Global Finance

Settling Up

Imf Shakes Up Policy Advice in Wake of Crisis

Economists who thought they had figured out how to keep national economies growing and inflation under control by simply focusing on short-term interest rates have learned some important lessons from the recent recession. Olivier Blanchard, economic counselor of the International Monetary Fund and head of its research department, is one economist who has done some rethinking. One clear lesson of the crisis is that fiscal policy can no longer play a secondary role to monetary policy. Fiscal po...

First Female President Set to Tighten Costa Rica/China Ties

Laura Chinchilla, a former VP and justice minister, is set to become Costa Rica's first female president after winning the country's early February election with a convincing 47% of the vote. As she acknowledged her victory, Chinchilla promised to further tighten ties between the Central American country and China and to maintain the business-friendly policies of her mentor, the current president, Oscar Arias. Chinchilla has also promised to crack down on crime, saying she would fight delinqu...

Financial Turmoil Hits London's Status

According to UK law firm Eversheds, increasingly US clients of the firm are opting to go direct to continental Europe rather than using London as a financial gateway. But it is not only European centers that London has to fear. In a survey Eversheds conducted late last year of 600 senior business decision-makers across five economic centers -- London, Mumbai, New York, Shanghai and the United Arab Emirates -- 87% of respondents indicated that traditional financial centers such as London face ...

Downturn Throws Chávez Onto the Ropes

Venezuelan president Hugo Chavez's dream of spreading his 21st century socialism throughout Latin America could be halted by a troubled economy. After he spent much of Venezuela's oil windfall on gifts to socialist allies, Chavez's dream is turning into a nightmare in the face of weakened oil prices, crumbling infrastructure and the global recession. In January Chavez ordered a devaluation that cut the value of Venezuela's currency, the bolivar, by 50%. The government's nationalization of the...

Wall Street Banks Consider Breaking for the Border

In the 1960s US draft dodgers headed north to Canada to avoid the war in Vietnam. Today, some 40 years later, Wall Street may be preparing a similar move to avoid dealing with US president Barack Obama's stricter new banking regulations. Many of Wall Streets top names already have offices in Toronto, including Goldman Sachs, J P Morgan and Citi. US bankers are particularly concerned about protecting their proprietary (or prop) trading and hedge fund operations. It's the kind of stuff that mak...

Rate Decision Sparks Fears of Political Meddling

In the wake of Lehman Brothers' collapse, foreign investors fled, exports plunged, the Korean won sank, and the economy contracted sharply. The central bank cut rates quickly and often in the months that followed, while the government introduced stimulus measures. Many economists predicted that South Korea would be the first Asian country to begin rolling back its accommodative monetary policy. Public debt crises in Europe further clouded Korea's economic outlook. Exports grew by 47.1% year o...

Sec Issues Wake-Up Call On Climate-Change Disclosure

The US Securities and Exchange Commission opened a can of worms with its decision to require companies to consider the effects of climate change when disclosing business risks to investors. It was a can that needed opening, however, in fairness to investors and to the long-term benefit of the companies themselves. It is intended to help the companies understand and satisfy their disclosure obligations under US securities laws and regulations. While collecting more data will have its costs, it...

Financial Services Industry Faces Long Convalescence

As banks enter the convalescence phase after what some describe as the financial equivalent of a major medical trauma, there may be a need for further medicine to ensure a full and stable financial and economic recovery. While they may be out of the trauma room, their full recovery hinges on a number of factors. The Oliver Wyman Group's 13th annual State of the Financial Services Industry report warned of the risk from withdrawing fiscal stimuli too soon. The unfolding and rapidly evolving re...

China

China's central bank in February raised the required proportion of deposits banks must hold in reserve for the second time this year. China is taking steps to rein in lending after the country's banks issued more than 9.6 trillion renminbi ($1.4 trillion) in new loans last year, more than double the total amount for 2008. The consumer price index rose by only 1.5% year-on-year in January, but producer prices increased by 4.3%. Real estate prices in 70 large and medium sized cities rose by 95%.

Africa

Zimbabwe's government is continuing its campaign against foreign ownership, insisting that businesses with assets of more than $500,000 must be 51%-owned by black Zimbabweans within five years of this month. The bill, known as the Indigenization and Empowerment Act, was passed in 2008 but not signed into law. Major mining companies could be affected, as Zimbabwe maintains the world's second-largest platinum and chrome reserves and is an important gold, diamond and nickel producer. Ironically,...

Middle East

Abu Dhabi Investment Authority, the world's biggest sovereign wealth fund, has purchased an approximately 15% stake in London's Gatwick Airport, although it would not confirm the exact size of the holding or the price paid. Sovereign wealth funds have become major investors in global infrastructure, although the market is limited, since some countries do not allow foreign investments in what they consider to be strategic assets. In Dubai, Emaar Properties, which built the 200-story Burj Khali...

India

Auto sales in India increased sharply over the past year, with the Society of Indian Automobile Manufacturers claiming sales have jumped by 50% since January 2009. The rising foreign appetite for Indian assets is prompting companies to announce equity issues. According to J.P. Morgan's Indian investment banking unit, the total expected stock sales for 2010 is around $311 billion, a 50% increase over 2009, when Indian firms raised $21 billion, of which $4 billion was IPOs and the rest follow-o...

Brazil

Brazil's Cosan, the world's largest ethanol and sugar processor, and Royal Dutch Shell are merging their Brazilian operations in a deal valued at $12 billion. Braskem, Latin America's largest petrochemicals producer, is acquiring a 100% stake in Sunoco Chemicals, a division of US-based oil company Sunoco, for $350 million. Brazilian banks are also leading an international acquisitions drive. Federally controlled Banco do Brasil is taking a majority stake in Banco Patagonia, Argentina's fifth-...

Russia

Russia's finance ministry hired a team of investment banks to help it prepare for the country's first eurobond sale since 1998. A number of statements by senior banking and government officials suggested that the privatization of some of Russia's state banks was being considered. While some additional protests are likely in the coming months, with the pretext of local elections in certain regions, the Kremlin has sufficient financial, political and media resources at its disposal to head off ...

Fx4cash: A Global Cross-Currency Payment Innovation

Leveraging Deutsche Bank's number one market share in global foreign exchange as well as its leading ranking in cash management, the bank introduced its global cross-currency payments solution known as FX4Cash. The FX4Cash platform has been desired to reduce costs and to deliver efficiency and transparency benefits to both corporates and financial institutions. An additional enhancement has also made the platform available for converting incoming cross-currency payments. FX4Cash's flexibility...

Microfinance Funds Get Fx Hedging Help

Chinese Firm's Adrs Trade On Otc International

Brazilian Port Attracts Chinese Auto and Steel Firms

Global Markets Brace for the Aftershock

Just as the mood was lifting worldwide -- and many markets had returned to their pre-Lehman Brothers bankruptcy highs -- a new risk has reared its head. The world has woken up to sovereign risk. In early February, stock markets around the world plummeted as fears rose that first Greece and then Spain and Portugal were facing a sovereign debt problem that could spiral out of control. The requirement for sovereigns currently considered at risk is simple: They must outline clear measures to incr...

Implications for Corporates of a Sovereign Crisis

If corporates invest in economies suffering from excess sovereign debt, it's essential to be aware that the pace of growth will be slow and domestic demand curtailed, not least because of increased taxes, John Flawksworth, head of macroeconomics at PricewaterhouseCoopers, says. Probably the greatest risk resulting from a sovereign default for corporates is that from the measures likely to be introduced to impose stability: Currency controls, for example, make the repatriation of profits and e...

Roaring Back to Life

As developed countries floundered last year, Latin America also felt the effects of the global downturn. But unlike developed countries such as the US, the region's road to recovery has been swift and sure. As the strength of the markets, and the sound fiscal policies underlying the markets, became clear, foreign firms also began once again directing trade and FDI flows into the region. By last summer it was full steam ahead for most countries in Latin America. Although already a tend before ...

Mexico's Next Wave

Long controlled by foreign players -- Spain's BBVA and Santander, the US' Citibank, Britain's HSBC and Canada's Scotiabank together control almost 70% of the Mexican market's total loans and retail deposits -- Mexico's banking industry is particularly vulnerable to the effects of global economic shocks. Despite the short-term local gloom, the glimmers of recovery in the global economy are prompting bankers to expand credit and support Mexico's rebound. Mexican banks began loosening their purs...

Can Nafta Fill the Gap?

The economic, financial and political circumstances of Canada, Mexico and the US remain highly intertwined, and Nafta remains an important contributor to the close ties between the three countries. However, all three are also actively involved in discussions for new trade agreements and some questions whether making changes to the agreement would create benefit, or whether smaller bilateral agreements are needed to improve trade between the three partners. Since the inception of Nafta, all th...

A New Capitalist Order

In the fall of 2008, the global economy was on the brink of a meltdown. It was in freefall. The crisis has distracted the US and much of the world from longer-run problems that will have to be addressed. A broader, longer-term vision -- focusing on the plight of the poor and the challenge of global warming -- will ensure that there is more than enough demand to absorb all of the world's production capacity. In the innovative economy of the 21st century, governments may need to take a more cen...

Spreading the Wealth

With more than 20% of the world's oil reserves. Saudi Arabia stands to benefit significantly from rebounding oil prices and the global economic recovery. Despite the recovery in oil prices, the worlds biggest crude producer is pushing ahead with its investment plans and is willing to incur small budget deficits to sustain its fiscal stimulus program. Saudi Arabia is building world-class industries and promoting entrepreneurship to diversify and sustain economic growth. The Saudi stock market ...

Post-Crisis Management

Aside maybe from Goldman Sachs and J P Morgan, few banks have emerged from the global downturn seemingly in better shape than they went into it. One that has is the European Bank for Reconstruction and Development (EBRD). Set up 20 years ago to help foster the transition of former communist countries to the free market, its primary purpose -- as an international financial institution -- is to invest in largely private sector entities whose financing needs cannot be met by the market. Given th...

World's Best Treasury Providers 2010

While some global cash management banks were more focused on staying in business and scaling down their global ambitions, others such as J P Morgan, Deutsche Bank and Standard Chartered continued to invest heavily in their treasury and cash management businesses, rolling out new functionality, particularly in the area of liquidity management. In this year's awards, Global Finance has picked the cash management banks and treasury management software and service providers they believe have succ...

Corporate Debt Issuance Stays Strong, but Risk Premiums Rise Sharply

While the Federal Reserve is unlikely to raise interest rates significantly this year in light of high US unemployment and subdued inflation, the long-running rally in the corporate bond market could come to a screeching halt as soon as the Federal Open Market Committee changes a few words in a post-meeting press release. Meanwhile, corporations are rushing to issue debt while the window of opportunity is still open. A long period of deleveraging nearly always follows a major financial crisis...

Europe's Debt Panic Brings Down Euro, Spurs Dollar Rally

Weakness in the euro is contributing to the dollar's recovery, as the search for a safe haven favors the US, analysts say. The euro fell to a 10-month low last month, with worries about Greece's sovereign risk spilling over into Portugal and Spain. The dollar's recent strength appears to be more a function of bad news overseas than of good news in the US, says Marc Chandler, global head of currency strategy at Brown Brothers Harriman, based in New York. The debt problems of Greece exposed a f...