Month: August 2018

Chilean President Sebastian Pinera said on Tuesday that his overhaul of the country’s tax structure would “modernize” Chile’s revenue system and stimulate investment by local and foreign companies.

The conservative leader said in a televised address that reform would, among other proposals, calibrate taxes paid by conventional companies with those paid by digital technology companies. The reform aims “to create a simpler and more equitable and fully integrated tax system for all Chilean companies.”

Digital commerce companies with local operations like Netflix and Uber are likely to be affected under the reform.

E-commerce is gaining traction in Latin America after a slow start. Last month, an Amazon Web Services vice president met with Pinera to discuss Amazon investing in the country as part of a longer-term regional expansion plan.

Pinera, a billionaire second-term president, whose first term as president was marred by protests over rising inequality, in June detailed a $26 billion spending plan and called for unity as Chile continues its “vigorous march towards development.”
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Mexico risks losing long-term passenger growth and billions of dollars if it fails to go through with building a new hub in the capital to alleviate congestion, an executive with the International Air Transport Association (IATA) said on Tuesday.

Mexico’s incoming government last week postponed a decision on whether to complete a partially constructed new airport in Mexico City, saying the public should be consulted on the fate of the $13-billion hub, which the next president initially opposed.

President-elect Andres Manuel Lopez Obrador said the project was tainted by corruption prior to his July 1 landslide election victory, and had pressed for an existing military airport north of the capital to be expanded instead.

Without the new airport, around 20 million fewer passengers would fly to Mexico City starting in 2035, year over year, said Peter Cerda, regional vice president in the Americas for IATA.

It would also mean a long-term loss of $20 billion from Mexico’s GDP and cost the country 200,000 jobs, according to an airline-industry study on the financial impact of not building the new airport, Cerda said.

IATA, the Montreal-based trade association, has 290 member airlines which together transport about 82 percent of global air traffic.

Passenger traffic is expected to double by 2035 on a global basis, including Latin America, Cerda said in an interview.

“If you don’t build an airport that’s able to meet the needs of the next 50 years you just cannot continue to grow,” Cerda said on the sidelines of the International Aviation Forecast Summit in Denver. “And that has financial implications for the country.”

Work began on the new airport, which is a few miles northeast of the current one, in 2015. The present airport, located in the east of Mexico City, has become increasingly saturated by rising air traffic and has no room to expand.

“This is an airport that was built for 32 million passengers a year and currently we have 45 million passengers traveling through,” Cerda said.

Cerda urged Mexico to make any decision on “technical justifications” rather than “public outcry that may not fully understand the consequences.”
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For Mazen Rahhal, a shop owner in a bustling district of Beirut, Lebanon’s economy has seldom felt more precarious. In one store, he sells clothes at a fraction of their previous price. Another, which he rented to a rival business, now lies empty.

Years of gradual stagnation have in 2018 merged with several newer trends: high interest rates, falling house prices and questions about the currency at a moment of profound uncertainty as politicians wrangle over forming a new government.

For Lebanese businesses and people, economic unease and the lack of a government to take firm control over policy — some three months after they voted in a general election — have become ceaseless sources of worry.

“We are struggling just to manage the costs we have to pay: from electricity, employee wages, everything,” said Rahhal. His family has owned shops on Hamra Street, the main business thoroughfare of west Beirut, since the 1970s.

As Lebanon rebuilt after its 15-year civil war ended in 1990, there was a period of economic growth, and as in its 1950s and 60s heyday, it drew Gulf Arab tourists ready to open their wallets as they escaped the stifling summer heat of home.

But problems were never far away.

In 2005 prime minister Rafik al-Hariri was assassinated, opening up wide divisions over the roles of the Iran-backed Hezbollah group, and of powerful neighbor Syria.

Syria’s own war since 2011 has aggravated those rifts, while cutting off much of Lebanon’s overland trade and scaring off the mostly Sunni Muslim Gulf tourists, who feared the growing power of the heavily armed Shi’ite Hezbollah movement.

Sclerosis ensued. After Hariri’s death, the government did not pass another state budget until last year. Parliamentary elections in 2009 were not held again until this May.

Economic growth, which averaged 8-10 percent before the Syria war, has averaged 1-2 percent since it began, and a purchasing managers’ index for Blom Bank has shown business activity in decline every month since 2013.

The state owes about 150 percent of the gross domestic product, much of it to local banks, whose own business is partly based on remittances paid into them by Lebanese working abroad, in turn partly drawn by attractive interest rates.

Difficulties 

Khoury Home is a major business in Lebanon. Its shops, a familiar sight across the country, sell home appliances. 

Romen Mathieu said he had told his staff every year since becoming the company’s chairman in 2013 that the coming year would be more difficult than the last.

“Now we reached 2018, and this year is disastrous, and I think we still didn’t see the tough part of this year,” he said. “If I have to say it in 2019, there won’t be anyone listening to me any more.”

Compounding Mathieu’s difficulties, the government last year scaled back a series of incentives to banks for home loans, which contributed to a dip in the housing market. As fewer people bought houses, fewer wanted new fridges or televisions.

“Let’s not make fools of each other. There is no money in the market and we need to adapt to this situation and get used to it,” said Mathieu.

Not all businesses are suffering. Supermarket chain Spinneys has increased sales volumes because many of its goods are imported from Europe, and currency fluctuation has brought prices down, said chief executive Michael Wright.

“We are selling more, our volumes are going up. But that’s balanced by a price drop,” he said.Since May’s election the rival political parties have squabbled over forming a new national unity government — one that contains enough of the major parties to ensure political backing across the country.

Without a new government, Lebanon cannot institute the fiscal reforms needed to get its debt under control or unlock billions of dollars in pledged foreign investment in infrastructure to get the economy moving.

Everybody Reuters interviewed said it was critical for Lebanon to form a government soon.

Meanwhile, interest rates have risen as the authorities increasingly try to attract higher levels of the bank deposits on which government debt relies.

Those high rates are hurting too.

Jessy Kojababian has been engaged for two years. Her wedding was fixed for September. But as interest rates rose, and the government incentives for banks to offer housing loans were scaled back, she and her fiance could no longer afford to buy a house.

They have now cancelled the wedding.

“We were already booking everything for the wedding. The roses, the restaurant, the church. Everything. We paid a deposit of $6,000, so how can we get it back?” she said.
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U.S. President Donald Trump’s administration weakened environmental controls on coal production Tuesday, overturning national regulations set by his predecessor, former President Barack Obama.

The Environmental Protection Agency said it will now allow individual coal-producing states to set their own rules for carbon emissions rather than have to adhere to an overall country-wide standard. The plan is subject to a 60-day comment period before it is finalized.

The action marks a fulfillment of a 2016 Trump campaign pledge to boost the fortunes of coal companies and coal-producing states.

It came hours before the president headed to a political rally for a Senate candidate in West Virginia, the second biggest U.S. coal production state, where he was expected to promote the plan. During his successful run for the White House, Trump supporters in coal states often held signs saying, “Trump Digs Coal.”

The EPA decision is Trump’s latest effort to topple Obama’s environmental legacy, following his withdrawal of the U.S. from the 2015 international Paris climate control accord championed by the former president.

At the time that he revoked U.S. participation in the agreement, Trump said, “I was elected by the citizens of Pittsburgh, not Paris.”

The EPA said its new rule is designed to replace Obama’s 2015 Clean Power Plan that targeted greenhouse gas emissions from coal plants and sought to shift power production away from coal to abundant natural gas supplies in the U.S., along with wind and solar energy. Trump’s EPA called the Obama rules “overly prescriptive and burdensome.”

The White House said the policy change will “significantly decrease bureaucratic red tape and compliance costs” for coal companies, “keeping American energy affordable and competitive on the world stage.”

But environmental groups immediately attacked the Trump administration edict, with the Natural Resources Defense Council calling it a “Dirty Power Plan.”

Environmental advocates said the Trump policy change, assuming some states weaken their regulations compared to the current national standards, will boost emissions from coal-fired power plants and worsen global warming.

Congressman Frank Pallone, a New Jersey Democrat, said “once again, this administration is choosing polluters’ profits over public health and safety.”
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British and European Union negotiators expressed cautious optimism Tuesday that they would reach a deal to prevent a disorderly U.K. exit from the bloc, saying talks will be intensified and take place “continuously” over the next few crucial months.

After meeting U.K. Brexit Secretary Dominic Raab in Brussels, chief EU negotiator Michel Barnier said differences remained between the two sides on future economic relations and maintaining an open border between EU member Ireland and the U.K.’s Northern Ireland.

Barnier said the challenge “for the coming weeks is to try and define an ambitious partnership between the U.K. and the EU, a partnership that has no precedent.”

Raab said there were “significant” issues to overcome, but that if both sides showed ambition and pragmatism, an agreement could be reached by October.

That’s the deadline the two sides have set themselves for a deal on divorce terms and the outlines of future trade, so that it can be approved by individual EU countries before Brexit day on March 29.

But negotiations have got bogged down amid infighting within British Prime Minister Theresa May’s divided Conservative government about how close an economic relationship to seek with the EU after Brexit.

Last month the government finally produced a plan, proposing to stick close to EU regulations in return for free trade in goods and no customs checks on the Irish border. But to some EU officials that smacks of cherry-picking benefits of EU membership without the responsibilities — something the bloc has explicitly ruled out.

Last week Latvian Foreign Minister Edgars Rinkevics put the chances of getting a Brexit deal at 50-50.

British businesses have warned that leaving without a deal could cause mayhem for trade and travel, bringing higher food prices, logjams around U.K. ports and disruption to everything from aviation to medical supplies.

A group that represents U.K. hospitals and ambulance services has said that its members may run out of drugs if Britain leaves the European Union without an agreement on future relations.

In a letter published Tuesday, NHS Providers said a lack of “visible and appropriate communication” from the government is hampering preparations for a so-called no-deal Brexit.

In a letter to National Health Service bosses that was leaked to the Times of London, the group’s chief executive said it would be more efficient to develop contingency plans nationally rather than “have to reinvent the wheel 229 times.”

Chris Hopson said “the entire supply chain of pharmaceuticals” could be affected by the failure to reach a deal, adding that it could also “jeopardize” the EU workforce “on which the NHS relies.”

The U.K. government says it remains confident of reaching a deal, but is preparing for all outcomes. Foreign Secretary Jeremy Hunt said Tuesday that the chance of no deal was “not negligible,” and that outcome would be bad both for Britain and for the EU.

On Thursday, the U.K. government plans to publish the first in a series of technical reports outlining the effects a no-deal Brexit would have on various sectors and offering advice to businesses and the public on how to prepare.

 
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Claudio Belotti knows he cut the denim that became the jeans Meghan Markle wore on one of her first outings as the fiancee of Britain’s Prince Harry.

That’s because he cuts all of the fabric for Hiut Denim Co., a 7-year-old company that makes jeans in Cardigan, Wales. Belotti is a craftsman with 50 years of experience that gives his work a personal touch — something that’s not quite couture but not exactly mass-produced either.

“There’s a story behind each one,” Belotti said. “You’re paying for the skill.”

Customer demand for something unique is helping small companies like Hiut buck the globalization trend and set up shop in developed countries that had long seen such work disappear. While international brands like H&M and Zara still dominate the clothing market, small manufacturers are finding a niche by using technology and skill to bring down costs and targeting well-heeled customers who are willing to pay a little more for clothes that aren’t churned out by the thousands half a world away.

Profits at smaller national clothing firms grew 2 percent over the last five years, compared with a 25 percent decline at the top 700 traditional multinationals, according to research by Kantar Consulting.

Their success comes from promoting their small size and individuality, said Jaideep Prabhu, a professor of enterprise at Cambridge University’s Judge Business School.

“It’s a different kind of manufacturing,” he said. “They are not the Satanic mills. These are very cool little boutiques.”

Hiut, which makes nothing but jeans, employs 16 people in Cardigan and makes 160 pairs a week. Women’s styles range from 145 pounds ($192) to 185 pounds ($244), men’s go for 150 pounds to 235 pounds. Each is signed by the person who sewed it, known in the company as a “Grand Master.” By contrast, Primark says it sources products from 1,071 factories in 31 countries and keeps costs down by “buying in vast quantities.” The most expensive pair of jeans on the company’s website sells for 20 pounds.

Many of these small manufacturers also try to stand out by embracing social issues, from reducing waste to paying a living wage.

Hiut, for example, highlights its efforts to put people back to work in a small town that was devastated when a factory that employed 400 people and made 35,000 pairs of jeans a week shut down. Underscoring the years of craftsmanship that go into each pair of jeans, the company offers “free repairs for life.”

This kind of customer service helps form a “personal relationship” between a brand and the shopper that is valuable, says Anusha Couttigane of Kantar Consulting.

Customers notice. Laura Lewis-Davies, a museum worker who from Wales, says she wants to support independent businesses when she can and bought a pair of Hiut jeans after seeing a story about Markle wearing the brand.

“Well-crafted things bring more joy,” she said. “I’d rather buy fewer things but know they’re good quality [and] made by people who are working in good conditions for a fair salary.”

The rise of small clothing makers reflects a broader shift in consumer preferences away from big brands — as evident, say, in the boom in craft beers. In fashion, technology is fueling the trend.

The internet provides a cheap way to reach customers, while off-the-shelf artificial intelligence programs allow companies to accurately forecast demand and order materials so they can make small batches and avoid unwanted stock. That makes it possible to produce clothes that are more customized.

“Data is the backbone for this and the trigger,” said Achim Berg, a senior partner at McKinsey & Co. in Frankfurt who advises fashion and luxury goods companies.  “It’s not custom-made, but it gives the consumer the opportunity to be more individual.”

A survey of 500 companies by McKinsey and The Business of Fashion, an influential industry news website, identified personalization as this year’s No. 1 trend. Consumers are willing to hand over personal information to get more customized products and services, according to a 2016 survey by Salesforce.com, which provides online sales and marketing tools for businesses.

Established brands have recognized the trend and offering to customize products, too. Adidas, for example, offers the chance to mix and match colors and materials on things like the sole and laces on some of its shoes.

But making clothes on a smaller scale has also gained a moral tinge after scandals about sweatshops, child labor and unsafe working practices hit global brands in recent years. The 2013 collapse of the Rana Plaza building in Bangladesh, which killed 1,100 and injured 2,500 others, highlighted the grim conditions in factories that export to the United States and Europe.

Jenny Holloway, who employs 100 people at Fashion Enter in London, said she’s not interested in making as many garments as possible and selling them as fast as she can.

“I’d like to say we’ve done a massive business plan and we refer to it. We don’t,” Holloway said. “We sit down and have a cup of tea and we have a chat and we evaluate how things sit with us. How does that client fit our ethics? … It isn’t about money and making that big buck. It’s about sustainability.”

Prabhu sees this as part of a bigger shift away from the model of outsourcing production to low-cost countries like China. “You’re trying to constantly keep up with your customers. Your competitive advantage is to give them something closer to their needs.”

Hiut Denim is an example of this backlash.

The company is based in a town of some 4,000 people where 10 percent of the population once made jeans. Then, a decade ago, the factory shut down as the owners moved production to Morocco and later to China.

When David and Clare Hieatt decided to start making jeans again, they were determined to take advantage of the years of professional experience going to waste. They hoped that would give their products a “story” to market.

Markle’s decision to wear Hiut jeans in Wales boosted that effort. The company now has a waiting list of three months.

“For the town it’s been incredible because it gives people a confidence to go, ‘Wow. This town makes a world-class product,'” David Hieatt said. “We lost our mojo when we lost 400 jobs, but now we’re getting it back. That’s a very cool story.”
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