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SUNDAY, FEBRUARY 15, 2015
BUSINESS
News
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b r i e f
Kuwaiti crude price
rises to $53.90pb
KUWAIT: Kuwaiti crude oil price rose on Friday by
$3.06 to settle at $53.90pb as opposed to $50.84 pb
on Thursday, Kuwait Petroleum Corporation (KPC) said
yesterday. In London, the Brent crude, for the April
delivery, rose $2.24, some four percent, reaching
$61.52 pb. In the New York commercial market, the
American crude futures climbed $1.57pb, some three
percent, to the level of $52.78pb.
SABIC CEO named to
defense industries post
DUBAI: New Saudi King Salman appointed
SABIC CEO Mohamed Al-Mady as the president
of the country’s military industries corporation, a
royal decree published on the state news
agency SPA said yesterday. The statement did
not make immediately clear whether Al-Mady
would be leaving his post at Saudi Basic
Industries Corp.
Kenya cuts fuel prices,
cites lower costs
NAIROBI: Kenya’s Energy Regulatory Commission
slashed yesterday the maximum retail prices of petrol,
diesel and kerosene, citing lower import prices. Since
2010, Kenya has set a cap on prices of petrol, diesel
and kerosene to protect consumers from what the
regulator has said were unfairly high prices. But consumers have questioned the system in recent months,
saying local prices do not reflect falling global prices.
The ERC cut the price of a litre of petrol in the capital
Nairobi by 8.17 shillings to 84.71 shillings. It also cut
the price per litre of diesel by 7.83 shillings to 75.52
shilling and that of kerosene by 13.19 shillings to
52.40 shillings. Fuel prices are a key component in the
basket of goods used to measure inflation. The price
changes take effect on Feb. 15 and will be in force for
a month.
Venezuelans
scratch heads over
complex devaluation
CARACAS: Venezuelans puzzled over the impact of a complicated currency devaluation and fretted that dire product shortages
in the OPEC nation’s recession-hit economy would not go away.
President Nicolas Maduro’s socialist government this week
launched a 70 percent devaluation via a new “free floating” currency system known as Simadi, the third of three-tier exchange
controls created by his predecessor Hugo Chavez. “They’re doing
this because they don’t have any money,” said a man who gave
his name only as Felix, and who said he was 83.
“This is not going to solve the problem,” said Felix as he stood
in a senior citizens’ line with about 50 other people to buy rice
and coffee at a Caracas supermarket. “We’re going to keep waiting in line to buy anything we need.” The Simadi system on
Friday posted an exchange rate of 174 bolivars per dollar, but
state officials insist most of the country’s foreign exchange will
be sold at two preferential rates: 6.3 for essential goods such as
food staples, and 12 for other sectors.
The country’s central bank administers dollars at those two
rates, but importers complain that allocations are limited, often
delayed and require overwhelming paperwork.
Dollars on the black market fetch 190 bolivars. The two preferential exchange rates of 6.3 and 12 can help keep prices down
for food and medicine, but businesses consistently struggle to
obtain dollars at the rate, which means they cannot bring in raw
materials or machine parts.
As a result, there are shortages of basic consumption goods
ranging from chicken to laundry detergent, leading to occasional scuffles for scarce products. The scarcities and lines have contributed to a dip in Maduro’s approval rating - to 22 percent
according to one pollster - and give opponents hope of wresting
control of parliament from the ruling Socialist Party in a vote later this year.
Maduro says the country is a victim of an “economic war,” and
argues that Venezuelans today are generally better off and better fed than they were before Chavez took office in 1999.
Impact on corporate accounts
The devaluation is likely to ripple across the balance sheets of
foreign corporations with significant exposure to Venezuela,
ranging from household products maker Kimberly-Clark Corp to
oil services company Schlumberger NV. Venezuelan bonds were
up on Friday after the release of the exchange rate, as devaluations tend to reduce the cost of imports and free up more hard
currency to pay debt.
The benchmark Global 2027 was up 0.603 point to a price of
41.570 and a yield of 24.261 percent. Economists believe the
benefits of devaluing are muted because the new Simadi system
will receive only a fraction of the dollars that the government
sells, with the vast majority being sold at preferential rates.
Essentially, those who cannot obtain dollars at the other two
rates will try to get the Simadi rate.
“We remain skeptical about the impact this three-tiered FX
system will have on an already stagflationary economy,” wrote
UBS economists in a research note. “We believe that Simadi will,
at most, remain a rather marginal FX allocation system.”
Venezuela’s bonds are trading at distressed levels on concerns that the rout in oil prices could prompt a default, and on
average pay 26 percentage points more than comparable US
Treasury bills. Maduro dismisses default talk as ill-intentioned
rumor mongering.—Reuters
US eases import curbs
from private Cubans
Unclear if Cuban govt will permit such exports
HAVANA/WASHINGTON: The United States on Friday
eased restrictions on imports of goods and services from
private Cuban entrepreneurs as part of Washington’s rapprochement with Havana after more than half a century of
enmity. However, the State Department said many goods
were excluded from the liberalization, including tobacco,
vegetable products and some textiles, and it was unclear
whether Cuba would relax its own rules to permit Cubans
to export to the United States.
The U.S. State Department said the import of all goods
was now allowed except in certain broad categories,
including live animals, vehicles, mineral products, machinery and some base metals. Exports of all services are permitted. It was not immediately clear, however, what Cuban
goods would find their way to the US market. One sanctions expert suggested that these could include such items
as artisanal soap, pottery and jewelry.
Of greater significance may be the opening up for services, which could allow Cuban graphic designers, computer
programmers, market researchers or party planners to
acquire US clients.
The move is the latest step toward normalization after
the United States and Cuba agreed on Dec. 17 to begin the
process of restoring diplomatic ties and US President
Barack Obama called for an end to the long economic
embargo against its old Cold War enemy.
both houses of Congress and who oppose normal relations
with the Communist-run island. However, Obama said he
was ending what he called a rigid and outdated policy of
isolating Cuba that had failed to achieve change on the
Communist-led island.
His administration’s policy shift includes allowing use of
US credit and debit cards, increasing the amount of money
that can be sent to Cubans and allowing export of
telecommunications devices and services.
Beyond securing permission from their own authorities,
another problem for potential Cuban exporters may be
coming up with “documentary evidence” that will satisfy
the US government that they are indeed private entrepreneurs. “The problem is going to be proving that it is in fact
a private-sector exporter,” said Cari Stinebower, a partner
with the law firm Crowell & Moring.
Nelson Espinosa, 31, a street merchant in Havana who
sells carved wood artifacts, including old Cuban cars and
miniature drums sets, said he was pleased by the idea of
exporting to the United States but would prefer American
visitors to Cuba.
“It’s good news if now we can sell to the US market,” he
said adding. “It’s not really our goal. What we really want
are the American tourists. That would be much easier for us
than all the hassles of getting licenses to export through
the airport.” — Reuters
From ‘Haircut’ to ‘Dirty Exit’:
Greek bailout buzz words
ATHENS: The Greek bailout drama has given rise to a series
of buzz words that so rile Athens they have become no-go
areas for those attempting to broker a deal. Here is a list of
the offending words:
“ Troika”-the nickname for Greece’s creditors, the
European Union, International Monetar y Fund and
European Central Bank-all of whom keep tabs on Athens to
ensure they’re getting enough reforms for their buck. For
many Greeks, the troika is made up of faceless bureaucrats,
despised “men in black” with no democratic legitimacy,
who lurk around the ministry of finance or gleefully order
Athens around by email-the utmost insult.
“Memorandum”-this is the deal Greece signed with its
creditors in 2010 and again in 2012, which comes to an end
on Februar y 28 unless Athens asks to extend it. In
exchange for billions of euros in aid, Greece was obliged to
implement a slew of unpopular reforms-termed “barbaric”
by the new Greek government-which included public sector lay-offs, pushing back the retirement age and raising
taxes.
“Germany”-the byword on the streets of Greece for a
ruthless and interfering austerity policy, which claims to be
a remedy for the euro-zone debt crisis but is squeezing
ordinary Greeks dry. Angela Merkel and her finance minister Wolfgang Schaeuble are frequently caricatured-sometimes in Nazi uniform-in newspaper cartoons depicting
Greece as a German colony.
It can also be a catchword for money due, after Athens
renewed claims that Berlin owes it around 162 billion euros
($183 billion) — or around half the country’s public debt-in
reparations and an unreturned war loan. “Extension” and
“Bridge”-The EU says Greece must prolong its bailout or risk
defaulting on its debts and crashing out of the euro-zone.
The Greek government insists it wants a “bridge program”
instead, which would tie it over while it negotiates a new
deal.
Cartoons in Greece’s dailies have had a field day with
this, with Greece’s Finance Minister Yanis Varoufakis depicted enthusiastically building bridges, only to find in one
case that his unfinished wooden creation was about to be
felled by a saw-wielding Merkel.
“Grexit” and “Dirty Exit”-A Greek default would likely
mean its exit from the euro-zone, but the knock-on effect
on its European neighbors feared in 2011 and 2012 may be
avoided.
After the diplomatic efforts scrambled across the EU to
keep Athens in the zone, however, a failure to clinch a deal
before the bailout expires at the end of the month would
lead to a “dirty exit”-a term flung about by analysts but
strictly avoided by politicians. “Haircut”-Ruling radical left
party Syriza wants Greece’s creditors to write off part of the
money it owes. Faced with EU resistance, the government
appears open to settling for an extended deadline for debt
repayment and lower interest rates-which Varoufakis has
termed essentially a haircut with another name.
“Structural reforms”-This is the watchword of the central
banks, from Mario Draghi of the ECB to Jens Weidmann of
the Bundesbank, who never miss an occasion to remind
the Greek government, and other European countries, that
it’s the key to their future growth.
Their biggest fear? That concessions to Greece would
weaken the resolve of others such as Italy and Portugal to
implement reforms. “ELA”-This is the Emergency Liquidity
Assistance granted by the Bank of Greece under the
European Central Bank’s approval, and is the life-jacket
keeping the country’s banks afloat since the ECB cut off a
key funding avenue last week.
Critics worry the ELA is only serving to keep the Greek
banks alive artificially and have called for strict criteria to
govern access. — AFP
China’s Minsheng to invest 1bn
pounds in new London project
SHANGHAI: China Minsheng Investment Co Ltd (CMI), the
country’s largest private investment fund, said on Saturday it
would invest 1 billion pounds ($1.5 billion) in a Chinese-led
project to develop a new financial district in London. The
project is one of the largest Chinese investments in the
United Kingdom in recent years and one of the most significant for Minsheng, which launched last August with registered capital of 50 billion yuan.
The private equity firm said it would become the majority
investor in the project, which was unveiled in 2013 by
Chinese developer Advanced Business Park (ABP) and Mayor
Boris Johnson and touted as potentially London’s third financial centre after the City and Canary Wharf.
ABP, headed by little-known Beijing businessman Xu
Weiping, wants to develop a 14-hectare sliver of land at the
historic Royal Albert Dock in east London into 400,000 square
metres of offices and shops. Headed by Gong Wenbiao, the
former chairman of state-owned Minsheng Bank Corp,
Minsheng Investment claims no formal relationship with the
bank or the Chinese government despite the name.
In January, the fund’s international advisory committee, a
“They are changing the thrust of US policy to allow the
private sector in Cuba to blossom,” said Pedro Freyre, chair
of law firm Akerman LLP’s international practice. “Of course
there are two ends to this. We are still waiting to see how it
is going to play out in Cuba.” Under Cuban law, private sector entrepreneurs cannot independently import and
export products or services without a government license.
However, artists are allowed to sell their work to foreigners,
and there is also an exotic bird cooperative that obtained a
license in 2013.
Philip Peters, president of the Cuba Research Center in
Alexandria, Virginia, said the step put the ball in Cuba’s
court to see how it would react to opening up the private
sector.
“It’s a very important barrier that’s been broken. We’ll
see how the Cuban government reacts,” he said, saying
Obama was opening up trade in broad categories. “He’s not
micro-managing. President Obama is leaving it to the
imagination of both sides.”
After 18 months of secret talks, Obama and Cuban
President Raul Castro agreed in a Dec. 17 phone call on a
breakthrough prisoner exchange, the formal reopening of
embassies and an easing of some restrictions on commerce.
Obama’s call for an end to the economic embargo drew
resistance from Republicans who in January took control of
panel that includes former European prime ministers, Asian
tycoons and a Nobel laureate, assembled at Diaoyutai State
Guesthouse in Beijing for the first time to discuss its globalization strategy.
The fund has said it would invest broadly in areas ranging
from sustainable energy to real estate to business jet services.
The Chinese developers and London officials have envisioned attracting growing Asian companies to establish their
European headquarters at their business park, which is close
to the London City airport.
“After the project is completed, it will be the international
platform and foundation for Chinese companies and capital
to enter the European market,” Minsheng president Li
Huaizhen told reporters in Shanghai on Saturday, hours after
striking a deal with the UK finance ministry.
As China’s economy cools, its businesses are ploughing
money into projects overseas at such a pace that China’s outbound investment will soon overtake inbound flows.
China’s outbound direct investment surged 14.1 percent
to a new high of $102.9 billion last year, according to the
commerce ministry. — Reuters
ROME: A woman shows a flag of Greek party Syriza yesterday in Rome during a demonstration to support new hard-left
Greek Prime Minister Alexis Tsipras (Syriza) during his talks in Brussels and to protest against austerity. — AFP