Argentina faces new devaluation as dollar demand grows

BUENOS AIRES(AFP):  Recession-hit Argentines are flocking to buy dollars, nervous over the government’s latest debt default and pressure from the business community to devalue the peso for the second time this year. Officially, a dollar is worth 8.42 Argentine pesos. But it takes 14.26 pesos to buy one on the black market, a gap that only shows signs of widening.President Cristina Kirchner has tried to convince Argentines to stop hoarding greenbacks and spend their pesos instead. “You have to invest in things you can touch and see. The rest is just fairytales,” she said recently. But her appeals have largely fallen on deaf ears in the country.

 that still bears the scars of its 2001 financial crisis, when the government froze $70 billion in deposits in a bid to stop a run on the banks.

Limited to withdrawals of $250 a day, Argentines flooded the streets, venting their wrath by banging pots and pans.

Rioting and the government crackdown that followed left 33 people dead.

Instead of retreating, the memory has grown more raw in recent months as the government again defaulted on the debt it restructured after the crisis.

Despite persuading the vast majority of its creditors to accept 70-percent losses on the face value of their bonds, Argentina lost a court battle against two US hedge funds demanding full payment.

A US federal judge barred the country from paying its restructured debt until it settles the $1.3-billion row, forcing it into a new default on July 30.

- ‘Can’t even export candy’ -

After the 2001 default — the largest in history at the time, at $100 billion — Argentina shut itself out of global capital markets.

That has exacerbated its foreign currency crunch.

And with annual inflation of more than 30 percent and exports sagging, businesses are pressuring Kirchner’s administration to devalue the peso again, after an 18-percent devaluation in January.

“We can’t even export a piece of candy. Argentina is not competitive today,” said Hector Mendez, leader of the largest employers’ organization, the Argentine Industrial Union.

Consumers are also suffering, cutting back purchases by 1.3 percent in the first half of the year as inflation gutted their salaries.

The economy shrank 0.2 percent in the first quarter and shows no signs of recovering.

- Auto, ag industries hurting -

The plethora of woes has put the central bank between a rock and a hard place.

“If it raises the interest rate, it will deepen the recession. If it doesn’t, it will add fuel to the fire of exchange-rate pressure and inflation,” said Belen Olaiz of consultancy

The central bank’s reserves currently stand at $28 billion, down 45 percent from 2011.

And the agriculture sector, traditionally a key source of foreign cash, is in a funk over a 15-percent drop in soy prices.

Grain farmers are cashing in just $60 million a day at the central bank, down from $150 million in July.

Analysts say farmers are holding back their soy crops hoping for higher prices.

The vital auto industry, for its part, is unable to get enough dollars to import the parts it needs, exacerbating poor sales that are down 25 percent so far this year.

Europeans move towards

watered-down ‘Tobin’ tax

MILAN (AFP): European finance ministers struggled to agree a long promised financial transaction tax on Saturday, with Germany urging a watered-down version amid resistance from France, eager to protect its lucrative derivatives trading sector.“The first step will only be small, that’s unfortunately true,” said German Finance Minister Wolfgang Schaeuble, an influential backer of the scheme on the sidelines of European Union minister talks in Milan.“Given the different situations in the different countries, we will probably only agree on a small first step, but a small first step is better than none,” Schaeuble said.

Blamed for the financial crisis that had sparked a global recession, public anger in 2011 against bank traders ran high.

This pushed the European Commission, backed by Germany and France, to propose a tax on financial transactions.

The idea was inspired by the ‘Tobin Tax’, named after Nobel laureate James Tobin, who proposed it in the 1970s as a means of reducing speculation in global markets and redistributing Wall Street profits to poor countries.

In the European version, the proceeds would go towards financing future bailouts, sparing the taxpayer from saving big banks caught out by over-speculation.

Many member states, led by Britain eager to protect its City of London financial hub, opposed the scheme, leaving 11 countries, including France and Germany, to go it alone.

But with public attention turned away from the crisis, some of those countries, notably France, have cooled to the idea, preferring to enact a watered-down version that would be less onerous on key types of financial trades.

The derivatives trading market “is very developed” in Paris, a European diplomatic source said.

For now, there is little detail on what the tax would entail, but another EU diplomat said the aim is to have a proposal “by the end of the year”.

In 2013, the Commission floated a 0.1 percent levy on stock and bond trades and 0.01 percent on the more complex derivatives, which would raise about 35 billion euros ($45 billion) a year, it said.

The banking lobby has been fierce in its opposition to a transaction tax.

“Even when an FTT is introduced in a limited number of member states in the EU its effects will be detrimental to the entire European economy,” the European Banking Federation said in the runup to the talks in Milan.

“Despite this overwhelming evidence against the merits of an FTT, the plan remains on the table,” the lobby group added.

Despite the resistance, Germany’s Schaeuble said he was hopeful that a scaled-back tax could gain support and eventually attract more member states.

“I am very optimistic that, if we make the first step, we will create a knock-on-effect that leads to further steps and that could convince other countries to join in,” he said.

Shujat inspects ongoing uplift

projects at Islamabad Airport

ISLAMABAD (APP): Special Assistant to Prime Minister for Civil Aviation Shujat Azim visited Islamabad International airport and inspected all ongoing development projects related to passenger facilitation, convenience and security related infrastructure measures.  He advised the project engineers to complete the projects in stipulated time and quality of work should be maintained of international standard. During the visit of new functionaries car park plan of expansion of international departure lounge was discussed with engineers, said a spokesman of Civil Aviation Authority (CAA) Mubarak Shah here on Saturday.

The Special Assistant said being the Capital airport, its quality and standard should not be compromised.

He emphasized that passengers are the ultimate image of the country.

International Departure briefing area expansion work plan was examined in the presence of engineers.

The purpose expansion is to utilize more space for check in counter and passengers maneuvering area.

During the inspection of airside taxiway project, the Advisor again reiterated that quality of International safety standard should be achieved.

By the completion of taxiway project, the fuel consumption of aircrafts particularly National Flag Carrier PIAC is being taken care.

At this occasion, Air Marshal ® Muhammad Yousaf DGCAA told the employees that proactive approach is required to cater the Passengers facilitation.

Britain plans yuan bond outside China

LONDON(AFP):  Britain on Friday said it would be the first country outside China to issue yuan-denominated bonds, as London seeks to become a Western hub for trading in the Chinese currency.The UK Treasury said the government plans to issue the bond in the coming weeks, subject to market conditions, without giving an exact amount or other details.“This will be the first non-Chinese issuance of sovereign RMB (yuan) debt and will be used to finance Britain’s reserves,” it said in a statement.“Up to now, Britain has only held reserves in US dollars, euros, yen and Canadian dollars, so today’s announcement signals the RMB’s potential as a future reserve currency.”

British politicians have been scrambling to make London China’s Western financial hub as Beijing loosens its tight regulations on international trading in the yuan.

Last year the yuan overtook the euro as the world’s second-largest trade currency after the dollar, and analysts predict its role is set to grow as China’s economy, already the world’s second-largest, expands.

In response, British authorities have embarked on a charm offensive to attract Chinese capital in the City of London, with yuan volumes more than doubling in the year to July 2014.

Mexico fines Sino retail project $1.1m

MEXICO CITY (AFP):  Mexican authorities imposed on Friday a $1.1 million fine against a controversial and massive Chinese shopping center project for causing damages to the ecosystem near the Caribbean resort of Cancun. The environmental protection prosecutor’s office had already slapped a $500,000 fine on Dragon Mart last month because it lacked proper environmental impact authorizations. This time, the agency issued a fine of $208,000 and ordered the Chinese-funded project to pay almost $900,000 to repair the damage.The $180 million project, financed by the Chinamex company, has been criticized by environmentalists because 418 hectares (1,032 acres) out of the total 557 on which the mall is to be built is located on land designated as a nature reserve.

The project stalled initially after authorities refused to issue a construction permit but got going after several rounds of legal appeals.

The mall, which would be the second largest Chinese retail complex in the world outside China, is scheduled to be inaugurated in November.