Day: May 1, 2018

Mexico will respond to the latest U.S. proposals to rework automotive sector rules under a revised North American Free Trade Agreement (NAFTA) when ministers meet next week, Mexican Economy Minister Ildefonso Guajardo said on Tuesday.

Guajardo is due to meet U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland in Washington next Monday to push for a deal on NAFTA after more than eight months of talks to update the 24-year-old accord.

At the heart of the revamp is the United States’ desire to retool rules for the automotive sector in order to try to bring jobs and investment back north from lower-cost Mexico.

Mexico’s main auto sector lobby on Monday described the latest U.S. demands, which include raising the North American content to 75 percent from the current 62.5 percent over a period of four years for light vehicles, as “not acceptable.

Response will come next week

When asked whether he agreed with the automotive lobby, Guajardo said Mexico was still consulting with the industry over the matter and would respond to the proposal next week.

“We will bring a plan in response to the U.S. position,” he told reporters at a news conference in Mexico City.

The minister said it was too early to say whether the three countries could reach a deal in the coming days. If the negotiators were sufficiently “creative” and “flexible,” a successful outcome was probable, Guajardo added.

Tariffs are not part of discussion 

The minister was speaking a day after the Trump administration decided to extend by one month an exemption for Mexico and Canada to planned steel and aluminum tariffs.

Guajardo said Mexico would not accept the U.S. imposition of tariffs, and that his government could mirror U.S. policy to ensure Mexico did not become a “back door” to the United States for steel or aluminum imports from Asia in particular, he said.

He stressed, however, that the steel and aluminum dispute was completely separate from the NAFTA negotiations.

The minister noted that the three sides remained at odds over a number of issues, including U.S. demands to change dispute resolution mechanisms and to impose a sunset clause that could automatically kill NAFTA after five years.
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Algerian farmer Hassen Miri trudges through mud to inspect his durum wheat field, helping the oil-producing nation in its efforts to boost agricultural output and reduce food imports.

“Things are moving slowly but better than in past years,” said Miri, who has fields of cereals and vegetables in Bourkika, about 80 kilometers (50 miles) south of Algiers.

“I’m optimistic,” he said, after weeks of heavy rain relieved a long period of drought in the North African country.

Algeria, a member of Organization of the Petroleum Exporting Countries, has long neglected its farmers and focused on its oil and gas industry, which generates about 60 percent of state revenues.

But a crash in oil prices from above $100 a barrel in 2014 to below $30 in 2016 left the nation struggling to fund its $50 billion annual import bill and has prompted the government to look for ways to ease the strain on its coffers.

Emphasis on local production

With 20 percent of the import bill going toward food, the government has launched a drive to increase local production, seeking to encourage farmers with incentives such as low-interest loans and free vaccinations for livestock.

It is also expanding the use of irrigation to cover 2 million hectares in 2019 (7,720 square miles) from 1.3 million hectares now (5,020 square miles), officials say, helping farmers who rely on rains that can fail.

The government is building 15 new dams to add to the 80 existing ones to water cereals covering an area of 600,000 hectares (2,315 square miles), up from just 60,000 hectares now.

“Now Algeria is offering the agricultural sector with great support, with huge funds to help the production and to provide food for all Algerians,” said Mohamed Djahed, head of the parliamentary agriculture committee.

The government wants to boost output of wheat — one of the main items on the food import bill — to 5.3 million tons by 2022 from 3.5 million tons in 2017.

Algeria, one of the world’s biggest wheat importers, is expected to consume 10.55 million tons of the grain in the 2018-19 season, the U.S. Foreign Agricultural Service said.

Algeria also wants to double output for other products such as potatoes, milk and meat over four years.

In addition to promoting Algerian production, the government has drawn up a list of 851 items that it now bans from being imported, including some food products.

Bureaucracy’s effects

But government initiatives are taking time to feed through.

Official figures show the overall value of food imports fell by just 0.2 percent in the first quarter of 2018 compared with a year earlier, while the value of cereal and milk imports rose.

“Algeria has all the tools needed to promote production,” said an economics professor at the University of Algiers, asking not to be identified. “But, as usual, the implementation will take time because of bureaucracy.”

Nevertheless, farmers are responding to the government push.

Mohamed Amine Abid, who breeds dairy cattle, has increased his herd to 70 cows from 40 since starting up in 2013, helped by state aid that included an extra piece of land.

“Our objective is to develop the Algerian cow. We want it to be born in and raised in Algeria to get used to our climate,” he said.

The state budget is still stretched, even as oil prices have been recovering, so some government initiatives have been scrapped. But Prime Minister Ahmed Ouyahia said agriculture spending, worth about $2 billion this year, would not be cut in 2019.

However, analysts say providing aid is not sufficient to achieve the government’s goal of increasing agriculture’s share of economic output from 12 percent now, as long as youths are losing interest in the land and looking elsewhere for jobs.

“We need to win the food security battle,” said farmer Ahmed Moussaoui, 50.
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Costa Rica will reach 200 years of independence in 2021 and the country’s new president plans to mark it with a revolution of his own: A plan to end the use of fossil fuels in transport.

“When we reach 200 years of independent life we will take Costa Rica forward and celebrate … that we’ve removed gasoline and diesel from our transportation” plans, Carlos Alvarado promised in his victory speech this month.

The 38-year-old progressive beat rival Fabricio Alvarado, an evangelical preacher and musician, with 60 percent of the vote in second-round elections, and will take office on May 8.

The president-elect’s promise marks the first time a Costa Rican leader has backed such a move, though green organizations have previously urged it.

According to Alvarado’s environmental advisors, no date has yet been set for a full phase out of fossil fuels in transport, but the plan should be ready by 2021.

Achieving zero-carbon transport quickly — even in a Central American country well-known for its environmental commitment — will be a significant challenge, energy experts say.

Jose Daniel Lara, a Costa Rican energy researcher at the University of California-Berkeley, said completely eliminating fossil fuels within just a few years is probably unrealistic — though the plan will lay the groundwork for faster action toward the goal.

“A proposal like this one must be seen by its rhetoric value and not by its technical precision,” Lara told the Thomson Reuters Foundation.

Oscar Echeverría, president of the Vehicle and Machinery Importers Association, said the transition away from fossil fuels in transport can’t be rushed as the clean transport market is so far undeveloped.

“If there’s no previous infrastructure, competence, affordable prices and waste management we’d be leading this process to failure. We need to be careful,” Echeverría said.

Small Country, Big Idea

But economist Mónica Araya, a Costa Rican sustainability expert and director of Costa Rica Limpia, which promotes renewable energy and electric transport, said that in a country already rapidly weaning itself off fossil fuels, focusing on transport — one of the last major challenges — could send a powerful message to the world.

“Getting rid of fossil fuels is a big idea coming from a small country. This is an idea that’s starting to gain international support with the rise of new technologies,” she said in an interview.

Costa Rica’s push toward clean energy faces no large-scale backlash, in part because the country has no significant oil or gas industry.

But demand for cars is rising, as is use of other transport systems, and that may prove one of the biggest challenges in meeting the new goal, Lara said.

According to data by the National Registry — the country’s records agency — there were twice as many cars registered as babies born in 2016.

Transport is today the country’s main source of climate changing emissions. According to the country’s National Meteorological Institute, 64 percent of Costa Rica’s emissions come from energy use, and more than two thirds of that is from transport.

According to data from the State of the Region report, put together by a council of Costa Rica’s university leaders, public transport has struggled to meet the transport needs of the country.

As a result, demand for private vehicles has risen dramatically, with the car industry growing 25 percent in 2015 alone, making Costa Rica one of the fastest growing auto markets in Latin America, according to the report.

Budget Hole

One problem in cutting back on fossil fuels is that the country’s budget depends on them, Lara said.

According to Ministry of Treasury data, 22 percent — more than a fifth — of the government’s income comes from fossil fuel taxes, and most of those are levied on transport.

That is particularly problematic because the country has run a budget deficit since 2009, with its debt now having climbed to more than 6 percent of GDP last year, according to the Treasury.

The International Monetary Fund noted in 2017 that “public debt continues to rise rapidly” despite efforts to curb it.

But the president’s proposal to eliminate fossil fuel use for transport could force a rethink of Costa Rica’s financial dependence on a pollution source, Lara said.

The country could, for instance, consider broader new taxes on carbon emissions, Araya said, a move that could provide cost-savings benefits, including less spending by the country’s health services on respiratory problems.

The new president-elect, a former national employment minister under the country’s current center-left government, envisions eliminating transport fuels as just another step toward a full phase-out of fossil fuels.

Such an achievement would be a defining moment in the country’s history, akin to the country’s abolition of its army in 1948, he said.

The effort to end the use of transport fossil fuels is expected to start with reform of the country’s hydrocarbon laws.

Technology Improvements

Araya said that the rapid international scale-up of renewable power and electric transport could make things easier — and be a big economic opportunity for Costa Rica.

“For example, it took almost 20 years to get to one million electric cars (worldwide). It took 18 months to reach two million. The third million happened in around the next eight months. This is exponential growth,” she said.

Prices are falling and efficiency growing in new clean energy technologies, including battery storage, she said. The biggest barrier to seeing them much more widely used may simply be that people aren’t yet used to them, she added.

“Tackling resistance to change is one of the most important tasks we have right now,” Araya said.
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California, 16 other states and the District of Columbia sued the Trump administration Tuesday over its plan to scrap Obama-era auto emissions standards that would require vehicles to get significantly higher gas mileage by 2025.

At issue is a move by Environmental Protection Agency Administrator Scott Pruitt to roll back 2012 rules aimed at curbing greenhouse gas emissions. Under those rules, vehicles would have to get 36 miles of real-world driving per gallon (58 kilometers per gallon), about 10 miles (16 kilometers) over the existing standard.

“Pollutants coming out of vehicles, out of the tailpipe, does permanent lung damage to children living near well-traveled roads and freeways. This is a fact. The only way we’re going to overcome that is by reducing emissions,” Governor Jerry Brown said in announcing the lawsuit along with other top California Democrats.

The rules were set six years ago when California and the administration of then-President Barack Obama agreed to a single nationwide fuel economy standard.

Pruitt, who has sought to block or delay an array of environmental regulations, has argued that assumptions about gas prices and vehicle technology used by the Obama administration to set the standards were too optimistic. And he said the standards would hurt automakers and consumers who can’t afford or don’t want to buy vehicles that are more fuel-efficient.

Automakers have likewise argued that the Obama-era rules would cost the industry billions of dollars and raise vehicle prices because of the cost of developing the necessary technology.

EPA representatives did not immediately respond to an email seeking comment on the lawsuit.

California officials say the standards are achievable and the EPA’s effort to repeal them is not based on any new research. They argue the plan violates the federal Clean Air Act and didn’t follow the agency’s own regulations.

California has a unique waiver that allows it to set its own tailpipe emissions standards for vehicles, which it has used to combat smog and, more recently, climate change. Thirteen other states and the District of Columbia have adopted the California standards as their own.

California has now sued the administration of President Donald Trump more than 30 times on topics including immigration and health care policy.

“The world is not flat, pollution is not free, and the health and safety of our children is not for sale,” said Democratic state Attorney General Xavier Becerra, standing alongside the governor.

Brown, who has made fighting climate change a core of his policy and political platform, said the state’s battles with Washington over climate are the most essential.

“If we follow the Pruitt-Trump path, we follow our way off the cliff to disaster,” he said.

The lawsuit was filed in the U.S. Circuit Court of Appeals for the District of Columbia. Joining California were Connecticut, Delaware, Illinois, Iowa, Maine, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Washington, Massachusetts, Pennsylvania, Virginia and the District of Columbia. All have Democratic attorneys general.
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With cities facing their fastest growth ever, the head of the United Nations’ agency for urban development is on a mission — to revitalize the organization and ensure people, particularly women, are central to future planning.

Maimunah Mohd Sharif, the former mayor of Penang who took up the role of UN-Habitat executive director in January, said cities need to more liveable for women to succeed if they are home, as expected, to 70 percent of the population by 2050.

But first, she said, she had to put UN-Habitat back on track to ensure it could help meet the United Nations’ latest set of global goals calling for cities to become inclusive, safe, resilient and sustainable by 2030.

For UN-Habitat has struggled in recent years to attract funding from national governments — its primary donors — with the Nairobi-based agency receiving just $2.5 million of a  two-year $45 million budget for core operations.

“Before I see change in cities I want to see change in UN-Habitat to make sure it is relevant,” Sharif, a professional planner, told the Thomson Reuters Foundation on Monday on the sidelines of a workshop on sustainable cities.

Since Sharif took office she has stressed that the U.N. General Assembly has adopted a resolution on strengthening UN-Habitat as the organisation’s focal point on sustainable urbanization and human settlements and that is her aim.

Sharif said one of her most immediate challenges is to reform UN-Habitat so that it can be a global driving force in implementing the New Urban Agenda (NUA), a 20-year-road map adopted by global leaders in 2016.

This sets non-binding goals such as developing cities that do not harm the environment, redeveloping informal settlements with residents involved and reining in urban sprawl.

Part of this includes working on a new six-year strategic plan to address urban challenges such as income inequality, affordable housing, climate change and resilience.

Sharif said making cities more liveable for women is one ofbher priorities because the benefits will be far-reaching. “If we plan the city for a woman, we plan it for all,” Sharif said.

“If pavements are more accessible for women with children, it’s also good for men and it’s also good for people with mobility issues.”

Sharif said participatory budgeting, in which ordinary people have a say in how city funds are spent, is an effective way to make sure women are included in key planning decisions.

Sharif added that urban planning was not just a “check-box” of building the school, the park, the road but you need to create “inclusive communities” involving the public, public sector and private companies.

“When you ask people what they want, you can make good decisions,” she said.
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Russia’s Gazprom said on Monday it had completed the sea portion of the first line of the TurkStream offshore gas pipeline across the Black Sea.

Gazprom, which plans to complete the pipeline in 2019, said in a statement that 1,161 km, of pipe had been laid since it began construction last year.

The second line, designed to ship gas to south European countries such as Greece, Bulgaria and Italy, will be laid in the third quarter of 2018, the company said.

Russian Energy Minister Alexander Novak said this month that Turkey’s approval for Gazprom’s onshore portion of the TurkStream pipeline’s second line was still pending.

Moscow, which relies on oil and gas revenue, sees new pipelines to Turkey and Germany – TurkStream and Nord Stream 2 – as crucial to increasing its market share in Europe.

 
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Mexican companies are delaying investment, bringing forward imports to protect against currency swings and warning the next few months could be volatile as the NAFTA trade talks reach a climax and July’s presidential election nears. 

From bakers to retailers and construction firms, more than a dozen of Mexico’s biggest companies cited concerns over NAFTA and the election and issuing conservative guidance in recent weeks, despite economic data pointing to an uptick in Latin America’s second-largest economy.

Grupo Bimbo, the world’s largest bread maker, said it was delaying capital expenditure and tightening costs due to a volatile economic environment amid the presidential campaign.

Though no major company mentioned him by name, the prospect of a government led by left-winger Andes Manuel Lopez Obrador is beginning to unsettle markets. Lopez Obrador is ahead by double digits in all major polls and the peso fell 2 percent in just one day in April, hit by political risk.

“These are not ‘business as usual’ times: there’s much at stake for Mexico in this election,” Bimbo’s Chief Executive Daniel Servitje told an earnings call. “The current situation…demands a cautious stance.”

Exchange rate uncertainty pushed retailer Liverpool to order all the imported products needed for its discount clothing stores Suburbia for the second half of the year.

Its Liverpool department stores have covered 50 percent of imported merchandise needed for the second half of 2018 and even the first half of 2019, the company said.

Juan Fonseca, head of investor relations at bottler and retailer Femsa, one of Mexico’s largest companies, said encouraging signs from falling inflation and wage growth were being overshadowed by the fragility of the peso due to political risk.

“Between now and the election, clearly things are going to be volatile,” he told an analyst call. “There are more data points that would support a cautious case.”

Preliminary gross domestic product (GDP) data for the first quarter on Monday showed year on year growth of 1.2 percent, driven by a jump in the service sector.

Analysts predict Mexico’s gross domestic product will grow 2.3 percent this year as manufacturing activity improves.

However, Scotiabank analysts warned in a recent report that NAFTA and the election could have a significant impact on economic performance.

Tough end to the year

Political leaders from the United States, Mexico and Canada say an initial deal to renew the North American Free Trade Agreement (NAFTA) is close but issues remain. Negotiations in Washington have been paused until May 7.

Mexican companies fear that scrapping the trade pact, as U.S. President Donald Trump has threatened to do, or renegotiating the deal in a way that hinders the Mexican economy would hit their earnings. Around 80 percent of Mexican exports go to the United States.

Executives at Unifin – which leases equipment and vehicles to mid-sized manufacturing, services and construction companies – said clients postponed business decisions every time they saw news suggesting cancellation of NAFTA.

Mexican cement companies Grupo Cementos Chihuahua and Elementia both warned of a tough second half of the year. 

Elementia said government spending on projects was “practically nonexistent” and the private sector was nervous.

“Consumption might stay, but personally, I don’t think it will grow in the second semester,” CEO Fernando Benjamin Ruiz said.

Several companies, including GCC and Mexican bank Banregio, linked their guidance to the outcome of NAFTA and the election.

Paper maker Kimberley Clark de Mexico warned that volumes could be hit by the uncertainty, while airlines Volaris and Aeromexico said it could change customers’ behavior.

The chief executive of Monterrey-based bottler Arca said that while the economy remained very robust in northern Mexico, a good year depended partly on the fate of the trade pact.

“If NAFTA is finally agreed…we definitely will see a good year in volume,” Francisco Rogelio Garza said.

Analysts at MRB Research and Barclays suggested, however, that markets may not yet be pricing the risks of Lopez Obrador winning the presidency.

The former Mexico City mayor, running on an anti-corruption platform, has threatened to cancel a project for a $13 billion airport in the capital and review a major energy reform.

A victory by Lopez Obrador, known as AMLO, would spell volatility in equities and the peso, Barclays said, adding it would be worrying for sectors from infrastructure and banks to construction.

“The assumption that AMLO’s bark is worse than his bite has been drifting into an even more complacent argument: that a populist leader is no bad outcome in the short term, implying fiscal thrust and more growth,” MRB Research said.
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Taiwan is becoming the next battleground for the world’s top offshore wind developers as they seek a foothold in Asia for a technology that has been expanding fast in Europe.

Taiwan announced results Monday of its first major offshore wind farm auction that aims to add 3.8 gigawatts (GW) of capacity to its existing network of just 8 megawatts (MW).

The island’s offshore wind market is expected to expand to 5.5 GW by 2025, and the government aims to invest $23 billion on onshore and offshore wind projects by 2025, law firm Jones Day says.

Taiwan is making a big push to attract investments in renewable technology as it phases out nuclear power by 2025, after the 2011 Fukushima disaster in Japan highlighted the risks of using nuclear energy in a region prone to earthquakes.

For developers in Europe, where expanding offshore wind projects particularly in the North Sea has driven down costs, Taiwan is seen as a route into Asian markets, such as Japan and South Korea, where the technology is still barely used.

Denmark’s Orsted and Germany’s wpd were Monday’s biggest winners, securing contracts to install 900 MW and 1 GW of capacity, respectively.

“We see Taiwan as a stepping stone into Asia-Pacific,” said Matthias Bausenwein, the regional general manager for Orsted, the world’s largest owner of offshore wind power sites that was previously known as DONG Energy.

Taiwan’s auction drew bids from the world’s biggest international players, attracted by the island’s strong winds, a stable regulatory framework and the offer of 20-year power purchase agreements with a feed-in-tariff above European benchmarks.

“We have aggressive targets in Taiwan and, with things going on in China, South Korea and other markets, that amounts to it becoming the fastest-growing region globally,” said Bausenwein.

Falling costs

Offshore wind power is costlier than onshore projects or solar power, and still only accounts for about 3.5 percent of global wind energy capacity.

But Europe has been leading the way in using the technology, adding 3 GW last year and taking total offshore capacity to 19 GW, according to the Global Wind Energy Council.

Costs have plunged as a result. In last week’s auction in Germany, the world’s second-biggest offshore wind power market, some bids offered capacity with no subsidies. In Britain, the world’s biggest market, the cost of wind power fell below new nuclear generation for the first time last year.

This has been encouraged by an expanding regional grid, greater ability to manage variable wind power supplies and the growing scale of turbines, expected to have capacity of 10 to 15 MW each in two or three years, roughly twice as powerful as today.

Taiwan is not considering firms from China, the world’s third-biggest offshore market and which claims Taiwan as Chinese territory. Chung-Hsien Chen, director of the energy technology division at Taiwan’s Bureau of Energy, said Chinese bids were excluded “due to concerns of national security.”

Alongside Orsted and wpd, other bidders included Copenhagen Infrastructure Partners, Canada’s Northland Power, Yushan Energy, a subsidiary of Singapore based Enterprize Energy and Taiwanese firms China Steel Cooperation and Taipower.

After awarding 3.8 GW capacity Monday, a further 2 GW will be allocated through a competitive price tender this summer. Monday’s auction had included an assessment of factors such as the amount of local content included.

European firms want local suppliers to avoid the cost of shipping bulky equipment used in the turbines from Europe.

“The requirements for local content are increasing step by step,” said Andreas Nauen, offshore chief executive for Siemens Gamesa, adding some European equipment would initially be used.

Siemens Gamesa is working to develop the Port of Taichung as a regional hub and has signed non-binding agreements with some local partners that could provide gear locally.

MHI Vestas, a venture between Japan’s Mitsubishi Heavy Industries and Danish turbine maker Vestas, is also considering developing local manufacturing.

“We want to produce locally because we want to be competitive,” the joint venture’s chief executive, Philippe Kavafyan, told Reuters.
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