After Brics, new power houses; Progress in war on poverty; ECB rates stay at record low of 0.25%; India diplomat indicted in US

1 After Brics, new power houses (Larry Elliott in The Guardian) First it was the Brics. The Brics are Brazil, Russia, India and China – four emerging economies lumped together in 2001 by Jim O'Neill, then at Goldman Sachs, to show that western investors needed to take notice of what was happening in the post-cold war global economy. Robert Ward, of the Economist Intelligence Unit, linked Colombia, Indonesia, , Vietnam, Egypt and Turkey but the Civets never really took off. Now O'Neill is championing the Mints, a name first coined by the fund managers Fidelity, for what he thinks will be the second generation of emerging market pace-setters: Mexico, Indonesia, Nigeria and Turkey.

The Mints share some common features. They all have big and growing populations with plentiful supplies of young workers. That should help them grow fast when ageing and shrinking populations will lead inexorably to slower growth rates in many developed countries (and China) over the coming decades. And they are nicely placed geographically to take advantage of large markets nearby, with Indonesia close to China, Turkey on the edge of the European Union and Mexico on America's doorstep.

Strong growth in Asia has pushed up demand for the fuel and raw materials needed for industrialisation and three of the Mints – Mexico, Indonesia and Nigeria – are leading commodity producers. Of the four, only Nigeria is not already a member of the G20 group of developed and developing countries. Even so, financial markets are wary about treating what is actually a disparate group of countries as a bloc. If the Brics are now a bit old hat, it is in part because their reputations are a little tarnished.

http://www.theguardian.com/business/2014/jan/09/mint-condition-countries-tipped-economic-powerhouses

2 Progress in war on poverty (Nicholas Kristof in The New York Times) America’s war on poverty turned 50 years old this week, and plenty of people have concluded that, as President Reagan put it: “We fought a war on poverty, and poverty won.” That perception shapes the right’s suspicion of food stamps, minimum-wage raises and extensions of unemployment benefits. Yet a careful look at the evidence suggests that such a view is flat wrong. In fact, the first lesson of the war on poverty is that we can make progress against poverty, but that it’s an uphill slog. 

The most accurate measures, using Census Bureau figures that take account of benefits, suggest that poverty rates have fallen by more than one-third since 1968. There’s a consensus that without the war on poverty, other forces (such as mass incarceration, a rise in single mothers and the decline in trade unions) would have lifted poverty much higher.

A Columbia University study suggests that without government benefits, the poverty rate would have soared to 31 percent in 2012. Indeed, an average of 27 million people were lifted annually out of poverty by social programs between 1968 and 2012, according to the White House Council of Economic Advisers.

Critics are right that antipoverty work is difficult and that dependency can be a problem. But the premise of so much of today’s opposition to food stamps and other benefits — that government assistance inevitably fails — is just wrong. And child poverty is as unconscionable in a rich nation today as it was half a century ago. 

http://www.nytimes.com/2014/01/09/opinion/kristof-progress-in-the-war-on-poverty.html?src=rechp&_r=0

3 ECB rates stay at record low of 0.25% (BBC) The European Central Bank (ECB) has kept its benchmark interest rate at a record low of 0.25%. ECB said president Mario Draghi said rates would "remain at present or lower levels for an extended period of time". There had been speculation that the bank might act to bolster fragile growth in the 18-nation euro bloc.

With eurozone inflation falling below 1%, there is also concern about deflation as consumers delay purchases in the hope of prices falling further. The eurozone economy grew only 0.1% in the third quarter, while inflation, at only 0.8%, remains below the ECB's goal of about 2%. Mr Draghi said the eurozone "may experience a prolonged period of low inflation, to be followed by a gradual upward movement towards inflation rates below but close to 2% later on".

http://www.bbc.co.uk/news/business-25669663

4 India diplomat indicted in the US (Christopher M Matthews in The Wall Street Journal) Federal prosecutors filed an indictment on Thursday against the Indian consular worker at the center of an international diplomatic spat, accusing her of underpaying a domestic worker. In a letter to US District Judge Shira Scheindlin, Manhattan prosecutors said that a federal grand jury had voted to return an indictment against Devyani Khobragade charging her with two counts visa fraud and making false statements.

Prosecutors initially said they had learned Ms. Khobragade left the US on Thursday. But they later learned she may not have gotten on her flight, according to a person familiar with the matter. Her whereabouts weren't immediately clear. Last month, Ms. Khobragade was arrested on charges she submitted false documents to get a work visa for a domestic helper in her Manhattan home. Prosecutors said she grossly underpaid the helper. Ms. Khobragade has denied all the charges.

The arrest and subsequent detainment of Ms. Khobragade sparked a diplomatic row between the US and India, leading Secretary of State John Kerry last month to issue a statement of regret over the situation.

http://online.wsj.com/news/articles/SB10001424052702303848104579310912803441496

Eurozone joblessness stays high; How slave labour builds modern, urban India; Macy's to cut 2,500 jobs; Record sales for Rolls-Royce; Indo-US ill will goes club size

1 Eurozone joblessness stays high (David Jolly in The New York Times) Europe’s labor market remained stagnant in November, but analysts saw reason for hope elsewhere in the economy, including a surge in retail sales. The unemployment rate in the euro zone stood at 12.1 percent, a stubbornly high level that has held since April, Eurostat, the European Union’s statistics agency, reported.

As the sovereign debt crisis seized the region and economic malaise set in, the jobless rose from just under 10 percent in early 2011 to the current record level. The November rate was in line with economists’ expectations. For the full European Union, made up of 28 member states, the jobless rate was unchanged at 10.9 percent. Eurostat estimated that 26.6 million people across Europe were unemployed and seeking work, 19,000 more than in October.

More than five years after the implosion of Lehman Brothers in 2008 triggered a global financial collapse, Europe’s economy remains on fragile footing. Lending to businesses is contracting, and investment is weak. There were indications, though, that the labor market might be lagging the broader economy.

Among the lowest unemployment rates in Europe were Austria’s 4.8 percent and Germany’s 5.2 percent. Greece showed the highest rate, 27.4 percent, though it is several months behind in its reporting. The November unemployment rate in the United States was 7 percent, although it is measured slightly differently.

http://www.nytimes.com/2014/01/09/business/international/unemployment-in-euro-zone.html?ref=business&_r=0

2 Building modern, urban Indian with slave labour (Oliver Wainwright in The Guardian) India's cities are expanding ever outwards to accommodate an expected 600 million people by 2030, when over 40% of the country's population will live in urban areas – compared to just 10% a century ago. But this miraculous metropolitan boom comes at a price. Over 150,000 brick production units in the country together employ an estimated 10 million workers, churning out the building blocks of the new offices and apartments, factories and shopping malls. India's brick industry – the second largest in the world after China – contributes around £3bn to the country's economy every year. Not that the workers see much of that.

“It's modern-day slavery,” says Andrew Brady, of Union Solidarity International (USI), a UK-based NGO that has been campaigning to improve the brick labourers' conditions over the last two years. “Entire families of men, women and children are working for a pittance, up to 16 hours a day, in terrible conditions. There are horrific abuses of minimum wage rates and health and safety regulations, and it's often bonded labour, so they can't escape.” Dr Vamsi Vakulabharanam of the University of Hyderabad says,  “They are forced to lead sub-human lives. It's a condition that the entire world should condemn, but multinationals are buying into this.”

The Blood Bricks campaign, which launches next week, is the latest chapter in USI's work to force international attention on the issue. In partnership with Indian human rights group, Prayas, they have been working to organise brick kiln workers into unions, an initiative that has already seen 70% wage rises in some areas. The campaign comes after the Observer's recent revelations of horrific labour abuses on Abu Dhabi's new pleasure island of Saadiyat, where new outposts of the Louvre and Guggenheim museums are under construction. The investigation discovered thousands of workers living in squalid conditions, passports confiscated and trapped until they paid back hefty recruitment fees.

“It's a world-wide issue,” says USI's Andrew Brady. “We're merely using India as the example, but we've seen the same abuses with projects in Qatar and Brazil for the World Cup and Olympics – iconic projects built on the back of the blood and sweat of bonded labour. It's time to put an end to this trade in blood bricks.”

http://www.theguardian.com/artanddesign/architecture-design-blog/2014/jan/08/blood-bricks-india-urbanisation-human-rights-slave-labour

3 Macy's to cut 2,500 jobs (BBC) Retailer Macy's said it will cut 2,500 jobs and shut five stores as part of a reorganisation plan. Macy's operates 840 stores in 45 US states under the Macy's and Bloomingdale's names and has approximately 175,000 employees. The retailer also said holiday sales rose 4.3% compared to the same period last year. But it lowered its forecast for 2014 sales growth to around 2.8%.

Macy's said the job cuts and store closures will save $100m per year and it forecast a profit for this year which was well above analysts forecast. Overall, US retailers posted their lowest holiday sales growth in four years, according to ShopperTrak, a research firm. Many retailers, including Wal-Mart and Target, were forced to slash prices to lure shoppers through their doors.

http://www.bbc.co.uk/news/business-25661755

4 Record sales for Rolls-Royce (BBC) Rolls-Royce reported its fourth year running of record sales with 3,630 cars delivered to customers in 2013. That is a 1.5% increase on the 3,575 cars Rolls-Royce sold in 2012. To help meet demand, the carmaker, which is owned by BMW, says it plans to hire 100 staff at its manufacturing plant in Goodwood, Sussex in 2014.

"We have reported a strong year and have maintained our position at the pinnacle of the super-luxury market," said Torsten Muller-Otvos, chief executive of Rolls-Royce Motor Cars. The strongest sales growth was seen in the Middle East, which recorded a rise of 17%, as well as China, where sales rose 11% last year. Rolls-Royce now employs more than 1,300 staff after hiring 100 additional workers in 2013.

http://www.bbc.co.uk/news/business-25660986

5 Indo-US ill will goes club size (Vibhuti Agarwal in The Wall Street Journal) When trying to win a diplomatic spat, the ability to make life a little less comfortable for the other country’s citizens by denying them diplomatic privileges and an expat lifestyle, can prove a useful weapon. India this week tightened the screws on the US Embassy and American citizens in New Delhi as part of an ongoing row over the arrest of one of its mid-ranking diplomats in New York in December.

The government told the US to shut down its club for American expats and stop operating shops and other commercial establishments in its embassy compound by Jan. 16. This means no more dining at the restaurant, swimming in the pool or playing on the soccer field or tennis court for members of the elite American Community Support Association, popularly known as American Club. These perks, reserved for members who have to be recommended by a US diplomat before they are granted membership, are rare in Delhi where open-air swimming pools and places serving steak aren’t the norm.

On top of this, the Indian government in recent days banned the embassy from screening movies at the American center in the capital, until they obtain a proper license. Normal diplomatic immunity from traffic rules will no longer apply to US embassy diplomats, the official added. Local traffic police “have been asked to make no exception,” with the US Embassy cars, the official said.

The latest action against US citizens in Delhi comes ahead of the Jan. 13 deadline for the indictment of Devyani Khobragade, an Indian consular officer, accused by US prosecutors of committing visa fraud and underpaying her domestic maid in New York. Following reports of her treatment, the India revoked diplomatic privileges for American officials and removed security barriers near the US Embassy in New Delhi.

http://blogs.wsj.com/indiarealtime/2014/01/08/india-hits-u-s-citizens-where-it-hurts-in-the-club/

IMF to raise global forecast; Apple 2013 app sales top $10bn; US trade deficit at 4-year low; 'Sharing economy won't solve jobs crisis'; Fewer monsignors in a simpler church

1 IMF to raise global forecast (BBC) The International Monetary Fund will raise its forecast for global growth according to its managing director, Christine Lagarde. She said the revision would come in the next three weeks but did not elaborate, saying that it would be premature to say any more. In October, the IMF lowered its growth forecasts, saying the global economy "remains in low gear". It cut its growth forecast for 2014 by 0.2 of a percentage point to 3.6%. It also reduced the estimate for 2013 growth by 0.3 of a point to 2.9%.

Back then it warned that a slower pace of expansion in emerging economies such as Brazil, China and India, was holding back global expansion. Many economists have been surprised at the strength of the rebound in developed economies, particularly the United States and the UK. Last month the US Commerce department revised US growth upwards to its fastest pace since late 2011. It said GDP grew at an annualised rate of 4.1% between July and September, up from an earlier 3.6% estimate.

http://www.bbc.co.uk/news/business-25646009

2 Apple 2013 app sales top $10bn (Daisuke Wakabayashi in The Wall Street Journal) As Apple Inc. sells more iPhones and iPads, it also sells more apps. The volume of those sales because clear for the first time when Apple said this week it sold more than $10 billion worth through its App Store last year. After taking its 30% cut, Apple appears to have generated more than $3 billion in revenue from the App Store last year—the vast majority of which likely was profit.

The milestone reflects the virtuous cycle that has emerged from the success of its iPhone and iPad. When an Apple user buys apps or spends money in the App Store, it strengthens that person's ties to Apple's iOS platform and increases the likelihood of that user buying another Apple device in the future. App Store revenue is a small fraction of the $91 billion generated by the iPhone in Apple's fiscal year ended in September. But it is a fast-growing business at a time when Apple's revenue growth overall is slowing.

When Apple introduced the iPhone in 2007, then-CEO Steve Jobs was reluctant to allow outside software developers to write programs for the handset, worried that they would bog down the phone's core functions. The company changed course a year later and opened the App Store, a marketplace that paved the way for a new era of software development. http://online.wsj.com/news/articles/SB1000142405270230393310457930626063572030 3 US trade deficit at 4-year low (Khaleej Times) The US trade deficit fell to its lowest level in four years in November as exports hit a record high and weak oil prices restrained import growth, the latest evidence of strengthening economic fundamentals. The Commerce Department said the trade gap fell 12.9 per cent to $34.3 billion. That was the smallest deficit since October 2009. October’s shortfall on the trade balance was revised to $39.3 billion from the previously reported $40.6 billion. Trade contributed marginally to growth in the third quarter, but abating fiscal headwinds in Europe should lead to a recovery in demand in that region and help boost US exports. The US economy appears positioned to shift into higher growth this year, with data ranging from employment to manufacturing and consumer spending suggesting it ended 2013 on a solid footing. The outlook has been strengthened by a pick-up in domestic demand and diminishing uncertainty over fiscal policy. Petroleum exports hit a record high in November. Exports to China also were the highest on record. They rose 8.7 per cent in the first 11 months of the year. The trade deficit with China also narrowed in November. There were also increases in US exports to Germany and Japan. Overall imports fell 1.4 per cent to $229.1 billion in November. Part of the decline in imports reflects a lower petroleum import bill, which was the smallest since November 2010. The petroleum deficit was the lowest since May 2009.

http://khaleejtimes.com/biz/inside.asp?section=internationbusiness&xfile=/data/internationbusiness/2014/January/internationbusiness_January34.xml

4 'Sharing economy won't solve jobs crisis' (Moira Herbst in The Guardian) These days, everyone's talking about the so-called sharing economy. Newspaper columnists, pundits and tech reporters are enthusiastically explaining how new rental, resale and sharing services are revolutionizing how we consume, and fostering entrepreneurship, conservation, cost savings and community spirit along the way. The prevailing narrative is that startups like these are the bright spots in an otherwise lackluster economy, and that if we could all learn to be better micro-entrepreneurs, our economy would recover faster.

True, the emergence of innovative ways to share or rent everything from car rides to Wi-Fi access, is making life easier and maybe even more fun for a growing number of users. But we must not get so starry-eyed with excitement about these services that we assume they can collectively save us from our economic woes, especially our most important one: the unemployment and underemployment crisis.

One big problem with claims that the "sharing economy" can lead the way out of our economic morass is that proponents often advocate less consumption. If we all start renting the same person's car, boat or power tool, we'll need fewer people to make and sell cars, boats and power tools. And what happens to the tax base if these transactions are happening under the radar?

There are other labor-related problems with the sharing economy. One is that being a micro-entrepreneur may sound sexy, but it offers no security, health insurance, pension or 401(k), workers' compensation, unemployment insurance, paid vacation, or paid sick days. Makes it all sound a little less glamorous. The reality is that with the economy still more than a million jobs short of pre-recession employment levels, and with labor force participation at a 35-year low, we can't look to clothing re-sales and ride sharing as juggernaut solutions.

http://www.theguardian.com/commentisfree/2014/jan/07/sharing-economy-not-solution-to-jobs-crisis

5 Fewer monsignors in a simpler church (Straits Times) Pope Francis, in his latest move to simplify the Roman Catholic Church hierarchy, has severely restricted the number of priests who can receive the honorific title "monsignor". Vatican Radio said a directive had been sent to Catholic bishops around the world outlining the new regulations for diocesan priests.

From now on, the honorific title can only be given to priests who are at least 65 years old, and thus have already given a life of service to the Church. Until now, bishops could ask the Vatican to confer the title on priests over 35 as a distinction from the rest of the general clergy.

http://www.straitstimes.com/breaking-news/world/story/move-simplify-church-pope-limits-monsignor-title-20140108

Asia democracy in peril; Samsung foresees 18% profit fall; Record orders for Boeing in 2013; Rising bad loans a threat for India

1 Democracy in peril in Asia (The New York Times) Street protests in three Asian countries — Cambodia, Bangladesh and Thailand — are a vivid reminder of the fragile state of democracy in many developing countries, particularly those that do not have independent judiciaries and professional police forces and militaries. While the immediate causes for the turmoil are different in each country, they share several shortcomings. Lack of sufficient democratic checks and balances in all three countries has undermined faith in elections and helped to create the conditions for civil unrest. Autocratic and corrupt political leaders have used government agencies, in some cases over decades, to serve themselves and their cronies.

In Cambodia, protests started after Prime Minister Hun Sen, who has ruled Cambodia through intimidation and violence for nearly three decades, was declared the winner of an election in July that international monitoring organizations say was riddled with irregularities. Workers in the country’s clothing factories also joined the protests to demand that the government set the minimum wage for the industry at $160 a month; the government has offered to raise the minimum to $100 a month, up from $80 now. While the economy has grown fast in recent years, lifting up living standards, about one-fifth of the country’s population lives below the country’s poverty line. 

In Bangladesh, the current prime minister, Sheikh Hasina, and her party won an election held on Sunday because the main opposition party boycotted it. While Bangladesh has made significant progress in reducing poverty and improving public health, Ms. Hasina and opposition leader Khaleda Zia have often sacrificed the country’s stability to settle scores with each other and have done little to strengthen institutions like the judiciary and the police. 

In Thailand, the country’s Election Commission said elections scheduled for next month would go ahead despite efforts by protesters to sabotage them. Led by opposition politicians, the protesters want to replace the country’s elected government with an appointed council of technocrats because they have been unable to win elections against the party of Prime Minister Yingluck Shinawatra. There are no easy or quick solutions to the crisis in these three nations. While elections are vital, they are not sufficient to create stable democracies. Until these countries build institutions capable of serving as a check on political leaders, they will remain vulnerable to civil unrest. 

http://www.nytimes.com/2014/01/07/opinion/democracy-in-peril-in-asia.html?src=rechp&_r=0

2 Samsung sees 18% profit fall (BBC) Samsung Electronics, the world's biggest maker of mobile phones and TVs, has forecast a fall in profit for the October-to-December quarter. It expects to make an operating profit of 8.3 trillion won ($7.8bn) for the quarter, down 18% from the previous three months. Compared to the same period in the previous year, it is a 6% decline.

Samsung did not say what caused the dip, but analysts said falling profit margins for smartphones had hurt it. "As the growth in the smartphone sector matures, and vendors seek expansion in emerging economies, both prices and operating margins have been coming down," Manoj Menon, managing director of consulting firm Frost & Sullivan, said. He added that profit margins of smartphone makers were likely to "remain under pressure" in the coming months.

http://www.bbc.co.uk/news/business-25633375

3 Record orders for Boeing in 2013 (BBC) Boeing has revealed record deliveries and orders for 2013, putting it on track to become the world's largest plane maker for a second consecutive year. The plane manufacturer delivered 648 commercial planes last year and had a backlog of 5,080 unfulfilled orders - both company records. The figures mean it is likely to have beaten rival Airbus which will reveal its 2013 orders on 13 January. Airbus is expecting 620 deliveries.

Boeing Commercial president and chief executive Ray Conner said all three of its US-based commercial plane factories had delivered a record number of planes. Overall, Boeing booked a record 1,531 gross commercial orders for the year, with 1,355 net commercial orders, the second-largest in its history.

http://www.bbc.co.uk/news/business-25622236

4 Rising bad loans a threat for India (Nupur Acharya in The Wall Street Journal) Bad loans in India have jumped to a record high, hurting profits and stocks of state-owned banks and threatening to curb lending in Asia's third-largest economy. With India's expansion slowing to a decade low and higher interest rates taking hold, companies are struggling to pay back what they have borrowed after a credit binge in recent years.

As a percentage of total loans, nonperforming assets at Indian banks climbed to 4.2% in September, up from 2.4% in 2009, according to the latest data available from India's central bank. Analysts expect the ratio to rise as high as 5.7% in the next four months. The country is stuck in a painful slowdown. Growth in gross domestic product is expected to be less than 5% in the year ending in March, a sharp decline from more than 9% just three years ago.

The pressure on lenders has led the government to inject cash into state-run banks for the past six years, according to data from the Reserve Bank of India. In the fiscal year ending in March, state banks will be receiving a 140 billion rupee ($2.25 billion) infusion, up from 125 billion rupees the year before.

While private-sector lenders have been able to keep their books relatively clean, state-run banks have seen their bad loans jump in recent years. India's banking system is dominated by public-sector lenders that account for three-fourths of the total lending in the country and they also shoulder close to 90% of the country's bad and stressed loans, according to the Reserve Bank of India. The nonperforming loan ratio at Indian banks is much higher than elsewhere in Asia. Japan's nonperforming assets are around 2.4% of all loan and even Indonesia's are closer to 2% according to the latest data from the World Bank.

Indian banks may be understating their bad loans, analysts said. Data from Crisil Ratings, a Standard & Poor's company, showed that Indian banks by the end of September had restructured outstanding loans of more than 3 trillion rupees of private companies facing difficulty in repaying loans. Restructuring means they forego the interest or defer repayments for a certain period to help borrowers get back on their feet.

http://online.wsj.com/news/articles/SB10001424052702304887104579302643048756988