West Virginia could produce profitable niche crops grown on reclaimed mine sites.

At least that’s what Nathan Hall, president of Reclaim Appalachia envisions.

Hall spoke about uses for reclaimed sites at the West Virginia Good Jobs Conference last Tuesday at Tamarack. The goal of the conference is to bring together entrepreneurs, funders, local community leaders and government agencies to trade ideas, provide mentorship and support entrepreneurs in southern West Virginia.

Reclaim’s first operational site is next to the Buck Harless Wood Products Industrial Park in Holden, a property owned by the Mingo County Redevelopment Authority.

Former miners

Reclaim and Refresh Appalachia have partnered to develop an active commercial agroforestry site, which is on about 50 acres of land that was mined and reclaimed in the late 1990s, managing crops including blackberries, hazelnuts, lavender and pawpaws. The site also has animals including chickens, hogs, goats and honeybees, which are managed with “rotational grazing techniques.”

Hall said he first started work on the Mingo County site early last year. The business has five full time crew members and one crew chief. Of those six employees, four are former coal miners.

According to Reclaim’s website, the organization intends to replicate the model on more mined properties and on a larger scale.

“With any post surface mine landscape, this model works well,” Hall said. “It’s especially suited to areas where it’s not feasible to turn into a big shopping center or a golf course.”

Long-term approach

Hall said the model is designed to be long term and said sites like these may not see profit until a few years down the road.

“This approach is never profitable in year one or even year two,” he said. “It’s more of a three-five year horizon to get into the black. A lot of agricultural investments like this are longer term.

“With animals, you have to establish a breeding stock. It takes some time before you’re able to send animals to slaughter,” Hall said. “And with perennial plants, it takes a year of establishment to get fruit, sometimes three to four years. We are looking at this as a longer-term investment but this is a pretty common way to invest in projects you see on the West Coast and the Northeast. A lot of investors know this is not a quick turnaround.”

However, down the road, Hall said he envisions West Virginia as being primary producers of niche produce on the East Coast.

“If we produce enough at a low cost and upgrade to high value products, move it six to nine hours away, there is a huge amount of ways to use these lands in ways that we’ve barely started to scratch the surface,” he said.

Crops, animals for rocky soil

Hall mentioned the possibility of products including lavender or grapes — plants that can thrive in the rocky soil.

“You could even have things like goat meat, which is something you don’t think about as something to eat in this area,” Hall said. “There are huge markets for it, maybe not here but the conditions are great for these sites.”

Hall spoke about some of the struggles with using these sites including the rocky terrain itself.

“You think about nice farmland where there is this loose, fluffy, brown soil you can almost scoop your hand into,” he said. “This soil, you can’t get a shovel to go more than 2 inches. The only thing that can survive is something with a shallow breeding system.”

Controlling invasive species

Another issue is invasive species of plants that were planted for reclamation. However, Hall said animals including goats and hogs can eat the shrubby plants while also adding nutrients to the soil.

“I’m a fan of high-intensity rotational grazing,” he said. “You have people out there tending fences and maintaining the animals and the site regularly. It has a more diversified income. And there is a benefit to the land through manure and reducing unwanted vegetation. You can eventually replant to better quality pastures if you do rotational.”

He said stacking systems including orchards and animals have been efficient in maintaining the land along with adding a larger labor force.

“You have the animals in between the orchard growth keeping the areas maintained,” he said. “It’s benefiting the roots and the trees. You’re also able to sell the meat and eggs while harvesting fruit and berries.”

Not the first attempt

Hall isn’t the first or the only person to grow crops on reclaimed mine sites. Hall mentioned one in particular back in the 1990s in Kentucky where there was a hog farm on a former mine site.

“There are a lot of activity in these spaces,” he said. “We are more focused on stacking systems and having this multifaceted approach. Other folks want one piece. It’s an interesting time to be involved. We can learn from each other and grow a new sector of the economy.”
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Ranchers in the Midwestern U.S. state of Nebraska are raising beef for tables in China, reopening trade suspended more than a decade ago during concerns over mad cow disease. From Nebraska, VOA reporter Abby Sun tells us how U.S. beef producers are changing to meet Chinese food-safety requirements.
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Luber Faneitte has lung cancer but there’s no medicine to treat it. She cannot make ends meet. Crime is rampant in her neighborhood.

And she fears that if Venezuela defaults on its $150 billion debt, which is considered likely, things will get worse.

Faneitte, 56, lives on the 18th story of a decrepit building in downtown Caracas. In her fridge there is only water. Meat is a luxury of the past because of inflation that the International Monetary Fund projects will hit 2,300 percent in 2018.

“We get by on grain, and that is just when we can get it. We make a kilo last two or three days,” Faneitte told AFP.

She is on disability from her job as a civil servant and survives on a pittance, equivalent to $8.70 per month.

She depends on food the government sells once a month at subsidized prices to offset the shortages of just about everything.

Last time she brought home two kilos (4.4 pounds) of beans, a kilo of rice, two liters (quarts) of cooking oil, a kilo of powdered milk and four kilos of flour.

But it went fast. Faneitte lives with a daughter and four grandkids. They all depend on her income.

Cendas, an NGO that monitors the cost of living in this oil-rich but now destitute nation, says that in September it took six times the minimum wage to provide for the average family.

Although she has nothing to cook, Faneitte leaves the gas stove running to save on matches.

The faucet drips, day and night. But she has no money to fix it, and water service — like that from other utilities — is practically given away by the government.

‘Hungrier’ and needier

Politically, the idea of Venezuela declaring default is seen as offering a possible short-term boost for widely unpopular President Nicolas Maduro, who has his eye on elections next year.

As oil prices are down — petroleum accounts for 96 percent of the country’s hard-currency revenue — Venezuela has cut down on imports to save money for debt service, worsening the seemingly endless shortages of basics, even such items as soap and toilet paper.

If Maduro declares default, it would free up money to buy imports, do election campaigning and thereby ease the risk of street protests.

But analysts say the long-term impact of defaulting would be disastrous. Venezuela would be mired in lawsuits by creditors and see its assets frozen abroad, said Alejandro Grisanti of the consultancy Ecoanalitica.

Maduro has said he wants to refinance and restructure Venezuela’s debt. But the idea of default is seen as looming.

“I don’t know if that is what Venezuela needs to open its eyes,” said Faneitte. “What I do know is that we are going to go hungrier and be more in need.”

She does not know how things got so bad but she certainly is feeling the effects.

Agonizing choice

She gave up chemotherapy in January because of the acute shortage of medicine to treat her cancer.

She made that tough decision after struggling for years over whether to buy food or treat her disease.

Doctors say she needs chemo. But instead she prepares a homemade concoction of liqueur, honey and aloe vera.

“I leave it outside for two days, then I take a spoonful in the morning and another at night. I think I breathe much better when I take it,” she said.

Faneitte has been a smoker since age 15. She struggles to breathe when she talks or walks. She has had three heart attacks.

She recalls sarcastically how the late socialist firebrand Hugo Chavez once complained that poor people in his country were reduced to eating dog food.

“I want to eat that again,” said Faneitte.

Crime is yet another woe. There is no internet in her neighborhood because thieves have stolen all the cables.

Her apartment building is pocked with bullet holes from shootouts among rival gangs. That violence forced her to move the beds in her apartment away from the windows.

“I am resigned,” she said, “to whatever God wants.”
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Afghanistan has received an inaugural consignment of wheat from India through an Iranian port, opening a new trade and transit route for the landlocked nation that bypasses neighboring Pakistan.

The strategic sea route, officials say, will help improve trade and transit connectivity between Kabul and New Delhi.

It will also potentially give India access to Central Asian markets through Afghanistan, because rival Pakistan does not allow Indian goods to be transported through its territory .

The shipment of almost 15,000 tons of wheat dispatched from India’s western port of Kandla on October 29 reached the Iranian port of Chabahar on November 1. It was then loaded on trucks and brought by road to the Afghan province of Nimroz, which borders Iran.  

Speaking at a special ceremony to receive the historic consignment Saturday in the border town of Zaranj, India’s ambassador to Kabul, Manpreet Vohra, said the shipment has demonstrated the viability of the new route. He added that India, Afghanistan and Iran agreed to operationalize the Chabahar port only a year-and-a-half ago.

“The ease and the speed with which this project is already working is evident from the fact that as we are receiving the first trucks of wheat here in Zaranj, the second ship from Kandla has already docked in Chabahar,” Vohra announced.

He said there will be seven shipments between now and February and a total of 110,000 tons of wheat will come to Afghanistan through Chabahar. Vohra added the shipments are part of a promised 1.1 million tons of wheat as India’s “gift” to Afghanistan out of which 700,000 has already been sent to the country.  

India is investing $500 million in Chabahar port to build new terminals, cargo berths and connecting roads, as well as rail lines.

The Indian shipment arrived in Afghanistan days after U.S. Secretary of State Rex Tillerson, on a visit to New Delhi, allayed concerns the Trump administration’s tough stand on Iran could pose a fresh stumbling block to India’s plans to develop the strategic Iranian port as a regional transit hub.

The Indian ambassador also took a swipe at Pakistan, though he did not name the rival country.

“The logic of finding easy connectivity, assured connectivity for Afghanistan is also because you have not had the benefit despite being a landlocked country of having easy access to international markets. We all know that a particular neighbor of yours to the east has often placed restrictions on your transit rights,” Vohra noted.

The shortest and most cost effective land routes between India and Afghanistan lie through Pakistan.

But due to long-running bilateral territorial disputes between India and Pakistan, Afghanistan and India are not allowed to do two-way trade through Pakistani territory. Kabul, however, is allowed to send only a limited amount of perishable goods through Pakistani territory to India.

“We are confident that with the cooperation, particularly of the government of Iran, this route now from Chabahar to Afghanistan will not see any arbitrary closure of gates, any unilateral decisions to stop your imports and exports, and this will provide you guaranteed access to the sea,” vowed Vohra.

Pakistan also allows Afghanistan to use its southern port of Karachi for transit and trade activities. However, Afghan officials and traders are increasingly complaining that authorities in Pakistan routinely indulge in unannounced trade restrictions and frequent closure of border crossings, which has undermined trade activities.

“With the opening of Chabahar Port, Afghanistan will no longer be dependent on Karachi Port,” provincial governor Mohammad Samiullah said while addressing the gathering. The economic activity, he said, will create job opportunities and bring billions of dollars in revenue to Afghanistan, Iran and India.

Afghanistan’s relations with Pakistan have also plunged to new lows in recent years over mutual allegations of sponsoring terrorism against each other’s soils.

In its bid to enhance economic connectivity with Afghanistan, India also opened an air freight corridor in June this year to provide greater access for Afghan goods to the Indian market.

Pakistani officials, however, have dismissed suggestions the direct trade connectivity between India and Afghanistan is a matter of concern for Islamabad.

“It is our consistent position that Afghanistan as a landlocked country has a right of transit access through any neighboring country according to its needs,” said Pakistani foreign ministry spokesman Mohammad Faisal.

Pakistan and Afghanistan share a nearly 2,600 kilometer largely porous border. However, Islamabad has lately begun construction of a fence and tightened monitoring of movements at regular border crossings between the two countries, saying terrorist attacks in Pakistan are being plotted on the Afghan side of the border.

 
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U.S. President Donald Trump arrived in Hanoi, Vietnam’s capital, Saturday evening for a state banquet, followed by a day of meetings with Vietnamese leaders.

He has been in Danang, where he attended the annual Asia-Pacific Economic Cooperation summit, one of several such events during his five-country Asian tour.

At the close of the meeting Saturday, the 21 member nations issued a statement expressing support for free trade and closer regional ties, without any mention of Trump’s “America First” doctrine.

WATCH: Leaders of US and China Offer Asia Business Leaders Divergent Paths

​Two views on trade

On Friday, Trump and his Chinese counterpart, President Xi Jinping, offered starkly contrasting views of the direction for trade in Asia in separate speeches to regional business leaders

Trump told the APEC CEO Summit that he is willing to make bilateral trade agreements with any country in the Indo-Pacific region, but he firmly rejected multinational deals, such as the 12-nation Trans-Pacific Partnership, which was abandoned in the first days of his administration.

“I will make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and that will abide by the principles of fair and reciprocal trade,” Trump said. “What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcement practically impossible.”

​The U.S. president said that in the past when his country “lowered market barriers, other countries didn’t open their markets to us.”

From now on, however, Trump warned the United States will, “expect that our partners will faithfully follow the rules. We expect that markets will be open to an equal degree on both sides and that private investment, not government planners, will direct investment.”

But making that happen is something that is easier said than done.

​Not playing by the rules

China has already shown that it has no intention of playing by the rules, said Fraser Howie, co-author of the book Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.

“China has been in WTO terms simply much sharper and smarter than the Americans,” Howie said. “While the Americans went in with good faith thinking the Chinese would change and whatever, the Chinese never had any intention of changing.”

Howie added that trade and access issues are difficult and sophisticated, and so far Trump has a poor track record when it comes to follow through — be it his travel ban, the border wall between the U.S. and Mexico, health care reform or tax policy.

“Yes you’re going to get tough on them, but how do get tough without penalizing them,” Howie said, adding, “how can China be penalized when Xi Jinping is your best mate? It doesn’t make any sense.”

WATCH: Despite Tough US Talk on Trade, Experts See Greater Trade Opportunities

President Xi, whose country’s rise has been driven greatly by large-scale government planning, immediately followed Trump on the stage in Danang.

Xi embraced the multilateral concept, in particular calling for support for a Free Trade Area of the Asia-Pacific (FTAAP), which would harmonize regional and bilateral economic pacts.

China was left out of the TPP, which was led by the United States and Japan, and was meant in great part as a bulwark against China’s strategic ambitions.

Xi also termed globalization an irreversible trend, but said the world must work to make it more balanced and inclusive.

The speeches came just hours after Trump left China where he and Xi met several times on Wednesday and Thursday.
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Chinese consumers are spending billions of dollars shopping online for anything from diapers to diamonds on “Singles Day,” a day of promotions that has grown into the world’s biggest e-commerce event.

China’s biggest e-commerce giant, Alibaba Group, said sales by retailers on its platforms had topped $19 billion by midafternoon Saturday in a count that started at midnight.

Its main rival, online retailer JD.com, which tracks sales starting from Nov. 1 through to the actual day, had topped $16.7 billion.

Starting at midnight, diamonds, Chilean frozen salmon, tires, diapers, beer, shoes, handbags, and appliances were shipped out from JD.com’s distribution centers on trucks bound for deliveries across China.

Singles Day was begun by Chinese college students in the 1990s as a version of Valentine’s Day for people without romantic partners.
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Former New York mayor and billionaire Michael Bloomberg is donating $50 million to help nations around the world shift from coal to combat pollution and climate change, expanding his funding outside the United States.

The project would start in Europe and expand into other countries later on, his charity, Bloomberg Philanthropies, said in a statement Thursday on the margins of U.N. climate negotiations among 200 nations in Bonn, Germany.

The European Climate Foundation, a non-governmental group, will be the leading partner in Europe, it said.

“Bloomberg’s announcement marks his first investment in efforts outside the U.S. to decrease reliance on coal and shift to renewable, cleaner energy sources,” Bloomberg’s charity said in a statement.

In the United States, Bloomberg has given $110 million to a Beyond Coal campaign to close mines since 2011.

“A growing number of European countries have made plans to go 100 percent coal-free, which sets a great example for the rest of the world — but coal still kills around 20,000 people in the European Union each year,” Bloomberg said in a statement.

Since 2011 nearly half of the U.S. coal-fired power plants, or nearly 260 plants, have closed.

The closures have continued this year despite President Donald Trump’s plan to pull out of the global Paris agreement for fighting climate change and instead promote jobs in the domestic fossil fuel industry.
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The outsourcing industry in the Philippines, which has dethroned India as the country with the most call centers in the world, is worried that the rise of artificial intelligence (AI) will eat into the $23 billion sector.

AI-powered translators could dilute the biggest advantage the Philippines has, which is the wide use of English, an industry meeting was told this week. Other AI applications could take over process-driven jobs.

The Philippines’ business process outsourcing (BPO) industry is an economic lifeline for the Southeast Asian nation of 100 million people. It employs about 1.15 million people and, along with remittances from overseas workers, remains one of the top two earners of foreign exchange.

“I don’t think our excellent command of spoken English is going to really be a protection five, 10 years from now. It really will not matter,” said Rajneesh Tiwary, chief delivery officer at Sutherland Global Services.

The Philippines, which was an American colony in the first half of the 20th century, overtook India in 2011 with the largest number of voice-based BPO services in the world.

“There’s definitely reasons to be concerned, because technology may be able to replace some of what could happen in voice,” Eric Simonson, managing partner of research at Everest Group, a management consulting and research firm, told Reuters.

AI, which combs through large troves of raw data to predict outcomes and recognize patterns, is expected to replace 40,000 to 50,000 “low-skilled” or process-driven BPO jobs in the next five years, said Rey Untal, president and chief executive officer of the IT & Business Process Association of the Philippines (IBPAP).

Contact centers make up four-fifths of the Philippines’ total BPO industry, which accounts for 12.6 percent of the global market for BPO, according to IBPAP.

U.S. is biggest customer

BPO firms in the Philippines list Citibank, JPMorgan, Verizon, Convergys and Genpact among their clients. While the United States remains the biggest customer for the industry, demand for BPO services from Europe, Australia and New Zealand is also growing.

The Philippines’ share of the global outsourcing pie, estimated to reach about $250 billion by 2022, is forecast by the industry to reach 15 percent by that year.

To get there however, the Southeast Asian nation must prove to the world it has more to offer than just a pool of English-speaking talent. BPO executives said the country has to take on high-value outsourcing jobs in research and analytics and turn the headwinds from artificial intelligence into an opportunity.

The key to staying relevant and ahead of the competition, they said, is to ensure workers are trained in areas like data analytics, machine learning and data mining.

“You will see in the next few years more automation coming in the way we do things in IT and the BPO industry, robotic processing, the use of chat bots,” Luis Pined, president of IBM Philippines, told Reuters.

“If we are ahead of the game, we will be at an advantage where people will give us more work, because we are cheaper and productive,” Pined said.

IBM Philippines divested its voice business in 2013.

IBPAP has projected a rise in the number of mid- and high-skilled jobs, or those that require abstract thinking and specialized expertise, which should bring the overall head count in the BPO sector to 1.8 million by 2022.

Augmenting the English language skills of the Philippines with technology will be a “game changer,” said Untal, the head of the association. “Who else can compete with us?”
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Two Republican bills that would achieve the largest overhaul of the U.S. tax code in more than 30 years are set to be unveiled Thursday.

While Senate Republicans are working out final details of their legislation, the House Republican tax-writing committee is working to approve its version after days of negotiation and last-minute changes.

Republican lawmakers in the House and Senate are hoping to fulfill a self-imposed deadline of ushering the bills out of both chambers before the November 23rd Thanksgiving holiday to devote the period between Thanksgiving and Christmas to reconciling the two measures.

A tax code overhaul is a top priority for President Donald Trump and Republican legislators who have not achieved any major legislative accomplishments this year despite controlling the White House and both chambers of Congress.

Democratic lawmakers are vehemently opposed to the partisan effort to rewrite the tax code, and the defeats Republicans endured in Tuesday’s state and local elections in Virginia, New Jersey and elsewhere emphasized the political risks of failing to achieve results.

Trump and Republican lawmakers are calling for tax cuts for corporations and individuals and leaders on both chambers have looked for ways to pay for them.  Senator David Perdue said the Senate bill would eliminate tax deductions people can take for state and local property, income and sales taxes.  A tax deduction is a reduction in tax obligation from taxpayers’ gross income. The House version would retain the deduction only for property taxes and cap it at $10,000.

The Senate plan will delay its reduction in the corporate tax rate by one year to take effect in 2019, Republican Senate Finance Committee member Bill Cassidy said Thursday.

Lowering the corporate tax rate to 20 percent from its current 35 percent has been a goal of Trump and the business sector, and postponing the cut would help contain the bill’s costs.

In addition to the proposed corporate tax rate cut, the measures propose to trim tax rates for many, but not all, middle-class families, broadly defined in the United States as those with an annual household income of $49,000 to $86,000.

An analysis released Wednesday by the he non-partisan Congressional Budget Office has concluded the Republican House measure would add $1.7 trillion to the country’s debt during the next decade, about $259 billion more than previously assumed.

Republican lawmakers had pledged the tax cuts over the next decade would not add any more than $1.5 trillion to the country’s current and growing long-term debt of more than $20 trillion.

With the CBO’s estimate the tax changes would cost more, House Republicans would have to change their proposals to keep the additional costs within the $1.5 trillion limit they have imposed on themselves.
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Treasury Secretary Steven Mnuchin said Wednesday that Janet Yellen has not said yet whether she plans to remain on the Federal Reserve board when her term as chair ends in February, but the administration is moving ahead with filling other vacancies.

There are three vacancies on the seven-member Fed board and there could be a fourth if Yellen decides to leave. Her term as a board member does not end until 2024.

In an interview on Bloomberg TV, Mnuchin said he had breakfast with Yellen on Wednesday from which he came away with the impression that she had not made a decision about her future at the Fed.

Last week, President Donald Trump announced he would nominate Fed board member Jerome Powell as the next Fed chairman, bypassing Yellen.

If Yellen did stay on the board, she would be only the second former chair to do so. Marriner Eccles, whose name is on the Fed’s headquarters in Washington, remained on the board for three years after he was not nominated for another term as chair by Harry Truman in 1948.

Mnuchin said the goal was to fill the vacancies quickly, but the administration did not necessarily see a need to pick someone with a PhD in economics for the vice chair position even though Powell will be the first person to lead the Fed without a degree in economics in nearly four decades.

“I think our priority is that we are going to fill these positions quickly. Our focus was on the chair,” Mnuchin said. “Now that we have resolved that issue, we are already looking at people for these positions. So I am comfortable we will have the jobs filled.”

Before Trump’s announcement last week, Yellen had declined to say what she might do if she was not tapped for a second term.

“I have said that I intend to serve out my term as chair, and that I’m really not going to comment on my intentions beyond that,” she told reporters in September.
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Commerce Secretary Wilbur Ross plans to completely divest from a shipping company that counts a Russian gas producer with ties to the Kremlin among its major customers.

A commerce department spokesman says Ross plans to sell all his shares of Navigator Holdings. That company ships products from Sibur, a Russian gas producer whose owners include two Russian oligarchs close to President Vladimir Putin and a businessman believed to be Putin’s son-in-law.

Details of the Ross stake in Navigator were revealed among the Paradise Papers leak of documents about offshore entities.

Critics have said Ross should not hold the stock given his public office. He has said that he disclosed his stake in reports filed with the government earlier this year and has done nothing wrong.
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Players line up beside a small kiosk in a poor neighborhood to choose animals in a lottery game that has become a craze in Venezuela even as the oil-rich country suffers a fourth year of brutal recession.

It seems more and more Venezuelans are turning to gambling in their desperation to make ends meet amid the country’s unprecedented economic crisis.

Though more people lose than win overall, the illusion of a payday has become more alluring as Venezuelans endure the world’s highest inflation, shortages of basics from flour to car batteries, and diminished real-term wages. 

Among multiple options from race courses to back-street betting parlors, the roulette-style “Los Animalitos” (or the Little Animals) is currently by far the most popular game on the street.

“Most people I see playing the lottery are unemployed, trying to make a bit extra this way because the payouts are good,” said Veruska Torres, 26, a nurse who recently lost her job in a pharmacy and now plays Animalitos every day.

Torres often plays more than a dozen times daily at the kiosk in Catia, spending between 5,000-10,000 bolivars, but sometimes making up to 50,000 or 60,000 bolivars in winnings – more than a quarter of the monthly minimum wage.

When that happens, she splits the money between buying food and diapers for her baby boy, and re-investing in the lottery.

The Animalitos game, whose results appear on YouTube at scheduled times, is hugely popular because it goes through various rounds, holding people’s interest, and provides more chances to win than most traditional betting options.

The cheapest ticket costs just 100 bolivars – a quarter of a U.S. cent at the black market currency rate, and more than 10 times less than that at the official exchange level.

“It helped me a lot,” said Eduardo Liendo, 63, of a timely win. He recently lost his house and lives in a car in Caracas’ Propatria neighborhood, but had a successful punt on the Animalitos, choosing the dog figure after his own had died.

There is no hard data on betting figures, and the government’s betting regulator did not answer requests from Reuters for information. But those behind Venezuela’s gambling businesses, run by a mixture of private companies and local regional authorities, said trade was booming, with lines longer and busier than ever – because of, not despite, the hard times.

“In a crisis like the one we’re going through, people drink and gamble more to escape from reality,” said psychologist Rosa Garcia from the rural state of Barinas.

The latest scarcity in Venezuela is cash – as authorities cannot produce enough notes to keep up with dizzying inflation – so many bars, shops and betting parlors have quickly switched from cash to electronic transactions to keep money flowing.

That has hit the Caracas hippodrome, where cash is still king. But thousands still go there at weekends, pushing against fences in front of the sand track to cheer their horse on as salsa music booms in the background.
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The U.S. Senate Banking Committee unanimously backed new sanctions targeting Chinese banks that do business with North Korea on Tuesday, just before President Donald Trump visits Beijing for the first time since taking office.

As well as strengthening existing sanctions and congressional oversight, the measure will target foreign financial institutions — in China and elsewhere — that provide services to those subject to North Korea-related sanctions by the U.S. Congress, a presidential order or U.N. Security Council resolution.

All 12 Republicans and 11 Democrats on the panel voted for the “Otto Warmbier Banking Restrictions Involving North Korea (BRINK) Act,” clearing the way for its consideration by the full Senate.

The bill was named after a U.S. student who died earlier this year after he was imprisoned in North Korea, further chilling already poor relations between Washington and Pyongyang.

“For too long, we’ve been complacent about the growing and gathering threat from the North Korean regime,” Republican Pat Toomey, one of the bill’s authors, said after the committee voted.

Democratic Senator Chris Van Hollen, another author, said that in addition to Chinese banks, Malaysian financial institutions might end up in its sights.

Trump is due to wrap up a visit to Seoul on Wednesday with a major speech on North Korea, and then shift focus to China, where he is expected to press a reluctant President Xi Jinping to tighten the screws further on Pyongyang.

Some of Trump’s fellow Republicans, as well as many Democrats, have been critical of Trump’s bellicose rhetoric about North Korea, and have called for the use of economic tools like sanctions or more negotiations before talking of war.

Washington so far has largely held off on imposing new sanctions against Chinese banks and companies doing business with North Korea, given fears of retaliation by Beijing and possibly far-reaching effects on the world economy.

Van Hollen told reporters on Monday ahead of the committee vote that he wished Trump would follow the model of President Theodore Roosevelt and “speak softly and carry a big stick,” adding: “We’re trying to give him a little bigger stick with the sanctions.”

Republican and Democratic lawmakers said last week they had reached a bipartisan agreement on the sanctions bill. A companion bill has been introduced in the House of Representatives.

The leaders of the Republican-led Senate have not said when the chamber might vote on the legislation.

 
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Inflation in Venezuela’s crisis-hit economy was 826 percent in the 10 months to October and may end 2017 above 1,400 percent, the opposition-controlled National Assembly said Friday.

The government stopped releasing price data more than a year ago but congress has published its own figures since January and they have been close to private economists’ estimates.

As well as the alarming Jan-Oct cumulative rise, the legislative body, which has been sidelined by President Nicolas Maduro’s government, put monthly inflation at 45.5 percent for October, compared with 36.3 percent in September.

Opponents say Maduro and his predecessor, Hugo Chavez, have wrecked a once-prosperous economy with 18 years of state-led socialist policies from nationalizations to currency controls.

The government says it is victim of an “economic war” including speculation and hoarding by pro-opposition businessmen, combined with U.S. sanctions and the fall in global oil prices from mid-2014. OPEC member Venezuela relies on crude oil for more than 95 percent of its export revenues.

Prices in Venezuela, which has long had one of the highest inflation rates in the world, rose 180.9 percent in 2015 and 274 percent in 2016, according to official figures, although many economists believe the real data was worse.

Announcing the October calculations, opposition lawmaker Angel Alvarado told the National Assembly that inflation next year could reach 12,000 percent.

“This is dramatic, this is Venezuelans’ big problem, it’s what keeps workers awake at night, it’s what’s killing the people with hunger,” Alvarado said.

In a research note this week, New York-based Torino Capital estimated Venezuela’s 2017 inflation would be 1,032 percent.

A central bank spokeswoman could not provide official data.
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A U.S. decision to cut funding for a demining program in Cambodia threatens to further worsen a feud between Phnom Penh and Washington.

On Tuesday, it emerged through local media reports the U.S. had decided to discontinue annual funding in 2018, worth about $2 million, to clear explosive remnants of war in Cambodia.

Prime Minister Hun Sen reportedly responded to the surprise decision by declaring he will stump to raise the money, according to a senior Cambodian demining official.

No public explanation has been given for the cut, and both the Cambodian Mine Action Center (CMAC), the final recipient of the funding, and Norwegian People’s Aid, which administer the money, say they do not know why the funding has been discontinued.

CMAC Director General Heng Ratana said he had no warning of any cut to the funding before he received notification Monday about the decision. The money covered the salaries of about 300 staffers, many of whom were deminers.

“I don’t know what the real dispute [is]. We just present the facts and we work together; they never indicated any dispute that we have had, but suddenly they cut the aid,” he said.

“But we are very lucky that the government, the head, the prime minister, granted approval that he will maintain our operation as usual so that means it has no impact on our operation,” he said, adding that funds for the rest of this year had not been affected.

The United States had a moral obligation to deal with the legacy of its bombing of Cambodia during the Vietnam war, he added.

Ruling Cambodian People’s Party spokesman Sok Eysan told VOA he was unaware of the cut, which seemed peculiar to him.

“I think that it’s an issue which we see that it’s not normal. So, no matter what we answer, it will still be not normal,” he said.

Norwegian People’s Aid country director Aksel Steen-Nilsen said he, too, had been unaware about the reasons for the cut.

“I mean, of course, there is a lot of rhetoric between Cambodia and the U.S. right now,” he said. “But … I don’t see any specific objective related to this because it’s the end of the grant cycle, and then of course, it’s up to the donor if they have funds and interest to continue or not.”

Steen-Nilsen said cooperation had been good thus far over the three years the grant had been running and there was no indication of any special reason it would stop.

In an email, the deputy spokesman of the U.S. embassy in Phnom Penh, David Josar, said demining remained at the top of the State Department’s assistance priorities, but he did not address the specific reason for the cut.

“We will use 2018 resources to put in place a world-class removal program targeting U.S.-origin UXO [unexploded ordnance] in eastern Cambodia,” he wrote. “UXO experts have proposed that the United States devote more attention to clearing such UXO, in addition to our support for clearing the more lethal Chinese, Vietnamese, and Soviet land mines in western Cambodia.”

Next year’s funding would be opened up to competitive bidding with requests for proposals — prepared in consultation with the Cambodian government — to be released this year, he wrote without providing any further details.

For months, Cambodia has accused the U.S. of fomenting a color revolution — a conspiracy plot it has used as the grounds to jail the country’s opposition leader, Kem Sokha, and justify moves to dissolve his party.

They have seized on the continuing impacts of unexploded ordinance left over from the U.S.’s massive illegal bombing campaign during the Vietnam war — a line of attack only bolstered by news of the cut to CMAC funding.

Carl Thayer, an emeritus professor at the Australian Defense Force Academy, said the embassy reports he had read also did not seem to be specific about the reasoning for the cut.

“So we don’t really know the reason why the funding was cut so far, and it’s sheer speculation on Hun Sen’s part and political opportunism on his part to make that linkage,” he said.

Any retaliatory action by the U.S. in response to the decimation of Cambodia’s opposition party would have been made up front, he said.

“There’s an expression, ‘between conspiracy and cock-up, you always go for conspiracy, and that seems to be what the Cambodians are doing, and until I see a better explanation, I’m saying its just a bureaucratic decision probably made in Washington and passed through without much thinking,” he said.  

Josar said the U.S. had spent more than $131 million on the remediation of explosive remnants of war in Cambodia.

In recent years, the main focus of that funding has been on U.S.-dropped unexploded ordnance left in Cambodia’s east. Some experts have complained this diverts resources away from more harmful explosive remnants in the west.

 
…

The restive Spanish region of Catalonia faces a potential $500 million financial hit in the fourth quarter as business-related travel dips following the attack in Barcelona and the uncertainty generated by the disputed independence referendum.

In an interview Monday with The Associated Press at the World Travel Market in London, Catalonia’s top tourism official Patrick Torrent said the region will likely see a 10-12 percent fall in tourist numbers during the fourth quarter, which would equate to around 450 million euros. The large bulk of that fall is related to a drop-off in business travel to events such as conventions.

Despite the anticipated fourth-quarter decline, the executive director at the Catalan Tourist Board, said Catalonia is set to see revenues this year outstrip those last year and that the expectation is that revenues will rise again next.

However, more insight will emerge at the turn of the year when the bulk of pre-reservations are made. His staff, he said, are “on alert” about the impact on the main booking season.

The worry among many economists is that deteriorating business environment in Catalonia, which has seen around 1,500 firms move their headquarters out of the region, could worsen further amid all the uncertainty. Credit ratings agency Moody’s has warned that the region’s financial recovery is being jeopardized

“Moody’s believes that the political instability will negatively affect the region’s economy, in particular foreign investor sentiment and the tourism sector, and add pressure to the region’s already weak finances,” it said last week.

The Catalan tourism industry, a key income generator in what is Spain’s richest region, has had a difficult few months. After the August attacks in Barcelona and a nearby town that saw 16 people killed, the region has been embroiled in a battle of wills with Spain over the disputed independence referendum in early October which prompted Madrid to impose direct rule and seek the arrest of members of the Catalan government, including its leader, Carles Puigdemont, who has fled to Brussels.

The impact of the attack in Barcelona on holiday travelers was short-lived, according to Torrent, and “less important” than other cities in Europe, such as Brussels or Paris.

“The perception of Barcelona and Catalonia as a safe destination has not suffered any impact,” he said, noting figures showing tourism numbers higher in September.

Torrent said he met up with Alvaro Nadal, the Spanish minister of energy, tourism and digital matters, on Monday for the first time since the triggering of Article 155 of the Spanish Constitution which imposed direct rule on Catalonia.

Torrent said the Spanish government has made no requirements upon him or his staff and that it is “business as usual” until an early Catalan regional election on Dec. 21.

“It’s not intervention. It’s more a kind of coordination,” he said. “It’s easy, it’s not complicated, with good relations without problems, at this moment.”

Before direct rule, Torrent would speak with Spanish tourism officials two or three times a month. Now, it’s that amount of times a week.

Torrent urged all participants in upcoming demonstrations in Catalonia before the election, including one this Saturday, to remain peaceful and law-abiding.

“It’s important to say that our streets are normal, our restaurants are working as usual, our destination is exactly the same situation,” Torrent said.
…

Two weeks ago the glitzy Ritz Carlton hotel in Riyadh was the site of an international conference promoting Saudi Arabia as an investment destination, with over 3,000 officials and business leaders attending.

Now the hotel is temporarily serving as a luxury prison where some of the kingdom’s political and business elite are being held in a widening crackdown on corruption that may change the way the economy works.

By detaining dozens of officials and tycoons, a new anti-corruption body headed by Crown Prince Mohammed bin Salman is seeking to dismantle systems of patronage and kick-backs that have distorted the economy for decades.

But it is a risky process, because the crackdown is hurting some of the kingdom’s top private businessmen — leaders of family conglomerates who have built much of the non-oil economy over the past few decades.

Many industries could suffer if investment by these families dries up in coming months, at a time when the economy has already fallen into recession because of low oil prices and austerity policies.

New breed of companies

Meanwhile, a new breed of state-backed companies is rising to compete with the old guard; many of the new enterprises are linked to the Public Investment Fund (PIF), the kingdom’s top sovereign wealth fund. But it is not clear how smoothly the transition to these firms will happen.

“The rules of the game are changing. But they’re changing indiscriminately,” said one financial analyst in the region, declining to be named because of political sensitivities. “Even people who thought they were within the rules don’t know if they will still be within those rules tomorrow. There’s just uncertainty.”

Some private businessmen in Saudi Arabia are now trying to move their money out of the country “while they still can,” the analyst said.

For many foreigners, the most shocking aspect of the purge has been the detention of billionaire Prince Alwaleed bin Talal, the flamboyant, internationally known chairman of investment firm Kingdom Holding.

But for Saudis, the names of other detainees have been equally stunning: Nasser bin Aqeel al-Tayyar, founder of the Al Tayyar Travel group; billionaire Saleh Kamel; and Bakr bin Laden, chairman of the huge Saudi Binladin construction conglomerate.

State contracts

The saga of the Binladin group underlines how the business environment is changing. Binladin and another big construction group, Saudi Oger, long enjoyed preferential access to the kingdom’s biggest projects and control over pricing as a result of their close relationships with royal patrons.

But the bottom fell out from under both companies last year, when a cash squeeze resulting from low oil prices caused the government to cancel or suspend projects and delay payments.

The firms faced multi-billion dollar debt restructurings; Binladin has laid off tens of thousands of people while Oger’s bankers say it has essentially stopped operating.

New construction company

At the same time, state oil giant Saudi Aramco is moving to set up a construction company with local and international partners to build non-oil infrastructure in Saudi Arabia — potentially taking billions of dollars of business that would previously have gone to the family conglomerates.

Aramco and PIF, the sovereign fund, have also linked up with U.S. construction firm Jacobs Engineering to form a management company for strategic projects in the kingdom.

Many in the Saudi business world are celebrating the downfall of the old patronage system and the shift toward a “cleaner” business environment.

“It’s great news for the clean ones among us — 99.99 percent are ecstatic,” said one senior executive.

But others express disquiet about the possible economic fallout of the purge. Some are concerned that banks could start calling in loans to families implicated in the probe, using loan clauses that permit this in cases of legal jeopardy; this could collapse companies’ share prices.

Business deals put in limbo?

Many new business deals may be put on hold. A businessman at a foreign technology services firm told Reuters he had been considering a venture with a Saudi partner, but decided against it this week because of the partner’s ties to the detained Bakr bin Laden.

The new anti-corruption commission has broad authority to seize assets at home and abroad. Some businessmen wonder if these powers could be used to pressure firms into participating in Prince Mohammed’s economic development projects.

“It’s the old royal fiefdoms that are not in the Al Salman branch of the royal family that are now being purged,” said a Western analyst. “It’s a further centralising of political and economic power, and a seizing of the private assets that those fiefdoms have accumulated.”

 
…

A revamping of the Federal Reserve’s leadership is widening with the announcement Monday that William Dudley, president of the New York Fed and the No. 2 official on the Fed’s key interest rate panel, will retire next year.

Just last week, President Donald Trump chose Fed board member Jerome Powell to replace Janet Yellen as Fed chair in February. The post of Fed vice chair remains vacant. So do two additional seats on the Fed’s seven-member board. And a fourth seat may open as well next year.

The unusual pace of the turnover has given Trump the rare opportunity for a president to put his personal stamp on the makeup of the Fed, which operates as an independent agency. Investors are awaiting signals of how Trump’s upcoming selections might alter the Fed’s approach to interest rates and regulations.

Trump has made it known that he favors low interest rates. He has also called for a loosening of financial regulations. The Fed has played a key role in overseeing the tighter regulations that were enacted after the 2008 financial crisis, which nearly toppled the banking system.

The uncertainty surrounding the Fed’s top policymakers has been heightened by the slow pace with which the Trump administration has moved to fill openings.

To date, the administration has placed one new person on the Fed board: Randal Quarles, a veteran of the private equity industry who is thought to favor looser regulations, was confirmed as the first vice chairman for supervision. That still left three vacancies on the Fed’s board: Just as Quarles was joining the board last month, Stanley Fischer was stepping down as Fed vice chairman.

And Yellen herself could decide to leave the board when her term as chair ends on Feb. 3, even though her separate term on the board runs until 2024.

Dudley’s announcement that he plans to retire by mid-2018 also creates an opening on the committee of board members and bank presidents who set interest rate policies. Dudley’s position is particularly crucial: As head of the New York Fed, he is a permanent voting member of the Fed committee that sets interest rates.

The committee is composed of the board members and five of the 12 regional bank presidents. Unlike the New York Fed president, the other regional bank presidents vote on a rotating basis. The New York Fed president also serves as vice chairman of the rate-setting panel.

Some economists said that while financial markets have so far registered little concern about the number of key open Fed positions, that could change quickly, especially if investors begin to worry that the central bank will accelerate interest rate hikes.

“We need to get rid of this uncertainty, and until these seats are filled, there is going to be uncertainty,” said Diane Swonk, chief economist at DS Economics.

Analysts are trying to read the two decisions Trump has made — picking Powell for the top job and Quarles for the key post for banking supervision — as signs for where he might be headed. With Powell, the president opted for continuity on rates by selecting someone who for years was the lone Republican on the board but who remained a reliable vote for the gradual approach to rate hikes Yellen favored.

And in the bank supervision post, analysts say Trump might have been signaling that he wants to reverse, or at least weaken, Yellen’s backing of the reforms instituted by the 2010 Dodd-Frank financial overhaul law. During the campaign, Trump argued that Dodd-Frank was harming the economy by constraining back lending.

Quarles has been critical of aspects of that law. To a lesser extent, so, too, has Powell, who will be the first Fed chairman in nearly 40 years to lack a degree in economics. Powell, a lawyer by training, amassed a fortune as an investment banker at the Carlyle Group.

“With his background, Powell can be expected to work well with Wall Street and the business community in general,” said Sung Won Sohn, an economics professor at California State University, Channel Islands.

A senior administration official indicated that one important attribute for the open positions will be a diversity of backgrounds.

“We believe the Fed will function best with a wide range of skill sets,” said the official, who spoke on condition of anonymity to discuss personnel decisions. This official would not give a timetable for when the administration’s next nominations for the Fed might occur.

Though Trump will choose officials to fill the openings on the board, the choice of Dudley’s replacement will fall to the board of the New York Fed. The New York Fed said a search committee had been formed to choose a successor to Dudley, who joined the New York Fed in 2007 after more than two decades at Goldman Sachs.

The announcement from the New York Fed said Dudley, 64, intended to step down in mid-2018 to ensure that his successor would be in place well before the mandatory end of Dudley’s term in January 2019.

After overseeing the New York Fed’s securities operations for two years, Dudley succeeded Timothy Geithner as its president after Geithner was tapped by President Barack Obama to become Treasury secretary in 2009.

Dudley won praise for the work he did with Geithner and Fed Chairman Ben Bernanke to contain the fallout from the 2008 financial crisis. Dudley supported Yellen’s cautious approach to raising the Fed’s benchmark rate and the plan the central bank has begun to gradually shrink its $4.5 trillion balance sheet, which is five times its size before the financial crisis.

The balance sheet contains $4.2 trillion in Treasurys and mortgage bonds that the Fed bought since 2008 to try to hold down long-term borrowing rates and help the economy recovery from the worst recession since the 1930s.

In a statement, Yellen praised Dudley for his “wise counsel and warm friendship throughout the years of the financial crisis and its aftermath.”
…

Chipmaker Broadcom made an unsolicited $103 billion bid for Qualcomm on Monday, setting the stage for a major takeover battle as it looks to dominate the fast-growing market for semiconductors used in mobile phones.

Qualcomm said it would review the proposal. The San Diego-based company is inclined to reject the bid as too low and fraught with risk that regulators may reject it or take too long to approve it, people familiar with the matter told Reuters.

A Broadcom-Qualcomm deal would create a dominant company in the market for supplying chips used in the 1.5 billion or so smartphones expected to be sold around the world this year. It would raise the stakes for Intel Corp, which has been diversifying from its stronghold in computers into smartphone technology by supplying modem chips to Apple.

Qualcomm shareholders would get $60 in cash and $10 per share in Broadcom shares in a deal, according to Broadcom’s proposal. Including debt, the transaction is worth $130 billion.

GBH Insight analyst Daniel Ives said bullish investors were hoping for $75 to $80 per share.

“Now it’s a game of high-stakes poker for both sides,” he said.

Shares of Qualcomm, whose chips allow phones to connect to wireless data networks, traded above $70 as recently as December 2016 and topped $80 in 2014.

Qualcomm’s shares were up 2 percent at $63.09 at mid-afternoon, suggesting investors were skeptical a deal would happen.

Broadcom shares fell 0.3 after hitting a record high of $281.80.

Regulatory scrutiny

Qualcomm’s largest market is the so-called modem chips that allow phones to use mobile data plans, but it also sells connectivity chips for automobiles that handle “infotainment” systems and wireless electric vehicle charging. Qualcomm provides chips to carrier networks to deliver broadband and mobile data.

Any deal struck between the two companies would face intense regulatory scrutiny. A big hurdle would be getting regulatory approval in China, on which both Qualcomm and Broadcom rely on to make money.

China is set to look at any deal closely after U.S. regulators blocked a flurry of chip deals by Chinese firms due to security concerns, thwarting the Asian country’s attempt to become self-reliant in chip manufacturing.

Broadcom could spin out Qualcomm’s licensing arm, QTL, to get regulatory approval and funding for the deal, raising as much at $25 billion from a sale, Nomura Instinet analyst Romit Shah suggested.

Broadcom had $5.25 billion in cash and cash equivalent as of July 30. Qualcomm had $35.03 billion as of Sept. 24.

Broadcom said BofA Merrill Lynch, Citi, Deutsche Bank, JP Morgan and Morgan Stanley have advised it they are highly confident that they will be able to arrange the necessary debt financing for the proposed transaction.

The company has also got a commitment letter for $5 billion in financing from private equity Silver Lake Partners, an existing Broadcom investor.

Vulnerable Qualcomm

Broadcom approached Qualcomm last year to discuss a potential combination, but did not contact Qualcomm prior to unveiling its $70 per share offer Monday, according to sources.

Qualcomm is more vulnerable to a takeover now because its shares have been held down by a patent dispute with key customer Apple, as well as concerns that it may have to raise a $38 billion bid for NXP Semiconductors NV that it made last year.

Broadcom, Qualcomm and NXP together would have control over modems, Wi-Fi, GPS and near-field communications chips, a strong position that could concern customers such as Apple and Samsung Electronics because of the bargaining power such a combined company could have to raise prices. However, a combined company would also likely have a lower cost base and the flexibility to cut prices.

Broadcom said its proposal stands irrespective of whether Qualcomm’s acquisition of NXP goes through or not.

Qualcomm’s entire 10-member board is up for re-election this spring, and Broadcom could seize on the Dec. 7 nomination deadline to put forward its own slate.

Broadcom Chief Executive Hock Tan, who turned a small, scrappy chipmaker into a $100-billion company based in Singapore and the United States, told Reuters he would not rule out a proxy fight.

“We are well advised and know what our options are, and we have not eliminated any of those options,” said Tan, who has pulled off a string of deals over the past decade. “We have a very strong desire to work with Qualcomm to reach a mutually beneficial deal.”

Tan added that if Broadcom acquires Qualcomm which in turn has acquired NXP, the combined company’s net debt could be in the range of $90 billion.

Two Qualcomm directors, Anthony Vinciquerra and Mark McLaughlin, have been aligned with activist hedge fund Jana Partners LLC, which pushed for a shakeup of the company two years ago. Jeffrey Henderson, another Qualcomm board director, was added last year as a compromise candidate.

Apple, as a key customer, could pose a risk to the deal, said Karl Ackerman, an analyst at Cowen.

Tan told Reuters that Broadcom taking over Qualcomm would improve relations with Apple: “We believe we can be very constructive in resolving these issues and resetting relationships.”

Broadcom plans to move its headquarters solely to the United States, which would allow it to avoid review by the Committee on Foreign Investment in the United States, which reviews foreign ownership of U.S. assets.

Broadcom’s offer represents a premium of 27.6 percent to Qualcomm’s closing price of $54.84 on Thursday, a day before media reports of a potential deal pushed up the company’s shares.
…

The Republican tax bill unveiled last week in the U.S. Congress could disrupt the global supply chains of large, multinational companies by slapping a 20-percent tax on cross-border transactions they routinely make between related business units.

European multinationals, some of which currently pay little U.S. tax on U.S. profits thanks to tax treaties and diversion of U.S. earnings to their home countries or other low-tax jurisdictions, could be especially hard hit if the proposed tax becomes law, according to some tax experts.

Others said the proposal could run afoul of international tax treaties, the World Trade Organization and other global standards that forbid the double taxation of profits if the new tax did not account for income taxes paid in other countries.

The proposed tax, tucked deep in the 429-page bill backed by President Donald Trump, caught corporate tax strategists by surprise and sent them scrambling to understand its dynamics and goals, as well as whether Congress is likely ever to vote on it.

Reuters contacted seven multinational companies and four industry groups. None would comment directly on the proposal, with most saying they were still studying the entire tax package.

The proposal is part of a broad tax reform bill unveiled by House of Representatives Republicans on Thursday, which promises to lower overall tax burdens and simplify the tax code.

Whether the proposed reforms ever become law is uncertain, with weeks and possibly months of debate and intense lobbying still ahead. The House package overall has drawn criticism for adding too much to the federal budget deficit and too heavily favoring the rich and big business.

However, the corporate tax part, experts said, included some ambitious proposals worthy of further discussion. They said the 20 percent excise tax is one such proposal targeting the abuses of so-called transfer-pricing where multinationals themselves set prices of goods, services and intellectual property rights that constantly move between their national business units.

Under global standards, those prices should resemble those available on the open market. However, if a foreign parent charges U.S. affiliates inflated price, it can reduce its U.S. tax bill and effectively shift profits to a lower-tax country, reducing the entire corporation’s overall tax costs.

Blunt instrument

“Clearly there’s a transfer-pricing issue and something should be done,” said Steven Rosenthal, senior fellow at the Tax Policy Center, a nonpartisan Washington think tank.

“I would view this 20-percent excise tax as a blunt instrument to address the problem. And the problem with blunt instruments is sometimes they hit what you want to hit, and sometimes they hit what you don’t want to hit,” said Rosenthal, former legislation counsel at Congress’s Joint Tax Committee.

Under the proposal, U.S. business units that import products, pay royalties or other tax-deductible, non-interest fees to foreign parents or affiliates in the course of doing business would either pay a 20-percent tax on these or agree to treat the amounts as income connected to their U.S. business and subject to U.S. taxes.

As proposed, the new tax rule would apply only to businesses with payments from U.S. units to foreign affiliates exceeding $100 million. The rule would not take effect until after 2018.

European companies that sell foreign-made products into the U.S. market through local distribution units could be among those most affected, said Michael Mundaca, co-director of the national tax department at the accounting firm Ernst & Young.

Such companies could end up paying tax on the transfers twice — first if they paid the excise tax in the United States and then at home where they are taxed now and where the new U.S. tax would not be accounted for without changes to bilateral tax treaties.

“That would be a structure that would at least initially be hit by the full force” of the excise tax, said Mundaca, a former U.S. Treasury Department assistant secretary for tax policy.

He said European officials would be registering concern. “I am sure they are making calls right now to their counterparts in the U.S. Treasury looking for some explanation… and making the point that this might be contrary to treaty obligations.”

Gavin Ekins, an economist at the Tax Foundation, a conservative think tank, predicted that most multinationals would opt to avoid the excise tax by electing to pay U.S. corporate tax on all the profits related to products sold in the United States. Those include profits on activities conducted overseas, like manufacturing or research, which are also subject to foreign income taxes.

The U.S. corporate tax rate on those profits would drop to 20 percent from 35 percent if the House bill becomes law.

The promise of additional revenue and hopes that the new tax may entice multinationals to locate more production and jobs in the United States, may well outweigh international concerns.

The entire Republican tax package is projected to add $1.5 trillion over 10 years to the $20 trillion federal debt and the planned excise tax is among sources of new revenue needed to avoid an even bigger shortfall. It is expected to bring about $155 billion over 10 years, according to a summary of the Republican proposal distributed last week.

Still, as the tax debate heats up, foreign multinationals are likely to lobby hard against it, with domestic corporations linked to foreign affiliates possibly concerned as well.

There is also uncertainty how the new rules would work in practice.

It was unclear, for example, from the bill’s language how companies should calculate income “effectively connected” to their U.S. business, Tax Foundation’s Ekins said.

“You don’t know what profit is included when you choose ‘effectively connected income’ and don’t know the formula,” he said. “Is it just for that product line? All the income that comes in from every other company or from every other source?”

The House tax committee was scheduled to begin considering amendments to the Republican tax bill on Monday.
…

Wireless carriers Sprint and T-Mobile called off a potential merger, saying the companies couldn’t come to an agreement that would benefit customers and shareholders.

The two companies have been dancing around a possible merger for years, and were again in the news in recent weeks with talks of the two companies coming together after all. But in a joint statement Saturday, Sprint and T-Mobile said they are calling off merger negotiations for the foreseeable future.

“The prospect of combining with Sprint has been compelling for a variety of reasons, including the potential to create significant benefits for consumers and value for shareholders. However, we have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record,” said John Legere, president and CEO of T-Mobile US, in a prepared statement.

T-Mobile and Sprint are the U.S.’ third- and fourth-largest wireless carriers, respectively, but they are significantly smaller than AT&T and Verizon, who effectively have a duopoly over U.S. wireless service. The two companies have said they hoped to find a way of merging to make the wireless market more competitive.

Sprint and its owner, the Japanese conglomerate SoftBank, have long been looking for a deal as the company has struggled to compete on its own. But Washington regulators have frowned on a possible merger. D.C. spiked AT&T’s offer to buy T-Mobile in 2011 and signaled in 2014 they would have been against Sprint doing the same thing. But with the new Trump administration, it was thought regulators might be more relaxed about a merger.

Sprint has a lot of debt and has posted a string of annual losses. The company has cut costs and made itself more attractive to customers, BTIG Research analyst Walter Piecyk says, but it hasn’t invested enough in its network and doesn’t have enough airwave rights for quality service in rural areas.

T-Mobile, meanwhile, has been on a yearslong streak adding customers. After the government nixed AT&T’s attempt to buy it in 2011, T-Mobile led the way in many consumer-friendly changes, such as ditching two-year contracts and bringing back unlimited data plans. Consumers are paying less for cellphone service, thanks to T-Mobile’s influence on the industry and the resultant price wars.

“T-Mobile does not need a merger with Sprint to succeed, but Sprint might need one to survive,” Piecyk wrote in an October research note.
…

U.S. President Donald Trump urged Saudi Arabia Saturday to list its state-owned oil company on the New York Stock Exchange when the company goes public in what is expected to be the largest-ever initial public offering in which shares of a company are sold to investors.

“Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!,” Trump tweeted from Hawaii, his first stop ahead of a 13-day trip to Asia.

Saudi officials have reportedly said the government intends to list 5 percent of  the company’s shares on local and global stock exchanges in 2018 but have yet to select an overseas venue. Saudi officials have estimated the IPO will be worth about $100 billion.

The NYSE has had discussions with the Saudis about the upcoming IPO as has the London Stock Exchange. Exchanges in Hong Kong, Singapore, Tokyo, Toronto and the U.S. are also soliciting portions of the public offering.

New York-based NASDAQ, which provides technology to Saudi Arabia’s exchange, has been leveraging that relationship in an attempt to win the listing.

Trump has developed a close relationship with Saudi Arabia. During his visit there last summer, he signed a $110 billion defense agreement with Saudi King Salman.

At a $2 trillion valuation Saudi officials have projected for Aramco, selling five-percent of the company’s shares would reap $100 billion.

The public offering of shares of Aramco, the world’s largest oil producer, is part of Saudi government plans to sell state assets as a recession slows Riyadh’s effort to eliminate a budget deficit caused by low oil prices.

 
…

The recent flurry of social and economic reform coming out of Saudi Arabia has left some Saudis ecstatic, others more circumspect, and a few conservatives bewildered or even angry.

Saudi Crown Prince Mohammed Bin Salman told a crowd of investors at a conference in late October that he was merely attempting to “return Saudi Arabia to the moderate Islam that once prevailed” before the Iranian Revolution in 1979. He stressed that 70 percent of Saudis are younger than 30 and vowed “not to spend another 30 years of our lives living under extremist ideas.”

The young crown prince also proposed an ambitious plan for a new economic zone on the Red Sea near Jordan and Egypt. In April, he put forward an economic road map for the kingdom, called Vision 2030. Part of the plan calls for privatizing 5 percent of the country’s flagship petroleum company Aramco, in addition to attracting foreign investment capital.

​Too much change too fast

Clarence Rodriguez, who spent 12 years as a French foreign correspondent in Riyadh and recently wrote a book called Saudi Arabia 3.0 on the aspirations of Saudi women and young people, tells VOA that she believes Saudi Arabia “is in crisis, due to the drop in the price of petroleum,” and that it has found itself under pressure to “diversify its economy, which necessitates societal reform involving women and young people, as well.”

Rodriguez points out that the late King Abdallah, who died in 2015, started the reform movement by allowing Saudi women to run for the country’s consultative “Shoura” council and to enter the work force, becoming lawyers, bankers and salespeople.

She worries, however, that some recent moves to change the status of women have angered parts of the kingdom’s mostly conservative population. Traditionalists, she says, are “not used to such quick change” and many “are afraid, because things are moving too fast for them.”

On a recent talk show on an Arabic-language news channel, a conservative Saudi caller told the show’s host that he thinks Saudi King Salman and Crown Prince Mohammed Bin Salman are “violating (Islamic) sharia law” with some of their recent reforms “and should go to jail.”

Saudi commentator Jamal Kashoggi tells VOA that he’s “not optimistic about the reforms,” but that he would “still like to be optimistic … since everyone will suffer if they fail.” Kashoggi worries that the reforms are “not engaging Saudi society, enough.” 

“We wish Mohammed Bin Salman well, and we need economic (and social) reform,” he said, “but, we also need to discuss (these issues). The change,” he said, “is being done in very narrow circles. (Ordinary) people are not feeling engaged.” 

Was Saudi society more moderate?

Hilal Khashan, who teaches political science at the American University of Beirut, is not convinced that Saudi society was more moderate before the Iranian Revolution in 1979. He thinks that parts of Saudi society have always had a conservative streak to them, pointing out that Wahabi conservatives killed many moderate Muslims, including the Shafa’i mufti of Mecca when they overran the city and the nearby resort city of Ta’ef in 1924.

A handful of prominent Saudi conservative clerics have been arrested since Mohammed Bin Salman replaced his cousin, Mohammed Bin Nayef, as crown prince, in June. 

“By weakening the clerical establishment and making clerics simple government workers,” Khashan said, “(Mohammed Bin Salman) will be able to give women more rights, as he is proposing.” Saudi women were allowed to drive, starting in September, and this week were given permission to attend sports matches with their families.

Khashan believes that economic considerations are a key factor in the decision to allow Saudi women to drive. 

“If 10 million women are given the right to drive in Saudi Arabia,” he said, “and if just a fraction of those women buy cars, take driving lessons or buy insurance, that would contribute to stimulating Saudi Arabia’s stagnant economy.” Allowing women to drive will also curtail the expensive practice of hiring foreign chauffeurs to drive women around.

Both Kashoggi and Khashan believe that the Saudi government will eventually prevail in its efforts to reform society. 

“Conservatives,” Kashoggi said, “have already lashed out. They’ve been lashing out since 2003. Al-Qaida, or ISIS, or the radical Wahabis … these are the extremists in Saudi Arabia … and they don’t want change. They have resisted, and will continue to resist. … The only thing stopping them is (government) security.”

Clashes with clerics

Khashan points out that in clashes with conservative clerics back in the 1960s, after King Faisal opened a school for girls in Riyadh, and when the king opened the first TV station in Riyadh in 1965, the government prevailed. 

“Whenever the state clashes with the (conservative) clerical establishment, the state emerges victorious,” he said, “and there’s no reason to believe that things will not be the same, this time.”

Jordanian analyst Shehab Makahleh is less certain about who will come out on top, however. 

“There is a kind of opposition among royal family members who are not happy (about the reforms),” he said, “and they have had a number of meetings to clarify where the country is heading in the coming five to 10 years.”

Makahleh believes that King Salman may soon abdicate in favor of Mohammed Bin Salman “in order to gain more support from the international community” for his ambitious reform program and to promote a more secular model of society.
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A solid rebound for the job market in October as the U.S. economy added 261,000 jobs. Job gains were strong across the board, and the unemployment rate fell to 4.1 percent, its lowest level in 17 years. But, as Mil Arcega reports, American workers are not seeing any real growth in their wages.
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Venezuelan President Nicolas Maduro has announced that the country and state oil company PDVSA will restructure its burgeoning foreign debt, even as he vowed to make a payment of more than $1 billion that came due on Thursday.

The announcement did not put Venezuela or PDVSA into default, but suggests that Maduro’s cash-strapped government may be preparing to do so as heavy debt payments aggravate the country’s crippling economic crisis.

Why is Venezuela so heavily indebted?

Even though the OPEC nation was flush with cash during a decade-long oil boom, Venezuela’s ruling Socialist Party borrowed heavily during the era of late president Hugo Chavez to finance generous social programs that made him popular. The country also dismantled mechanisms meant to ensure Venezuela saved money when oil prices were high, leaving it without sufficient hard currency reserves to import basic goods such as food and medicine after prices crashed in 2014. Hunger and preventable diseases are as a result taking a growing toll on the population of 30 million.

Why can’t Venezuela refinance its debt?

The most common refinancing mechanisms are effectively blocked by U.S. sanctions levied this year, in response to accusations that Maduro was undermining democracy, which prevent U.S. banks from acquiring newly issued Venezuelan debt.

Venezuela and PDVSA cannot carry out “swap” transactions in which they exchange maturing bonds for ones that come due further down the road because financial institutions with U.S. headquarters would not be able to acquire the new debt. Investors also say bondholders would have no interest in renegotiating payment timelines without a cohesive plan to reform the country’s dysfunctional socialist economic model. Maduro has repeatedly balked at carrying out such reforms.

Who are the major holders of Venezuela and PDVSA bonds?

These securities are popular among funds that invest in emerging market bonds. Their high yields – which are close to 10 times higher than those of neighboring Colombia – help increase the overall profitability of the portfolios.

Institutional investors with big holdings include T. Rowe Price Associates Inc., Ashmore Investment Management Ltd., and BlackRock Investment Management Ltd. Goldman Sachs Group Inc came under heavy fire this year for purchasing $2.8 billion in PDVSA bonds at a steep discount, which opposition critics dubbed “hunger bonds.”

What would be the consequences for Venezuela of default?

Creditors could seek to seize assets Venezuela owns in other countries, including refineries such as those operated by PDVSA’s U.S. refining and marketing subsidiary Citgo. A default could also make it more complicated for Venezuela to import products from foreign companies.  Providers of goods such as food and medicine may reduce sales to Venezuela on concern that they will not get paid, or that they could find themselves ensnared in creditor lawsuits.

What is the role of Russia and China in financing

Venezuela?

Venezuela has borrowed heavily from both nations via oil-for-loan agreements in which it pays back in deliveries of crude and fuel. Investors believe support from Moscow and Beijing has been instrumental in allowing Venezuela to keep up with bond payments so far. Russia recently said it was willing to restructure a $3 billion loan.  But both China and Russia have shown impatience with Venezuela’s continued refusal to reform its Byzantine socialist economic regulations that are widely cited as the principal obstacle to growth.

Could multi-lateral institutions such as the International Monetary Fund and the World Bank get involved in the country’s debt restructuring?

Maybe, but substantial obstacles loom. There has been no formal contact between Venezuela and the IMF and World Bank although it does have a representative on each of their boards. Before the fund could get involved again, Maduro’s government would have to agree to an economic and financial assessment – something it has for years refused to do on the grounds that it violates sovereignty. Its current willingness to submit to such a review is unclear.

How would a default affect daily life in Venezuela?

Default would likely further pummel the country’s already bruised bolivar currency, which has depreciated 99 percent on the black market since Maduro took office. Reluctance to do business with Venezuela could make it harder to import goods.
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California Gov. Jerry Brown and lawmakers asked the U.S. government Friday for $7.4 billion to help rebuild after a cluster of fires tore through the heart of wine country, killing more than 40 people and leaving thousands without housing.

In a letter to the White House, Brown joined California’s U.S. senators and 39 members of its congressional delegation to urge President Donald Trump and Congress to quickly adopt a disaster-related appropriations measure to support the state’s recovery.

Brown said the funding would go toward cleanup and programs to support housing, transportation, agriculture, environmental protection and other services for those affected by the fires.

A series of blazes that started in Northern California the night of Oct. 8 killed at least 43 people and destroyed about 8,900 homes and other buildings. At the peak, thousands of firefighters battled 21 blazes that burned simultaneously.

Officials have not yet assessed all the damage and effects of the fires, but the governor’s office and the affected counties determined that $7.4 billion in federal funding is needed to help California recover, the letter says.

The wildfires significantly damaged farmland, rangeland and watersheds, and more than a third of the funding requested, $3.1 billion, would go toward helping agricultural industries bounce back, including affected wineries, California officials said.

“The full economic impact to the agricultural, tourism, hospitality, and wine industries is still not known,” the letter says. “Nine California wineries were destroyed and 21 were damaged in the nation’s most prominent winemaking region.”

Congress last month approved $576.5 million in aid for wildfires earlier this summer in California and the U.S. West. It also has approved billions in relief funding to help states affected by hurricanes and other weather-related disasters this year.

Trump pledged aid for California fire victims on Oct. 10, saying he had told Brown that “the federal government will stand with the people of California.”

Brown said he has asked the California Department of Finance to expedite doling out $41.5 million to support the immediate needs of victims not eligible for federal aid.

During the wildfires last month, Brown declared a state of emergency for the Northern California counties of Solano, Napa, Sonoma, Yuba, Butte, Lake, Mendocino and Nevada as well as Orange County in the south.
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Economic growth in sub-Saharan Africa is expected to rebound this year from 20-year lows in 2016, according to the International Monetary Fund’s biannual report. The Washington-based organization warns that, despite the modest recovery, public debt is continuing to rise and could soon become unsustainable in some African countries. Henry Ridgwell has more.
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President Donald Trump is making his mark on the US Federal Reserve, naming former investment manager and central bank governor Jerome Powell to replace Janet Yellen, whose term expires in February. If confirmed by the Senate, the next chairman of the Federal Reserve will oversee U.S. monetary policy and maintain the stability of the world’s largest economy. Mil Arcega has more from the nation’s capital.
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Venezuela on Thursday announced plans to restructure its burgeoning foreign debt, a move that may lead to a default by the cash-strapped OPEC nation whose collapsing socialist economy has left its population struggling to find food and medicine.

President Nicolas Maduro vowed to make a $1.1 billion payment on a bond maturing Thursday, but also created a commission to study “restructuring of all future payments” in order to meet the needs of citizens.

Venezuela has few avenues to do that though because of sanctions by the United States that bar American banks from participating in or even negotiating such deals.

Thus, Maduro’s most readily available recourse to ease payments is unilaterally halting them.

“I am naming a special presidential commission led by Vice President Tareck El Aissami to begin refinancing and restructuring all of Venezuela’s external debt and (begin) the fight against the financial persecution of our country,” Maduro said in a televised speech.

Billions in bonds

Venezuela and state-owned companies have $49 billion in bonds governed by New York Law and promissory notes, according to New York-based Torino Capital.

The government and state oil company PDVSA owe about $1.6 billion in debt service and delayed interest payments by the end of the year, plus another $9 billion in bond servicing in 2018.

The next hard payment deadline for PDVSA is an $81 million bond payment that was due Oct 12 but on which the company delayed payment under a 30-day grace period. Failing to pay that on time would trigger a default, investors say.

That would likely make countries less willing to do business with Venezuela, aggravating shortages of food and medicine and creating further problems for its oil industry, which is hobbled by under-investment.

Wall Street for years pumped billions of dollars into Venezuela by way of bond purchases, passing off the revolutionary rhetoric of the ruling Socialist Party as bluster that belied an iron-clad willingness to pay its debts.

Maduro surprised many by maintaining debt service after the 2014 crash in oil prices, diverting hard currency away from imports of food and medicine toward Wall Street investors.

PDVSA carried out a debt renegotiation in 2016.

But that option was taken off the table after U.S. President Donald Trump levied sanctions blocking the purchase of new debt issued by Venezuela and government-owned entities.

Investors puzzled

Investors seemed puzzled by Maduro’s statements Thursday, which neither clearly declared default nor laid out a path to easing payment burden.

“At no moment did he say they wouldn’t pay, so it’s not a default,” said Alejandro Grisanti of Caracas-based consultancy Ecoanalitica. “But in this environment, Maduro has no way to restructure or refinance as he said today.”

And the mere presence of El Aissami on the new debt commission makes it a non-starter for U.S. financial institution. He was blacklisted this year by U.S. Treasury Department on accusations he is involved in drug trafficking.

The increased pressure of the sanctions has made banks more nervous about working with PDVSA, according to financial industry sources, leading to delays in simple operations.

PDVSA struggled for days to deliver funds for a bond payment due last week amid confusion over which banks were charged with transferring the money.

​Toll on Venezuelans

Critics say Maduro’s decision to put debt above imports has taken a huge toll on the population.

Child malnutrition has reached the scale of a humanitarian crisis in four Venezuelan states, according to a May 2017 report by Caritas Internationalis, a Rome-based nongovernmental organization with links to the Catholic Church. Medicine shortages have also left children dying of preventable diseases.

Officials say ideological adversaries are exaggerating problems for political effect.

But the situation is a stark contrast to the oil boom years of late socialist leader Hugo Chavez, who spent generously on social welfare programs while borrowing profusely to keep spending at full tilt.

Venezuela’s debt is the highest yielding of emerging market bonds measured by JPMorgan’s EMBI Global Diversified Index , paying investors an average of 31 percentage points more than comparable U.S. Treasury notes.

That is nearly double the spread on bonds issued by Mozambique, which is already in default, and more than six times the spread on bonds from war-torn Ukraine.
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A $100 billion semiconductor company based in Singapore will legally relocate its home address to the United States, President Donald Trump announced Thursday.

Broadcom Limited, which manufactures communications chips around the world, said it would relocate its legal address to Delaware once shareholders approve the move, bringing $20 billion in annual revenue back to the U.S. The move will allow Broadcom to avoid a cumbersome federal review process.

The Oval Office announcement was tied to the release of congressional Republicans’ tax reform proposal, which would drastically reduce corporate rates and makes it easier for companies to deduct foreign taxes.

The company credits the GOP plan with making it easier to do business in the U.S. “America is once again the best place to lead a business with a global footprint,” Broadcom CEO Hock Tan said.

However, Broadcom’s move to the U.S. will take place regardless of whether the Republican plan passes, the company said.

Scrutiny regarding merger deal

A year ago, the company entered a $5.5 billion agreement to merge with U.S. network provider Brocade Communications Systems, but that has been delayed while it’s scrutinized by the Committee on Foreign Investment in the United States. The high-level government committee, familiarly known as CFIUS, investigates proposed acquisitions of U.S. companies by foreign buyers on national security and intellectual property grounds.

By becoming a U.S.-based company, Broadcom can avoid the CFIUS process. Broadcom’s corporate headquarters will remain in San Jose, California.

The company makes semiconductor chips used for a variety of products, from cable set-top boxes to smartphones and other wireless devices.

It’s rooted in one of the largest-ever tech industry acquisitions, when Singapore-based Avago Technologies Ltd. bought Broadcom Corp. for $37 billion last year. The deal made Broadcom Ltd. the parent company of both Broadcom Corp. and Avago Technologies. By joining forces, the rival chipmakers hoped to make a bigger dent in the rapidly growing market for wireless devices.

Nearly 20 percent of its revenue in the most recent fiscal quarter came from sales to Apple and the contractors that manufacture Apple products, such as the Foxconn Technology Group.

About half of its revenue comes from China-based distributors and manufacturers, though the end products are used around the world.

Singapore tax breaks

The Singapore Economic Development Board has awarded the company with tax breaks for having a major presence there, but the company warned in a recent regulatory filing that one of those benefits terminates in 2021, four years earlier than expected.

About 39 percent of Broadcom’s employees are in Asia.

Broadcom has 7,500 U.S. employees across 24 states, the company said. It has manufacturing facilities in Colorado and Pennsylvania and engineering offices in California and traces its origins to blue chip American companies like Bell Laboratories, Lucent, and Hewlett-Packard.

“The proposed tax reform package would level the global playing field and allow us to compete worldwide from here in the United States,” Tan said in a statement. “Our move would domicile our $20 billion annual revenue in the United States. From our base here, each year we will invest $3 billion in research and engineering and $6 billion in manufacturing, resulting in more high-paying tech jobs.”
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