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Wednesday, July 16, 2014
BRICS to create development bank, 'mini-IMF' n AFP, Fortaleza Leaders of the BRICS group of emerging powers meet Tuesday to launch a new development bank and a reserve fund seen as counterweights to Western-led financial institutions. Brazilian President Dilma Rousseff hosts the leaders of Russia, India, China and South Africa in Fortaleza before talks with South American leaders the next day in Brasilia. The summit will mark the first faceto-face meeting between India's new Hindu nationalist Prime Minister Narendra Modi and Chinese President Xi Jiping. For Russian President Vladimir Putin, who visited Argentina and Cuba before coming to Brazil, the trip gives him a chance to hammer home his calls for a "multipolar" world amid tensions with the West over the Ukraine crisis. "Together we should think about a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies," Putin told Russia's ITAR-TASS news agency. Russia has been excluded from the G8 group of industrialized powers as punishment for its annexation of Crimea and perceived meddling in Ukraine. The United States is threatening to impose new economic sanctions on Russia over accusations that it is backing pro-Moscow separatist rebels in eastern Ukraine.
'Mini IMF'
The summit comes as the economies of some BRICS countries, which together represent 40% of the world population and a fifth of the global economy, are cooling down. Russia and Brazil are expected to see growth of just one percent this year. The five emerging nations unveiled in 2013 their plans to create the bank, which aims to rival the Washingtonbased World Bank while the reserve is seen as a "mini-IMF." The creation of the bank will give a
backbone to the BRICS, which is not a formal international organization, said Marcos Troyjo, Brazilian director of BRICLab research center at New York's Columbia University. "They are only taking their first steps towards a platform for building consensus on international agenda items such as rules for international trade, joint action at the UN or the WTO," he told AFP, referring to the World Trade Organisation. The bank will have initial capital of $50bn with each country contributing an equal share, while the reserve will have $100bn at its disposal.
Negotiations to launch new BRICS bank hit snag n Reuters, Fortaleza On the eve of the signing of a deal to launch a joint development bank, the BRICS nations have still not agreed on where the lender will be headquartered, a senior official involved in the talks told Reuters late yesterday. The leaders of the five emerging market economies are expected to sign a deal on Tuesday that creates the $100bn bank and a reserves fund of the same size to challenge Western dominance over global finance. The five nations are Brazil, China, India, Russia and South Africa. Negotiations have stalled for now on a dispute between China, India and South Africa over who will host the bank. The disagreement has also delayed a decision on which of the countries will hold the first 5-year presidency of the bank. "This should be easy to resolve but we have this dispute. If it doesn't move forward, we may have to leave the decision for another meeting," said the official, who declined to be named. Another negotiator confirmed that no decision has been reached. A delay could be an embarrassment for the BRICS, which see the creation of the bank as a major step to gain more influence in the shaping of the world's financial architecture. The official said that if no deal is reached on Tuesday, the leaders could still sign off on creation of the bank and decide on the headquarters and its president at a later date. Negotiations to create the bank dragged on for more than two years as Brazil and India fought China's attempts to get a bigger share in the lender than the others. The stark economic and political differences between the BRICS countries has made it difficult for the group to turn rhetoric to concrete action in coordinating policies. Russian and Indian officials have signaled that China's business hub, Shanghai, was the front-runner in the race to land the headquarters. l
Together we should think about a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies The bank is "key to foster growth for the BRICS countries," Brazilian Industry and Commerce Minister Mauro Borges said. For the fund, China will make the biggest contribution, $41bn, followed by $18bn from Brazil, India and Russia and $5bn from South Africa. Despite their agreement on the need for a bank, the five countries are split on where it should be headquartered. Shanghai is seen as the frontrunner to host the bank but South Africa insists on having it in Johannesburg. New Delhi and Moscow are the other candidates. The five nations are also negotiating who should hold the bank's rotating presidency first and the make-up of the board. The talks in Fortaleza will open a series of marathon summits and bilateral meetings in Brazil. l
Gloomy German investor sentiment weighs on economy IMF cuts eurozone 2014 n growth forecast AFP, Frankfurt
Investment sentiment in Germany fell to the lowest level for 19 months in July amid signs of a dent in activity in Europe's top economy, a survey found on Tuesday. Even as the euphoria engendered by Germany's World Cup soccer victory reached its climax with the return of the national Mannschaft to Berlin on Tuesday, the widely watched investor confidence index calculated by the ZEW economic institute fell by 2.7 points to 27.1 points in July, it said in a statement. Analysts had been projecting a shallower drop to 28 points this month. The index now stands at its lowest level since December 2012. "Germany has experienced a slight
dent in economic activity recently -- retail sales declined and industrial production as well as incoming orders dropped," said ZEW president Clemens Fuest. The latest decline in the ZEW barometer "reflects this sobering development. On a general note, however, the medium-term economic outlook remains favourable," Fuest insisted. For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months. The sub-index measuring financial market players' view of the current economic situation in Germany fell by 5.9 points to 61.8 points in July, its first decline since November 2013.
Google's Nest launches network technology for connected home n Reuters, San Francisco Google Inc's Nest Labs yesterday unveiled an industry group to encourage makers of smart home gadgets like locks and light bulbs to use Thread, a new standard for devices to communicate on a network. The attempt by Nest, a smart thermostat maker that Google bought in January for $3.2 billion, to lead the way on how future household devices to speak to each other, underscores the importance Google puts on areas like cars and the home. It follows similar initiatives by Qualcomm Inc, Intel Corp and other technology companies. The new Thread Group includes Samsung Electronics and chip companies ARM Holdings, Freescale Semiconductor and Silicon Labs. Big Ass Fans and lock maker Yale are also members of the group, which will cer-
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tify Thread-compatible products. Thread is a networking protocol with security and low-power features that make it more suitable for connecting household device than others, such as Wifi, NFC, Bluetooth or ZigBee, said Chris Boross, a Nest product manager who heads the new group. Nest's products already use a version of Thread, he said. The radio chips used for Threadcompatible smart devices are already in many existing connected home products that use ZigBee, like Philips Hue smart light bulbs. Those Zigbee devices could potentially be updated with software from their manufacturers to work with Thread after a product certification program starts next year, Boross said. "Around that time I imagine that Thread-compliant products will start hitting the market, but people can start building Thread today," he said. l
"While the World Cup trophy just landed in Berlin, the German ZEW index is sounding a signal of increased caution," said ING DiBa analyst Carsten Brzeski. The expert said that recent data had raised concerns of a possible stagnation in the German economy in the second quarster. "Weak industrial production, a sharp correction in the construction sector and the reversal of the positive weather effect from the first quarter do not bode well for second-quarter growth," he said. "Only die-hard optimists and soccer fanatics would argue that the German victory at the soccer World Cup would be sufficient to boost private consumption," the analyst said. Contrary to 2006 when Germany
hosted the World Cup, "soccer enthusiasm is very unlikely to ignite economic confidence," Brzeski argued. Germany beat Argentina 1:0 in a nailbiting final on Sunday and the national team returned to euphoric crowds in the German capital on Tuesday. Capital Economics economist Jennifer McKeown also believed that the latest ZEW reading "adds to signs of a slowdown in the eurozone's largest and strongest economy." Berenberg Bank economist Christian Schulz said that while the ZEW index remains "significantly positive, such a protracted period of declines points to a noticeable cooling of the economy." Postbank economist Heinrich Bayer attributed the renewed drop in the index to disappointing hard economic data and increased geo-political risks. l
n AFP, Brussels The IMF cut its 2014 growth forecast for the eurozone on Monday, warning that the recovery in the single currency bloc was "neither robust nor sufficiently strong." In an annual report on the eurozone, the International Monetary Fund said growth this year would reach 1% instead of the 1.1% earlier forecast. The estimate for 2015 remained at 1.5%. "We acknowledge there is recovery but a lot more needs to be done," said Mahmood Pradhan, Deputy Director of the IMF's European Department, in a conference call presenting the report. The Washington-based IMF recom-
mended eurozone policy-makers adopt measures to boost demand, reinforce banks, and pursue structural reforms that applied to all 18-member countries, including ways to fight youth unemployment. The IMF praised monetary measures decided in June by the European Central Bank, which included negative interest rates and fresh financing for lenders, and said proof of their effectiveness could take time. If the measures fall short however, the IMF urged even more stimulus, including so called quantitative easing embraced by the United States, Britain and Japan, but so far resisted by the more conservative ECB. l
Portugal hopes new boss at BES marks fresh start for troubled bank n Reuters, Lisbon Portugal's troubled Espirito Santo clan was forced to sell a chunk of the bank it founded and accept independent managers on Monday after the lender's links to the family unsettled international markets. An audit of the family-owned holding companies behind Banco Espirito Santo found financial irregularities that raised the prospect of potentially destabilising losses at the country's largest listed bank. The news last week sent Portugal's debt and stock markets into turmoil that spread to Europe as well as other firms in the Espirito Santo family's sphere. Portugal Telecom, waiting to be reimbursed on over $1bn in debt issued by one of the family holding companies, was hard hit. Pressured by Portugal's central bank, BES announced on Monday that its board had put in place new executives - including economist Vitor Bento as chief executive - hastening changes not due to happen until the end of the month in order to distance itself from the family group. Bento is joined by new chief financial officer Joao Moreira Rato, who headed Portugal's IGCP debt agency, and new deputy CEO Jose Honorio. l
Microsoft Chief Operating Officer Kevin Turner holds up a HP Stream 2-in-1 tablet and notebook computer device that will be released this fall for $199 during the keynote address at the Microsoft Worldwide Partner Conference 2014 at the Verizon Center in Washington, DC on Monday AFP