Brazil has plenty of entrepreneurs but many lack ambition when it comes to expanding companies

May 8, 2013 7:27 pm

A spirit for enterprise

By Joe Leahy

When Linda Rottenberg moved to Latin America in the 1990s, she was surprised to find there was no word for “entrepreneur” in the local Spanish or Portuguese. Ms Rottenberg, president of Endeavor, a global non-governmental organisation that supports entrepreneurship, says every university student she met wanted to work for the government. Over the years, however, with the opening of the region’s economies and the rise of its stock markets, that attitude has changed so much that a Portuguese word for entrepreneur has emerged: empreendedor. “One of my favourite days was when the editor of a Portuguese dictionary told me he was adding the word for ‘entrepreneur’,” Ms Rottenberg said recently, before the Global Entrepreneurship Conference, a summit for service providers in the field, which was held in Rio de Janeiro.

Few people, particularly the participants milling around the conference, would question the existence of a Brazilian entrepreneurial spirit. On the global stage, there is Brazil’s most prominent entrepreneur, Jorge Paulo Lemann, who is teaming up with Warren Buffett to buy Heinz. Or Embraer, the world’s third-largest commercial aircraft maker, which continues to practise “intrapreneurship” by taking risks on new products and investing in fresh business lines. At home, there are businessmen such as Andre Esteves, who is building BTG Pactual, the country’s biggest independent investment bank, or Peixe Urbano, the collective buying platform that is Brazil’s version of Groupon. The idea of the entrepreneur has become such a celebrated part of Brazilian culture that one of the main characters in Avenida Brasil, a popular soap opera, was an entrepreneur selling hair products developed in her shop in a favela.

But in a country dominated by huge companies, some state run and most recipients of state credit, how much is this idea of the great Brazilian entrepreneur myth or reality? Rather than patting itself on the back, should Brazil, facing increasing doubts over its international competitiveness, be doing much more to foster entrepreneurship? “You need more Embraers, you need more Brazilian companies participating in higher value-added production chains,” says Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Centre for Scholars in Washington. Read more of this post

Norges, the world’s largest sovereign wealth fund, is fleeing out of inflation-linked bonds in a sign of how many large investors are souring on the asset class

May 8, 2013 4:44 pm

Norway’s oil fund dumps inflation-linked bonds

By Richard Milne in Oslo and Robin Wigglesworth in London

The world’s largest sovereign wealth fund is fleeing out of inflation-linked bonds in a sign of how many large investors are souring on the asset class. Norway’s oil fund has cut its holdings of inflation-linked bonds by 73 per cent in the past year and almost halved them in the first three months of this year alone. Yngve Slyngstad, head of the oil fund, told the Financial Times that, in theory, inflation-linked debt was one of the ways investors could hedge the risk of negative real yields in government bond portfolios. But he added that the oil fund was in fact reducing its exposure to inflation-linked bonds sharply because it had concluded that it was not a big enough market. Read more of this post

University endowments trim holdings in US Treasuries from as much as 30 per cent in 2008-09 to zero in some cases, fearing they could be caught flat-footed by a reversal of the Federal Reserve’s low interest-rate policy

May 8, 2013 7:34 pm

University endowments trim holdings in US Treasuries

By Henny Sender in New York

Some of the smartest money in America is getting out of US government debt. Many university endowments have scaled back their holdings of Treasury securities from as much as 30 per cent in 2008-09 to zero in some cases, say people familiar with their investment strategies. The sell-off reflects a big change in the way fund managers view US government debt. The traditional attraction of Treasuries for US investors was that they were certain to be repaid. But with interest rates at such low levels, investors worry that bond prices could fall dramatically. “Treasuries were a core holding,” said one university fund manager. “Now everyone is holding less than 5 per cent.” The fear on campuses is that universities, which profited in recent years from the rally in Treasury prices, could be caught flat-footed by a reversal of the Federal Reserve’s low interest-rate policy. “If you think you can change allocations quarter by quarter, and you believe rates will be low for longer, and you think you can make a quick switch, then maybe it is OK,” the university fund manager said. “But that isn’t the way we invest. Today government bonds should come with a warning about interest rate risk.” Princeton’s $17bn endowment has converted its Treasury holdings to cash, according to published reports. Duke’s $5.5bn endowment has also shifted from Treasuries to US stocks with high dividends and emerging market equities, a person familiar with the university fund said. Last week, Cornell’s $5bn endowment decided to reduce its investments in Treasury securities to just over 3 per cent of assets. As of June last year, Yale’s $19bn endowment had only 4 per cent of its holdings in Treasuries. “Yale is not particularly attracted to fixed income assets as they have the lowest expected returns of the seven asset classes that make up the endowment,” the university’s fund said in its annual report. According to one survey of 831 US universities, the average endowment lost 0.3 per cent in the fiscal year ending June 2012, with gains on holdings of government debt offsetting losses elsewhere in their portfolios. By contrast, endowments earned an average return of 19.2 per cent in the year to June 2011.

China may not overtake America this century after all; world’s tallest tower in Changsha should have been built by now when officials announced said last year the great edifice would be erected in 3 months

China may not overtake America this century after all

Doubts are growing about whether China can pass the US to become the world’s biggest economy this century amid warnings that the country’s 30-year miracle is nearing exhaustion.

China’s catch-up spurt has a few more years to run in the Western hinterlands perhaps, but when the full story comes out we may find that nationwide growth has already fallen below 7pc. Photo: Getty

By Ambrose Evans-Pritchard

3:21PM BST 08 May 2013

The world’s tallest tower should have been built by now. Officials said last year that the great edifice with 220 floors would be erected in three months flat in China’s inland city of Changsha by March, snatching the crown from Dubai’s Burj Khalifa. The deadline has come and gone, yet the wasteland sits untouched. It now looks as if the fin d’époque project – using prefab blocs – may never be approved. Even China knows its limits. Read more of this post

The US will match China on the cost of manufacturing by 2015. Companies in both countries must adapt

The parity puzzle

Thursday, May 9, 2013

The US will match China on the cost of manufacturing by 2015. Companies in both countries must adapt, write Ivo Naumann and Steve Maurer

Ivo Naumann and Steve Maurer are managing directors at AlixPartners, a global business advisory firm. Naumann heads the firm’s activities in mainland China, and Maurer leads the firm’s manufacturing practice for the Americas.

It happens regularly in virtually every segment of every industry: A newcomer arrives, offers an advantage that competitors in the segment can’t match and rapidly begins to build both its business and market share.

What often follows, however, is also predictable: The market adapts, the advantage diminishes and the newcomer finds that it is in a vulnerable, rather than valued, situation. Read more of this post

U.S. taxpayers employ more low-wage workers than Wal-Mart, McDonald’s combined

Study: U.S. taxpayers employ more low-wage workers than Wal-Mart, McDonald’s combined

By Jim Tankersley and Marjorie Censer, Published: May 8

Federal taxpayers employ more low-wage workers than Wal-Mart and McDonald’s combined, a new study calculates.

The report from a public policy organization Demos, set to be released Wednesday, estimates that taxpayer dollars fund nearly 2 million private-sector jobs that pay $24,000 a year — about $12 an hour — or less. Those workers owe their incomes to government contracts, Medicare and Medicaid spending, and federal infrastructure funds, among other public sources. In contrast, Demos estimates that about 1.4 million workers earn that amount or less at Wal-Mart and McDonald’s, which are two of the largest employers of low-wage workers.

The findings highlight inequality within the government contracting industry; as chief executives of major contractors rake in millions, many contract employees are struggling to get by, according to the report from Demos, which advocates for worker-friendly policies. It is a situation that could be worsened by the budget pressures of sequestration, which is pushing the federal government to spend fewer dollars and pursue lower-priced contracts. Read more of this post

Huawei founder gives first ever interview

Huawei founder gives first ever interview

May 9, 2013 – 2:21PM

Tom Pullar-Strecker

The founder and president of Chinese technology giant Huawei, Ren Zhengfei, has used a visit to New Zealand to speak to the media for the first time in his career.

Ren, 68, had never previously consented to media interviews inside or outside of China, but this morning fielded questions from a handful of journalists at Wellington’s Museum Hotel on topics ranging from his personal view of China’s human rights record to a rumour he will soon retire.

Responding to speculation about Huawei’s relations with the Chinese government, he said they were no different to those that might exist between a New Zealand firm and the New Zealand government.

His visit follows a trade trip to China by Prime Minister John Key and a large entourage last month to celebrate the fifth anniversary of the countries’ free-trade agreement, during which relations between the governments appeared to hit a new high. Read more of this post

Kuroda stimulus policies backfire as mortgage costs rise

Kuroda stimulus policies backfire as mortgage costs rise

BY YUMI IKEDA

BLOOMBERG

MAY 9, 2013

Bank of Japan Gov. Haruhiko Kuroda’s stimulus policies are backfiring in the housing market, where mortgage rates are rising even as the central bank floods the financial system with cash. Fixed 35-year home-loan costs rose to 1.81 percent this month, the first increase since February and up from an all-time low of 1.8 percent in April, according to data compiled by the Japan Housing Finance Agency. The BOJ’s April 4 announcement that it would double bond buying to generate 2 percent inflation unleashed the highest government-debt volatility in a decade and pushed 10-year yields up by five basis points. The benchmark lending rate for large corporations, known as the prime rate, increased five basis points from its record low to 1.2 percent on April 10, despite the BOJ’s aim of stoking the economy through cheaper funding.

“It makes little economic sense for rates to decline when the BOJ says it will raise consumer prices,” said Toru Suehiro, a market economist at Mizuho Securities Co. “Yields are higher than before the monetary easing to reflect the volatility risk, and lending rates have risen because they are set based on bond yields.” Read more of this post

Meltdown of company triggers suicides in India; Failing to repay investors’ money after the Saradha Group meltdown, an agent and a director of two different deposit mobilising companies committed suicide

Meltdown of company triggers suicides in India

Thu, May 09, 2013
The States Man/Asia News Network

Indian activists of the Congress party shout slogans against the arrested Chairman of Saradha group, Sudipta Sen, outside the court in Kolkata on April 25, 2013.

Failing to repay investors’ money after the Saradha Group meltdown, an agent and a director of two different deposit mobilising companies committed suicide. Ten persons have committed suicide in the state so far following the multi-million dollar scam.

Indrajit Roy, one of the directors of Hello India, a chit fund company, committed suicide by hanging himself from the ceiling of a room in his residence off 14 Brindaban Mallick Lane at Amherst Street today. Read more of this post

Next Wal-Mart CEO Faces Challenges Sam Walton Never Saw

Next Wal-Mart CEO Faces Challenges Sam Walton Never Saw

As Wal-Mart Stores Inc. (WMT) prepares to anoint the fifth chief executive in its history, the world’s largest retailer is grappling with challenges founder Sam Walton never faced.

Wal-Mart’s board has identified international chief Doug McMillon, 46, and Bill Simon, 53, who runs the U.S. operations, as leading candidates to succeed Chief Executive Officer Mike Duke, according to a person familiar with the situation. While Duke, 63, isn’t expected to step down immediately, Wal-Mart may name his successor in the coming months, said the person, who asked not to be identified because the matter is private.

Wal-Mart is trying to goose slowing sales gains in the U.S. as such rivals as Amazon.com Inc. (AMZN) and the dollar stores lure its customers. Overseas, the company is struggling to ignite growth in China and other emerging markets even as it probes allegations of bribery in Mexico and possible violations of the Foreign Corrupt Practices Act.

The next CEO will face “tough decisions globally,” said David Strasser, a New York-based analyst for Janney Montgomery Scott LLC. “They have to pick and choose. China has been a big struggle. What do you do? Double down? Back out?” Read more of this post

Fed Council Warned of Credit Risk, Asset Price Bubble

Fed Council Warned of Credit Risk, Asset Price Bubble

A Federal Reserve (TREFTOTL) panel of bankers warned policy makers in February that record stimulus was pushing financial institutions to take on more credit risk and creating a “bubble” in the price of U.S. farmland.

“The margin pressures that the low-rate environment has put on financial institutions, coupled with dramatically increased compliance and other infrastructure costs, have caused many to seek higher returns by accepting greater interest-rate or credit risk,” the bankers said on Feb. 8, following a Federal Open Market Committee meeting on Jan. 29-30.

The minutes of the meeting by the Federal Advisory Council trace how the 12 bankers’ views evolved from opposition to the Fed’s announcement of new bond buying in September to support for Fed efforts in February to boost an economic expansion beset by a “drag” from fiscal tightening. Read more of this post

Aquino Hunts ‘Big Fish’ to Bury Philippines’ Sick-Man Tag

Aquino Hunts ‘Big Fish’ to Bury Philippines’ Sick-Man Tag

The Philippines, Asia’s fastest-growing economy after China, needs to do more to finally lose its decades-old tag as the “Sick Man of Asia,” according to the country’s president.

“We’ll have to be able to prove that this is not cyclical, or a temporary aberration,” President Benigno Aquino said in an interview yesterday of the country’s economic revival. “We’ll have to be able to do it year in, year out.” His point was illustrated when the lights went out during the 90-minute meeting at the presidential compound in Manila, as the capital suffered a major power failure. Aquino, 53, who is campaigning to expand his support in elections for the Senate on May 13, said more needs to be done to jail the “big fish” in his anti-corruption drive. Reducing the number of Filipinos who travel abroad to find work is also a key benchmark of success in the three years that remain in his single six-year term, he said. In the first half of his presidency, Aquino has overseen a resurgence in the economy, which expanded 6.6 percent last year. While the growth rate and a shrinking budget deficit helped earn the country a ratings upgrade, they mask an unemployment rate that is among the highest in Asia-Pacific and poverty levels unchanged since before he took office in 2010.  Read more of this post

SAT Scandal Shines Harsh Light on South Korean Academics

May 9, 2013, 4:28 a.m. ET

SAT Scandal Shines Harsh Light on South Korean Academics

By JEYUP S. KWAAK

SEOUL—The recent cancellation of U.S. college entrance exams in South Korea—the first time SAT tests have been called off nationwide anywhere in the world for suspected cheating—is throwing the spotlight back on the country’s hyper-competitive academic environment. The May 4 sessions of the SAT, the most widely used standardized evaluation tool for high-school students applying to American universities, were scrapped three days before the test date across South Korea after the U.S.-based administrator discovered questions from the tests circulating in test-prep centers in the country.

The cancellation has thrown college-entrance preparations for thousands of students into disarray. Some students now plan to travel to other countries in the region to ensure they are able to take the next test in the summer. Read more of this post

Shale Boom a Bust for Europe’s Gas Plants; European utilities are forced to mothball modern gas-fired power plants that can’t compete with growing imports of cheap coal dislodged from the U.S.

May 8, 2013, 11:44 a.m. ET

Shale Boom a Bust for Europe’s Gas Plants

By JAN HROMADKO

FRANKFURT—The ripples of the North American shale boom continue to spread, as a growing number of European utilities are forced to mothball modern gas-fired power plants that can’t compete with growing imports of cheap coal dislodged from the U.S.

Norwegian state energy company Statkraft said Wednesday it has idled a gas-fired power station in Germany that couldn’t compete with its coal-fired rivals, while German utility E.ON EOAN.XE -0.60% SE said it is seriously considering mothballing more gas-fueled plants, including a state-of-the-art facility in Slovakia.

Other European utilities have taken similar action, presenting policy makers with a dilemma—cheaper coal-fired power could provide some relief for the region’s struggling economies, but might be incompatible with long-term goals for carbon emissions and renewable energy.

The closures across Europe are another example of the far-reaching effects of the North American energy-supply boom. Surging supplies of natural gas in North America, unlocked from shale rock by a new combination of technology known as hydraulic fracturing, have prompted many U.S. power generators to switch away from coal, pushing increasing amounts of the fuel into Europe as cheap imports.

In 2012, U.S. exports of coal to Europe rose 23% to 66.4 million short tons, according to data from the U.S. Energy Information Administration.

Much of this coal is displacing natural gas as a fuel for electricity generation in Europe. In the U.K., for example, the proportion of electricity generated from coal rose to its highest level in 17 years in 2012, while gas fell to a corresponding low.

“The economic situation of our legacy business in Europe, particularly in conventional power generation, remains difficult,” said E. ON Chief Executive Johannes Teyssen.

Gas-fired power plants are losing out to coal-fueled rivals, which are more competitive at present electricity and commodity prices. Additionally, the expansion of renewable energies is reducing the operating hours of gas power plants; wind and solar energy output is generally higher at peak demand hours, a market gas plants are designed to serve. “Companies are struggling to operate gas-fired power plants economically, even in case of modern, state-of-the-art facilities,” said IHS Energy analyst Kash Burchett. Read more of this post

Giant Australian property trust GPT agreed to pay its shareholders $75 million for allegedly failing to disclose in 2008 that the company was financially underperforming its previous forecasts.

Davids win in giant fight with GPT

May 9, 2013

Elizabeth Knight

The final chapter in the legal brawl between giant property trust GPT and its shareholders drew to a close on Wednesday. The Davids won and the Goliath agreed to pay $75 million for allegedly failing to disclose in 2008 that the company was financially underperforming its previous forecasts. It was a two-year battle and it went to the wire. In class action cases, neither party wants the outcome to be determined by the courts and this was no exception. Allowing the courts to set precedents presents hazards for both sides. The corporate defendant would have to accept liability if it lost and the damages could be more onerous. For the shareholder plaintiffs, a poor outcome could be every bit as damaging if an unfavourable precedent was set.

Corporate continuous disclosure is an area in which the phrase ”the lawyers always win” is particularly apposite. This class action was mounted in 2011 by lawyers Slater & Gordon and bankrolled by a US litigation funder who, for its troubles, will probably get about 25 per cent of the proceeds. Thanks to the newly intense focus in this area, legal firms are raking in fees for ensuring companies adhere to legal disclosure responsibilities. For the legal fraternity, corporate disclosure is lucrative business. Read more of this post