It’s Time To Break Up Massive Banks !!!

The banks are blackmailing us, Sigmar Gabriel, the head of the Germany’s center-left Social Democratic Party wrote in a position paper for his party. But with the fuss over Gabriel’s partly justified and partly exaggerated claim, one hopes that the most important words spoken last week will not get lost in the noise. Those words were from Sandy Weill, who for eight years was decisive figure at Citibank, major American bank. This is same Sandy Weill who forged a financial empire and fought against just about every regulation has been thrown at banking sector. His message today? Split up massive banks. (source: Georg Mascolo – Der Spiegel – 01/08/2012) 

What Weill is calling for is a return to rules that already once served the world well. They were conceived during the 1930s financial crisis and then disposed of during the liberalization frenzy of the 1990s. The Glass-Steagall Act is the name of the law that divided the banking world into two categories. The first is banks that are dedicated to the classic business of managing customer deposits and issuing loans making them systemically relevant. These banks must be protected and, in an emergency, rescued by the state. The second is investment banks, which too often have no problem at all with any risky business that comes its way as long as it promises to deliver profits. Weill believes that if things go awry at the investment banks, no one should be too quick to bail them out. These banks would be smaller and no longer the financial Goliaths that they are today.

What is deemed too big to fail, would be deemed too large to even be allowed to exist in the future. America, as well as the entire financial world, is discussing Weill’s proposal. And not without reason, either after all, US banker was one of the people who pushed Bill Clinton in 1999 to repeal Glass-Steagall. He even has a plaque in his office celebrating himself as “The Shatterer of Glass-Steagall.” The proposal still doesn’t have enough backing, despite support in many quarters including those in a number of Germany’s top boardrooms, such as reinsurance giant Munich Re, whose chairman, Nikolaus von Bromhard, also wants to eliminate the design flaw. SPD’s Sigmar Gabriel wants to as well. Objections have been raised from all sides (including the editorial staff of SPIEGEL’s business and economics desk). They argue, for example, that the case of Lehman Brothers bankruptcy shows that nothing can be radically changed. Eventually, the investment bank, whose collapse triggered the financial crisis, should have been rescued in some way or other. That may be true, but only under the current system. If a strict division of banks had been in place, it is highly unlikely that Lehman would have been able to drag entire financial world along with it into the abyss. And, yes, such a division would create problems for an institution like Germany’s Deutsche Bank, which as both investment and commercial bank would be forced to pursue a new business model. Still, advantages by far outweigh disadvantages. So far, any halfway sensible reform of the financial world has failed because of opposition from Wall Street, the City of London or political forces like Germany’s business-friendly Free Democratic Party. Politicians still believe they can honor their pledge to stop the kind of banking excesses that led to the crisis, but so far nothing has happened. It may be true that old dual banking rules wouldn’t be able to function today as they were written decades ago, but they could be adjusted to fit with the current financial world. It would require craftsmanship, but it could and must happen quickly. Incidentally, Glass-Steagall Act was only made possible because a Senate committee had exposed the dumb, risky and at times criminal behavior of banks in the run-up to Great Depression. The outrage paved the way for the law. Sometimes history repeats itself. Glass-Steagall served the world well for decades and it would have been better if it had never been repealed. It is high time to correct this error.

Brasil y Argentina acuerdan reducir déficit comercial automotor y afianzar integración

Débora Giorgi y Fernando Pimentel, acordaron trabajar de manera conjunta para reducir déficit que Argentina registra en comercio automotor, en especial en sector autopartes, y avanzar en integración productiva entre ambas naciones. Durante el encuentro celebrado en Brasilia, en paralelo a la Cumbre de Presidentes MERCOSUR en que se oficializó el ingreso de Venezuela al bloque regional, ratificaron además que en agosto se realizará una reunión entre los equipos técnicos de ambos ministerios, mientras que en la primera quincena de septiembre se volverán a encontrar Giorgi y Pimentel. La intención es sustituir importaciones que provienen de países extrazona por un monto total de 37.000 millones de dólares. (Fuente: Agencia Télam – 01/08/2012)

Ambos funcionarios acordaron avanzar en la negociación de un Nuevo Protocolo Automotriz Bilateral que vence en Junio 2013. El Ministerio de Industria informó que durante el encuentro, “Argentina propuso fortalecer al sector autopartista bilateral, fijando reglas más exigentes de contenido regional, que impliquen desarrollos de nuevas tecnologías para la fabricación de piezas hasta ahora no producidas”, y que los contenidos de ambos tengan “trato nacional”. “El objetivo es sustituir 37.000 millones de dólares de importaciones de autopartes que se registraron en 2011, extrazona por parte de Argentina y Brasil”. En este sentido, Georgi puntualizó que “se analizarán las situaciones por empresa, buscando acciones coordinadas bilateralmente que no sesguen las inversiones” y “se revisarán las protecciones efectivas de las cadenas de produccion de autopartes sensibles”. Es por ello que ambos funcionarios acordaron avanzar en la negociación de un Nuevo Protocolo que ya vence en junio del 2013. El nuevo protocolo deberá incorporar no solo elementos de administración de comercio sino alcanzar temas industriales, fijando pautas sobre la inversión, la producción y el contenido regional. Para este objetivo se acordó conformar un equipo técnico que se reunirá hacia fines de agosto. Giorgi y Pimentel acordaron avanzar en un trabajo con empresas globales radicadas en ambos países para potenciar la integración productiva en sus negocios. Asimismo, se analizarán aquellos productos finales e insumos que son producidos en ambos países pero no son comprados por estas firmas. “Debemos afianzar la competitividad de nuestros productos, peleando contra competencia desleal, con más políticas públicas, a partir del desarrollo de proveedores locales”. En cuanto a pymes, coincidió en la necesidad de seguir un trabajo conjunto para la integración productiva en este segmento. Argentina propuso trabajar con las grandes empresas globales que actúan en ambos países para reorientar importaciones que realizan desde terceros destinos, desarrollar proveedores locales, construir plataforma exportadora. Se abordaron cuestiones referidas a compras gubernamentales. Argentina propuso trabajar en sectores puntuales en los que existen posibilidades de acceso para productos nacionales. Brasil, por su parte, se comprometió a evaluar las propuestas, en particular sobre la demanda potencial en sector naval. Del encuentro participaron la jefa de Gabinete de la cartera, Andrea Bovris, y secretario de Planeamiento Estratégico, Horacio Cepeda. Estuvieron el embajador en Argentina, Enio Cordeiro, y las secretarias de Desarrollo Productivo, Heloisa Menezes y de Comercio Exterior, Tatiana Prazeres.

MERCOSUR acoge a Venezuela y se convierte en la quinta economía mundial

Venezuela ingresó oficialmente como miembro pleno del MERCOSUR en cumbre extraordinaria a la que asistieron los presidentes de ese país, Argentina, Brasil y Uruguay, en la que se puso de relieve el peso económico del nuevo socio. “MERCOSUR se convierte en la quinta economía mundial”, con un Producto Interno Bruto de 3,3 billones de dólares, se consolida como una “potencia” en las áreas de energía y producción de alimentos. Dilma Rousseff, cuyo país ejerce durante este semestre la presidencia rotativa, dio “calurosa bienvenida” a “todo el pueblo venezolano” al MERCOSUR, que pasa a ser una zona económica con 270 millones de habitantes, que suponen 70% de toda la población suramericana. Venezuela mostró su peso económico en MERCOSUR al suscribir en Brasilia, antes de la cumbre extraordinaria, un contrato para la compra de 6 aviones del modelo E190 del fabricante brasileño Embraer que serán destinados a la aerolínea Conviasa, con una opción de compra de otras 14 aeronaves. El contrato tiene un valor de 270 millones de dólares y puede alcanzar 900 millones en caso que Venezuela confirme todas las opciones de compra. Ante sus homólogos de Argentina, Cristina Fernández; Uruguay, José Mujica, y Venezuela, Hugo Chávez, Rousseff invitó a “los sectores empresariales de toda la región a participar activamente en este momento”, aprovechar nuevos espacios para comercio e inversiones que se pueden abrir con la ampliación del bloque. Destacó en particular que Venezuela “tiene las mayores reservas probadas de petróleo del mundo”, incidió en que debe “avanzar en su industrialización”, y sostuvo que eso representa “nuevo universo de oportunidades” para sus socios del MERCOSUR. Chávez admitió tácitamente esa realidad y declaró que el ingreso es “la más grande oportunidad histórica en 200 años en Venezuela, un país que, por modelos de desarrollo que le habían sido impuestos, estaba condenado antes al subdesarrollo, atraso y a la miseria”. El líder bolivariano subrayó el “interés” de su país “en salir de ese modelo e impulsar un nuevo modelo agrícola”, para lo cual dijo que Venezuela tiene “más de 30 millones de hectáreas” de tierra disponibles. “El MERCOSUR es sin duda la locomotora más grande para garantizar nuestra independencia y acelerar nuestro desarrollo”, dijo Chávez. Fernández dedicó la mayor parte de su discurso a criticar a los países desarrollados por su manejo de la actual crisis financiera, pero también valoró las “potencialidades” que cobra MERCOSUR con el ingreso de Venezuela, que consideró una respuesta a quienes dudan del futuro del bloque. A su turno, Mujica coincidió con Chávez en que “nunca a lo largo de la historia” Suramérica tuvo “una oportunidad como ésta”, afirmó que “es ahora o nunca”, aunque recordó que la región sigue siendo “una de las más ricas y una de la más desiguales del mundo”. Paraguay, uno de los cuatro fundadores del MERCOSUR, fue el único ausente debido a la suspensión que le impusieron los otros tres socios el pasado 29 de junio en la cumbre de Mendoza a raíz de la destitución por el Congreso del presidente Fernando Lugo. En los discursos la única alusión a la situación de Paraguay la hizo Rousseff, quien volvió a defender esa decisión, que atribuyó a un “inequívoco compromiso del MERCOSUR con la democracia”. Según Dilma, “la perspectiva es que Paraguay normalice su situación interna y recupere todos sus derechos”. El Congreso de Paraguay era el único que no había aprobado la incorporación plena de Venezuela, país que tiene 4 años de plazo para adaptarse a toda la normativa comercial del MERCOSUR. (Agencia EFE – 01/08/2012)

2nd Day of Power Failures Cripples Wide Swath of India

(…..) India’s power sector has long been considered a hindrance to the country’s economic prospects. Part of the problem is access; more than 300 million people in India still have no electricity. But India’s power generation capacity has not kept pace with growth. Demand outpaced supply by 10.2 percent in March, government statistics show. In recent years, India’s government has set ambitious goals for expanding power generation capacity, while new plants have come online, more have faced delays, because of bureaucratic entanglements, environmental concerns or other problems. India depends on coal for more than half of its power generation, but production has barely increased, with some power plants idled for lack of coal. Many analysts have long predicted that India’s populist politics were creating an untenable situation in the power sector because government is selling electricity at prices lower than the cost of generating it. India’s public distribution utilities are now in deep debt, which makes it harder to encourage investment in the power sector. Tuesday’s blackout struck some analysts as evidence of a system in distress. “It’s like a day of reckoning coming nearer,” said Rajiv Kumar, secretary general of Federation of Indian Chambers of Commerce and Industry. India’s major business centers of Mumbai, Bangalore and Hyderabad were not affected by the blackout, since they are in southern and central parts of country that proved to be immune from failure. Phillip F. Schewe, a specialist in electricity and author of the book “The Grid: A Journey Through the Heart of Our Electrified World,” said the demand pressures on India’s system could set off the sort of breakdown that occurred on Tuesday. In cases when demand outstrips the power supply, the system of circuit breakers must be activated, often manually, to reduce some of the load in what are known as rolling blackouts. But if workers cannot trip those breakers fast enough, Schewe said, a failure could cascade into a much larger blackout. Some experts attributed excessive demand in part to the lower levels of monsoon rains falling on India this year, which have reduced capacity of hydroelectric power and forced many farmers to turn to electric pumps to draw water from underground. It was unclear how long it would take to restore power fully in areas still lacking it or if the problem would recur this week. In Lucknow, capital of India’s most populous state, Uttar Pradesh, Dr. Sachendra Raj said his private hospital was using two large rented generators to power air-conditioners and dialysis machines. “It’s a very common problem,” he said of power failures. “It’s part and parcel of our daily life.” Meanwhile, about 200 coal miners in the state of West Bengal were stranded for several hours in underground mines when the electricity to the elevators was shut off, according to reports in the Indian news media. “We are waiting for the restoration of power to bring them up through the lifts, but there is no threat to their lives or any reason to panic,” said Nildari Roy, an official at Eastern Coalfields Ltd., mine’s operator. Most of the miners had been rescued by late evening, news agencies said. Ramachandra Guha, an Indian historian, said the blackout was only latest evidence of government dysfunction. On Monday, he noted, 32 people died in a train fire in Tamil Nadu State, a reminder that the nation’s railway system, like the electrical system, is underfinanced and in dire need of upgrading. “India needs to stop strutting on the world stage like it’s a great power,” Mr. Guha said, “and focus on its deep problems within.”

Link: http://www.nytimes.com/2012/08/01/world/asia/power-outages-hit-600-million-in-india.html