Day: November 10, 2017

From Britain’s Queen Elizabeth to Formula One racing champion Lewis Hamilton — the leak of more than 14 million documents from firms involved in offshore finance, known as the Paradise Papers, has engulfed some of the world’s most famous names.

The latest revelations show U2 frontman Bono used a company based in low-tax Malta to invest in a shopping mall in Lithuania. The Irish band, well known for its campaigning against poverty, has faced past criticism for its tax arrangements. There’s no suggestion that Bono acted illegally.

But campaigners against poverty say sheltering profits in secretive tax havens is depriving the public.

“This is money that’s lost to healthcare, to education, vital public services,” says Murray Worthy of Global Witness.

Europe wants to blacklist jurisdictions that refuse to cooperate on tax transparency. After a meeting of finance ministers this week, French representative Bruno Le Maire said the threat must be credible.

“If states do not stick to their commitments we have to put sanctions on those states,” he said Thursday.

Many of the world’s wealthy shelter their money in British Overseas Territories and Crown Dependencies, which operate autonomously and have their own rules on tax and company law. British Prime Minister Theresa May said the government is demanding more openness. “We want people to pay the tax that is due,” she told business leaders this week.

Campaigners question that commitment, especially as economic uncertainty grows after Britain’s vote to leave the European Union.

“Since the Brexit vote here in the United Kingdom, the government has been far less assertive with British Overseas Territories and Crown Dependencies,” said Duncan Hames of Transparency International.

The group has just released the details of an investigation into how lax rules and enforcement on company ownership in Britain are exploited to launder illicit wealth. Hames says just six people are employed to police the ownership of the country’s 4 million registered companies.

“We looked at just over 50 known corruption and money-laundering schemes. And we found over 750 U.K. companies at the very heart of those schemes, which themselves amounted to some $80 billion.”

Forty-four of the companies identified in the investigation were officially registered at one mailbox — number 11, at 43 Bedford Street in central London.

The property is owned by a franchise of the firm Mail Boxes Etc. No allegations of corruption or money laundering are made against the owners — who told VOA they carry out due diligence and follow all U.K. laws. But mailbox forwarding services are a major weakness in the system, argues Hames.

“That has resulted in what we call ‘company factories’ — single locations where there are thousands upon thousands of companies registered. Not locations where there is any meaningful head office activity taking place. Half of the companies we found involved in these corruption and money-laundering schemes were registered at just eight addresses,” said Hames.

An estimated $100 billion of illicit wealth passes through London every year. Campaigners say British laws on company ownership urgently need tightening up.

 
…

Maine’s wild blueberry crop fell sharply this summer to land below 100 million pounds (45.3 million kilograms) for the first time in four years, according to a trade group that promotes the industry.

Preliminary industry figures show the crop coming in at about 65 million pounds (29.5 million kilograms), Wild Blueberry Commission of Maine Executive Director Nancy McBrady said. It’s more than enough for the state to remain far and away the wild blueberry capital of the country, but a sharp drop from recent years when the size of the crop soared and the price to farmers dwindled.

The crop is down because of factors including bad growing conditions, such as a lack of rain, and lack of farming effort, McBrady said. Surplus supplies of blueberries from recent years and a resultant drop in prices to farmers have motivated some growers to scale back.

 “It’s going to be smaller,” she said. “Having a small supply, hopefully we can start to see more stable prices in the future.”

Last year, the crop grew a little less than one percent to almost 102 million pounds (46 million kilograms), while prices hit a 10-year low of 27 cents per pound to farmers. The drop in farm prices hasn’t significantly trickled down to consumers, in part because Maine isn’t the only source of the fruit. Canada is another major supplier of wild blueberries in the U.S.

Maine produces about a tenth of the blueberries in North America, according to the University of Maine. The state is best known for wild blueberries, which are smaller than cultivated blueberries and are almost always sold frozen.

Maine’s industry has been looking for new buyers to help drive up demand for the blueberries and improve prices. It recently found one such new buyer when Oakhurst Dairy, a major player in New England food that is based in Portland, announced it plans to begin issuing wild blueberry milk in the spring.

The company chose to make milk flavored with blueberries after the concept won a social media contest with consumers, said Jim Lesser, vice president of marketing for Oakhurst.

“This has more to do with what consumers want. It just happens to be good for Maine’s blueberry industry,” he said.

 
…

The large drop in global cocoa prices has hurt African farmers, leading some to abandon their plantations. In Cameroon, however, cocoa producers are mapping out ways to encourage more local processing.

At Nkog-Ekogo in the center region of Cameroon, a cocoa post-harvest processing and treatment center is inaugurated. Farmer Petronella Ndukong said that will help farmers dry and conserve their produce while waiting for prices to increase.

“[It] is going to be a wonderful thing for the producers,” Ndukong said. “They will start learning how to transform it.”

The world’s fifth-largest cocoa producer, Cameroon’s average cocoa production was 230,000 tons in 2015. That increased to 260,000 tons last year when demand rose in the world market.

The International Cocoa and Coffee Organization reports that in 2015 there was a boom with growing demand, particularly in the new markets of China and India. This pushed farmers to produce a surplus of 400,000 tons of cocoa against the four-million-ton annual supply. In 2016 and 2017, there has been another surplus of about 400,000 tons.

Yet, local processing in Africa is only 25 percent of production, so the continent relies on developed countries for processing.

Luc Magloire Mbarga Atangana, Cameroon’s trade minister, said this year has been the worst in the last five as the farm gate price per kilogram officially dropped to $1, from $3 three years ago. That is pushing farmers to abandon their farms.

Atangana said the main challenge is that financial and social pressure is forcing some farmers to harvest cocoa that is not ready, and drying it under unhealthy conditions. The result, he said, is that prices will continue to be drastically reduced because the cocoa is of very poor quality.

And there are indications production will plummet.

Ambe Funui, president of a cocoa producers association in the Lekie, center region of Cameroon, said environmental factors are harming production.

“I pray that the production should not reduce this year because we have noticed that there is very timid bearing of cocoa, there is late bearing and then it seems as if there is persistent black spots despite the fact that farmers are applying the insecticides and fungicides,” Funui said.

During the Yaounde meeting to encourage African countries to process cocoa, Daniel Mercier of the French Confederations of Chocolate Makers and Confectioners said it will be dangerous for Africa’s economy if cocoa production is abandoned because of low prices. He advises that production should not be dropped and the quality of the crop should be controlled by halting early harvests. 

It is a shame, he said, that while developed countries process cocoa and make much profit from its sale, producing countries remain very poor. The best thing would be for cocoa-producing countries to process their cocoa to highly consumable food items like chocolate, he added.

Seventy percent of the world’s cocoa comes from west and central Africa. Producers have suggested that the issue of cocoa price decline should be included in the agenda of the Africa-EU summit to be held later this month in Abidjan, Ivory Coast, which, together with Ghana, contributes 60 percent of the cocoa sold in the world.
…

President Donald Trump’s two-day stop in China saw the signing of $250 billion in deals between the world’s two biggest economies and the two countries aligning themselves closer in resolute opposition to North Korea’s nuclear ambitions.

But analysts say little new ground was broken on trade or North Korea, an issue that will continue to top President Trump’s agenda as he travels to Vietnam and attends the Asia-Pacific Economic Cooperation Summit.

And the true test of the feel-good foundation forged during the meetings, analysts said, is likely to come in the days, weeks and months ahead.

Big deal?

By design, the $250 billion sum of the deals was meant to provide a sharp contrast to the $300-500 billion deficit that exists between the United States and China, something Trump called “horrible” before departing for his 12-day trip to Asia.

Chinese state media have kicked into overdrive hailing the visit as a huge success. Media reports have highlighted the tone of the meetings, repeatedly noting the total amount of the deals.

An editorial in the official China Daily Friday said, “Although the differences that had been pestering bilateral ties have not instantly disappeared, the most important takeaway from their talks in Beijing has been the constructive approach to these issue the two leaders demonstrated.”

Chinese President Xi Jinping has called the meeting “historic.”

“We will definitely write a new chapter in the U.S.-Chinese relations. We will definitely make a new contribution to realize a beautiful future for U.S.-Chinese relations,” Xi said at a banquet Thursday evening.

Whether the “historic” nature of the meetings will hold, however, remains in question.

Liao Qun, chief economist at China CITIC Bank International, said that the size of the deal shows trade takes priority above all else.

“Though the U.S. and China do not see eye to eye, both still compete on many geo-political issues, trade still remains at the top of their agenda. With closer trade relations, the U.S.-China relation will still make headway,” Liao said.

​No guarantees

But not all agree with that assessment.

Some analysts said that despite Trump’s softer approach and “incredibly warm” feeling he expressed about his Chinese counterpart, the president is likely to be back to criticizing China again in a few months.

“The president likes deals, and he likes big numbers, but we’re not going to change something he doesn’t like, which is the big China trade deficit, without changing Chinese practices,” said Derek Scissors, a resident scholar at the American Enterprise Institute. “China has to have a different approach to trade in the world than it does.”

Scissors said that more than the deficit, it is what is behind the numbers, such as the fact that Chinese state-owned enterprises never go out of business.

“Which means American goods and services can’t ever win in the China market,” he said.

WATCH: Trump Touts Excellent Progress in Beijing During Talks with Xi

Paul Haenle, director of the Carnegie-Tsinghua Center for Global Policy said we may have a case of misaligned assessments of how the visit has played out.

The Chinese leadership may think that they have done a lot to give President Trump face, with all of the pomp and business deals, and that that has put the relationship on solid footing, he said.

“But President Trump may go home to a domestic political environment where people are disappointed he hasn’t achieved more progress on the structural trade and economics issues (market access, more fair and reciprocal treatment for U.S. businesses, intellectual property rights, forced technology transfer, and Chinese unfair industrial policies) and North Korea,” Haenle said. “My concern is you may see a shift towards a much harder line coming from the U.S. administration. That will be a huge surprise to China and President Xi.”

​Pretty small

The huge deals reached could create jobs in America and provide a small boost to exports, but the meetings did little to advance market access.

“Open markets are better for both sides. It is also better for China to open up its market. But China is not interested in opening markets,” said Christopher Balding, associate professor of finance at Peking University’s HSBC Business.

In a briefing with reporters Thursday after the two leaders issued a joint statement, Secretary of State Rex Tillerson said that “in the grand scheme of a $300- to $500-billion trade deficit, the things that have been achieved thus far are pretty small.”

“I mean, they’re not small if you’re a company, maybe, that has seen some relief. But in terms of really getting at some of the fundamental elements behind why this imbalance exists, there’s still a lot more work to do,” he said.

China has repeatedly pledged to do more to open its markets, and the Communist Party recently approved amendments to its charter that called for letting “the market play a decisive role in the economy. But progress has been slow and contradictory.

Earlier this year, China announced it would be allowing U.S. credit card companies to operate fully owned units in the country after years of stalling. However, several sources recently told Reuters that authorities are still pressing foreign credit card companies to form joint ventures with Chinese companies.

On Friday, China announced that it will raise the ownership limits in joint venture firms involved in securities, futures and fund markets. China’s Vice Finance Minister Zhu Guangyao said that ownership limits would be raised from 49 to 51 percent, allowing foreign companies to hold a majority stake.

No time frame for implementing the measures was given, but according to Reuters Zhu did say that all restrictions on equity holdings for the sectors would be removed in three years.

Analysts note that while it is still hard to say what else was discussed behind closed doors, on trade and North Korea, the ball is clearly in China’s court.

“Trump has put the onus on President Xi to solve the North Korea problem. This is why he said that if Xi wants something to happen, it will happen,” Balding said.

VOA’s Joyce Huang and Saibal Dasgupta contributed to this report.
…

Donald Trump warned that the stock market was a “big, fat, ugly bubble” just weeks before he was elected. A year later, Wall Street remains on a milestone-shattering run that the president has been eager to tout and tweet about.

The Standard & Poor’s 500 index, the broadest measure of the stock market, has notched 61 record highs and climbed about 21.3 percent in the year since Trump was elected.

That exceeds the S&P 500’s gain in the first-term election anniversaries of all but two presidents since World War II: George H.W. Bush (22.9 percent) and John F. Kennedy (27 percent), according to CFRA Research.

It also outpaces the market’s performance in the same postelection period of several other modern-era White House occupants, including Ronald Reagan (-3.3 percent), Bill Clinton (10.3 percent), George W. Bush (-22.1 percent) and Barack Obama (4.1 percent). But it trails the S&P 500’s gain in the first year after the second-term elections of Clinton (31.7 percent) and Obama (23.4 percent).

​Initially a sell-off in Asia

The billionaire’s surprise electoral victory initially set off a steep sell-off in Asian markets. But by the end of the day on Nov. 9, 2016, global markets had steadied and the S&P 500 index closed sharply higher. The market’s rally continued for several weeks, driving the major U.S. stock indexes to record highs. This year, stocks have gradually moved higher, clocking new milestones for the indexes along the way.

Since Trump’s election, investors have been betting that the White House and a GOP-controlled Congress will have a clear pathway to cut taxes, relax regulations and enact other business-friendly policies, despite legislative stumbles that have delayed the administration’s efforts.

Strong corporate profits, revenue

Yet, the biggest driver of the market’s gains has been strong corporate profits, Wall Street analysts say.

“The most important thing that’s happened is we’ve had very good earnings seasons,” said JJ Kinahan, chief market strategist at TD Ameritrade. “Companies are making money. Earnings drive the market and earnings have been good.”

In recent weeks, more than 400 of the companies in the S&P 500 have reported their results for the July-through-September quarter, and they’ve been so much better than forecast that Wall Street has more than doubled its expectations for third-quarter earnings growth to 6.8 percent, according to S&P Global Market Intelligence.

What’s more encouraging to many investors is that more companies than usual are also reporting higher revenue than analysts had forecast.

Stock prices tend to track corporate profits over the long term, so the better-than-expected earnings growth helps to validate the stock market’s record-setting run, at least somewhat.

Betting on growth

Investors have also continued to bet big on economic growth in the U.S. and worldwide as economies in Europe and Asia have bounced back, Kinahan noted.

Since Trump’s election, technology companies have led the way with a 39 percent surge. Banks and industrial and basic materials companies have also soared. Only phone company stocks are down from a year ago.

During the first presidential debate between Trump and his Democratic rival Hillary Clinton in September 2016, Trump cautioned that the stock market was in bubble and that even a small increase in interest rates would bring the market “crashing down.”

That’s not happened, even though the Federal Reserve has raised interest rates twice this year and is expected to do so again next month.

‘Sailing along’ another year

Eight years into the bull market, many analysts expect stocks to keep climbing, at least for the next year. The global economy is improving, corporate profits are rising and inflation remains low but not so low that it makes economists nervous.

On average, the S&P 500 has continued “sailing along” for another year after a president’s first-term election anniversary, before declining 10 percent or more, said Sam Stovall, chief investment strategist at CFRA Research.

He notes that the shortest time was 36 days following Kennedy’s first election anniversary, while the longest stretch was nearly four years after Clinton was elected.

“Should history repeat, and there is no guarantee it will, this bull (market) could continue to surprise investors with its resiliency,” Stovall said.
…