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While President Donald Trump continues an Asia trip with high geo-strategic stakes, Republicans in Washington are promoting an ambitious tax reform bill that could bring enormous fiscal, and political, consequences. VOA’s Michael Bowman reports, a tax cut is Trump’s last hope for a major legislative victory in his first year in office, something Republicans desperately need and something Democrats are determined to deny them.
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The Republican tax bill unveiled last week in the U.S. Congress could disrupt the global supply chains of large, multinational companies by slapping a 20-percent tax on cross-border transactions they routinely make between related business units.

European multinationals, some of which currently pay little U.S. tax on U.S. profits thanks to tax treaties and diversion of U.S. earnings to their home countries or other low-tax jurisdictions, could be especially hard hit if the proposed tax becomes law, according to some tax experts.

Others said the proposal could run afoul of international tax treaties, the World Trade Organization and other global standards that forbid the double taxation of profits if the new tax did not account for income taxes paid in other countries.

The proposed tax, tucked deep in the 429-page bill backed by President Donald Trump, caught corporate tax strategists by surprise and sent them scrambling to understand its dynamics and goals, as well as whether Congress is likely ever to vote on it.

Reuters contacted seven multinational companies and four industry groups. None would comment directly on the proposal, with most saying they were still studying the entire tax package.

The proposal is part of a broad tax reform bill unveiled by House of Representatives Republicans on Thursday, which promises to lower overall tax burdens and simplify the tax code.

Whether the proposed reforms ever become law is uncertain, with weeks and possibly months of debate and intense lobbying still ahead. The House package overall has drawn criticism for adding too much to the federal budget deficit and too heavily favoring the rich and big business.

However, the corporate tax part, experts said, included some ambitious proposals worthy of further discussion. They said the 20 percent excise tax is one such proposal targeting the abuses of so-called transfer-pricing where multinationals themselves set prices of goods, services and intellectual property rights that constantly move between their national business units.

Under global standards, those prices should resemble those available on the open market. However, if a foreign parent charges U.S. affiliates inflated price, it can reduce its U.S. tax bill and effectively shift profits to a lower-tax country, reducing the entire corporation’s overall tax costs.

Blunt instrument

“Clearly there’s a transfer-pricing issue and something should be done,” said Steven Rosenthal, senior fellow at the Tax Policy Center, a nonpartisan Washington think tank.

“I would view this 20-percent excise tax as a blunt instrument to address the problem. And the problem with blunt instruments is sometimes they hit what you want to hit, and sometimes they hit what you don’t want to hit,” said Rosenthal, former legislation counsel at Congress’s Joint Tax Committee.

Under the proposal, U.S. business units that import products, pay royalties or other tax-deductible, non-interest fees to foreign parents or affiliates in the course of doing business would either pay a 20-percent tax on these or agree to treat the amounts as income connected to their U.S. business and subject to U.S. taxes.

As proposed, the new tax rule would apply only to businesses with payments from U.S. units to foreign affiliates exceeding $100 million. The rule would not take effect until after 2018.

European companies that sell foreign-made products into the U.S. market through local distribution units could be among those most affected, said Michael Mundaca, co-director of the national tax department at the accounting firm Ernst & Young.

Such companies could end up paying tax on the transfers twice — first if they paid the excise tax in the United States and then at home where they are taxed now and where the new U.S. tax would not be accounted for without changes to bilateral tax treaties.

“That would be a structure that would at least initially be hit by the full force” of the excise tax, said Mundaca, a former U.S. Treasury Department assistant secretary for tax policy.

He said European officials would be registering concern. “I am sure they are making calls right now to their counterparts in the U.S. Treasury looking for some explanation… and making the point that this might be contrary to treaty obligations.”

Gavin Ekins, an economist at the Tax Foundation, a conservative think tank, predicted that most multinationals would opt to avoid the excise tax by electing to pay U.S. corporate tax on all the profits related to products sold in the United States. Those include profits on activities conducted overseas, like manufacturing or research, which are also subject to foreign income taxes.

The U.S. corporate tax rate on those profits would drop to 20 percent from 35 percent if the House bill becomes law.

The promise of additional revenue and hopes that the new tax may entice multinationals to locate more production and jobs in the United States, may well outweigh international concerns.

The entire Republican tax package is projected to add $1.5 trillion over 10 years to the $20 trillion federal debt and the planned excise tax is among sources of new revenue needed to avoid an even bigger shortfall. It is expected to bring about $155 billion over 10 years, according to a summary of the Republican proposal distributed last week.

Still, as the tax debate heats up, foreign multinationals are likely to lobby hard against it, with domestic corporations linked to foreign affiliates possibly concerned as well.

There is also uncertainty how the new rules would work in practice.

It was unclear, for example, from the bill’s language how companies should calculate income “effectively connected” to their U.S. business, Tax Foundation’s Ekins said.

“You don’t know what profit is included when you choose ‘effectively connected income’ and don’t know the formula,” he said. “Is it just for that product line? All the income that comes in from every other company or from every other source?”

The House tax committee was scheduled to begin considering amendments to the Republican tax bill on Monday.
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Wireless carriers Sprint and T-Mobile called off a potential merger, saying the companies couldn’t come to an agreement that would benefit customers and shareholders.

The two companies have been dancing around a possible merger for years, and were again in the news in recent weeks with talks of the two companies coming together after all. But in a joint statement Saturday, Sprint and T-Mobile said they are calling off merger negotiations for the foreseeable future.

“The prospect of combining with Sprint has been compelling for a variety of reasons, including the potential to create significant benefits for consumers and value for shareholders. However, we have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record,” said John Legere, president and CEO of T-Mobile US, in a prepared statement.

T-Mobile and Sprint are the U.S.’ third- and fourth-largest wireless carriers, respectively, but they are significantly smaller than AT&T and Verizon, who effectively have a duopoly over U.S. wireless service. The two companies have said they hoped to find a way of merging to make the wireless market more competitive.

Sprint and its owner, the Japanese conglomerate SoftBank, have long been looking for a deal as the company has struggled to compete on its own. But Washington regulators have frowned on a possible merger. D.C. spiked AT&T’s offer to buy T-Mobile in 2011 and signaled in 2014 they would have been against Sprint doing the same thing. But with the new Trump administration, it was thought regulators might be more relaxed about a merger.

Sprint has a lot of debt and has posted a string of annual losses. The company has cut costs and made itself more attractive to customers, BTIG Research analyst Walter Piecyk says, but it hasn’t invested enough in its network and doesn’t have enough airwave rights for quality service in rural areas.

T-Mobile, meanwhile, has been on a yearslong streak adding customers. After the government nixed AT&T’s attempt to buy it in 2011, T-Mobile led the way in many consumer-friendly changes, such as ditching two-year contracts and bringing back unlimited data plans. Consumers are paying less for cellphone service, thanks to T-Mobile’s influence on the industry and the resultant price wars.

“T-Mobile does not need a merger with Sprint to succeed, but Sprint might need one to survive,” Piecyk wrote in an October research note.
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U.S. President Donald Trump urged Saudi Arabia Saturday to list its state-owned oil company on the New York Stock Exchange when the company goes public in what is expected to be the largest-ever initial public offering in which shares of a company are sold to investors.

“Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!,” Trump tweeted from Hawaii, his first stop ahead of a 13-day trip to Asia.

Saudi officials have reportedly said the government intends to list 5 percent of  the company’s shares on local and global stock exchanges in 2018 but have yet to select an overseas venue. Saudi officials have estimated the IPO will be worth about $100 billion.

The NYSE has had discussions with the Saudis about the upcoming IPO as has the London Stock Exchange. Exchanges in Hong Kong, Singapore, Tokyo, Toronto and the U.S. are also soliciting portions of the public offering.

New York-based NASDAQ, which provides technology to Saudi Arabia’s exchange, has been leveraging that relationship in an attempt to win the listing.

Trump has developed a close relationship with Saudi Arabia. During his visit there last summer, he signed a $110 billion defense agreement with Saudi King Salman.

At a $2 trillion valuation Saudi officials have projected for Aramco, selling five-percent of the company’s shares would reap $100 billion.

The public offering of shares of Aramco, the world’s largest oil producer, is part of Saudi government plans to sell state assets as a recession slows Riyadh’s effort to eliminate a budget deficit caused by low oil prices.

 

 
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The recent flurry of social and economic reform coming out of Saudi Arabia has left some Saudis ecstatic, others more circumspect, and a few conservatives bewildered or even angry.

Saudi Crown Prince Mohammed Bin Salman told a crowd of investors at a conference in late October that he was merely attempting to “return Saudi Arabia to the moderate Islam that once prevailed” before the Iranian Revolution in 1979. He stressed that 70 percent of Saudis are younger than 30 and vowed “not to spend another 30 years of our lives living under extremist ideas.”

The young crown prince also proposed an ambitious plan for a new economic zone on the Red Sea near Jordan and Egypt. In April, he put forward an economic road map for the kingdom, called Vision 2030. Part of the plan calls for privatizing 5 percent of the country’s flagship petroleum company Aramco, in addition to attracting foreign investment capital.

​Too much change too fast

Clarence Rodriguez, who spent 12 years as a French foreign correspondent in Riyadh and recently wrote a book called Saudi Arabia 3.0 on the aspirations of Saudi women and young people, tells VOA that she believes Saudi Arabia “is in crisis, due to the drop in the price of petroleum,” and that it has found itself under pressure to “diversify its economy, which necessitates societal reform involving women and young people, as well.”

Rodriguez points out that the late King Abdallah, who died in 2015, started the reform movement by allowing Saudi women to run for the country’s consultative “Shoura” council and to enter the work force, becoming lawyers, bankers and salespeople.

She worries, however, that some recent moves to change the status of women have angered parts of the kingdom’s mostly conservative population. Traditionalists, she says, are “not used to such quick change” and many “are afraid, because things are moving too fast for them.”

On a recent talk show on an Arabic-language news channel, a conservative Saudi caller told the show’s host that he thinks Saudi King Salman and Crown Prince Mohammed Bin Salman are “violating (Islamic) sharia law” with some of their recent reforms “and should go to jail.”

Saudi commentator Jamal Kashoggi tells VOA that he’s “not optimistic about the reforms,” but that he would “still like to be optimistic … since everyone will suffer if they fail.” Kashoggi worries that the reforms are “not engaging Saudi society, enough.” 

“We wish Mohammed Bin Salman well, and we need economic (and social) reform,” he said, “but, we also need to discuss (these issues). The change,” he said, “is being done in very narrow circles. (Ordinary) people are not feeling engaged.” 

Was Saudi society more moderate?

Hilal Khashan, who teaches political science at the American University of Beirut, is not convinced that Saudi society was more moderate before the Iranian Revolution in 1979. He thinks that parts of Saudi society have always had a conservative streak to them, pointing out that Wahabi conservatives killed many moderate Muslims, including the Shafa’i mufti of Mecca when they overran the city and the nearby resort city of Ta’ef in 1924.

A handful of prominent Saudi conservative clerics have been arrested since Mohammed Bin Salman replaced his cousin, Mohammed Bin Nayef, as crown prince, in June. 

“By weakening the clerical establishment and making clerics simple government workers,” Khashan said, “(Mohammed Bin Salman) will be able to give women more rights, as he is proposing.” Saudi women were allowed to drive, starting in September, and this week were given permission to attend sports matches with their families.

Khashan believes that economic considerations are a key factor in the decision to allow Saudi women to drive. 

“If 10 million women are given the right to drive in Saudi Arabia,” he said, “and if just a fraction of those women buy cars, take driving lessons or buy insurance, that would contribute to stimulating Saudi Arabia’s stagnant economy.” Allowing women to drive will also curtail the expensive practice of hiring foreign chauffeurs to drive women around.

Both Kashoggi and Khashan believe that the Saudi government will eventually prevail in its efforts to reform society. 

“Conservatives,” Kashoggi said, “have already lashed out. They’ve been lashing out since 2003. Al-Qaida, or ISIS, or the radical Wahabis … these are the extremists in Saudi Arabia … and they don’t want change. They have resisted, and will continue to resist. … The only thing stopping them is (government) security.”

Clashes with clerics

Khashan points out that in clashes with conservative clerics back in the 1960s, after King Faisal opened a school for girls in Riyadh, and when the king opened the first TV station in Riyadh in 1965, the government prevailed. 

“Whenever the state clashes with the (conservative) clerical establishment, the state emerges victorious,” he said, “and there’s no reason to believe that things will not be the same, this time.”

Jordanian analyst Shehab Makahleh is less certain about who will come out on top, however. 

“There is a kind of opposition among royal family members who are not happy (about the reforms),” he said, “and they have had a number of meetings to clarify where the country is heading in the coming five to 10 years.”

Makahleh believes that King Salman may soon abdicate in favor of Mohammed Bin Salman “in order to gain more support from the international community” for his ambitious reform program and to promote a more secular model of society.
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For Yu Kaiguang, harsh new United Nations sanctions on North Korea are a disaster.

The trader in the Chinese border city of Dandong has seen business all but dry up, and he spends his days scrambling to obtain payment from the suddenly broke North Korean state companies to whom he sold on credit.

“They have no money to pay us in cash, and the worst is that because of sanctions they can’t settle the bill with goods such as coal, as they did in the past,” said Yu, reached by telephone at the offices of his Dandong Gaoli Trading Company.

Yu said he’s owed about $1 million in all for deliveries of toothpaste, instant noodles and other household items. He’s trying to avoid laying off staff by continuing to export foodstuffs such as pine nuts and red beans. “If they become unemployed, it would be bad for both the state and society.”

​Common problem for traders

Yu’s plight appears increasingly commonplace across Dandong, where the bulk of the cross-border trade is handled. Interviews with four trading companies and recent media reports indicate Chinese companies are hurting in a city where North Korean trucks used to rumble across the Yalu River bridge several times a week delivering metal scrap and returning with everything from televisions to toilet bowls.

The owner of another firm, Dandong Baoquan Commerce and Trade Co., which used to import iron ore and coal and export basic consumer goods, said he was owed around $200,000 by his North Korea clients.

“I had to lay off about 10 staffers, but I had no other choice because it was the government policy,” Han Lixin said, referring to the sanctions. “I’m still in business hoping to trade with other countries, but it takes a lot of time and efforts to develop customers.”

Large-scale trade involving North Korean resources such as iron ore and coal has been banned entirely under the sanctions, dealing a big blow to Dandong’s port, whose operator defaulted on a $150 million corporate bond this week in part because of cratering revenues.

Both economies hurting

“The sanctions have a broad effect, and both the economies of North Korea and China are suffering a lot,” said Jin Qiangyi, professor at the Institute of Northeast Asia Studies at Yanbian University in Northeast China. “Chinese companies doing business with North Korea may see quite a lot of losses, and the companies that have already invested in North Korea will suffer more.”

Dealing with North Korean companies was never easy. Wang Chengpeng, former manager of Dandong Hongwei Trading Company, quit doing business with the North entirely because of hassles, restrictions and low-profit margins, even before the latest sanctions began to bite.

Despite that, China has long been the North’s biggest economic partner. Beijing accounted for more than 90 percent of its neighbor’s foreign trade of about $6.5 billion in 2016, according to the South Korean-owned Korea Trade Investment Promotion Agency. China continues to be a key source of food and fuel aid to help keep North Korea’s weak economy from collapsing, and Chinese officials say they won’t agree to measures that could cut off basic life necessities and possibly cause Kim Jong Un’s dictatorship to topple.

Sanctions holding

China’s patience with Kim has grown increasingly thin, however, and Beijing has lent its support to increasingly tough resolutions unanimously approved by the Security Council this year that target North Korea’s economy in response to its ballistic missile launches and latest nuclear test.

China has said it sees sanctions purely as a means of inducing North Korea to return to nuclear disarmament talks and has rejected unilateral measures not approved by the Security Council, of which it is one of the five veto-wielding permanent members.

Still, despite some allegations of cheating, China appears to be seeking to enforce the sanctions that also ban exports of lead, textiles and seafood, prohibit joint ventures, and bar any country from authorizing new permits for North Korean workers, all sources of hard currency for Pyongyang.

The sanctions have also blacklisted a number of firms in the extraction and financial industries, imposed travel bans and frozen the assets of some government officials, banned the import of natural gas liquids and condensates, and capped the country’s crude oil imports.

It’s hard to gauge the exact impact of sanctions on the North Korean economy because the crucial food and energy sectors are less likely to be hurt by external conditions, said Lee Seok-ki, a senior researcher at the South Korean government-run Korea Institute for Industrial Economics and Trade.

However, while the North’s economy has been expanding, by 3.9 percent in 2016, according to an estimate by the Bank of Korea in South Korea, that rate almost certainly can’t be sustained if sanctions continue, Lee said.

China for its part is watching North Korea to see how its ally will respond to the new measures, eager for signs of a shift in tactics by Kim and an improvement in relations between Beijing and Pyongyang that have “sunk into a standstill,” as Jin puts it.
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A solid rebound for the job market in October as the U.S. economy added 261,000 jobs. Job gains were strong across the board, and the unemployment rate fell to 4.1 percent, its lowest level in 17 years. But, as Mil Arcega reports, American workers are not seeing any real growth in their wages.
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Venezuelan President Nicolas Maduro has announced that the country and state oil company PDVSA will restructure its burgeoning foreign debt, even as he vowed to make a payment of more than $1 billion that came due on Thursday.

The announcement did not put Venezuela or PDVSA into default, but suggests that Maduro’s cash-strapped government may be preparing to do so as heavy debt payments aggravate the country’s crippling economic crisis.

Why is Venezuela so heavily indebted?

Even though the OPEC nation was flush with cash during a decade-long oil boom, Venezuela’s ruling Socialist Party borrowed heavily during the era of late president Hugo Chavez to finance generous social programs that made him popular. The country also dismantled mechanisms meant to ensure Venezuela saved money when oil prices were high, leaving it without sufficient hard currency reserves to import basic goods such as food and medicine after prices crashed in 2014. Hunger and preventable diseases are as a result taking a growing toll on the population of 30 million.

Why can’t Venezuela refinance its debt?

The most common refinancing mechanisms are effectively blocked by U.S. sanctions levied this year, in response to accusations that Maduro was undermining democracy, which prevent U.S. banks from acquiring newly issued Venezuelan debt.

Venezuela and PDVSA cannot carry out “swap” transactions in which they exchange maturing bonds for ones that come due further down the road because financial institutions with U.S. headquarters would not be able to acquire the new debt. Investors also say bondholders would have no interest in renegotiating payment timelines without a cohesive plan to reform the country’s dysfunctional socialist economic model. Maduro has repeatedly balked at carrying out such reforms.

Who are the major holders of Venezuela and PDVSA bonds?

These securities are popular among funds that invest in emerging market bonds. Their high yields – which are close to 10 times higher than those of neighboring Colombia – help increase the overall profitability of the portfolios.

Institutional investors with big holdings include T. Rowe Price Associates Inc., Ashmore Investment Management Ltd., and BlackRock Investment Management Ltd. Goldman Sachs Group Inc came under heavy fire this year for purchasing $2.8 billion in PDVSA bonds at a steep discount, which opposition critics dubbed “hunger bonds.”

What would be the consequences for Venezuela of default?

Creditors could seek to seize assets Venezuela owns in other countries, including refineries such as those operated by PDVSA’s U.S. refining and marketing subsidiary Citgo. A default could also make it more complicated for Venezuela to import products from foreign companies.  Providers of goods such as food and medicine may reduce sales to Venezuela on concern that they will not get paid, or that they could find themselves ensnared in creditor lawsuits.

What is the role of Russia and China in financing

Venezuela?

Venezuela has borrowed heavily from both nations via oil-for-loan agreements in which it pays back in deliveries of crude and fuel. Investors believe support from Moscow and Beijing has been instrumental in allowing Venezuela to keep up with bond payments so far. Russia recently said it was willing to restructure a $3 billion loan.  But both China and Russia have shown impatience with Venezuela’s continued refusal to reform its Byzantine socialist economic regulations that are widely cited as the principal obstacle to growth.

Could multi-lateral institutions such as the International Monetary Fund and the World Bank get involved in the country’s debt restructuring?

Maybe, but substantial obstacles loom. There has been no formal contact between Venezuela and the IMF and World Bank although it does have a representative on each of their boards. Before the fund could get involved again, Maduro’s government would have to agree to an economic and financial assessment – something it has for years refused to do on the grounds that it violates sovereignty. Its current willingness to submit to such a review is unclear.

How would a default affect daily life in Venezuela?

Default would likely further pummel the country’s already bruised bolivar currency, which has depreciated 99 percent on the black market since Maduro took office. Reluctance to do business with Venezuela could make it harder to import goods.
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California Gov. Jerry Brown and lawmakers asked the U.S. government Friday for $7.4 billion to help rebuild after a cluster of fires tore through the heart of wine country, killing more than 40 people and leaving thousands without housing.

 

In a letter to the White House, Brown joined California’s U.S. senators and 39 members of its congressional delegation to urge President Donald Trump and Congress to quickly adopt a disaster-related appropriations measure to support the state’s recovery.

 

Brown said the funding would go toward cleanup and programs to support housing, transportation, agriculture, environmental protection and other services for those affected by the fires.

A series of blazes that started in Northern California the night of Oct. 8 killed at least 43 people and destroyed about 8,900 homes and other buildings. At the peak, thousands of firefighters battled 21 blazes that burned simultaneously.

Officials have not yet assessed all the damage and effects of the fires, but the governor’s office and the affected counties determined that $7.4 billion in federal funding is needed to help California recover, the letter says.

 

The wildfires significantly damaged farmland, rangeland and watersheds, and more than a third of the funding requested, $3.1 billion, would go toward helping agricultural industries bounce back, including affected wineries, California officials said.

 

“The full economic impact to the agricultural, tourism, hospitality, and wine industries is still not known,” the letter says. “Nine California wineries were destroyed and 21 were damaged in the nation’s most prominent winemaking region.”

Congress last month approved $576.5 million in aid for wildfires earlier this summer in California and the U.S. West. It also has approved billions in relief funding to help states affected by hurricanes and other weather-related disasters this year.

 

Trump pledged aid for California fire victims on Oct. 10, saying he had told Brown that “the federal government will stand with the people of California.”

 

Brown said he has asked the California Department of Finance to expedite doling out $41.5 million to support the immediate needs of victims not eligible for federal aid.

During the wildfires last month, Brown declared a state of emergency for the Northern California counties of Solano, Napa, Sonoma, Yuba, Butte, Lake, Mendocino and Nevada as well as Orange County in the south.
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The largest port complex in the nation has set goals to drastically reduce air pollution over the next several decades.

The plan approved Thursday at a meeting of the governing boards of the twin ports of Los Angeles and Long Beach outlines strategies for improving equipment and efficiency to eventually move cargo with zero emissions.

The ports estimate that the cost of the efforts ranges from $7 billion to $14 billion, but the plan does not make clear who will pick up the tab. And detailed plans for implementing each program will require approval by each port’s harbor commission.

“Collaboration will be critical to our success,” Long Beach Harbor Commission President Lou Anne Bynum said in a statement. “Moving the needle to zero requires all of us — the ports, industry, regulatory agencies, environmental groups and our communities — to pool our energy, expertise and resources.”

The plan has raised concerns that the enormous cost of the clean air goals could make the two ports less attractive in the face of competition from ports on the East and Gulf coasts.

The Los Angeles Times reported that Pacific Merchant Shipping Association President John McLaurin told commissioners he feared the cost “and its potential negative impacts on port competitiveness and the one in nine jobs in the Southern California region that are reliant on the ports.”

Largest pollution source

The neighboring ports 20 miles south of downtown Los Angeles are the single largest fixed source of air pollution in Southern California, according to the South Coast Air Quality Management District.

Main points of the plan include clean-engine milestones for trucks, creating incentives to speed up fleet turnover to near-zero and zero-emission trucks, and efficiency programs for truck reservations and staging yards. The timeline for achieving a zero-emission truck fleet is 2035.

Other elements include requiring terminal operators to use zero-emission equipment by 2020, if possible, or the cleanest available equipment.

The plan also pursues electrification of terminal equipment and expands on-dock rail, with a goal of moving 50 percent of all cargo out of the ports by train.

The ports of Los Angeles and Long Beach sprawl over more than 23 square miles (60 square kilometers) of land and water. They handle about 40 percent of U.S. container import traffic, about 25 percent of total exports, and together rank as the ninth-largest port complex in the world, according to the ports.
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A Nigerian militant group whose attacks on energy facilities in the Niger Delta last year helped push Africa’s biggest economy into recession said Friday that it had ended its cease-fire.

The Niger Delta Avengers announced a halt to hostilities in August 2016, although they carried out attacks in October and November last year.

“Niger Delta Avenger’s cease-fire on Operation Red Economy is officially over,” the group said on its website.

“Our next line of operation will not be like the 2016 campaign, which we operated successfully without any casualties; this outing will be brutish, brutal and bloody,” it said in a section of its statement addressed to oil companies.

The move threatens Nigeria’s fragile economic growth and poses a further security challenge for President Muhammadu Buhari, in addition to the jihadist Boko Haram insurgency in the northeast and rising secessionist sentiments in the southeast.

The government has been in talks for more than a year to address grievances over poverty and oil pollution, but local groups have complained that no progress has been made, despite Buhari’s receiving a list of demands at a meeting last November.

Buhari’s office did not immediately comment.

The 2016 attacks cut oil production from a peak of 2.2 million barrels per day (mbpd) to near 1 mbpd, the lowest level in Africa’s top oil producer for at least 30 years.

Result was recession

The attacks, combined with low oil prices, caused the OPEC member’s first recession in 25 years. Crude sales make up two-thirds of government revenue and most of its foreign exchange. Nigeria came out of recession in the second quarter of this year, mostly because of the rise in oil production after attacks stopped and as prices strengthened.

The Niger Delta Avengers, who say they want a greater share of Nigeria’s energy wealth to go to the impoverished swampland region, said they decided to end the cease-fire because they had “lost faith” in local leaders.

“We can assure you that every oil installation in our region will feel the warmth of the wrath of the Niger Delta Avengers,” it said.

There have been no substantial attacks in the region since January.

Eric Omare, president of the Ijaw Youth Council, which represents the largest ethnic group in the Niger Delta, said the government had paid only “lip service” to communities’ concerns.

“The truth is that the federal government has not demonstrated any seriousness towards addressing the issues that led to the Niger Delta agitation,” Omare said, while adding that his group sought a “peaceful dialogue.”

Nigeria’s economy grew 0.55 percent year-over-year in the second quarter, largely on higher oil receipts.

The World Bank cut its 2017 growth forecast in October to 1 percent from 1.2 percent, as the oil production increase was lower than expected and non-oil sector growth was subdued.
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Venezuela’s cash-strapped government invited creditors to a Nov. 13 meeting in Caracas on Friday, after announcing plans to potentially restructure some $60 billion in bonds that sent the OPEC nation’s debt prices plunging.

President Nicolas Maduro on Thursday vowed to make a $1.2 billion bond payment but said future payments would be refinanced. Investors were unsure about what he meant, because U.S. sanctions has taken refinancing off the table.

Many saw the announcement as paving the way for default – despite Venezuela’s promises to the contrary – because the debt burden has left the country desperately short of basic goods such as food and medicines.

A default could create a sovereign debt crisis of a scale not seen in Latin America since the massive 2001 default in Argentina that shut it out of markets for years.

Investors say a newly created debt negotiation commission has little chance of making progress, in part because it is headed by Vice President Tareck El Aissami – who is blacklisted by the United States for alleged drug dealing.

“This commission will lay the groundwork for true and transparent dialogue between the government and bondholders,” El Aissami, who has no known experience in debt negotiations, said in a televised address.

Investors were bewildered that Maduro, who narrowly won election in 2013 after the death of Hugo Chavez, appeared to be opening the door to default immediately after authorizing more than $2 billion to bond payments.

Market wisdom had been that Venezuela would not make such payments if it expected to end up in default. It will need those funds because it will be locked out of financial markets.

“Nobody has ever paid a bond in full only to announce default the next day,” said an executive from one local brokerage, who asked not to be identified.

In addition to outstanding bonds, Venezuela owes some $26 billion to bilateral and multilateral creditors and $24 billion in commercial loans, according to New York-based Torino Capital.

It put the total public sector debt at $152 billion, though Maduro’s announcement appeared to be focused primarily on bonds.

The government and PDVSA owe some $1.6 billion in bond service and delayed bond interest payments by the end of the year, plus another $9 billion in bond servicing throughout 2018.

‘Zero Possibility’

U.S. President Donald Trump, accusing Maduro of dictatorship, barred U.S. banks from participating in or negotiating new Venezuelan debt deals. That rules out swap operations, which allow investors to voluntarily exchange near-term debt for new securities that mature later.

Restructuring – which generally follows a default – refers to an involuntary arrangement under which creditors agree to change payment conditions. But they usually do so only in exchange for major economic reforms, which Maduro has balked at.

“A restructuring has a very close to zero possibility given U.S. sanctions, time constraints given the payment schedule, and the fact that Venezuela obviously does not have the technical capacity to negotiate,” said Jim Barrineau, co-head of emerging market debt at Schroders.

The International Monetary Fund issued a warning to Venezuela on Friday for failing to provide it with economic data on time and gave it six months to address the problem. The IMF could issue a “declaration of censure” for non-compliance, two sources told Reuters.

Although the IMF’s warning is unrelated to Maduro’s announcement, it added to investor worries about the economy.

Venezuelan bond prices took a beating on Friday.

Near-term maturities were hardest hit. The PDVSA 2021 bond dropped 20 percentage points to a bid price of 27 points.

Longer-dated bonds fared better, with PDVSA’s 2027 bond slipping 4.83 points to bid 25.13. Venezuela’s 2018 bond was down 31 points.

Investors holding longer-dated paper generally expect a default will take place well before maturity, while the profitability of short-term bets is more dependent on the bonds being paid off.

Bank of America on Friday estimated that bond prices would drop to around 20 cents on the dollar if a default took place.

There was no immediate impact on oil exports and production from Maduro’s announcement.

EMTA, a trade association that sets practices for emerging markets, recommended that Venezuelan bonds not under U.S. sanctions continue trading with accrued interest – a sign Venezuela is for now expected to keep up with its payments.

The Washington-based International Institute of Finance (IIF) held an investor call for bondholders in the event talks with the government go ahead, according to two market sources who participated in the call.

Most were not planning to go to Caracas, the sources said. IIF declined to comment.

‘Nobody Trusts His Government’

Leaders of the opposition-led National Assembly said on Friday that any restructuring would be invalid without congressional approval.

“Maduro won’t be able to restructure the debt because nobody in the world trusts his government,” National Assembly head Julio Borges said.

Though there is widespread public disquiet at economic hardship, the opposition coalition is cracking after a disastrous showing at last month’s gubernatorial elections, and there is speculation Maduro may bring forward the presidential vote, which had been expected for the end of 2018.

Vice President El Aissami said a $1.2 billion payment on PDVSA’s 2017N bond that matured on Thursday had already been transferred. The Central Bank’s website showed a drop of $430 million in international reserves, signaling the government may have dipped into reserves to pay the PDVSA bond.

That pushed reserves to $9.7 billion, their lowest level in at least 20 years.

The company spent days trying to make payment on its 2020 bond, which finance industry sources attributed to nervousness by bank officials over possible U.S. sanctions violations.

Principal payments on the two bonds were moving through the clearing system without a problem, a source familiar with the matter said on Friday.

The next hard payment deadline for PDVSA is an $81 million bond payment that was due on Oct. 12 but on which the company delayed payment under a 30-day grace period. Failing to pay that on time would trigger a PDVSA default, investors say.

That would expose Venezuela and PDVSA to lawsuits by creditors seeking to seize assets such as refineries in the United States.
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In a warehouse outside Paris, university drop-out Celine Galland stacks  palettes and fills out an inventory sheet, part of a logistics apprenticeship she hopes will put a decade of short-term contracts and unemployment behind her.

France’s jobless rate has sat stubbornly above 9 percent for nearly a decade. President Emmanuel Macron blames a notoriously rigid labor market and has two ideas to change it: more vocational training for school leavers and making it easier for workers to retrain and change jobs.

On Nov. 10, his government will open talks with unions, business leaders and the regions on how to reform the apprentice system, cutting through its bureaucracy and financing.

The former investment banker promises an extra 15 billion euros ($17 billion) for professional training over five years, but beyond the money he will need to counter public prejudice if he is to reverse a slide in apprentice numbers.

University did not sit well with Galland, who quit after several weeks. Since then the 31-year-old has worked at menial jobs in McDonald’s and local supermarkets.

“What I love about this is the variety of tasks,” she enthused last week at an AFTRAL logistics and transport training centre in Savigny-le-Temple, east of Paris. “There’s no boredom in this job.”

France’s unemployment rate is more than double Britain’s and several points higher than Germany’s. Particularly troubling for Macron’s centrist government is youth unemployment — nearly one in four 15-24 year olds are without a job, according to official data, a major drag on long-term growth.

Macron has already defied union-led street protests to loosen labor laws, necessary he says to make hiring and firing workers cheaper and easier for small companies.

Leftist opponents and hardline trade unions accuse him of abandoning France’s long-cherished ideals of an egalitarian society to side instead with corporate interests.

But the 39-year-old president is standing firm. He promises greater support for workers through an overhaul of training and a revamped welfare system, pointing to the Nordic model of flexibility in the labor market underpinned by security through the social welfare system.

He will, though, need to overturn a widely-held perception that apprenticeships are a poor alternative to school and university diplomas, which France obsesses over.

“We have to put an end to French defeatism, to people saying that apprenticeships are for those who have failed,” Macron said this month while visiting a college.

Decline in apprenticeships

France’s existing apprenticeship system involves the signing of a contract between the apprentice, the employer and the training institution. Students earn a percentage of the minimum wage and gain workplace experience, while companies can source talent and receive welfare payment waivers.

France lags behind numerous European peers. OECD data from 2016 shows 4.9 percent of French youths aged between 16 and 29 completed apprenticeships in 2012, compared with 8.6 percent in Denmark and 15.1 percent in Germany.

As a recovery in the euro zone’s second biggest economy gathers strength, employers complain they cannot fill vacancies despite the near double-digit jobless rate because of a skills gap — a mismatch Macron says apprenticeships can help fix.

“Our figures have shown a clear trend for several years: 80-95 percent of our apprentices are in jobs within six months of finishing,” said Pierre de Surone, director of the Savigny-Le-Temple training center. “Apprenticeship works!”

While the number of higher education apprentices is rising, the number of youngsters gaining college-level apprenticeship diplomas fell to 260,000 in 2016 from 335,000 a decade ago, Education Ministry data shows.

That presents a challenge for Macron. Data published by Cereq, a French government think-tank, shows apprenticeships boost the employability of individuals with low academic qualifications more than for those at higher education grade.

“We don’t value practical jobs, technical jobs. If we don’t give recognition to these jobs then we’re in trouble,” said Gabriel Schumacher, director at a local distribution company.

 
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