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INTERNATIONAL EDITION
THURSDAY, JULY 28, 2011
108TH YEAR I Š2011 THE MIAMI HERALD
Congress still split as debt default looms BY STEVEN R. HURST Associated Press
AP
Peru’s President Alan Garcia is leaving his successor a rapidly growing economy, record international reserves and social unrest simmering across much of this Andean country.
UNFINISHED BUSINESS
postpone a vote on his plan that originally had been scheduled for Wednesday after the nonpartisan congressional budget ofďŹ ce said the proposal would cut spending less than advertised. He promised to rewrite the measure, but that will delay a vote until at least Thursday. Boehner is struggling to mend the rift between more mainstream House Republicans and the Tea Party block that is demanding deeper spending cuts to accompany a short-term, nearly $1 trillion increase in the government’s borrowing cap. Many of the increasingly powerful Tea Party group said they would not support the speaker’s position. But some Republican doubters seemed to be falling in line. “We’re moving in his direction in a big way today,â€? Rep. Mike Rogers said of Boehner’s plan. Rogers and others cited changes being made in the bill to make sure spending cuts exceed added borrowing authority, and the fact that the House will soon vote on a balanced budget plan. Senate Minority Leader Mitch McConnell said only Boehner’s
WASHINGTON — The U.S. Congress remained dangerously split Wednesday in the face of an unprecedented default on its debt in just six days, as Republicans clashed with Democrats — and with each other — over raising the federal cap on borrowing. World stock markets watched nervously for a feared downgrade of the United States’ AAA bond rating, shedding value across the board. The political and ďŹ scal turmoil embroiling Washington — brought on by the striking ascension of a block of newly elected members of the House who are beholden to the Tea Party wing of the Republican party — threatens to slow the U.S. economy back into recession or worse if Congress can’t agree on the normally routine issue of raising the debt limit by Tuesday. So far all efforts at compromise among the Republican-controlled House, the Democratic-run Senate and U.S. President Barack Obama have failed, raising the level of partisan acrimony. House Speaker John Boehner, a Republican, was forced Tuesday to * TURN TO DEBT LIMIT, 2A
Peru’s outgoing president leaves his sucessor a number of unresolved conflicts
BY CARLA SALAZAR Associated Press
LIMA — When Alan Garcia handed over power as his ďŹ rst term ended in 1990, Peru’s Congress erupted in catcalls. The South American nation was saddled with hyperination and was bleeding badly from the Maoist Shining Path’s fanatical rebellion. Garcia leaves Peru in much better shape as he ends his second term on Thursday. Economic growth averaged 7 percent a year during his 2006-11 administration, ination held at less than 3 percent annually and the government amassed $47 billion in foreign reserves. The economic numbers only tell part the story, however. While the guerrilla war was largely over when Garcia returned to ofďŹ ce, social conicts in which authorities had to intervene nearly tripled on his watch. Critics
claim his pro-business policies often ignored Peru’s native peoples and damaged the environment. The resulting unrest has led to 104 deaths and 1,398 injuries since 2008, according to Peru’s national human rights ombudsman’s ofďŹ ce. And few of the underlying conicts have been resolved. Garcia leaves President-elect Ollanta Humala, an apparently moderate leftist who assumes ofďŹ ce Thursday, with a ticking time bomb of disputes stemming in large part from objections by indigenous groups to the damage to water supplies, crops and hunting grounds wrought by mining, logging and oil and gas extraction. “On the positive side, [Garcia] leaves a basically healthy economy,â€? said historian and political analyst Nelson Manrique. “On the negative side, he has been authoritarian, hasn’t been open to political dialogue and put off
Billionaires’ ascent helps India, and vice versa BY JIM YARDLEY AND VIKAS BAJAJ New York Times Service
ial and has found the right opportunity,â€? said Eswar Prasad, an economic advisor to India’s ďŹ nance minister. “But it’s a symptom of a dysfunctional state. He is able to deliver something more effectively than the state.â€? Today, India is increasingly turning to the private sector to deliver the electricity needed to maintain rapid economic growth into the future. India’s economy is growing at more than 8 percent annually, but is badly constrained by an inadequate power supply after years in which the government dominated the power sector and failed to keep up with growing demand. The rise of Adani attests to a broader shift, as the private sector is playing a greater role in areas once controlled by the state such as telecommunications, ports, airports, banks and infrastructure. At a global level, this contrasts sharply with China, where huge state-owned enterprises dominate strategic industries and lead the country’s global expansion. Adani recently had to outbid the Chinese for his Australian port. Within India, though, the success of private tycoons has created a paradox: India’s moguls are essential to the country’s success and admired for their ability to
MUNDRA, India — On a recent wind-whipped morning, a steel-hulled behemoth arrived at a desolate stretch of India’s western coast groaning with enough coal to power a city of 1 million people for more than two weeks. The ship, the Vanshi, was carrying coal from Indonesia, a two-week trip across the Indian Ocean. India has its own abundant reserves of coal, which raises a question: Why did India need to go so far to get something it already had? For Gautam Adani, the power mogul, the answer was simple: The easiest and most proďŹ table way to meet India’s rising demand for electricity is to avoid the hassles, divisive political confrontations and practical inefďŹ ciencies of India. In the spirit of the workaround ethos typical of India’s private sector, Adani is working around the subcontinent itself. He owns the Indonesian coal mine, the Korean-made cargo ship, the Indian power plant and, most important, the private Mundra port. He owns coal mines and a major port in Australia, and has built his own private railroad spur in India. His business plan is to do as much as possible without relying on India’s creaky state infrastructure. “He is able to do so well partly because he is very entrepreneur- * TURN TO INDIA, 2A
MEXICAN JOURNALIST KILLED WHILE PROBING EDITOR’S DEATH, 4A
SOUTH KOREA LANDSLIDES LEAVE 32 DEAD, 6A
dealing with a series of demands that have generated a climate of social volatility.â€? Garcia favored multinationals bent on extracting Peru’s nonrenewable resources at the expense of the majority of Peru’s people, his critics contend. The bloodshed dogged Garcia into his last days in ofďŹ ce. At least ďŹ ve people were killed last month in clashes with police as highland protesters in Puno state demanded a halt to illegal artisanal mining that has contaminated their water. Other protesters in Puno demanded that a proposed silver mine be scrapped. A strident leftist as president in the 1980s, Garcia gained global fame then for declaring a moratorium on Peru’s foreign debt payments. In his second term, he reinvented himself as * TURN TO PERU, 2A
Norway premier calls for ‘more democracy’ BY IAN MACDOUGALL AND KARL RITTER Associated Press
security measures and not be naive,� he said. Stoltenberg underlined his commitment to openness, defending freedom of thought even if includes extremist views such as those held by the 32-year-old Norwegian who confessed to Friday’s bomb blast at government headquarters and to the shooting massacre at a Labor Party youth camp hours later. At least 76 people were killed. “We have to be very clear to distinguish between extreme views, opinions — that’s completely legal, legitimate to have. What is not legitimate is to try to implement
OSLO, Norway — Prime Minister Jens Stoltenberg vowed Wednesday that his countrymen will ďŹ ght back against the twin terror attacks with “more democracyâ€? and said an independent commission is being formed to investigate the massacre and to help survivors and relatives. Norwegians will defend themselves by showing they are not afraid of violence and by participating more broadly in politics, he told reporters. “It’s absolutely possible to have an open, democratic, inclusive society, and at the same time have * TURN TO NORWAY, 2A
Women flout Israeli law for a swim BY ETHAN BRONNER
New York Times Service
TEL AVIV — Skittish at ďŹ rst, then wide-eyed with delight, the women and girls entered the sea, smiling, splashing and then joining hands, getting knocked over by the waves, throwing back their heads and ultimately laughing with joy. Most had never seen the sea before. The women were Palestinians from the southern part of the West Bank, which is landlocked, and Israel does not allow them in. They risked criminal prosecution, along with the dozen Israeli women who took them to the beach. And that, in fact, was part of the point: to protest what they and their hosts consider unjust laws. In the grinding rut of IsraeliPalestinian relations — no negotiations, mutual recriminations, growing distance and dehumanization — the illicit trip was a rare event that joined the simplest of pleasures with the most complex of politics. It showed why coexistence here is hard, but also why there are, on both sides, people who refuse to give up on it. “What we are doing here will not change the situation,â€? said Hanna Rubinstein, who traveled to Tel Aviv from Haifa to take part. “But it is one more activity to oppose the occupation. One day in the future, people will ask, like they did of the Germans, ‘Did you know?’ And I will be able to say, ‘I knew. And I acted.’ â€?
FINANCIAL FIRMS WEIGH OPTIONS SHOULD U.S. DEFAULT, BUSINESS FRONT
RINA CASTELNUOVO/NEW YORK TIMES SERVICE
Palestinians from the West Bank swim with a group of Israeli women who smuggled them into Israel for a day. Such visits began a year ago as the idea of one Israeli, and have blossomed into a small, determined movement of civil disobedience. Ilana Hammerman, a writer, translator and editor, had been spending time in the West Bank learning Arabic when a girl there told her she was desperate to get out, even for a day. Hammerman, 66, a widow and the mother of a grown son, decided to smuggle her to the beach. The resulting trip, described in an article she wrote for the weekend magazine of the daily newspaper Haaretz, prompted other Israeli women to invite her to speak, and led to the creation of a group they call “We Will Not Obey.� It also led a right-wing organization
to report her to the police, who summoned her for questioning. In a newspaper advertisement, the group of women declared: “We cannot assent to the legality of the Law of Entry into Israel, which allows every Israeli and every Jew to move freely in all regions between the Mediterranean and the Jordan River while depriving Palestinians of this same right. They are not permitted free movement within the occupied territories nor are they allowed into the towns and cities across the green line, where their families, their nation, and their traditions are deeply rooted. “They and we, all ordinary citizens, took this step with a clear and * TURN TO ISRAEL, 2A
PHELPS WINS GOLD; PELLEGRINI REPEATS DOUBLE AT WORLDS, SPORTS FRONT
INDEX NEWS EXTRA .............3A U.S. NEWS ....................5A OPINION ........................7A COMICS & PUZZLES ...6B 5
BUSINESS&SPORTS B THURSDAY, JULY 28, 2011
THE MARKETS DOW 30
12,302.55
-198.75
S&P 500
1,304.89
-27.05
NASDAQ
2,764.79
-75.17
2.98
+0.03
$97.40
-$2.19
10-YR NOTE CRUDE OIL
Stocks fall on renewed debt limit concerns BY CHIP CUTTER
Associated Press
NEW YORK — Stocks plunged Wednesday as the United States edged closer to defaulting on its debt and the economy showed more signs of deteriorating. Major indexes gave up all of their gains for the month. The Dow Jones industrial average fell 198.75 points, or 1.7 percent, to 12,302.55, its biggest one-day drop since early June. It has fallen for four days straight. The S&P 500 fell 27.05 points, or 2 percent, to 1,304.89. The technology-focused Nasdaq composite index fell 75.17 points, or 2.7 percent, to 2,764.79, its worst day in five months. The Dow is headed for its worst weekly decline in nearly a year and is now 4 percent below the 2011 high it reached on April 29. The S&P, which serves as a benchmark for most mutual funds, is also down 4 percent from its recent peak. The declines were broad. More than 10 stocks fell for every one that rose on the New York Stock Exchange, and all but two of the 30 stocks in the Dow average fell. With no sign of a compromise in Washington, investors are becoming more fearful that the U.S. rating could be lowered. That would raise interest rates and slow down the already weak economy. Small-company stocks fell more than the rest of the market. Small companies are more vulnerable to economic downturns since they make fewer products and usually have less cash on hand than large companies. With the deadline for a debt deal just six days away, investors are selling the stocks they consider to be the riskiest. The Russell 2000 index, which tracks smaller U.S. companies, fell 3 percent, almost twice as much as the Dow. Stocks have been falling overall since last Friday as an Aug. 2 deadline for raising the U.S. borrowing limit approaches. With no sign of a compromise between Republicans and Democrats in Washington, investors are becoming more fearful that the United States’ triple-A credit rating could be lowered or that the country might default on its debt. Either event would raise interest rates across the board and slow down the already weak U.S. economy. A decline in orders for manufactured goods also pushed stocks lower. The government said orders for durable goods fell 2.1 percent in June because of a drop in demand for commercial aircraft, automobiles and heavy machinery. Manufacturing has been disrupted this year by parts shortages from Japan and higher energy prices. Earnings reports were mixed. Amazon.com rose 3.9 percent after the online retailer reported that its earnings and revenue were far higher than analysts were expecting. Juniper Networks plunged 20.9 percent, the most of any company in the S&P 500, after the computer networking equipment maker issued an earnings forecast that was lower than many analysts expected. Dunkin’ Brands shot up 46.6 percent to $27.85 on the company’s first day on the Nasdaq market. The parent of Dunkin’ Donuts and the Baskin-Robbins ice cream chain went public to help pay down its debt.
INTERNATIONAL EDITION
Financial firms mull options should U.S. default BY TODD WALLACK
The Boston Globe
Financial institutions across the United States were reviewing their holdings, preparing contingency plans, and working to calm anxious investors as the government moved another day closer to defaulting on its financial obligations. While most banks and investment firms expect Congress to strike a deal, they are nonetheless preparing for what might happen if lawmakers fail to lift the debt ceiling and avoid a default by next week’s deadline. Fidelity Investments in Boston, for example, has performed so-called stress tests on its money market holdings to be sure they could withstand the fallout from a default. Rockland Trust, a community bank south of Boston, said it plans to waive overdraft fees for customers affected if the government
is something that banks have had weeks and months to prepare for,” said banking analyst Nancy Bush. “It’s been a slow-moving train of money until Aug. 10, when it New York Times Service wreck.” WASHINGTON — It turns out would be unable to cut millions For weeks, U.S President Barack the federal government is sitting of Social Security checks without Obama and congressional Repubborrowing more money. on some extra cash. licans have tangled over a deficitU.S. President Barack Obama Thanks to an inflow of tax reduction package, which has bepayments and maneuvering by has described Aug. 2 as a “hard come a prerequisite for raising the the Treasury Department, the deadline” for Congress to instatutory debt limit, expected to be government can probably con- crease the maximum amount reached Aug. 2. tinue to pay all of its bills for that the government is allowed to If Congress fails to raise the limseveral days after Aug. 2, provid- borrow. it, the government would be unable Jay Carney, the White House ing potentially critical breathto borrow to meet its obligations, ing room for Congress to raise spokesman, restated that position resulting in a technical default, the debt ceiling, according to on Tuesday. and provoking what many analysts “That’s not a guess. That’s estimates by several Wall Street say would be another financial and banks and a Washington research not a political opinion,” Carney economic crisis. said. “It is the judgment of career organization. Both Republican and DemocratThe consensus is that the ic leaders say they want to avoid a government will not run short ) TURN TO DEBT, 2B default and, so far, financial marstops paying Social Security and Wells Fargo, and Citibank, are all kets have signaled they believe they other benefits. drafting contingency plans, though will. Stocks have declined in each Major banks, including Bank of they declined to disclose details. ”This is not an unknown. This ) TURN TO FIRMS, 2B America, TD Bank, Sovereign Bank,
Analysts unsure when U.S. will reach debt limit
KUNI TAKAHASHI/NEW YORK TIMES SERVICE
Technicians work at a plant for Precision Automation and Robotics in Pune, India. The company sells robots to Western manufacturers like Caterpillar, Ford and Chrysler.
Manufactured goods lead surge in Indian exports BY VIKAS BAJAJ
New York Times Service
PUNE, India — When Ranjit Date returned to India 20 years ago after earning a doctorate in robotics from a U.S. university, he hoped to help automate factory assembly lines in his home country. His company, Precision Automation and Robotics India, has done that. But more recently it has also begun selling robots to Western manufacturers like Caterpillar, Ford and Chrysler. This year,
in fact, a third of Precision Automation’s sales will come from exports, up from almost nothing five years ago. Date’s company is emblematic of a recent surge in exports of engineered and other sophisticated goods from India — a country perhaps better known for exports of skilled services like software outsourcing. But in fact, Indian exports of goods are now nearly double exports of services, growing 37.5 percent, to $245.9 billion, in
the 12 months that ended in March. Leading the way are high-value products like industrial machinery, automobiles and car parts, and refined petroleum products. Indian exports are following a different path from that taken by other Asian countries like Japan, Korea and China. Those countries started by exporting products like garments and toys made by armies of low-paid, low-skilled workers, before moving to more sophisticated products like cars and industrial machinery.
India has largely skipped the first step and gone straight to producing capital-intensive items that require skilled workers but not necessarily many of them. Rather than pursue the traditional developing-country model of exports, India aspires to eventually achieve something more like Germany’s mix of industrial goods for the global market — even if India has a long way to go before approaching Germany’s $1.3 trillion ) TURN TO INDIA, 2B
James Murdoch’s future at stake at BSkyB board meeting BY JULIA WERDIGIER AND GRAHAM BOWLEY
New York Times Service
LONDON — The phone hacking scandal riling the British political and media worlds has posed a significant challenge to British Sky Broadcasting, the lucrative satellite-television network known as BSkyB that has long been the centerpiece of Rupert Murdoch’s European ambitions. On Thursday, BSkyB’s board will meet for the first time since the outcry over phone hacking by one of Murdoch’s tabloid newspapers forced his News Corp. to drop its bid to buy the 61 percent of outstanding shares in BSkyB it does not already own. The future of BSkyB’s broadcasting license and the fate of its current chairman, Murdoch’s son James, are on the line, analysts said. “The biggest issue is whether James Murdoch is to remain chairman,” said Steve Liechti, an analyst at Investec Securities in London. “Given the issues going on
to hold a broadcasting license because of the scandal unfolding at News Corp. BSkyB’s share price has dropped 14 percent since the latest phase of the affair erupted earlier this month. Several former employees of News International, News Corp.’s British newspaper empire, have been arrested in the investigations into telephone voicemail hacking and corruption at News of the World, which Murdoch shuttered this month. James Murdoch, who is head of the News Corp.’s European operations, which include News International and BSkyB, approved a settlement of £725,000 (about $1.4 million at the time) to a hackADRIAN DENNIS/AFP-GETTY IMAGES ing victim in 2008. In Parliament The future of BSkyB’s broadcasting license and the fate of its last week, he denied he was ever current chairman, Rupert Murdoch’s son James, above, are on told that underlying evidence in the the line at a board meeting on Thursday. case implicated a second reporter at the tabloid, in addition to one The meeting comes as Ofcom, convicted in 2007, although two with News Corp. and James Murdoch’s position within that busi- the British broadcasting regulator, former senior executives of News ness, it may be seen that it is not proceeds with inquiries into whether BSkyB remains “fit and proper” ) TURN TO MURDOCH, 2B appropriate.”
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