Posts in category Business and finance


ApprovedBusiness and financeFINANCEFinance and economics

Defying gravity

IT LOOKS like a bad joke: the world’s fastest man promoting a bank in the world’s fastest-shrinking big economy. Yet the use of Usain Bolt’s image on posters for Banco Original, a five-year-old Brazilian bank, is apt in a way. In 2015 Original raced ahead at a clip worthy of Mr Bolt: profits increased by half compared with the previous year, to 111m reais ($30m). Its loan book grew by two-thirds, to 4.25 billion reais, even as Brazil’s economy shrivelled by 3.8%.

Original’s lightning loan-growth stands out. Demand for credit has sagged as the worst recession since the 1930s deprives Brazilian businesses of customers and workers of income or, worse, jobs. With non-performing loans (NPLs) on the rise, banks think twice before lending. After a decade of expansion, outstanding credit barely budged last year; in real (ie, inflation-adjusted) terms it contracted.

But look at Brazilian banks’ bottom lines, and most, like Original, have had a remarkably good crisis so far. Out of 180-odd institutions monitored by the central bank only 25, most of them small, posted losses in 2015. In the year to September the banking sector as a whole…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The elephant in the stats

GOVERNMENT statisticians shun the limelight, which only ever finds them when things go awry. So it is with India’s national bean counters, who are struggling to convince the world that an economy with idle factories, sagging exports and ailing banks grew by 7.5% in 2015, as their models purport to show. Ever since a new methodology for calculating GDP was adopted last year, India has appeared to be the world’s fastest-growing big economy, outpacing China. But scepticism about the data is growing even faster.

Growth figures are calculated by first arriving at the value of economic output over a given period and then comparing it with the prior period. The difference between the two gives a nominal rate of growth (ie, without any adjustment for inflation). Most observers agree that India’s egg-heads perform these tasks well. The problem seems to be the “GDP deflator”, a gauge of inflation by which the data are adjusted to derive the “real” growth rate. The higher inflation is assumed to be, the bigger the slice of nominal growth that is attributed to price rises rather than genuine increases in output.

Mercifully…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Marjorie Deane internships

Applications are invited for The Economist’s 2016 Marjorie Deane internships. Financed by the Marjorie Deane Financial Journalism Foundation, the awards are designed to provide work experience for a promising journalist or would-be journalist, who will spend three months at The Economist writing about economics and finance. Applicants are asked to write a covering letter and an original article of no more than 500 words suitable for publication in the Finance and economics section. Applications should be sent to deaneintern@economist.com by April 30th. For more information, please visit www.marjoriedeane.com.

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ApprovedBusinessBusiness and finance

Gluts for punishment

FIRST a tsunami of steel—next a flood of what? Industrialists all over the place might look nervously at China’s cooling economy and ask that question. The global glut in steel is most alarming because China’s industry dwarfs all others and its mills could easily produce more. Yet other sectors also have existing or looming gluts.

One is coal. Thanks to a massive expansion now under way, China’s coal industry could have 3.3 billion tonnes of excess capacity within two years, reckons Fitch, a rating agency; domestic consumption is less than 4 billion tonnes a year and dropping. Traditionally China has imported, not exported, coal—but that could change. Shenhua Energy, the country’s biggest coal miner, says it might export 10m tonnes soon, up from 1.2m tonnes last year.

Another possibility is aluminium. Chinese smelters push out over half the world’s supply of the metal, thanks to an expansion that goes on despite the current global oversupply. China Hongqiao, the world’s biggest producer, plans to increase capacity to 6m tonnes, up from 5.2m a year ago. The output of Chinese…Continue reading

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ApprovedBusinessBusiness and finance

Pfiasco

IN THE final year of the Obama administration its relationship with big business, always testy, is deteriorating into outright combat. On April 4th Jack Lew, the treasury secretary, announced a renewed crackdown on “inversions”, takeovers that allow American firms to switch their nationality to that of the firm they are buying, in order to escape America’s tax net.

Two days later Pfizer, a pharmaceutical firm, cancelled its $160 billion purchase of Allergan. It would have been the third-biggest takeover in history and was premised on shifting Pfizer’s tax-domicile to Dublin. Howls of outrage were heard from America’s boardrooms and from Allergan investors, who lost $13 billion in 48 hours as its shares sank. European multinationals panicked that they might become the injured bystanders in an American brawl.

The spat makes everyone look bad. It reveals an administration that is capricious and a Republican Party establishment so out of touch that it thinks it should be the mouthpiece for firms that renounce their citizenship. It shows great companies, such as Pfizer, reduced to shifty deal-junkies that are obsessed with financial…Continue reading

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ApprovedBusinessBusiness and finance

Bots, the next frontier

App exterminators

“YOU are a developer and you’ve just spent two weeks writing this amazing app. What is your dream? Your dream is to get it in front of every iPhone user.” That was how Steve Jobs, then Apple’s boss, introduced an online shop for smartphone apps eight years ago. At first few paid it much heed, but it launched one of the fastest-growing software markets ever. Since then over 100 billion apps have been downloaded, generating $40 billion in revenues for developers and billions more in subscriptions and other fees.

At a conference on April 12th in San Francisco, Mark Zuckerberg, Facebook’s boss, is expected to make a similar announcement. He will probably unveil an online shop and coding tools for “chatbots”. These are text-based services which let users complete tasks such as checking news, organising meetings, ordering food or booking a flight by sending short messages. Bots are usually powered by artificial intelligence (hence the name, as in “robot”), but may also rely on humans. Many in the technology industry hope that Facebook’s event will mark the beginning of another fast-growing,…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Don’t stop believing

ASK a Greek government official what is ailing the economies of the European periphery, and he will almost certainly mention weak demand, before launching a tirade against austerity-obsessed politicians from northern Europe. Ask a German official, however, and the answer will be very different. In March, as the European Central Bank prepared a new salvo of stimulative measures, Jens Weidmann, the president of the Bundesbank, expressed his disapproval. Stimulus is no panacea, he warned, and “can’t replace urgently needed reforms.”

Structural reform is like exercise: nearly everyone could use a bit more of it. This newspaper has been known to recommend it to governments from time to time. Yet the extent to which economies stuck in a mire of low growth and low inflation should focus on structural reform, rather than stimulating demand, is a tricky question. Few economists would argue that Italy’s economy is a model of efficiency. Yet some economists reckon that making it easier to sack workers and cut prices is risky when a country is already facing high unemployment and deflation.

In its latest “World…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Dumping and tub-thumping

IT WAS a flood of cheap steel from an intimidating new economic power that prompted the passage of the world’s first anti-dumping law. In 1904 Canada’s parliament, angered by soaring imports of cut-price steel from America, imposed punitive tariffs. America is now on the other side of a similar trade dispute. Last year China exported over 100m tonnes of steel—more than the entire output of all America’s mills. Only 3% of that went to America, but American steelmakers squealed all the same and in March the government announced plans to impose an anti-dumping tariff on steel imports from China (and a handful of other countries) of up to 266%. The instinct behind such measures is understandable, but no good will come of them.

Dumping is the practice of selling goods in foreign markets at an unfairly low price—typically, one lower than the going rate in the exporter’s home market. Anti-dumping measures are intended to prevent a company from selling goods below cost in order to drive competitors out of business, before using the resulting market power to gouge customers.

The threat was all too real when Canada adopted its…Continue reading

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