Dookeran: Time to clean-up

Trinidad Newsday - 9 September 2010

FINANCE Minister Winston Dookeran yesterday vowed to “clean-up” the mess caused by widespread financial mismanagement, as he presented the first Budget of the People’s Partnership coalition which offered relief to depositors of CL Financial subsidiaries and the Hindu Credit Union (HCU) and pledged tighter financial regulations and incentives to bolster the economy.

“It is time to embrace fiscal responsibility and wipe out corruption,” a sombre-looking Dookeran told MPs at the Parliament Chamber in the Red House. As former Prime Minister Patrick Manning looked on, the Finance Minister alluded to the previous administration.

“Corruption, mismanagement and arrogance became the order of the day. It will take time to untangle that mess and bring those responsible to justice. But justice will be served,” he said.

Dookeran announced a plan to pay out millions to depositors and policyholders at CL Financial subsidiaries Colonial Life Insurance Company (Clico), and British American at an initial cost of $3.3 billion. He also pledged to pay depositors at the bankrupt HCU at a cost of $300 million.

Dookeran further announced that the billion-dollar trust assets of the Unit Trust Corporation (UTC) will be ring-fenced to protect 500,000 unit holders and that the UTC will now be placed under the scrutiny of the Central Bank.

In relation to the State bail-out of the CL Financial companies, Dookeran said, “More than eighteen months after the previous Government invoked Section 44D of the Central Bank Act, the People’s Partnership Government must now clean-up this mess.”

The insurance business of Clico and British American will be merged and depositors in short term investments and mutual funds will be paid an initial payment of $75,000. This is expected to pay off 40 percent of the 25,000 investors in these products.

Persons with balances over $75,000, however, will be paid through a Government IOU amortised over 20 years at zero interest. The IOUs will be tradeable on the secondary markets. Dookeran said the State would separate the insurance business of the CL companies from their investment and mutual funds business in order to protect insurance policy holders. He also pledged that the obligations of 225,000 policyholders will be honoured through the statutory fund.

In relation to the HCU, Dookeran said depositors and shareholders will similarly be entitled to $75,000 under the rules of the Deposit Insurance Corporation. Depositors above $75,000 will be paid in equal annual installments at a zero interest rate. Shareholders are to sign over the rights to the Government which will sell off HCU’s assets to recoup its $300 million bail-out. The measure, Dookeran said, will benefit more than 160,000 people.

Dookeran said the total funding by the State in relation to CL Financial, excluding indemnities and guarantees to First Citizens Bank, amounted to $7.3 billion as at May 2010. As at June 2010, Clico and British American’s combined total liabilities were $23.8 billion, but total assets were $16.6 billion.

“This fiasco was caused by reckless corporate governance and the glaring failure of our financial regulatory institutions,” he said. “The failure of both the regulators and the financial regulations resulted in insufficient oversight and investigation.” He said the Government will move to tighten State regulations of financial institutions.

“To ensure that this does not happen again, we shall strengthen the legislative and regulatory framework governing financial institutions and their holding companies. We shall strengthen the enforcement of regulations through stricter oversight and compliance with the relevant legislation, including the Insurance Act,” he said. The Central Bank Act, he said, will also be amended to provide the legal framework “to implement an economic solution and to subject our financial institutions to a higher level of control than currently exists.”

In relation to the ring fencing of trust assets of the UTC, Dookeran said, “this measure will further enhance the corporation’s governance framework...Segregated reporting for the collective investment schemes will be achieved via the legal separation of the trustee from the investment management and other lines of business like merchant banking.”

Dookeran added, “a legislative framework will introduce changes in the Central Bank’s powers to take decisive actions to protect Clico’s assets and ensure the safe and sound continuation of its legitimate insurance business.” He said, tellingly, “Our nation cannot allow a mistake of this magnitude to go without severe consequences. Those responsible for this crisis must be held accountable.”

Additionally, the Finance Minister announced plans to open several controversial special purpose state enterprises, like Udecott, to public ownership.

“A programme of public offerings will ensure that our people will participate in the fruits of growth and development,” he said. “It will further reduce the financial burden on the treasury.”

A re-alignment of scattered special purpose companies is also in the works.

“We have begun to rationalise the State enterprises...(to) incorporate a new accountability system that goes beyond the presently operating company ordinances. It is these loopholes in public accountability that resulted in the Udecott scandal. This must never again happen in Trinidad and Tobago,” he said.

The State will also aim to literally clean-up the nation, with a doubling of penalties for littering offences. For example, a person who litters in a public place will, from October 1, 2010, be fined $2,000 instead of the current $1,000. A corporation which litters gets slapped with a $4,000 fine. Failure to comply with a clean-up order will cost a corporation an initial $2,000 and $400 per day thereafter. Derelict vehicles left in public places will attract identical fines for those responsible.

Special measures to improve the use of solar energy equipment were also introduced, as the Finance Minister said the $2 billion-dollar fuel subsidy was under review.

Motor vehicle tax will also be reduced to zero for a period of five years on imports of factory outfitted “clean” CNG motor vehicles no older than two years. There will also be no VAT on the import of such vehicles, in addition to the removal of customs duty on CNG conversion kits and the CNG conversion cylinders required to convert a vehicle from gasoline to CNG.

Dookeran spoke for two hours and twenty minutes as he presented a wide-ranging $49 billion Budget which is expected to be funded by $41.3 billion in revenues and therefore result in a $7.7 billion deficit. The Budget is based on an oil price of US$65 per barrel, a gas price of US$2.75 per mmbtu, an inflation rate of seven percent and an estimated real GDP rate of two percent. Dookeran said 30 percent of the $7.7 billion deficit will be funded by money raised on the local market with deficit financing from regional financial bodies.

“Billions were spent yet the common man’s needs were neglected,” Dookeran said as he outlined a wide-range of initiatives to bolster trade and deal with different sectors of the economy. “From an obsession with two million dollar flags and private jets to police on the streets...hospital beds, computers for our children and so much more. Our spending priorities must change.”

He said the Alutrint smelter project would be stopped, and the $22.5 billion rapid rail project replaced with an alternative transport scheme. Of property tax, he said, “we will axe the tax” and revert to land and building taxes. However he was silent on promised lower rates of such taxes as promised on Sunday by Prime Minister Kamla Persad-Bissessar.

In relation to housing, Dookeran announced the consolidation of the Trinidad and Tobago Mortgage Finance Company (TTMF) and the Home Mortgage Bank (HMB) in order to tidy the confused functions of the myriad of home financing companies under the State’s management.

“We will clarify and confirm the mandates of these institutions and create a new holding company,” he said. The TTMF and HMB will initially be subsidiaries of this company, to be called the Trinidad and Tobago Mortgage Bank, with the HMB acting as the funding source.

However the new company will buy out the shareholders of the subsidiaries and then offer an initial public offering on the Trinidad and Tobago Stock Exchange.

First-time home owners will gain a $18,000 tax allowance per household on mortgage interest paid in the year of income for five years from date of acquisition, effective January 1, 2011.

Dookeran said contractors were owed approximately $4 billion, a figure lower than the $5 billion to $7 billion estimate calculated by officials of the local construction industry. He pledged to deal with the debt, but gave no fixed time-table to do so. The Finance Minister also said the Government would deal with approximately $2.8 billion worth of VAT refunds owed currently to businesses.Manufacturing businesses will gain from an increase in the wear and tear allowance from ten percent to 25 percent (except for buildings), to assist in the quicker write-off of assets. The regulations for customs entry will also be relaxed, with only goods valued over $20,000 now requiring customs entry (as opposed to goods over $1,000). There will also be tax allowances for persons and businesses who contribute to the Children’s Life Fund, a fund for terminally ill minors.

The State will also slash Petroleum Profits Tax from 50 percent to 35 percent in respect of deep water blocks. Additionally, a reduction of 20 percent on supplemental petroleum tax rates and an investment tax credit of 20 percent on capital expenditure will also be granted amidst other measures to stimulate the petrochemical sector.

There will be additional funding for the fashion and music industries, as well as a partnership with the Artists Coalition of Trinidad and Tobago on a planned National Heroes Policy aimed at promoting the legacy of local artists. There will also be a review of the Trinidad and Tobago Film Company and the Trinidad and Tobago Entertainment Company.

Of several measures outlined to deal with National Security, Dookeran announced a plan to pay a tax free special duty allowance to 7,000 police officers from October 1, 2010. Cops are now expected to up their visibility by increasing bicycle patrols.

Dookeran said the GATE, Conditional Cash Transfer Programme; School Feeding Programme; CDAP and URP will be untouched. A Milk Feeding Programme will now compliment the School Feeding Programme. An elderly mobile shuttle service introduced, in addition to legislation to deal with homes for older persons. A tax amnesty for income-tax filings takes effect immediately and will last until May 31, 2011.

The Finance Minister also announced a revamp of the Scarborough International Airport, amidst a cluster of measures revealed for Tobago last week by the Prime Minister. Tobago received an allocation of $2.6 billion, or 5.24 percent of total expenditure.

This, Dookeran said, was notably higher than the four percent allocation as required by law. Debate on the Budget, which is formally called the Appropriation (Financial Year 2011) Bill, will kick-start next Tuesday with the response of Opposition Leader Dr Keith Rowley.

Business community reacts to 2011 Budget

Trinidad Guardian - 9 September 2010

The different sections of the business community seem to have agreed that the Government has paid attention to diversifying the economy in yesterday’s budget statement for the fiscal year 2010-2011—the first one to be presented by the People’s Partnership Government.

TTMA In a release, the Trinidad and Tobago Manufacturers’ Association (TTMA) commended the Government’s efforts to facilitate reimbursements of Value Added Tax (VAT) and the payment of outstanding funds to contractors. The TTMA also acknowledged the enhancement of the Research and Development Fund (RDF) of the Business Development Company (BDC) which it said is a critical component of business development and the adoption of high value-added manufacturing processes within the industry. The TTMA did say that there is more that the Government could do in some areas.

San Juan Business Association In a press release, the San Juan Business Association (SJBA) stated that the Government dealt with broad areas which include national security, stimulating economic growth and smalls business development, education, health and infrastructure. They acknowledged the Government has addressed the issues of the delay in the processing of VAT returns and the inefficiencies at the Port of Port-of -Spain.

“These anomalies together with the disastrous turn of events in the financial sector vis a vis CL Financial and the HCU did have a negative impact on business in T&T,” the release stated. The SJBA also said that the tax allocations in the budget to support the manufacturing sector will go a long way to foster economic growth.

Energy Chamber Charles Percy, President Energy Chamber is commending the Government for focusing on entrepreneurship and the energy sector. “...I like the public offering programme that will have state enterprises and others in the private sector on the stock exchange. The Government is providing fiscal incentives for entrepeneurship,” he said. He said the Supplementary Petroleum Tax was adjusted by the Government which should generate more energy sector activity.

Republic Bank Chief Economist Dr Ronald Ramkissoon described the budget as “interesting” but added that he was not surprised by what was delivered. He believes that the Government made an attempt to be “creative” in the way the budget was formulated. Ramkissoon said that economy is not in the negative state that some people have believed. He also said he would have preferred the Government had pegged oil at $60 a barrel instead of $65. Finance Minister Winston Dookeran had also projected growth rates of between two to four per cent for 2011, Ramkissoon said based on the peformance of the economy for 2010 such a projetion for 2011 would not be unrealistic.

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Recycling will bring social rewards

Trinidad Guardian - 9 September 2010

Our multimedia crew on Cleaning Up the Mess welcomes the government’s intention stated in the budget to “do a feasibility study” on recycling. This should involve the resurrection of the Draft Beverage Bill with a tax placed on bottles. We dump valuable recyclable material—some 50 million plastic bottles and 10 million glass bottles every month. We also welcome the doubling of fines on littering and trust that litter wardens are assigned to enforce this. Last week our multimedia crew—CNC3 cameraman Joel Allick, Guardian photographer Keith Mathews and Ira Mathur—were escorted to the Beetham landfill, or the La Basse dump, by Carib Glass’s Dave Gajadhar.

We discovered then that all our major landfills are overflowing, not fenced, not lined and don’t meet international safety standards. Senior environmentalists claim toxins from landfills are running into our water table and into our produce. Our guest columnist this week is Allan de Boehmler, director of Waste Disposals Ltd and chairman of the recycling committee of the Trinidad and Tobago Manufacturers Association (TTMA).

Allan de Boehmler At first I was a little apprehensive when I was asked to write this column on local waste management because I am not a journalist. Then after thinking about it for sometime it made sense because I have been involved in the industry for 16 years so you could say I am a seasoned garboligist. After so many years of disposing of our waste in the same way, that is dumping at the approved landfill sites, we all need to commit to changing our bad habits for the benefit of our environment and our beautiful country. The Ministry of Local Government stated on Monday that the long and eagerly awaited report on waste management legislation, prepared by the consultants from Nova Scotia will be completed in six weeks.

This report is supposed to pave the way for a modernised system of waste management in Trinidad and Tobago that is similar to that of Nova Scotia whose environmental performance is impressive to say the least.

The way forward The most important initial goal in this new legislation is a target for landfill diversion. For example, Government should commit to the diversion of 50 per cent of waste away from the landfills within eight years. If this can be done we would be wasting less, recycling more while benefitting from the environmental, social and economic rewards. To achieve a target of 50 per cent diversion to start with we need three waste processing centres. One centre in North Trinidad, one in South and one in Tobago. Instead of putting all garbage out for collection four times a week, garbage can be collected twice a week and recyclables can be collected twice a week.

In this way garbage collection contractors remain involved and are part of the solution. All residents have to learn to separate their paper, plastic, aluminium and glass waste and place it in a separate transparent recycling bag. On recycling collection day, workers will easily identify which are the bags to collect. Now the truck loaded with bagged recyclables goes to the processing centre and dumps its load onto a conveyor. After some initial mechanical sorting the waste will be conveyed along a sorting line where pickers will pick and sort the different waste into piles. These piles are then pushed into a large and powerful baler, the resulting bales of waste can then be shipped for recycling.

Once the quality and volume of waste output become reliable one of our many entrepreneurs will convert the waste into new value added products. The economics of land, building, plant and machinery mean the processing centre’s revenue for the sale of its sorted and packaged output would be less than the cost to own and operate the facility. This is why the centres should be owned by the state but operated by private enterprise under contract for efficiency and accountability. The upcoming beverage container legislation also will be a good way of contributing to the landfill diversion targets. Scrapped vehicle tyres should be banned from the landfills.

All importers of tyres should pay an advance disposal fee which would be passed on to consumers. This fee would go into a fund. Upon the delivery of used tyres to a shredding and chipping facility, an individual will get back half this fee, the other half goes toward the tyre-shredding company. The rubber chips can then be used as an economic additive to aggregate for road construction. Wide-ranging public awareness campaigns, using all forms of media, would be a crucial aspect to achieve the landfill diversion goals. With a good slogan, a catchy tune, some bold visuals and a wake-up call, we could all make that change for a better Trinidad and Tobago.”

GHL remains volume leader

Trinidad Guardian - 9 September 2010

Guardian Holdings Ltd led yesterday’s trading session with a volume of 58,100 shares and value of $798,875. Overall 154,806 shares crossed the floor with a market value of $1.30 million. Advances monopolised trading activity as Trinidad Cement Ltd climbed $0.05 to $3.05 and Sagicor Financial Corporation gained $0.03 to close at $9.03. The mutual fund market was inactive. Prices stood firm at $5.11 for Caribbean Property Fund, $3.50 for Praetorian Property Mutual Fund and $62.50 for Savinvest India Asia Fund. The second tier Market was also inactive.

The Government bond market registered a volume of 109,971 and value of $119 million. The corporate bond market remained inactive. The Composite Index added 0.22 points on its way to 817.11. The All T&T Index traded up 0.28 points to settle at 1,151.11. The Cross Listed Index inched up 0.02 points to end the day at 60.02.

Doubt over coming winter season

Barbados Nation News - 9 September 2010

There is some uncertainty about the kind of winter tourism season Barbados will have.

Colin Jordan, president of the Barbados Hotel & Tourism Association, told the BARBADOS BUSINESS AUTHORITY: “Many hotels already have some bookings from repeat guests, but we don’t really have an idea about where fall or the upcoming winter is going to end.”

He noted that tourism arrivals were up by just over three per cent while for the vast majority of hotels, guest revenue was down.

Jordan said many hotels already had some bookings from repeat guests, “but we don’t really have an idea about where fall or the upcoming winter is going to end”.

He explained: “This is due to a number of factors. People are staying shorter periods of time but, significantly, those who are coming are spending less.”

Jordan said the outlook for September and October was “a little slow at this point”, and added that because of a trend towards late bookings, it was difficult to determine whether it would be slow “going forward”.

The president therefore welcomed this month’s World Boxing Championships in Barbados, which he said would give September a “bit of a boost”.

However, he was unclear about the numbers expected for this event and though he could give no definitive figure on bookings, Jordan believed any bookings would enhance arrival figures in what is traditionally a bad month.

“It really speaks to the importance of not just sports tourism, but sports working with tourism.”

Meanwhile, the BHTA president said some hotels were “trying to spruce up their properties for the coming winter season”.

“I don’t think we are going to see major renovations, given the state of people’s cash flow.”

“But people are still trying to make their properties bright for the winter and some are doing work in terms of their bathrooms; one or two are looking to change soft furnishings.”

According to Jordan, hotels in the Elegant group were the only properties undergoing major renovations, while The Sandpiper Hotel in St James had started “pretty significant work”.

‘On top of things’

Barbados Advocate - 9 September 2010

PM assures Barbadians he is keeping abreast of issues on the ground

PRIME Minister David Thompson has assured the nation yesterday, that during his time away he continues to keep abreast of what is happening in the country.

This assurance came during a live broadcast on local radio station, Voice of Barbados, yesterday afternoon as he thanked Barbadians for their continued support during his two-month absence to seek medical treatment abroad.

According to the Prime Minister Thompson, “But I believe the time had to be taken. I came back to Barbados last week and chaired Cabinet and did some other things, worked on some economic issues and that kind of thing which in due course we will be putting in place.”

When asked if he may be pushing his health condition too far by remaining at the helm of the country, and about the likelihood of a Cabinet reshuffle, the Prime Minister said it was not his intention yesterday to deal with those particular issues. He noted, however, that he resumed his duties after two months as promised at a lower level of activity and assured that all things are being considered in the interest of Barbados.

“...When I saw Barbadians their first concern is for me to restore my health and that is what I have been focusing on and in the circumstances I believe that should I need to take any course of action that is in the interest of the country that I love, I will take that course of action.

“At the same time one does not want to unsettle the social, political or economic environment and therefore don’t get excited about those things as yet. This is me, speaking to you and I think you can work out from that, that my brain is still functioning, I am able to talk lucidly, that I am able to carry out my function – maybe not with the same level of physical intensity as before, with less... As I said in my circumstances, do my best, but all this at the end of the day depends on the grace of God and his provision for me to carry out this mission,” he stated.

“Barbadians’ first interest has been for me to get better. And in those circumstances I am saying to you as a Barbadian, my interest is in the success of Barbados. We have a Government in place with and an Acting Prime Minister, we have a full Government in operation and in the circumstances those are matters that will be discussed at another level,” he said.

NHT fearful - Says ministry move could hurt contributors

Jamaica Gleaner - 9 September 2010

THE BOARD and senior management of the National Housing Trust (NHT) have come out strongly against a recommendation by the Public Sector Transformation Unit (PSTU) that the trust be placed under the Ministry of Water and Housing, citing fears that contributors could be adversely affected.

This move, according to the NHT board, could compromise the original mandate of the trust, which is to provide housing solutions to its contributors.

NHT Chairman Howard Mitchell, who appeared before the Public Administration and Appropriations Committee (PAAC) of Parliament yesterday, cautioned against the PSTU's proposal.

"We feel that the temptation for conflict will be great if you place an entity which is funded by compulsory contribution from a segment of the society side by side with a sectoral entity which has a charge and a mandate for the service of the overall housing needs of the country," he said.

The PSTU proposal, which is intended to bring under one umbrella all housing and development functions, was debated yesterday at a meeting of the PAAC in Gordon House.

In a document presented to the committee, the NHT said it viewed the proposal with concern and unease.

The trust's board and management argued that the proposed transfer would neither reduce cost nor create greater efficiency at the NHT.

In its submission to the committee, the housing entity raised concern that the minister of housing would be given supervising authority over the well-funded NHT and the underfunded social housing programmes.

Arguing that this could create a conflict of interest, the NHT contended that the supervision of these two areas could possibly influence the minister to act on behalf of the social housing mandate by imposing requirements on the trust that did not accrue to its beneficiaries. This, the trust added, could lead to a breach of the NHT's mandate.

"Moreover, we see it as a structure that promotes self-dealing, as the minister with control over the trust could influence it to improperly enter into transactions with another segment of the ministry's mandate," the document stated.

Responding to the NHT's position, committee member Fitz Jackson supported the PSTU's suggestion.

He indicated that if the housing ministry should be given responsibility for the NHT, the minister would have to obey the provisions in law that govern the trust.

However, Mitchell made it clear that he was not casting aspersions on any minister or any Cabinet member by raising the concerns.

"... Human nature is such that conflict, if it is not hemmed about with restraint, will cause evil. That's human nature, it doesn't repose in politicians and members of parliament," he said.

Putting an alternative recommendation on the table, the NHT chairman advocated that the trust be made a creature of Parliament. He also proposed that the NHT could be made a legal foundation with trustees appointed by the governor general.

"We feel that the fitness for purpose and the relevance of the trust would be better preserved in one of these alternative positions," said Mitchell.

Mayor makes FNO appeal to Portmore store owners

Jamaica Observer - 9 September 2010

CONCERNED that too few businesses had signed up to participate in the local version of Fashion's Night Out, the board of management of Portmore Shopping Centre Limited Tuesday called its tenants to a meeting to shore up the numbers for the Observer's celebration of the premier retail shopping event.

Prior to Tuesday, the mall accounted for fewer than 30 of the 56 FNO participating stores throughout the municipality.

But, according to the board, and Portmore Mayor Keith Hinds, it is a poor showing given that there are 104 shops in the 140,000 square-foot mall.

"We have the single largest mall in the Caribbean, which means we have the largest block of customers and what do you have to show for it?" Hinds asked the business owners as he displayed a list of registered participants.

"This is not good enough," he said.

The mayor, himself a business owner, reminded the mall tenants that customer-friendly events such as FNO are excellent ways to jump-start slow business and to dispel the long-held belief that the municipality is nothing more than a dormitory community for the Corporate Area's working class.

"Business people, I'm begging you. It's very important that we change the concept (of Portmore being a dormitory community). We really need to get on board with this thing," said Hinds. "People should be coming from (Kingston) to spend their money here instead of the other way around."

He also urged owners to be more economically prudent by living within the means the business provides, and to improve their services to the public.

"Not everybody coming into your store wants to hear 'suss'. They need professionalism, they need to be treated with respect," said Hinds, who also pointed to the physical condition of the shopping complex.

"This mall needs to be resuscitated," he said, making references to the cinema which closed down a few years ago, and to the amphitheatre which is underused.

If the mall is in a bad shape, rebutted board member Winston Bryan, it's not for lack of good management.

"The mall is not mashed up. One of the problems we are having is non-compliance with maintenance fees. We are stifled. We are constrained with costs for security, water and light for the common areas," he said.

Board chairman Norman Walker concurred: "We are struggling to keep up with the services".

They say the compliance, of which "there has been significant fall off" in the last two years, is close to 50 per cent.

Maintenance fees go towards utilities, and sanitation and security services, but with a handful of stores carrying the weight of others, the board says it's a virtual "hand-to-mouth" situation.

Security accounts for the biggest chunk of its budget, coming in at $1.2 million per month. The monthly common-area water cost is $700,000; light is $340,000; janitorial services cost $300,000 and sanitation comes in at $220,000.

"We are going to be showcasing the mall this weekend and we would have loved to have got a paint job and give the mall a facelift," Walker said.

"We, as operators, have a lot of work to do. We're nowhere near saturating the market. We can start that on September 10," he said.

Director in charge of promotions on the board, Mavis Beckford, urged the business owners to give "genuine discounts" and dissuaded them from marking up prices and marking them down to reflect the original selling price.

Bahamas hailed on sustainable tourism

Nassau Guardian - 8 September 2010

The Bahamas Ministry of Tourism has announced its sponsorship of the Caribbean Media Exchange on Sustainable Tourism(CMEx), slated for the Jamaican capital of Kingston from September 30 to October 4, 2010.

"It's wonderful to be recognized in this way by the ministry, led by Minister of Tourism Vincent Vanderpool-Wallace, one of the region's visionaries whose eloquence on the benefits of sustainable tourism for individuals as well as for companies and governments is respected far beyond the Caribbean region,"said Lelei LeLaulu, who currently serves as vice president of the nonprofit organization.

"We are particularly delighted to have both The Bahamas'and Minister Vanderpool-Wallace's very strong support for the Kingston meetings which will look at one of the minister's priorities-the teaching of tourism to our youth and the importance of educating people throughout our Caribbean communities,"he added.

According to Dr. Basil Springer, a member of the CMEx Board of Directors, the Harvard University-educated Vanderpool-Wallace"is known as a bold and creative thinker who is unafraid to consider innovative approaches to keep The Bahamas at the cutting edge of tourism destinations."The Bahamas has previously hosted two CMEx interactive dialogues.

In Kingston, journalists, editors and young leaders from the Caribbean, North America and Europe as well as development specialists and representatives of the hospitality, civil society and government sectors will interact over the four days to explore the theme:"Tourism: Linkages for Growth."

Delegates will examine how tourism intersects and contributes to the development of other sectors like manufacturing, food, agricultural and enterprise development. The role of the region's preeminent academic institutions will also be featured.

The upcoming CMEx, to be held at the Jamaica Pegasus and partnering hotels in Kingston, will again have a strong focus on the Caribbean Diaspora and Faith Tourism as key contributors to Caribbean sustainable development.

Since 2001, CMEx has produced 18 conferences and networking symposia throughout the Caribbean and North America to underscore the value of the region's largest industry, tourism, in improving the health, education, culture, environment and wealth of Caribbean communities, both at home and abroad, in a sustainable and climate friendly fashion.

The upcoming CMEx meeting is supported by the Jamaica Tourist Board, Jamaica's Ministry of Tourism, and the Jamaica Pegasus Hotel. Additional contributors include: Anse Chastanet Resort, Bahamas Ministry of Tourism, Barbara Pyle Foundation, Bay Gardens Resorts, Caribbean Business Enterprise Trust, Caribbean Broadcasting Union, CaribWorldNews, Coco Palm, Community Benefit Development, 4P Group, Jade Mountain, Marketplace Excellence, Michael D. Communications, Ruder Finn, Spirit Airlines, and The SpeakEasy M.E.D.I.A. Foundation.

Budget based on bright hopes

Trinidad Express - 8 September 2010

If the People's Partnership administration was contemplating a third election campaign shortly, a budget different from the one Finance Minister Winston Dookeran delivered yesterday can hardly be imagined.

The Partnership, hurriedly pulled together last April, and victorious in elections in May and July, has by now shown itself more effective in campaigning than it has in governing.

As governments go, the period of the one led by Kamla Persad-Bissessar has only begun. Mr Dookeran made much of what had been achieved within 120 days, but he also dedicated "the framework of our new policy direction" to a time-frame "located in a wider three- to five-year horizon''.

Some financial bottom lines appear, at first glance, to have little changed from those read one year before by Finance Minister Karen Nunez-Tesheira. Compared with the September 7, 2009 budget, Mr Dookeran's expenditure is up by some $4.6 billion, but he yesterday projected a deficit of $7.732 billion. The deficit projected in the previous Budget had been $7.702 billion.

No clear strategy emerges, however, for the progressive reduction of the deficit. The new budget is based on bright hopes for increased income, but on no identifiable, painful cuts in expenditure.

Once again, this year, gross domestic product is estimated to grow by two per cent, with an average inflation rate of seven per cent. Mr Dookeran expects improvement in the oil price of US$65 a barrel — above Ms Nunez-Tesheira's projection of US$55 a barrel. Natural gas prices, as projected by both one year apart, remain at US$2.75 per million British thermal units.

The message conveyed by such figures is that Trinidad and Tobago, though with different figures in the driver's seat, will be rolling along, more or less at the same pace. The new budget promises, however, that the direction of travel will be different.

The 2010-2011 Budget confirms what was always expected. The signature projects, and proud initiatives of the Patrick Manning administration suffered defeat on May 24, and definitive repudiation thereafter.

Ms Nunez-Tesheira had reported action taken to prevent "negative repercussions (of) a disorderly collapse" of CL Financial. Mr Dookeran bluntly called that response "the CL Financial/Clico fiasco" and deemed it to have been "badly handled by the authorities from the start''.As of last June, the cost to the public purse of the Clico rescue effort had risen to $7.3 billion, with no end in sight. What Mr Dookeran proposed yesterday is itself a rescue of the 2009 rescue effort, but with a dire warning that "our nation cannot allow a mistake of this magnitude to go without severe consequences."

The budget thus promises a CL Financial/Clico clean-up along brisk lines apparently recommended by a "team of experts".

And so it goes with the abandonment of the Alutrint and the Rapid Rail projects. Likewise, the PNM's property tax legislation will be repealed; and no new taxes are planned.

For the People's Partnership, it looks like good politics. Whether the budget makes for good economics is entirely another matter.

China ‘Sweet Spot’ Is Returning for Investors

Bloomberg - 9 September 2010

Commentary by Stephen Green

To understand what is going on with China’s economy, just look at wheel loaders. They are tractors with a big shovel on the front to pick up and move earth or coal. Such machines are used to build roads and railways or to dig black stuff out of shallow mines.

China is, as we all know, an investment-heavy economy, so wheel-loader sales are a pretty good leading indicator: Companies only buy them if they plan to use one over the next 24 months. In July, 15,823 new loaders rolled out of the showrooms. That represented a 50 percent increase in seasonally adjusted sales compared with a year earlier.

This is hardly the kind of number that one would expect from an economy on the verge of collapse. Instead it is just one of many signs that Chinese gross domestic product is steadily expanding while inflationary pressures have moderated. In short, figures for August may well be what we have all been waiting for: a China sweet spot.

This year, officials in Beijing have been trying to cool an over-stimulated economy. And from March through June, it looked like the government was achieving just that. The bureaucrats approved fewer new infrastructure projects. The banks were given loan quotas and told that all the loans they had extended in 2009 were, yes, actually meant to be paid back.

Roaming Bears

In April, the State Council launched a spectacular attack on real-estate speculation. Steel prices fell, China-related equities sold off, and we even saw some hedge funds take aggressive short yuan positions in the non-deliverable forward space. The China bears were roaming.

Now there are indications the economy has come out of this four-month policy-induced slide. Apart from those wheel-loader sales, the Purchasing Managers Index stood at a seasonally adjusted 53.4 in August, steady on the previous month, according to Standard Chartered estimates. New orders reached 56.4, suggesting there is more growth to come.

Other signs of renewed dynamism include upticks in apartment and car sales. Floor space sold in 11 smaller cities is almost back to levels seen before the April measures.

The bears will cry that this is the calm before the storm. We know a wave of new apartments will hit the market in September to October. This will trigger price declines as developers compete to shift inventory. Property investment, making up about a third of all investment, should then slow.

U.S. Slowdown

At the same time, the recovery in the U.S. is probably over. Standard Chartered Plc predicts the U.S. economy will grow only 0.5 percent in the fourth quarter and in the first three months of next year. China will struggle to boost its exports to North America in this period by more than 3 percent.

This will, of course, drag on China’s growth. But with momentum looking healthy, there is no reason for major concern. There are some who still anticipate accelerating inflation. Yet manufactured-good prices are under control, while the cost of meat and oil is stable even though grain prices have soared.

As long as inflation is contained, the Chinese government may loosen policy by year’s end and approve more infrastructure projects. It will probably allow the banks to lend more freely. Bumper fiscal revenue piled up in the Finance Ministry’s bank account in the first half and is crying out to be spent, possibly on low-income housing, education and health care. Assuming that apartment prices drop in September to October, the ministry could also afford to loosen its housing measures a bit.

Chinese Stimulus

In short, we may well be in for a miniature re-run of the fourth quarter of 2008. Back then, a collapsing U.S. economy sent panic through most markets. The only dynamic place in the world with the policy dial turned toward stimulus was China.

Investors are presented with a call: Will the negative fallout from a decelerating U.S. wipe out all risk appetite? Or will investors bet again that there is enough right with China to support higher valuations on the commodities the nation consumes and on the companies operating there? With the Federal Reserve on hold and probably introducing more quantitative easing, it won’t take much to push money in this direction.

If this is the case, China will soon hit another of its sweet spots, with an economy that is neither too hot nor too cold. They don’t come along too often these days, so don’t let it go to waste.

U.S. Stock-Index Futures Rise Before Jobless Claims Report; Exxon Advances

Bloomberg - 9 September 2010

U.S. stock-index futures advanced, indicating the Standard & Poor’s 500 Index may rise for a second day, ahead of economic reports that may provide more evidence about the strength of the recovery.

Exxon Mobil Corp., the largest U.S. energy company, climbed 0.7 percent in German trading as oil rallied for a second day. Fuqi International Inc. slumped 11 percent after the Chinese jewelry maker said it received a subpoena from the Securities and Exchange Commission.

Futures on the S&P 500 expiring this month rose 0.4 percent to 1,103.2 at 10:42 a.m. in London after the benchmark gauge yesterday climbed 0.6 percent. Dow Jones Industrial Average futures advanced 0.3 percent to 10,426, while Nasdaq-100 Index futures gained 0.4 percent to 1,884.75.

“U.S. stocks look like they are going to carry on the momentum from yesterday, but everybody is waiting for the jobs numbers,” said Antony Gifford, a London-based manager at Henderson Global Investors, which oversees $87 billion. “I’m hopeful the numbers will be better than expectations, but I’m not holding my breath.”

The S&P 500 rose for the fifth time in six days yesterday as concern eased that Europe’s sovereign debt crisis will derail the global recovery. Still, the benchmark measure has fallen 9.7 percent from its 2010 high in April amid mounting evidence of a slowdown in the world’s largest economy. The drop pushed the index’s valuation to 11.9 times estimated profits in the next year, near the lowest since March 2009.

Jobless Claims

A Labor Department report set for 8:30 a.m. in Washington may show U.S. initial jobless claims declined by 2,000 to 470,000 last week, according to the median projection in a Bloomberg survey of economists. The level compares with a 465,000 average this year and shows employment is stagnating.

A separate report due at the same time from the Commerce Department may show the U.S. trade deficit narrowed in July as a slowing recovery prompted Americans to buy fewer goods from abroad, economists said.

The gap between imports and exports decreased to $47 billion from $49.9 billion the prior month, according to the median of 73 estimates in a Bloomberg News survey. Exxon rose 0.7 percent to $61.18 in Germany. Oil rose for a second day on speculation that a U.S. government report today may show a smaller increase in crude inventories than previously forecast.

U.S. crude stockpiles fell 7.31 million barrels last week, the industry-funded American Petroleum Institute said yesterday. A Bloomberg survey before today’s Energy Department report forecast an increase of 1 million barrels.

Fuqi International tumbled 11 percent to $5.60 in Germany. The company received subpoena from the SEC for failing to file periodic reports on time.

U.S. Competitiveness Slips, Switzerland Is Tops in WEF Study

Bloomberg - 9 September 2010

The U.S. slipped to fourth in the annual rankings of the world’s most-competitive economies amid a record budget deficit, while Switzerland retained the top spot, the World Economic Forum said.

The U.S. fell from second, a year after losing the No. 1 position for the first time since the Geneva-based organization began its current index in 2004. A budget shortfall of more than $1 trillion and public distrust of politicians were among the weaknesses in the world’s largest economy.

“A number of escalating weaknesses have lowered the U.S. ranking over the past two years,” the study of 139 nations showed. “A lack of macroeconomic stability continues to be the United States’ greatest area of weakness.”

Switzerland, home to companies including drugmaker Novartis AG and food company Nestle SA, was credited for its innovation and business culture.

America’s loss of competitiveness represents another obstacle to an economic recovery at the same time President Barack Obama asks Congress to take up proposals to spend $50 billion to repair and rebuild the U.S. transportation infrastructure and spur business investment and research.

“We want to put more Americans back to work rebuilding America -- our roads, railways, runways,” Obama said yesterday in a speech at Cuyahoga Community College West Campus in Parma, Ohio, near Cleveland. “If we want to compete in this global economy, we need to rebuild this vital infrastructure.”

Wasteful Spender

The U.S. ranked 87th for macroeconomic stability, and American businesses also increasingly questioned the government’s ability to avoid meddling in the private sector and viewed it as a wasteful spender, the forum said. In its index of financial market development, the U.S. fell to 31st from ninth in 2008.

Switzerland held the premier position in the survey thanks to ranking fourth in the world for its business sophistication and second for its ability to innovate, the WEF said.

Sweden climbed two slots to second, surpassing Singapore which remained third. Sweden was credited for its transportation and high level of ethical behavior, while Singapore won points for its lack of corruption and for the efficiency of its government.

Germany, Japan, Finland, the Netherlands, Denmark and Canada rounded out the top 10, the composition of which was unchanged from last year. Among the other Group of Seven economies, the U.K. and France each rose one spot to 12th and 15th respectively, while Italy stayed 48th.

Developing Nations

China led the way among the large developing economies, rising to 27th from 29th, while India dropped two slots to 51st. Brazil fell to 58th from 56th and Russia stayed 63rd. In Latin America, Chile was the highest-ranked country at 30th and South Africa, 54th, was the best performer in its region.

The report -- published each year by the organizers of the annual conference of business leaders, politicians and entertainers in Davos, Switzerland -- is based on 12 measures of competitiveness and an opinion poll of more than 13,500 business leaders. Chad was ranked bottom of all the countries studied.

U.K. Homebuilders Buying Land Below 2007 Peak Set to Profit

Bloomberg - 9 September 2010

U.K. homebuilders are profiting from cheap land purchases just as property prices start to fall.

Developers are able to buy land for as little as a third of peak 2007 prices, London-based Savills Plc estimates. Those savings will more than make up for any weakness in the property market in the next three years, according to a shareholder in the industry’s biggest company.

“Some investors feel like they’re buying houses and not operating businesses, which is a mistake,” Gary Channon, chief investment officer of Phoenix Asset Management Partners, said in an interview. “Right now, housebuilders are making hay.” Phoenix owns 5 percent of Barratt Developments Plc.

The Bloomberg EMEA Home Builders Index has declined 21 percent this year as the prospect of the biggest government spending reductions since World War II undermined confidence in the housing market because of likely job cuts. Britain’s benchmark FTSE 100 Index is little changed in that period.

Prices for abandoned or partially developed land, known as brownfield sites, in the southeast of England have dropped about 46 percent since the market’s peak, according to Savills. In the north of the country, values have fallen as much as 71 percent, the property broker said in a July 15 report.

Barratt agreed to buy land for about 527 million pounds ($816 million) in the 12 months through June, giving the company enough plots to build on for the next 5 1/2 years. Because of accounting rules, the latest margins are based on land purchases made three years ago, when prices were skyrocketing.

Wider Margins

Operating profit in the six months through June equaled 5.9 percent of sales compared with 1.8 percent a year earlier, Barratt said yesterday. Margins in the industry may average about 15 percent within three years, according to Chris Millington, an analyst at Numis Securities in London with a “buy” rating on the stock.

“Even with a fall of 10 percent in house prices, we’ll produce very creditable margins,” David Ritchie, Chief Executive of Bovis Homes Group Plc, said in an interview.

Bovis, the smallest publicly traded U.K. homebuilder by volume, increased its operating profit margin to 4.2 percent in the first half from minus 2.2 percent a year earlier. Persimmon Plc, the U.K.’s third-biggest homebuilder, said last month that its profit margin widened to 8 percent from 1.6 percent.

‘Unrealistic’ Forecasts

Not everyone’s optimistic about earnings prospects in the industry. Robin Hardy, an analyst at KBC Peel Hunt in London, said forecasts for improved profitability may be unrealistic.

“If house prices conspire against them, it could become increasingly difficult for these companies to rebuild margins,” he said in an interview. Hardy has “sell” ratings on Barratt, Persimmon and Bovis.

Home values fell the most in six months last month as an increase in properties on the market gave buyers more bargaining power, Nationwide Building Society said on Sept. 2.

A report published yesterday by Halifax, the mortgage lending division of Lloyds Banking Group Plc, said prices unexpectedly rose for a second month. Still, the pace of economic growth is unlikely to be sustained and prices will probably “remain static” this year, said Martin Ellis, an economist at Halifax.

“We see value in some of the housebuilders, based on our valuation of their land banks,” said Jeremy Cave, an analyst at MF Global with a “sell” rating on the shares. “But I can’t see the economic drivers that will result in the sector performing very well for the next couple of years.”

No ‘Seasonable Blip’

Hometrack Ltd. said on Aug. 30 that there is a growing weakness in demand for residential properties that’s more than just a “seasonal blip.” The market probably won’t recover until 2012, Savills said in a report last month, a year later than the London-based property broker predicted in November.

Prices will drop 2.5 percent this year and 1 percent in 2011, Savills said, as potential homebuyers find it harder to borrow money because of rising unemployment and tax increases stemming from government efforts to cut the deficit.

“I don’t subscribe to the double-dip theories,” Mike Farley, Persimmon’s chief executive officer, said in an interview. “There is no reason to expect any change for the worse in the mortgage market.”

Prices for new homes are less volatile than the market as a whole because the builders set uniform prices for each type of property in an individual development, Channon said. In the secondary market, similar houses on the same street can have widely different prices.

Channon, 42, traded derivatives at banks including Goldman Sachs Group Inc. before helping to form Phoenix in 1998.

The asset manager has owned more than 3 percent of Barratt since May 2008. It doesn’t own shares of any other homebuilders.

While home sales may not return to peak levels anytime soon, investors shouldn’t write off the builders, Channon said.

“They’ll get through this and show that they’re actually very profitable,” he said.

China's Stocks Decline Most in 2 Weeks on Concern About New Property Curbs

Bloomberg - 9 September 2010

China’s stocks fell the most in two weeks as rising property prices boosted concern the government will deepen measures to curb speculation and reports of a probe into rubber futures fuelled a selloff in commodity prices.

China Vanke Co. and Industrial & Commercial Bank of China Ltd. paced declines for developers and banks as Jones Lang LaSalle Inc. said the government may further tighten anti- speculation measures. Jiangxi Copper Co. dropped the most in three weeks as metal prices slid after the Securities Times reported that regulators were investigating large positions in natural rubber futures. China Shenhua Energy Co. slid 2.1 percent as domestic coal prices fell the most in five months.

“It remains a big possibility that new tightening measures in the property market will come out as the pickup in prices is a bad sign for the government,” said Zhang Kun, a strategist at Guotai Junan Securities Co. in Shanghai.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 38.94, or 1.4 percent, to 2,656.35 at the 3 p.m. close, the biggest decline since Aug. 25. The CSI 300 Index fell 1.8 percent to 2,926.46. The market’s losses accelerated in the afternoon on speculation inflation may have exceeded economists’ estimates in August, spurring concern about higher interest rates. The data will be released Sept. 11.

The Shanghai measure plunged 27 percent in the first half of the year as the government increased down-payment requirements on home sales and ordered banks to set aside more deposits as reserves to curb surging property prices. The gauge has rebounded 12 percent from this year’s low on July 5, paring this year’s loss to 19 percent, as investors speculated the government would ease lending curbs to spur growth.

Property Stocks

A gauge of property stocks fell 2.4 percent for the steepest decline in the Shanghai Composite, adding to the 27 percent drop this year. The 21st Century Business Herald reported yesterday China may introduce a second-round of measures to curb the property market, including stopping loans to real estate developers and compulsory lowering of home prices.

Vanke, the nation’s biggest listed property developer, dropped 3.4 percent to 8.28 yuan. Poly Real Estate Group Co., the second largest, fell 4.1 percent to 11.32 yuan. ICBC, the nation’s biggest listed lender, slipped 0.7 percent to 4.06 yuan. China Construction Bank Corp., the second largest, lost 0.6 percent to 4.65 yuan.

The government is determined to see a decline in the nation’s residential property prices and may increase mortgage rates and cash down payments for home purchases if residential prices don’t decline, said Colin Dyer, Chief Executive Officer with Jones Lang LaSalle Inc. Soufun data show a 12.3 percent monthly appreciation for Beijing homes in August and gains of almost 7 percent in Shenzhen and 6.6 percent in Guangzhou.

Trade Frictions

The recent increase in property prices and transaction volumes is a short-term fluctuation, the Shanghai Securities News reported, citing central bank adviser Xia Bin. The nation’s tightening policies for real estate, local government financing vehicles and its promotion of energy savings won’t change in the second half, Xia was cited as saying.

The customs office may tomorrow say China’s trade surplus topped $20 billion for a third month in August in a report, risking American lawmakers’ calls for protection from imports.

Exports probably exceeded imports by $26.9 billion, compared with $15.7 billion in the same month a year earlier, according to the median of 34 forecasts in a Bloomberg News survey. Shipments abroad gained 35 percent and imports grew 27.5 percent, according to the survey.

“The greatest risk to the global economy in the coming years is U.S.-China trade friction,” Donald Straszheim, director of China research at International Strategy & Investment, said in a note to clients.

Commodity Declines

Other Chinese data due on Sept. 11 may show industrial- output growth weakened in August, while inflation accelerated to 3.5 percent, the fastest pace in almost two years, partly because of rising food costs. The inflation rate may have risen to 3.7 percent in August, UBS AG said Sept. 2.

China, which hasn’t raised interest rates since 2007, may start increasing borrowing costs from the fourth quarter because of accelerating inflation, large wage increases and “loose” liquidity conditions, RBC Capital Markets said after the release of July inflation data on Aug. 11.

Commodity prices in China declined today on market rumors that regulators were investigating large positions in natural rubber futures, the Securities Times said on its website, citing people it didn’t identify. Rubber prices dropped in Shanghai and the declines spilled over into other commodities including copper, aluminum and zinc, it said.

Coal Drops

Jiangxi Copper, China’s biggest producer of the metal, dropped 1.7 percent to 33.81 yuan, the most since Aug. 20. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal, slid 3.8 percent to 10.29 yuan. Zhuzhou Smelter Group Co., China’s biggest producer of refined zinc, retreated 3.4 percent to 11.26 yuan.

Shenhua, the nation’s largest coal producer, slid 2.1 percent to 23.72 yuan. Datong Coal Industry Co., the third largest, retreated 1.9 percent to 16.41 yuan. Yanzhou Coal Mining Co., the listed unit of China’s fourth-biggest coal miner, lost 2.4 percent to 18.52 yuan.

The price of coal dropped 1.4 percent to 710 yuan to 720 yuan a metric ton from a week earlier, data from the China Coal Transport and Distribution Association showed.

Drugmakers Gain

Chinese drugmakers rose after Xinhua News reported deaths in China’s central Henan province from tick-borne disease and a Health Ministry alert against a drug-resistant bacteria.

Shandong Lukang Pharmaceutical Co., a Chinese antibiotic maker, jumped by the 10 percent daily limit to 10.18 yuan. A measure of healthcare-related stocks was the only gainer among the 10 industry groups on the CSI 300.

“The tick deaths certainly provided a trigger for today’s gains in healthcare stocks, which may benefit from increased demand,” said Liu Bin, an analyst at Guoyuan Securities Co. in Shanghai.

Japan Plans to Seek Discussions With China on Bond Purchases

Bloomberg - 9 September 2010

Japan’s government said it will seek discussions with China over the nation’s record purchases of Japanese bonds as an appreciating yen threatens to undermine an economic recovery.

Japan is closely watching the transactions and will seek to maintain close contact with Chinese authorities on the issue, Vice Finance Minister Naoki Minezaki told lawmakers in Tokyo. Finance Minister Yoshihiko Noda suggested at the same hearing that it’s inappropriate for China to buy Japan’s bonds without a reciprocal ability for Japanese to invest in China’s market.

A surge in the yen to a 15-year high against the dollar has prompted Japanese companies to warn their overseas earnings are under threat, with almost half of manufacturers seeing a hit to sales, one survey showed last week. China, by contrast, has kept the yuan’s gain to less than 1 percent since June, in the process accumulating foreign exchange that it needs to invest.

“I feel strange that China can buy Japanese government bonds while Japan can’t buy theirs,” Noda said in answering lawmakers’ questions at a hearing on the economy today. “There is room to discuss that” with Chinese officials, he said.

China bought more Japanese bonds than it sold for a seventh straight month in July, acquiring a net 583.1 billion yen ($6.97 billion) and heading for a record annual increase, Japan’s government reported yesterday.

China’s Needs

China said its purchases of foreign bonds including those of Japan are based on its needs at any given time.

“Our management always adheres to security, liquidity and good value,” Jiang Yu, a spokeswoman at the Foreign Ministry, told reporters in Beijing today. “We will decide whether or not to buy one country’s bonds according to our own needs.”

While Japan has sought to boost foreign purchases of its government bonds, such a shift would erode its advantage over countries such as Greece, which have seen bond yields soar as external investors fled. Less than 10 percent of Japanese debt is held by foreigners.

China’s purchases are mainly of short-term debt, suggesting officials are making a “tactical” decision “rather than a structural shift in their reserve allocation,” said Masafumi Yamamoto, chief currency strategist at Barclays Bank Plc in Tokyo. “Once the trend turns to a weaker yen, that investment could be withdrawn swiftly.”

The yen has soared 9 percent against the dollar in the past three months, posing a risk to the export gains that have propelled Japan’s rebound from its deepest postwar recession. Noda today said that his government is studying the effectiveness of intervention in the foreign-exchange market, something Japan hasn’t done since 2004.

Highest Since 1995

Against the dollar, the yen traded at 83.66 at 3 p.m. in Tokyo, after it yesterday reached 83.35, the highest level since 1995.

China, which possesses the world’s largest foreign-exchange reserves at $2.45 trillion in June, has sought to diversify its holdings after already becoming the largest overseas investor in U.S. Treasuries. Japan has the second-largest reserves total, at $1.01 trillion, and is the No. 2 foreign owner of U.S. debt.

At the same time, Premier Wen Jiabao’s government has begun to open up access to China’s own debt market. The PBOC said on Aug. 17 it would let overseas financial institutions invest in the nation’s bond market to promote greater use of the yuan in global trade and finance.

Reduce Reliance

The Hong Kong Monetary Authority said last month it’s investigating details of the program. China approved use of the yuan to settle cross-border trade with Hong Kong in June 2009, part of a drive to reduce reliance on the U.S. dollar. The popularity of that program was limited by the lack of investments available in the currency.

Bank Negara Malaysia, which in 2009 won a QFII, or qualified foreign institutional investor, license to invest in Chinese stocks and bonds, hasn’t commented on whether it intends to apply to invest in yuan bonds.

Overseas banks and central banks must first apply for investment quotas on the interbank market, the People’s Bank of China said on Aug. 17. Foreign institutions should also disclose funding sources and investing plans, it said.

The comments by Japanese officials today indicate communication gaps between Asia’s two largest economies even as their trade links deepen, with Noda reiterating he doesn’t understand why China is accumulating the securities.

Tensions have risen this week as Japan yesterday arrested a Chinese boat captain for colliding with one of its Coast Guard vessels near a chain of islands claimed by both countries. China lodged a formal complaint demanding the captain’s release.

Peru May Raise Rate to 3% as Surging GDP Growth Threatens Inflation Target

Bloomberg - 9 September 2010

Peru’s central bank may raise its benchmark lending rate today for a fifth straight month as the fastest economic expansion since 2008 threatens to accelerate inflation beyond the central bank’s target.

The seven-member board will probably increase the bank’s reference rate by a half-point to 3 percent from 2.5 percent, according to all 14 economists surveyed by Bloomberg. The board will announce its decision after 6 p.m. New York time.

Concern that growth in South America’s sixth-biggest economy may become unsustainable prompted the bank to raise the benchmark rate by a greater-than-expected half-point last month. Policy makers will probably maintain the current pace of rate increases as rising consumer and investor confidence, an improving labor market and credit growth threatens to send inflation above the bank’s 1 percent to 3 percent target range, said Alberto Ramos, an economist at Goldman Sachs Group Inc.

“The economy has gained a lot of momentum and no longer needs any level of monetary stimulus,” Ramos said in a phone interview from New York. “It’s likely inflation will exceed 3 percent by the end of the year.”

Inflation, which accelerated at the fastest annual pace in more than a year in August, is a concern for policy makers, central bank Governor Julio Velarde said in a Sept. 2 interview. Higher food costs caused consumer prices to rise 2.31 percent from a year earlier and 0.27 percent from July, a level Velarde described as “a little high.”

GDP Surge

After the economy expanded 0.9 percent in 2009, the slowest pace since 2001, increased business spending and rising inflows have made Peru the fastest growing among Latin America’s major economies. Gross domestic product jumped 10.1 percent in the second quarter, including an 11.9 percent expansion in June.

The economy will probably grow 7.5 percent to 8 percent in 2010, Velarde told lawmakers this week. The bank previously forecast 6.6 percent growth.

“The bank has been adjusting the interest rate because with this level of private investment we don’t believe an expansive monetary policy is necessary,” Velarde said. “We’re moving toward neutral terrain.”

‘Appropriate’ Pace

Economists expect GDP growth of 7.5 percent in 2010 and annual inflation of 2.9 percent, according to a central bank survey released Sept. 3. They previously forecast 6.8 percent growth and 2.5 percent inflation.

Bank lending rose 19 percent from a year earlier to a record $35.9 billion through July on rising consumer spending and private investment. Electricity output, an indicator of manufacturing activity, increased 12 percent. Cement demand grew 13 percent in July, propelled by the construction of malls, homes and highways as well as mining and electricity projects.

Investment

Companies may invest $12 billion next year, in projects including Xstrata Plc’s $4.2 billion Las Bambas copper mine, the country’s largest ever investment project, Finance Minister Mercedes Araoz said Aug. 31.

“We’re seeing strong demand from export packaging, printing, consumer goods industries, and a real big demand for paint for apartment blocks,” Peter Anders, general manager of Quimica Anders SAC, a distributor of plastics and resins, said in an interview in Lima.

Peru was the second Latin American country after Brazil to raise borrowing costs in 2010. Rising borrowing costs have spurred overseas demand for the sol, which strengthened to a two-year high this week. The currency has appreciated 3.4 percent against the U.S. dollar in 2010, the eighth-best performance among 25 emerging market currencies tracked by Bloomberg.

Sol, Assets

The central bank has purchased $7.1 billion this year to slow gains in the sol, helping to boost foreign currency reserves to a record $40.2 billion.

In a bid to curb demand for the currency, policy makers also doubled the marginal reserve requirement for foreign banks this month to 120 percent of their short-term sol deposits.

The yield on Peru’s benchmark 8.6 percent sol-denominated bond due in 2017 has declined 84 basis points since June 8, according to Citigroup Inc.’s local unit, reflecting increased demand for the country’s assets.

Five-year credit-default swaps tied to Peru’s bonds and used to hedge against losses traded at 1.13 percentage points yesterday, the lowest in Latin America after Chile, and 10 basis points lower than Brazil, according to data compiled by CMA DataVision.

The bank may make further reserve requirement adjustments to align dollar rates with those for soles, and at the same time slow gains in the currency, Mario Guerrero, a Scotiabank Peru economist, wrote in a Sept. 6 report.

European Stocks Extend Four-Month High as Automakers Advance

Bloomberg - 9 September 2010

European stocks rose for the fourth time in five days, extending a four-month high, as a rally in automakers outweighed declines by retailers. U.S. index futures and Asian shares gained.

Daimler AG paced a measure of carmakers to the highest level since October 2008 as Credit Suisse Group AG lifted its earnings estimates. ARM Holdings Plc surged 5 percent after unveiling a new processor. Home Retail Group Plc and HMV Plc led British retail shares lower.

The Stoxx Europe 600 Index gained 0.5 percent to 263.62 at 12:05 p.m. in London, having earlier lost as much as 0.4 percent. The measure has rallied 14 percent from this year’s low in May as concern eased that efforts by European countries to tame their budget deficits would curb economic growth.

“Within the developed world, we maintain our current preference for Europe over the U.S. and Japan,” said Bill O’Neill, Merrill Lynch Wealth Management’s chief investment officer for Europe, the Middle East and Africa, where he helps manage about $1.4 trillion. “The economic outlook for Europe is more favorable than the U.S. and Europe also offers higher yield and greater sales exposure to emerging economies.”

Standard & Poor’s 500 Index futures expiring this month advanced 0.4 percent today. The MSCI Asia Pacific Index climbed 0.9 percent as Australian employers added more workers than estimated.

U.S. Economy

The Federal Reserve said after the close of European markets yesterday that the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks. Five regional banks reported “economic growth at a moderate pace” and two pointed to “positive developments or net improvements.” The remaining five banks said conditions were mixed or decelerating.

A Labor Department report at 8:30 a.m. in Washington may show U.S. initial jobless claims declined by 2,000 to 470,000 last week, according to the median projection in a Bloomberg survey of economists. The level compares with a 465,000 average this year and shows employment is stagnating.

The global economic recovery is proving slower than projected and policy makers may need to extend or bolster stimulus programs to support it, the Organization for Economic Cooperation and Development said today.

BOE Rates

In the U.K., the Bank of England maintained its emergency bond-purchase plan and left its benchmark interest rate at a record low. The nine-member Monetary Policy Committee held the target for bond holdings at 200 billion pounds ($308 billion), as forecast by all 31 economists in a Bloomberg News survey, and kept the interest rate at 0.5 percent.

Daimler gained 2.1 percent to 42.88 euros, leading a measure of automakers to the largest increase among 19 industry groups in the Stoxx 600. The company is likely to increase its full-year forecast for earnings before interest and taxes to more than 7 billion euros ($8.9 billion) from 6 billion euros currently, Credit Suisse analyst Arndt Ellinghorst wrote.

Fiat SpA, Italy’s biggest automaker, gained 2.3 percent to 10.02 euros as JPMorgan Chase & Co. lifted its recommendation to “neutral” from “underweight.”

PSA Peugeot Citroen and Renault SA, France’s largest automakers, rallied 3.6 percent to 22.45 euros and 3.1 percent to 35.25 euros, respectively.

ARM Advances

ARM gained 5 percent to 406.9 pence as it unveiled a new processor. This “new product announcement is a potential game changer,” Aviate Global analysts wrote in an email to clients today. “It offers five times the performance of today’s best in class smartphone processors.”

Lloyds Banking Group Plc advanced 2.7 percent to 74.27 pence after UBS AG said the lender is “overcapitalised” and may start to return cash to shareholders. The broker has a “buy” recommendation on the shares.

Home Retail, the U.K. owner of Argos catalog stores and the Homebase home-improvement chain, sank 2.9 percent to 214.9 pence after saying it expects full-year earnings to be at the “bottom half” of analysts’ estimates after sales slipped amid a “challenging” market.

HMV slumped 10 percent to 59.75 pence, the most since December 2008, as the music and DVD retailer said sales at outlets open at least a year in the U.K. and Ireland fell 15 percent in the 19 weeks ended Sept. 4. The retailer also said its finance director, Neil Bright, will leave the company in December to join Holidaybreak Plc.

Axa, Aveva Slide

Axa SA dropped 1.5 percent to 12.82 euros as Australian regulators blocked National Australia Bank Ltd.’s A$13.3 billion ($12.2 billion) takeover of Axa Asia Pacific Holdings Ltd. for a second time.

Aveva Group Plc, a U.K. maker of engineering software, lost 4.7 percent to 1,411 pence after UBS downgraded to “sell” from “neutral.”

Vestas Wind Systems A/S tumbled 6 percent to 204.9 kroner, for the biggest decline on the Stoxx 600, after Danske Bank A/S reduced its recommendation on the world’s biggest maker of wind turbines to “reduce” from “buy.”

Separately, Michael Holm, a spokesman for the company, said a portion of the blade on the first prototype of its V112 wind turbine broke off late yesterday in Denmark.

Mystery eye problem at dairy show caused by cow urine

Reuters - 8 September 2010

The cause of a mystery eye ailment that struck about 50 visitors to a dairy pavilion at an agricultural show in Australia has been traced -- to cow urine.

The Royal Adelaide Show had to close its dairy cattle pavilion after an rising number of people reported sore eyes when visiting the judging marquee.

Officials from the South Australia (SA) Health Department were called in to investigate and found the cause of the outbreak was stagnant cow urine.

Show spokeswoman Michelle Hocking told local reporters that a recent spell of wet weather may have created conditions within the pavilion where ammonia from cow urine was released.

About 30 people were treated on site by volunteers from the first aid group St. John Ambulance but about 20 went to the emergency department of the Royal Adelaide Hospital.

"From our institutional memory we can't recall an incident of this nature before," Peter Jackson from the St. John Ambulance told Reuters.