Green with worry
Published: May 22 2009 19:11 | Last updated: May 22 2009 19:11
In most countries, a bank crisis would drive investors to flee. The US is different. When a financial storm struck Wall Street, traders sought shelter in the dollar. As confidence has returned, however, the allure of holding US assets is fading. Investors want yields, and many are now growing nervous about the future of the US dollar.
In the wake of the Lehman Brothers implosion, the equities market slumped. Terrified investors had no idea which grand old institution might next be hit by ricochets, or whether the whole system might collapse under its own weight. The S&P 500 index almost halved. Vix, a measure of volatility in that index, rocketed. Safe, certain and liquid assets were in high demand.
The dollar, shepherded by a big triple-A government, was seen as a safe haven. Scared investors looking to shed risk scrambled to hold the greenback, speeding the currency’s rise. As the stock market troughed in March, the dollar peaked – 15 per cent higher on a trade-weighted basis than it was on Lehman Brothers’ last working day.
Since then, investors’ nerves have been soothed; equities are up by 31 per cent, and the Vix, while still high, is down from its summits. The dollar’s movements reflect that pattern. While still more expensive than in September, the currency plumbed a record low for the year this week.
On the basis of how much goods and services actually cost, the dollar now looks too weak against the euro and the yen. Against sterling, its current position looks roughly right. It is perhaps unsurprising that investors are treating the US and UK alike. Both are beached financial superpowers and are pursuing similar policies.
The UK and the US are easing monetary policy aggressively while running cavernous fiscal deficits. The US has long exploited its position as the supplier of the world’s reserve currency, running up enormous debts which no other government could sustain. But there may be a limit to what even the US can get away with.
This week, UK sovereign debt was placed on negative outlook by Standard & Poor’s, partly because the ratings agency feared the British debt ratio would breach 100 per cent of national output. If this seems likely, the UK might lose its triple-A credit rating. But, if S&P were to apply the same criteria, the US also faces the threat of a downgrade.
Indeed, the US debt stock is higher and its deficits will remain larger for longer. Owing to the strictures of the US political system, the executive will find it harder to ram through any kind of emergency fiscal retrenchment. It is not obvious from the bond markets, where prices do not indicate the fear of runaway inflation. But be warned: currency traders are pricing in the tail risk that the US will be forced to resort to the printing press.
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China stuck in ‘dollar trap’
By Jamil Anderlini in Beijing
Published: May 24 2009 23:30 | Last updated: May 24 2009 23:30
China’s official foreign exchange manager is still buying record amounts of US government bonds, in spite of Beijing’s increasingly vocal fear of a dollar collapse, according to officials and analysts.
Senior Chinese officials, including Wen Jiabao, the premier, have repeatedly signalled concern that US policies could lead to a collapse in the dollar and global inflation.
But Chinese and western officials in Beijing said China was caught in a “dollar trap” and has little choice but to keep pouring the bulk of its growing reserves into the US Treasury, which remains the only market big enough and liquid enough to support its huge purchases.
In March alone, China’s direct holdings of US Treasury securities rose $23.7bn to reach a new record of $768bn, according to preliminary US data, allowing China to retain its title as the biggest creditor of the US government.
“Because of the sheer size of its reserves Safe [China’s State Administration of Foreign Exchange] will immediately disrupt any other market it tries to shift into in a big way and could also collapse the value of its existing reserves if it sold too many dollars,” said a western official, who spoke on condition of anonymity.
The composition of China’s reserves is a state secret but dollar assets are estimated to comprise as much as 70 per cent of the $1,953bn total and China owns nearly a quarter of the US debt held by foreigners, according to US Treasury data.
The collapse of Fannie Mae and Freddie Mac, the US mortgage financiers, last summer prompted Safe to adjust its strategy and start buying far more short-term US government securities, instead of longer-maturity bonds and notes.
This approach is widespread in the market because of expectations that the US will have to raise interest rates in the medium term to deal with rising inflation, as a result of all the money that it is printing.
But Safehas not fundamentally changed its strategy of allocating the bulk of its burgeoning foreign exchange reserves to US Treasury securities, a western adviser familiar with Safe thinking told the Financial Times.
He said Safe traders were “very negative” on sterling because of expectations of renewed weakness of the UK currency but Safe was neutral on the euro and bullish on the Australian dollar.
The pound ended last week at its strongest since December, shrugging off a warning over the UK’s soaring public debt from Standard & Poor’s, a rating agency.
The US dollar fell to its lowest level of the year against major currencies last week. Treasury yields spiked to six-month highs as investors focused on the willingness of creditors to fund a deficit that was expected to be about 13 per cent of gross domestic product this year.
China’s determination to keep buying US government debt is helping Washington fund its soaring budget deficit and there is no indication that Beijing will shy away from continued purchases, the Obama administration’s budget chief told a congressional sub-committee last week.
As its reserves soared in recent years, Safe began trying to diversify away from the dollar, It has been adding to its gold stocks and taking small equity stakes in publicly listed companies all over the world.
Over the long term, Beijing hopes to reduce the size of its enormous reserves and cut exposure to US Treasury bonds by encouraging state-owned enterprises to use foreign exchange to acquire competitors abroad.
Chinese outbound foreign direct investment nearly doubled from 2007 to $52.2bn last year. Beijing announced a plan last week to ease restrictions on domestic companies to make it easier to buy and borrow foreign exchange for offshore investment.
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Gulf base shows shift in France’s focus
By Ben Hall in Paris and Andrew England in Abu Dhabi
Published: May 25 2009 02:43 | Last updated: May 25 2009 02:43
Nicolas Sarkozy, French president, will on Tuesday open a French naval base in Abu Dhabi, underlining his country’s renewed strategic interests in the Persian Gulf amid tensions over Iran’s nuclear ambitions.
The new installation in the United Arab Emirates, which will support French naval operations in the Gulf and Indian ocean, is France’s first overseas military base in 50 years.
Mr Sarkozy is also expected to use his visit to Abu Dhabi, beginning on Monday, to lobby on behalf of French companies, including Dassault, the military aircraft maker, and a consortium of Total, GdF-Suez and Areva, which is bidding to build two nuclear power stations in the UAE.
Dassault is hoping to clinch a deal to sell as many as 60 of its Rafale fighters to the UAE, in what would be the first international order for its latest military jet.
France’s new base is less important in military than in diplomatic terms. It will house at most 500 people. This number includes personnel supporting a detachment of three Mirage and Rafale jet fighters at the al-Dhafra air base in the emirate and another unit at a desert training camp.
The naval installation will make it easier to supply French ships in the region, but it will not supplant France’s larger base at Djibouti on the Horn of Africa. Neither is the base intended as a signal of military intent against Iran, say Elysée palace officials, insisting France wants a peaceful solution to the stand-off over Tehran’s nuclear programme.
But France’s military presence in Abu Dhabi is intended to drive home its tough stance against Iran’s nuclear plans. In a forthcoming interview with Diplomatie magazine, Mr Sarkozy said it underlined France’s wish “to participate fully in the stability of this region that is essential for the world’s equilibrium”.
The new base also represents a shift in French strategic interests away from protecting its former African colonies towards the conflicts in the Middle East, Afghanistan and Pakistan, where French security is considered more at threat.
France’s arrival breaks the US monopoly on western military powers having a permanent presence in the the Gulf, analysts say.
“From the Abu Dhabi side, they have the full commitment from another western power to the security of this region and also there’s no more monopoly from one side for security in the region, and definitely they will look for more contribution from the French in terms of transfer of technology and industrial and economic programmes together,” said Riad Kahwaji, chief executive of the Institute for Near East and Gulf Military Analysis.
Mr Sarkozy is looking to extend commercial ties with the UAE and is likely to discuss the possibility of one of the country’s sovereign wealth or investment funds taking a stake in Areva, the state-owned nuclear group. But the Elysée said no decision on this was likely until the winner of the UAE’s nuclear competition was decided in September.
Abu Dhabi is the wealthiest of the seven city states that make up the UAE and home to about 95 per cent of its hydrocarbons resources. The emirate is going through a programme of huge development and boasts a big stable of sovereign investments vehicles.
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ECB staff call strike over pensions
By Ralph Atkins in Frankfurt
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
Staff at the European Central Bank have called their first ever strike, in a protest over planned changes to their pension scheme.
A 90-minute warning strike will take place on June 3, just as the ECB's 22-strong governing council arrives in Frankfurt for its regular monthly interest rate policy-setting meeting. The ECB said it would ensure essential central banking activities were maintained during the protest action.
Staff at European institutions are generally regarded as enjoying good benefits as well as job security. But the strike marks a heightening of the tension between the ECB council and staff organisations over reforms to the bank's pension scheme aimed at avoiding future funding gaps.
It highlights how institutions such as the ECB have not been able to escape the pressures created by longer lifespans and poor financial market returns.
The protest has been called by the International and European Public -Services Organisation (Ipso), the ECB staff trade union, which has 460 members among the bank's 1,500-strong staff.
Under changes to the ECB pension scheme, which the bank announced on Friday after their approval by the council earlier this month, contributions will be increased both for staff and for the ECB.
There will also be changes in the way benefits are calculated, and reduced incentives for staff to leave before the normal retirement age of 65.
Adrian Petty, Ipso's president, said the changes could reduce benefits by as much as 15 per cent.
Staff were also annoyed at having to pay the price for mistakes that had been made in running the scheme, he said. But Ipso's main complaint was that the ECB had failed to enter into binding negotiations over the planned changes.
"The ECB has been able to implement more or less what it wanted to do, which is out of step for a modern European institution," he said.
The ECB argued that staff retiring at 65 would not be worse off under the changes but the implicit subsidies provided for those who retired before that age would end.
It said the changes had been discussed for two years and had involved "extensive consultations with ECB staff representatives".
The changes were necessary, the ECB said, because of the "changing demographic and economic environment, specifically the increase in longevity and decline in long-term interest rates".
The Frankfurt-based ECB was founded as the central bank for the common European currency, the euro, launched in 1999.
Next week's action is believed to mark the first strike in recent history at any large central bank.
Officials at the Federal Reserve last night could not recall any strikes in the history of the US central bank.
The central staff of the Bank of England have not been on strike since they were first unionised in 1975. Its printers, however, have conducted industrial action as long ago as 1912.
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Tax clampdown on second homes to hit workers and couples
By Matthew Vincent
Published: May 21 2009 19:38 | Last updated: May 22 2009 10:01
Relocated workers, newly married couples and part-time property developers are more likely to face a tax bill when they sell their properties – as a result of the controversy over the ‘flipping’ of second homes by MPs.
Tax experts warned this week that the rules allowing homeowners to ‘flip’ the status of a second property to that of a ‘principle private residence’, to claim exemption from capital gains tax (CGT), will almost certainly be tightened in the coming months.
“When Gordon Brown stands up and says he wants a fair and equal tax system, I can’t see how it can be allowed to carry on,” said Sharon Bedford, tax partner at accountants James Cowper. But Patricia Mock, private client services director at Deloitte, pointed out that any clampdown would adversely affect the homeowners that the rules were intended to help. “I suspect it is on the cards – but it is hard to see how they could tighten it up without affecting the genuine person moving from one part of the country to another.”
The current rules date back to the last recession, and were designed for individuals forced to move home to find work. They allow homeowners moving out of a property, but unable to sell it, to elect that property as their tax-exempt principal residence, even if they no longer live there. This exemption can apply for up to three years, under a concession granted in the last housing market downturn, giving owners “time to sell”.
“During the recession of the early 80s, Norman Tebbit suggested the unemployed may want to ‘get on their bike’ and look for work, to encourage migration from depressed areas of the UK to more prosperous regions,” explained Bedford. “Those who did have to move to secure a job often faced another problem. The depressed housing markets in some areas of the country meant they could not sell their home for a considerable time and may have been faced with short term letting. It would have been a double whammy if this letting meant they also lost their tax free status, hence the ‘time to sell’ rules. The last three years of any period of ownership of a residence should qualify for tax free status.”
Couples who each own a property, but move into one of them after marrying, also benefit from these rules at present. They have this ‘time to sell’ their second property tax free – as they lose their individual exemptions on marriage. “Once they get married, they have just one principal private residence exemption between them,” explained Mock. “But then they still get the other three years.”
Even amateur property developers, who buy properties to refurbish and sell on, can claim the exemption if they live in the property for a few weeks. “These tax breaks are not exclusive to MPs and can be exploited by anyone who has a second home and the means to fund relatively short term property gains,” said Bedford.
However, following the announcement by House of Commons leader Harriet Harman that MPs are to be banned from ‘flipping’ the status of second homes in 2009/10, HM Revenue & Customs is expected to amend the rules for all homeowners.
“One way they might tighten the rules is to say you can’t decide which is your principle private residence – it has to be factually your main residence,” suggested Mock. “Or they might say that, once you have made an election, you can’t vary it.”
Bedford at James Cowper agreed. “HM Revenue & Customs could get more aggressive in enquiring if you really live there, or announce a change in legislation overnight,” she said. “Amending the three year ‘time to sell’ rule would stop the tax breaks from the ‘flipping’ of second homes but would seriously disadvantage those who in the current downturn really do have to “get on their bike” and are unable to find a buyer for their home.”
A spokesman for HM Treasury said the current rules were being “kept under review on an ongoing basis.”
How does ‘flipping’ a second home work?
Mr Smith owns a large house which is his family home. He then purchases a flat near his place of work.
As he owns two properties, he can elect which of them is to be treated as his principal private residence (PPR) and exempted from capital gains tax (CGT).
So, within 2 years of acquiring the flat, Mr Smith nominates his family home as his PPR.
But, after two years and ten months of owning the flat, its value has risen by £50,000. So Mr Smith decides to cash in by selling the flat and realising the profit. This would normally be liable to CGT, but the rules allow Mr Smith to elect that the flat is treated as his PPR and to backdate this – so that up to three years are exempt from CGT. This means he does not pay tax on the £50,000 gain.
He may then be worried about the loss of the PPR exemption on his family home. So he ‘flips’ his PPR election again – within a week . And again, he benefits from a backdated period.
As a result, the gains realised on both properties are kept exempt from CGT – apart from one week’s worth of gains on the family home, which is taxable.
Source: James Cowper
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China to Auction About 10,000 Tons of Cotton Daily (Update1)
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By Bloomberg News
May 25 (Bloomberg) -- China, the world’s biggest cotton producer, will hold daily auctions of about 10,000 metric tons of cotton from reserves in a bid to ease tight domestic supplies, an official from the China National Cotton Exchange said.
“We aim to auction about 10,000 tons of cotton initially,” Sun Juan, an official from the exchange, said in a phone interview. “But the daily auction volume will be adjusted according to market conditions and we might raise it in the future.” The government will aim to sell 9,204 tons today, Sun said. The exchange is in charge of organizing the sales.
On May 21, China said it would sell 1.523 million tons from its stockpiles in a bid to ease tight supplies. The government by April 10 had purchased 2.72 million tons of cotton, or about a third of last year’s crop.
China on May 22 sold 56 percent of the 8,890 metric tons of reserves available on the first day of the auction, according to data compiled by industry watcher Cottonchina.org.
About 4,991 tons, or 22,923 bales, of government stockpiles were purchased, Cottonchina.org said. The sales averaged 12,995 yuan a ton, or 86.39 cents a pound.
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既存複合ビル、多様な生物が住む環境に 森ビル
森ビルは自社で開発した既存の複合ビル開発地区で、多様な動植物が生息できる環境づくりに取り組む。日本生態系協会（東京・豊島）の協力を得て、都心のアークヒルズ（東京・港）に野鳥や昆虫などがどれだけ生息しているかを調べる。過去にどのような生態系が保たれていたか文献にもあたり、1年かけてデータを蓄積。今後の都市開発案件などに生かす。
アークヒルズでは飛来してきた野鳥などを調査する。夏と冬にそれぞれ2、3日を費やし、鳥や昆虫、それらが集まる植物などの生態系をチェックする。また同地区で生息していた生物に関する過去の文献も活用。今後予定する開発地区で、呼びこみたい生物を策定する際の基礎データにする。(15:03)
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暴力団も不況… 職探して上京し裏ＤＶＤ販売
2009.5.25 13:48
このニュースのトピックス：暴力団・外国人犯罪
わいせつＤＶＤを販売目的で所持したとして、警視庁本所署はわいせつ図画販売目的所持の現行犯で、東京都台東区台東、指定暴力団道仁会系幹部、鹿子嶋（かごしま）康治容疑者（３６）と住所不定、裏ＤＶＤ販売店経営、山野正一容疑者（５５）を逮捕した。同署によると、両容疑者は容疑を認めている。店には１日２０人ほどが訪れ、月約１００万円を売り上げていた。
同署の調べによると、鹿子嶋容疑者は２１日、自宅にしていたウィークリーマンションで、無修正のわいせつＤＶＤ３１９０枚を販売目的で所持した。山野容疑者は同日、台東区上野のＤＶＤ販売店「バンビ」の店内で、わいせつＤＶＤ１５枚を所持した。
同署によると、鹿子嶋容疑者は、地元の福岡県で仕事を探していたところ、知人から「山野容疑者のところに行けば仕事がある」と紹介され、今月１０日に上京。パソコンと複製機を使って裏ＤＶＤを製造し、連絡を受けると店に裏ＤＶＤを運ぶなどして、山野容疑者を手伝っていたとみられる。
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前田五郎さんが休養 カウスさん脅迫状報道で
2009.5.25 13:00
このニュースのトピックス：芸能人の不祥事
前田五郎さん 前田五郎さん
吉本興業は二十五日、漫才師の前田五郎さん（６７）が中田カウスさん（５９）への脅迫状送付事件に関係していたと一部で報道されたため、タレント活動を休養させると発表した。
同社によると、前田さんが脅迫状に実際にかかわっていたかどうかは分からないが、世間を騒がせたため、本人と相談の上、休養を決めたという。
中田カウスさんをめぐっては、１月９日夜に乗用車の助手席で金属バットを持った男に襲われ軽傷を負ったほか、翌１０日に吉本興業の劇場に脅迫電話があり、４月３日にはカウスさん宅に「舞台に立てないようにしてやる」という文書が届いた。
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イタリアの原発導入に日本協力
2009.5.25 11:50
日本とイタリアの両政府は２５日、原子力協力に関する協力文書に署名した。Ｇ８エネルギー相会合でローマを訪問中の二階俊博経済産業相と、イタリアのスカイヨーラ経済振興相が現地時間２４日に署名したもの。イタリアでの原発導入を促進するため、日本が情報交換や人材育成などで協力する。
イタリアが参加する欧州原子力共同体と日本は、すでに原子力の平和利用に関する法的枠組みである原子力協定を結んでいるが、協力文書によってさらに関係を強化。日本の原子力産業のイタリア進出が見込まれる。
イタリアは１９８６年にウクライナで起きたチェルノブイリ原発事故を受け、原発の新設を凍結、９０年にはすべての原発の運転を停止した。しかし、ロシアなどからの天然ガスや石油に依存する経済構造から脱し地球温暖化対策を進めるため昨年５月、原発建設を再開する方針を決めた。今年２月にはフランスと原子力協定を締結した。
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アホの坂田ショック！ 脅迫文が前田五郎“筆跡酷似”
中田カウスと日ごろから折り合い悪く
前田五郎（右）の疑惑に「コメディＮｏ．１」の相方、坂田利夫はショックを受けているという（クリックで拡大）
前田五郎（右）の疑惑に「コメディＮｏ．１」の相方、坂田利夫はショックを受けているという（クリックで拡大）
吉本興業所属の人気漫才コンビ、中田カウス・ボタンのカウス（５９）あてに今年４月、カウスや吉本興業幹部に危害を加えることを示唆する内容の脅迫状が届いた問題で、脅迫状の文字が同じ吉本興業に所属するベテラン漫才コンビ、コメディＮｏ．１の前田五郎（６７）の筆跡と酷似していることが２５日、分かった。吉本興業が独自に行った筆跡鑑定で判明した。前田は関与を否定しているが、資料の提出を受けた大阪府警南署は１月のカウス襲撃事件との関連も含めて捜査している。
吉本興業の広報担当者によると、筆跡鑑定は４月３日にカウス宅に脅迫文が郵送され、吉本が同署に相談した後、社として独自に専門業者に依頼して実施。関係者によると、前田とほぼ同一人との鑑定結果が得られたといい、先週南署に提出した。
脅迫文は届いた直後から前田の文字に似ていると吉本内で指摘され、前田の相方の“アホの坂田”こと坂田利夫（６７）に脅迫文であることを伏せて一部を見せた際、坂田も「相方の字だと思う」と話したという。
【吉本の独自鑑定で判明】
身内の関与が浮上したことに関し、吉本は「警察の判断を待ちたい。現段階では何とも言えない」としつつも、「脅迫文は会社幹部２人の実名をあげるなどしており、事態を重く見た。誰の仕業であっても、いたずらや冗談では済ませられない」と説明。前田については結論が出るまで活動停止処分とした。
またカウスは広報担当者を通じ「今年１月の襲撃事件との関与も含め、警察の捜査に協力していきたい」と話している。
一方、南署は「署では独自に捜査を進めており、（吉本が行った筆跡鑑定の）証拠能力は認められない」と説明。前田の事情聴取も取りざたされるが、「署としては事情は聴取すべき時にすべき人から聴く」としている。
カウスは今年１月９日夜、大阪市中央区日本橋の府道（堺筋）で、車の助手席に乗って信号待ちをしていたところ、金属バットを持った男に窓ガラスを割られ、頭を数回突かれるなどして軽傷を負った。さらに翌１０日にはなんばグランド花月（ＮＧＫ）に低い男の声で「今後も中田カウスを出演させる気なら、きのうのようなことではすまない」「客も巻き込む」という脅迫電話があった。
４月に届いた脅迫文は「山本」の名前で「舞台に立てぬ様にしてやる」などと書かれていた。
関係者によると、前田はカウスとは日ごろから不仲とされ、１月のカウス襲撃事件の直後も「自業自得」と周囲に語っていたという。
夕刊フジは前田へ何度か電話取材を試みたが、一方的に切られ、取材には応じてもらえなかった。
■まえだ・ごろう １９４２年、大阪市生まれ。６３年に吉本新喜劇に入り、坂田利夫と結成した漫才コンビ「コメディＮｏ．１」で、ツッコミを担当。なんばグランド花月などの舞台を中心に活動している。上方漫才大賞新人賞、同大賞のほか、上方お笑い大賞金賞などを受賞した。
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Chinese oil major in $1bn offshore deal
By Jamil Anderlini in Beijing
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
PetroChina, the state energy group, has agreed to pay $1bn for 45.5 per cent of Singapore Petroleum Company in what will be the first major Chinese offshore purchase of a downstream energy company.
PetroChina will buy the entire stake in SPC held by Singapore's Keppel Corporation, the world's largest maker of oil rigs, and will carry out a mandatory general offer for the remaining 54.5 per cent of the Singapore-listed company as soon as the deal is granted Chinese regulatory approval.
The deal will be Petro-China's first cross-border acquisition of a public company, the first Chinese takeover of a publicly listed company in Asia and the largest public takeover in Singapore since 2001, according to people involved in the transaction.
The Chinese company agreed to pay S$6.25 per share for SPC, which operates one of the three major refiners in Singapore. The price is a 24 per cent -premium over SPC's closing price on Friday of S$5.04 and a 120 per cent premium over its six-month volume-weighted average price.
The offer for SPC implies an equity value for the entire company of $2.25bn on a fully diluted basis. SPC's market capitalisation was $1.8bn on Friday.
"SPC will become a new -platform for the implementation of our international strategy and will provide a broader foundation and stable path for development," PetroChina said.
The three major Chinese oil groups, including state-owned Sinopec and China National Offshore Oil Corporation, have been scouring the world for access to upstream oil reserves but - apart from a failed attempt by CNOOC to buy the US's Unocal - they have not attempted to buy big refining operations abroad.
"The Chinese oil majors are still focused on securing upstream resources through merger and acquisition, but this purchase of SPC is a logical and smart move," said a person involved in the deal. "In fact, this is a teeny tiny deal for -PetroChina."
The Chinese government last week called on domestic companies, particularly state-owned "champions", to take advantage of depressed asset valuations by stepping up their merger and acquisition activity abroad.
Beijing also said it was relaxing strict capital controls and foreign exchange regulations to allow Chinese companies to borrow and invest more foreign currency for offshore expansion.
Regulatory approval for PetroChina's acquisition of SPC is expected to take a few weeks, at which point it will make a mandatory offer for the rest of the shares.
Deutsche Bank is the sole financial adviser to Petro-China on the deal.
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US urged to stop drone attacks
By Farhan Bokhari and agencies in Islamabad
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
Attacks by US drones on Pakistani territory are "counter-productive" because they undermine Islamabad's efforts to isolate militants, Yousuf Raza Gilani, Pakistan prime minister, says.
Mr Gilani's comments at the weekend came as Pakistan stepped up its efforts to regain control of the northern Swat valley from Taliban militants. The military launched a campaign to seize Mingora, the main administrative and commercial hub of the region.
The battle for Mingora is potentially a high-risk venture as there are an estimated 10,000-20,000 civilians trapped in the city.
Mr Gilani said missile strikes by US drones on the northwestern tribal areas bordering Afghanistan were in fact strengthening the militants.
"Our policy is to isolate militants from the local tribes, but drone attacks unite them," Mr Gilani said.
He added Pakistan had convinced the international community about the repercussions from drone attacks and was urging the US to stop them.
"We have convinced the world, we have tried to convince the United States also and you will see that America would review its policy."
Leon Panetta, director of the Central Intelligence Agency, last week defended the use of unmanned aircraft to target al-Qaeda militants and said President Barack Obama's policies had severely disrupted the network's leadership.
Islamabad publicly opposes drone attacks, saying they violate its territorial sovereignty and deepen resentment among the populace. Since August 2008, more than 40 such strikes have killed about 420 people.
About the military operations against Taliban militants in northwestern Swat valley and the adjoining districts of Dir and Buner, Mr Gilani said militants would not be allowed to take the nation hostage.
"This is not possible that terrorists take us hostage and we sit at home fearing them," he said. "We will launch military operations where the writ of the state is challenged and attempts are made to form a parallel government."
Western diplomats warned the battle for Mingora could see large-scale civilian casualties as troops target suspected locations of Taliban militants. The Pakistan military claims that 1,100 militants have been killed and 29 captured, while it has lost about 60 of its own.
On Friday, Ban Ki Moon, UN secretary-general, launched an emergency appeal for $454m (€325m, £285m) to provide relief to an estimated 2.5m people believed to have been displaced from the Swat valley.
The UN claims the size of the displacement from Swat is the largest event of its kind since the Rwandan exodus in the 1990s.
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Iran in regional co-operation deal
By Monavar Khalaj
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
Afghanistan, Pakistan and Iran signed a declaration yesterday designed to bolster regional co-operation to tackle extremism and the cross-border drugs trade, writes Monavar Khalaj in Tehran.
Mahmoud Ahmadi-Nejad, Iran's president, hosted his Afghan and Pakistan counterparts Hamid Karzai and Asif Ali Zardari in the first trilateral summit of the countries in Tehran.
Mr Ahmadi-Nejad said that the problems facing the region, including "extremism, militarism and [foreign] interventions", are against the interests of the three neighbouring nations. "[The] presence of foreign troops . . . has so far failed to bring stable security."
Mr Karzai said that the trilateral co-operation, if successful, would help ensure security and stability in the region.
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US admiral hints at softer Iran stance
By Krishna Guha in Washington
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
The US's top military official appeared to suggest yesterday that the US could accept Iran retaining its capacity to enrich uranium provided it abandoned efforts to develop nuclear weapons.
Admiral Mike Mullen, the chairman of the joint chiefs of staff, also said he thought Iran could have its first nuclear bomb within one to three years - a shorter timeframe than envisaged by the 2007 National Intelligence Estimate.
Admiral Mullen said in a television interview that a successful outcome of USIranian dialogue "from my perspective means they don't end up with nuclear weapons" - a narrow definition favoured by the administration of President Barack Obama.
When the interviewer - George Stephanopoulos, a former Clinton administration White House official - followed up by asking: "They don't end up with nuclear weapons, but could they have, as Japan does, a full nuclear fuel cycle programme that's fully inspected?" Mr Mullen replied: "I think that's certainly a possibility."
The chairman of the joint chiefs added: "From my perspective, from the military perspective, this isn't about them having the ability to produce nuclear power. It's about their desire and their goal to have a nuclear weapon."
Any compromise that would allow Iran to continue producing nuclear fuel - presumably through enriching uranium - would mark a break with the policies pursued under former president George W. Bush.
US diplomats have in the past insisted that Iran forfeited its right to develop a full civilian nuclear programme because of its efforts to develop nuclear weapons. Tehran insists the programme is peaceful.
A US defence official said there was no change in policy and Mr Mullen was referring only to possibilities.
The last official US assessment of Iran's nuclear ambitions - the 2007 National Intelligence Estimate - judged "with moderate confidence Iran probably would be technically capable of producing enough HEU [highly-enriched uranium] for a weapon sometime during the 2010 to 2015 time frame".
But Admiral Mullen characterised the threat in more concrete and imminent terms. "Most of us believe that it's one to three years" before Iran could produce a nuclear bomb, he said, "depending on assumptions about where they are right now".
He believed it was Iran's "strategic intent" to acquire nuclear weapons and said "they are moving closer, clearly and they continue to do that".
Asked whether he was more worried about the consequences of a US strike on Iran's nuclear facilities or the possibility of Iran obtaining nuclear weapons, Admiral Mullen said: "They both worry me a lot."
Admiral Mullen said the "unintended consequences of a strike against Iran right now would be incredibly serious".
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Riyadh paves way for foreign ventures
By Andrew England in Abu Dhabi
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
The project began on a small scale, with two wells dug into the ground a short distance from the Nile as the river snakes a path through remote northern Sudan.
Tests on the underground water quality and the soil proved positive and a small batch of wheat was -harvested last year, confirming that the land was suitable for cereal and forage crops.
The results mean Hail Agricultural Development Company, a Saudi Arabian agricultural company, will move ahead to the next stage of a 22,000-acre project in Africa's largest country. For the oil-rich Gulf kingdom it means it is a small step closer towards its controversial longer-term strategic goal of securing food resources through large-scale farm projects overseas.
Since details emerged of Saudi Arabia's plans to ensure supplies of wheat, rice, corn, soya beans and alfalfa through overseas agricultural investments, officials have insisted they intended the programme to be private sector led.
The government's role will be to secure bilateral agreements with nations hosting the farms, including details of how much would be exported back to the kingdom. It will also provide financial support through development institutions and last month announced the setting up of an $800m company to invest in joint ventures and assist with infrastructure development.
But it is the kingdom's private sector - which has helped the desert nation be wheat self-sufficient for the past three decades - that is expected to be the player getting its hands dirty on the ground.
Hadco will carry out a pilot project for corn next month, and it hopes to be producing about 6,000 acres of wheat in Sudan in 2010, with a 48-year-lease on the land for an annual fee of about SD£3 ($1.30, €0.90, £0.80) per feddan (1.04 acres, 0.42 hectares).
"It's the first country that gives us land without complicated procedures," said Mohammed Rasheed al-Balawi, Hadco's agriculture general manager. "The area is big, the people are friendly [and] they gave us the land almost free."
Hadco, which secured a SR100m ($27m, €19m, £17m) soft loan from a Saudi development institution, expects to invest SR170m in the project.
The company's ultimate target is to farm 100,000 hectares - nearly three times the land it cultivates in its home country - which will include investments in other, more distant countries such as Turkey and Kazakhstan. With those nations, however, it will wait until the government has secured bilateral agreements as the authorities work on a list of some 20 countries they will recommend to the private sector.
"We have good experience on large-scale farming so we said to the government that we can, as the private sector, secure your needs from your major imported crops 100 per cent," Mr Balawi said. "Give us support, politically and financially, but we can do it."
The initiative comes as Saudi companies, such as Hadco, face challenges at home following the government's decision to phase out its domestic wheat programme by 2016 to protect its finite water resources, with annual 12.5 per cent reductions in production.
Mr Balawi said it was a problem because "some of these areas, they depend on the agriculture business", but added Hadco may look to produce more wheat overseas than it has at home.
Hadco, which has been in the business for almost 27 years and produces about 60,000 tons of wheat annually in the kingdom, is not the only one to harbour such ambitions.
Several firms have joined forces to form a limited liability company, Jannat, which will seek to acquire companies, enter into joint ventures and set up greenfield projects - all overseas. It has a target of securing 100,000 to 215,000 hectares of land to grow wheat, rice, vegetables and fodder, said Saad Al Swatt, chief executive of Tabuk Agricultural Development Company, one of Jannat's main investors.
Jannat has plans to invest $40m in African countries, and Tadco, Jannat and its other partners signed a memorandum of understanding with the Arab Authority for Agricultural Investment and Development to set up an agricultural company to invest abroad, according to a statement on the Saudi stock market on Saturday.
The AAAID was set up by Arab governments during the 1970s oil boom to contribute to Arab food security.
The companies are moving ahead with plans in spite of some analysts questioning the risks of the programme and whether Saudi companies have the experience and appetite to invest abroad.
Particular concerns have been raised about the prospect of an Arab country shipping food from impoverished African states that suffer perennial food shortages, while also dealing with the sensitivities that surround land ownership.
Hadco hopes to offer Sudan employment and development through the project, with an estimate it will create at least 500 jobs.
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Pragmatism offers route for Palestinian refugees
By David Gardner in London
Published: May 20 2009 18:33 | Last updated: May 20 2009 18:33
The tense meeting between Barack Obama, the US president, and Benjamin Netanyahu, Israeli prime minister, this week was a vivid reminder of the formidable obstacles in the way of Middle East peace. Even so, there are some Arab-Israeli minefields that can be traversed with a pragmatic compass: including the fate of the roughly 5m Palestinian refugees – used by rejectionists on both sides to argue that no reconciliation of this tragic history will ever be possible.
The Palestinian refugees – who fled or were driven out by the 1948 and 1967 wars – and the Palestine Liberation Organisation, insist on their right of return. According to the United Nations Relief and Works Agency (UNRWA) responsible for their welfare, the number of refugees is about 4.5m. Israel opposes their return, arguing that it would irreversibly change the demographic balance of the Jewish state. This is a real concern, so it would be as well to examine the reality.
First, the UNRWA numbers, though juridically correct, are not, in reality, accurate. In Lebanon, for example, the UN had just 374,000 refugees on its books in 2002, spread out in 12 camps. Fearful of its delicate confessional balance, Lebanon denies Palestinians not only citizenship, but the right to own property or work in 71 specified professions. Many Palestinians, using UNRWA-acquired educations as their passport, have therefore left. The actual number remaining in Lebanon in 2002, UN officials say privately, was 192,000.
Second, how many among them would exercise their right to return? Khalil Shikaki, a reputable Palestinian pollster, in 2003 asked refugees in Jordan and Lebanon if, given the choice, they would return to Israel, or accept compensation.
In Jordan, which hosts the biggest concentration of about 2.8m refugees who, unlike in Lebanon, enjoy citizenship, 5 per cent opted for return; in Lebanon it was 23 per cent.
Taken together, these two factors give some idea of the real dimensions of the problem. Furthermore, UNRWA’s regional tally is almost certainly a good deal higher than the actual number of refugees in the Arab states neighbouring Israel. The reason for the discrepancy is that the UN agency is obliged to safeguard the legal rights of all the refugees, wherever they are, against compensation they might receive under a settlement. Which brings us to the third element in the reality of the problem: compensation.
According to Shlomo Ben-Ami, former Israeli foreign minister, the outline deal issued to the parties in December 2000 by Bill Clinton, then US president, gave the refugees the right of return to “historical Palestine”, but “no explicit right of return to the state of Israel”, which could limit the numbers it admitted. The rest of the refugees would be covered by a multi-billion dollar compensation and resettlement programme.
The Arab League peace offer agreed at Beirut in 2002, moreover, proposed “a just solution” to the right of return that foresees compensation for the majority of refugees.
Israeli officials complain the Clinton parameters and Beirut plan are too nebulous. Yet Israel negotiated just such a deal in 2000, with Syria. That package fell apart, but there was agreement on an internationally funded deal of up to $17bn (€12.3bn, £10.8bn), to compensate 450,000 Palestinian refugees in Syria.
The right of return conundrum, in other words, is pragmatically soluble so long as it is clearly understood that no Palestinian leader can possibly yield on the rights of the refugees, as opposed to negotiating how those rights are honoured.
The cost of overall compensation, benchmarked against the Syrian package, could exceed $100bn, most probably financed by the US, the European Union and the Gulf states. That would prove a lot cheaper than the alternative: a beleaguered Israel ringed by dozens of camps, desperate huddles of misery so cut off from any hope of a decent future they become the new universities of jihad. No Israeli wall will be proof against that.
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Israel to press on with settlements
By Vita Bekker in Tel Aviv
Published: May 25 2009 02:40 | Last updated: May 25 2009 02:40
Benjamin Netanyahu vowed on Sunday to continue the construction of homes in Jewish settlements in the occupied West Bank, less than a week after the US president called on the right-wing Israeli leader to halt settlement expansion.
Mr Netanyahu said during his weekly cabinet meeting that while he does not intend to build any new settlements in the West Bank, he would not curtail construction to meet the needs of “natural growth” in existing communities, a senior Israeli official quoted him as saying.
By natural growth, Israel means the increase of population as a result of factors such as increased birth rates.
While Mr Netanyahu’s comments echoed a position he had voiced during his campaign for the premiership at February’s national elections, their reiteration on Sunday threatened to widen a growing rift with the US on the issue of Palestinian statehood.
After meeting the Israeli premier last week in Washington for the first time since both of them took office, Barack Obama, the US president, said that “settlements have to be stopped”. Hillary Clinton, the US secretary of state, last Tuesday told al-Jazeera, the Qatar-based news channel, that the US wanted to ban any kind of settlement activity, including what Israel called natural growth.
The expansion of settlements has been a key impediment in stalled talks between Israel and the Palestinians on the issue of Palestinian statehood. Mr Obama has pledged to vigorously pursue the establishment of a Palestinian state alongside Israel, a concept which has been opposed by Mr Netanyahu and most members of his predominantly hard-line new government.
Mahmoud Abbas, the president of the Western-backed Palestinian Authority, who is due to meet with Mr Obama in Washington this week, has ruled out renewing talks with Israel on the two-state solution until Mr Netanyahu publicly commits to Palestinian statehood and freezes settlement building.
Commenting on Mr Netanyahu’s statements on Sunday, Mark Regev, a spokesman for the Israeli premier, said: “The question of the existing settlements … would be determined in final status negotiations between us and the Palestinians. In the interim, normal life must be allowed in those communities.”
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France Telecom and Orascom at loggerheads over Egyptian operator
By Ben Hall in Paris
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
A long-running and acrimonious battle between Egypt's Orascom and France Telecom appears deadlocked as the two sides argue over the validity of a legal ruling that ordered control of their jointly run Egyptian mobile operator to be transferred to the French group.
Orascom Telecom and the former French monopoly have jointly controlled Mobinil, Egypt's largest mobile operator, since 2001, but fell out over strategy.
The Egyptian group resorted to legal action to oust its partner in 2007. However, an international arbitration panel concluded two months ago that control should be handed to France Telecom.
Mobinil is an important asset for the French company, which has been slower than its main European rivals in making acquisitions in fast-growing emerging markets. Egypt is the most populous Arab country and mobile ownership is relatively low, making it a market with big potential, with 12m new mobile subscribers last year alone.
Full ownership of the Egyptian operator and its holding company would cost France Telecom about €2bn ($2.8bn), small compared with the French company's market capitalisation of about €60bn, but much bigger than recent purchases.
Equally, Orascom, the largest mobile operator in the Arab world, is reluctant to cede a prize asset on its home territory. Naguis Sawiris, Orascom's chairman, has made clear he does not want to sell.
Orascom last week said the March arbitration ruling requiring it to sell its 28.75 per cent stake in Mobinil to France Telecom had lapsed, and it appealed to an Egyptian court to have it annulled.
However, a Swiss court document seen by the Financial Times indicated that Orascom was still obliged to sell. The document from the Geneva court of first instance dated May 7 states that the ruling is "enforceable". The court's jurisdiction covers the arbitration panel of the International Chamber of Commerce, which issued the ruling.
Orascom originally accepted the ruling to transfer its stake in Mobinil, which owns 51 per cent of operator ECMS.
But it argued that France Telecom was also obliged to buy out the minority shareholders in ECMS, which include Orascom with a 20 per cent direct stake, at an "equivalent" price or 273.26 Egyptian pounds per share.
France Telecom's initial tender of 200 Egyptian pounds was dismissed by the Egyptian stock market regulator as too low.
The French group is understood to have tabled an improved offer last week of about 230 Egyptian pounds. The Egyptian regulator on Friday delayed a decision on the offer, saying it needed more information from the French company.
France Telecom and Orascom declined to comment.
Analysts said that Orascom's legal move to have the sale annulled altogether was an attempt to push up France Telecom's bid price.
"Their endgame is to get 273 Egyptian pounds," said one London-based analyst. "It's just a fair game."
But Mr Sawiris's legal challenge raises doubts over whether the deal will be completed soon, if at all.
Analysts at UBS said there was a 50 per cent probability the deal would go ahead at a price close to 273 Egyptian pounds and a 50 per cent chance of it not going ahead at all.
Didier Lombard, France Telecom chief executive, may come under pressure from investors to explain the situation at a shareholder meeting next week.
Mr Lombard's credibility in mergers and acquisitions took a battering last year over the aborted takeover attempt of TeliaSonera, the Swedish-Finnish operator.
Trading in Mobinil and Orascom Telecom shares was allowed to resume yesterday after being suspended by the Egyptian authorities on Tuesday as they considered France Telecom's revised bid for ECMS minority shareholdings.
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Why Syria fuels the Iraqi insurgency
By Raymond Tanter
Commentary by
Monday, May 25, 2009
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In May 2008, Iraqi and Coalition forces attacked Syrian-based Al-Qaeda in Iraq cells in and around Mosul. Despite a mid-2007 drop in the number of foreign fighters transiting from Syria into Iraq, the flow of Al-Qaeda fighters has increased during the first months of 2009. Insurgents have been transiting through Syria into Iraq since the launch of the 2003 American invasion of Iraq that toppled the regime of Saddam Hussein. As US forces raced toward Baghdad during March and April of that year, Syrian security personnel waved buses of foreign volunteers across the border into neighboring Iraq to fight the Americans. At the same time, Iraqi Baathists still loyal to Saddam's regime fled in the opposite direction, finding safe haven in sparsely populated parts of eastern Syria. There, they established the New Regional Command, a headquarters from which to raise funds, procure weapons, and train personnel for the insurgency in Iraq. The base was critical because it ensured they would be free from harassment by US forces.
For two years, Syrian security personnel facilitated the activities of foreign jihadists and Saddam loyalists with the implicit approval of Damascus. The regime had two major incentives in doing so.
First, in the same way that Saudi Arabia disposed of its most fervent jihadists by sending them to Afghanistan during the 1980s to fight and die against the Soviet Union, Iraq was a fortuitous outlet for Syria's own Islamist opposition, based mainly in and around Aleppo, in the country's northwest corner. The strategy was, at best, a short-term success. Syria will now be forced to contend with battle-hardened jihadists returning from Iraq. Saudi Arabia experienced a similar "blowback" when it struggled to "digest" returning Saudis from the Afghanistan war.
Second, Syria had a strategic interest in tying down US forces in Iraq and preventing the rise of a stable Iraqi government allied with the United States. Despite the significant animosity that existed between Damascus and Saddam's Iraq, the regime in Damascus determined that chaos in Iraq was preferable to the rise of a stable US ally to Syria's east.
Improvements in Iraqi security since 2007 are the result of developments on the Iraqi side of the Syrian border, including the US troop surge, a new counterinsurgency strategy, and Sunni Iraqi disgust with Al-Qaeda. This led to the formation of the "Awakening Councils" through which tribal leaders cooperated with the US-led multinational force in Iraq. Iranian dissidents in Iraq also acted as mediators between Iraqi Sunni chiefs and the Coalition forces to help stabilize the country.
Contrary to Syrian claims, the stability in Iraq has very little to do with the cooperation Damascus has offered (as minimal as that happens to be). Indeed, the regime has tolerated the continued presence of jihadists and insurgents. Coupled with Iran's sheltering of radical Shiite groups, such as that of Moqtada al-Sadr, jihadists and insurgents in Syria constitute a sword of Damocles hanging over the government of Iraq.
Looking forward, President Barack Obama will need a multi-pronged strategy of focusing on Iraqi security, occasional covert operations across the border against high-value targets in Syria, and outreach to Damascus. However, expectations should be tempered. Even at the height of US leverage in the aftermath of the assassination of former Lebanese Premier Rafik Hariri in Lebanon, Syria was unwilling to undertake serious efforts to curtail the activities of jihadists and insurgents on its soil.
Ultimately, the Iraqi government may eventually have more influence over Damascus, given Syria's desire to expand economic relations between the two countries. When Iraqi President Jalal Talabani made his first official visit to Damascus in January 2007, topping Syria's agenda was the signing of agreements related to economy and oil, which Damascus believed should precede agreements on security issues. Syria also seeks relief from the economic stress of its Iraqi refugees. According to December 2006 statistics from the United Nations High Commission for Refugees, there are between 600,000 and 1 million Iraqi refugees in Syria. Iraq has a unique opportunity to ensure that its security demands are met before moving forward with Syria on those issues that are critical to the Syrian economy.
What may ultimately doom the jihadist and Baathist operatives in Syria is the domestic headache they give Damascus. Just as Saudi Arabia suffered the blowback effects of jihadists returning from Afghanistan in the 1980s, a new generation of foreign fighters driven out of Iraq may yet challenge the Syrian regime.
However, the Islamist opposition has been down that road before. The late Syrian President Hafez Assad brutally crushed a challenge to the regime from the Muslim Brotherhood in 1982 in the city of Hama, killing some 20,000 people. Thus, as journalist Thomas Friedman wrote in his book "From Beirut to Jerusalem," those who seek to challenge the Syrian regime should be prepared to play by "Hama Rules," which would prompt Damascus to neutralize the Islamists whenever they pose a threat to the regime's survival.
Raymond Tanter, a former senior staff member of the US National Security Council, is a visiting professor at Georgetown University and is president of the Iran Policy Committee. He wrote this commentary for THE DAILY STAR.
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Move for German investors to vote on pay
By Bertrand Benoit in Berlin and Richard Milne in Oslo
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
Shareholders in German companies could be given a vote on executive pay under proposals being debated by parliament in one of the toughest measures considered in Europe to tackle excessive boardroom compensation.
A vote on pay would be a big victory for shareholders who have often complained of having little influence over management in Germany. It would also add to the pressure for other European countries to follow the Netherlands, the UK and France in giving investors "a say on pay".
A group of Christian Democratic MPs allied to chancellor Angela Merkel is proposing that supervisory boards be allowed to give annual meetings a non-binding vote over the packages of executive directors.
News of the German discussion comes days after investors in Royal Dutch Shell rejected the Anglo-Dutch oil company's remuneration policy in a stinging rebuke.
Although the vote was non-binding, it was a public relations embarrassment for Shell.
"It is the easiest way for investors to show their displeasure with management and it would be a big step forward for Germany," said a large foreign investor in Germany said.
Otto Bernhardt, a CDU MP who is also a finance expert, told the Financial Times he and his allies were pushing to have the non-binding shareholder vote added to a bill on the "appropriateness" of executive pay which parliament is now finalising.
Yet opposition from the Social Democratic party, junior partner in Ms Merke's "grand coalition" meant the additional proposal could have to wait until after the general election of September 27.
He said a final expert hearing would be held on the bill this week. "We will try to find an agreement but if we cannot make a deal by the end of the week, we will have to pass the bill as it is."
The SPD is sceptical of granting shareholders a say on pay because it thinks it would dilute the influence of employees, who sit on supervisory boards but are not represented at annual
meetings.
Under its current form, the "appropriateness" bill would increase the transparency of board-level compensation, for instance forcing non-executive directors to vote on boardroom pay instead of delegating such decisions to small, unaccountable compensation committees.
By defining objective criteria for executive performance, the bill would also make it easier for shareholders to obtain damages from supervisory board members who had endorsed excessive pay deals. It has sparked protests from managers.
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Property entrepreneur with prestigious portfolio
By Daniel Thomas
Published: May 23 2009 03:00 | Last updated: May 23 2009 03:00
Simon Halabi's advisers have long enjoyed gifts of fine wine from his vineyard in France, which along with a yacht moored at Portofino in Italy and a Mayfair office full of Louis XIV furniture is among the more obvious trappings of wealth for the Syrian-born property tycoon, writes Daniel Thomas .
But unlike many of the moguls in the sector, Mr Halabi keeps a low profile. He lives between Switzerland, the south of France and London.
The fortune held by his family trusts, to which he is an adviser, was rumoured to be worth more than £2bn at the peak of the property market, although there has never been any official confirmation. This fortune is likely to have fallen along with the rest of the slump in the property sector.
Through his family trusts, advised by Buckingham Securities, the family property group, there is a substantial property empire built over the past decade. This is centred around a London property estate including the King's Reach office development, Alban Gate, the Bankside Estate, Millennium Bridge House and 60 Victoria Embankment. There were plans at one point to convert these properties into a listed vehicle.
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Brazil hedge funds reel after client exodus
By Jason Mitchell
Published: May 24 2009 16:41 | Last updated: May 24 2009 16:41
Brazil’s hedge fund industry was battered by weak performance and redemptions last year. Although overall performance has improved this year, several managers remain weak and are fighting for survival, say experts.
Up to 20 of about 100 hedge fund managers could be forced to close their funds following an exodus of clients. They have seen assets under management drop by up to 85 per cent in the past year to an average of R$75m ($37m, €27m, £23m) and are no longer profitable.
Analysts say that funds may have to be liquidated if they do not attract more assets.
Managers that have suffered the most include Fiducia, whose Black Diamond fund has seen its assets under management drop from R$1.05bn to less than R$15m, and Mauá Investimentos, whose Brazil macro-strategy fund is about R$300m, down from R$1.6bn in November 2007.
Analicia Gil of Mauá Investimentos says: “The aggressive hedge funds in Brazil lost around two-thirds of their assets during 2008 because Brazilian investors are not absolute return- driven and always seek as benchmark the CDI [Brazil’s interbank lending rate], the Brazilian opportunity cost of money.”
She says that redemptions were concentrated in the first half of last year when funds showed a loss of 4.78 per cent, although performance recovered to 4.14 per cent by the end of 2008.
Marcello Stallone, a partner at Gavea, a Brazilian hedge fund manager, says: “Most Brazilian fund managers have managed to navigate through the crisis that erupted last September and October; most were caught by surprise, especially in their positions in the stock market and the Brazilian reais.
“However, since November, many managers have been able to present pretty good results; they have been able to extract value from local rates that in certain maturities have dropped markedly. Rates for fixed derivative contracts are down by up to 800 basis points and for inflation- indexed bonds by up to 400 basis points.”
He adds that managers have been able to hedge rates against equities: the stock market – although volatile – has risen by more than 70 per cent from a low of 29,435 on October 27. Hedge fund performance last year was flat or slightly negative, he says, while so far this year it is up 6 per cent.
Experts say long-short equity managers and multi-strategy managers have suffered the most from redemptions. The long-short managers had bet heavily on the relative value of small-mid caps versus large caps and had excellent performance until the start of last year, when large caps started to outperform massively. They also invested heavily in many of the companies that undertook initial public offerings in 2007, but which have underperformed the Bovespa exchange since the start of last year.
Multi-strategy managers suffered from wrongly hedging the currency and rates. Many managers were caught by surprise when the exchange rate moved from R$1.6 to the US dollar in August to R$2.4 in October, before falling back to R$2.0. Many managers were also wrongfooted when rates on short-dated government paper shot up in October .
Investors have moved towards cash, certificates of deposit and equity funds (with a net inflow of R$4.6bn) and funds that invest in a mixture of private equity and listed equities (with a net inflow of R$14.2bn). Experts say investors have switched to investments such as equity funds that they have been accustomed to in the past and that financial advisers can more easily explain to them.
Michel Abadi, a fund manager at Gems Advisors, an offshore hedge fund manager with Brazilian clients, says: “Currently, retail investors and private client investors are scared about everything and prefer to sit on cash or invest in certificates of deposit. They are concerned there could be another big bank failing or a country default. In this environment, it’s hard to separate people from their cash.”
Certificates of deposit have long been one of Brazilians’ favourite investments because of historically high interest rates. With current rates at 10.25 per cent and annualised inflation at 7 per cent, certificates offer an attractive risk-free return.
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Argentina: The superpower that never was
By Alan Beattie
Published: May 23 2009 01:32 | Last updated: May 23 2009 01:32
Everyone remembers the world-changing events of the morning of September 11, 2001. Everyone remembers the planes commandeered by terrorists slamming into the twin towers of the Centro Mundial de Comercio in Buenos Aires. As the richest country on earth and the modern world’s first global hyperpower, Argentina was a prime target for malcontents revolting against the might of the western capitalist order.
Fewer recall the disaster that befell the United States of America three months later. Fewer recall the wrenching moment when the US federal government, crushed by the huge debts it had run up borrowing abroad in pesos, announced it was bankrupt. The economic implosion that followed, in which thousands of jobless, homeless Americans slept rough and picked through trash tips at night in Central Park, shocked only those still used to thinking of the US as a first-world country.
Well, no. It happened the other way round. But that was not inevitable. And the crisis that has hit the US – and then the entire global financial system, threatening to plunge the world into another Great Depression – should be a warning. The US could have gone the way of Argentina. It could still go that way, if the painfully learnt lessons of the past are forgotten.
A short century ago the US and Argentina were rivals. Both were riding the first wave of globalisation at the turn of the 20th century. Both were young, dynamic nations with fertile farmlands and confident exporters. Both brought the beef of the New World to the tables of their European colonial forebears. Before the Great Depression of the 1930s, Argentina was among the 10 richest economies in the world. The millions of emigrant Italians and Irish fleeing poverty at the end of the 19th century were torn between the two: Buenos Aires or New York? The pampas or the prairie?
A hundred years later there was no choice at all. One had gone on to be among the most successful economies ever. The other was a broken husk.
There was no individual event at which Argentina’s path was set on a permanent divergence from that of the United States of America. But there was a series of mistakes and missteps that fit a general pattern. The countries were dealt quite similar hands but played them very differently. The similarities between the two in the second half of the 19th century, and in fact up to 1939, were neither fictional nor superficial. The “lords of the pampas” – young Argentines strutting the salons of Europe between the wars – pop up in accounts of the time as an equally prominent type as the swaggering Americans playing at European decadence in Berlin and Paris.
For a long while the two countries were on parallel paths. The states that later became the US declared independence in 1776 and became a new nation in 1789. The vice-royalty of Argentina, part of the Spanish empire, was overthrown in 1810 by rebels inspired by the American revolution; in 1816, Argentina became an independent republic.
Both faced an internal struggle between those that wanted a centralised nation and those that wanted power reserved for the individual states or provinces. In the US, the separate colonies had existed long before the idea of uniting them and it was not guaranteed that a republic would succeed. The negotiations that led to the writing of the constitution were tortuous and often bad-tempered, and the different denominations, traditions and constitutions of the previous colonies all too evident. Only five of the 13 founding colonies, later states, even bothered turning up to the first drafting meeting, in 1786. Battles had to be fought to make flesh the national motto “E pluribus unum” (“out of many, one”). That motto appears today on US coins, but at the time of independence in 1789 dozens of different currencies were circulating. A national bank and a single “national debt” – making the federal government responsible for the debts of the states – were not created without fierce opposition.
In Argentina, it took decades of struggle before a constitution was adopted in 1853 with a system of sharing tax revenue between the centre and the provinces. But continual tensions were not settled until the suppression of an armed uprising in the province of Buenos Aires in 1880, handing more power to the centre. Domingo Sarmiento, who had tried to forge Argentine national unity while president between 1868 and 1874, said he would settle for an Argentina whose inhabitants were not killing each other.
On the face of it the economies of the two countries also looked similar: agrarian nations pushing settlement westwards into a wilderness of temperate grasslands. In both nations, the frontier rancher – the gaucho and the cowboy – was elevated into a national symbol of courage and independence. But there were big disparities in the way this happened. America chose a path that parcelled out new land to individuals and families; Argentina delivered it into the hands of a few rich landowners.
From the founding of the colonies, America was fortunate to have imported many of the farming practices of northern Europe. The farmers of “New England” came largely from Britain, Germany and the Netherlands, bringing with them the tradition of skilled farmers on small homesteads. Argentina, by contrast, had a history of a few rich landowners on great estates left by the Spanish and the aristocratic elitism that came with it. It also had a labour shortage. Mass immigration to Argentina came later in the 19th century, but the country had to push forward its frontier with a skeleton staff.
Both countries opened up the west, the US to the Pacific and the Argentines to the Andes, but not in the same way. America favoured squatters: Argentina backed landlords. Short of cash, Buenos Aires found the best way to encourage settlers was to sell in advance large plots in areas yet to be seized from the native Americans. But once the battles were won the victors were exhausted, good farm labourers in short supply and the distances from the eastern seaboard to the frontier vast. Most of the new landowners simply encircled wide tracts of grassland with barbed-wire fences and turned them over to pasture.
Thus was privilege reinforced. European emigrants to Argentina had escaped a landowning aristocracy, only to recreate it in the New World. The similarities were more than superficial. In the 1860s and 1870s, the landowners regarded rural life and the actual practice of agriculture with disdain. Many lived refined, deracinated lives in the cities, spending their time immersed in European literature and music. The closest they came to celebrating country life was elevating polo, an aristocratised version of a rural pursuit, to a symbol of Argentine athletic elegance. Even then it took an elite form: the famous Jockey Club of Buenos Aires. By the end of the 19th century some were sending their sons to Eton.
America’s move westwards was more democratic. The government encouraged a system of smaller family holdings. Even when it did sell off large tracts of land, the potential for a powerful landowning class to emerge was limited. Squatters who seized family-sized patches of soil had their claims acknowledged. US cattle ranchers did not spend much time boning up on the entrance requirements of elite English schools. And as well as raising cattle, the western settlers grew wheat and corn. By the 1850s, the US was importing a quarter of a million immigrants a year.
Immigrants came to Argentina as well, but they came later and with fewer skills – largely low-skilled Italians and Irish. In 1914, a third of Argentina’s population was still illiterate. America imported the special forces of British agriculture, and in addition a large number of literate, skilled workers in cloth and other manufactures. Meanwhile, Argentina had more land than it could efficiently work. But it was well into the 20th century before the rot in the foundations was apparent.
. . .
Hyperbole about the “unprecedented” nature of the 21st century globalised economy is misplaced. There was huge integration in markets for goods, capital and (particularly) people during the first “Golden Age” of globalisation, roughly dating from 1880 to 1914. Peace in Europe coincided with the growth of cities and with them urban consumers. A global trading system swiftly developed as transport costs dropped sharply.
It was a great time to be a New World farmer. A canning industry already existed, having been boosted by the need to provision soldiers in the American civil war. Canning was supplemented by other new industrial processes such as freezing and refrigerating meat. American and Argentine farmers saw the markets of Europe open wide and clear in front of them.
Production expanded massively. Fresh American beef appeared with frequency on the tables of Europe. Established supply chains meant that concentrating output in a few areas such as cattle and wheat seemed the logical thing to do. By the end of the 19th century Argentina’s economy, per head of population, was higher than that of France and a third higher than Italy’s. The export boom could have kept Argentina up in the pack, but much of the money was captured by landowners who generally either spent it on imported consumer goods or bought more land with it.
Economies rarely get rich on agriculture alone and Britain had shown the world the next stage, industrialisation. America grasped that building a manufacturing industry would allow it to benefit from better technologies, while trying to squeeze a little more grain out of the same fields would not. It was not as if Argentina consciously rejected the same course. It could scarcely avoid growing its own manufacturing industry. But when industrialisation did come, prevailing prejudices ensured it was limited and late. Argentina’s elites saw no reason to risk their status and livelihoods in the fickle new sphere and anyway there were not enough new workers to fill the factories. Argentina brought the same tendencies that it had to the ossified agricultural sector, preferring cosy, safe monopolies to the brutal riskiness of competition. Its wellbeing rested on farm prices holding their own against the prices of manufactured goods, and on global markets remaining open.
The 20th century was a time of markets opened and snatched away, a time that rewarded rapid reactions to unprecedented events. An economy like America’s, with a nimble industrial sector, was well placed to take advantage. An economy like Argentina’s, grown fat and complacent, endlessly borrowing foreign money to pump out grain and corned beef to foreign markets, was not. The Great Depression after 1929 drove a wedge between the two countries that would later cleave into a gulf between democracy and dictatorship. Between 1880 and 1914, the US political system was reacting to change and addressing at least some of the demands of the discontented. But Argentine politics remained dominated by a small, self-perpetuating elite.
Franklin Delano Roosevelt, elected president amidst crisis and despair in 1932, took few chances. He saw that reform was needed and met the Depression head-on with the New Deal, a somewhat experimental set of policies distinctly at odds with the hands-off doctrine of the Golden Age. It was not until the build-up to war in 1939 revived demand for factory output that the economy truly recovered. But the political impact of the federal government’s efforts was undoubtedly felt. The system was capable of absorbing new ideas. The system could renew itself. The system did not crash.
By contrast, Argentina suffered a deep crisis that ran throughout its narrow political class. With a pathological dislike of anything that smacked of socialism, it appeared paralysed by the slump. Exports of beef and wheat were particularly hard hit – by the end of the 1920s, meat exports to continental Europe had fallen by more than two-thirds from their level in 1924.
The Depression brought FDR and a more active federal government to the US. To Argentina it brought dictatorship. Nationalism and self-sufficiency became attractive; hapless democratic governments passing power ineffectually between each other did not. The man who came to embody the new doctrine, Juan Perón, was one of the leaders of a military coup in 1943. He became president in 1946 and projected an assertive, disciplined nationalism. He encouraged a cult of personality and urged Nazi-style economic self-sufficiency and “corporatism” – a strong government, organised labour and industrial conglomerates jointly directing and managing growth. These ideas came to the US, too, but few took them seriously.
Argentina believed that its travails had been caused by becoming an economic colony – exporting low-value commodities and importing higher-value manufactured goods. There was some truth in this, but the solution, to industrialise at the cost of cutting off the economy from the rest of the world, was not the right answer.
. . .
In 1944, a meeting at Bretton Woods, New Hampshire, created the eponymous system of fixed exchange rates and controls on capital. The footloose money of speculators was to be subordinated to the production of real goods and services. To oversee the system, the conference created the International Monetary Fund. The US and the Europeans also began talks to reduce trade barriers, to undo the panicked protectionism of the Depression.
Argentina headed blindly off in the other direction, rejecting the tenets of open trade. Perón referred to foreign capital as an “imperialist agent”. Rather than face its own problems, the elastic Argentine sense of victimhood stretched to include other, successful economies. Argentina’s obsession with itself was shared by few. Once the US was satisfied that Argentina was unlikely to ally itself with the Soviet Union, it turned its attention to preventing other Latin American states doing so.
The US had emerged from the second world war with both moral and financial credit from Europe. For the next 30 years the US economy was raised by the tide of trade, technology and growth that lifted all the western European countries together. Some referred to the three decades after 1945 as the second Golden Age. The world economy was less integrated than during the first, but the benefits of growth were more widely and sustainably spread.
Meanwhile, Argentina pursued industrialisation within one country. Tariffs averaged 84 per cent in the early 1960s, at a time when barriers between many advanced countries were being reduced towards single figures. It also taxed exports: Argentina had been one of the most open economies in the world in the late 19th century, but now its exports shrank to equal just 2 per cent of its national income. In the US, by 1970, the equivalent figure was nearly 10 per cent and rising fast.
Peronism endured, and indeed endures: Argentina’s current president calls herself a Peronist, and so did her predecessor, who happens to be her husband. One reason is that, in a limited way and under its own distorted terms, it succeeded. The state had become strong. The government owned and ran not just natural monopolies such as water and electricity but anything that looked big and strategic – steel, chemicals, car factories. The economy did industrialise. But it was still falling behind. In 1950 Argentine income per head was twice that of Spain, its former coloniser. By 1975 the average Spaniard was richer than the average Argentine. Argentines were almost three times richer than Japanese in the 1950s; by the early 1980s the ratio had been reversed. Argentina’s was a fragile and superficial progress that masked relative decline.
Workers flood Plaza de Mayo in Buenos Aires, on August 31, 1955 to support President Juan Peron
Workers flood Plaza de Mayo in Buenos Aires, on August 31, 1955 to show their support for President Juan Peron, who had offered to resign.
Since exports had been discouraged, Argentina again and again ran into balance of payments problems. Though Perón was forced out in 1955 (he would later return), Peronism survived. The lavish promises of social welfare made by Perón to the urban workers meant that the government was often in deficit. And when the stability of the Bretton Woods system broke down in the early 1970s as even the US struggled to make its budget balance, Argentina’s defining trait came to the fore. Argentines might not have known how to build, but they most certainly knew how to borrow.
No countries except net exporters of oil did well in the 1970s. Even America had double-digit inflation, but at least it could continue to borrow in dollars. The pretence that Argentina was still a first-world country should have disintegrated in the 1970s, when swelling oil prices and economic dislocation battered even seaworthy governments, and Argentina was thrown repeatedly on to the rocks. In rich countries, the 1970s generally presaged a move to more free-market administrations and policies, as faith in the ability of governments to guide the economy disappeared. In the US, this eventually meant appointing the tough-minded Paul Volcker as chairman of the Federal Reserve. The advanced countries experienced strikes, demonstrations and petrol shortages, but they survived and stabilised.
Argentina slid instead towards military dictatorship. An army junta took over in an out-and-out coup in 1976, just as the White House was again changing hands peacefully and constitutionally. After the disastrous misadventure of seizing the symbolic but economically worthless Falkland Islands from the British, the junta too collapsed.
A “lost decade” of stagnation and strife followed. Hyperinflation wiped out the value of lifetime savings in a few months. Osvaldo Soriano, an Argentine author, writing in 1989, noted that during the time it took him to type the piece, the price of the cigarette that he was smoking went from 11 to 14 australes (a new currency that lasted a matter of weeks).
. . .
In the 1990s, many fragmented markets around the world once more dissolved into one. Like the Golden Age of the late 19th century, the lurch forward of globalisation was helped by a shove from new technology, this time in information and telecommunications rather than ships and railways. As in the Golden Age, the US and Argentina were both leaders of the charge. And as before, the US weathered the storms of change while Argentina, having promised a heroic rise, once again succumbed to a fatal flaw.
On this occasion the hubris was embodied in the government of Carlos Menem. Although from a Peronist background, Menem edged away from economic isolationism, deciding there was one useful thing Argentina could import from America: credibility. He linked the Argentine peso irrevocably, or so the intention was, to the US dollar. This was a high-risk course. Argentina had got used to printing as much domestic currency as it liked. It now had to earn dollars with an economy that had forgotten how to export. It also required public spending to be controlled. It required, in fact, Argentina to stop acting like Argentina.
For a while, it seemed to work. Inflation dropped and the economy stabilised. The IMF, desperate to find a model globaliser to parade to the developing world, unwisely began touting Argentina as an exemplar. But once again Argentina proved a delinquent, better at borrowing than earning. As capital markets dried up after 1998 investors started pulling dollars out of the country and so the supply of pesos had to fall too. In countries that controlled their own currencies, like the US, the severity of the worldwide economic slowdown in 2001 could be minimised by rapid cuts in interest rates, the price of money. The US Federal Reserve slashed the cost of borrowing in 2001, ensuring that the American economy would endure only a brief recession despite huge falls in the inflated share prices of technology companies.
Demonstrators protesting Argentina's economic crisis bang pots and pans in Buenos Aires on January 31, 2002
Demonstrators protesting Argentina’s economic crisis bang pots and pans outside the Supreme Court building in Buenos Aires on January 31, 2002.
In Argentina, a shortage of dollars in its reserves drove up interest rates to punishingly high levels, crushing businesses and bankrupting families. In December 2001 the IMF pulled the plug, forcing Argentina into the largest government bankruptcy in history. Income per head dropped by nearly a quarter in three years. Five presidents came and went within two weeks. The country became a laughing stock.
Yet at dozens of different points over the previous two centuries it could have been the other way round. In fact, it still could. During the second Golden Age of globalisation, the US too was not immune from the deception that everything was fine as long as it could keep borrowing. Throughout the 1990s and 2000s the American economy ran an ever larger trade deficit, financed by borrowing from abroad. But what sparked the financial crisis in the US was the way that borrowing was being financed domestically. Decades of deregulation had produced ways of borrowing and new financial assets so complex that not even the banks that sold them really understood what they were doing. Critics were dismissed as doom-mongers and a property bubble was allowed to inflate absurdly. Mortgages were extended to people with bad credit histories – the Argentines of the US housing market.
If the US fails to recognise the flaws and correct them, as it painfully learnt to do in the Great Depression, the trajectory of its future wealth and power will be lowered. Its rise was not preordained, and neither is its continued pre-eminence.
Argentina, meanwhile, remained true to form. Having initially announced with familiar hubris that the country would be unaffected, its government decided that a good way to deal with the loss of investor confidence would be to appropriate the country’s private pensions.
All in all, it would be wise to keep betting on the US finding the right way out of the financial crisis and Argentina continuing to harm itself. Of the two great hopes of the western hemisphere in the late 19th century, one succeeded and the other stalled in the 20th. It was history and choice, not fate, that determined which became which. It is history and choice that will determine which is which in a century’s time.
Alan Beattie is the FT’s world trade editor
This is an edited extract from ‘False Economy: A Surprising Economic History of the World’ by Alan Beattie, published next month by Viking, £20. To buy the book for £16 call the FT ordering service on 0870 429 5884 or go to www.ft.com/bookshop
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Native Indians come down mountain to redeem Chávez pledge of ancestral land
By Benedict Mander in Chaktapa
Published: May 23 2009 03:00 | Last updated: May 23 2009 03:00
Chief Sabino Romero is in two minds about Hugo Chávez's socialist revolution.
As the leader of a small native Indian community in the remote and lawless mountains on Venezuela's northwestern border with Colombia, Mr Romero heartily approves of the president's apparently pro-indigenous stance. But he despairs at his powerlessness to claim the rights granted to his people during Mr Chávez's rule.
His 12,000-strong Yukpa tribe complains that it is victim to a range of more powerful interests: not just wealthy cattle ranchers, whom they accuse of stealing their land, but drug traffickers, fugitive Colombians linked to guerrilla and paramilitary forces and mul-tinational mining groups.
But despite Mr Chávez's blustery rhetoric, which has most recently been aimed at oil services groups, his government has done little to improve the lives of the Yukpa, out of wariness, they say, of getting mixed up in the tangled web of interests.
"Government institutions are full of people that resemble the apple: red on the outside but white within," says Mr Romero, who sports a red T-shirt characteristic of government supporters and also a feathered headdress with the word "revolution" woven into its band.
"There are communities here which have been completely forgotten by the government," says Mr Romero, shaking his fist before the green slopes of the Sierra de Perijá separating Venezuela from Colombia.
The Yukpa are descending from those isolated mountains to claim their rights enshrined in Venezuela's progressive 2001 constitution, ushered in by Mr Chávez. It entitles indigenous groups to recover their ancestral lands, whose lower reaches have gradually been occupied by cattle ranchers over the past century.
"They have stolen great riches from us and they dare to tell us that we are invading their land?" asks the stern-faced cacique . or chief, of Chaktapa, a settlement at the humid eastern edges of the Perijá mountains.
Also, in a quest for refuge from the threat posed by drug traffickers, leftwing guerrillas and paramilitaries that thrive in the area's seclusion, and in the absence of government help, the Yukpa are taking matters into their own hands.
Last year Mr Romero's ageing father died after he was allegedly beaten up by ranchers who were said to be irate at the Indians' occupation of their land. Shortly after the incident, Mr Chávez declared on his weekly talk show: "Let there be no doubt: between the large estate owners and the Indians, this government is with the Indians."
But while he is quick to engage in assaults on the private sector - this week his government nationalised two gas injection plants as part of a takeover of 60 oil services companies - he has been less active in demarcating the Indians' land.
A clause in the constitution grants Indians the rights to their ancestral land. But because indigenous groups could claim as much as half Venezuela's territory, there are fears that the clause might spark conflicts nationwide. Indians of pure descent represent 2 per cent of the 28m population. Tensions are heightened by the economic sway of the ranchers.
Machiques, where the Yukpa dispute is unfolding, is the biggest milk-producing municipality in Venezuela, where shortages of basic goods, especially milk, have been a politically sensitive problem for a country dependent on imports.
The area also has huge mineral deposits. The fringes of the Perijá range are rich in coal, uranium, phosphates, tungsten, manganese and titanium. International companies including Anglo-American Coal, Chevron and Peabody are involved in the two big coal mines on the Venezuelan side of the range, which contains almost half South America's coal deposits.
Lusbi Portillo, an anthropologist who is against the exploitation of the region's minerals, says the government must decide between favouring the Indians or the multinationals.
Armando Chacín, a farmer and president of Gadema, a local ranchers' association, alleges that the Yukpa lands are a haven for leftwing guerrillas operating with impunity in the border area. He adds that the guerrillas have been recruiting Yukpa Indians, while conceding that some ranchers and members of the national guard are also probably involved in drug trafficking.
Set upon from all sides, the Yukpa pin their fading hopes on Mr Chávez's help.Mr Romero says stoutly: "The revolution was born here." But he does not sound convinced that their erstwhile hero will deliver.
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Santander decides to leave Venezuela
By Peter Thal Larsen in London
Published: May 23 2009 03:00 | Last updated: May 23 2009 03:00
Santander yesterday retreated from Venezuela after its local subsidiary was nationalised by Hugo Chávez, the country's president.
The Spanish bank said it had agreed a deal to sell its stake in Banco de Venezuela to the government for $1.05bn in cash and notes.
The deal marks the end of a turbulent period for Santander in Venezuela. The bank, which has extensive operations across South America, has at times found itself at the centre of spats between Mr Chávez and the Spanish government.
Santander last year struck a deal to sell its shareholding to a local group of private investors before Mr Chávez intervened to say he wanted to buy it.
The sale is the latest in a series of disposals by Santander, which has started selling assets after a decade of acquisitive growth that helped to make it one of the world's largest banks.
The disposals will help to strengthen the bank's capital ratios, which have been under scrutiny from investors. Last autumn Santander raised its target for core tier one equity - a key measure of balance sheet strength - to 7 per cent of risk-weighted assets, from 6 per cent previously. Executives have since hinted at a new target of 8 per cent.
Last month, Santander sold its 32 per cent stake in Cepsa, the Spanish oil company, to International Petroleum Investment Company of Abu Dhabi for about €2.8bn ($3.9bn).
The bank could also revive plans to sell its asset management division, which were shelved in the autumn after the turmoil in the markets made a sale impossible. However Barclays, the British bank, is currently in talks to sell its Barclays Global Investors subsidiary, suggesting activity in the industry has picked up.
Santander is facing a sharp increase in bad loans in Spain, where the credit crunch has triggered a collapse in property prices. However, executives are confident the bank can generate sufficient income from its businesses to allow it to report strong profits and pay healthy cash dividends.
The bad loans are being partly absorbed by provisions set aside by Santander and other Spanish banks during the boom. The bank believes the provisions will not run out until 2011.
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ＮＨＫ：米軍基地の一部所有 「国に買い上げを要望」
赤坂プレスセンターの位置
赤坂プレスセンターの位置
東京・六本木にある米軍基地「赤坂プレスセンター」の敷地の一部をＮＨＫが所有し、４０年以上にわたって国に賃貸してきたことが分かった。ＮＨＫは毎年度、部分的に国へ土地を売却して所有面積を減らしているが、「報道機関が軍用地主」という異例の状態はあと数年続く。
同基地の土地はもともと旧日本軍駐屯地で、１９４５年９月に連合国軍が接収し、在日米軍が使用するようになった。国は東京オリンピック（６４年）を控えた６０年と６２年に計約３万平方メートルをＮＨＫにテレビセンター用地として払い下げたが、米軍の使用が続いた。このため、ＮＨＫは６３年に土地の大部分を、現在の放送センターがある代々木の国有地と交換。残った約８２００平方メートルを６６年度から国に賃貸するようになった。
六本木ヒルズ目の前の一等地に位置し、ＮＨＫが土地の一部を所有する在日米軍基地「赤坂プレスセンター」＝東京都港区で２００８年１０月、真野森作撮影
六本木ヒルズ目の前の一等地に位置し、ＮＨＫが土地の一部を所有する在日米軍基地「赤坂プレスセンター」＝東京都港区で２００８年１０月、真野森作撮影
国はＮＨＫの要望で７５年度から所有地の買い戻しを進め、これまでに約７６００平方メートルを総額約６９億円で買い上げた。現在の基地面積約３万１６００平方メートルのうち、国有地を除いた約６００平方メートルが今もＮＨＫの所有のまま残っている。国側は「毎年度の予算措置で買収している」としている。
同基地は六本木ヒルズに近い都心の一等地に位置し、ヘリポート、将校宿舎、米軍機関紙社屋などがある。ヘリ墜落の危険や騒音の問題があることから、地元の港区と東京都は一貫して国に基地返還を求めている。
ＮＨＫ広報局は「この件はあくまで所有地に関するもので、報道機関の中立性とはなんら関係ない。当該土地はＮＨＫとしては必要ないため、国に買い上げを強く要望し続けている」と説明。在日米軍広報は「コメントする立場にない」としている。
元ＮＨＫ政治部記者の評論家、川崎泰資さんは「過去のいきさつはともかく、公共放送が米軍用地に関与している現状は一刻も早く解消すべきだ」と語った。
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