The economic outlook in South Korea is not good, according to the Hyundai Research Institute, which stated in a report this week that the economy “reached its peak in May 2017” and may bottom out in 2020.

The bad economic news continues to contribute to President Moon Jae-in’s plummeting approval rating, which now stands at 45 percent, his lowest evaluation according to Gallup Korea. The latest poll indicates 53 percent of businesses gave Moon a negative rating, compared to only 41 approving of his administration.

The Hyundai Research Institute forecasts South Korea’s economic growth rate at 2.5 percent for the coming year, a rate matched by the LG Economic Research Institute. The state-run Korean Development Institute and the International Monetary Fund estimate a 0.1 percent higher growth rate. However, the Bank of Korea is an outlier and holds on to the most optimist view of a 2.8 to 2.9 percent growth rate through 2020.

Kim So Young, an economics professor at Seoul National University said Asia’s fourth-largest economy is slowing down, “but at this moment, it’s not at it’s worst.”

Research Fellow Chung Min, at the Hyundai Research Institute, said data it collected predicts things will approach the economy’s lowest point during the second half of 2019.

The 2018 third-quarter data led Seoul to cut its upcoming economic outlook, citing weak investments and global trade disputes.

“The economy is faced with downward risks such as deepening trade disputes, spreading financial instability in emerging markets amid the normalizing monetary policy by the major countries,” according to the government outlook. 

Experts agreed with that assessment, but had more to add.

Kim So Young said rising household debt is another factor, and Yonsei University professor of economics Taeyoon Sung cited two other potential causes.

One, he said, is major businesses have lost their competitiveness in global markets. The other is the Moon administration’s mandate to increase the minimum wage. Sung asserted higher wage costs have had a huge impact on the market economy.

Hansung University assistant professor Kim Sang Bong specifically identifies potential hardships the South Korean semiconductor sector may face because of increased competition from China and potential for the United States economy to “bottom out” in 2020 as well because of its own trade issues.

Hopes of a turnaround

Monday, Moon unveiled his plan to stave off South Korea’s stagnant economy and reverse course from his administration’s income-led growth policy, dubbed “J-nomics” (a combination of the president’s name (Jae-in) and economics).

Moon said in a ministers meeting that “we have to put policies that would vitalize the economy through innovation in regulation and encourage investment and, at the same time, lift regional economies and balanced development.”

Moon acknowledged that “it’s difficult to radically change an economy in a five-year term… In the process of changing the economic policy direction [to income-led growth], there could be some controversy and doubts, but we need to take an attitude to see [the changes] bear fruit with patience.”

Taeyoon Sung finds it hard to be optimistic about South Korea’s economy, predicting a continued downward trend for the country and calling the global situation “out of control.”

Hyundai Research Institute’s Chung Min said, “In the short-term, the administration needs to encourage investment and regulatory reform is required for that (reform) to take place, particularly in the SOC (Social Overhead Capital, a term referring infrastructure needs of a society).”

“Because investment in the construction sector is decreasing, it is necessary to have early execution of SOC [projects],” he added. “In the long-term, economic restructuring should take place, leading to a more active economy.”

The Hyundai Research Institute recommends the government carry out more flexible economic policies and consider an interest rate cut, “also, they should pursue expansionary fiscal policies and front load 2019 budget in the first half.”

Kim So Young agrees that altering South Korea’s current economic policies is a wise course of action, because the nation cannot control external conditions like the tariff dispute between Washington and Beijing.

Moon’s announcement “patches” things, said Kim Sang Bong, “but it offers no consistent policy.”

Leading Sung to mention that whatever changes are implemented, it will be difficult to forecast any type of recovery time should the economy “bottom out” as the Hyundai Research Institute predicts.

Chung Min noted that continued and careful monitoring of the economy is needed.

Lee Ju-hyun contributed to this report.
…

Chinese President Xi Jinping on Tuesday called for the implementation of reforms but offered no new specific measures in a highly anticipated speech that marked the 40th anniversary of China’s move towards market liberalization.

In a speech lasting nearly an hour-and-a-half, Xi called for support of the state economy while also guiding the development of the private sector, and said China will expand efforts at opening up and ensure the implementation of major reforms.

“We must, unswervingly, reinforce the development of the state economy while, unswervingly, encouraging, supporting and guiding the development of the non-state economy,” Xi said during a speech at Beijing’s Great Hall of the People.

Xi was speaking on the day China marked as the 40th anniversary of the start of late leader Deng Xiaoping’s campaign of “reform and opening up,” which led to explosive industrial growth that made China’s economy the world’s second-largest.

“Opening brings progress while closure leads to backwardness,” he added.

“Every step of reform and opening up is not easy. In the future, we will be inevitably faced with all sorts of risks and challenges, and even unimaginable tempestuous storms,” said Xi, stressing the role the ruling Communist Party.

Xi was speaking amid mounting pressure to accelerate reforms and improve market access for foreign companies as a bitter trade war with the United States weighs on the Chinese economy.

China’s heavy support of its sprawling state sector has been a point of contention with the United States.

The trade war has spurred some Chinese entrepreneurs, government advisers and think tanks to call for faster economic reforms and the freeing up of a private sector stifled by state controls and struggling to gain access to credit.

Xi and U.S. President Donald Trump agreed early this month to a 90-day truce in the trade dispute, which halted the threatened escalation of punitive tariffs while the two sides continue negotiations.

In his speech, Xi enumerated the accomplishments of China’s development.

“Grain coupons, cloth coupons, meat coupons, fish coupons, oil coupons, tofu coupons, food ticket books, product coups and other documents people once could not be without have now been consigned to the museum of history,” he said. “The torments of hunger, lack of food and clothing, and the hardships which have plagued our people for thousands of years have generally gone and won’t come back.”

Numerous luminaries in attendance were cited for their contributions to China’s economic reforms including the heads of online giants Alibaba, Tencent Holdings and Baidu and car maker Geely Automobile Holdings.
…

China hopes Britain’s exit from the European Union can happen in an orderly way and that the bloc will reduce hurdles to Chinese investment and keep its markets open, China’s foreign ministry said on Tuesday.

China, the world’s second-largest economy, has watched Brexit nervously, worried not only about potential market turmoil from a disorderly departure but about losing Britain’s supportive voice for free trade within the EU.

“China hopes to see Brexit proceed in an orderly fashion and stands ready to advance China-EU and China-UK relations in parallel,” the ministry said in a lengthy policy document on EU ties.

The EU and China are often at loggerheads over trade and other issues, with the EU sharing many of the same concerns as the United States about market access, trade imbalances and intellectual property rights protection.

The bloc is China’s largest trading partner while China is its biggest trading partner after the United States.

The EU has been pressing for better access to the Chinese market for its companies, while China has complained about what it sees as unfair restrictions on Chinese investments in the EU.

Despite events such as Brexit, China said the EU has remained committed to integration, pressed on with reforms and played a major role in regional and international affairs.

Beijing has promised to look at the possibility of reaching a “top notch” free trade deal with Britain post-Brexit.

The Brexit process is currently deadlocked with just over 100 days until Britain is due to leave the EU.

On trade, China’s white paper said the EU should ease high-tech export controls on China and facilitate mutual investment.

The government will significantly ease market access and endeavor to foster a “stable, fair, transparent, law-based and predictable business environment that protects the legitimate rights and interests of foreign investment and treats Chinese and foreign firms registered in China as equals,” it said.

“China hopes that the EU will keep its investment market open, reduce and eliminate investment hurdles and discriminatory barriers, and provide Chinese companies investing in Europe a fair, transparent and predictable policy environment and protect their legitimate rights and interests.”

The EU last month provisionally agreed on rules for a far-reaching system to coordinate scrutiny of foreign investments into Europe, notably from China in the wake of a surge in Chinese investments, to end what a negotiator called “European naivety.”
…

Boeing is buying a majority stake in Embraer’s commercial aircraft and services operations for $4.2 billion.

The joint venture, announced Monday, gives Boeing 80 percent ownership of those operations, with Embraer owning the remaining stake.

Boeing will have operational and management control of the company. Embraer will keep consent rights for some decisions, such as the transfer of operations from Brazil.

The deal still needs approval from the Brazilian government, as well as shareholders and regulators.

The companies also agreed to another joint venture to promote and develop new markets for the multi-mission medium airlift KC-390. Embraer will own a 51 percent stake in the joint venture, with Boeing owning the remaining 49 percent. The transaction is targeted to close by the end of next year.
…

U.S. President Donald Trump on Monday implored the country’s independent central bank to not raise interest rates again when its policy makers meet this week.

In a Twitter message, Trump said, “It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!”

Central bank policy makers, who operate independently of White House oversight, are meeting Tuesday and Wednesday in Washington and have hinted they could again boost the key rate by another quarter percentage point, with even higher rates a possibility but not a certainty in 2019.

Trump has basked in a robust U.S. economy, the world’s biggest, even as numerous investigations engulf him and his 2016 presidential campaign and key advisers have quit his administration or been forced out.

U.S. trade disputes are ongoing with China and world stock market volatility has cut investor gains in recent weeks. But the 3.7 percent jobless rate is the lowest in the United States in 49 years, worker wages are increasing and consumers, the backbone of the U.S. economy, are spending.

But Jerome Powell, the Fed board member Trump named a year ago as chairman, has drawn the president’s ire by overseeing three interest rate hikes this year, pushing the country’s key lending rate to a range of 2 to 2.25 percent, a benchmark that helps determine other lending rates on loans for U.S. businesses and consumers and often serves as a guidepost for central banks around the world.

Trump last month said he is “not even a little bit happy” with his appointment of Powell.

Trump has said he thinks the Fed is “way off base” by raising rates, but has been powerless to stop it from boosting them. Central bank policy makers have raised interest rates to keep the inflation rate in check and keep the economy from expanding too rapidly.

“I’m doing deals and I’m not being accommodated by the Fed,” Trump told The Washington Post last month. “They’re making a mistake because I have a gut and my gut tells me more sometimes than anybody else’s brain can ever tell me.”

Some economists are predicting, however, that the decade-long improving U.S. economy could stall in the next year or so and perhaps even fall into a recession, which, if it occurs, would in most circumstances call for cutting interest rates to boost economic activity.

 
…

Nissan’s board met Monday but failed to pick a new chairman to replace Carlos Ghosn, who was arrested last month on charges of violating financial regulations, saying more discussion was needed.

Nissan Motor Co. Chief Executive Hiroto Saikawa told reporters that the board approved a special committee of outsiders to strengthen governance at the company. A date for the selection of a chairman was not decided.

“We plan to be cautious in this process, and I do not plan to rush this,” Saikawa said.

The recommendations for beefing up governance are due in March, and Saikawa said he was willing to wait until then to choose a chairman.

The board meeting came amid an unfolding scandal that threatens the Japanese automaker’s two-decade alliance with Renault SA of France and its global brand, and highlights shoddy governance at the manufacturer of the Leaf electric car.

Ghosn and another board member Greg Kelly were formally charged last week with falsifying financial reports in underreporting Ghosn’s income by about 5 billion yen ($44 million) from 2011 to 2015. They were arrested Nov. 19 by Tokyo prosecutors and remain in detention.

A source close to Ghosn’s family says Ghosn is innocent, as the alleged income was never decided upon or paid. Aubrey Harwell, the U.S. lawyer for Kelly, an American, says he is innocent, and that Nissan insiders and outside experts had advised him that the financial reporting was proper.

The chairman must be selected from among the board members. Three outside board members — race-car driver Keiko Ihara, Masakazu Toyoda, an academic, and Jean-Baptiste Duzan, formerly of Renault — are making that decision.

The special committee for governance includes the three outside board members and four other outsiders, including former judge Seiichiro Nishioka.

One candidate for chairman is Saikawa, who was hand-picked by Ghosn to succeed him as chief executive. He has denounced Ghosn and Kelly as the “masterminds” in a scheme to falsify income reports and abuse company money and assets.

Renault has kept Ghosn as chief executive and chairman, saying its investigation has not found wrongdoing in the awarding of Ghosn’s compensation.

Nissan Motor Co.’s allegations also include million-dollar homes in several nations, including France, Japan, Brazil, Lebanon and the Netherlands, purchased by Nissan or a subsidiary and used by Ghosn.

Wrangling over a home in Rio de Janeiro has developed into a court battle in Brazil, with Nissan seeking to block Ghosn’s family from retrieving items.

Ghosn was born in Brazil of Lebanese ancestry and holds French citizenship. He was sent in by Renault in 1999 to turn around Nissan from the brink of bankruptcy.

It’s unclear when Ghosn and Kelly may be released, with Tokyo prosecutors saying they are a flight risk.

 
…

Homeowners appear to have learned the lesson of the Great Recession about not taking on too much debt. There is some concern that Corporate America didn’t get the message.

For much of the past decade, companies have borrowed at super-low interest rates and used the money to buy back stock, acquire other businesses and refinance old debt. The vast majority of companies are paying their bills on time, thanks in large part to profits that have surged since the economy emerged from the Great Recession nine and a half years ago.

But with interest rates rising and U.S. economic growth expected to slow next year, worries are building from Washington to Wall Street that corporate debt is approaching potentially dangerous levels. U.S. corporate debt has grown by nearly two-thirds since 2008 to more than $9 trillion and, along with government debt, has ballooned much faster than other parts of the bond market. Investors are most concerned about companies at the weaker end of the financial-strength scale _ those considered most likely to default or to get downgraded to “junk” status should a recession hit.

“I’ve been more worried about the bond market than the equity market,” said Kirk Hartman, global chief investment officer at Wells Fargo Asset Management. “I think at some point, all the leverage in the system is going to rear its ugly head.”

Consider General Electric, which said in early October it would record a big charge related to its struggling power unit, one that ended up totaling $22 billion. Both Moody’s and Standard & Poor’s subsequently downgraded GE’s credit rating to three notches above “speculative” grade, which indicates a higher risk of default.

GE, with about $115 billion in total borrowings, is part of a growing group of companies concentrated at the lower end of investment-grade. Other high-profile names in this area within a few notches of junk grade include General Motors and Verizon Communications. They make up nearly 45 percent of the Bloomberg Barclays Credit index, more than quadruple their proportion during the early 1970s.

Credit-rating agencies say downgrades for GE, GM or Verizon aren’t imminent. But the concern for them, and broadly for this swelling group of businesses, is if profits start falling or the economy hits a recession.

If those companies do drop below investment grade, they’d be what investors call “fallen angels,” and they can trigger waves of selling. Many mutual funds and other investors are required to own only high-quality, investment-grade bonds — so they would have to sell any bonds that get cut to junk.

The forced selling would lead to a drop in bond prices, which could result in higher borrowing costs for companies, which hurts their ability to repay their debts, which could lead to even more selling.

Even the chairman of the Federal Reserve has taken notice of the rise in corporate debt. Jerome Powell said in a recent speech that business borrowing usually rises when the economy is growing. But he said it’s concerning that, over the last year, the companies increasing their borrowing the most are those already with high debt and interest burdens.

To be sure, many bond fund managers say companies were smart to borrow hefty sums at low rates. And at the moment, there are no outward signs of danger. The default rate for junk-rated corporate bonds was 2.6 percent last month, which is lower than the historical average, and S&P Global Fixed Income Research expects it to fall in upcoming months.

Even if the economy does fall into a recession, fund managers say losses won’t be to the same scale as 2008 when the financial crisis sent the S&P 500 to a drop of nearly 37 percent and the most popular category of bond funds to an average loss of 4.7 percent.

In his speech, Powell said he doesn’t see the weaker parts of the corporate debt market undermining the financial system in the event of an economic downturn, at least “for now.”

Other investors see the market’s growing worries as premature. Companies are still making record profits, which allow them to repay their debts, and consumer confidence is still high.

“There is a story out there that there’s a recession coming very soon, and you had better head for the hills,” said Warren Pierson, deputy chief investment officer at Baird Advisors. “We think that’s a pretty early call. We don’t see recession on the horizon.”

That’s why he and Mary Ellen Stanek, who run bond mutual funds at Baird, haven’t given up on corporate bonds, even if they’ve moderated how much they own.

But critics see some echoes of the financial crisis in today’s loosening lending standards. Consider leveraged loans, a section of the market that makes loans to companies with lots of debt or relatively weak finances. These loans have been popular with investors in recent years because they often have what are called floating rates, so they pay more in interest when rates are rising.

Paul Massaro, portfolio manager for floating-rate strategies at T. Rowe Price, says he’s still positive about this market in general. But his team of analysts has been finding more warning flags in offerings, where the terms of the deal may be overly friendly to borrowers and allow them to amass more debt than they should.

It’s gotten to the point where Massaro is participating in about 15 percent of all offerings today, down from 30 percent a few years ago.

Investors have largely been willing to stomach higher risk because they’ve been starved for income following years of very low interest rates.

As a result, some bonds that by many accounts look like risky junk bonds are trading at prices and yields that should be reserved for higher-quality bonds, say Tom McCauley and Yoav Sharon, who run the $976.3 million Driehaus Active Income fund. To take advantage, they’re increasingly “shorting” corporate bonds, which are trades that pay off if the bonds’ prices fall.

They recently began shorting bonds of a packaged goods company with a “BBB” rating that borrowed to help pay for a large acquisition, for example. A “BBB” rating is at the lower end of investment grade, and a drop to “BB” would send it into junk status.

With so much debt, McCauley and Sharon believe that it’s at risk of getting downgraded to junk and is not paying enough in yield to compensate for its risk.

“As we get into the later stages of the cycle, the sins of the early stages of the cycle tend to start showing up,” said Sharon. “We think that’s where we are today.”

 
…

After two weeks of bruising negotiations, officials from almost 200 countries agreed Saturday on universal, transparent rules that will govern efforts to cut emissions and curb global warming. Fierce disagreements on two other climate issues were kicked down the road for a year to help bridge a chasm of opinions on the best solutions. 

The deal agreed upon at U.N. climate talks in Poland enables countries to put into action the principles in the 2015 Paris climate accord.

“Through this package, you have made a thousand little steps forward together,” said Michal Kurtyka, a senior Polish official chairing the talks. 

He said while each individual country would likely find some parts of the agreement it didn’t like, efforts had been made to balance the interests of all parties. 

“We will all have to give in order to gain,” he said. “We will all have to be courageous to look into the future and make yet another step for the sake of humanity.” 

The talks in Poland took place against a backdrop of growing concern among scientists that global warming on Earth is proceeding faster than governments are responding to it. Last month, a study found that global warming will worsen disasters such as the deadly California wildfires and the powerful hurricanes that have hit the United States this year. 

Overhaul of global economy

And a recent report by the Intergovernmental Panel on Climate Change, or IPCC, concluded that while it’s possible to cap global warming at 1.5 degrees Celsius (2.7 degrees Fahrenheit) by the end of the century compared with pre-industrial times, this would require a dramatic overhaul of the global economy, including a shift away from fossil fuels. 

Alarmed by efforts to include this in the final text of the meeting, oil-exporting nations the United States, Russia, Saudi Arabia and Kuwait blocked an endorsement of the IPCC report midway through this month’s talks in Katowice. That prompted an uproar from vulnerable countries like small island nations and environmental groups.  

The final text at the U.N. talks omits a previous reference to specific reductions in greenhouse gas emissions by 2030, and merely welcomes the “timely completion” of the IPCC report, not its conclusions. 

Last-minute snags forced negotiators in Katowice to go into extra time, after Friday’s scheduled end of the conference had passed without a deal. 

One major sticking point was how to create a functioning market in carbon credits. Economists believe that an international trading system could be an effective way to drive down greenhouse gas emissions and raise large amounts of money for measures to curb global warming. 

But Brazil wanted to keep the piles of carbon credits it had amassed under an old system that developed countries say wasn’t credible or transparent. 

Push from U.S. 

Among those that pushed back hardest was the United States, despite President Donald Trump’s decision to pull out of the Paris climate accord and promote the use of coal. 

“Overall, the U.S. role here has been somewhat schizophrenic — pushing coal and dissing science on the one hand, but also working hard in the room for strong transparency rules,” said Elliot Diringer of the Center for Climate and Energy Solutions, a Washington think tank. 

When it came to closing potential loopholes that could allow countries to dodge their commitments to cut emissions, “the U.S. pushed harder than nearly anyone else for transparency rules that put all countries under the same system, and it’s largely succeeded.”  

“Transparency is vital to U.S. interests,” added Nathaniel Keohane, a climate policy expert at the Environmental Defense Fund. He noted that the breakthrough in the 2015 Paris talks happened only after the U.S. and China agreed on a common framework for transparency. 

“In Katowice, the U.S. negotiators have played a central role in the talks, helping to broker an outcome that is true to the Paris vision of a common transparency framework for all countries that also provides flexibility for those that need it,” said Keohane, calling the agreement “a vital step forward in realizing the promise of the Paris accord.” 

Among the key achievements in Katowice was an agreement on how countries should report their greenhouses gas emissions and the efforts they’re taking to reduce them. Poor countries also secured assurances on getting financial support to help them cut emissions, adapt to inevitable changes such as sea level rises and pay for damages that have already happened. 

Some not hearing alarms

“The majority of the rulebook for the Paris Agreement has been created, which is something to be thankful for,” said Mohamed Adow, a climate policy expert at Christian Aid. “But the fact countries had to be dragged kicking and screaming to the finish line shows that some nations have not woken up to the urgent call of the IPCC report” on the dire consequences of global warming. 

But a central feature of the Paris Agreement — the idea that countries will ratchet up their efforts to fight global warming over time — still needs to be proved effective, he said. 

“To bend the emissions curve, we now need all countries to deliver these revised plans at the special U.N. secretary-general summit in 2019. It’s vital that they do so,” Adow said. 

In the end, a decision on the mechanics of an emissions trading system was postponed to next year’s meeting. Countries also agreed to consider the issue of raising ambitions at a U.N. summit in New York next September. 

Speaking hours before the final gavel, Canada’s Environment Minister Catherine McKenna suggested there was no alternative to such meetings if countries want to tackle global problems, especially at a time when multilateral diplomacy is under pressure from nationalism. 

“The world has changed, the political landscape has changed,” she told The Associated Press. “Still, you’re seeing here that we’re able to make progress, we’re able to discuss the issues, we’re able to come to solutions.”  
…

Stocks staggered to eight-month lows Friday after weak economic data from China and Europe set off more worries about the global economy. Mounting tensions in Europe over Britain’s impeding departure from the European Union also darkened traders’ moods.

The Dow Jones Industrial Average dropped as much as 563 points. On the benchmark S&P 500 index, health care and technology companies absorbed the worst losses. Johnson & Johnson plunged by the most in 16 years after Reuters reported that the company has known since the 1970s that its talc Baby Powder sometimes contained carcinogenic asbestos. The company denied the report.

China said industrial output and retail sales both slowed in November. That could be another sign that China’s trade dispute with the U.S. and tighter lending conditions are chilling its economy, which is the second-largest in the world. Meanwhile, purchasing managers in Europe signaled that economic growth was slipping.

Running out of steam?

Sameer Samana, senior global market strategist for Wells Fargo Investment Institute, said investors are concerned that weakness will make it way to the U.S. They’re wondering if the U.S. economy is likely to run out of steam sooner than they had thought.

“Market consensus has been that the next recession is probably in 2020 or beyond,” he said. Now, he said, the market is “really testing that assumption and trying to figure out whether it’s sooner.”

The S&P 500 index lost 50.59 points, or 1.9 percent, to 2,599.95, its lowest close since April 2. The Dow retreated 496.87 points, or 2 percent, to 24,100.51.

The Nasdaq composite slid 159.67 points, or 2.3 percent, to 6,910.66. The Russell 2000 index of smaller-company stocks fell 21.89 points, or 1.5 percent, to 1,410.81.

December is typically the best month of the year for stocks and Wall Street usually looks forward to a “Santa Claus rally” that adds to the year’s gains. With 10 trading days left this month, however, the S&P 500 is down 5.8 percent. That followed a small gain in November and a steep 6.9 percent drop in October. 

Market value falls

Johnson & Johnson dropped 10 percent to $133 in very heavy trading. Its market value fell by $40 billion.

Reuters reported that court documents and test results show Johnson & Johnson has known for decades that its raw talc and finished Baby Powder sometimes contained asbestos, but that the company didn’t inform regulators or the public. The company called the story “false and inflammatory.”

In July the company lost a lawsuit from plaintiffs who argued that its products were linked to cases of ovarian cancer and mesothelioma. A St. Louis jury awarded plaintiffs $4.7 billion. Johnson & Johnson faces thousands of other lawsuits. 

For more than 20 years, China has been one of the biggest contributors to growth in the global economy, and when investors see signs the Chinese economy is weakening, they expect it will affect other countries like the U.S. that sell things to China. 

Protests hurt France

In Europe, the index of purchase managers fell in France, which is racked by protests, to a level that points toward economic contraction. Germany’s reading still pointed to growth, but it fell to its lowest level in four years.

Those reports canceled out some potential good news on trade: the Chinese government announced a 90-day suspension of tariff increases on U.S. cars, trucks and auto imports. It’s part of a cease-fire that China and the U.S. announced earlier this month to give them time to work on other issues.

Among technology companies, Apple dipped 3.2 percent to $165.48. Adobe skidded 7.3 percent to $230 after its fourth-quarter profit disappointed investors and it also forecast lower-than-expected earnings in the current fiscal year. Industrial companies sank as well. Boeing lost 2.1 percent to $318.75.

Oil prices again turned lower, as a slower global economy would weaken demand for oil and other fuels. Benchmark U.S. crude fell 2.6 percent to $51.20 a barrel in New York. Brent crude, used to price international oils, dropped 1.9 percent to settle at $60.28 a barrel in London.

European Union leaders rejected British Prime Minister Theresa May’s request to make changes to their deal covering Britain’s departure from the EU on March 29. British legislators aren’t satisfied with the terms May negotiated, and she canceled a scheduled vote earlier this week because it was clear Parliament wouldn’t approve it. Britain’s economy and financial markets across Europe face severe disruption without an agreement.

European bonds slide

European bond prices rose and yields fell. Both the British pound and the euro weakened. The pound slipped to $1.2579 from $1.2660 and the euro fell to $1.1303 from $1.1367.

Germany’s DAX declined 0.5 percent and the CAC 40 in France declined 0.8 percent. Britain’s FTSE 100 fell 0.5 percent.

Japan’s Nikkei 225 index slid 2 percent and the Kospi in South Korea lost 1.3 percent. Hong Kong’s Hang Seng was down 1.6 percent. 

Bond prices edged higher. The yield on the 10-year Treasury note fell to 2.89 percent 2.90 percent.

In other commodities trading, wholesale gasoline lost 3 percent to $1.43 a gallon. Heating oil fell 1.7 percent to $1.85 a gallon and natural gas dropped 7.2 percent to $3.83 per 1,000 cubic feet.

Gold fell 0.5 percent to $1,241.40 an ounce. Silver dipped 1.5 percent to $14.64 an ounce. Copper was little changed at $2.77 a pound.

The dollar fell to 113.29 yen from 113.60 yen.
…

Nigeria’s President Muhammadu Buhari said the country’s economy was in “bad shape,” the governor of a northwestern state told reporters Friday after a meeting with governors from across the country. 

Buhari will seek a second term in an election to be held in February in which the economy is likely to be a campaign issue. 

Africa’s top oil producer last year emerged from its first recession in 25 years, caused by low crude prices, but growth remains sluggish. 

“Mr. President, as usual, responded by telling us that the economy is in a bad shape and we have to come together and think and rethink on the way forward,” Abdulaziz Yari, who chairs the Nigeria Governors’ Forum, told reporters when asked how Buhari answered requests for a bailout to some states. 

“Mr. President talked to us in the manner that we have a task ahead of us. So, we should tighten our belts and see how we can put the Nigerian economy in the right direction,” said Yari, governor of Zamfara state. He spoke to journalists in the capital, Abuja. 

The main opposition candidate, businessman and former Vice President Atiku Abubakar, has criticized Buhari’s handling of the economy and said that, if elected, he would aim to double the size of the economy to $900 billion by 2025. 

Nigeria’s economy grew by 1.81 percent in the third quarter of this year, the statistics office said Monday. And on Friday, it said consumer prices had risen 11.28 percent in November compared with a year ago. 
…

The federal budget deficit surged to a record for the month of November of $204.9 billion, but a big part of the increase reflected a calendar quirk. 

In its monthly budget report, the Treasury Department said Thursday that the deficit for November was $66.4 billion higher than the imbalance in November 2017. 

But $44 billion of that figure reflected the fact that December benefits in many government entitlement programs were paid in November this year because Dec. 1 fell on a Saturday. 

For the first two months of this budget year, the deficit totals $305.4 billion, up 51.4 percent from the same period last year. The Trump administration is projecting that this year’s deficit will top $1 trillion, reflecting increased government spending and the loss of revenue from a big tax cut. 

The new report showed that the higher tariffs from President Donald Trump’s get-tough trade policies are showing up in the budget totals. Customs duties totaled $6 billion in November, up 99 percent from November 2017. 

Trump has imposed penalty tariffs on steel and aluminum imports from a number of countries and on $250 billion of Chinese imports as the administration seeks to apply pressure to other countries to reduce their barriers to American exports. However, China and other nations have retaliated by imposing penalty tariffs on U.S. exports, sparking a tit-for-tat trade war. 

The administration still believes it will prevail and is currently in talks with China over trade practices the administration feels are unfair to American companies and workers. 

Three years of $1 trillion deficits

Last year’s budget deficit totaled $779 billion. The administration is projecting that this year’s deficit, for a budget year that runs from October through September, will total $1.09 trillion. The administration sees the deficit remaining above $1 trillion for three straight years. 

The only time the government has run deficits of this size was for four years from 2009 through 2012 when the Obama administration was boosting spending to grapple with the 2008 financial crisis and the worst recession since the 1930s. 

Trump has said that the new budget he will unveil next February will require 5 percent spending cuts for domestic agencies in a bid to trim future deficits. The administration is also counting on government revenues to be increased by faster economic growth from the $1.5 trillion tax cut passed a year ago. 

The $204.9 billion deficit last month was the biggest deficit ever recorded in November, a month when the government normally runs a deficit. Outlays were also a record in the month of November. 

Through the first two months of this budget year, revenues total $458.7 billion, 3.4 percent higher than the same period a year ago. Outlays totaled $764 billion, up 18.4 percent from the same period a year ago.  
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A gauge of world equities was little changed after giving up early gains on Thursday, continuing a pattern seen for the past several sessions, while the euro eased after the European Central Bank formally ended its bond purchasing scheme.

In the United States, the S&P and Nasdaq finished in the red while the Dow closed well off its session highs as cautious trade optimism faded.

Nervousness has heightened volatility in stocks recently, with a tendency for stocks to lose morning gains as the day wears on. 

In Beijing, a commerce ministry spokesman said China and the United States were in close contact over trade, and any U.S. trade delegation would be welcome to visit.  

Although signs of a trade thaw have been welcomed by investors, other worries have kept stocks from sustaining gains.

“It’s a market that’s been very nervous. Investors get excited in the morning and then their fears come back,” said Omar Aguilar, chief investment officer of equities at Charles Schwab Investment Management in San Francisco. 

“We need a catalyst to get us a more consistent trend — it could be good economic data or more clarity on the Fed’s intentions for next year or more certainty in U.S.-China. I don’t think it’s going to happen any time soon.”

Dow Jones rises while S&P 500 dips

The Dow Jones Industrial Average rose 70.11 points, or 0.29 percent, to 24,597.38, the S&P 500 lost 0.53 points, or 0.02 percent, to 2,650.54 and the Nasdaq Composite dropped 27.98 points, or 0.39 percent, to 7,070.33.

U.S. economic data showed jobless claims fell last week to near 49-year lows, while import prices dropped as the cost of petroleum products tumbled. Shares in Europe edged lower to snap a two-session winning streak, as concerns about Britain’s exit from the European Union and euro zone growth outweighed a budget compromise in Italy.

The pan-European STOXX 600 index lost 0.17 percent and MSCI’s gauge of stocks across the globe gained 0.05 percent.

Help from ECB to continue

Britain’s weakened prime minister, Theresa May, survived a late night no-confidence vote, and then said she did not expect a quick breakthrough in Brexit talks that would help get the deal through parliament. 

The ECB officially ended its post-crisis asset purchase program but promised to keep feeding stimulus into an economy struggling with an unexpected slowdown and political turmoil.

The euro and sterling were choppy on the Brexit uncertainty and in the wake of comments from ECB President Mario Draghi investors viewed as dovish following the policy announcement.

Dollar index slightly up 

The dollar index rose 0.02 percent, with the euro down 0.04 percent to $1.1363.

Sterling, rebounding from earlier declines, was last trading at $1.2662, up 0.26 percent on the day.

Oil prices were higher after data showed inventory declines in the United States and as investors began to expect the global oil market could have a deficit sooner than previously thought.

U.S. crude settled up 2.8 percent at $52.58 per barrel and Brent was last at $61.45, up 2.16 percent.

  
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Wall Street stocks finished higher on Wednesday due to improved hopes for the US-China trade talks.

The Dow Jones Industrial Average added 0.6 percent at 24,527.27.

The broad-based S&P 500 advanced 0.5 percent to 2,651.07, while the tech-rich Nasdaq Composite Index jumped 1.0 percent to 7,098.31.

Wall Street stocks have been volatile in recent weeks in part due to unpredictable and ambiguous events connected to the Beijing-Washington trade negotiations.

The latest indicators have been more upbeat, with a Chinese Huawei executive granted bail in a Canadian court in a closely-watched legal case and confirmation from Commerce Secretary Wilbur Ross in a television interview that Beijing had offered to cut tariffs on autos imported from the United States and resume soybean purchases.

Unlike the last two sessions, there were no major gyrations lower on Wednesday. But stocks still finished well below their session highs, with the Dow falling about 300 points from its peak in the last three hours of trading.

Gainers included some equities that have been seen as vulnerable to a trade war with China. Boeing advanced 1.5 percent, Caterpillar 1.7 percent and Deere 0.8 percent.

Tech shares were also upward-bound, with Google parent Alphabet winning 1.1 percent, Amazon 1.2 percent and Netflix 3.6 percent.

Tencent Music, in its first session after going public, jumped 7.7 percent a day after the music streaming company raised $1.1 billion in an initial public offering.
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Wood consumption — including logging and the production of charcoal — is a leading cause of forest degradation in Africa. In some of Kenya’s coastal regions, recurring droughts have made the problem even worse.  Now, farmers in those regions are planting trees, putting their once-barren land to use in a venture that enables them to earn a living and conserve the environment at the same time. 

At Be Sulubu Tezo, in Kilifi county, Kenya, Kanze Kahindi Mbogo tends to her tree farm. She thins out the trees whose wood is now strong enough for her to sell for home-building and making fences.  

The money she makes is for her six children. 

A better life

Kahindi says she has been able to educate her children, pay a couple of debts and do lots of other things. She adds she was also able to take one of her sons to college and right now he is a driver.

Before growing trees, putting food on the table was difficult in this land where droughts are common and crops often fail.

With the help of NGOs and entrepreneurs, farmers are learning how agroforestry can make them money and at the same time save the environment. One of those firms is Komaza, a Kenyan firm that is working with 14,000 farmers to plant drought-resistant trees for harvest, reducing the drive to deforest. 

Help with the harvest

“Farmers are able to nurture the seedlings into trees, and then the trees become fully grown trees ready to harvest,” said Allan Ongang’a, a manager at Komaza.  “Once they are ready for harvest we have the operations team from the forestry department that identify trees that are ready for harvest, agree with the farmers on a fair price, the trees are marked and harvested.”

The firm trains farmers on cultivation and selective harvesting.  

But not all farmers have the resources to plant a tree and wait for it to grow, so some farm subsistence crops among the trees.  Researchers say this arrangement counters the effects of climate change. 

Everybody benefits

“Trees end up absorbing carbon dioxide when they making their food and therefore essentially the trees are actually getting to bring carbon from the atmosphere into the tree stem and therefore on land,” explained researcher John Recha with the Climate Change Agriculture and Food Security Program, a private entity in Nairobi.. “That means there is the benefit of reducing greenhouse gas emission through more enhanced agroforestry systems.”

For these Kenyan farmers, environmentalism begins to make sense when it starts to translate into a sustainable income. 
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Former Malaysian Prime Minister Najib Razak was charged Wednesday with tampering with the final audit report into a defunct state investment fund, adding to a long list of corruption allegations against him since his ouster in May elections.

Najib was charged along with Arul Kanda Kandasamy, the former head of the 1MDB fund, which is being investigated in the U.S. and other countries for alleged cross-border embezzlement and money laundering.

Najib pleaded not guilty to abusing power to order the modification of the report in February 2016 before it was presented to the Public Accounts Committee, in order to protect himself from disciplinary and legal action. Kandasamy, who was detained overnight by anti-graft officials, pleaded not guilty to abetting Najib.

​The charges came after the auditor-general revealed last month that some details had been removed from the 1MDB report. Kandasamy led 1MDB from 2015 until he was terminated in June. The two men were released on bail, and face up to 20 years in prison if found guilty.

Najib set up 1MDB when he took power in 2009 to promote economic development, but the fund amassed billions in debts. U.S. investigators say Najib’s associates stole and laundered $4.5 billion from the fund, including some that landed in Najib’s bank account. 

Public anger over the scandal led to the defeat of Najib’s long-ruling coalition in May 9 elections and ushered in the first change of power since Malaysia gained independence from Britain in 1957.

The new government reopened the investigations stifled under Najib’s rule. Najib, his wife and several top-ranking former government officials have been charged with multiple counts of corruption, criminal breach of trust and money laundering. 

Najib, 65, has accused the new government of political vengeance.
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Cash-strapped Avianca Brasil, the country’s fourth-largest airline, on Tuesday sought bankruptcy protection from creditors but reassured passengers that flights will continue.

“Due to resistance from the lessors (of their aircraft) to reaching a friendly settlement, we have filed seeking protection from creditors, to protect clients and passengers,” a company statement said.

Operations are not expected to be affected and “passengers can have complete peace of mind to make reservations and buy tickets, since all sales will be honored and flights will be operating,” it said.

The airline has debts of almost 493 million reais ($127 million) with multiple creditors, the business daily Valor reported.

Avianca Brasil, a brand of Oceanair Linhas Aereas SA (Oceanair), is not part of the group Avianca Holdings S.A, based in Colombia.

But both are parts of a holding company led by the same investor, German Efromovich.

Brazilian media said the carrier is in debt to creditors including state oil giant Petrobras and Sao Paulo’s Guarulhos Airport.

Avianca Brasil serves domestic and international routes with 60 jets. The company is facing lawsuits for the return of 26 planes and 52 engines, Valor said.

The airline recorded net losses in the first half of the year of 175.6 million reais, up 24.4 percent from the same period last year.
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Protesters disturbed a U.S.-sponsored event promoting fossil fuels on the sidelines of U.N. climate change talks on Monday.

The event called “U.S. innovative technologies spur economic dynamism,” touting the benefits of burning fossil fuels more efficiently, infuriated campaigners and many government delegations who want the talks to focus on moving away from coal, oil and gas.

Some 100 protestors in the audience at the event seized a microphone and interrupted opening remarks by Wells Griffith, the man President Donald Trump appointed as senior director for energy at the National Security Council.

They waved banners and chanted: “keep it in the ground.”

“I’m 19 years old and I’m pissed,” shouted Vic Barrett, a plaintiff in the “Juliana vs U.S.” lawsuit filed in 2015 by 21 young people against the government for allowing activities that harm the climate.

“I am currently suing my government for perpetuating the global climate change crisis… Young people are at the forefront of leading solutions to address the climate crises and we won’t back down.”

Before the interruption, Griffiths said it was important to be pragmatic in dealing with climate change in a world still heavily reliant on fossil fuels.

“Alarmism should not silence realism… This administration does not see the benefit of being part of an agreement which impedes U.S. economic growth and jobs,” he said.

The conference, in Katowice, Poland, aims to work out the rules for implementing the Paris Agreement, the global pact on combating climate change.

The United States, the world’s top oil and gas producer, is the only country to have announced its withdrawal from the accord.
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Stock markets around the world spiked higher Tuesday after Wall Street rebounded amid hopes the U.S. and China are back negotiating over their trade dispute.

KEEPING SCORE: In Europe, Germany’s DAX was up 2 percent to 10,831 while France’s CAC 40 was up 2 percent at 4,837. Britain’s FTSE 100 was up 1.7 percent at 6,834. Wall Street was set to open higher too, with Dow futures and the broader S&P 500 futures up 0.9 percent.

U.S.-CHINA RELATIONS: U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He have spoken by phone about “the promotion of the next economic and trade consultations,” a statement by China’s Commerce Ministry said Tuesday. It did not elaborate. This indicates that the detention of Meng Wanzhou, the chief financial officer of Chinese telecommunications giant Huawei, in Canada may not derail trade talks. Meng is wanted in the U.S. for allegedly misleading banks about the company’s business dealings in Iran. China has protested her arrest and a bail hearing for Meng is underway in Vancouver, British Columbia. Still, traders fear a 90-day tariffs cease-fire may not be enough for the countries to resolve deep-seated issues.

ANALYST TAKE: “We’re now seeing daily commentary it seems about the progress of talks between the U.S. and China but the reality is that this is going to be a process that moves at a glacial pace but the fact that talks are happening are a reason to be optimistic,” said Craig Erlam, senior market analyst at OANDA.

BREXIT AND THE POUND: A day after the pound tanked to 20-month lows against the dollar after British Prime Minister Theresa May pulled a vote on her Brexit deal with the European Union, the currency recovered somewhat after figures showed wages rising at their fastest rate in a decade. The pound was up 0.3 percent at $1.2610.

IPHONE BAN IN CHINA: On Monday, U.S. chipmaker Qualcomm said it won an order in a Chinese court banning sales of some Apple phones in China. This is part of a lengthy dispute over two Qualcomm patents allowing users to format photos and manage phone apps using a touch screen. Although Qualcomm said the ban applies to models of the iPhone 6S through X, Apple said all iPhones will remain available for customers in China. Qualcomm shares jumped 2.2 percent to $57.24 on the news.

ASIA’S DAY: Softer economic data from Japan and China weighed on some Asian indexes on Tuesday. Japan’s benchmark Nikkei 225 lost 0.3 percent to 21,148.02 and South Korea’s Kospi dropped less than 0.1 percent to 2,052.97. But Hong Kong’s Hang Seng edged 0.1 percent higher to 25,771.67. The Shanghai Composite rose 0.4 percent to 2,594.09.

ENERGY: Oil prices recovered a sharp decline overnight that erased gains from news of a production cut by OPEC countries and other major oil producers. U.S. benchmark crude was up 67 cents at $51.67 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price international oils, rose 59 cents to $60.56 a barrel.

CURRENCIES: The euro was up 0.2 percent at $1.1378 while the dollar dropped 0.2 percent to 113.12 yen.

 
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EU economics affairs commissioner Pierre Moscovici on Tuesday said Brussels will keep close watch over France’s new spending plans, a day after President Emmanuel Macron unveiled new measures to quell violent protests.

“The European Commission will closely monitor the impact of the announcements made by President Macron on the French deficit and any financing arrangements,” Moscovici told AFP.

“We are in constant contact with the French authorities,” added Moscovici, who was attending a plenary session of European Parliament in Strasbourg.

Meeting the EU’s three percent deficit limit has been a centrepiece of Macron’s European strategy in order to win the trust of powerful Berlin and its backing for EU reforms.

Before the “yellow vests” protests, the 2019 public deficit was expected to reach 2.8 percent of gross domestic product (GDP), just below the threshold.

Among the potentially costly measures Macron announced on Monday was a 100 euro ($113) monthly increase in the minimum wage as of next year paid for by the government, not employers.

The 40-year-old centrist also announced he would roll back most of an unpopular increase in taxes on pensioners introduced by his government.

And he called on all businesses “that can afford it” to give employees a one-off “end of year bonus” which would be tax free.

The EU rules on public spending are “binding for everybody that is clear,” said senior German MEP Manfred Weber, when asked by reporters about France’s new expenditure.

But he added that “what we should not do as the European Union is intervene in domestic policies so when a government in Italy is presenting its budget it is an Italian budget and in France it is the same.”

Italy’s budget for 2019 was the first in history to be rejected by Brussels for breaking bloc rules on spending.

 
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Russia is seeking to boost its power in Europe and grip over Ukraine with the proposed Nord Stream 2 natural gas pipeline, the top U.S. energy diplomat said on Monday, in a step-up of Washington’s rhetoric against the pipeline.

“Through Nord Stream 2, Russia seeks to increase its leverage of the West while severing Ukraine from Europe,” Francis Fannon, the U.S. assistant secretary for energy resources at the State Department, told reporters in a teleconference.

The pipeline has been opposed both by President Donald Trump, a Republican, and his Democratic predecessor Barack Obama as a political tool for Russia to consolidate power over Europe.

Much of the gas that Europe currently gets from Russia via pipeline goes through Ukraine, which collects billions of dollars in transit charges making up to 3 percent of its gross domestic product.

If Nord Stream 2, which aims to bring Russian gas to Western Europe via the Baltic Sea, and TurkStream, a pipeline to bring gas from Russia to Turkey, are completed it would mean transit revenues would evaporate, “It’s kind of just what’s left over that would be transited, potentially transited, through Ukraine,” Fannon said. “Even then that’s only based on whether we can trust (Russia President Vladimir) Putin, I don’t think the record should indicate anyone should.”

Putin has said that Nord Stream 2, a consortium of Russia’s state-controlled Gazprom and five European companies, is purely economic and not directed against other countries. Russian gas could continue to go through Ukraine if the pipeline is completed, Putin has said.

But Russia has stopped shipments of gas to Ukraine in winter in recent years over a series of pricing disputes. Critics of Nord Stream 2 say it could increase Russia’s ability to manipulate European energy markets. In an increase in tensions, Russia last month seized three Ukrainian naval ships off the coast of Russia-annexed Crimea in the Sea of Azov after opening fire on them.

Germany’s foreign minister, Heiko Maas, said this month that Berlin will not withdraw its political support for Nord Stream 2 and that German Chancellor Angela Merkel had secured a pledge from Putin in August allowing gas shipments across Ukraine’s territory.

Fannon made his comments after traveling to Eastern Europe to discuss projects that could offer Europe a more diverse natural gas supply. Those included a floating liquefied natural gas terminal on the Adriatic island of Krk that could one day receive gas imports from the United States, which is increasing its exports of the fuel, or the eastern Mediterranean.

Fannon said he expected Russia’s aggression in the Sea of Azov to boost support for several bills in the U.S. Congress that include new sanctions on Russia’s energy sector, though he refrained from commenting on any particular legislation.
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A rise in small-scale illegal gold mining is destroying swaths of the Amazon rainforest, according to research released on Monday that maps the scale of the damage for the first time.

Researchers used satellite imagery and government data to identify at least 2,312 illegal mining sites across six countries in South America – Brazil, Bolivia, Colombia, Peru, Ecuador and Venezuela.

The maps show the spread and scale of illegal mining and were produced by the Amazon Socio-environmental, Geo-referenced Information Project (RAISG), which brings together a network of nonprofit environmental groups in the Amazon.

“The scope of illegal mining in the Amazon, especially in indigenous territories and protected natural areas, has grown exponentially in recent years, with the rise in the price of gold,” said Beto Ricardo, head of the RAISG.

Soaring prices in the decade to 2010 sparked a gold rush and hundreds of thousands of illegal miners poured into the Amazon rainforest hoping to strike it rich.

The mercury they use to separate gold from grit is poisoning the rivers, the report said. Mercury seeps into soil, rivers and the food chain and can cause serious health problems.

“Illegal mining can kill us,” Agustin Ojeda, an indigenous leader of Venezuela’s Shirian indigenous people, is quoted as saying in the report.

“The mining wells allow for the reproduction of mosquitoes that bring diseases, such as malaria. The effect of mercury on water isn’t taken seriously either. It not only contaminates water but also the fish we eat.”

Environmentalists fear Brazil’s President-elect Jair Bolsonaro will open up more protected land for mining and other projects when he takes office on January 1, placing further pressure on the Amazon.

Right-wing Bolsonaro has said he plans to stop recognizing new native reservation lands, and he also favors a relaxation of environmental licensing processes for infrastructure projects and other businesses.

“The concern is enormous,” said Ricardo, who is also an anthropologist at Brazil’s Socioenvironmental Institute (ISA), one of the six groups that produced the report.

“The public narrative is to clear the area (of forests), weaken those institutions that monitor and control in favor of agribusiness and mining for the production and export of commodities, which will hasten the deterioration of the forest,” he told the Thomson Reuters Foundation.

Brazil is home to the world’s largest rainforest in the Amazon, whose preservation is seen by climate experts as critical to avoiding higher concentrations of carbon dioxide in the atmosphere that have been blamed for global warming.

In one of the worst hit areas, stretching between Brazil and Venezuela and home to the Yanomami indigenous people, the study showed there were 55 illegal mining sites in protected areas.

“Illegal mining is a serious threat to the Amazon rainforest and the indigenous peoples who call it home,” said Moira Birss, spokeswoman for Amazon Watch, a U.S.-based non-profit group.

“This report provides important new data and clearly demonstrates the scope of the problem, and as such is a call to action to regional governments and the companies that purchase the illegally-mined minerals to take bold, concrete action to stop the destruction.”
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Puerto Rico’s governor signed a bill Monday to overhaul the U.S. territory’s tax laws in a bid to attract foreign investment and help workers and some business owners amid a 12-year recession.

The bill creates an earned income tax credit, reduces a sales tax on prepared food and eliminates a business-to-business tax for small to medium companies, among other things.

Officials say the bill represents nearly $2 billion in tax relief at a time when the island is struggling to recover from Hurricane Maria and restructure a portion of its more than $70 billion public debt load.

“There’s still a lot of work to be done to completely transform the tax system … but we see it as a good first step,” said Cecilia Colon, president of Puerto Rico’s Association of Public Accountants.

Governor Ricardo Rossello said the earned income tax credit will result in benefits ranging from $300 to $2,000 for each worker, representing a total of $200 million in annual savings. He also said an 11.5 percent sales tax on processed food will drop to 7 percent starting in October 2019.

The bill also eliminates a business-to-business tax for businesses that generate $200,000 or less a year, representing $79 million in savings in five years, Rossello said. Nearly 80 percent of businesses in Puerto Rico will benefit from that measure, added Treasury Secretary Teresa Fuentes.

In addition, the new law reduces the tax rate for corporations from 39 percent to 37.5 percent.

“Today marks an important day for maintaining Puerto Rico’s competitiveness,” she said.

The measure also legalizes tens of thousands of slot machines, but also limits the number of machines owned, with legislators estimating they will generate at least $160 million a year. Up to $40 million of that revenue will go to the government’s general fund, with the remaining funds directed to help municipalities and police officers.

However, Natalie Jaresko, executive director of the federal control board that oversees Puerto Rico’s finances, has repeatedly said the island needs a much broader tax reform that improves revenue collection and promotes economic development. She said in a statement the board also is concerned that the government and legislature have not proved that the changes will not “cannibalize” revenues.

Antonio Fernos, a Puerto Rico economics and finance professor, questioned the effectiveness of the new law, which appears to generate less overall revenue.

“It doesn’t make sense,” he said. “Why are they doing this, especially on an island that is insolvent and needs more sources of revenue?”

Fernos also argued that the earned income tax credit is not enough to lure people out of the informal economy: “I don’t foresee anyone abandoning tax evasion schemes.”
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The International Telecommunication Union reports that for the first time in history, half of the global population is using the internet. A new report finds by the end of the year, 3.9 billion people worldwide will be online.

The report finds access to and use of information and communication technologies around the world is trending upwards. It notes most internet users are in developed countries, with more than 80 percent of their populations online. But it says internet use is steadily growing in developing countries, increasing from 7.7 percent in 2005 to 45.3 percent this year.

The International Telecommunication Union says Africa is the region with the strongest growth, where the percentage of people using the internet has increased from just over two percent in 2005 to nearly 25 percent in 2018.

The lowest growth rates, it says, are in Europe and the Americas, with the lowest usage found in the Asia-Pacific region.

In addition to data on internet usage, newly released statistics show mobile access to basic telecommunication services is becoming more predominant. ITU Senior Statistician, Esperanza Magpantay says access to higher speed mobile and fixed broadband also is growing.

“So, there is almost 96 percent of the population who are now covered by mobile population signal of which 90 percent are covered by 3G access. So, this is a high figure, and this helps explain why we have this 51 percent of the population now using the internet,” she said.

With the growth in mobile broadband, Magpantay says there has been an upsurge in the number of people using the internet through their mobile devices.

The ITU says countries that are hooked into the digital economy do better in their overall economic well-being and competitiveness. Unfortunately, it says the cost of accessing telecommunication networks remains too high and unaffordable for many.

It says prices must be brought down to make the digital economy a reality for the half the world’s people who do not, as yet, use the internet.

 
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Corruption costs the world economy $2.6 trillion each year, according to the United Nations, which is marking International Anti-Corruption Day on Sunday.

“Corruption is a serious crime that can undermine social and economic development in all societies. No country, region or community is immune,” the United Nations said.

The cost of $2.6 trillion represents more than 5 percent of global GDP.

The world body said that $1 trillion of the money stolen annually through corruption is in the form of bribes.

Patricia Moreira, the managing director of Transparency International, told VOA that about a quarter of the world’s population has paid a bribe when trying to access a public service over the past year, according to data from the Global Corruption Barometer.

Moreira said it is important to have such a day as International Anti-Corruption Day because it provides “a really tremendous opportunity to focus attention precisely on the challenge that is posed by corruption around the world.”

​Anti-corruption commitments

To mark the day, the United States called on all countries to implement their international anti-corruption commitments including through the U.N. Convention against Corruption.

In a statement Friday, the U.S. State Department said that corruption facilitates crime and terrorism, as well as undermines economic growth, the rule of law and democracy.

“Ultimately, it endangers our national security. That is why, as we look ahead to International Anticorruption Day on Dec. 9, we pledge to continue working with our partners to prevent and combat corruption worldwide,” the statement said.

Moreira said that data about worldwide corruption can make the phenomena understandable but still not necessarily “close to our lives.” For that, we need to hear everyday stories about people impacted by corruption and understand that it “is about our daily lives,” she added.

She said those most impacted by corruption are “the most vulnerable people — so it’s usually women, it’s usually poor people, the most marginalized people in the world.”

The United Nations Development Program notes that in developing countries, funds lost to corruption are estimated at 10 times the amount of official development assistance.

What can be done to fight corruption?

The United Nations designated Dec. 9 as International Anti-Corruption Day in 2003, coinciding with the adoption of the United Nations Convention against Corruption by the U.N. General Assembly.

The purpose of the day is to raise awareness about corruption and put pressure on governments to take action against it.

Tackling the issue

Moreira said to fight corruption effectively it must be tackled from different angles. For example, she said that while it is important to have the right legislation in place to curb corruption, governments must also have mechanisms to enforce that legislation. She said those who engage in corruption must be held accountable.

“Fighting corruption is about providing people with a more sustainable world, with a world where social justice is something more of our reality than what it has been until today,” she said.

Moreira said change must come from a joint effort from governments, public institutions, the private sector and civil society.

The U.S. Statement Department said in its Friday statement that it pledges “to continue working with our partners to prevent and combat corruption worldwide.”

It noted that the United States, through the U.S. Department of State and U.S. Agency for International Development, helps partner nations “build transparent, accountable institutions and strengthen criminal justice systems that hold the corrupt accountable.”

Moreira said that it is important for the world to see that there are results to the fight against corruption.

“Then we are showing the world with specific examples that we can fight against corruption, [that] yes there are results. And if we work together, then it is something not just that we would wish for, but actually something that can be translated into specific results and changes to the world,” she said.

VOA’s Elizabeth Cherneff contributed to this report.

 
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