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Gene Ellis

Russia puts squeeze on Ukraine, jacks up natural gas prices 40 percent - CSMonitor.com - 0 views

www.csmonitor.com/...-natural-gas-prices-40-percent

shared by Gene Ellis on 19 Feb 15 - No Cached
  • Russia puts squeeze on Ukraine, jacks up natural gas prices 40 percent
  • On Thursday, the International Monetary Fund threw a financial lifeline, agreeing to stump up $14-18 billion as part of a two-year bailout package in exchange for tough economic reforms.
  • Russia's milk union has asked for a ban on Ukrainian dairy products
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  • Russia accounts for 13 percent of Ukraine's iron and steel exports, and the political crisis has already hit shipments from Ukrainian steelmakers this year.
  • Sales of rebar - a steel bar or mesh of steel wires used in reinforced concrete - to the Commonwealth of Independent States (CIS), a bloc of former Soviet states, fell 70 percent to 45,000 tonnes in January compared with the average monthly export figure in the first half of 2013.Russian steelmakers have aggressively lobbied their government to implement measures to defend domestic producers from Ukrainian imports.
  • Tough competition on the international steel market makes the chance of (steelmakers) expanding their export market presence very low," Eavex Capital metals analyst Ivan Dzvinka said in Kiev
  • Manufacturers of train carts and turbo engines, which together account for 2.5 percent of Ukraine's total exports, will be hit particularly hard.
  • "Re-orienting these industries to Europe would be nearly impossible without very heavy investment,
  • "The point of the FTA is not to make it possible for Ukraine to export Soviet-era tractors to Europe. That's not going to happen. But it could eventually lead to Ukraine becoming a producer of Peugeots, Volkswagens, fridges or Nokia telephones," the EUISS's Popescu said.
Gene Ellis

Sub-Saharan Africa's Subprime Borrowers by Joseph E. Stiglitz and Hamid Rashid - Projec... - 0 views

www.project-syndicate.org/...h-e--stiglitz-and-hamid-rashid

Africa subprime borrowers

shared by Gene Ellis on 10 Jan 14 - No Cached
  • Taking the lead in October 2007, when it issued a $750 million Eurobond with an 8.5% coupon rate, Ghana earned the distinction of being the first Sub-Saharan country – other than South Africa – to issue bonds in 30 years.
  • Nine other countries – Gabon, the Democratic Republic of the Congo, Côte d’Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania – followed suit. By February 2013, these ten African economies had collectively raised $8.1 billion from their maiden sovereign-bond issues, with an average maturity of 11.2 years and an average coupon rate of 6.2%. These countries’ existing foreign debt, by contrast, carried an average interest rate of 1.6% with an average maturity of 28.7 years.
  • So why are an increasing number of developing countries resorting to sovereign-bond issues? And why have lenders suddenly found these countries desirable?
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  • recent analyses, carried out in conjunction with the establishment of the new BRICS bank, have demonstrated the woeful inadequacy of official assistance and concessional lending for meeting Africa’s infrastructure needs, let alone for achieving the levels of sustained growth needed to reduce poverty significantly.
  • the conditionality and close monitoring typically associated with the multilateral institutions make them less attractive sources of financing. What politician wouldn’t prefer money that gives him more freedom to do what he likes? It will be years before any problems become manifest – and, then, some future politician will have to resolve them.
  • So, are shortsighted financial markets, working with shortsighted governments, laying the groundwork for the world’s next debt crisis?
  • he risks will undoubtedly grow if sub-national authorities and private-sector entities gain similar access to the international capital markets, which could result in excessive borrowing.
  • Nigerian commercial banks have already issued international bonds; in Zambia, the power utility, railway operator, and road builder are planning to issue as much as $4.5 billion in international bonds.
  • Signs of default stress are already showing. In March 2009 – less than two years after the issue – Congolese bonds were trading for 20 cents on the dollar, pushing the yield to a record high. In January 2011, Côte d’Ivoire became the first country to default on its sovereign debt since Jamaica in January 2010.
  • In June 2012, Gabon delayed the coupon payment on its $1 billion bond, pending the outcome of a legal dispute, and was on the verge of a default. Should oil and copper prices collapse, Angola, Gabon, Congo, and Zambia may encounter difficulties in servicing their sovereign bonds.
  • They need not only to invest the proceeds in the right type of high-return projects, but also to ensure that they do not have to borrow further to service their debt.
  • But borrowing money from international financial markets is a strategy with enormous downside risks, and only limited upside potential – except for the banks, which take their fees up front. Sub-Saharan Africa’s economies, one hopes, will not have to repeat the costly lessons that other developing countries have learned over the past three decades.
Gene Ellis

Irish Charm With Germans Leads Nation Out of Bailout Wilderness - Bloomberg - 0 views

www.bloomberg.com/...-german-love-ends-bailout.html

shared by Gene Ellis on 13 Dec 13 - No Cached
  • Before the new government could go on the offensive, it needed to play defense. It fended off an attack on Ireland’s 12.5 percent corporate tax rate, the cornerstone of an economic policy that transformed Ireland from a financial backwater into a European hub for companies such as Pfizer Inc., the maker of Viagra, and Google Inc.
  • Two days after commencing his premiership, Irish Prime Minister Enda Kenny, 62, became embroiled in what he called a Gallic spat with French President Nicolas Sarkozy after refusing to raise the tax rate in return for an interest-rate cut on aid.
  • “The attitude was: ‘You misbehaved and here’s what you have to do’,’”
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  • Within months, the central bank injected more than 1 trillion euros of three-year loans into the region’s banking system
  • Banks used the cash to buy sovereign debt
  • Noonan then ramped up his efforts to broker a deal on banking debt. He had a consistent line: it was payback time. The government hadn’t imposed losses on senior bank bondholders, preventing contagion spreading across the euro region from the Irish banking crisis.
  • The economy emerged from recession in the second quarter, unemployment dropped for six months in a row, and house prices in Dublin are rising again. The yield on 10-year bonds is down to 3.5 percent, lower than Italy and Spain.
  • “The Germans disagree all the time until the very end, and then they agree,” he said. “Once you realize that, you keep talking, you keep chipping away.”
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