, saying the U.S. “will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?”

A public comment period for the proposed new tariffs ended last week. The U.S. trade representative’s office received nearly 6,000 comments on the proposal.

Even more tariffs

Last week, Trump threatened even more tariffs on Chinese items — duties on another $267 worth of goods, which when combined with the others would cover virtually all the products that China sends to the United States.

“That changes the equation,” he told reporters.

The Untied States has already imposed tariffs on $50 billion worth of Chinese goods, leading China to retaliate on an equal amount of U.S. goods. 

The Trump administration has argued that tariffs on Chinese goods would force China to trade on more favorable terms with the United States.

It has demanded that China better protect American intellectual property, including ending cybertheft. The Trump administration has also called on China to allow U.S. companies greater access to Chinese markets and to cut its U.S. trade surplus.

China has threatened to retaliate against any potential new tariffs. However, China’s imports from the United States are worth $200 billion a year less than American imports from China, so it would run out of room to match U.S. sanctions.
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The Turkish central bank caught international markets by surprise Thursday as it aggressively hiked interest rates in an effort to strengthen consumer confidence, stem inflation and rein in the currency crisis. 

Interest rates were increased to 24 percent from 17.75 percent, which is more than double the median of investor predictions of a 3 percent hike. The Turkish lira surged above 5 percent in response, although the gains subsequently were pared back.

International investors broadly welcomed the move. “TCMB [Turkish Republic Central Bank] did show resolve in hiking the one-week repo rate substantially and going back to orthodoxy,” chief economist Inan Demir of Nomura International said.

The central bank had drawn sharp criticism for failing to substantially raise interest rates to rein in double-digit inflation and an ailing currency. The lira had fallen by more than 40 percent this year.

The rate hike is an apparent rebuke to Turkish President Recep Tayyip Erdogan, who has been opposed to such a move.

Only hours before the central bank decision, Erdogan again voiced his opposition to increasing interest rates. The Turkish president reiterated his stance of challenging orthodox economic thinking, arguing that inflation is caused by high rates, although that runs contrary to conventional economic theory. Erdogan also issued a presidential decree banning all businesses and leasing and rental agreements from using foreign currency denominations.

The central bank indicated further rate hikes could be in the offing. “Tight stance monetary policy will be maintained decisively until inflation outlook displays a significant improvement,” the central bank statement reads.

The strong commitment to challenge inflation was welcomed by investors. “Most importantly, the CBT seemed to be vocal about price stability risks,” wrote chief economist Muhammet Mercan of Ing bank.

‘Crazy’ spending

Fueled by August’s sharp fall in the lira, which drove up import costs, inflation is on a rapid upward trajectory. Some predictions warn inflation could approach 30 percent in the coming months.

While international markets are broadly welcoming the central bank’s interest rate hike, economist Demir warns more action is needed.

“This rate hike does not undo the damage inflicted on corporate balance sheet, and market concerns about geopolitics will remain in place. So this is not the hike to end all problems,” said Demir.

The World Bank and IMF repeatedly have called on Ankara to rein in spending, which they say is fueling inflation. Perhaps in response, Erdogan has announced a freeze on new state construction projects.

In the past few years, he has embarked on an unprecedented construction boom, including building one of the world’s largest airports and a multibillion-dollar canal project in Istanbul, which the president himself described as “crazy.”

Trade tariffs

Investors also remain concerned about ongoing diplomatic tensions between Ankara and Washington. The two NATO allies remain at loggerheads over the detention on terrorism charges of American pastor Andrew Brunson.

Brunson’s detention saw U.S. President Donald Trump impose trade tariffs on Turkey, which triggered August’s collapse in the lira. Trump has warned of further sanctions.

“If we somehow sort out our problems with the United States and adopt an orthodox austerity program, we may find a way out of this mess,” said political analyst Atilla Yesilada of Global Source Partners.  “Turkey is a country that has a net foreign debt of over $400 billion, and where 40 percent of [Turkish] deposits are in foreign currency, so the game could be over in a day.”

Turkey has a long tradition of carrying out business in foreign currencies to mitigate the threat of inflation and a falling lira. The growing danger of the so-called “dollarization” of the economy and the public abandonment of the lira are significant risks to the currency.

Turkish companies are paying the cost for the depreciation of the lira. Analysts estimate about $100 billion in foreign currency loans have to be repaid by the private sector in the coming year. Companies and individuals borrowing in local currency, however, will be facing higher repayments. And most analysts predict the Turkish economy is heading into a recession.

Economist Demir says, though, that the situation could have been far worse.

“In the absence of an [interest rate] hike, the rollover pressures on banks would get even worse, damage on corporate balance sheets would intensify, and local deposit holders’ confidence would have weakened further. So this hike, although it doesn’t eliminate other risks, eliminates some of the worst outcomes for the Turkish economy,” he said.

Thursday’s rate hike appears to have bought time for the Turkish economy and the nation’s besieged currency. Analysts say investors are watching to see if Turkey’s decision-makers use that time wisely.
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Cuba’s street vendors are bringing back the pregon, the art of singing humorous, rhyming ditties with double entendres about the goods they are selling, with some modernizing the tradition by setting their tunes to reggaeton.

The pregon is a centuries-old tradition that has inspired famous songs like “El Manisero” (the peanut vendor), composed in the late 1920s by Cuban musician Moises Simons on son music, the backbone of salsa.

It faded out in Cuba after Fidel Castro’s 1959 revolution did away with most free enterprise. With the tentative liberalization of the centralized economy over the last few decades, however, it has made a comeback.

Cubans can now get a permit to make and sell their own goods on the street, from coconut ice cream to juices. Vendors often opting for that option, rather than opening a shop, which remains an onerous venture given ongoing restrictions on private business.

Others just illegally sell wares from stores at a mark-up, hoping to avoid authorities and a fine.

Not all street vendors bother with the pregon. Some just shout out what they are selling and their prices in a blunt manner on a loop, often using loudspeakers that they strap to rickety carts or bicycles, adding to the urban cacophony.

Cuba’s pregoneros however, like Lyssett Perez, who hawks paper cones of roasted peanuts to tourists in Old Havana, believe their ditties help them stand out.

“Firstly, it’s so people listen to me. Secondly, so they love me,” said Perez. “For me the pregon means joy.”

Perez has opted for more traditional pregons. She dresses up in colonial-style dresses with voluminous skirts and white aprons in order to catch the eye of potential clients.

“If you want to have fun by the mouth, buy yourself a peanut cornet,” she sings in a deep, melodious voice as she meanders up and down Old Havana’s pebbled and picturesque streets.

Other pregoneros are updating the genre. Gilberto Gonzalez raps about his wares to the beat of reggeaton that blends reggae, Latin and electronic rhythms.

“Toilet paper, so the chorus goes, buy me my people, to clean your bottom, hands in the air!” he raps in a video captured by a passer-by that subsequently drew tens of thousands of views on YouTube.

The video appeared just months after shortages of toilet paper in Havana, adding to its humorous appeal. Cubans are notorious for dealing with constant shortages of basic goods by making fun of them.

Such was its success that one of Cuba’s top DJs, DJ Unic, did a remix that further spread Gonzalez’s peculiar renown. Sporting a cap that reads “Money on my Mind,” Gonzalez said he was just trying to “make ends meet.”
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Even before U.S.-China trade tensions began escalating dramatically, foreign businesses who operate in China were warning about the impact tariffs could have. And now, according to a newly released joint survey from the American Chamber of Commerce in China and AmCham Shanghai, many are already feeling the pinch.

More than 60 percent say the initial $50 billion in tariffs rolled out by the United States and China are having a negative impact on business, increasing the demand of manufacturing and slowing demand for products.

That number is expected to rise to nearly 75 percent if a second round of tariffs, an additional $200 billion in tariffs from Washington and another $60 billion from Beijing, goes ahead.

The administration of President Donald Trump has threatened it could go ahead with $200 billion in tariffs and, if needed, $267 billion more after that.

Unexpected consequences

William Zarit, chairman of AmCham China said while there are expectations in Washington that an additional onslaught of tariffs could force Beijing to wave the white flag, it risks underestimating China’s capability to continue to meet fire with fire, he said.

“It seems that American companies will be more harmed by the American tariffs than they will by the Chinese tariffs. I don’t think that this necessarily is a result that was expected,” Zarit said.

President Trump argues that China is stealing jobs from the United States and not doing enough to address the huge trade deficit between the two economies. The tariffs are seen by proponents as a way of pressuring China to move away from its state-led economy and policies that force technology transfers.

Zaritt said it remains to be seen whether some of the Trump administration’s tactics and tariffs will address big problems, such as Chinese protectionism, state capitalism and other things such as preferential loans and subsidies. He said one key approach that could go a long way to help ease tensions is for the focus to shift toward equal and reciprocal treatment.

“The Chinese have acknowledged that as their economy is evolving away from an export driven/investment driven to a more consumption/domestic demand driven economy, that they really need to open their market. And so, the big question is why would you not do that if it is in your interest?” Zarit said.

Private vs public economy

In Beijing, some have framed the trade tensions as an attempt by the United States to thwart China’s rise. Others, however, have suggested that instead of opening up markets and giving private enterprises more space, the opposite should happen. An article written by Wu Xiaoping, a veteran financier and columnist argues it is time for private enterprises to think about exiting the market.

In the article, he argued China should move toward a large scale centralized private-public mixed economy. He also said the private economy shouldn’t expand blindly.

“The private economy has accomplished its mission to help the public economy develop and it should gradually step aside,” he wrote in the article.

The article has sparked a backlash online and even state media reports have criticized Wu’s views. The fact that the idea was able to circulate so widely before being heavily censored on Thursday is a signal that the government might be sending out a trial balloon.

Others analysts argue the publication of the article could have been motivated by a fear for some that Beijing was preparing to make major concessions.

Zhang Yifan, an associate economics’ professor at the Chinese University of Hong Kong, said despite the widespread criticism, the idea was worrisome.

“President Xi’s government, they believe [in a] strong government,” Zhang said. “So, there is a trend that they strengthen the power of the government and I am worried that market forces will play a smaller and smaller role.”

More trade talks

On Thursday, China’s Foreign Ministry confirmed that both Washington and Beijing are preparing for another possible round of talks and trade negotiations.

A spokesman from the Foreign Ministry welcomed the invitation from Washington and the two were discussing details about the proposed talks. U.S. Treasury Secretary Steven Mnuchin invited his counterparts in China along with Vice Premier Liu He to attend the talks, which could happen in the coming weeks.

The fact that higher ranking officials would attend the talks is being seen as a positive sign. The last round of talks were carried by lower-ranking officials.

Joyce Huang contributed to this report

 

 
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A new report by Transparency International suggests foreign bribery is alive and well. 

The report, by the Berlin-based, anti-corruption watchdog, suggests little has changed in recent years in the way governments enforce their anti-bribery laws. Today, only seven major exporting countries actively crack down on companies that offer bribes to foreign officials in exchange for favorable business deals.

The United States is one of the seven countries, which together account for 27 percent of world exports, Transparency International said. The others are Germany, Israel, Italy, Norway, Switzerland and the United Kingdom. 

2016 a record year

Between 2014 and 2017, the United States launched at least 32 investigations, opened 13 cases and concluded 98 cases involving foreign bribery, according to the report. Enforcement activity surged in 2016, resulting in a record $2.5 billion in penalties levied by U.S. authorities. 

Among several high-profile foreign graft cases adjudicated in the United States, the report cited a case in which British aircraft engine maker Rolls-Royce payed law enforcement authorities in the United States, Britain and Brazil $800 million in 2017 to resolve allegations of bribing officials in at least a dozen countries over more than two decades

The report rated the performance of 44 major exporting countries, including 40 nations that have signed the Organization of Economic Cooperation and Development’s (OECD) Anti-Bribery Convention. The 1997 compact requires signatories to make it a crime for companies and individuals in their countries to bribe foreign officials. 

Transparency International’s last report on the topic, released in 2015, listed just four countries with active anti-foreign bribery law enforcement: Germany, Switzerland, Britain and the U.S.

But the elevation of Israel, Italy and Norway to the ranks of countries with vigorous anti-foreign bribery enforcement was offset by declining levels of enforcement in four other countries: Austria, Canada, Finland and South Korea. 

“Disappointingly, there has been little change in the overall enforcement level (taking the share of world exports into account) since the last report,” the report said. 

‘Limited’ enforcement

Of the 44 countries examined by Transparency International, four — Australia, Brazil, Portugal and Sweden  had “moderate” anti-foreign bribery law enforcement; 11 had “limited” enforcement, while 22, including Russia and China, had “little to no” enforcement. Argentina, Brazil and Chile were among countries that improved their enforcement. 

For the first time, Transparency rated the performance of China, Hong Kong, India and Singapore — all non-OECD members that have not signed the organization’s anti-graft convention — and put them all in its lowest rung of enforcement. 

Concern about Chinese corporate bribery of foreign officials has heightened since Beijing rolled out its ambitious Belt and Road Initiative in 2013. But Transparency said there were no known foreign bribery cases or investigations brought by the Chinese government between 2014 and 2017. 

The watchdog said that China has recently “signaled” that it may focus more on foreign bribery enforcement, noting that Beijing and the World Bank held a symposium last year that focused, in part, on corruption risks associated with Belt and Road projects. 

‘Naive’ suggestion

To close the enforcement gap, Transparency recommended that all four sign the OECD convention.

Stuart Gilman, a former head of the United Nations global program against corruption, called the recommendation “naive.”

For China and Russia, “corruption and whatever way they can influence other governments is, in effect, part of their foreign policy,” Gilman said. “I think in my discussions with Chinese officials — not officially but reading between the lines — they see it as one among many tools to extend the influence of China around the world, from the Silk Road to Africa to other areas of the world.”
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Labor unions and social groups blocked streets in downtown Buenos Aires on Wednesday, with more marches planned over the days ahead over   austerity measures proposed by the government and backed by the International Monetary Fund.

Protesters are angry about the belt-tightening policies, which are cutting services to low-income Argentines already walloped by inflation of 31 percent and climbing.

But Argentine leader Mauricio Macri says he needs to carry out such measures to regain investors’ confidence by reducing the country’s fiscal deficit.

The outlook for Latin America’s third biggest economy is grim, according to orthodox and left-leaning economists alike.

Planned cuts to public utility subsidies, forcing Argentines to pay more for transportation and electricity, are expected to keep upward pressure on consumer prices for the rest of 2018.

“The day to day uncertainty is getting worse,” said protester Gabriela Gil, a 49-year-old mother of five.

The year will close with inflation at more than 40 percent, according to economists’ forecasts. Hardest hit are low-income families that spend a high proportion of their income on food.

“The poorest people in the country are on the verge of hunger,” said Daniel Menendez, a spokesman for Barrios de Pie, one of the groups that helped organized the march.

Fiscal medicine

Measures aimed at taming inflation, like the central bank’s 60 percent monetary policy rate, have helped push the economy into recession by choking off credit. Stimulus spending that might pep up the economy would dash Macri’s promise of bringing the primary fiscal deficit to zero next year. The previous 2019 deficit target was 1.3 percent of gross domestic product.

Economy Minister Nicolas Dujovne said earlier this month that it was weakness on the country’s “fiscal flank” that prompted a run on the peso in August. The currency fell 26 percent last month alone and has lost more than half its value so far in 2018.

On Tuesday, the peso wobbled 1.4 percent lower to close at 38.5 per dollar.

Having signed a $50 billion standby financing deal with the IMF in June, the slide in the peso prompted Macri’s administration to pledge deeper spending cuts to secure an early release of funds.

The revamped fiscal targets are being hammered out in Washington and will be part of the 2019 budget bill that Macri is expected to send to Congress over the days ahead.

“What we are seeing in asset prices in Argentina is that people are not giving them the benefit of the doubt,” Daniel Osorio, president of New York-based consultancy Andean Capital Advisors, said in a telephone interview.

With investors demanding that the government stand by its budget-cutting program, some economists say the bitter fiscal medicine called for by the IMF might prove worse than the recession and high inflation that are already ailing Argentina.

“The financial markets have closed for the country. Argentina’s government is responding by attempting a much more drastic fiscal adjustment,” said Martin Guzman, an economist at Columbia University Business School. “My view is that such a measure will lead to another recession in 2019.”
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The median U.S. household income reached $61,372 last year — its highest level ever, the U.S. Census reported Wednesday.

The new median figure, meaning that half of U.S. families earned more money and half less, was a reflection of the robust U.S. economy, the world’s largest, that expanded 4.1 percent in the April-to-June period even as the unemployment rate held steady in August at 3.9 percent. The 2017 household income was 1.8 percent higher than the $60,309 figure in 2016.

Middle-class income in the U.S. has been expanding in recent years as the country continues its recovery from the steep recession of a decade ago — a time when millions of people lost their jobs, and many lost their homes through foreclosure when they no longer had enough money to make monthly home loan payments.

Now, one Census official said, many Americans are moving from part-time to full-time work, adding to their financial well-being.

With the income improvement, the Census said that 12.3 percent of the 328 million Americans are living in poverty, a slight improvement from the 12.7 percent figure in 2016. It said 8.8 percent of Americans are without health insurance coverage, the same figure as the year before.
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The Turkish central bank is facing growing pressure to decisively hike interest rates at a meeting Thursday to defend an ailing currency and rein in double-digit inflation.  But concerns remain over President Recep Tayyip Erdogan’s grip on monetary policy.

The Turkish lira has fallen more than 40 percent, much of it in the past few weeks, fueling rampant inflation.  

”Just to keep up with the acceleration of inflation the central bank needs to hike by more than 400 basis points,” said chief economist Inan Demir of Nomura International, “This is only to keep up with the acceleration in inflation, since last formal hike.  If we consider the prospect of a further acceleration inflation outlook, perhaps more is needed [interest rate hikes],” he added.

Demir says what has accelerated heavy lira falls are investor concerns the central bank can’t act decisively because of Erdogan, who has sweeping executive powers.  He has repeatedly voiced opposition to high-interest rates, which he claims “enslaves poor people.”

In a statement, this month the central bank declared it was ready to alter monetary policy to rein in inflation.  Financial markets interpreted the comment as the bank preparing to hike rates aggressively.  “The statement suggests we will see some action,” Demir said, “but I am not very confident the policy response will be as large as the markets need.”

This week, Finance Minister Berat Albayrak sought to talk up the Turkish economy, claiming the financial system was already “correcting itself.”  

Albayrak is the president’s son in law and widely seen as having the inside track with  Erdogan.  Some analysts suggest Albayrak’s positive statements may be seeking to play down the need for a significant increase in interest rate.

Misjudging international investors expectations could be costly.  “There will be massive sell off to the point of a panic if they don’t raise rates enough,” said political analyst Atilla Yesilada of Global Source Partners, “the sky’s limit, there is no way to make a rational forecast on the exchange rate, because we really don’t know when it stops,” he added.

Analysts warn a further decline in the lira risks undermining the Turkish public’s faith in the currency will lead them to convert their savings into dollars, adding pressure to the currency and risking the economy falling into a vicious cycle.

“Lira weakness feeds into inflation,” Demir said, “insufficient action by the central bank leads to deposit dollarization, which feeds into lira weakness, and that feeds into inflation again.”

 

“Past experiences in Turkey show, a sharp slow down of the economy followed after sharp depreciation,” Demir said, “the GDP [Gross Domestic Product – the size of the economy] growth rate [has] dropped off by 11 to 13 percent, that is the big risk we are looking at for Turkey.”

International banks are forecasting the Turkish economy heading into recession next year.  The timing for Erdogan could not be worse.  In March, Turkey holds critical local elections for the country’s biggest cities, one of the few places where opposition parties still have the opportunity to exercise power.  Erdogan has made it a priority to win the March polls.

Erdogan is likely to be aware, with many of Turkey’s big companies heavily indebted, a further hike in interest rates also risks driving the economy further into recession.

 

But interest rate hikes on their own may not be enough to address investor concerns and restore stability to the currency.  “A package of reforms is needed,” Demir said.

The World Bank has warned Turkey to rein in massive state building projects it says are overheating the economy and stoking inflation. Investors are also calling for the central bank to be independent and free of political interference.  Analysts say Ankara will also need to repair relations with Washington.

August’s crash in the lira was triggered by the imposition of Turkish sanctions by U.S. President Donald Trump over the detention of American Pastor Andrew Brunson, who is on trial for terrorism charges that Washington claims are politically motivated.

“To stop inflation they [Turkish central bank] will need at least 500 basis points or possibly like Argentina 1,000 basis points interest rate hike,” analyst Yesilada said.

“But is the problem [currency weakness] lack of confidence in running the economy or Father Brunson,” he added.  “If it’s Brunson then raising rates will hurt the economy, but not do much to stabilize the currency.  So maybe it’s better to wait until Mr. Erdogan decides to end this crisis with the United States.”

For now, Erdogan appears to be ready to tough it out, insisting Brunson should stand trial and that lira weakness is part of an international conspiracy against Turkey.
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