High gas prices and poor fuel economy led to the decline of sport utility vehicle sales in the United States in the mid-2000s, a time when customers preferred smaller, more affordable cars, some with new electric motor technology. But now, SUV’s have made a comeback, as VOA’s Kane Farabaugh reports on the floor of the Nation’s Largest Auto Show in Chicago.
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Is that love in the air or french fries? White Castle, KFC and other fast-food restaurants are trying to lure sweethearts for Valentine’s Day.

It’s an attempt to capture a bit of the $3.7 billion that the National Retail Federation expects Americans to spend on a night out for the holiday. Restaurant analyst John Gordon at Pacific Management Consulting Group says it appeals to people who don’t want to splurge on a pricier restaurant. And some customers enjoy it ironically.

White Castle, which has been offering Valentine’s Day reservations for nearly 30 years, expects to surpass the 28,000 people it served last year. Diners at the chain known for its sliders get tableside service and can sip on its limited chocolate and strawberry smoothie. KFC is handing out scratch-and-sniff Valentine’s Day cards that give off a fried chicken aroma to diners who buy its $10 Chicken Share meals or a bucket full of Popcorn Nuggets.

Panera Bread wants couples to get engaged at its cafes; those who do can win food for their weddings from the soup and bread chain. And Wingstop sold out of its $25 Valentine’s Day kit, which came with a gift card and a heart-shaped box to fill with chicken wings. The company says 1,000 of the kits were gone in 72 hours.
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The U.S. on Wednesday reported its biggest increase in consumer prices in a year, pushing stocks lower in early trading.

The consumer price index, which follows the costs of household goods and services, advanced by a half percentage point in January, up from two-tenths of a point in December.

The January increase pushed the year-over-year inflation rate up by 2.1 percent. It was the same 12-month rate recorded in December, increasing fears among investors that firming inflation, along with increasing wages paid to American workers, could lead policymakers at the country’s central bank, the Federal Reserve, to boost interest rates at a faster pace.

The Labor Department said consumer prices, minus the volatile changes in food and energy costs, rose three-tenths of a percentage point in January, the largest increase since January 2017. Analysts had been expecting an increase of 0.2 percent.

Stock indexes were lower at the start of Wednesday, with the key Dow Jones industrial average falling about a third of a percentage point after a string of recent days with massive swings between losses and gains.
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Electric powered bicycles, known as “e-bikes,” are a common sight among New York’s immigrant delivery workers, who consider the bikes a necessity to make a living wage. The problem is, they’re illegal to operate in the city, creating a dilemma for these immigrants who feel they have no alternative employment options. VOA’s Ramon Taylor and Ye Yuan report.
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Even though the U.S. Postal Service delivers about 46 percent of the world’s total mail, competition is getting tougher every day. The post office is turning to technology to stay current. VOA’s Elizabeth Lee shows how the USPS is using virtual and augmented realities, along with email, to attract business.
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When the Federal Reserve’s policy meeting ended last month, U.S. stock indexes were near record highs, market volatility was almost non-existent and policymakers chatted about the calm waters welcoming incoming central bank chief Jerome Powell.

Now, Janet Yellen’s successor may instead be facing an early test of his leadership as the Fed weighs the significance of a recent market downturn and jump in long-term bond yields as well as the risk the Trump administration’s tax and spending policies may light the fuse of unexpectedly fast inflation.

Powell’s views will become clearer when he testifies separately before lawmakers in the U.S. House of Representatives and Senate during the week of Feb. 28, and holds his first press conference as Fed chief after the March 20-21 policy meeting.

Investors widely expect the central bank to raise interest rates at its March meeting.

New U.S. inflation data on Wednesday may also indicate whether the pace of price increases is accelerating, which will be good news for a central bank that has struggled to hit its 2 percent annual inflation target — unless it comes too fast.

Meanwhile, the market turbulence this month “will worry them and induce considerable hand-wringing,” UBS economist Seth Carpenter said in an essay that asked whether Powell would delay a March rate hike to steady financial markets.

Not likely, said Carpenter, but he added that the selloff put the Fed in the quandary of determining whether the sudden market wobbliness is more important to policy than the recently passed tax cuts or an expected rise in U.S. government deficits.

Last week, the U.S. Congress passed and President Donald Trump signed into law a temporary spending deal expected to push budget deficits past $1 trillion annually with new military and domestic outlays.

On Monday, Trump proposed a budget that called for spending $57 billion less in fiscal year 2019 than mandated in last week’s deal.

‘Upside risks’

Powell’s colleagues at the Fed so far have said the central bank should stay the course, gradually raising rates along the path Yellen set and neither reacting to the recent market turbulence or jumping to conclusions about the impact the tax cuts and higher deficits could have on inflation.

But they’ve also made clear they are looking closely at all of the above, which will make Powell’s first months as Fed chief more complex than they seemed a couple of weeks ago.

“There are more salient upside risks to the forecast than we have seen in quite a while,” Cleveland Fed President Loretta Mester told reporters on Tuesday after a speech in Dayton, Ohio, flagging the possibility the extra spending generated by tax cuts and a rise in budget deficits could throw off the Fed’s outlook for growth, inflation and other aspects of the economy.

“It is going to be important to evaluate how firms and households are responding.”

“Who knows?” Mester said. “The financial markets may be a risk on the downside if we do see a pullback in confidence. We have not seen it so far. I am not anticipating it.”

As stock markets were plummeting last week, San Francisco Fed President John Williams said he felt investors in a sense were playing catch-up — finally accepting the fact that central banks would continue raising rates, and repricing stock and bond investments accordingly.

“I think some of the market reaction is the fact that the economy is doing well,” Williams said, calling the rise in long-term bond yields “maybe delayed recognition” that global economic growth will continue and central banks will raise rates as a result.

 
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Turkish President Recep Tayyip Erdogan is taking a hard line against nations and foreign energy companies exploring for gas in the eastern Mediterranean, warning them not to “step out of line” and encroach on his country’s territorial rights.

“Let them not think that the search for natural gas in Cypriot waters and opportunistic initiatives relating to islets in the Aegean have slipped our attention,” Erdogan said Tuesday as he addressed his ruling AK Party parliamentarians. Both Greece and Turkey claim the islets, known as Imia and Greek and Kardak in Turkish. The two countries nearly went to war in 1996 over ownership of the islets.

Erdogan made his remarks as Turkish warships continued to block an Italian ship from proceeding to search for energy in contested Cypriot waters.

“We warned Italy to not send oil company ENI to Cyprus for offshore drilling,” Turkish Foreign Minister Mevlut Cavusoglu said, adding that Ankara would defend what he said were Turkish Cypriot rights. Turkey claims as its own a part of the area designated by Cyprus for exploration. The government in Nicosia says Cyprus has a sovereign right to drill.

“The Turkish side made clear, what is unilaterally done [by Greek Cypriots] is totally unacceptable. The [exploration] blocks declared by the Greek Cypriot side overlap the blocks by Turkish Cypriot side,” said former Turkish Ambassador Mithat Rende, who had responsibility for energy issues in his country’s Foreign Ministry.

The latest dispute also has embroiled Egypt, with Cairo criticizing Ankara’s actions. Egypt and the Greek Cypriots have a partnership to search for energy together. The Egyptian Foreign Ministry’s official spokesperson, Ahmed Abu Zeid, said in a statement that no party can dispute the legality of the agreement on the demarcation of the maritime borders between Egypt and Cyprus.

In a related development, Greece says a Turkish coast guard vessel collided with a Greek coast guard boat off the disputed islets late Monday. No injuries were reported. The Greek vessel, however, was damaged. The Reuters news agency says Greece protested to Turkey over the incident and that the Turkish prime minister, Binali Yildirim, told his Greek counterpart, Alexis Tsipras, that Athens must  take steps to decrease tension in the Aegean.

Earlier this month, the U.S. ambassador to Greece, Geoffrey Pyatt, warned of the danger of an “accident” between Greece and Turkey in the Aegean. The warning came as Athens claimed there had been a major surge in Turkish fighter jets infringing on its airspace over the waters.  

“What we are seeing is an aggressive [Turkish] nationalist rhetoric, backed by action, exactly like Russia. Its quite likely to result in a confrontation,” warned political scientist Cengiz Aktar. “Turkey’s foreign policy is a return to the 19th century, based on the affirmation of the power. It’s a muscle-flexing policy. This aggressive foreign policy feeds the nationalist feelings in the country. It’s very functional for the regime in the upcoming elections.”

Turkey is due to hold local, general and presidential elections by 2019.

The potent combination of electoral politics shaping foreign policy makes Ankara unpredictable, analysts say, in a region bereft of unresolved disputes. “This all has a history; it’s very much embedded in concepts on national causes, both on the Greek side and the Turkish side,” said political columnist Semih Idiz of Al Monitor website. “So Erdogan has to appear determined. This is one issue he has to be seen protecting Turkey’s rights in the Aegean and Cyprus; in effect he is playing to the nationalist gallery.”

“Anything can happen at any time – a [Turkish] adventure in the Aegean [Sea] would mean occupation of a small island. For Cyprus, it would mean the annexation of the northern part of the island,” said political scientist Aktar. Northern Cyprus is administered by a Turkish Cypriot government and recognized internationally only by Ankara. The rest of the island is ruled by a Greek Cypriot administration. Cyprus was partitioned after a 1974 Turkish invasion of the island following a Greek-inspired coup.

The past couple of decades have seen diplomatic flareups among Ankara, Athens and Nicosia. The trouble occasionally has involved Ankara using strong rhetoric. Analysts point out that such disputes were contained by Turkey’s bid to join the European Union, given that Ankara was aware any spilling over of diplomatic tensions into violence or even the very threat, likely would end its membership aspirations.

Given that Turkey’s EU bid is widely considered dead for the foreseeable future, the region could be entering a new era, according to Aktar. “There are no more checks and balances that a future [Turkish] membership of the European Union is providing – owing to the difficult bilateral relations between the two countries [Greece and Turkey] and this is new, and that opens the door to a very dangerous future,” Aktar underscored.
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General Motors said Tuesday it will close an underutilized factory in Gunsan, South Korea, by the end of May as part of a restructuring of its operations.

The move is a setback for the administration of President Moon Jae-in, who has made jobs and wages a priority.

A GM statement said Monday the company has proposed to its labor union and other stakeholders a plan involving further investments in South Korea that would help save jobs.

“As we are at a critical juncture of needing to make product allocation decisions, the ongoing discussions must demonstrate significant progress by the end of February, when GM will make important decisions on next steps,” Barry Engle, GM executive vice president and president of GM International, said in the statement.

The company’s CEO Mary Barra has said GM urgently needs better cost performance from its operations in South Korea, where auto sales have slowed.

South Korea’s government expressed “deep regret” over the factory’s closure. It said it plans to study the situation at the business and will continue talks with GM.

Korea’s finance ministry said earlier this month that GM had sought government help. The government has denied reports that South Korea will raise the issue in trade talks with the U.S.

The factory in Gunsan, a port city about 200 kilometers (125 miles) southwest of Seoul, has been making the Cruze, a sedan, and the Orlando model SUV. It employs about 2,000 workers, and only used about 20 percent of its full production capacity in 2017, rolling out 33,982 vehicles.

GM Korea has made 10 million vehicles since it was set up in 2002. In 2017, it sold 132,377 units in Korea and exported 392,170 vehicles to 120 markets around the world.
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Companies selling some of the most lucrative prescription painkillers funneled millions of dollars to advocacy groups that in turn promoted the medications’ use, according to a report released Monday by a U.S. senator.

The investigation by Missouri’s Senator Claire McCaskill sheds light on the opioid industry’s ability to shape public opinion and raises questions about its role in an overdose epidemic that has claimed hundreds of thousands of American lives. Representatives of some of the drugmakers named in the report said they did not set conditions on how the money was to be spent or force the groups to advocate for their painkillers.

The report from McCaskill, ranking Democrat on the Senate’s homeland security committee, examines advocacy funding by the makers of the top five opioid painkillers by worldwide sales in 2015. Financial information the companies provided to Senate staff shows they spent more than $10 million between 2012 and 2017 to support 14 advocacy groups and affiliated doctors.

The report did not include some of the largest and most politically active manufacturers of the drugs.

The findings follow a similar investigation launched in 2012 by a bipartisan pair of senators. That effort eventually was shelved and no findings were ever released.

While the new report provides only a snapshot of company activities, experts said it gives insight into how industry-funded groups fueled demand for drugs such as OxyContin and Vicodin, addictive medications that generated billions in sales despite research showing they are largely ineffective for chronic pain.

‘Pretty damning’

“It looks pretty damning when these groups were pushing the message about how wonderful opioids are and they were being heavily funded, in the millions of dollars, by the manufacturers of those drugs,” said Lewis Nelson, a Rutgers University doctor and opioid expert.

The findings could bolster hundreds of lawsuits that are aimed at holding opioid drugmakers responsible for helping fuel an epidemic blamed for the deaths of more than 340,000 Americans since 2000.

McCaskill’s staff asked drugmakers to turn over records of payments they made to groups and affiliated physicians, part of a broader investigation by the senator into the opioid crisis. The request was sent last year to five companies: Purdue Pharma; Insys Therapeutics; Janssen Pharmaceuticals, owned by Johnson & Johnson; Mylan; and Depomed.

Fourteen nonprofit groups, mostly representing pain patients and specialists, received nearly $9 million from the drugmakers, according to investigators. Doctors affiliated with those groups received another $1.6 million.

Most of the groups included in the probe took industry-friendly positions. That included issuing medical guidelines promoting opioids for chronic pain, lobbying to defeat or include exceptions to state limits on opioid prescribing, and criticizing landmark prescribing guidelines from the U.S. Centers for Disease Control and Prevention.

“Doctors and the public have no way of knowing the true source of this information and that’s why we have to take steps to provide transparency,” said McCaskill in an interview with The Associated Press. The senator plans to introduce legislation requiring increased disclosure about the financial relationships between drugmakers and certain advocacy groups.

‘Front groups’

A 2016 investigation by the AP and the Center for Public Integrity revealed how painkiller manufacturers used hundreds of lobbyists and millions in campaign contributions to fight state and federal measures aimed at stemming the tide of prescription opioids, often enlisting help from advocacy organizations.

Bob Twillman, executive director of the Academy of Integrative Pain Management, said most of the $1.3 million his group received from the five companies went to a state policy advocacy operation. But Twillman said the organization has called for non-opioid pain treatments while also asking state lawmakers for exceptions to restrictions on the length of opioid prescriptions for certain patients.

“We really don’t take direction from them about what we advocate for,” Twillman said of the industry.

The tactics highlighted in Monday’s report are at the heart of lawsuits filed by hundreds of state and local governments against the opioid industry.

The suits allege that drugmakers misled doctors and patients about the risks of opioids by enlisting “front groups” and “key opinion leaders” who oversold the drugs’ benefits and encouraged overprescribing. In the legal claims, the governments seek money and changes to how the industry operates, including an end to the use of outside groups to push their drugs.

U.S. deaths linked to opioids have quadrupled since 2000 to roughly 42,000 in 2016. Although initially driven by prescription drugs, most opioid deaths now involve illicit drugs, including heroin and fentanyl.

Companies and their contributions

Purdue Pharma, the maker of OxyContin, contributed the most to the groups, funneling $4.7 million to organizations and physicians from 2012 through last year.

In a statement, the company did not address whether it was trying to influence the positions of the groups it supported, but said it does help organizations “that are interested in helping patients receive appropriate care.” On Friday, Purdue announced it would no longer market OxyContin to doctors.

Insys Therapeutics, a company recently targeted by federal prosecutors, provided more than $3.5 million to interest groups and physicians, according to McCaskill’s report. Last year, the company’s founder was indicted for allegedly offering bribes to doctors to write prescriptions for the company’s spray-based fentanyl medication.

A company spokesman declined to comment.

Insys contributed $2.5 million last year to a U.S. Pain Foundation program to pay for pain drugs for cancer patients.

“The question was: Do we make these people suffer, or do we work with this company that has a terrible name?” said U.S. Pain founder Paul Gileno, explaining why his organization sought the money.

Depomed, Janssen and Mylan contributed $1.4 million, $650,000 and $26,000 in payments, respectively. Janssen and Mylan told the AP they acted responsibly, while calls and emails to Depomed were not returned.
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U.S. prosecutors on Monday announced charges against five former Venezuelan officials accused of soliciting bribes in exchange for helping vendors win favorable treatment from state oil company PDVSA, the latest case to stem from a $1 billion graft probe.

The indictment by the U.S. Justice Department was filed in federal court in Houston, Texas, and was made public after Spain on Friday extradited one of the former officials, Cesar Rincon, who was a general manager at PDVSA’s, procurement unit Bariven.

Others charged included Nervis Villalobos, a former Venezuelan vice minister of energy; Rafael Reiter, who worked as PDVSA’s head of security and loss prevention; and Luis Carlos de Leon, a former official at a state-run electric company.

Those three like Rincon were arrested in Spain in October at the request of U.S. authorities amid a foreign bribery investigation into the financially struggling PDVSA, or Petroleos de Venezuela SA.

De Leon, Villalobos and Reiter remain in Spanish custody.

The indictment also charged Alejandro Isturiz Chiesa, who was an assistant to Bariven’s president and remains at large.

All five face conspiracy and money laundering charges. De Leon and Villalobos were also charged with conspiring to violate the U.S. Foreign Corrupt Practices Act.

Fred Schwartz, a lawyer for Rincon, said he expected his 50-year-old client would plead not guilty when he is arraigned on March 6. Lawyers for the other defendants could not be immediately identified.

The case flowed out of a U.S. investigation into what prosecutors have previously called a $1 billion bribery plot involving payments to PDVSA officials that became public with the arrest of two businessmen in 2015.

The indictment announced on Monday said that from 2011 to 2013, the five Venezuelans sought bribes and kickbacks from vendors in exchange for helping them secure PDVSA contracts and gain priority over other vendors for outstanding invoices during its liquidity crisis.

The indictment said the five Venezuelans then used various companies and bank accounts in Switzerland, Curaçao and elsewhere to launder the money they received.

Among the vendors that they promised to help in exchange for bribes were Roberto Rincon, who was president of Tradequip Services & Marine, and Abraham Jose Shiera Bastidas, the manager of Vertix Instrumentos, the indictment said.

Both pleaded guilty in 2016 to conspiring to pay bribes to secure energy contracts. Eight other people have also pleaded guilty in connection with the U.S. investigation.
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The invention of a machine that removes pumpkin seeds from the shell and sorts them is being celebrated in Cameroon as traders hope to boost production of the commodity in the Central African Country. Mariama Diallo reports.
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Federal investigators are still looking at how CSX railway crews routed an Amtrak train into a parked freight train in Cayce, South Carolina, last weekend. But even if CSX should bear sole responsibility for the accident, Amtrak will likely end up paying crash victims’ legal claims with public money.

Amtrak pays for accidents it didn’t cause because of secretive agreements negotiated between the passenger rail company, which receives more than $1 billion annually in federal subsidies, and the private railroads, which own 97 percent of the tracks on which Amtrak travels.

Both Amtrak and freight railroads that own the tracks fight to keep those contracts secret in legal proceedings. But whatever the precise legal language, plaintiffs’ lawyers and former Amtrak officials say Amtrak generally bears the full cost of damages to its trains, passengers, employees and other crash victims — even in instances where crashes occurred as the result of a freight rail company’s negligence or misconduct.

​No ‘iron in the fire’

Railroad industry advocates say that freight railways have ample incentive to keep their tracks safe for their employees, customers and investors. But the Surface Transportation Board and even some federal courts have long concluded that allowing railroads to escape liability for gross negligence is bad public policy.

“The freight railroads don’t have an iron in the fire when it comes to making the safety improvements necessary to protect members of the public,” said Bob Pottroff, a Manhattan, Kansas, rail injury attorney who has sued CSX on behalf of an injured passenger from the Cayce crash. “They’re not paying the damages.”

Beyond CSX’s specific activities in the hours before the accident, the company’s safety record has deteriorated in recent years, according to a standard metric provided by the Federal Railroad Administration. Since 2013, CSX’s rate of major accidents per million miles traveled has jumped by more than half, from 2 to 3.08 — significantly worse than the industry average. And rail passenger advocates raised concerns after the CSX CEO at the time pushed hard last year to route freight more directly by altering its routes.

CSX denied that safety had slipped at the company, blaming the change in the major accident index on a reduction of total miles traveled combined with changes in its cargo and train length.

“Our goal remains zero accidents,” CSX spokesman Bryan Tucker wrote in a statement provided to The Associated Press. CSX’s new system of train routing “will create a safer, more efficient railroad resulting in a better service product for our customers,” he wrote.

Amtrak’s ability to offer national rail service is governed by separately negotiated track usage agreements with 30 different railroads. All the deals share a common trait: They’re “no fault,” according to a September 2017 presentation delivered by Amtrak executive Jim Blair as part of a Federal Highway Administration seminar.

No fault means Amtrak takes full responsibility for its property and passengers and the injuries of anyone hit by a train. The “host railroad” that operates the tracks must only be responsible for its property and employees. Blair called the decades-long arrangement “a good way for Amtrak and the host partners to work together to get things resolved quickly and not fight over issues of responsibility.”

Amtrak declined to comment on Blair’s presentation. But Amtrak’s history of not pursuing liability claims against freight railroads doesn’t fit well with federal officials and courts’ past declarations that the railroads should be held accountable for gross negligence and willful misconduct.

​Maryland crash, backlash

After a 1987 crash in Chase, Maryland, in which a Conrail train crew smoked marijuana then drove a train with disabled safety features past multiple stop signals and into an Amtrak train — killing 16 — a federal judge ruled that forcing Amtrak to take financial responsibility for “reckless, wanton, willful, or grossly negligent acts by Conrail” was contrary to good public policy.

Conrail paid. But instead of taking on more responsibility going forward, railroads went in the opposite direction, recalls a former Amtrak board member who spoke to the AP. After Conrail was held responsible in the Chase crash, he said, Amtrak got “a lot of threats from the other railroads.”

The former board member requested anonymity because he said that Amtrak’s internal legal discussions were supposed to remain confidential and he did not wish to harm his own business relationships by airing a contentious issue.

Because Amtrak operates on the freight railroads’ tracks and relies on the railroads’ dispatchers to get passenger trains to their destinations on time, Amtrak executives concluded they couldn’t afford to pick a fight, the former Amtrak board member said.

“The law says that Amtrak is guaranteed access” to freights’ tracks, he said. “But it’s up to the goodwill of the railroad as to whether they’ll put you ahead or behind a long freight train.”

A 2004 New York Times series on train crossing safety drew attention to avoidable accidents at railroad crossings and involving passenger trains — and to railroads’ ability to shirk financial responsibility for passenger accidents. In the wake of the reporting, the Surface Transportation Board ruled that railroads “cannot be indemnified for its own gross negligence, recklessness, willful or wanton misconduct,” according to a 2010 letter by then-Surface Transportation Board chairman Dan Elliott to members of Congress.

That ruling gives Amtrak grounds to pursue gross negligence claims against freight railroads — if it wanted to.

“If Amtrak felt that if they didn’t want to pay, they’d have to litigate it,” said Elliott, now an attorney at Conner & Winters.

Same lawyers

The AP was unable to find an instance where the railroad has brought such a claim against a freight railroad since the 1987 Chase, Maryland, disaster. The AP also asked Amtrak, CSX and the Association of American Railroads to identify any example within the last decade of a railroad contributing to a settlement or judgment in a passenger rail accident that occurred on its track. All entities declined to provide such an example.

Even in court cases where establishing gross negligence by a freight railroad is possible, said Potrroff, the plaintiff’s attorney, he has never seen any indication that the railroad and Amtrak are at odds.

“You’ll frequently see Amtrak hire the same lawyers the freight railroads use,” he said.

Ron Goldman, a California plaintiff attorney who has also represented passenger rail accident victims, agreed. While Goldman’s sole duty is to get the best possible settlement for his client, he said he’d long been curious about whether it was Amtrak or freight railroads which ended up paying for settlements and judgments.

“The question of how they share that liability is cloaked in secrecy,” he said, adding: “The money is coming from Amtrak when our clients get the check.”

Pottroff said he has long wanted Amtrak to stand up to the freight railroads on liability matters. Not only would it make safety a bigger financial consideration for railroads, he said, it would simply be fair.

“Amtrak has a beautiful defense — the freight railroad is in control of all the infrastructure,” he said. But he’s not expecting Amtrak to use it during litigation over the Cayce crash.

“Amtrak always pays,” he said.
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Increasing demand for long-haul truckers in the United States is drawing more African immigrants onto America’s roads. VOA’s Arzouma Kompaoré hitched a ride with African truckers whose routes to success stretch across the United States.
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It’s been a tough week on Wall Street. The Dow Jones Industrial average closed more than 300 points higher Friday, after plunging more than 1,000 points the day before, the second steepest decline in history. The biggest dive happened Monday when the blue chip index fell more than 1,100 points. It’s enough to make even the most experienced investors swoon. But does this mean the end of the nine-year bull market? Is it time to worry? Mil Arcega spoke with economic analysts to get some answers.
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Ride-sharing giant Uber and the self-driving car company Waymo have agreed to settle their legal battle over allegedly stolen trade secrets.

The surprise agreement Friday came as lawyers for the companies prepared to wrap up the first week of the case’s jury trial in San Francisco, California.

As part of the agreement, Uber will pay $245 million worth of its own shares to Waymo.

Waymo sued Uber last year, saying that one of its former engineers who later became the head of Uber’s self-driving car project took with him thousands of confidential documents.

After the lawsuit was filed, Uber fired the employee and fell behind on its plans to roll out self-driving cars in its ride-sharing service.

Waymo, a company hatched from Google, says the settlement also includes an agreement that Uber cannot use Waymo confidential information in its technology.

“We have reached an agreement with Uber that we believe will protect Waymo’s intellectual property now and into the future. We are committed to working with Uber to make sure that each company develops its own technology,” Waymo said in a statement.

Uber’s new CEO, Dara Khosrowshahi, expressed regret for the company’s actions in a statement Friday.

“While we do not believe that any trade secrets made their way from Waymo to Uber, nor do we believe that Uber has used any of Waymo’s proprietary information in its self-driving technology, we are taking steps with Waymo to ensure our Lidar and software represents just our good work,” Khosrowshahi said in a statement.

Lidar is a laser-based system that helps self-driving cars to navigate their surroundings.

The trial so far included testimony from former Uber chief executive Travis Kalanick, who denied any attempt to steal trade secrets from Waymo.

Uber has faced a series of recent struggles, including public accusations of sexual harassment at the company and accusations it used software to thwart government regulators.
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There are growing fears that Britain could be headed for a so-called “cliff-edge” exit from the European Union, as big differences remain between Brussels and London over the shape of any future deal. 

The European Union’s chief negotiator, Michel Barnier, voiced frustration Friday that London has yet to detail what type of relationship it wants with the EU after Brexit.

“We had agreed with the British team on an agenda this week covering Ireland, the governance of the withdrawal agreement, and of course the transition,” Barnier told reporters in Brussels. “We had also planned an update by the United Kingdom on the future relationship. That update could not take place as planned this morning due to a scheduling issue on the British side.”

He also warned that both sides must agree on precise legal terms on the future border arrangements between Northern Ireland and the Republic of Ireland.

“Once again, ladies and gentlemen, it is important to tell the truth. A U.K. decision to leave the single market and to leave the customs union would make border checks unavoidable,” Barnier said.

That would mean the return of a physical border along the frontier, which many fear could reignite sectarian violence. Analyst Jonathan Portes of the U.K. in a Changing Europe program at Kings College London said the Ireland issue could determine the success of any overall Brexit deal.

“We have to work out how to translate the political fudge on the Northern Irish border that was agreed at the end of December into hard legal language,” he said. “And at the moment, no one really has any idea how to do that.” 

Britain says it wants frictionless trade with the EU after Brexit, but also the freedom to strike trade deals with other countries. But analyst Portes said the government is deeply divided over the shape of Britain’s future relationship with Europe, making negotiations difficult. A leaked government analysis suggests that economic growth in Britain will be reduced by up to 8 percent after it leaves the bloc.

Warning from Japan

Meanwhile, Tokyo’s ambassador to Britain warned that Japanese businesses might pull out of Britain if they faced higher costs after Brexit.

“If there is no profitability of continuing operations in the U.K., not Japanese only, no private company can continue operation. So, it’s as simple as that, and this is all high stakes that I think all of us need to keep in mind,” Ambassador Koji Tsuruoka told reporters Thursday, ahead of a meeting between British Prime Minister Theresa May and bosses of Japanese firms.

Japan has invested billions of dollars in Britain, lured by the promise of a tariff-free gateway to Europe. Carmakers Nissan, Honda and Toyota produce almost half of Britain’s cars, while pharmaceutical firms, tech companies and banks employ thousands of people.

Britain’s competitors, notably France, are eyeing that investment keenly. French Foreign Minister Jean-Yves Le Drian visited Tokyo last week and said any hopes that Britain might reverse course and stay in the EU were unfounded.

“It’s our choice, and our move, to tell the Japanese companies that, yes, the U.K. as part of the EU is over, but here is what we can offer you,” Le Drian told reporters.

‘Difficult pill’

Britain and Europe both want a transition period to ease the changeover for businesses. 

“Which is likely going to mean that the U.K. accepts that the EU makes all the rules, and we continue to pay, but we get no say. That’s going to be quite a difficult pill to swallow,” said Portes.

As the one-year Brexit countdown approaches, pressure is growing from Britain’s global and European partners for clarity over what future it wants after the European Union.
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Stocks lurched lower again in midday trading on Wall Street Thursday, extending a streak of losses and putting the market on track for its second big weekly decline in a row.

The market got off to a mixed start but fell steadily as the morning wore on. Technology companies, the leading sector over the past year, and banks fell the most.

The Standard & Poor’s 500 index, the benchmark for many index funds in 401(k) accounts, is now down 7.7 percent from the latest record high of 26,616 it set January 26. It’s still up 15.5 percent over the past year.  

Stock trading turned volatile over the last several days, breaking an unusually long period of calm, and the market is on track for its fifth loss in the last six days. European markets were also lower after the Bank of England said it could raise interest rates in the coming months.

After huge gains in the first weeks of this year, stocks tumbled Friday after the Labor Department said workers’ wages grew at a fast rate in January. That’s good for the economy, but investors worried it will hurt corporate profits and that rising wages are a sign of faster inflation. It could prompt the Federal Reserve to raise interest rates at a faster pace, which would act as a brake on the economy.

The S&P 500 shed 30 points, or 1.1 percent, to 2,651 as of noon Eastern time.

The Dow Jones industrial average lost 342 points, or 1.4 percent, to 24,550. Boeing and Caterpillar took some of the worst losses. The Nasdaq composite fell 89 points, or 1.3 percent, to 6,962.

The losses were broad. Three stocks fell for every one that rose on the New York Stock Exchange, and nine out of the 11 industry sectors in the S&P 500 index were down.

Bond prices recovered most of an early loss, sending yields slightly higher. The yield on the 10-year Treasury note rose to 2.85 percent from 2.84 percent.

Mixed bag for companies

High-dividend stocks including phone companies fell. Those stocks are often seen as substitutes for bonds because they tend not to fluctuate that much in price and provide steady income. Those stocks fall out of favor when bond yields rise, as they have been for the past few months, and many expect the trend to continue. The yield on the 10-year note was as low as 2.04 percent as recently as September.

The market didn’t get much help Thursday from company earnings reports, several of which disappointed investors. While U.S. companies mostly did well at the end of 2018, a number of them had a weak finish to the year.

Hanesbrands, which makes underwear, T-shirts and socks, reported a smaller profit than investors expected, and its forecast for the current year didn’t live up to analysts’ estimates either. The company also said it will pay $400 million to buy Australian retailer Bras N Things. The stock dropped $2.02, or 9.2 percent, to $19.94.

IRobot, which makes Roomba vacuums, plummeted 30 percent after projected a smaller annual profit than Wall Street was expecting. The stock dropped $26.64 to $61.40.

Twitter had a banner day, soaring 16 percent after turning in a profit for the first time. Its fourth-quarter revenue was also better than expected. The stock rose $4.55, or 15.9 percent, to $31.46.

Online delivery company GrubHub soared after it announced a partnership with Yum Brands, the parent of Taco Bell and KFC. GrubHub will provide the delivery people and technology to let people order food from those restaurants. GrubHub jumped $19.46, or 27.8 percent, to $89.37, while Yum Brands dipped 77 cents, or 1 percent, to $79.36.

After a sharp loss Wednesday, benchmark U.S. crude lost 97 cents, or 1.6 percent, to $60.82 a barrel in New York. Brent crude, the international standard for oil prices, gave up 85 cents, or 1.3 percent, to $64.66 per barrel in London.

Stocks in Europe declined and bond yields increased after the Bank of England said could raise interest rates in coming months because of the strong global economy. That also sent the pound higher. Britain’s FTSE 100 fell 1.6 percent and the French CAC 40 lost 2.4 percent. Germany’s DAX declined 2.6 percent.

In Tokyo the Nikkei 225 index rose 1.1 percent. South Korea’s Kospi gained 0.5 percent and the Hang Seng of Hong Kong rose 0.4 percent.

 
…

China’s export growth accelerated in January amid mounting trade tension with Washington while imports surged as factories stocked up ahead of the Lunar New Year holiday.

Exports rose 11.1 percent compared with a year earlier to $200.5 billion, up from December’s 10.9 percent growth, trade data showed Thursday. Imports surged 36.9 percent to $180.1 billion, up from the previous month’s 4.5 percent.

China’s politically sensitive trade surplus with the United States widened by 2.3 percent from a year ago to $21.9 billion, while its global trade gap narrowed by 60 percent to $20.3 billion.

“Export growth remained robust in January, indicating steady global demand momentum,” said Louis Kuijs of Oxford Economics in a report.

“While we expect the favorable external setting to continue to support China’s exports, rising U.S.-China trade friction remains a key risk,” Kuijs said. “We expect the U.S. administration to scale up on measures impeding imports from China.”

US import duties

Beijing’s steady accumulation of multibillion-dollar trade surpluses with the United States has prompted demands for import controls.

President Donald Trump’s administration has increased duties on Chinese-made washing machines, solar modules and other goods it says are being sold at improperly low prices. It is set to announce results of a probe into whether Beijing improperly pressures foreign companies to hand over technology, which could lead to further penalties.

Exports to the United States rose 12.1 percent in January from the same time last year to $37.6 billion while imports of U.S. goods rose 26.5 percent to $15.7 billion, according to the General Administration of Customs of China.

Exports to the European Union, China’s biggest trading partner, rose 11.6 percent to $33.7 billion while purchases of European goods rose 44.4 percent to $23.8 billion. China reported a $9.9 billion trade surplus with the EU but that was down 29.8 percent from a year earlier.

Trade war accusations

Chinese authorities have accused Trump of threatening the global trade regulation system by taking action under U.S. law instead of through the World Trade Organization. Beijing has filed a challenge in the WTO against Washington’s latest trade measures.

Beijing announced an anti-dumping investigation last weekend of U.S. sorghum exports. In response to suggestions the move was retaliation for Trump’s increase tariffs, Chinese government spokespeople say it is a normal regulatory step.

January’s import growth was driven in part by demand from factories that are restocking before shutting down for the two-week holiday. Each year, the holiday falls at different times in January or February, distorting trade data.

Forecasters expect Chinese demand to weaken this year as Beijing tightens controls on lending to slow a rise in debt. That is a blow to its Asian neighbors, for which China is the biggest export market, and for suppliers of iron ore and other commodities such as Brazil and Australia.
…

Dutch lender Rabobank’s California unit agreed Wednesday to pay $369 million to settle allegations that it lied to regulators investigating allegations of laundering money from Mexican drug sales and organized crime through branches in small towns on the Mexico border.

The subsidiary, Rabobank National Association, said it doesn’t dispute that it accepted at least $369 million in illegal proceeds from drug trafficking and other activity from 2009 to 2012. It pleaded guilty to one count of conspiracy to defraud the United States for participating in a cover-up when regulators began asking questions in 2013.

The penalty is one of the largest U.S. settlements involving the laundering of Mexican drug money, though it’s still only a fraction of the $1.9 billion that Britain’s HSBC agreed to pay in 2012. It surpasses the $160 million that Wachovia Bank agreed to pay in 2010.

Three execs behind cover-up

Under the agreement, the company will cooperate with investigators. The federal government agreed not to seek additional criminal charges against the company or recommend special oversight.

The settlement describes how three unnamed executives ignored a whistleblower’s warnings and orchestrated the cover-up. Two of the executives were fired in 2015 and one retired that year.

“Settling these matters is important for the bank’s mission here in California,” said Mark Borrecco, the subsidiary’s chief executive.

In 2010, Mexico proposed new limits on cash deposits at the country’s banks, resulting in more tainted deposits at Rabobank branches in Calexico and Tecate, according to the plea agreement. Accounts in the two border towns soared more than 20 percent after Mexico’s crackdown, and bank officials knew the money was likely tied to drug trafficking and organized crime.

Risky customers escaped scrutiny, including one in Calexico who funneled more than $100 million in suspicious transactions. Customers in Tecate withdrew more than $1 million in cash a year from 2009 to 2012, often in amounts just under federal reporting requirements.

“The cartels probably thought these were sleepy towns, no one’s going to notice,” said Dave Shaw, head of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations in San Diego. “When you bring in $400 million, someone is going to notice. The bank should have known and they just chose not to report any suspicious activity.”

Punishment for cover-up, not crime

Heather Lowe, legal counsel and government affairs director at research and advocacy group Global Financial Integrity, said the illegal activity bore similarities to what happened with HSBC and Wachovia.

But those banks were charged with laundering Mexican drug proceeds, while Rabobank only acknowledged covering it up.

“It seems in this case we have the bank taking the hit for lying but not for the violations themselves,” said Lowe, who expects the three unnamed executives will be prosecuted.

A whistleblower alerted two of the three executives to suspicious activity in 2012 and shared her concerns with the bank’s “executive management group,” according to the plea agreement. She also spoke with regulators amid concerns in the company that the government scrutiny could endanger a pending merger. She was fired in July 2013.

The government has a cooperating witness in former compliance officer George M. Martin, who agreed in December to cooperate with authorities in a deal that delayed prosecution for two years.

Martin, a vice president and anti-money laundering investigations manager, acknowledged he oversaw policies and practices that blocked or stymied probes into suspicious transactions and said he acted at the direction of supervisors, or at least with their knowledge.

Martin told investigators that he and others allowed millions of dollars to pass through the bank.

Rabobank, based in Utrecht, Netherlands, said last month that it set aside about 310 million euros ($384 million) to settled allegations against its subsidiary. Sentencing is scheduled May 18.
…

In the heartland of the tequila industry, in Mexico’s western state of Jalisco, a worsening shortage of agave caused by mounting demand for the liquor from New York to Tokyo has many producers worried.

The price of Agave tequilana, the blue-tinged, spiky-leaved succulent used to make the alcoholic drink, has risen six-fold in the past two years, squeezing smaller distillers’ margins and leading to concerns that shortages could hit even the larger players.

In front of a huge metal oven that cooks agave for tequila, one farmer near the town of Amatitan said he had been forced to use young plants to compensate for the shortage of fully grown agave, which take seven to eight years to reach maturity.

He asked not to be identified because he did not want his clients to know he was using immature plants.

The younger plants produce less tequila, meaning more plants have to be pulled up early from a limited supply – creating a downward spiral.

“They are using four-year-old plants because there aren’t any others. I can guarantee it because I have sold them,” said Marco Polo Magdaleno, a worried grower in Guanajuato, one of the states allowed to produce tequila according to strict denomination of origin rules.

More than a dozen tequila industry experts interviewed by Reuters said that the early harvesting will mean the shortage is even worse in 2018.

Already, the 17.7 million blue agaves planted in 2011 in Mexico for use this year fall far short of the 42 million the industry needs to supply 140 registered companies, according to figures from the Tequila Regulatory Council (CRT) and the National Tequila Industry Chamber (CNIT).

The shortages are likely to continue until 2021, as improved planting strategies take years to bear fruit, according to producers.

The result is agave prices at 22 pesos ($1.18) per kilo – up from 3.85 pesos in 2016.

Those higher prices mean that low-cost tequila producers, which make a cheaper, less pure drink that once dominated the market, find it harder to compete with premium players.

“It doesn’t make sense for tequila to be a cheap drink because agave requires a big investment,” said Luis Velasco, CNIT’s president.

Small-scale distillers of quality tequilas are also feeling the pinch and some warn that drinkers are seeking alternative tipples.

“At more than 20 pesos per kilo, it’s impossible to compete with other spirits like vodka and whisky,” said Salvador Rosales, manager of smaller producer Tequila Cascahuin, in El Arenal, a rural town in Jalisco.

“If we continue like this a lot of companies will disappear,” he said.

Exports to the United States of pure tequila jumped by 198 percent over the past decade, while cheaper blended tequila exports rose by just 11 percent, CNIT data shows.

Over the same time, Mexican production declined 4 percent, with blended tequila leading the fall.

Global Demand

As it sheds its image as a fiery booze drunk by desperados and fratboys, while moving into the ranks of top-shelf liquors, the tequila industry has seen a flurry of deals in recent years.

In January, Bacardi Ltd. said it would buy fine tequila maker Patron Spirits International for $5.1 billion.

In 2017, after years of speculation, Mexico’s Beckmann family launched an initial public offering of Jose Cuervo, raising more than $900 million.

And Britain’s Diageo Plc swapped its Bushmills Irish whiskey label for full ownership of the high-end Don Julio tequila in 2014.

The question posed by many distillers is how to keep pace with tequila’s success.

“The growth has overtaken us. It’s a crisis of success of the industry,” said Francisco Soltero, director of strategic planning at Patron, which buys agave under various contracts.

“We thought that we were going to grow a certain amount, and we’re growing double,” he said.

Large sellers such as Patron and Tequila Sauza say they have not experienced problems paying for agave, and forecast that their inventories will keep growing.

“If you sell value, the costs don’t worry you,” Soltero said.

Tequila Sauza, which mostly grows its own agave, does not foresee supply problems, chief executive Servando Calderon said.

But some think it is simply a matter of time before the higher production costs and scarcity pressures bigger players.

“We are sure this will have a strong impact on the big firms such as Cuervo or Sauza,” said Raul Garcia, President of the National Committee for Agave Production in Tequila, a group that includes most agave producers in the country.

“We don’t see that the problem will be resolved soon, and that’s what worries us.”

Demand is also being driven by other, fashionable agave-derived products, including agave syrup and health supplement inulin, which use the equivalent of 20 percent of the plants needed in 2018, the CRT said.

And rising prices are leading to growing theft, driving out smaller producers, said Jose de Jesus, a producer of blue agave in Tepatitlan. Criminals come to the area with large trucks in the middle of the night to steal agave, he said.

According to the CRT last year 15,000 plants were reported stolen, more than triple the number in 2016.

($1 = 18.7096 Mexican pesos)
…

Peru’s trade minister defended China as a good trade partner on Tuesday, after U.S. Secretary of State Rex Tillerson warned Latin American countries against excessive reliance on economic ties with the Asian powerhouse.

Eduardo Ferreyros said Peru’s 2010 trade liberalization deal with China had allowed the Andean nation of about 30 million people to post a $2.74 billion trade surplus with Beijing last year.

“China is a good trade partner,” Ferreyros told foreign media, as Tillerson met with President Pedro Pablo Kuczynski in Lima, a stop on Tillerson’s five-nation Latin American tour.

“We’re happy with the results of the trade agreement.”

The remarks were the Peruvian government’s first signal since Tillerson’s warning that it does not share Washington’s concerns about growing Chinese influence in the region.

Before kicking off his trip to Latin America on Friday, Tillerson suggested that China could become a new imperial power in the region, and accused it of deploying unfair trade practices.

“I appreciate advice, no matter where it comes from. But we’re careful with all of our trade relations,” Ferreyros said, when asked about Tillerson’s remarks.

Ferreyros also praised Peru’s trade relationship with Washington, despite a trade deficit with the United States. “I’m not afraid of trade deficits,” Ferreyros said.

Since China first overtook the United States as Peru’s biggest trade partner in 2011, thanks mostly to its appetite for Peru’s metals exports, bilateral trade has surged and diplomatic ties have tightened.

Kuczynski, a former Wall Street banker, made a point of visiting China before any other nation on his first official trip abroad as president in 2016.

Under former president Barack Obama, the United States had hoped to counter China’s rise in the fast-growing Asia-Pacific region, which includes large parts of Latin America, with the sweeping Trans-Pacific trade deal known as the TPP.

While President Donald Trump withdrew the United States from the TPP upon taking office, the 11 remaining signatories, including Peru and Japan, have struck a similar deal that they plan to sign without the United States in March.

Tillerson, who left Peru for Colombia on Tuesday, said on Monday that Trump was open to evaluating the benefits of the United States joining the so-called TPP-11 pact in the future, which Ferreyros called “a good sign.”

All countries in the Asia-Pacific region, including China, were welcome to join TPP-11, Ferreyros said. “But the deal has closed and countries that want to join obviously can’t renegotiate the whole agreement,” he added.
…

Among the countless Puerto Rico neighborhoods battered by Hurricane Maria is one named after another storm: Villa Hugo. The illegal shantytown emerged on a public wetland after 1989’s Hurricane Hugo left thousands homeless.

About 6,000 squatters landed here, near the El Yunque National Forest, and built makeshift homes on 40 acres that span a low-lying valley and its adjacent mountainside. Wood and concrete dwellings, their facades scrawled with invented addresses, sit on cinder blocks. After Maria, many are missing roofs; some have collapsed altogether.

Amid the rubble, 59-year-old Joe Quirindongo sat in the sun one recent day on a wooden platform — the only remaining piece of his home. Soft-spoken with weathered skin and a buzzcut, Quirindongo pondered his limited options.

“I know this isn’t a good place for a house,” said Quirindongo, who survives on U.S. government assistance. “Sometimes I would like to go to another place, but I can’t afford anything.”

Villa Hugo reflects a much larger crisis in this impoverished U.S. territory, where so-called “informal” homes are estimated to house about half the population of 3.4 million.

Some residents built on land they never owned. Others illegally subdivided properties, often so family members could build on their lots.

Most have no title to their homes, which are constructed without permits and usually not up to building codes. The houses range in quality and size, from one-room shacks to sizable family homes. Many have plumbing and power, though not always through official means.

The concentration of illegal housing presents a vexing dilemma for local and federal authorities already overwhelmed by the task of rebuilding an economically depressed island after its worst natural disaster in nine decades.

Puerto Rico Governor Ricardo Rosselló has stressed the need to “build back better,” a sentiment echoed by U.S. disaster relief and housing officials. But rebuilding to modern standards or relocating squatters to new homes would take an investment far beyond reimbursing residents for lost property value. 

It’s an outlay Puerto Rico’s government says it can’t afford, and which U.S. officials say is beyond the scope of their funding and mission. Yet the alternative — as Villa Hugo shows — is to encourage rebuilding of the kind of substandard housing that made the island so vulnerable to Maria in the first place.

“It’s definitely a housing crisis,” said Fernando Gil, Puerto Rico’s housing secretary. “It was already out there before, and the hurricane exacerbates it.”

In Puerto Rico, housing is by far the largest category of storm destruction, estimated by the island government at about $37 billion, with only a small portion covered by insurance.

That’s more than twice the government’s estimate for catastrophic electric grid damage, which was made far worse by the shoddy state of utility infrastructure before the storm.

Puerto Rico officials did not respond to questions about how the territory estimated the damage to illegally built homes.

Maria destroyed or significantly damaged more than a third of about 1.2 million occupied homes on the island, the government estimates. Most of those victims had no hazard insurance — which is only required for mortgage-holders in Puerto Rico — and no flood insurance. Just 344,000 homes on the island have mortgages, according U.S. Census Bureau data.

Officials at the U.S. Federal Emergency Management Agency (FEMA) and the Small Business Administration (SBA) acknowledged the unique challenges of delivering critical housing aid to Puerto Rico. Among them: calculating the damage to illegal, often substandard homes; persuading storm victims to follow through on application processes that have frustrated many into giving up; and allocating billions in disaster aid that still won’t be nearly enough solve the island’s housing crisis.

By far the most money for Puerto Rico housing aid is expected to come from the U.S. Department of Housing and Urban Development (HUD).

HUD spokeswoman Caitlin Thompson declined to comment on how the agency would spend billions of dollars in disaster relief funds to rebuild housing, or how it planned to help owners of informally built homes. Two HUD officials overseeing the agency’s Puerto Rico relief efforts, Todd Richardson and Stan Gimont, also declined to comment.

But the disaster aid package currently under consideration by the U.S. Congress would provide far less housing aid than Puerto Rico officials say they need. Governor Rosselló is seeking $46 billion in aid from HUD, an amount that dwarfs previous allocations for even the most destructive U.S. storms.

That’s nearly half the island’s total relief request of $94 billion.

The U.S. House of Representatives instead passed a package of $81 billion, with $26 billion for HUD, that still needs Senate and White House approval. The money would be divided between regions struck by several 2017 hurricanes — including Maria, Harvey in Texas and Irma in Florida — as well as the recent California wildfires. Congress could also decide to approve additional aid later.

‘My mother is scared’

A generation ago, Maria Vega Lastra, now 61, was among the estimated 28,000 people displaced by Hurricane Hugo. Neighbors helped her build a new home in what would become Villa Hugo, in the town of Canóvanas.

Her daughter, 34-year-old Amadaliz Diaz, still recalls her older brother grinning as he sawed wood for the frame of their self-built, one-floor house, with a porch and three bedrooms.

Now, Vega Lastra’s roof has holes in it, and her waterlogged wooden floorboards buckle with each step.

Vega Lastra has been staying with her daughter, who lives in Tampa, as the family waits on applications for FEMA aid. The agency initially denied her application in December, saying it could not contact her by phone, Diaz said.

Vega Lastra is returning to her home this week, uncertain if its condition has gotten worse. Her daughter bought her an air mattress to take with her.

“My mother is scared,” Diaz said. “I hope the government helps her. I work, but I have three kids to take care of.” The island’s housing crisis long predated the storm.

According to Federal Housing Finance Agency data, Puerto Rico’s index of new home prices fell 25 percent over the last decade, amid a severe recession that culminated last May in the largest government bankruptcy filing in U.S. history.

Legal home construction, meanwhile, plummeted from nearly 16,000 new units in 2004 to less than 2,500 last year, according to consultancy Estudios Tecnicos, an economic data firm.

A 2007 study by environmental consultant Interviron Services Inc., commissioned by the Puerto Rico Builders Association, found that 55 percent of residential and commercial construction was informal. That would work out to nearly 700,000 homes.

That figure might be high, said David Carrasquillo, president of the Puerto Rico Planning Society, a trade group representing community planners. But even a “every conservative” estimate would yield at least 260,000 illegally built houses, he said.

Generations of Puerto Rican governments never made serious efforts to enforce building codes to stop new illegal housing, current and former island officials said in interviews. Past administrations had little political or economic incentive to force people out of neighborhoods like Villa Hugo.

Former Governor Rafael Hernandez Colon, in office during Hurricane Hugo, said he tried to help informal homeowners without policing them. 

“Our policy was not to relocate, but rather improve those places,” Hernandez Colon said in an interview.

Subsequent administrations advocated similar policies; none made meaningful headway, partly because of Puerto Rico’s constant political turnover.

Today, informal communities provide a stark contrast to San Juan’s glittering resorts and bustling business districts. San Juan Mayor Carmen Yulin Cruz pointed to poor barrios like those near the city’s Martín Peña Channel, hidden behind the skyscrapers of the financial hub known as the Golden Mile.

“It’s not something I’m proud of, but we hide our poverty here,” Cruz said in an interview.

Recovery dilemma 

The task of rebuilding Puerto Rico’s housing stock ultimately falls to the territory government, which has no ability to pay for it after racking up $120 billion in bond and pension debt in the years before the storm. 

That leaves the island dependent on U.S. relief from FEMA, the SBA and HUD.

The SBA offers low-interest home repair loans of up to $200,000. FEMA provides homeowners with emergency grants, relocation assistance and other help. HUD is focused on long-term rebuilding efforts, working directly with local agencies to subsidize reconstruction through grants. 

FEMA’s cap for disaster aid to individuals is $33,300, and actual awards are often much lower. Normally, FEMA eligibility for housing aid requires proving property ownership, but the agency says it will help owners of informal homes if they can prove residency.

How exactly to help gets complicated. For example, someone who builds their own home with no permits on land they own is more likely to be treated as a homeowner, said Justo Hernandez, FEMA’s deputy federal coordinating officer. Squatters who built on land they didn’t own, however, would likely only be given money to cover lost items and relocate to a rental, he said.

Several Villa Hugo residents said they received money from FEMA, but many didn’t know what it was for and complained it wasn’t enough.

Lourdes Rios Romero, 59, plans to appeal the $6,000 grant she got for repairs to her flooded home, citing a much higher contractor’s quote. Neighbor Miguel Rosario Lopez, a 62-year-old retiree, showed a statement from FEMA saying he was eligible for $916.22, “to perform essential repairs that will allow you to live in your home.”

Without money for major changes, most homeowners said they planned to combine the aid they might get from FEMA with what little money they could raise to rebuild in the same spot.

FEMA does not police illegal building. Code enforcement is left to the same local authorities who have allowed illegal construction to persist for years.

Quirindongo is planning to buy materials to rebuild his Villa Hugo home himself with about $4,000 from FEMA. It will be the third time he has done so, having lost one home to a 2011 flood, another to a fire.

“I just want to have something that I can say, ‘This is mine,’” Quirindongo said.

Giving up

Many others appear to have given up on FEMA aid because the agency’s application process is entangled with a separate process for awarding SBA loans to rebuild homes.

FEMA is legally bound to assess whether applicants might qualify for SBA loans before awarding them FEMA grants. If an applicant passes FEMA’s cursory eligibility assessment, they are automatically referred to SBA for a more thorough screening.

Applicants are not required to follow through on the SBA process — but they cannot qualify for FEMA aid unless they do.

FEMA only provides a grant when the SBA denies the applicant a loan.

FEMA said it has referred about 520,000 people out of 1.1 million total applicants so far to the SBA. But as of Monday, only 59,000 followed through with SBA applications. Of those, some 12,000 later withdrew, SBA data shows.

“As soon as people see SBA they say, ‘I give up, I don’t want a loan — I can’t afford a loan,’” FEMA’s Hernandez said.

SBA spokeswoman Carol Chastang said the agency is working with FEMA to educate flood victims on available benefits and the application process, including sending staffers to applicants’ homes.

330,000 vacant homes

Before the storm hit, Puerto Rico already had about 330,000 vacant homes, according to Census Bureau 2016 estimates, resulting from years of population decline as citizens migrated to the mainland United States and elsewhere. Puerto Ricans are American citizens and can move to the mainland at will.

Puerto Rico and federal officials have considered rehabilitating the vacant housing for short- and long-term use, along with building new homes and buying out homeowners in illegally built  neighborhoods, according to Gil and federal officials.

Rosselló, the Puerto Rican governor, has said the rebuilding plan must include a fleet of properly built new homes. Gil, the housing secretary, said the administration would like to build as many as 70,000 properties.

HUD officials declined to comment on whether the agency would finance new housing. Its Community Development Block Grant program allows for local governments to design their own solutions and seek HUD approval for funding.

The cost of constructing enough new, code-compliant properties to house people displaced by Maria could far exceed the available federal aid. Making them affordable also presents a problem.

Puerto Rico’s subsidized “social interest housing,” geared toward low-income buyers, typically provides units that sell in the mid-$100,000 range, with prices capped by the government.

That’s beyond the means of many displaced storm victims.

Gil offered little detail on a solution beyond saying it will include a mix of new development, buyout programs for owners of illegally built homes and other options.

The answer will come down to how much Washington is willing to pay, he said. He invoked the island’s territorial status and colonial history as a root cause of its poor infrastructure and housing stock before the storm.

“It is precisely because we have been neglected by the federal government that the island’s infrastructure is so weak,” he said.

Many Puerto Rico officials continue to advocate for bringing relief and legitimacy to squatter communities like Villa Hugo, rather than trying to relocate their residents.

Canóvanas Mayor Lornna Soto has been negotiating with island officials to provide property titles to Villa Hugo’s population.

The vast majority still don’t have them.

“It’s long overdue to recognize that they are not going anywhere and their communities need to be rebuilt with proper services,” Soto said.

Diaz said she supports her mother’s decision to return to Villa Hugo, regardless of what aid the government ultimately provides.

“I grew up there,” Diaz said. “Everyone knows us there.”
…

Asia’s benchmark stock indexes collapsed Tuesday, as Monday’s massive selloffs on Wall Street rolled across the globe. 

Japan’s Nikkei 225 index lost as much seven percent of its value at one point during the trading session, before closing at 21,610 points, a loss of nearly five percent. Hong Kong’s Hang Seng index followed suit, dropping just over five percent in its worst trading day since August 2015. 

The benchmark indexes Australia and South Korea also suffered serious losses.

In early Europe trading London’s FTSE 100 was down 3.5 percent at 7,081 points.

Asian markets were caught in the ripple effect of Monday’s 1,175-point loss on the Dow Jones Industrial Average, marking the biggest point decline in history. The S&P (Standard and Poor’s) 500 also had a bad day, losing just over four percent to finish at 2,648 points. 

The stock market has now lost about a trillion dollars in value since Friday, when the Dow lost 666 points. That drop followed a solid jobs report that showed the U.S. economy adding 200 thousand jobs and wages rising at the fastest pace in a decade. The tighter labor market and rising wages prompted investor fears of higher inflation and the possibility that the U.S. Federal Reserve would raise interest rates faster and higher than they have in recent years. 

Analysts who spoke with VOA had been expecting a stock market “correction” (a decline of about 10% from recent highs) as a result of the record run up in stock prices this year.
…

As U.S. stocks plunged on Monday, President Donald Trump was speaking at an event in Ohio but noticeably not taking credit for the market despite doing so repeatedly when stocks were rising.

The stark contrast was a sign that Trump may be absorbing a tough message, underscored by former White House advisers, that American presidents traditionally have avoided commenting directly on Wall Street’s fickle trends.

Gene Sperling, a top economic adviser to Democratic former presidents Bill Clinton and Barack Obama, said Trump erred in recent months by focusing so heavily on the stock market.

“Even though the stock market tripled under Bill Clinton, his view was that you should always focus your policies and your public messages on bread-and-butter kitchen table issues … and that focusing on the stock market would take your eye off the real economy,” Sperling said.

White House spokesman Raj Shah, in an adjustment to the administration’s message on stocks, told reporters aboard Air Force One en route to Trump’s speaking event in Ohio, “Look, markets do fluctuate in the short term. We all know that … But the fundamentals of this economy are very strong and they’re headed in the right direction.”

Throughout a speech at a factory in Blue Ash, Ohio, Trump made no mention of stock markets. That departed sharply from past practice.

In his State of the Union address last week, Trump said, “The stock market has smashed one record after another, gaining $8 trillion and more in value in just this short period of time.”

‘Tremendous Benefits’

On Jan. 7, he wrote on Twitter, “The Stock Market has been creating tremendous benefits for our country in the form of not only Record Setting Stock Prices, but present and future Jobs, Jobs, Jobs. Seven TRILLION dollars of value created since our big election win!”

Three days before that, he tweeted, “Dow just crashes through 25,000. Congrats! Big cuts in unnecessary regulations continuing.” He had sent similar tweets for months.

The Republican president told Reuters in a Jan. 17 interview he has been getting kudos from people grateful for increased 401(k) retirement plan values and he believed the rise would not have happened if his Democratic opponent Hillary Clinton had won the 2016 presidential election.

“If the Democrats won the election, the stock market would have gone down 50 percent from where it was, and now look at the percentage increase. It’s a record increase,” Trump said.

Once the markets closed, the White House issued a statement saying Trump’s focus is “on our long-term economic fundamentals, which remain exceptionally strong, with strengthening U.S. economic growth, historically low unemployment, and increasing wages for American workers.”

“The president’s tax cuts and regulatory reforms will further enhance the U.S. economy and continue to increase prosperity for the American people,” White House spokeswoman Sarah Sanders said.

The benchmark Dow Jones industrial average soared 42 percent between Election Day 2016, when Trump won the presidency, and its historic peak a week ago above 26,400.

On Monday, the Dow fell to below 24,000 but regained some of its midday losses to close at 24,345. In the past five trading days, the index has erased all its gains since late November.

The benchmark S&P 500 has pulled back more than 6 percent from a Jan. 26 record high.

The “Trump rally,” as some traders have dubbed it, has coincided with a sweeping tax code overhaul approved in December, which slashed corporate taxes, and a deregulation push.

The S&P 500 rose 34 percent from Trump’s election to its recent high.

But stocks have been climbing since March 2009, when Obama inherited a serious financial crisis and the worst economic recession since the Great Depression of the 1930s. At that time, the Dow was trading at around 6,500.

Trump has also criticized his predecessor Obama’s effect on markets. In November 2012, Trump tweeted, “The stock market and U.S. dollar are both plunging today. Welcome to @BarackObama’s second term.”

The S&P 500 rose 126 percent from Obama’s 2008 election to his final day in office in 2017.

Former Obama press secretary Jay Carney on Monday tweeted, “Good time to recall that in the previous administration, we NEVER boasted about the stock market — even though the Dow more than doubled on Obama’s watch — because we knew two things: 1) the stock market is not the economy; and 2) if you claim the rise, you own the fall.”

Doug Holtz-Eakin, president of the American Action Forum and a former economic adviser to 2008 Republican presidential nominee John McCain, said, “The president shouldn’t comment about the stock market. Indeed if anyone is going to make major pronouncements about economic data, it should be the Treasury secretary or the agency releasing the data, so if they get it wrong you can get rid of them. You don’t want the president owning those things.”
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Federal officials will take another look at the historic Alaska community of Nome as a possible port serving ships heading for the Arctic.

The U.S. Army Corps of Engineers announced it has signed an agreement with the city of Nome to examine whether benefits justify costs of navigation improvements, said Bruce Sexauer, chief of civil works for the Corps’ Alaska District.

“The study will look at economic and social reasons to see if expanding the port is in the federal interest,” he said.

The study process generally takes three years and could culminate in a Corps’ recommendation to Congress to authorize port improvements, Sexauer said.

Alaska lacks deep-water ports along most of its west and northwest coast. The nearest permanent U.S. Coast Guard station is Kodiak more than 800 miles (1,287 kilometers) away.

Arctic marine traffic continues to grow and Nome, though south of the Arctic Circle, is well situated south of the Pacific chokepoint to the Arctic, the Bering Strait, Sexauer said.

A joint federal-state study started in 2008 looked at alternatives for Arctic ports in the Bering and Chukchi seas. Nome became the top choice because of infrastructure already in place, including an airport that handles jets, a hospital and fuel supply facilities.

“It just needed to be bigger and deeper,” Sexauer said

However, economic justification for the port diminished in late 2015 when Royal Dutch Shell PLC drilled a dry hole in the Chukchi Sea and suspended its U.S. Arctic offshore drilling program.

“The benefits for a project at Nome went away, at least the oil and gas benefits,” Sexauer said. The Corps paused its study with the state and officially terminated it last month, Sexauer said.

The study with the city will again look at how a Nome port would aid marine traffic for petroleum development, mining and regional delivery of fuel and other products.

Federal law changed in 2016 to allow the Corps to also consider social benefits, such as support of search and rescue operations, national security and aid to communities to help them be sustainable.

The Port of Nome remains too shallow to handle large ships. Fuel tankers stay anchored in deep water and fuel is lightered to Nome.

Nome’s inner harbor in 2014 was just 10 feet (3 meters) deep and its outer harbor was less than 23 feet (7 meters) deep. The Corps that year looked at constructing docks up to 1,000 feet (305 meters) long and dredging to 35 feet (10.7 meters).

The Corps in late April has scheduled a planning meeting in Nome to detail the scope of the new study.
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Digital currencies such as bitcoin demand increased oversight and may require a new federal regulatory framework, the top U.S. markets regulators will tell lawmakers at a hotly anticipated congressional hearing on Tuesday.

Christopher Giancarlo, chairman of the Commodity Futures Trading Commission, and Jay Clayton, chairman of the Securities and Exchange Commission, will provide testimony to the Senate Banking Committee amid growing concerns globally over the risks virtual currencies pose to investors and the financial system.

Giancarlo and Clayton will say current state-by-state licensing rules for cryptocurrency exchanges may need to be reviewed in favor of a rationalized federal framework, according to prepared testimony published on Monday.

Reporting by Michelle Price.
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Jerome Powell has been sworn in as the 16th chairman of the Federal Reserve in a brief ceremony in the Fed’s board room. In a short video message, Powell pledged to “support continued economic growth, a healthy job market and price stability.”

Powell took the oath of office from Randal Quarles, the Fed’s vice chairman for supervision, in a ceremony that was attended by Fed staff and Fed board member Lael Brainard.

Powell succeeds Janet Yellen, the first woman to lead the nation’s central bank in its 100 year history. President Donald Trump picked Powell after deciding to break with recent tradition and not offer Yellen a second four-year term.

In his video message, Powell did not mention the current turbulence in financial markets which sent stocks plunging on Friday.
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When Jerome Powell is sworn in Monday as the new chairman of the Federal Reserve, the pride of the moment may be tempered by Powell’s recognition of the risks that lie ahead.

A ferocious sell-off on Wall Street on Friday — with stocks tumbling and bond yields rising after the January U.S. jobs report suggested higher inflation ahead — served as a blunt reminder of the challenges Powell’s Fed will face.

At his Senate confirmation hearing, Powell stressed his intention to carry on the cautious approach to interest rate hikes that his predecessor, Janet Yellen, pursued in four years as Fed chair. Yellen was able to oversee a gradual rate policy because inflation posed no threat: It ran below even the Fed’s 2 percent annual target throughout her tenure.

The Powell era could be entirely different. The job market is tighter. Wages are up. Federal debt will likely rise. Tax cuts could accelerate growth.

All of which seems likely to drive up inflation, which is what spooked investors Friday. The main question, is by how much? For weeks, investors have been demanding higher bond yields. On Friday, after the government said average pay rose year-over-year in January at the fastest pace in more than eight years, the 10-year Treasury yield reached 2.84 percent, a four-year high.

The Powell-led Fed would be pleased to see inflation finally reach its 2 percent goal. The problem would be if it were to surge well above that level. The Fed would face intense pressure to accelerate its rate hikes to tighten credit and curb inflation.

That’s where the risks come in: If the Fed tightened credit too little, inflation might surge out of control. If it tightened too much, a recession could result. Steering a safe middle ground has proved tricky for the Fed throughout its history. It has sometimes miscalculated how fast to raise rates and triggered an economic downturn.

In December, the Fed predicted that it would raise its benchmark short-term rate three times in 2018, just as in 2017. Yet some economists now foresee four increases. And those rate hikes would coincide with the Fed’s continued paring of its bond holdings — action that puts upward pressure on rates for long-term consumer and business loans.

“The next phase of managing the economy may not be as easy,” said Diane Swonk, chief economist at Grant Thornton, who expects four rate increases in 2018. “The Fed may have to raise rates more quickly because the economy is stronger.”

For now, the economy that Powell’s Fed will preside over shows strength and resilience. Unemployment is at a 17-year low. The economic expansion, already the third-longest in U.S. history, appears to be improving after a long stretch of subpar growth. On the surface, it might seem that all the Powell Fed needs to do now is serve as caretaker for a high-flying economy.

But the Fed has always felt compelled to respond to threats before, not after, they arise, while there is time to prevent high inflation or an economic slowdown.

“Everything points to a more aggressive Fed under Powell,” said Mark Zandi, chief economist at Moody’s Analytics.

No less an authority than Alan Greenspan, who led the Fed for 18{ years until 2006, expressed worries last week that dangerous bubbles might be forming in the financial markets, in part because of high federal debt resulting from increased benefit spending as baby boomers retire and the $1.5 trillion in tax cuts now taking effect.

“We are dealing with a fiscally unstable long-term outlook in which inflation will take hold,” Greenspan said in an interview on Bloomberg Television.

The two most recent U.S. recessions were caused by bursting asset bubbles. The pricking of the dot.com bubble led to a brief recession in 2001. And the collapse of the housing bubble ignited the 2007-2009 downturn, the worst since the Great Depression of the 1930s.

The current recovery began in June 2009. If it lasts until June 2019, it would tie the longest expansion on record  — the one that lasted from March 1991 to March 2001.

Though the expansion has been marked by slow economic growth, that very trait might ensure its durability: Plodding growth has kept inflation low and prevented the economy from overheating.

“I don’t think a recession is on the horizon,” said Sung Won Sohn, an economics professor at California State University, Channel Islands. “We have had one of the slowest periods of economic growth on record, and I think slow means it will go for a longer period.”

For that forecast to prove correct, the Powell Fed will need to manage its rate policy with exceeding care. Friday’s jobs report showing wages rising 2.9 percent over the past 12 months — the biggest such jump since the recession ended in 2009 — suggested that the Fed may be entering an era of higher inflation and a need for higher rates.

With Yellen’s departure, the seven-member Fed board will have only three members. President Donald Trump has nominated Marvin Goodfriend, an economics professor who has long urged the Fed to raise rates more quickly, for one vacancy. Goodfriend awaits Senate confirmation.

But the president hasn’t yet nominated anyone for the three other vacancies. Those selections will be critical in determining the Fed’s pace of rate hikes and in carrying out Trump’s desire to loosen bank regulations. Powell’s responsibility will be to forge a consensus among the board members and the 12 regional Fed bank presidents who help set monetary policy.

Powell will be the first Fed leader in three decades without a Ph.D. in economics. But David Jones, the author of several books on the Fed, said that Powell, with his background as an investment banker, reminded him of the longest-serving chairman, William McChesney Martin, who led the Fed from 1951 to 1970. Martin also lacked a doctorate in economics but had extensive knowledge of Wall Street.

“Powell, like Martin, understands markets, and I think he will be as plain-spoken as Martin,” Jones said, citing Martin’s famous summation of the Fed’s job: “To take away the punch bowl just when the party gets going.”

 
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Recent losses on global financial markets, including those in the U.S., have some investors concerned about expectations for their holdings and plans for the future.

The Dow Jones Industrial Average declined 2.5 percent Friday, its largest percentage drop since Britain’s decision in June 2016 to leave the European Union.

The Dow and the broader U.S. Standard & Poor’s 500 Index ended the week roughly 4-percent lower, their biggest weekly drops since early 2016, amid fears of inflation and disappointing quarterly corporate earnings results.

Key stock indexes in Europe also fell Friday. Germany’s DAX index dropped 1.7-percent, while France’s CAC 40 Index declined 1.6-percent.

In Asia, Japan’s Nikkei 225 Index slid nearly 1-percent and South Korea’s Kospi fell 1.7-percent.

Meanwhile, U.S. bond yields climbed and contributed to the sell-off after the U.S. government reported that wages grew last month at their fastest pace in eight years.

The wage data helped stoke investor concern that the Federal Reserve, the U.S. central bank, will respond to higher inflation by hiking its key interest rate more quickly than anticipated.

Darrell Cronk, head of the Wells Fargo Investment Institute, said an extended period of low interest rates has helped create the uncertainty.

“We’ve enjoyed low interest rates for so long, we’re having to deal with a little bit higher rates now, so the market is trying to figure out what that could mean for inflation.”

The yield on the benchmark 10-year U.S. Treasury notes rose to 2.852-percent, its highest level in more than four years. The rise in bond yields hinders stock performance in two ways: it makes corporate borrowing more expensive and it makes bonds more attractive to investors compared to riskier stocks.

Bond strategists were unwilling Friday to predict what lies ahead for interest rates this week after the markets’ unusual volatility in the past week.

Investors may get a hint of the direction of interest rates when trading resumes in Asia early Monday, and possibly more insight after the U.S. Treasury’s $66 billion in auctions of 3-, 10- and 30-year bonds from Tuesday to Thursday.
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Over the last decades, growing economic hardships forced people in cities and villages around the world to leave their hometowns to find work in other countries. Dreaming of returning one day and enjoying a better life where they grew up, many invested most of their savings buying houses back home. But often, these houses remain empty, making many communities look like ghost towns. Faiza Elmasry has the story. Faith Lapidus narrates.
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