Unit 4 Global Markets
Text 4.1 Shares jump on short war hopes
BBC News, Friday, 21 March, 2005, 21:05 GMT
Shares on the world’s stock markets have surged because of hopes of a swift end to the conflict in Iraq.
Investors were closely following reports from the Gulf and their interpretation was that it would be a short war, ending in favour of the US.
In New York that view sent the Dow Jones index up 235 points to 8,522 – a rise of nearly 3%.
London’s FTSE 100 index of leading shares finished the day up 95 points, or 2.5%, at 3,861 after its longest sustained rally since November 2001.
It was the seventh successive day of gains and lifted blue chip shares back to their level in mid-January.
In Frankfurt the German Dax put in an even stronger performance, rising more than 4% to 2,715.
And the French Cac ended up 96 points, or 3.4%, at 2,891.
The Dow Jones index of leading US shares also opened strongly and by 1950 GMT it was up 178 points, more than 2% at 8,465.
It seems likely this will be the eighth consecutive day of rises for the index, its longest winning streak since 2000.
Reversing the Gains
Traders said the advance of US and British troops into Iraq, together with television pictures of Iraqi troops surrendering, was the reason behind the rise.
However, they warned that the market was still extremely fragile.
With Tokyo’s stock exchange closed for a public holiday, equity dealing in the rest of Asia was lackluster, with most markets edging up a handful of points in the wake of gains in New York.
The war in Iraq is the dominant factor for all stock markets at present, with market participants trying to decipher the latest news to assess how long the conflict may last.
Analysts said the current rises were based on hopes of a swift end to the war, but that a prolonged conflict could quickly reverse the gains.
Staying Positive
“Few of our clients want to make any big bold bets on the sustainability of this rally”, said Jonathan Wilmot, a global strategist at Credit Suisse First Boston (CSFB).
US and British troops advanced deep into Iraq on Friday, and took over important airfields in the western part of the country.
The first day of active hostilities on Thursday had proved less intensive than many had foreseen.
President George W Bush’s warning on Thursday that the war might prove “longer than expected” is likely to keep traders on edge.
But traders said investors were focusing on the good news and the apparent early successes of US-led forces.
“It would appear that things are going well in Iraq and the market is reacting positively to that”, said Craig Cummings, a partner at Cantor Fitzgerald brokers.
Sober US News
Mixed economic news from the US was overshadowed by war talk.
“This market is headline driven and economics don’t seem to matter any more, it’s all about sentiment”, said one trader.
US consumer prices rose 0.6% in February and were up 3% year on year – the biggest monthly increase in consumer inflation since January 2001 and slightly higher than expectations.
But the core inflation rate – which excludes volatile energy and food prices – was up just 0.1% and 1.7% year on year.
Economists said the data would determine the longer term direction of the stock markets.
“People will not make up their minds about the sustainability of this rally until they are able to take the temperature of the world economy, once this war is no longer the focus”, said Mr. Wilmot.
The Turkish stock market, however, has slumped significantly, falling more than 7% on Friday.
Traders there are worried about the lack of a deal with the US on using Turkish airspace.
Billions of dollars of aid may depend on a deal being reached.
Text 4.2 U.S. recession fears weigh on world stocks
By Herbert Lash
International Herald Tribune
Friday, February 29, 2008
NEW YORK: Stocks fell Thursday in Europe and the United States as the dollar dropped to a new low against the euro after more signs of a possible US recession.
Fears that the worst has yet to arrive in the battered U.S. housing sector and a fourth-quarter update on gross domestic product showing weakness lifted U.S. Treasury prices as investors scrambled for safety.
Financial markets were hit by reports that the U.S. economy barely expanded, with growth at just 0.6 percent, and that the number of workers filing claims for jobless aid jumped last week. Testimony by the Federal Reserve chairman, Ben Bernanke, did little to help sentiment.
Bernanke’s comments accelerated a fall in European and U.S. shares, with the major European stock indexes closing down almost 2 percent and major U.S. indexes were down more than 1 percent at midday. U.S. government debt surged.
Bond prices also jumped in the flight to safety and on the weak economic data.
“There’s ongoing flight to safety in Treasuries because of credit risk. Equities look softer, and we’ve got discouraging earnings reports from companies like Freddie Mac,” said Kim Rupert, managing director of global fixed income analysis with Action Economics in San Francisco.
In late trading, benchmark 10-year notes were up 14/32, yielding 3.708 percent, down from 3.85 percent late on Wednesday. The yield had peaked at 3.96 percent last week, a high for the year and sharply up from the 4-1/2-year low of 3.2850 percent struck last month. Bond yields move inversely to prices.
The Dow Jones industrial average was down 123.17 points, at 12,571.11. The Standard & Poor’s 500-stock index was down 12.24 points, at 1,367.75. The Nasdaq index was down 20.18 points, at 2,333.60.
European shares fell as financial stocks were weighed by renewed worries about a U.S. recession and Bernanke’s remarks about possible bank failures.
The FTSE Eurofirst 300 index of top European shares closed 1.8 percent lower at 1,333.42 points, leaving it 11.5 percent down in the year to date compared with a 6.3 percent loss for the MSCI’ s main world equity index.
Across Europe, the FTSE in Britain lost 1.8 percent, the DAX in Germany fell 1.9 percent and the CAC 40 in France dropped 2.1 percent.
Cash was also moving into commodities again, as gold, oil and some agricultural futures were trading near records.
Investors have pumped cash into commodities in recent weeks, betting the Fed will keep cutting interest rates to prop up the flagging U.S. economy.
Oil rose toward $102 a barrel, trading within sight of a record set earlier in the week, as the dollar sank to new lows and after militants cut supply from Nigeria, the top exporter in Africa.
“The energy complex is a dollar/inflation story as investors have moved into commodities as a hedge against inflation,” said Nauman Barakat, senior vice president at Macquarie Futures USA.
“The ever-weakening dollar, upward inflationary pressures and geopolitical tensions are having a greater impact on the energy market than the fundamentals,” Barakat added.
The euro rose above $1.52 for the first time in its nine-year history as investors bet that U.S. interest rates are set to fall further as the benchmark rate in Europe stays unchanged.
The euro hit a high at $1.5229, according to Reuters data, before retreating slightly.
In late trading, the euro was at $1.5218, up from $1.51.29, and the pound rose to $1.9939 from $1.9823. The dollar fell to ¥105.230 from ¥106.378 and to 1.0494 Swiss francs from 1.0623 francs.
Gold raced to a record above $965 an ounce as the dollar’s slump and strong oil prices bolstered investor buying, analysts said.
Gold futures for April delivery rose $7.90 to$968.90.
“Gold is pretty much tracking the euro/dollar moves and funds and investors will keep buying the metal until it gets to $1,000 an ounce,” said David Thurtell, an analyst at BNP Paribas.
Text 4.3 UK’s super-rich ‘getting richer’
BBC News, Sunday, 27 April 2008 01:17 UK
The UK’s super-rich have never been richer, according to this year’s Sunday Times Rich List.
The top 1,000 richest people in the country now have more than £400 bn between them, it estimates – up almost £53bn in the last year.
Forty of the top 75 are foreign. Indian steel tycoon Lakshmi Mittal is top again with £27.7 bn, up £8 bn on 2007.
Times are harder for UK figures such as Virgin boss Sir Richard Branson, whose fortune dropped by £400m to £2.7bn.
Sir Richard has dropped nine places in the list, down from 11th in 2007 to 20th.
New entries
It is the fourth year running that Lakshmi Mittal has topped the list.
Second is Chelsea owner Roman Abramovich, the Russian oil and industry tycoon who saw his fortune increase from £10.8bn to £11.7bn this year.
New entries in the top include steel and mines magnate Alisher Usmanov – the largest shareholder in Arsenal football club – who comes in at five with £5.7bn.
He is followed by Ernesto and Kirsty Bertarelli: the former Miss UK winner and her husband have a £5.6 bn fortune based on pharmaceuticals.
Sunday Times Rich List editor Ian Coxon said it was the British-born billionaires, like Sir Richard Branson, who were being hardest hit by the credit crunch.
Monaco-based Sir Philip Green, 56, who with his wife Tina, 58, owns Bhs and Topshop, has seen the value of his retail fortune drop by more than 10% in a year to £4.3 bn, according to the list.
Ineos chemicals billionaire Jim Ratcliffe, 55, owner of the strike-torn Grangemouth refinery, has seen an ever bigger downturn which is attributed to higher energy costs and more competition from the Middle East.
Ratcliffe,10th in the list last year with an estimated fortune of £3.3bn, now sits at 25th, worth £2.3bn.
A fortune of £80m is needed to be one of Britain’s richest 1,000 people – up from £70m in 2007.
The top 1,000 richest included 762 self-made millionaires.
Philip Beresford, who has compiled the list since it was first published in 1989, said: “Until now, the 11 years of Labour government have proved a boon for the super-rich, rarely seen before in modern British history.”
“However, much of the rise in this year’s wealth can be attributed to one factor: the number of foreign rich who have made London or its environs the main home and base of operation.”
The Queen’s wealth has stayed fairly static at £320m, Mr. Coxon said – although she has been sliding slowly down the list in recent years and is this year at 264.
Meanwhile the Independent on Sunday has published its antidote to the rich list, which it calls the Happy List of 100 people who make Britain a better and a happier place to live.
These include Tim Berners-Lee, the inventor of the worldwide web, cricketer and fundraiser Ian Botham, and author and philanthropist JK Rowling.
Text 4.4 The world has two energy crises but no real answers
Gideon Rachman
Financial Times, Tuesday, July 10 2007
How very shocking! Brendan Nelson, Australia’s defence minister, has caused sharp intakes of breath by saying something that is obviously true. He remarked last week that the Middle East was “an important supplier of energy, oil in particular” and that – as a result – people “need to think what would happen if there were a premature withdrawal from Iraq”.
Mr. Nelson did not say that Iraq was a “war for oil”. He merely noted that there was a lot of the stuff sitting under the ground there – and that this mattered.
This is not news. If you look at the biggest geopolitical questions facing the world, energy is at the heart of most of them.
The world is, in fact, facing two energy crises. The first is rooted in scarcity and traditional power politics. It involves the struggle by the world’s largest and most energy-hungry economies to get hold of the natural resources they need. Just yesterday the International Energy Agency warned that the world oil market would be “extremely tight” over the next five years. Demands from China and other emerging economies are rising. But Mary Kaldor – co-author of a new book called Oil Wars (Pluto) – points out the struggle to find new oil is a familiar sort of conflict, reminiscent of the 19th century “great game” or earlier imperial clashes.
The second energy crisis is new. It is driven by climate change. It demands international co-operation rather than competition. While the first crisis leads politicians and businessmen to search out ever more oil and gas, the second demands that they radically reduce their economies’ dependence on hydrocarbons.
Politicians find themselves pulled in two directions. Tony Blair, the former prime minister, spent much of his last few months in office trying to promote an international agreement on climate change. But he also thinks that one of his most important – if least heralded – achievements was to secure a long term deal for Britain on gas supplies from Norway.
In theory, the two energy crises could point in the same direction. The development of alternative, “clean” energies would reduce dependence on oil and gas. It is also crucial to any effort to cut emissions of carbon dioxide. The trouble is that there is little sign that alternative energy can be developed fast enough to rein in demand for oil and gas. Mr. Blair is a firm believer in the need to develop nuclear energy. But even this policy – controversial as it is – seems unlikely to fill the gap. One report published last week argued that four new nuclear reactors a month would have to be built from now to 2070 to make any difference to global carbon dioxide emissions (Too Hot to Handle? The Future of Civil Nuclear Power, Oxford Research Group).
But while the debate about global warming continues to generate more hot air than real change, the pursuit of new sources of oil and gas is now central to the foreign policies of all the world’s biggest powers.
China’s controversial foray into Africa is its first real effort to build power and influence outside Asia. The search for oil is fundamental to this policy – in particular, China’s controversial relationship with the government of Sudan. At home, China is opening a new coal-fired power station every week, to despair of global-warming activists.
Energy is also now probably the most important – and divisive – issue facing the European Union. Tensions between Poland and Germany have been raised by a Russo-German plan to build a new gas pipeline under the Baltic Sea. But while the Germans are placing their bets on securing long-term supplies from Russia, some other EU countries are scrambling to diversify their sources of supply – alarmed by the prospect that Russia could threaten to turn off the gas, as it did with Ukraine in 2006. Britain has its deal with Norway. The Balts and the Finns are constructing big new nuclear power stations.
Few in Europe will be comforted to hear Alexander Medvedev of Gazprom, the giant Russian energy company, remark matter-of-factly that: “In 25 years’ time there will be only three major suppliers of natural gas – Russia, Iran and Qatar”. Meanwhile the Russian economy is growing fast and Russian foreign policy is becoming more assertive – fuelled by a booming energy industry.
The US has its own energy dilemma. It accounts for 25 per cent of the world’s oil consumption, but around 9 per cent of world oil production and 2 per cent of world oil reserves. America’s demand for hydrocarbons keeps rising and the economy is still utterly dependent on the stuff – 97 per cent of the US transport system is fuelled by oil.
The Iraq war has done nothing to ease this problem. If it was a “war for oil”, it was singularly unsuccessful. Just before the invasion, oil was trading at around $30 a barrel. Yesterday it hit an 11-month high of more than $76 a barrel.
President George W. Bush announced last year that he intended to end his nation’s “addiction to oil”. Billions are being poured into research on alternative energy.
The US government is doubtless sincere in its protestations that it means to kick the oil habit. But, like many an addict, it has said similar things before – and the addiction has only grown worse. Now the US is competing for energy supplies with new and hungry addicts. Chinese oil consumption is currently growing by more than 7 per cent a year.
Climate change has only increased the moral and strategic case for alternative energy. Speaking at the London School of Economics last week, Sir Nicholas Stern – author of an influential report on climate change – struggled to sound optimistic. He admitted that finding and deploying alternative energy fast enough to avoid climate disaster would be very difficult, but added: “It is possible. And if it’s not possible, we’re in real trouble”. I would say we’re in real trouble.
Text 4.5 World will face oil crunch ‘in five years’
IEA says supply falling faster than expected
Dependence on Opec to increase as prices rise
By Javier Blas in London
Financial Times, Tuesday, July 10 2007
The world is facing an oil supply “crunch” within five years that will force up prices to record levels and increase the west’s dependence on oil cartel Opec, the industrialized countries’ energy watchdog has warned.
In its starkest warning yet on the world’s fuel outlook, the International Energy Agency said “oil looks extremely tight in five years time” and there are “prospects of even tighter natural gas markets at the turn of the decade”.
The IEA said that supply was falling faster than expected in mature areas, such as the North Sea or Mexico, while projects in new provinces such as the Russian Far East, faced long delays. Meanwhile consumption is accelerating on strong economic growth in emerging countries.
The problem is exacerbated by the fact that supply from non-members of the Organization of the Petroleum Exporting Countries will increase at an annual pace of 1 per cent, or less than half the rate of the demand rise.
The widening gap between rising consumption and lagging non-Opec supply will force Opec to sharply increase its production in the next five years.
Lawrence Eagles, head of the IEA’s oil market division, told the Financial Times: “If we get to the point were there is insufficient supply, the only way to balance the market will be through higher prices and a drop in demand”.
The IEA Medium Term Oil Market Report came as oil is approaching last year’s record high. Brent crude oil yesterday rose 72 cents to a 11-month high of $76.34 a barrel.
Refineries are already paying record high prices as producing countries have cut the discount at which they sell their oil relative to Brent, according to an analysis by the FT. Most of the discounts had been reduced to levels not seen since 2004 and some even to six-years lows.
Oil demand will grow at an annual rate of 2.2 per cent during the next five years, up from a previous estimate of 2 per cent, to reach 95.8m barrels a day in 2012. China, the Middle East and other emerging countries will lead the increase.
Rex Tillerson, the chairman and chief executive of ExxonMobil, said recently that he thought non-Opec oil production was close to levelling off. He told the FT: “We still see capacity for a little more growth, but pretty modest, and then in our own energy outlook it begins to plateau. And that results then in this call on Opec”.
UK oil production is set to suffer dramatic decline from today’s 1.7m barrels a day to just 1.0m b/d in 2012, according to the IEA. The IEA estimates Opec would have to supply about 36.2 m b/d in 2012, up from today’s 31.3m b/d. That would reduce the oil cartel’s spare capacity to a “minimal level” of 1.6 per cent of global demand, down from 2.9 per cent in 2007.
Text 4.6 Starbucks warns of falling profits as US consumers tighten belts
Coffee firm’s shares dip 11% to four-year low
Chairman blames homes crisis and energy costs
Andrew Clark in New York
The Guardian, Tuesday April 24 2008
Starbucks last night warned it was facing the weakest trading environment in its 37-year history as American consumers cut back on lattes, mochas and frappuccinos. The Seattle-based coffee company’s shares dived by 11% to a four-year low of $15.90 in unofficial after-hours trading following a gloomy announcement that its profits were set to fall this year.
“The current economic environment is the weakest in our company’s history, marked by lower home values and rising costs for energy, food and other products that are directly impacting our customers,” said Starbucks’ chairman, Howard Schultz.
Analysts had expected second-quarter earnings per share to rise from 19c to 21c. But Starbucks revealed the figure was likely to fall to 15c instead. It said its like-for-like sales in the US were down in “mid single digit” percentage.
Some of the weakest performing coffee shops were in California and Florida – where the US property market has suffered a particularly heavy slump. “The wheels have really come off this train,” said Larry Miller, an analyst at RBC Capital Markets.
Starbucks has just relaunched to revive its fortunes, revamping its menu and introducing a new signature brew called Pike Place Roast. Under pressure from investors, the firm sacked its chief executive in January and closed about 100 underperfoming stores.
Schultz said he remained optimistic about the initiatives – although he indicated they would seek further cuts. “We are rigorously managing our expenses and seeking additional opportunities to reduce costs.”
The firm, which has 15,000outlets worldwide, made profits of $1.1bn from sales of $9.4bn last year. But it has been criticized for expanding too fast at home and becoming too like a fast-food chain.
A leaked senior management memo last year admitted the “romance and theatre” of its coffee was fading due to the overpowering smell of hot sandwiches in its stores and use of vacuum-packed granules rather than beans ground on the spot.
Onslaughts into the coffee market by Dunkin’ Donuts and McDonald’s have further damaged Starbucks’ franchise. But so far, the company’s problems have been limited to its 10,500 outlets in America with little sign of a slowdown in the UK.
Other firms which have warned about profits as a result of contraction in spending in the US are the motorcycle maker Harley-Davidson, the motor homes maker Winnebago and the jeweller Tiffany’s. The package delivery company UPS imposed a freeze on hiring yesterday, citing an “anaemic” US economy.
Starbucks has told staff to be more chatty and introduced free wireless internet in its stores. It has struck deals to distribute CDs at its stores by artists including Paul McCartney and Joni Mitchell.
Text 4.7 Russo-German gas deal irks Poland
BBC News, Sunday, 30 April 2006
Poland’s defence minister has condemned a gas pipeline project which will link Russia and Germany via the Baltic Sea but bypass Poland.
Radek Sikorski reportedly compared the deal to a pre-World War II Nazi-Soviet pact dividing up Poland.
He said the move by Germany raised questions about the feasibility of a common European foreign policy.
The $5bn (£2.7bn) pipeline, agreed in September 2005, will connect Babayevo in Russia to Greifswald in Germany.
The 1,200km (744mile) pipeline is now under construction and will deliver Russian gas to Germany – and eventually to other Western European nations – by 2010.
But it is set to bypass Poland, prompting concern in Warsaw that the new pipeline could be used to divert energy away from Poland for political purposes.
‘Deals above our head’
Speaking at an international conference in Brussels, Mr. Sikorski said the move by Germany did not bode well for plans for more integrated European Union cooperation on foreign and security affairs.
He said Germany should have consulted Poland before the deal. “Taking the discussion first and consulting us later is not our idea of solidarity,” he said.
Poland was sensitive to “deals above our head”, he said.
“That was the Locarno tradition, that was the Molotov-Ribbentrop tradition”, he said quoted by Reuters news agency, referring to a 1939 pact between Stalin and Hitler which divided Poland up between Russia and Germany.
And he explained why Poland was worried. “The Russian ambassador to Belarus said last week when the Baltic pipeline is built, Gazprom will be able to cut off
Belarus without cutting off Germany. That means Poland too”.
The BBC’s Jonathan Marcus says energy security is now one of the principal issues driving international diplomacy.
Russia’s emergence as an energy superpower, ready and willing to use its market strength as a diplomatic tool, makes less powerful countries like Poland worried, he says.
The Baltic pipeline episode underscores the difficulty of separating energy diplomacy from old-fashioned power politics, our correspondent says.
Text 4.8 Aging Turkish immigrants pose new tests for Germany
By Mark Landler
International Herald Tribune, Monday, March 26, 2007
Duisburg, Germany: The last cups of Turkish black tea had been drained, the platters of olives and goat cheese cleared, but the snowy-haired Turks lingered at the table.
“Of course I always think about going back,” said Yusuf Mermer, 69, who left Ankara in 1969 for the Ruhr, where he operated a forklift. He now lives in a nursing home here. “I have nieces and nephews in Turkey, but I would just be a burden on them.”
His voice cracked and tears trickled down his creased face.
“Looking back, I don’t even know why I came to Germany,” he said.
“Things were going fine for me in Turkey.”
Four decades after the first Turks arrived as guest workers, they are reaching retirement in a land that still feels foreign. For Mermer and many others, it is a break time with the recognition that they will live out their days in a place where they had planned to stay only a few years.
Germany never planned for them to stay, either, and now it faces a social and financial burden. Of its 2.7 million people of Turkish origin, 320,000 are of retirement age. That number is expected to double by 2020.
Many of these immigrants, particularly older women, do not have the savings or pension and health benefits to afford nursing homes with round-the-clock care. The government has to pick up the shortfall – an unexpected payback for the long years of service of these gastarbeiter, or guest workers.
Socially isolated after decades of living in Turkish enclaves, these accidental Germans often speak little or no German. And having toiled in low-paying, physically taxing jobs, they are in poor health relative to native Germans of comparable age.
“For the first time in our history, we have to deal with considerable numbers of immigrants who are elderly,” said Berlin Institute for Population and Development. “They age differently from Germans. They have different medical problems.”
But they do share one thing with Western Europeans: They cannot rely on their busy children to take care of them. Three cities are trying different approaches to help them.
In Berlin, the first private nursing home in the country exclusively for Turkish people opened last year. Called Turk Huzur Evi, or the Turkish House of Well-Being, it will eventually offer beds for 155 people. It has a Muslim prayer room, with a visiting imam who preachers regularly, and serves Turkish food and meat prepared according to Islamic rules.
In Frankfurt, the state of Hesse finances a retirement home with a section for Muslims.
In Duisburg, the nursing home, known as Haus am Sandberg and run by the German Red Cross, has 15 Turkish residents – eight women and seven men – and nearly 80 Germans. They share airy quarters around a two-story atrium. Ralf Krause, the director, said it made little sense to segregate the Turkish residents, since they were already a diverse group: Sunnis and Kurds, Anatolians and people from Istanbul, devout Muslims and acolytes of Ataturk, Turkey’s great nationalist leader.
There is plenty of room for friction. “It’s not even as if they all eat olives and goat cheese,” he said, referring to the traditional Turkish breakfast served each Tuesday.
On a recent morning, however, there was quiet harmony in the breakfast room. Young women, some in head scarves, served food to their parents. A little girl scampered about, chattering in German.
Children and grandchildren are the main reason these Turkish immigrants stay. With the passage of time, many of them have few friends or family members left back home.
The German government, which has struggled with immigration policy in general, has yet to come to grips with aging immigrants. In the 1980s, it tried to entice people to return home by paying them cash.
About 250,000 foreigners – mostly Turks – did leave by 1984, but the flow soon dwindled because there were few jobs in Turkey then.
With only 4,000 Turks a year returning home these days, the German government and Turkish groups will have to share the burden of providing culturally aware nursing homes and caring for the growing number of retirees, said Faruk Sen, director of the Center for Turkish Studies in Essen. There are signs of that. In another part of Duisburg, a Turkish group that is building one of Germany’s largest mosques has included plans for a small retirement community across the street. The German and Turkish residents of Haus am Sandberg are experiencing genuine integration for the first time, after a lifetime in what social scientists have called “parallel societies”. Frieda Fuchs, a 90-year-old German, said her Turkish neighbors made life more interesting.
Multicultural living is not without its crossed wires, however. A few weeks ago, the staff brought together the groups for a dinner with cuisine from both countries.
Sitting across the table from the Turks, the Germans broke into a quavering chorus of “Deutschland, Deutschland über alles,” the former lyrics of Germany’s national anthem.
“Maybe they were rattled because we were playing Turkish music,” Azcan said, wincing at the memory. “This is a process. We’ll see as we go along which model works best.”
Text 4.9 The band plays on as communist Cuba embraces heart of capitalism
The cigars are out, the beer flows and it's BMWs all round as Bavaria puts aside ideological differences in $500m deal with Castro regime
Kate Connolly in Munich
The Guardian Friday May 18, 2007
In front of a picture of a skinny boy in his underpants hugging a water pump and flanked by a 1950s car, Thomas Lang, a Bavarian businessman, proudly describes his delight at striking a deal with the Cuban government.
“We've been asked to send 808 pumps to help the country's infrastructure get on its feet,” he tells an audience at Munich's chamber of trade and industry (IHK), noting the dearth of clean drinking water for the Caribbean island's 11.4 million inhabitants.
Mr. Lang's firm, Wilo-EMU, represents one of hundreds of companies in this most capitalist of German states that have agreed to help communist Cuba’s command economy, which, despite the United State's embargo, has of late found a new lease of life, largely thanks to help from Venezuela and China.
In its blurb to businesses, the IHK claims: “Cuba has far more to offer than beautiful beaches and cigars. Its rotten infrastructure offers German companies splendid business possibilities.”
Cuba has a thirsty need for German technology to replace its rusting Soviet-era equipment. Bavaria even has its own ”ambassador” to Cuba to oversee developments and before his recent illness Fidel Castro held through-the-night talks with German engineers about diesel motors and electricity generators prior to deals being struck.
A $500m (£250m) agreement has been struck between the Free State of Bavaria and Cuba, under which the German companies are providing the island with an array of generators, antennas, motors, and medical technology. By comparison, the US had just $340m trade with Cuba last year, mostly in agriculture.
The most delicious part of the deal for Bavarian traditionalists is the request for the luxury carmaker BMW to provide all of Cuba’s ambassadors with its Series 1, 3 and 5 models. Even Raul Castro, who is standing in for his sick brother, is to get a Series 5 car.
As far as the Cubans are concerned, Bavarians have proven themselves to be loyal participants in the revolution. By improving infrastructure they are helping to put socialism on a solid footing for the post-Castro generation.
“There are many points of the Cuban revolution that are interesting for Bavarian firms,” Eduardo Escandell, deputy trade minister, tells the suits. “We're happy you want to take part.” And please, he adds, continue buying Cuban cigars, rum and honey in return.
His words sealed a “memorandum of understanding” between the Cuban government and Bavaria this week as part of the island’s attempts to broaden its international interests - as well as thumbing its nose at the 45-year-old US embargo. “For 50 years we've suffered from the blockade but we've also survived without America for 50 years,”Mr. Escandell told the Guardian.
“We will continue this fight. We need products, and we’re happy that Bavarian companies can provide them. It's not about politics, because trade is trade.”
Text
4.10
Latin America’s oil rebels rebuff EU
Venezuela and Bolivia use summit to hail ‘new era’
Blair urges responsible approach to energy stocks
Duncan Campbell and agencies
The Guardian, Saturday May 13, 2006
The presidents of Venezuela and Bolivia, Latin America’s most outspoken leaders, yesterday rebuffed demands by the European Union and other leaders at a summit in Vienna to temper their policies on foreign investment and energy, declaring that a new political era had arrived.
Tony Blair, who attended the summit of European Union, Latin American and Caribbean countries, called for a “responsible approach” to the debate.
“Neo-liberalism has begun its decline and has come to an end,” the Venezuelan president, Hugo Chavez, said at the gathering of nearly 60 heads of state, according to Reuters. “Now a new era has begun in Latin America. Some call it populism, trying to disfigure our beauty. But it is the ... voice of the people that is being heard.”
Interest in the summit which continues today, has been heightened by the recent decree by the new Bolivian president, Evo Morales, who announced on May 1 plans to nationalize his country’s natural gas fields. Mr. Morales is part of the new “pink tide” of leftist politicians who have recently been elected in Latin America.
“What countries do in their energy policy when they are energy producers like Bolivia and Venezuela matters enormously to all of us,” Mr. Blair said yesterday. “My only plea is that people exercise the power they have got in this regard responsibly for the whole of the international community ... people are worried about energy supply in the future.”
The summit, which was called to discuss a series of issues of mutual concern, has so far been dominated by energy. Addressing the issue, and concern from the Spanish and Brazilian governments about their energy interests in Bolivia, the UN secretary general, Kofi Annan, said investors needed guarantees of long-term stability.
“Without that assurance you may be disrupting all economic activities,” he said.
Brazil’s foreign minister called on Bolivia to compensate Brazilian state oil company Petroleo Brasileiro, or Petrobras, if Bolivia takes control of the company assets there, according to the Associated Press.
“If investments [assets] are passed to a different owner, they need to be compensated,” Celso Amorim told reporters at the summit. Mr. Morales met various leaders separately, including Spanish prime minister Jose Luis Rodriguez Zapatero and EU foreign policy chief Javier Solana, over his new policy.
In a letter of clarification sent to the Spanish foreign minister, Miguel Angel Moratinos, and handed to reporters, Mr. Morales said: “We hope that in the term of 180 days we can establish to decide new contracts of mutual interest... with all the necessary conditions, so true and lasting legal security exists for companies.”
Text 4.11 Watch your step: fashion industry told to ‘grow up’
over models’ health and safety
Size zero just one issue for wide-ranging inquiry
Catwalk queens and designers have their say
Hadley Freeman, deputy fashion editor
The Guardian, Tuesday May 22, 2007
The fashion world was issued with a firm command yesterday to “just grow up” by the woman in charge of cleaning up an industry which has come under heavy fire for its use of size zero models.
Lady Kingsmill, chair of the Model Health Inquiry - an independent body created by the British Fashion Council to look at whether models are endangering their health in an industry which notoriously puts style over comfort - said action was needed on a range of issues.
The committee, made up of high-profile members of the fashion industry including designers, models and managers, was created last March when public concern about the size zero debate reached a peak. Members of the panel will be talking to colleagues about the problems and will issue guidelines this year on how to improve current practices.
Committee member and model Erin O’Connor held a focus group yesterday with other models to discuss the issue; designers Betty Jackson and Giles Deacon will be talking to fellow designers about the preference for thin models in the shows, and Sarah Doukas, founder of the model agency Storm and the woman who discovered Kate Moss, has been speaking to other models’ agents. The outsider on the panel is Adrienne Key, a consultant psychologist and clinical director of the eating disorders unit at the Priory hospital in Roehampton, south-west London.
However, Lady Kingsmill was keen to stress that the inquiry was “not just about size zero, but about health and safety within the industry as a whole”, and she compared her current task to her previous roles in implementing health and safety measures in the construction industry.
“It might seem odd to compare fashion and construction, but when I started to look at working conditions in the construction industry in the 80s it was an extremely dangerous industry with little regulation. Now the British construction industry is one of the safest in the world.”
There are almost no regulations regarding models’ working conditions and Lady Kingsmill said the panel had heard “some terrible anecdotes from models, such as girls being taken out for late-night shoots in the middle of nowhere, and then left there, with no money for a taxi home.” She added: “Fashion is an enormously important economy and should not be thought of as something fluffy, or just part of your Saturday shopping. It is time for the fashion industry to just grow up and accept that it is a real industry and to look after the health and safety of the people who work within it.”
The panel aims to publish its recommendations in September, in time for the next London fashion week. Although there will be no legal obligations for designers and agencies to follow the recommendations, Lady Kingsmill said that “changes can be implemented from recommendations”.
She added that some lawyers said that in future, models could sue designers and editors if they felt their health had been endangered.
But even if the inquiry does iron out the kinks in the British fashion industry, it will not resolve the problems within the industry as a whole. Anecdotal evidence, said Lady Kingsmill, suggested that “pastoral care of models” in Britain was better than it was elsewhere.
Models in New York, Milan and Paris fashion weeks are nearly always notably thinner than those on the catwalks in London because the major designers tend to show abroad and there is an almost subconscious belief in the business that the slimness of the models has a direct correlation to how upmarket a label or magazine is.
Lady Kingsmill said she would speak to magazine editors about this soon. “These are all problems that we will be looking at and I shall be talking to the fashion councils in New York, Milan and Paris about this very issue,” she told the Guardian.
The key issues
Issues to be looked at by committee:
Number of hours worked by models
Diet and eating habits
Drug and alcohol habits
The age of models working
The industry’s preference for slim models
Pastoral care and education available to the models when working
Text 4.12 China’s rural millions left behind
By Rupert Wingfield-Hayes
BBC News, Beijing, Tuesday, 7 March 2006, 13:17 GMT