YCLOAK

Mexico’s economy minister said on Monday a successful retool of the North American Free Trade Agreement (NAFTA) would hinge on two or three complex areas that he called “elephants in the room,” just days before the next round of treaty talks in Canada.

Speaking at an event in Mexico City, Ildefonso Guajardo said four chapters in the agreement could be renegotiated in the third round of talks, due to take place Sept. 23-27 in Ottawa.

The areas cover smaller companies, transparency and food safety.

The “elephants,” such as the U.S. trade deficit with Mexico and rules of origin, will determine the success of the trade treaty’s renegotiation, he said. Rules of origin specify the percentage of components in a product that must be from the three NAFTA nations for it to qualify as duty free.

“This challenge of resolving two or three un-traditional topics at the trade negotiation tables is what is going to determine if, at the end of the day, we’re going to have an agreement or not,” Guajardo said in a Forbes Mexico talk.

In addition, Guajardo added that as many as 13 other chapters would also be tough to negotiate.

Asked by journalists if Mexico would accept national content rules that would require a portion of products to be made in the United States, the minister said the topic had yet to reach the negotiating table.

“We would analyze it, but I believe as of today there is no trade agreement that contains this type of clause,” he said.

Guajardo reiterated that Mexico was ready to modernize the agreement, which U.S. President Donald Trump has threatened to scrap, and to find solutions with the United States and Canada.
…

The WTO dispute settlement system is “deficient” and has often ruled in favor of free trade that overlooks details of a trade agreement, U.S. trade envoy Robert Lighthizer said on Monday.

Speaking at the Center for Strategic and International Studies, Lighthizer, a trade lawyer, made clear that the administration was poised to push for major changes to the global trade system during upcoming meetings of the Geneva-based trade body. WTO member countries will meet in Buenos Aires on Dec 10.

U.S. President Donald Trump called the World Trade Organization a “disaster” during his presidential campaign and his administration has sought to unilaterally go after countries like China that it thinks is breaking trade rules.

“There are a number of issues on which there is pretty broad agreement that the WTO dispute settlement understanding is deficient,” said Lighthizer, highlighting problems with WTO staffing and transparency.

“The United States sees numerous examples where the dispute settlement process over the years has really diminished what we’ve bargained for or imposed obligations that we do not believe we agree to,” he said.

He added: “There have been a lot of cases in the trade remedies laws where in my opinion the decisions are really indefensible.”

Since its launch in 1995 the WTO has become the main venue for resolving trade disputes between countries. The Trump administration has begun to launch trade investigations under statutes seldom used in the WTO era, including a “Section 301” probe of China’s intellectual property practices.

Lighthizer did not threaten a U.S. withdrawal from the WTO, but emphasized his own dissatisfaction with some of its rulings.

In a letter in March, the Trump administration made clear that U.S. law supersedes WTO rules — a view that could be invoked should Congress adopt policies that are later challenged by other member countries as violating WTO rules.

“We’ve had tax laws struck down, we’ve had other provisions where the WTO has taken…the decision they were going to strike down something they thought shouldn’t happen, rather than

looking at the agreement as a contract,” he said.

Lighthizer emphasized that the Trump administration was reviewing all trade agreements and would seek to renegotiate those that did not benefit U.S. workers and businesses.

“I believe, and I think the president believes, that we must be proactive,” he said, “We must demand reciprocity in home and international markets. So expect change, expect new approaches and expect action.”
…

Peru’s prime minister said on Monday that the country’s new Cabinet will focus on reviving public investments as it seeks to mend fences with the opposition party that forced President Pedro Pablo Kuczynski to form a new government.

Congress ousted the former Cabinet last week following a dispute over education reforms, fueling fears that political fighting might hurt economic growth that has already slowed sharply this year due to floods and a graft scandal.

Mercedes Araoz, Peru’s new prime minister, said on local broadcaster RPP that she was optimistic about rebuilding a working relationship with the opposition. A key test will be efforts to rapidly rebuild parts of Peru hit by flooding, Araoz said.

Congress will likely vote on whether to give Araoz’ Cabinet a vote of confidence in the first week of October, she added.

Araoz is a ruling party lawmaker and former finance minister in the 2006-2011 term of former President Alan Garcia.

Forecasts for an economic recovery in Peru hinge on the government increasing public investments that fell 10.4 percent year-on-year in the first half of 2017.

“Now’s the time. We can’t fall behind in this process” of increasing public investments, Araoz said.

President Kuczynski, a center-right politician and former Wall Street banker, vowed to work to modernize Peru and strengthen the economy of the world’s second-biggest copper producer.

But his first year in office has been marked by slowing economic growth and clashes with Congress, where the right-wing populist party of his former rival Keiko Fujimori has a majority.

Fujimori welcomed the new Cabinet on Twitter after it was sworn in on Sunday and said Kuczynski’s government still has four years to “mend its ways and make progress.”

Similar remarks from opposition lawmakers signaled Congress would likely give the new Cabinet a vote of confidence. But after previous efforts to reset relations failed, it was unclear how long the new truce might last.

Verisk Maplecroft, a global risk analysis company, said Peru has a score of 4.44 out of 10 – a “high risk” ranking – on its government effectiveness index.

Despite Fujimori’s support for the new Cabinet, “the re-tooled team will remain hostage to the Fujimorista-controlled Congress, with Kuczynski’s political credibility continuing to ebb,” said Maplecroft analyst Eileen Gavin.

If Congress fails to approve of the new Cabinet, Kuczynski can summon new legislative elections.
…

U.S. central bank leaders are expected to hold the key interest rate steady this week, but they may begin trimming a huge bond-buying program that was intended to boost economic growth.

Federal Reserve Chair Janet Yellen is scheduled to speak with reporters about those decisions Wednesday afternoon, following a two-day strategy meeting in the U.S. capital. Surveys of economists show they do not expect the Fed to raise interest rates at this time.

During the 2008 financial crisis, Washington slashed the key interest rate nearly to zero in a bid to boost growth and jobs. Over the years, it has worked well enough to help cut the unemployment rate to its current low of 4.4 percent. As the jobless rate improved, interest rates have been raised, but remain below historic averages. 

An additional effort to boost growth involved purchasing trillions of dollars’ worth of bonds. The Fed is expected to gradually reduce this program over the next few years. 

Some experts worry that cutting back stimulus efforts too sharply or too soon could cause the economy to stumble back into recession. But continuing ultra-low interest rates or bond-purchase programs for too long could spark a sudden and sharp increase in prices. That inflation could also damage the economy.
…

The man tasked with overseeing Texas’ Hurricane Harvey rebuilding efforts sees his job as “future-proofing” before the next disaster, but he isn’t empowered on his own to reshape flood-prone Houston or the state’s vulnerable coastline, which has been walloped by three major hurricanes since 2006.

Texas A&M Chancellor John Sharp will face the same political and bureaucratic challenges that have long stalled meaningful improvements in storm protections, and some doubt that even Harvey’s record flooding and huge price tag will bring about real change.

“It doesn’t give me very much confidence at all,” Houston resident Steve Sacks said of the prospects that the government will get the recovery right. Sacks’s home has flooded four times since 2012, and even before Harvey’s floodwaters near the rooftops in his Meyerland neighborhood, he was frustrated by delays and what he believes is the mismanagement of a government project to elevate homes in the city.

“It’s all spur of the moment and not thought out. It’s just, ‘Let’s go ahead and react now to make it look good,”’ said the 46-year-old Sacks.

Sharp, who was appointed by Republican Gov. Greg Abbott, follows a line of fix-it men charged with picking up the pieces following major storms in recent years, including Hurricane Katrina in 2005 and Superstorm Sandy in 2012. He has won early bipartisan praise as a practical choice to preside over the efforts to recover from Harvey, which killed more than 70 people and damaged or destroyed more than 200,000 homes.

Sharp is the rare Democrat with sustained relevance in Republican-controlled Texas. He is former lawmaker and state comptroller who was U.S. Energy Secretary Rick Perry’s college roommate at Texas A&M, which Sharp has led since 2011 and will continue to lead while overseeing the rebuilding effort. Abbott joked that he’s now getting calls, texts and emails from Sharp “up to and sometimes well after midnight.”

Sharp hasn’t laid out a long-term rebuilding plan yet and most of his public comments so far have been aimed at reassuring hard-hit communities that he won’t be a bureaucratic cog. But he has indicated that he’s thinking about the next disaster, saying “one of the guiding principles will be to future-proof what is being rebuilt so as to mitigate future risks as much as possible.”

Abbott spokesman John Wittman said Sharp will be involved in developing a rebuilding plan to “minimize the impact” of future natural disasters and will advocate for funding.

But Sharp is constrained in how far he can go in reimagining a more resilient Texas coast. His mandate only pertains to public infrastructure, and not housing, which experts say is crucial to any comprehensive mitigation plan, including buying out particularly flood-prone neighborhoods.

Sharp’s mandate also doesn’t mention zoning changes — Houston is the largest U.S. city with no zoning laws — or how much money the state will put up to deliver on his eventual recommendations. Abbott, who has estimated that the recovery could cost more than $150 billion, has suggested the state will dip into its $10 billion rainy day fund, but not by how much.

“When you’re dealing with a limited amount of funds, there are always trade-offs that have to be made,” said Marc Williams, deputy executive director of the Texas Department of Transportation. His agency will work closely with Sharp’s commission, which could recommend elevating certain roads that flooded during Harvey.

All rebuilding czars are eventually tested by political and financial realities. Donald Powell, who left his role as chairman of the Federal Deposit Insurance Corporation to be the federal coordinator of Gulf Coast recovery efforts after Katrina, expressed frustration over not being able to speed up the rebuilding.

Marc Ferzan, who was appointed by Gov. Chris Christie to oversee New Jersey’s recovery after Sandy, said his biggest struggle was jumping from agency to agency to get funding.

“Whether it’s Katrina or Sandy or any major event you’re going to hear the same story. It’s just the way disaster aid is administered. It’s a slow, cumbersome process that is too bureaucratic to respond to the urgency of the situation,” he said.

After Hurricane Andrew caused $26 billion in damage to the Miami area in 1992, Florida installed the most stringent building codes in the country. Since 2001, structures throughout the state must be built to withstand winds of at least 111 mph (178 kph), and new codes also require shatterproof windows, fortified roofs and reinforced concrete pillars, among other things.

Sam Brody, an environmental planning expert and director of the Center for Texas Beaches and Shores at Texas A&M University, said drainage is among the “low-hanging fruit” that could be addressed immediately to begin future-proofing the coast for the next major storm. But he said the funds and the political determination must be solved.

“In terms of will, there hasn’t been the will in the past. Maybe this is a wake-up call, and maybe with his leadership and personality, he can change the way we can think and act,” Brody said of Sharp.

This week, Houston Mayor Sylvester Turner endorsed long-stalled plans for a sweeping reservoir project that might have spared parts of the city from Harvey’s flooding. He also has joined some top Texas Republicans in urging Congress to approve billions to build a coastal seawall that could protect Houston and other areas from deadly storm surges that Harvey didn’t unleash but that future storms could.

Turner said Houston “cannot talk about rebuilding” if “we do not build the coastal spine.”

How active the federal government will be in making the Texas coast more resilient is unclear. Following Sandy, the Obama administration commissioned a design competition that ultimately resulted in nearly $1 billion in federal funding to kickstart projects that include turning the low-lying Meadowlands into a flood-protected public park and installing bulkheads and seawalls along the Hudson River.

The project, known as Rebuild by Design, was just a one-time initiative. And even when things go right, such enormous undertakings are slow to materialize: the first projects aren’t scheduled to break ground until 2019, seven years after Sandy.

“You are receptive when you feel like something ripped the heart out of your city,” said Amy Chester, managing director of Rebuild by Design. “Everyone is going to need to say, ‘We’ve had enough.”’
…

Florida’s economy has long thrived on one import above all: People.

Until Irma struck this month, the state was adding nearly 1,000 residents a day – 333,471 in the past year, akin to absorbing a city the size of St. Louis or Pittsburgh. Every jobseeker, retiree or new birth, along with billions spent by tourists, helped fuel Florida’s propulsive growth and economic gains.

Yet Hurricane Irma’s destructive floodwaters renewed fears about how to manage the state’s population boom as the risks of climate change intensify. Rising sea levels and spreading flood plains have magnified the vulnerabilities for the legions of people who continue to move to Florida and the state economy they have sustained.

Florida faces an urgent need to adapt to the environmental changes, said Jesse Keenan, a lecturer at Harvard University who researches the effects of rising sea levels on cities.

“A lot is going to change in the next 30 years – this is just the beginning,” Keenan said.

People might need to live further inland, Keenan said, and employers might have to relocate to higher ground, with the resulting competition between offices and housing driving up land prices. It would become harder to adequately insure houses built along canals. Traffic delays could worsen across parts of Florida as more roads flood. Developers might shift away from sprawling suburban tracts toward denser urban pockets that are better equipped to manage floods.

At the same time, the belief remains firm among some developers and economists that for all the threats from rising water levels, the state’s population influx will continue with scarcely any interruption. The allure of lower taxes and easier living, the thinking goes, should keep drawing a flow of residents and vacationers.

“Irma doesn’t change the fact that there is no state income tax,” said Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness. “In a few months, when the first Alberta Clipper starts blowing down cold weather across the United States and it’s 80 degrees and sunny down here, the memories of Irma will be blown away.”

Certainly, the influx of people has been testament to that appeal. After slowing when the housing bubble burst in 2007, the population has marched steadily upward. The number of Floridians, now above 20 million, is projected to hit 24 million by 2030, with more than half the increase coming from retiring baby boomers. Many of them first experienced Florida as tourists. More than 112 million people visited the state last year – a 33 percent increase over the past decade.

All of which means that compared with Hurricane Andrew 25 years ago, Irma struck a far more densely packed state. It is also one marked by greater extremes of wealth and poverty. Luxury condo towers populated by the global elite now crowd the Miami skyline. But the metro area is also cursed by the worst rental housing affordability in the United States, according to Harvard University’s Joint Center for Housing Studies.

Flooding washed away mobile home parks in the Florida Keys where lower-income workers live. As a magnet for jobs at restaurants, hotels and other parts of the services sector, the state attracts workers with relatively low incomes who can’t pay higher rents if flooding eliminates a chunk of the housing stock.

Still, Citigroup estimated that damages were just $50 billion – well below initial estimates – in part because some homes were better equipped to weather the wind and rain than during Andrew.

Storms can cause population loss in the near term. A year after Andrew hit in 1992, Miami-Dade County lost 31,000 residents. Many appear to have moved to Broward and Palm Beach counties, where the risks of flooding were lower, a pattern that could be repeated after Irma.

Given the brisk pace of construction and population growth, Florida could endure a heavy economic blow in coming decades if it fails to reduce the risks from climate change. Homes that were too close to eroding beaches could become effectively worthless. Those along canals that flood could become too costly to rebuild. The state’s economic fuel – tourism and residential development – could dissipate.

Sean Becketti, chief economist at Freddie Mac, the mortgage giant, warned in an analysis last year that rising sea levels and widening flood plains “appear likely to destroy billions of dollars in property and to displace millions of people.”

“The economic losses and social disruption,” Becketti added, “may happen gradually, but they are likely to be greater in total than those experienced in the housing crisis and Great Recession.”

Federal taxpayers might oppose bailing out these homeowners, Becketti said, mortgage lenders could absorb heavy losses and employers might choose to move to safer parts of the country – and take their jobs with them.

Still, for now at least, the heads of several major Florida real estate companies say they expect people to keep flocking to Florida despite the increasing risks.

Budge Huskey, president of Premier Sotheby’s International Realty, drove around Naples, Florida, and said he observed “very little damage” to homes constructed under new building codes after Hurricane Andrew. These houses had wind-resistant hurricane windows and stronger roofs.

“Let’s face it, people work their whole lives to retire to Florida – that’s where they want to be,” Huskey said.

Jay Parker, CEO of Douglas Elliman’s Florida brokerage, monitored Irma from an Atlanta hotel. He was gratified that Florida escaped much of the expected destruction. And he said would-be buyers, sniffing out potential bargains, were approaching him at the hotel about cut-rate deals on condos in the storm’s wake.

“If anything,” Parker said, “this might create some short-term buying sprees.”
…

Scandal-hit Brazilian construction company Odebrecht said on Sunday it has sold its 33 percent stake in a massive subway project in Argentina’s capital Buenos Aires, but vowed to keep working in the country.

Odebrecht is involved in a sprawling corruption saga and has already paid $3.5 billion in settlements in the United States, Brazil and Switzerland, embroiling politicians across Latin America.

“Present for 30 continuous years, Odebrecht plans to continue contributing to the development of Argentina in an ethical, integral and transparent manner,” the construction company said in a statement emailed to Reuters.

In July the Argentine justice system banned Odebrecht from bidding on new projects in the country a period of one year.
…

Prime Minister Narendra Modi inaugurated India’s biggest dam on Sunday, ignoring warnings from environment groups that hundreds of thousands of people will lose their livelihoods.

The controversial Sardar Sarovar Dam on the Narmada river in the country’s western state of Gujarat that will provide power and water to three big states was dedicated to the people of India by Narendra Modi.

The project has been beset by controversies since the laying of the foundation stone by Prime Minister Jawaharlal Nehru in 1961. The construction of the project began in 1987.

The dam is the second biggest dam in the world after the Grand Coulee Dam in the United States.

Ahead of the inauguration Modi said in a tweet, “This project will benefit lakhs of farmers and help fulfil people’s aspirations.” (1 lakh = 100,000)

The dam is expected to provide water to 9,000 villages and the power generated from the dam would be shared among three states — Madhya Pradesh, Maharashtra and Gujarat.

The Narmada Bachao Andolan (NBA), led by social activist Medha Patkar, has been protesting against the project, raising several environmental concerns.

Construction on the dam had been suspended in 1996 following a stay by the Supreme Court which allowed work to resume, four years later, but with conditions.

Patkar and her supporters started the protest against the inauguration of the dam on Saturday and the opening of its gates which would raise the level of water and risk displacing several villages.

“Today is a very sad day for India, and for one of our biggest peoples’ movements and struggle — the Narmada Bacchao Andolan,” Ravi Chellam, executive director at Greenpeace India said in a statement.

“The Sardar Sarovar Project… signals ruin not development for tens of thousands of unsuspecting, hapless and poor farmers,” Chellam added.
…

Just a stone’s throw across a narrow waterway from the world’s largest gambling hub Macau, a former oyster farming island is being transformed into China’s newest tourism haven.

Dubbed by some as China’s answer to Florida’s Orlando — a global tourist magnet with its cluster of major theme parks — Hengqin has seen property prices more than double over the past two years.

While still a dusty mass of construction sites, Hengqin now draws millions annually to its anchor attraction, the “Chimelong Ocean Kingdom” theme park, with a slew of hotel, malls and sprawling residential developments being built nearby.

Spanish soccer club, Real Madrid, announced last week they would open an interactive virtual reality complex in Hengqin, in partnership with Hong Kong-listed developer, Lai Sun Group .

The 12,000-square-meter venue, set to open in 2021, will include virtual reality entertainment and a museum showcasing the club’s history.

​Oysters to Orlando of China

The transformation of Hengqin, which is three times as large as Macau, is part of Beijing’s efforts to bolster links between Hong Kong, Macau and nine cities in the Pearl River Delta region, or so-called “Greater Bay Area,” modeled after other dynamic global bay areas such as Tokyo and San Francisco.

“Hengqin will be the Orlando of China. Macau is Las Vegas (and) Hong Kong is New York,” said Larry Leung, an executive with Lai Sun that is helping build the Real Madrid complex at its “Novotown” project in Hengqin. “Within an hour you can have them all.”

Novotown’s entertainment mix will also feature China’s first Lionsgate movie world with theme rides from blockbuster films such as the Hunger Games and Twilight, as well as a National Geographic educational center. High-end hotel chains and luxury yacht makers are building more hotels and a marina on Hengqin.

​Expanding Macau

Chinese officials see Hengqin helping Macau diversify away from casinos to a more wholesome tourism industry. More than 80 percent of Macau’s public revenues come from the gambling sector.

Businesses in Macau have been encouraged to invest in Hengqin with the government providing cheaper rent and tax subsidies. Galaxy Entertainment, Shun Tak and Macau Legend have also earmarked developments for Hengqin.

Realtors expect property prices to keep rising once a sea bridge linking Hong Kong, and a high-speed rail station are completed.

Hoffman Ma, deputy chairman of Success Universe Group, which operates the Ponte 16 casino in Macau, said Hengqin could take some convention and exhibition business away from the former Portuguese colony.

“It doesn’t make sense for Macau to do that, due to a consistent labor shortage,” he said.

Big population, more theme parks

Wang Lian, from Wuhan in central China, brought his daughter to watch whale sharks and polar bears at Chimelong Ocean Kingdom recently.

Industry reports show 8.5 million people visited China’s top theme park last year, more than Hong Kong Disneyland’s 6.1 million, and almost a third of the 28 million people who visited Macau last year.

“China’s population is so big they need something like this nearby … its (Hengqin’s) economic ties will also help Macau develop,” Wang said.
…