Transcript power point slides

ICTF’s 2014 Global Trade
Symposium
Hans Belcsak, Rundt’s Intelligence
Critical Developments
Russia
MENA
United States
China
By Geographical Region
LOGO
Your Title Here
The US Dollar
Global Oil Prices
De-Globalization
Nuclear Talks With Iran
LOGO
The United States
• Positive signals from the economy (3.5% after
4.6%, investment, jobs, leading indicators)
• Caveats, but we expect 2.5% for 2014
• The mid-term elections (increased House
membership, control of Senate, 31 governorships
• Consequences
– The pessimists: Republican “hell no” group, president adamant
– The optimists: Senate “roach motel” now gone
– Problems with Obamacare, immigration policy
– But some movement, Keystone XL, fast-track authority, some DoddFranc changes
Russia
•
•
•
•
•
•
•
•
Double whammy (biting sanctions and low oil)
Budget based on USD 100 pb (Urals)
Still has USD 430 billion in reserves
High interest rates, stagnation or recession
Rallying around the flag
Rapprochement with China
Will not deter Putin from aggression in Ukraine
Baltic nations the big risk
MENA
• Metastasized al-Qaeda
• From Aqap and Aqim to al-Shabaab and
Boko Haram
• Pure terrorism from ISIS
• Enormous threat to adjacent nations
• Extremely complex relationships
• Homegrown extremists
• Why this matters to business
China
•
•
•
•
•
•
•
•
Slowed growth, soft landing (7.3% third quarter)
Stimulus limited to minor moves
National debt = 251% of GDP (but domestic)
Sees itself as pre-eminent world power
Near-term in the region
Stick and carrot approach
Determined to blunt Western influence
Growing nationalism, problems for foreign
investors
Nuclear Talks With Iran
•
•
•
•
•
•
•
Overly eager US Administration
Rouhani no “moderate”
“Threshold” nuclear power
Regional arms race
Fears of the Sunni-led Gulf states
Existential danger for Israel
Saudi Arabia’s position
De-Globalization
• No progress on the Doha round
• Regional attempts (Trans-Pacific Partnership, Free Trade
Area of the Asia-Pacific, US-EU agreement, Russia’s Eurasian economic
area)
• Pressing Dublin on the “Double Irish”
Oil Prices
• Brent below USD 80 a barrel
• Beneficiaries those that spend the most relative to GDP
(China, EU, Japan). Among industries: airlines, UPS and FedEx,
trucking industry (69% of US freight tonnage)
• Double-edged sword: in the US, gas guzzlers
(complicating 45.5 mpg goal), shale development
• Arguments within OPEC
• Hard hit: Nigeria, Russia, Venezuela
The US Dollar
• Still with upside potential
• Safe-haven qualities, end of QE-3, expectation
of higher interest rates
• Unfair privilege for the US?
• Attempts to replace:
• Yuan promotion, BRICs development bank, African
commodity exporters (Angola, Mozambique, Ghana, Zambia)
• Won’t be successful
• Needs deep markets, rule of law, ease of transaction (FX
bazaar turns over USD 5.3 trillion/day)
• The issue of carry trades
Brazil
• Rousseff won, unhappy markets
• Selic to over 11%
• Her own dismal legacy (recession, fiscal deficit, public
debt, current-account gap)
•
•
•
•
Not Lula’s personality
Divided country (she did well in poor North and Northeast)
Minor and temporary course corrections
Drought in Sao Paulo State
Venezuela
• Hit by oil and gold (71% of reserves)
• Exchange rate gap 6.3 to 113.5
• More transactions to Sicad 1 (12) and
Sicad 2 (about 50)
• Limited amount to export (China, Cuba,
Petrocaribe)
• Ad hoc measures (e.g., rationing)
• Inflation 63.4%
• Maxi-devaluation inevitable
Greece
• Hopes for Grexit without 3rd bailout
• Optimistic budget for 2015 (2.9% growth,
tax cuts for heating fuel, solidarity tax)
• Perspective: GDP still 25% down
• Problems with company & household debt
• Recent bond sales met good response
• ECB has questions
• Tricky presidential election next year
Ireland
•
•
•
•
•
•
Economy is doing well
Finance Ministry: 4.5% for 2014
Much-improved external accounts
Standard corporate tax 12.5%
Core of industrial policy, but heavily criticized
The “Double Irish” (intellectual property
acquired)
• Qualified pull-back (not all details are known yet)
• “Knowledge Development Box”
Egypt
• Back to stability by repression
• This allowed significant reforms (e.g. fuel
subsidy cuts)
• Stormy relationship with the US
• Now good, also with EU (Sinai help)
• Elections will create rubberstamp body
• USD 3.5 billion arms from Russia
• USD 8.5 billion for Suez Canal expansion
• Billions from Saudi Arabia, UAE (Muslim
Brotherhood ban)
Turkey
• From “only friends among the neighbors”
to no friends
• Erdogan is an autocrat having pulled a
“Putin”
• His position on Kobani is understandable,
however
• Two banks in trouble – Denizbank and
Bank Asya – have nothing to do with
developments in Syria or Iraq
Tunisia
• Jasmine revolution, Ennahda’s failure
• Interim government has met rising jihadist
violence (AQIM, Ansar al-Sharia)
• Elections October 26 (parliament) and
November 23 (president). Ennahda and Nida
Tounes may co-govern
• Worse external accounts (ccBoP 8.4%)
• IMF USD 1.75 billion, 24 months
• Hope for tourism, phosphates
• For the dinar, look for further devaluation
Nigeria
• 2006-2014 US imports of oil from1.3 million bpd to zero
• Not necessarily a disaster
• Stepped-up exports to Asia
• Less significant to the economy
• GDP last April revised upward by 90%
• Consumer market
• One in five of Sub-Saharan’s930 million people
• 114 m cell phones, 55 m internet users, 11 m on Facebook
• Economy forecast to grow 7.1% annually through 2030
• But:
• Many weaknesses in infrastructure (housing & energy)
• Boko Haram (questionable deal re Chibok girls)
India
• Now governed by Bharatiya Janata Party under PM Narendra Modi
• Moving in the right direction
• Subsidies for food, USD 18 billion p.a., minimum support prices 12
bio, fertilizers 10 bio, rural employment scheme 6 bio, cooking gas 3
bio, kerosene 3 bio.
• Archaic labor laws (comply with 100, violate 20)
• Plans to improve infrastructure, open up defense and insurance
• Gingerly beginning, but shift in political thinking
• Just won two state elections (controls Lower House, but just 17% of
Upper House)
• Indian-Chinese trade agreements
• US complaints: sanctity of contract, protections for intellectual
property, retroactive tax hits
Indonesia
•
•
•
•
•
President Joko Widodo (Jokowi)
Cabinet is no dream team, but competent
18 technocrats among 34 members
Wants to boost growth to 7% (5.1% Q2)
Headwinds: China, commodity prices, QE3, 37%
control of parliament
• Positive: popularity, ability to take matters
directly to the people.
• Some signs of protectionism
Open Forum