Tag Archives: Brazil

Five Stories You Might Have Missed

Debates over Wall Street compensation reemerged on the national stage last week, as the government urged companies that received federal assistance under the Troubled Asset Recovery Program (TARP) limit executive compensation. On Thursday, the Federal Reserve issued draft rules governing compensation for companies that have not repaid TARP assistance. Under the new rules, the companies would be required to demonstrate that their compensation packages do not encourage excessive risk-taking. In an interview with the Financial Times, George Soros weighed in on the debate, calling Wall Street’s profits this quarter “hidden gifts” from the U.S. government. He commented that, “Those earning are not from the achievement of risk-takers. These are gifts, hidden gifts, so I don’t think that those monies should be used to pay bonuses. There’s a resentment which I think is justified.”

Meanwhile, concerns over the spread of the H1N1 (swine flu) virus continue to grow. On Saturday, President Barack Obama declared a declaration of “national emergency” to combat the flu. Under the declaration, hospitals eases some restrictions on hospital operations, giving them additional powers to treat the flu. 

In news from outside the United States last week:

1. German Chancellor Angela Merkel formally announced her new coalition agreement on Saturday. There were few surprises, as Merkel’s center right Christian Democrats allied with the liberal Free Democratic Party. The coalition contract included a promise to pass a €24 billion tax cut for poor and middle-income Germans and will reform inheritance laws. Under the new coalition agreement, Guido Westerwelle, the leader of the Free Democrats, will assume the post of foreign minister. The Christian Democrat’s Wolfgang Schäuble, a strong fiscal conservative, will become finance minister.

2. In two separate attacks, two car bombs exploded outside government buildings in Baghdad, Iraq, on Sunday, killed more than 130 people and injuring more than 500. The attacks were the deadliest in more than two months. Iraq had been enjoying a period of relative stability, as Western-backed tribal leaders had pushed al Qaeda militants into the margins. But U.S. officials contend that Iraq may be entering a period of increased violence, as militants attempt to reignite sectarian violence ahead of parliamentary elections scheduled for next year.

3. Negotiations intended to resolve the standoff over the Iranian nuclear program appear to have stalled. The talks, which were reopened early last week, were intended to develop an agreement which reduced Iran’s stockpile of low enriched uranium (LEU), building upon an agreement reached earlier this month under which Iran agreed, in principle, to send some of its estimated 1,200 kg of LEU to Russia and France, which would convert the fuel into medical isotopes before sending it back to Iran. But after Iran failed to meet a Friday deadline, the United States warned that it would be willing to wait for a few more days, but cautioned that its patience was limited. Iran’s current stockpile, if enriched, could provide enough uranium for a single nuclear weapon.

4. Figthing between Somali insurgents and African Union (AU) peacekeepers broke out in Mogadishu on Thursday, killing at least 30 people. According to witnesses, militants attacked using mortars as Somali President Sheikh Sharif Ahmed was leaving the country for a meeting in Uganda. AU forces responded with artillery fire. More than 19,000 civilians have been killed, and an estimated 1.5 million people have been displaced from their homes since 2007 as a result of ongoing fighting in Somalia, which has made the country a center for international piracy and terrorism.

5. The government of Brazil on Tuesday imposed a two percent tax on some capital inflows into the country. The decision, which as intended to slow the increase in the value of the real, Brazil’s currency, which had already increased more than 36 percent against the U.S. dollar this year. The new tax targets portfolio investment and financial speculation, not productive investment in the country. Nevertheless, the announcement was not well received by the market, and stocks fell sharply after the government made its announcement. But analysts offered a more positive pronouncement. In an editorial comment, the Financial Times described the new tax as “wise,” “sensible,” and “honest.”

Advertisements

Five Stories You Might Have Missed

The G20 meeting in Pittsburg this week resulted in agreement on several important principles, with the group agreeing in principle to establish guidelines for bankers’ pay, developing a timetable for reforming financial regulations, and establishing a new framework for economic growth. The G20 also agreed to transfer five percent of the shares in the International Monetary Fund and three percent of the shares in the World Bank to emerging countries. The organizations have long been criticized for voting structures which over-represent the developed world at the expense of the developing world.

In other news from the previous week:

1. There were several important developments in Iran this week. On Sunday, Iran test fired a short-range missile as part of ongoing war games in the country. The missile, a Shahab-3, has range sufficient to reach Israel and U.S. bases in the Persian Gulf. The launch comes just days after the United States announced it had discovered Iran possessed a second, secret uranium enrichment facility. France and the United Kingdom joined the United States in condemning Iran for misleading the international community. The discovery and announcement put pressure on Tehran, which maintains that the facility is used for peaceful purposes. The most recent announcement produced new signals from Russia, which had historically opposed sanctions against Iran. But after being briefed on the new facilities by the Obama administration, Russian President Dmitry Medvedev indicated that the Russian government may be willing to consider sanctions as a way of addressing the Iranian nuclear situation.

2. Germany is headed to the polls today, with most analysts calling the election too close to call and many speculating about what kind of coalition will take control of the world’s fourth largest economy. Although Angela Merkel’s ruling Christian Democrats have been leading throughout the campaign, her support has been slipping over the past week. With low turnout forecast, observers believe that the election could still be close. Further, a quirk in the German voting system could result in Merkel’s CDU winning a plurality of seats in the Bundestag despite winning a smaller percentage of the popular vote than her rivals. Her rival, the Social Democrats, have lagged in the polls throughout the campaign but managed a late-campaign surge. No matter what the margins, negotiations around a forming a new coalition in Germany will likely be the central focus of German politics in coming days.

3. Two car bombings believed to the work of the Taliban in Pakistan killed 27 people on Saturday. The attacks targeted Pakistan’s military and police forces, coming just days after the country’s President, Asif Ali Zardari, appealed to the G20 for assistance in fighting terrorism in Pakistan. The attacks demonstrate the resilience of the Taliban in Pakistan, which has been engaged in a protracted war with the national military. Last month, the Pakistani military killed Baitullah Mehsud, the Taliban’s main leader in Pakistan, and earlier this year, the military killed more than 3,000 Taliban militants in operations in the Swat valley region. Despite these losses, however, the Taliban remains a central threat to the stability of the Pakistani regime. 

4. The government of Guinea is moving forward with its efforts to overturn some of the contracts signed with foreign companies under the military dictatorship of Lansana Conté, whose 24 year-rule ended with his death in December. The new government has already forced Rio Tinto to return a portion of its iron ore concessions and convinced the South African gold company, AngloGold Ashanti, to establish a $10 million fund to pay for environmental damages caused by their operations in the country. On Tuesday, the government ordered the Russian aluminum company Rusal to quit the country, claiming that it owed more than$750 million in taxes, royalties, and other duties owed since 2002. With a GDP per capita of $442, Guinea remains one of the poorest and least developed countries in the world.

5. Deposed President Manuel Zelaya returned to Honduras last week, sneaking into the country and hiding in the Brazilian embassy in Tegucigalpa. Honduran security forces used water cannons and tear gas to dispurse crowds which had gathered outside the embassy in support of Zelaya. The Brazilian government has called on the international community to do more to support Zelaya’s return. Most of the international community has refused to recognize the new government and international assistance from the World Bank and the International Monetary Fund has been suspended. Speaking before the United Nations General Assembly on Wednesday, Brazlian President Luiz Inácio Lula da Silva said, “The international community demands that Mr Zelaya return immediately to the presidency of his country and must be alert to ensure the inviolability of Brazil’s diplomatic mission in the capital of Honduras.”

Of Cotton Subsidies and Essential Medicines

On Monday, the World Trade Organization [glossary] granted partial approval to Brazil’s proposal to impose countervailing sanctions against U.S. goods after the United States failed to comply with an earlier order to end illegal subsidies to cotton farmers. The ruling is the latest development in a trade dispute that stenches back several years. In 2002, Brazil failed suit against the United States, claiming that U.S. subsidies [glossary] to cotton farmers violated WTO rules and cost Brazil more than $3 billion per year in revenue lost due to distorted global prices. Brazil won its case in 2004, but the U.S. Congress has been slow to remove the subsidies.

Under WTO rules, Brazil would has the right to impose countervailing tariffs against U.S. exports to Brazil, up to the amount that the WTO certified Brazil is losing due to U.S. policy, in this case $3 billion. But for countries in the developing world, such an option is often unpalatable for two reasons. First, the imposition of tariffs could lead to higher consumer prices for goods, which can be politically unpopular. Second, the relative size of the markets means that Brazil’s loss of access to U.S. markets has a greater impact than the U.S.’s loss of access to Brazilian markets, even if the two losses are equal in absolute terms. Consequently, developing countries have made significantly less use of the WTO’s dispute resolution system and, even when victorious, have been more hesitant to use countervailing tariffs to enforce WTO decisions.

But Brazil’s proposal was an interesting one. After the United States continued to refuse to remove the trade distorting subsidies, it appealed to the WTO for an alternative recourse. Brazil proposed to impose the WTO penalty not by imposing tariffs on U.S. goods exported to Brazil, but by infringing patents on U.S. pharmaceutical products.

Brazil’s proposal is interesting in three respects. First, it makes the WTO’s dispute resolution system much more accessible to the countries of the global south. Enforcement, which has historically been difficult for countries in the global south, would be become more feasible. Second, it hits the United States in an area of much greater significance. The United States has long pushed for stronger intellectual property protections worldwide, campaigning against expanding the World Health Organization’s essential medicines list, for example. The political value of a ruling against U.S. pharmaceutical interests would be much higher as a result. Finally, and most importantly, such a ruling would link the agricultural subsidies dispute—which has been at the center of WTO talks in recent years—directly to the health and medicines debate. Farmers in the global south, whose lose an estimated $300 billion per year as a result of agricultural subsidies in the global north, could potentially benefit as a result of access to cheaper generic medicines manufactured in the global south.

So, on Monday, the WTO ruled. It denied Brazil’s request to bypass intellectual property protections, but confirmed that such a request could, in principle, be granted in the future. Indeed, last year, the WTO granted Antigua the right to do precisely that in its trade dispute over U.S. gambling laws. In the Brazilian case, the WTO decided that the current level of subsidies is not high enough to warrant such a radical step. A small victory for both sides, perhaps, but certainly a warning to the United States that intellectual property rights may be an effective tool to influence U.S. trade policy.

Five Stories You Might Have Missed

Japanese elections took place on Sunday, marking a dramatic shift in political power in the country. The Liberal Democratic Party, which has ruled Japan for nearly all of its post-World War II history, looks set to lose handily to its main rival, the Democratic Party of Japan. Some analysists are projecting the DPJ may win as many as 320 seats in the lower house, giving it a two-thirds majority and eliminating any need to form coalition partners. Prime Minister nad LDP leader Taro Aso has already conceded defeat and announced his intention to resign as party leader. With the DPJ’s victory, Yukio Hatoyama looks poised to become the country’s next prime minister.

In other news from the previous week:

1. The dispute over the status of last week’s Afghan election continues. Although incumbent President Hamid Karzai has extended his lead in the most recent results, the current tally (in which Karzai leads his main challenger, Abdullah Abdullah 46% to 31%) would still force a runoff election in October. Although final results are not expected until the end of September, Abdullah has accused the government of engaging in a “massive state-engineer[ing]” of the election results, alleging voter intimidation, ballot-box stuffing, and other election irregularities. The United States has also expressed concerns over the accusations, with U.S. Special Envoy to Afghanistan and Pakistan “mak[ing] it very clear” in a meeting with Karzai last week that the election should be free and fair.

2.  Fighting between the government of Burma and a rebel militia known as the Myanmar National Democratic Alliance Army broke out last week, ending a ceasefire signed between the two more than twenty years ago. The fighting, which has led to a massive exodus of refugees into China, drew criticism from the Chinese government over the weekend. China has been one of the few countries to maintain close ties to the Burmese government, but those ties have been challenged after a reported 10,000-30,000 people crossed into China to flee fighting. The Burmese government is attempting to reassert control ahead of next year’s elections over a region which has large ethnic minorities who reject the central government’s authority.

3. The United Arab Emirates announced it had seized a ship carrying North Korean arms to Iran. According to a report issued by the government of the UAE to the United Nations, the ship, which was seized several weeks ago, was carrying ammunition and small arms, including rocket-propelled grenades, in contravention of a UN embargo established under UN Security Council Resolution 1874 (2009). That resolution was passed after North Korea’s second nuclear test in May. The United Arab Emirates is a close U.S. ally in the region, and has been under pressure to step-up its screening of  shipments bound for Iran.

4. The longstanding trade dispute between Brazil and the United States will take a new turn on Monday, when the World Trade Organization is expected to rule that Brazil may infringe patents on U.S. pharmaceuticals in retaliation for U.S. subsidies on cotton. Brazil successfully challenged U.S. cotton subsides in 2002, when the WTO ruled that the $3 billion annual cotton subsidies paid by the U.S. government unfairly distorted global cotton prices. Despite the victory, the United States has continued to pay the subsidies, and the Brazilian government has struggled to find a way to enforce the ruling. If the WTO does indeed rule that Brazil may bypass U.S. intellectual property protection in the case, it may represent a new avenue for developing countries to enforce WTO rulings. More on this in a future blog entry.

5. South African President Jacob Zuma stated last week that he will be quick to condemn any “deviant” behavior during his upcoming visit to Zimbabwe. The South African government has historically been very slow to criticize the Zimbabwean government or to bring pressure on the country, which has been in the throes of an economic and political crisis for the more than five years. Meanwhile, a United Nations report last week contended that international humanitarian assistance for Zimbabwe has fallen well short of the amount needed to address the food shortages and disease outbreaks facing the country. The UN estimates Zimbabwe will require $718 million in humanitarian aid this year. So far, only $316 million has been pledged.

Five Stories You Might Have Missed

The major news story this week was the nomination of Sonia Sotomayor to replace David Souter on the U.S. Supreme Court. If confirmed by the Senate, Sotomayor would be the first Hispanic and only the third woman appointed to the highest court in the United States. Politically, Sotomayor’s nomination was a brilliant move on the part of the Obama administration. While President Obama did not take advantage of the opportunity to appoint a liberal counter-weight to the conservative ideologues of Justice Antonin Scalia, the President did manage to force Republicans into a difficult spot. Republicans had been gearing up for a protracted fight against any Obama nomination as a way to mobilize their softening political base and increase fundraising in anticipation of next year’s Congressional elections. But in nominating Sotomayor, Obama forces Republicans to balance their desire to mobilize their base against their need to expand the base of the party to include the country’s largest and fastest growing minority group.

In news from outside Washington DC last week:

1. The United States is still struggling to figure out how to deal with the challenges posed by North Korea’s increasingly belligerent policy stance. Over the past two weeks, North Korea has engaged in a nuclear warhead test (on Monday) and several missile test fire operations. While the United States has officially downplayed the situation, describing North Korea’s actions as “nothing out of the ordinary” and dismissing it as mere “posturing,” it has discussed the need for a tougher approach. Meanwhile, the United Nations Security Council seems unlikely to moved on fresh sanctions against the North Korean regime.

2. After a week of intense fighting, the Pakistani military has regained control of Mingora, the main town in the disputed Swat valley. The government of Pakistan has been fighting against Taliban militants, who have turned to terrorist  bombings in their fight against the Pakistani government. On Thursday, for example, four bombs exploded in Peshawar, a city in north-west Pakistan. Observers are speculating that the Pakistani government may turn its attention to the Waziristan region along the Afghanistan border once operations in the Swat valley are completed. But the ability of the Pakistani government to continue to exercise sovereignty over the border regions will depend on its ability to establish governmental institutions and expand the reach of the country’s central institutions into the border regions—something the central government has not been able to do so far.

3. Political tensions within the Palestinian Authority intensified on Sunday after forces loyal to Palestinian President Mahmoud Abbas (from the Palestinian Liberation Organization faction) raided a safe house belonging to Hamas, the other party in government. The clash–the bloodiest since the Abbas government revived peace talks with Israel in 2007, resulted in six deaths, including two high-ranking Hamas officials. The attack came just four days after Abbas met with President Barack Obama in Washington, DC. Obama encouraged Abbas to improve his efforts to fulfill his obligations under the road map for peace, including maintaining law and order in the West Bank. Observers believe this attack was part of that effort, intended to demonstrate to the United States that the Palestinian Authority is following through on its promises.

4. Fighting in the Niger River Delta region continued over the past week, as the government of Nigeria continued its attacks on militants in the region. The government is hoping to reopen oil wells in the Ogoniland region. But observers fear that the government’s increasingly militarized efforts to address the crisis may backfire. Groups in the Niger Delta region claim that they have received few benefits from the country’s oil wealth, suffering from severe environmental degradation and severe human rights violations resulting from oil production, but seeing little benefit from the industry. Militants in the region have already launched attacks against some oil production facilities, hoping to cut off production and increase the cost of operating. Activists in the United States have taken a different approach, attempting to sue in U.S. courts the multinational oil giant Royal Dutch Shell for their alleged involvement in the death of Ken Saro-Wiwa and other human rights activists in the region.

5. Oil prices reached a six-month high on Friday, trading at $66 per barrel. OPEC is projecting that oil should reach $70-$75 per barrel by the end of the year. While the fighting in the Niger Delta region certainly contributed to increasing prices, observers also believe that speculators are coming back into commodities markers, leading to price increases. In a move certainly linked to the higher prices, the government of Brazil announced that it would reopen its vast offshore oil fields to international bidders. Meanwhile, the oil giant Chevron is being sued in Ecuadorian courts, facing damage liabilities as high as $27 billion for alleged damage to the environment and human health caused by their operations in the country.

Five Stories You Might Have Missed

It’s been a relatively quiet week in domestic U.S. politics. Congress continues to spar over the Pelosi-CIA briefing debate, and observers continue to speculate about who President Barack Obama might nominate to replace Justice David Souter in the U.S. Supreme Court. Congress also moved forward with passage of a cap-and-trade system to address greenhouse gas emissions (though the legislation still has a long way to go before it becomes law). The most interesting story of the week came on Wednesday, when former Vice President Dick Cheney and President Obama gave “dueling speeches” on the topic of torture and U.S. national security.

But while it was relatively quiet in the United States, it was a busy week globally. Here are five stories you might have missed:

1. The campaign for elections to the European Parliament, scheduled for June 4, are beginning to heat up. The European Parliament is selected on the basis of nation-wide proportional representation elections, which means that national politics often play out in interesting ways at the European-wide level. Thus, observers are looking to the results of the election in the U.K. as a forecast for Gordon Brown’s political future, which has been challenged in recent weeks by the ongoing corruption scandal. In Italy, the vote is being cast as a referendum on Silvio Berlusconi’s aggressive anti-immigration platform. And in France, the campaign is centering on the question of Turkish membership in the European Union.

2. The German presidential elections took place on Saturday, with incumbent president Horst Köhler narrowly winning re-election and handing Chancellor Angela Merkel a symbolic victory ahead of her own re-election campaign. The German presidency is elected by the upper house of the country’s parliament. The position has little real authority, with executive power being vested in the office of the chancellor. However, a challenge from Merkel’s coalition partners threatened to see Köhler defeated, creating a political challenge just four months from the country’s next general election.

3. A trade agreement currently being negotiated between China and Brazil aims to see the countries use their own currencies rather than U.S. dollars in transactions. The move, seen as part of China’s broader strategy of moving the U.S. dollar out of its status as the global reserve currency, expands on a previous currency swap agreement between the two countries. In separate negotiations, China agreed to expand imports of Brazilian chicken and beef and to provide up to U.S. $10 billion to Brazil’s government-controlled oil company in exchange for guaranteed oil supplies over the next decade. China overtook the United States as Brazil’s largest trading partner earlier this year. 

4. The government of Nigeria launched a new military offensive in the Niger River Delta last week, hoping to defeat armed opposition forces in the area. The move marks a decisive shift in the politics of the delta. The previous Nigerian administration had opted for a more diplomatic approach, emphasizing negotiations with the Movement for the Emancipation of the Niger Delta, an umbrella group emphasizing autonomy for the Warri region. According to observers, however, the new Nigerian government headed by Umaru Yar’Adua is opting for a military-based approach to the crisis. The oil-rich region houses operations by leading international oil companies, including Royal Dutch Shell, ExxonMobil, and Total. The conflict has led to a sharp decline in Nigerian oil exports, and observers fear that this may lead to a spike in global oil prices.

5. Former South Korean President Roh Moo-hyun committed suicide on Saturday. Roh rose to power as a human rights lawyer representing student and union activist in the struggle against the country’s military government in the 1980s. He was elected president in 2003 on a strong anti-corruption and political reform platform, earning him the nickname “Mr. Clean.” However, after his party suffered a series of electoral defeats, he resigned from office in 2008. Shortly after Roh’s resignation, accusations of corruption in his administration began to surface, including charges that a South Korean tycoon paid his wife $1 million while another family member received $5 million from the same tycoon. Roh killed himself after losing face as a result of the scandal. However, such accusations have not been uncommon in South Korean presidential politics, and two of the four presidents who preceded Roh have been jailed on similar charges. Nevertheless, observers fear that Roh’s suicide may increase political tensions in South Korea.

Five Stories You Might Have Missed

The world is preparing for the upcoming G20 summit, scheduled to meet in London later this week. While each country is arriving at the meeting with their own objectives, it is clear that the global financial crisis will dominate discussions. In this context, the main issues on the table appear to resolve around three key policy debates: developing a globally coordinated stimulus package, strengthening global financial regulation, and reforming the international financial architecture, particularly the International Monetary Fund. Police are preparing for widespread tens of thousands of protestors accompanying the meeting.

In other news from the previous week:

1. President Barack Obama on Friday announced that the U.S. would expand its commitment in Afghanistan, sending an additional 4,000 troops to train Afghan security forces. The Obama administration is also hoping to refocus the U.S. mission in Afghanistan, moving away from the nebulous mission of national building and democratization and instead focusing on defeating al-Qaeda and Taliban militants operating along the Afghan-Pakistan border. FT blogger Gideon Rachman raises some important questions about the new strategy, pointing out that bringing the fight to al-Qaeda militants in Pakistan may well undermine the stability of Pakistan—an ultimately self-defeating strategy, he argues.

2. After struggling for weeks to secure a coalition government, incoming Israeli Prime Minister Benjamin Netanyahu was able to convince their center-left rival, the Labour party, to join a new coalition government on Tuesday. Netanyahu hoped to bring the center-left Labour party into the coalition in order to avoid allying with a number of far right parties and running the risk of souring relations with the U.S.  Nevertheless, the new government raises concerns among many Palestinian leaders about the future prospects of the peace process.

3. The medical journal the Lancet offered a powerful criticism of Pope Benedict’s recent speech during a trip to Cameroon and Angola. During the visit earlier this month, the Pope claimed that condom use increased the prevalence of AIDS on the continent. After the World Health Organization and other AIDS experts attacked the claim, the Vatican last week issued a statement that reasserted the Pope’s claim that condom use was both ethically wrong and actually exacerbated the AIDS crisis. The condom/AIDS debacle is just the recent in a series of missteps and controversies that have plagued the current Pope. In February, he lifted the excommunication of four ultra-conservative clerics who denied the holocaust. And in 2006, he quoted a fourteenth century emperor who characterized Islam as “evil and inhumane.”

4. On a Thursday press conference with British Prime Minister Gordon Brown, Brazil’s President Luiz Inácio Lula da Silva told reporters, “This [current global economic] crisis was caused by the irrational behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing…I do not know any black or indigenous bankers so I can only say [it is wrong] that this part of mankind which is victimised more than any other should pay for the crisis.” Brown immediately sought to distance himself from the comments. But the comments underline the potential difficulty of securing agreement at the upcoming G20 meeting, in which Argentina and Brazil will be pushing for reform of the international financial institutions and campaigning against protectionist policies in the developed world.

5. German Chancellor Angela Merkel cautioned against excessive stimulus spending in Europe while at the same time calling on China to expand its stimulus package in an effort to address the global financial crisis. In an interview given in anticipating of the upcoming G20 summit, Merkel argued that the current crisis was caused, in part, by policies which facilitated unsustainable growth with too much money. She argued it was necessary to avoid repeating those mistakes in the recovery. Spain’s finance minister, Pedro Solbes, on Friday said that Spain would not be able to expand its own stimulus spending, fearing that excessive national debt would undermine future economic prospects.