editorials/op eds
Monday, January 26, 2004
nyt 24jan04
caramba... lulinha tah bem...
January 24, 2004
Brazil's Moment
A year after assuming Brazil's presidency, Luiz Inácio Lula da Silva, a longtime labor activist, has displaced Vicente Fox of Mexico as the most influential Latin American leader, and he is an increasingly powerful presence on the global stage. The repercussions of Brazil's ascendancy for the Bush administration are clear: better ties with the rest of Latin America now hinge on a closer relationship with Brasília.
Brazil's retaliatory fingerprinting of visitors from the United States in response to new American security measures is an indication of longstanding frictions in the relationship. Despite being the largest country in Latin America, Brazil has usually stood apart from its Spanish-speaking neighbors. And Mr. da Silva's leftist world view is often at odds with that of the Bush administration.
His growing clout reflects a broader shift in the continent's center of political gravity in the last three years. In the absence of robust economic growth, Latin American governments eager to follow Washington's lead on trade and economic policy have been replaced by more populist ones, which are wary of American intentions. From Hugo Chávez of Venezuela to Néstor Kirchner of Argentina, Latin leaders are looking less to Mexico and more to Brazil to provide regional leadership.
Our relations with Brazil, a country little understood by Americans but which sees itself as the United States of South America, have always been complicated. A medium-size industrial power and an agricultural superpower, Brazil does not rely on trade with the United States to the same degree as most Latin American countries. Brasília is more interested in cementing a close-knit South American bloc than in buying into a Washington-dominated hemispheric arrangement.
Brazil led the entire developing world last year in opposing the further liberalization of global trade until and unless the United States and Europe stop giving their farmers subsidies that provide them an unfair advantage on world markets.
Still, Brazil's president is hardly a reckless firebrand. Wall Street applauds his prudent fiscal policies, which helped stave off a potential debt and currency crisis that could have affected all emerging markets. Moreover, President da Silva has acknowledged that it is important for Colombia to defeat its drug-trafficking guerrilla movements.
So long as Washington moves beyond outdated notions that Latin America must march behind us in lock-step unity on every issue, there is reason to believe that a more constructive relationship can be cultivated with Brazil. It's important to try.
Friday, October 10, 2003
GOVERNATOR
ft 09oct03
Terminator 4
Published: October 9 2003 5:00 | Last Updated: October 9 2003 5:00
Arnold Schwarzenegger's victory in the California recall election is testimony to the power of celebrity politics in the US. Aside from his name, his oversized muscles and his long-suffering Kennedy dynasty spouse, Mr Schwarzenegger is not the most obvious candidate to take over as governor of what Gray Davis, the hapless Democratic incumbent, liked to describe as the fifth largest economy in the world.
Unlike Ronald Reagan, a fellow Hollywood actor who served as governor of the Golden State and went on to greater political heights, Mr Schwarzenegger is a political ingénu. He is a social liberal and a fiscal conservative with a soft spot for environmentalists. He does not fit any obvious political label. He is most emphatically not one of the rock-ribbed Republicans who once dominated California politics. Yet these unconventional qualities are precisely those that helped him to victory over Mr Davis and assorted publicity-seekers and oddballs.
Many, including this newspaper, have deplored the crude mechanism of the recall. The process offers a chance for millionaires, such as Mr Schwarzenegger, to manipulate the political agenda. More seriously, the recall undermined the legitimacy of a governor who had secured a popular mandate just 11 months before. However weak his recent record of vacillation and pandering to vested interests, Mr Davis deserved more time.
However, Governor-elect Schwarzenegger's victory - with more votes than Mr Davis got last year - gives him a popular mandate to tackle what is arguably the biggest crisis the state has faced in more than a century. The state budget deficit is at least $8bn (£4.9bn). Millions of jobs have been lost since the dotcom bust. Education standards are a disgrace. Skilled people are moving to other states.
Moreover, by clearly rejecting Cruz Bustamante, the Democratic establishment's alternative to Mr Davis, voters sent a strong signal to the do-nothing Democrat-dominated legislature. They want co-operation not confrontation.
Mr Schwarzenegger refused during his brief campaign to discuss how he would bridge the deficit or remedy the state's long-term malaise. These problems cannot simply be terminated. Nor is it obvious how his opposition to higher property taxes helps him in this respect. He might want to have another word with Warren Buffett, his economic adviser, on this point.
The wider lessons of the California recall are less clear. Some Democrats see the popular revolt against a fiscally irresponsible administration as bad news for President George W. Bush. Republican strategists herald the Schwarzenegger victory as a signal that Mr Bush will take the huge electoral prize of California in next year's presidential race. In practice, neither claim may hold up. The recall verdict may be no more than the triumph of a populist over an incumbent, a trend in western democracies from the US to France and the Netherlands.
Thursday, October 09, 2003
GOVERNATOR
wsj editorial
October 9, 2003
REVIEW & OUTLOOK
Earthquake Arnold
So much for the recall "circus." Arnold Schwarzenegger's landslide victory Tuesday amounts to a loud and deliberate repudiation of the political class that has done so much harm to California. Winning so easily, the new Governor can now claim a mandate, if he's willing to seize it.
Special congratulations belong to California's voters, who proved all of the national mockery wrong. They were perfectly capable of separating the Ariannas from the serious candidates as well as the serious issues from last-minute political hits. The people who should be embarrassed are members of the press corps, both state and national, who were too busy sneering to see the real story: a brewing popular revolt unlike any since Proposition 13 a generation ago.
In an election marked by a heavy turnout, 55% voted "yes" on the recall, including a quarter of liberals and some 30% of moderate Democrats. Mr. Schwarzenegger and his closest Republican rival, state Senator Tom McClintock, combined for more than 60% of the vote in a Democrat-leaning state. Gropergate notwithstanding, Arnold won even among women. The Governor-elect by himself collected more votes (48%) than those who voted "no" on the recall (45%).
No doubt some of Mr. Schwarzenegger's appeal was personal, since as an actor and first-time candidate he was by definition not part of the political class. Other indicators suggest that voters wanted to punish not just Governor Gray Davis but Democratic leadership generally. The actor routed the most prominent Democrat in the race, Lieutenant Governor Cruz Bustamante. Exit polls indicate that 57% of voters held an unfavorable view of the state's No. 2 official. Despite blunt class-warfare and ethnic appeals throughout the campaign, he ended up with less than two-thirds of the Latino vote and less than a third of the independent vote.
The recall was undeniably a personal defeat for Mr. Davis, and his fate should instruct other politicians that failing to lead can be fatal. At every stage of the energy and budget crises, the Governor sought to point the finger at everyone but himself -- the utilities, Enron, Republicans in Sacramento, President Bush, the tides. Fed up, voters finally pinned the blame on him and the Democratic interest groups he pandered to in an effort to save his own skin. The lesson here is that it's sometimes safer to take political risks and do the right thing, even if the initial polls tell you it's unpopular. Mr. Davis never did, and now he's out of a job.
It's now up to Governor Schwarzenegger to do something about the "progressive" train wreck he's inherited. That won't be easy with hostile Democratic majorities in the legislature. But Arnold brings considerable assets to the fight, not least of which is his star power. The state legislature in Sacramento has been operating under a rock for 20 years with almost no news coverage. Mr. Schwarzenegger can turn over that rock, shine a light and threaten to take issues to the voters if the legislature resists.
The Democrats will no doubt try to break him by making a tax increase the price of any reform or spending cuts. Mr. Schwarzenegger said he wouldn't raise taxes but never took the no-tax pledge. What he needs to appreciate is that if he gives in he will alienate his most loyal supporters and cripple his chance of success. Tax increases would be especially hurtful in a recovering economy, sapping the growth the state needs to close its budget gap.
The new Governor should also work to fulfill his campaign promises, such as addressing California's workers' compensation system, enacting tort reform and repealing the Democrats' recent 300% hike in the car tax. Improving the state's business climate and restraining government growth are essential. A useful step would be the reinstitution of spending limits to prevent outlays from growing faster than a combination of state GDP and population.
Tax reform of the kind recently proposed on these pages by economist Art Laffer would be a harder political challenge, but structural changes are needed to restore the state's long-term economic health. Mr. McClintock should have quit the race a week ago, but Mr. Schwarzenegger would still be wise to make him an ally and steal his ideas on this front.
As for the Democrats, the smarter ones will understand the rebuke they just received and try to work with the new Governor. Court challenges and continued personal attacks could backfire. If they're not careful, Democrats could wake up 13 months from now and find that their legislative majorities have also been terminated.
URL for this article:
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Updated October 9, 2003
GOVERNATOR
wsp editorial
Recalled to Reality
Thursday, October 9, 2003; Page A36
AS WRETCHED AN IDEA as the California recall was, as insultingly substance-free a campaign as the winner ran, there are some positive things to say in its aftermath. The worst recall scenario -- that a candidate in the crowded field could be elected with just a sliver of popular support, undermining his or her political legitimacy -- didn't happen: More Californians voted to make Arnold Schwarzenegger governor than to retain Gray Davis. Indeed, Mr. Schwarzenegger captured a greater percentage of the vote and attracted more total votes this year than Mr. Davis did when he was reelected last year. Turnout was strong (about 60 percent) -- far above the anemic, dispirited showing (51 percent) of the last election.
Mr. Schwarzenegger's campaign was an irresponsible blend of bluster and evasion, perhaps best illustrated at a rally just before the election when he had a wrecking ball dropped on an old car "to show you exactly what we are going to do to the car tax." Yet the recall also gave Californians the chance to vote for the kind of Republican who is in tune with a majority of the state on social issues -- abortion, gay rights, gun control -- but unlikely to survive an ordinary GOP primary. Meanwhile, voters defeated a ballot measure that would have imposed yet another straitjacket on state spending, this time to devote a set percentage of funds to improving the deteriorating infrastructure. Could this be an indication that Californians finally are figuring out that they can't order the government to spend on various worthy causes, hamstring its ability to raise revenue and still expect a balanced budget?
Indeed, Mr. Schwarzenegger is about to discover this himself. The state faces a shortfall of at least $8 billion, and "step one" on his 100-day agenda is to repeal the tripling of the car tax, a move that may be popular but that will put the state $4 billion further in the red. Next come spending cuts, but Mr. Schwarzenegger has already put education spending, which accounts for more than half the state's budget, off limits. "Details, details, details. Sacramento is filled with warehouses of details," Mr. Schwarzenegger said dismissively during the campaign, as he was being pressed about where, exactly, he would trim. Now that he's got the keys to the warehouse, Mr. Schwarzenegger is going to have to delve into some of those annoying details. A budget needs to be submitted to the state legislature by Jan. 10. During the campaign, Mr. Schwarzenegger wisely left himself a bit of wiggle room on taxes. "You can't ever say never," he said, citing the possibility of an earthquake or a terrorist attack. Mr. Schwarzenegger was more categorical yesterday in ruling out new taxes, and he may yet regret those words. The more likely disaster to befall California is not a natural one but a shaky credit rating that could force the new governor to reconsider his no-new-taxes stance.
Having unleashed one misguided recall, the worst thing that Californians could do would be to continue the cycle. Democrats ought to make clear that they will not support another recall effort that could only disrupt matters further. As for the larger lessons of Tuesday's vote, incumbents of all stripes have some reason to be nervous. Angry voters, once roused, aren't easy to placate.
GOVERNATOR
nyt editorial
October 9, 2003
California's Day After: Governor Schwarzenegger
he results of the California recall are giving us pause, beyond the difficulty of adjusting to the phrase "Gov. Arnold Schwarzenegger." New York, after all, also has a governor who concealed the bad news about the state's impending deficit until he was safely re-elected, along with a State Legislature that gives a whole new resonance to the word dysfunction. But no one seems to be trying to replace George Pataki with Robert DeNiro.
New York, like most states, makes it difficult for voters to indulge in fits of pique at politics as usual by installing an action hero in the governor's office. Alienated citizens can't rush in and register to vote on Election Day, as they did in Minnesota when Jesse Ventura was elected. They don't have the option of a recall, as Californians do. The political tradition in New York might best be described as antipopulist. On Tuesday night at least, that didn't seem entirely bad.
California's system is actually the worst of all evils. The voters micromanage the state budget through one referendum after another. But they are generally deprived of real choice in picking state officials. Right-wing Republicans have been able to control their party's nominating process, forcing a moderate-to-liberal populace to accept whatever slate the Democrats deign to offer. Mr. Schwarzenegger, a moderate-to-liberal Republican, would have had a much tougher time in a primary than he did in this race, where he was able to insert himself onto the ballot without the party's screening.
The final days of the race were dominated by charges from a growing crowd of female accusers that Mr. Schwarzenegger was, at best, a boor when it came to dealing with vulnerable women. The voters seemed in the main to ignore the issue, demonstrating once again that a politician's private sins bother the citizenry only if they clash violently with his public image. There isn't much in Mr. Schwarzenegger's film career that would have caused people to be shocked by the news that he has behaved like a sexist and a bully off camera.
The exit polls did not shed much light on the California voters' feelings, except their profound sense of irritation. A sizeable chunk of the Schwarzenegger voters said they had voted on the issues, but agreed that he had not really addressed them.
Now everyone wants to see what happens next. California is famously difficult to govern, and Mr. Schwarzenegger will not have any more options than Gray Davis did when it comes to balancing the state's budget. Perhaps the voters understand that, and simply want to stagger through their current economic woes with a chief executive who is more diverting than the dour Mr. Davis. During the campaign, Mr. Schwarzenegger had a huge advantage in the low expectations that everyone had about him. In politics, it is better to be lucky than to be good. But Mr. Schwarzenegger already knew that from his movie days.
wsj 09oct03
on gse: privatize or nationalize
October 9, 2003
REVIEW & OUTLOOK
Fannie Takes the Hill
Sober analysts have been saying for years that Fannie Mae and Freddie Mac are dangerous. And so they have always seemed to us -- on paper. But this week, when it became clear that the House of Representatives couldn't get even a modest regulatory bill out of committee, the dangers became clear in reality.
Congress, which has ultimate oversight over these two government-sponsored hedge funds, was moved to act after a year in which Fan and Fred experienced some financial and corporate governance blowups. Earnings surprises and accounting scandals have demonstrated that Fan and Fred's current regulator, the Office of Federal Housing Enterprise Oversight, was utterly clueless. Obviously stronger regulatory oversight was needed. The Bush Administration and House Financial Services Committee Member Richard Baker (R., Louisiana) proposed that Fan and Fred be brought under Treasury's authority.
And then the fun began. At first, Fannie Mae took her usual magisterial tone and welcomed stronger regulation. Franklin Raines, Fan's boss, testified that he supported the move to Treasury and intoned that he "looked forward to working with Congress and the Administration to adopt the proposal into law this year."
Behind the scenes, however, Fan has been lobbying her head off against the bill. Fan's chief objection is to a provision moving the power to approve new products from the Department of Housing and Urban Development to Treasury. But in a three-page paper, widely circulated on Capitol Hill, Fan has also raised major objections to other parts of the legislation. Fannie is nothing if not a bossy and effective lobbyist, and various Congress people started caving in, right and left.
No surprise then that the bill was gutted, leaving Treasury with a limp carcass. But Treasury refused to take delivery, arguing that the gutted bill would cripple its ability to provide significant oversight. Quite sensibly, Treasury does not want the responsibility for Fan and Fred without the authority to police them.
The House Financial Services Committee has now postponed a vote indefinitely. And Representative Baker, who had been working in good faith with Fan and Fred to achieve reform, has pretty much thrown in the towel. After the effort fell apart, he put out a statement blaming them for "obstructionism and mendacity."
Of course it's all very good theater. Fan and Fred need to find a credible regulator soon, so they can assure investors that the political risk that has been weighing on their stock prices is at an end. This goal, however, is complicated by a Catch-22. They need a credible regulator to convince the markets that they aren't risky propositions, but a credible regulator might wring some risk out of their operations and make their returns less attractive to the market. Their too-clever-by-half solution has been to welcome Treasury as a strong regulator but to make sure that Treasury didn't have any real authority.
Fan and Fred have grown fat on the public purse. Their implicit backing from the federal government has subsidized their speedy growth into two of the largest financial institutions in the country. They are now so big and powerful that they can, apparently, dictate the terms of their existence to Congress.
Lack of accountability in any government-connected enterprise is dangerous. And we are now witnessing that danger firsthand in the fight over regulatory authority. What makes this particularly dangerous is that Fan and Fred's current regulatory setup has allowed them to indulge in all sorts of risky practices. And the taxpayers are on the hook for risks that go sour.
Simply put, Fan and Fred enjoy private profits at great public risk. There are two ultimate remedies for this problem. Either privatize or nationalize. We have always favored privatization. But if the pair can defeat any serious public financial accountability, privatization is even less likely to make it through Congress. So perhaps the Members ought to consider calling these fundamentally public entities what they truly are, government protectorates that taxpayers are guaranteeing even if they don't realize it. At least nationalizing Fan and Fred would be more honest about who is really on the hook.
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Updated October 9, 2003
Monday, October 06, 2003
barrons 06oct03
wants lower spending!!
Monday, October 6, 2003
EDITORIAL COMMENTARY
Happy New (Fiscal) Year
The federal government once again backs into the future
By THOMAS G. DONLAN
HARDLY A MURMUR of apprehension was heard last week when the federal government lumbered into a new fiscal year with only three of 13 appropriations bills enacted. There's no worrying about a government shutdown: The feds are running this month on a continuing resolution, just as they do nearly every year at this time, come Democrats or come Republicans to power.
The continuing resolution permits the government to stay open for business as if it were still fiscal 2003. All laws on spending simply carry forward another month, or until they are replaced by new laws for fiscal 2004.
In such circumstances, it should not be surprising that Congress plans to go home for a Columbus Day recess, or that it already is working on a supplemental appropriation -- the hotly debated extra appropriation for the cost of the Iraq war and postwar reconstruction. Price tag: $87 billion, and the administration says it will be the only emergency supplemental this year, assuming no other military, economic or financial crises arrive without fair warning. Even an optimist might say just wait until next year -- and a pessimist will say no, wait until later this year.
Poor timing, however, may be the least of the government's deficit woes. The sheer size of the deficit -- more than half a trillion dollars -- and the neck-snapping speed with which surpluses converted themselves to deficits have astonished and frightened...practically nobody except the Concord Coalition and eight or nine people running for the Democratic nomination for president.
Their Democratic colleagues in Congress are working as hard as Republicans to get those spending bills laden with as much spending for guns as possible, even as Republicans are working as hard as Democrats to enact the spending bills that call for as much spending on butter as possible.
Does this remind anyone of the fiscal policy of the late 1960s?
Keynesians and Hooverians
As President Nixon famously observed in 1972, after following several years of Democratic guns and butter policies with more of the same, "We are all Keynesians now," by which he meant that it was orthodox economic policy for Republicans to run deficits in recessions. He might as well have said, "We are all Hooverians now," since such "counter-cyclical" policies date to the Republican administration of Herbert Hoover.
With Keynesian economic theory for a foundation, President Bush has given his tax cuts credit for the mildness and brevity of the recession. They put money in consumers' pockets at just the right time to keep the economy moving.
The credit may be deserved, although the perfect timing surely was accidental. Bush campaigned for tax cuts on many grounds, most notably and reasonably that nobody should have to pay the federal government more than one-third of his income. But he never mentioned that another big reason for cutting taxes was that if he took office he would usher in a recession.
Other administration officials also maintain that the tax cuts and spending increases since January 20, 2001 were all for the best.
"Find a voice, a rational human being, who suggests the federal government should have run a surplus for the last three years," demands Peter Fisher, undersecretary of the Treasury for domestic finance.
Fisher may not know any rational human beings who think that the federal government should have run a surplus, but there are many rational people who would have preferred that the government lower spending instead of taxes, or -- our preference -- lower both taxes and spending. Some of them supported the long-lost Constitutional amendment to require a balanced budget, which was an element of the Republican Contract With America.
Imagine the fiscal follies we would be living through if that amendment had passed in Congress and been ratified by the requisite number of states. Washington would be in as much of a mess as Sacramento, and the nation would be looking for a national version of Arnold Schwarzenegger. Since the amendment resolution failed in the U.S. Senate by a single vote in 1995, Bush's would-be opponents, and many representatives and senators of both parties, can offer a more perfectly Hooverian policy of higher taxes and higher spending.
By the way, if Undersecretary Fisher's political touchstone is rationality, then he should hasten to reverse one of his major contributions to irrational finance before he leaves office later this week.
Peter Fisher is the guy who announced, on Oct. 31, 2001, that the Treasury would no longer issue 30-year bonds. By putting long money into other instruments, this may have done wonders for individual debtors, many of whom have refinanced their mortgages twice since then. But it's certainly not rational for the federal government to borrow short-term during a period of low interest rates. Bringing back the long bond would reduce the Treasury's vulnerability to higher interest costs.
Short-Sighted
Having seen surpluses appear as if by magic where there were deficits as far as the eye could see, and vice-versa, we don't put much faith in long-term forecasts of federal finances at the best of times. And this is not the best of times. Within 10 years, the leading edge of the baby boom will be claiming Social Security and Medicare benefits, which may well create deficits much larger than those contained in the most pessimistic forecasts. Over the next 10 years, heavy borrowing, a declining dollar and rapidly rising interest rates could push inflation to levels not seen since the 1970s.
Or not. The fiscal eye can't see very far. There are reasons for optimism also.
Despite the strongest efforts of the leaders of both parties in Congress, truly enormous spending increases such as a prescription-drug benefit in Medicare seem farther off than they did at the beginning of the year. The mandarins of Capitol Hill couldn't even agree on a gigantic new six-year highway bill because responsible lawmakers refused to let it go through unless it's paid for with a gas-tax increase.
The war and the reconstruction of Iraq, though costly, look a good deal cheaper than they did at the beginning of the year, when we did not know whether the Iraqi army would fight or what weapons it might use.
The short recession and the long stagnation have blown down some of the hollow trees in the corporate forest, and it's now clearer that the stronger trees are still standing tall. Productivity gains more than match losses in manufacturing employment, leaving capital and labor available to go to work on the next Big Thing, whatever it turns out to be.
There is a fair chance, in other words, that lots of people will get rich in the next 10 years, maybe even more than got rich in the 1990s. Which presents an interesting political problem: The politicians who want higher taxes on those rich folks ought to realize that they can't live without those rich folks. That fair chance is the only thing that really stands between the baby boom generation and the renunciation of all the federal promises it's counting on in retirement.
Gloomy Scorecard
After several decades of tax cuts and outright tax subsidies for low-income Americans, the rich are the main support of government for the rest of us. The top 10% of families paid about 65% of individual income taxes in 2001, while the bottom 50% paid only 4% of the tax bill. The progressive income tax was more progressive than most people imagined.
Unfortunately for the federal fisc, the rich weren't doing quite as well in 2001 as they were in 2000. The top 1% of taxpayers reported $1.09 trillion of income in 2001, down from $1.34 in 2000. The fed's total bite on the top 1% of taxpayers was $300 billion, down 18% from $367 billion in 2000. Taxes paid by the other 99% fell $26 billion. The overall result was that federal income tax revenues fell 9.4% even though individual income fell only 2.8%.
As is so often the case with the most important government statistics, the income report is nearly two years out of date. We can only guess how much more national wealth and federal revenue have been lost in the upper income strata in 2002 and 2003. But what does it matter? The national government keeps on spending just the same, with or without appropriations, with or without revenues.
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Editorial Page Editor Thomas G. Donlan received e-mail at tg.donlan@barrons.com1.
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Monday, September 22, 2003
ft editorial 22sep03
To: Everybody
Published: September 20 2003 5:00 | Last Updated: September 20 2003 5:00
Oh, for the days before e-mail: before the first half-hour of the day spent deleting invitations to enlarge various body parts and take custody of $100m from Nigeria; before sifting through copies of memos sent to 30 others; before constant forwarding of internet flotsam and jetsam; before the world of electronic logorrhea.
There can be few office workers whose hearts did not lift a little at the news that Phones 4u, the UK's second-biggest mobile phone retailer, has banned its 2,500 staff from communicating internally via e-mail. Henceforth they can exchange messages with customers and suppliers, but if they want to impart something to each other, they will have to say it.
Phones 4u estimates that it will save £1m a year in staff time and, if anything, this seems conservative. Few inventions have been as abused as e-mail - the ease and frictionless quality of being able to pop off a missive to 100 or 1,000 colleagues has filled offices with silent babble. Never mind the Viagra merchants; the worst spammers are inside the building.
Nor can it have escaped John Caudwell, chief executive of Phones 4u, that eliminating internal e-mail reduces the risk of an electronic paper trail coming back to bite you. The Wall Street firms that allowed analysts to tell colleagues in lurid detail how little they thought of the stocks they were recommending to investors have paid a hefty price.
Michael Eisner, chairman of Walt Disney, showed uncanny prescience in a memorable FT article about the perils of the all-pervasive email in May 2000: "I have come to believe that, if anything will bring about the downfall of a company or maybe a country, it is blind copies of e-mails that should never have been sent."
As Mr Eisner also pointed out, e-mail has particular pitfalls as a means of communicating with colleagues. It is so easily dispatched that it feels like the spoken word, yet it is as indelible as the written one. An incriminating e-mail will turn up at an inquiry or in a court case and an angry or unpleasant one will cause long-lasting bitterness among the recipients.
So three cheers for Mr Caudwell. Back to the pre-Lapsarian days of the water cooler, when we walked around to talk to each other and exchange a bit of gossip rather than wasting time polishing an e-mail. No more of those pompous announcements from above, or insidious ones from one's peers, intended to place on permanent record a minor victory.
It will not happen, of course. The hegemony of e-mail is too strong to be resisted; we now live in an electronic world, for good or ill. But it is not too late for companies to ponder how internal e-mail could be used more sparingly. Here are some suggestions. E-mails should convey essential information when conversation is impossible; use of the cc: and bcc: boxes should be minimised; showing-off and telling-off must be done face-to-face. And people, talk to each other.
Wednesday, September 03, 2003
nyt 03sep03
--------------------------------------------------------------------------------
September 3, 2003
Blaming Beijing
nemployment in America is high, and elections are on the horizon. It must be time to look east again for scapegoats. Japan is only starting to recover from its protracted recession, so China will be handed the role of economic villain in the coming election cycle. Expect to hear a chorus of presidential candidates blame unfair Chinese competition for the nation's manufacturing woes.
China's trading partners do have legitimate grievances, but it would be irresponsible and inaccurate for American politicians to pin our economic sluggishness on scheming culprits in Beijing.
Exhibit A of what is alleged to be the perfidy of Beijing's communist rulers is China's $100 billion trade surplus with the United States. Exhibit B in the evolving politicized debate, if not the smoking gun proving Beijing's unfairness, is China's undervalued currency, the yuan, because an undervalued currency makes a nation's exports more competitive. The yuan has been pegged at about 8.3 to the dollar for some time. But most economists say China's currency would appreciate by as much as a third if allowed to float freely.
Traveling in Asia yesterday, Treasury Secretary John Snow heeded political pressures back home in exhorting Chinese leaders to let the market price their currency. This is a desirable outcome in the long run, but a raft of immediate caveats come to mind.
China's financial system remains fragile, and sudden currency volatility could lead to a banking crisis that could spell disaster for the world economy. Washington would do better to urge China's leaders to focus on their lack of preparation to assume their proper role in the world's financial order, rather than to demand any supposedly quick fix. Moreover, China's refusal to devalue its currency in the aftermath of the late 1990's crises in East Asia (much appreciated by its neighbors and Washington at a time when the yuan seemed overvalued) adds credence to its leadership's insistence that it prizes stability when it comes to exchange rates, not short-term advantage. With most economists concerned that China's robust growth could fuel inflation and a speculative bubble, there are valid reasons for Beijing to fear a surging currency.
It would also be silly to argue that exchange rates, as opposed to cheap labor and other factors, are the primary reason Americans buy three-quarters of their toys from China. Nor does a prospering China, by definition, cost America jobs, as the experience of the late 1990's proved. American politicians should resist dusting off old complaints about Japan and redirecting them at China. This is hardly a case of an exporting nation that is unfairly protecting its own market. China's imports are growing at a faster clip than its exports, and the bulk of the exports registering in those eye-popping trade figures are goods built in China by the likes of Intel and America's automakers.
wsj 03sep03
September 3, 2003
REVIEW & OUTLOOK
Snowed in Beijing
Treasury Secretary John Snow is in Beijing this week urging China to revalue its currency -- counsel that we're happy to say the Chinese seem more than prepared to ignore. It's a shame Mr. Snow didn't focus on China's bigger economic challenge: liberalizing the flow of capital.
We sympathize with Mr. Snow in the sense that it's hard for any political actor to resist the flavor of the month, and China's strong yuan is now it. Everyone from the Democratic Presidential candidates to the usual suspects at the National Association of Manufacturers insist that China's swelling foreign exchange reserves are proof that the country is holding down the value of its currency to boost exports and steal American jobs. They say the market should set the value of the yuan. Allowing market forces to work sounds good to us, but first let's look at how China is failing to do so before jumping for the quick and dirty fix of currency manipulation.
It's true that the People's Bank of China is holding the value of the yuan stable against the U.S. dollar. But take the glib pronouncements that the yuan is 40% undervalued with a grain, or rather a block, of salt. The yuan might be under pressure to appreciate now, but that's only because capital is largely free to enter China but not free to leave. If the market were truly allowed to determine the yuan's value, it would quickly come under selling pressure.
That's because if capital controls were lifted, some of the trillions of yuan in Chinese household savings would migrate abroad in search of higher returns. China so far has been unable to channel this domestic capital into efficient enterprises because its state-run banks are mismanaged and its stock and bond markets are dysfunctional. Much of the country's own savings have been wasted on loss-making state-owned enterprises. That leaves China overly dependent on foreign investment, which has created its most efficient companies and accounts for more than half of its exports.
That's the real story behind China's rising forex reserves. Trade flows aren't the problem; China's trade surplus has actually been falling of late. Rather there is a surge of foreign investment into the country, partly due to its entry into the World Trade Organization. But this has also been exacerbated by the international pressure on Beijing to revalue the yuan, which only encourages individuals and companies to buy and hold the currency in anticipation of windfall profits.
Some serious problems are emerging as a result. The capital inflow seems to be creating a curious form of overheating: Even though prices in the real economy remain stable, real estate prices in some areas are soaring. Bank loans in the first seven months of 2003 exceeded the total figure for all of 2002. In short, there's a lot of froth in China's economy at the moment, and some of the capital inflows look like "hot money" making exchange-range bets.
The central bank has prudently responded by lifting the reserve ratio for banks to 7% from 6%, effectively pulling $150 billion from the pool of money available for loans. The fact that this in turn caused a cash crunch that forced the People's Bank to put some emergency liquidity back into the system shows that many Chinese banks were indeed lending very aggressively.
Reforming the banks and creating efficient capital markets is not something China is going to do overnight. But neither would allowing the yuan to float freely be of much benefit to China or the U.S. Revaluing the yuan even by 20% won't eliminate the cost savings that are driving factories exporting to the U.S. to move to China from other countries, and would just complicate business decisions.
It would also create the expectation of even further revaluation, which could produce a deflation spiral in one of the few economies in the world that is actually growing. Japan shows that a steadily appreciating currency doesn't eliminate trade surpluses. It merely postpones the reforms needed to create a true market economy.
Beijing is now most likely to take a series of smaller measures, like the minor easing of capital controls announced yesterday, evidently as a gesture to Mr. Snow. Rebates on value-added tax for exporters will likely be reduced, and Chinese are being allowed to travel abroad more freely and take more foreign exchange when they do. Implementing WTO commitments to lower barriers to imports can also be hurried along. All of these will take some of the pressure off the yuan while the ground is prepared for more fundamental reforms.
If all else fails, it may be necessary to widen the trading band of the yuan to allow some appreciation. But Mr. Snow would have been better to focus whatever influence the U.S. has in Beijing on domestic market reforms that would help keep China's economy moving in the direction of greater freedom and prosperity.
URL for this article:
http://online.wsj.com/article/0,,SB106254204734756900,00.html
Updated September 3, 2003
Sunday, August 31, 2003
wsp 30aug03
Let Venezuela Vote
Sunday, August 31, 2003; Page B06
FOR YEARS Venezuelans have debated whether President Hugo Chavez is prepared to impose his quasi-socialist "Bolivarian revolution" on the country by force or will respect the country's increasingly fragile democratic rules. Now they will likely learn the answer. Unless Mr. Chavez directly violates or obstructs the constitution promulgated under his own government, he probably will have to face a recall referendum in the coming few months. Such a vote, nominally agreed on by the president and opposition in June, would give Venezuela a peaceful way out of a civil conflict that threatens to tear the country apart. But polls show that if the vote were held, Mr. Chavez would probably lose -- and so the president has made it clear he will do everything he can to prevent it. The challenge for Venezuelans, and for their neighbors, will be to ensure that democracy in this important oil-producing country is not disrupted.
The chances that Venezuelans will be able to vote their way out of crisis grew considerably last week when the country's Supreme Court, ending months of impasse, named the last member of an electoral council that must oversee the process. Days earlier, opposition organizers had turned in recall petitions bearing 3.2 million signatures, more than enough to meet the constitutional requirement. The council has 30 days to judge whether the petitions are valid and, if it rules they are, 60 days to schedule an election. The referendum requirements in Mr. Chavez's constitution are quirky: Some experts believe the signatures may be ruled invalid for having been collected before this month, a problem the opposition believes it could overcome by quickly collecting new petitions. If a vote takes place, it won't be enough for Mr. Chavez to lose (polls show him failing by a margin of 2-to-1); the constitution says more people must vote "no" than the 3.8 million who voted for Mr. Chavez when he was reelected three years ago. That, too, is a threshold the opposition believes it can cross -- and if it does not, Mr. Chavez will have earned a mandate to remain in power for three more years.
The real danger is that the president, who once attempted a military coup, will block the vote by fraud or force. Already he claims, without evidence, that the petition signatures are falsified. His supporters in Venezuela's Congress have been trying to pass measures changing the composition of the Supreme Court and imposing new restrictions on the media. Violence against opposition supporters, including shootings and bombings, has happened before and could return. Opposition leaders themselves backed an unsuccessful coup and later led a disastrous general strike; now they must avoid being provoked by Mr. Chavez and must build a platform that bridges the gap between Venezuela's rich and middle classes and the poor -- most of whom also want to see the president go. The Bush administration, the Organization of American States and key neighbors such as Brazil have all supported the electoral solution. In the coming weeks they must make clear to Mr. Chavez that any attempt to stop a referendum by violent or illegal means will be regarded as an interruption of Venezuela's democracy.
Thursday, August 28, 2003
wsj 28aug03
Hillary Confesses
We're not making this one up, folks. In a video snippet you can play for yourself on the NY1 News Web site (www.ny1.com), Hillary Rodham Clinton accuses the Bush White House of "a cover-up at the highest level."
"What transpired in the White House?" an angry Mrs. Clinton asked this week from the steps of New York's City Hall. "I know a little bit about how White Houses work. I know somebody picked up a phone, somebody got on a computer, somebody sent an e-mail, somebody called for a meeting, somebody, probably under instructions from somebody further up the chain, told the EPA, 'Don't tell the people of New York the truth,' and I want to know who that is."
Mrs. Clinton's cover-up accusation was prompted by a report from the Environmental Protection Agency's inspector general, which says the Bush Administration prodded the EPA to issue reassuring reports about the air quality in Lower Manhattan after September 11. She's not buying the argument that, in the chaotic aftermath of that day, no one really knew what was going on with air quality.
Maybe the first couple of days, Mrs. Clinton allows. "But a week later, two weeks later, two months later, six months later? Give me a break. They knew, and they didn't tell us the truth," she says.
This, of course, comes from the same woman who as First Lady thought it understandable that her long-subpoenaed records could suddenly materialize in a room right next to her White House study. "I think people need to understand that there are millions of pieces of paper in the White House," she told Barbara Walters at the time, "and for more than two years now people have been diligently searching."
Recall that she also dismisses the collection of hundreds of FBI files of Bush and Reagan appointees as a "bureaucratic snafu" by innocent newcomers "who did not recognize the mistake." And who can forget her classic disavowal of any responsibility for the sacking of staffers in the White House Travel Office?
We suppose Mrs. Clinton's explanations have to be taken on faith. So if the honorable junior Senator from New York now wants to argue that she knows a cover-up when she sees it, because she knows all about how these things work, who are we to argue?
Updated August 28, 2003
Wednesday, August 06, 2003
wsj 06aug03
this is the main wsj editorial, doom and gloom. talks of impact of widening ust: on securities portfolios, on housing->reverse wealth effect, on mortgage and business defaults! ends calling on administration to cut spending...
August 6, 2003
REVIEW & OUTLOOK
Surviving the Recovery
Yesterday's blowout report by the Institute for Supply Management would normally be cause for popping champagne corks, but stocks fell sharply again instead and bond prices took another hit. Investors seem to have settled at one of those places where everyone wonders if we are going to survive the recovery.
On most of the evidence, the economy is finally poised to accelerate after months of bouncing around below potential growth. Second quarter GDP growth rolled in the other day at 2.4%, much higher than expected for a period that included the main Iraq fighting. Jobless claims are down and corporate profits have been beating most expectations.
If more optimism is needed, the ISM survey of the huge U.S. service sector provides it. The bellwether measure of non-manufacturing activity surged in July to 65.1, well above June's 60.6 and the fourth monthly increase in a row. A measure of 50 signifies flat growth for the industry that includes tourism, finance, retail sales and restaurants, among other services, and July's measure is the highest since the survey began in 1997.
There are even -- hard to believe -- signs of growth overseas. Japan's economy may be getting off the tatami mat, with its manufacturing index cracking 50% in July. Meanwhile, the U.S. dollar has recovered from its long fall, suggesting that capital is again flowing here in anticipation of new opportunities.
So why all the long Wall Street faces? The answer is the bond market, which has taken its sharpest tumble in more than a decade. From their historic lows just 40 or so days ago, interest rates (the flip side of bond prices) have shot up at a rate that has given the markets the heebie-jeebies. The 10-year Treasury note, which hit a low of 3.11% in early June, closed yesterday at 4.40%.
Some of our supply-side friends have been discounting this as the normal market response to a burst of faster economic growth. Credit demand is suddenly rising or soon will, so the price of credit naturally rises along with it. That's capitalism, and no doubt this explains part of the bond move. Others blame Fed Chairman Alan Greenspan's recent dance with "deflation" rhetoric, which has hurt his credibility.
But whatever the cause, markets that move this rapidly can also do some damage. Someone was long in bonds, and whoever it was has quickly lost a lot of money. If a hedge fund or bank got caught on the wrong side of such a market rout, the results might be ugly. Financial players are all now looking at one another and inspecting their appendages to see if anyone caught a bullet.
The larger worry of the bond bath is its impact on growth, especially in housing. We wrote in these columns last March that, after years of historically low rates, the U.S. economy is more vulnerable than usual to an increase in rates. To moderate the downturn after the stock-bubble burst, Chairman Greenspan brought rates low to finance the housing boom. But housing prices can't rise forever, especially if rates are rising.
Higher interest rates now mean an end to the home refinancing boom, which has helped to sustain consumer spending through the long, post-bubble drought in corporate investment. One result may be a reverse "wealth effect," backed by a similar negative effect among bond-holders, that could slow the pace of recovery or undermine its sustainability.
Financial institutions have also become inured to low rates and may be vulnerable to mortgage or business defaults. Some of this interest-rate risk has been securitized and passed along to the likes of Fannie Mae and Freddie Mac, but that means those two home-mortgage giants must also be watched.
We don't want to overplay the gloom. The economy still looks to us as if it's ready to break out of its three-and-a-half-year funk. Monetary policy has been accommodating, to say the least, and the Bush tax cuts are just starting to kick in. The latter have already induced 171 companies to raise or initiate dividend payments, easily surpassing the 112 for all of last year, according to Standard & Poor's Corp.
One way President Bush can help nurture the recovery now is by showing a new willingness to control spending, especially in entitlements (Medicare drugs). The more future federal liabilities Mr. Bush agrees to, the more investors will assume future tax increases to pay for them. His Treasury might also beef up its financial team to cope with, and minimize, any banking or hedge-fund failures. Left to its own devices the economy seems ready to resume its natural growth path, but it can't hurt to be prepared.
URL for this article:
http://online.wsj.com/article/0,,SB106012762214820800,00.html
Thursday, July 03, 2003
nyt 03jul03
impressively partisan nyt editorial...talkserious heartless republicans bastards against children! lets raise taxes! just read on reuters: "S&P may cut university of california's ratings, affects $5.5bn of debt"
July 3, 2003
No Budging in California
n California, where Republicans hold no statewide offices and are minorities in both houses of the Legislature, the G.O.P. has found an arena to exercise some political muscle: the state budget debacle. Republicans are stalwartly committed to blocking the passage of tax increases, while Democrats insist that raising taxes is better than continuing to hack away at already drained public services. The result of this standoff is that California has entered a new fiscal year with no budget.
State governments with budget woes are as common as mosquitoes this summer. But California's problems are so huge — the current deficit is $38 billion — and the barriers blocking any solution are so daunting that it stands in a category all by itself.
If California were like most other states, requiring a simple, rather than two-thirds, majority to pass the budget, it would have met its July 1 deadline. But it's not, and as a result, the government is legislatively paralyzed and running entirely on borrowed money.
Gov. Gray Davis needs to muster up support from a handful of Republicans to get the votes needed to pass a budget, but Mr. Davis is short on bargaining tools. He is unpopular within his party, and the public is so tired of him that a recall campaign is gaining support with lightning speed. By the end of the year, it is conceivable that Mr. Davis will be gone and the new governor will be someone who got a tiny fraction of the vote on a huge recall ballot listing people who have volunteered to run for his job.
California's system of government, heavy on voters' rights to set the rules through referendums and laced with restrictions that tie the hands of elected officials, is high on democracy but very low on efficiency. Right now the two parties are busy blaming each other for causing the state's once-robust reserves to disappear and trying to ignore the serious damage that budget delays will cause.
Officials say California has enough money to keep functioning on short-term borrowing until mid-August. But its credit rating is low, and without a budget, it will not be able to continue living on loans as the fall approaches. It will soon have to begin withholding hundreds of millions in funds from public schools and vendors who sell products to the state.
Local governments, with limited ability to raise taxes, are already reeling from the uncertainty of state aid. If the budget remains in limbo long enough, state employees may have their paychecks dropped to the minimum wage, an average pay cut for individuals of about 70 percent.
The Republicans hope to win voters' approval with their no-tax-increases stance, but their plan means increasing cuts for already strapped elementary schools and universities by $1 billion. A good example of the inflexibility with which the Republicans are operating is their plan to save on education expenses by raising the age at which children are eligible to attend kindergarten.
The divided, posturing Democrats obviously deserve their share of the blame for this debacle. But Republicans cannot be absolutists about opposing taxation at this level of financial meltdown. Whatever rancor they have built up against the governor and the Democrats' liberal spending policies, they should not take it out on the public during an emergency. Californians will inevitably be hurt by the budget crisis; they don't deserve additional suffering caused by the fecklessness of their elected officials.
Thursday, June 26, 2003
wsj 26jun03
Greenspan's Animal Spirits
We've been watching with amazement, and sometimes amusement, the not-so-epic debate over whether the Federal Reserve would reduce interest rates by a quarter point, or a half, at its June meeting yesterday. The Fed chose a quarter, getting its target rate down to the ripe round number of 1%, but in the end it really doesn't matter.
Chairman Alan Greenspan has for some time had the money supply opened up like the Colorado in spring. The drama is whether all of that liquidity in the system will help spur the economy back to more vigorous growth. So far Mr. Greenspan's bet seems to be paying off, as lower rates have kept housing prices up and consumers going back for one more round of mortgage refinancing.
A revival in capital spending is less certain, though there are signs of that too. The Fed's statement yesterday noted "a firming in spending, markedly improved financial conditions, and labor and product markets that are stabilizing." The recent tax cut is adding another dose of incentives to work and invest, so the Fed doesn't have to lift everyone's boat by itself.
What we'd like to hear from the Fed for a while is nothing. What the economy needs now is a burst of capitalist animal spirits, rather than everyone sitting on their cash for one more month, or two, to see if rates have a chance to go still lower. Mr. Greenspan has made his bet; now let's see how well the horses run.
Friday, June 13, 2003
wsj 13jun03
The Trouble With Freddie
The problems keep coming for Freddie Mac, the mortgage-finance giant. In addition to investigations by its regulator, the SEC, and Congress, the U.S. Attorney's Office in Northern Virginia has opened a criminal probe. Right now, the betting is that any wrongdoing involves accounting irregularities and won't be fatal. But even if Fred finesses this one, the past week demonstrates how vulnerable the economy remains to potential havoc coming from Fred and its larger sister, Fannie Mae.
The main purpose of Fred and Fan is to provide liquidity to the housing market. A worthy mission and they do a good job. But a decade of indifferent regulatory oversight and shrewd political lobbying have allowed Fan and Fred to transform themselves into companies that run with lots of leverage, use arcane hedging strategies and occupy a central and ever-larger place in the U.S. financial system.
Fan and Fred have been able to carve out their position because investors assume their ties to the federal government translate into an implicit guarantee for their debt. Thus, they can borrow at rates close to Treasuries. They then use these cheap funds to buy the same mortgage backed securities (MBSs) that they have bundled and plop them into their portfolios. If things go according to plan, those MBSs pay higher returns than Fan and Fred have to pay on their debt. This very profitable arrangement has propelled them to the tope of the financial world.
But consider where all of their debt ends up. Simply put, everywhere. U.S. and foreign banks, pension funds and individuals. According to Federal Financial Analytics, more than 60% of U.S. banks with less than $100 million in assets hold Fan and Fred debt in excess of 50% of capital. For banks with more than $1 billion in assets, 20% hold Fan and Fred debt in excess of 50%.
And here's where systemic risk comes in. Say that investors become anxious about the probes into Fred's accounting and start selling its debt. If its market value fell sharply, the enormous scale of Fred's liabilities could create serious problems in the credit markets. If sellers overwhelm buyers, trading could come to a screeching halt. Banks might refuse to buy Fred's debt.
Moreover, uncertainty might extend to Fred's MBSs and, not unlikely, to Fannie's as well. The resulting credit crunch and drop in market value of Fan and Fred's debt and MBSs would cause liquidity problems at some banks and thrifts. The result might be a contagion of illiquidity throughout the banking system and the financial sector -- possibly causing bankruptcies, a huge disturbance in the housing market and ultimately a big hit to the economy. And, probably, a taxpayer bailout of unthinkable size.
If you think we're being fanciful (and we wish we were), then consider that Fan and Fred satisfy many of the conditions that make it ripe for a systemic crisis. According to the Office of Federal Housing Enterprise Oversight, these conditions are: High levels of interdependence with other financial institutions, high leverage, lax safety and soundness regulations, and poor public disclosure.
So what to do? Better regulation and disclosure are the bare minimum needed to protect investors and taxpayers, Treasury Secretary John Snow noted yesterday. Another essential fix would require Fan and Fred to increase the amount of capital they hold. Capital provides insurance against mistakes and unexpected trouble, yet the two companies are required to hold less than half the amount of capital (as a share of assets) that banks must maintain for mortgages.
Capital is so important that almost any firm that maintains an adequate capital cushion can get a loan to cover a liquidity problem. William Poole, the president of the St. Louis Fed, points out that capital is especially important for Fan and Fred since they have a large amount of short-term obligations, with billions of dollars rolling over every week. Mr. Poole estimates that 45% of their debt liabilities are debt obligations due within one year.
We assume that a now-mobilized Congress will consider all of these solutions, as well as privatization and even breaking the duo up into smaller firms so that no single mortgage company carries so much risk. It is, after all, the government that created these behemoths that thrive on private profit but socialized risk. This is the right moment for government to lasso them and head off disaster.
Updated June 13, 2003
Monday, June 02, 2003
ft 02jun03
u don't hear this every day...calling for a 1 time REVAL of the renminbi....
Revaluing the renminbi
Published: June 2 2003 5:00 | Last Updated: June 2 2003 5:00
The dollar's slide is turning into a test of China's willingness to assume its share of global economic responsibility. Since its last peak in February 2002 the US currency has declined 9 per cent on the Federal Reserve's trade-weighted index but dropped 27 per cent against the euro. The dollar's fall against the yen, meanwhile, has been only 12 per cent, while the Chinese renminbi has remained firmly pegged to the greenback.
As a result, a large part of the pressure of this painful - though desirable - adjustment is falling on the already enfeebled eurozone. This is where Asia's help is called for. Japan urgently needs to expand domestic demand. And Asia's smaller economies should allow their currencies to appreciate rather than continuing to accumulate vast foreign exchange reserves. But the biggest change ought to come from China, which must be persuaded either to generate significant inflation in its domestic economy or, preferably, to appreciate its currency.
Chinese policymakers have so far ignored such calls. They fear not only a loss of export competitiveness but also a domestic price shock that could push an economy already going through painful restructuring into significant deflation. But such concerns are overblown. Nominal interest rates are indeed at a record low of just under 2 per cent; but it is desirable for real interest rates to remain solidly positive given the country's robust growth. Too-low real interest rates could encourage yet more overinvestment in China's capital stock.
Meanwhile, as Goldman Sachs notes, domestic credit grew 17 per cent in 2002 and the M2 measure of money expanded by 19 per cent. This does not exactly look like an economy stuck in a Japanese-style liquidity trap or heading for a deflationary spiral. Indeed, some rate of falling prices may even prove a boon, in the sense that it prevents the economy from overheating.
To the extent that China does have a problem with falling prices, this stems from the woeful state of the country's banking sector. Deflation would make that mess worse by increasing the burden of non-performing loans. But it would also increase the pressure on the authorities to overhaul the financial system - a huge challenge but one to which they will, sooner or later, have to rise.
As for the mechanics of currency appreciation, a free float of the renminbi would be the ideal solution, giving China the flexibility to cope with the growing pressures stemming from trade liberalisation. However, a free float will work properly only if the country's capital and exchange controls are lifted. That, in turn, is too risky until the financial sector is sorted out, otherwise China risks huge capital flight and the implosion of its banking system. That leaves a one-off revaluation of the renminbi, after which it is re-pegged at its new and stronger level. This may be a second-best solution but it is still far better than doing nothing.
Wednesday, May 28, 2003
fsp 28may03
BOLSA-ESCÂNDALO
É escandaloso o desperdício de bolsas-escola verificado em todo o país. Como mostrou reportagem da Folha publicada no domingo, a burocracia está impedindo que 645 mil bolsas cheguem aos destinatários. A verba existe, a família de baixa renda que poderia ser beneficiada existe, mas, por conta de "falhas cadastrais", o dinheiro não é recebido por quem dele tem necessidade.
O fenômeno é especialmente perverso porque as verbas não utilizadas nos programas sociais passam a ser contabilizadas como superávit primário. O já diminuto quinhão do Orçamento que deveria ser utilizado na distribuição de renda transforma-se em ajuste fiscal, tendo sua destinação desvirtuada.
Compreende-se que não seja uma tarefa simples distribuir mais de 5,7 milhões de bolsas num país com as dimensões do Brasil. As dificuldades, porém, não parecem autorizar uma "taxa de desperdício" da ordem de 11%. Em valores absolutos, o montante não utilizado varia de R$ 9,67 milhões a R$ 29 milhões mensais, considerando-se que o benefício pago a cada família oscila entre R$ 15 e R$ 45, dependendo do número de filhos matriculados em escolas.
Registre-se que é perfeitamente possível aproveitar todas as bolsas disponíveis. É o que ocorre, por exemplo, no Distrito Federal, onde surgiu esse programa, que tem a grande virtude de, a um só tempo, melhorar a renda e o nível de instrução das famílias por ele atendidas.
Outra crueldade do sistema reside no fato de que são justamente as áreas mais carentes as que mais deixam de captar bolsas. Na região Norte, por exemplo, o não aproveitamento chega perto de 20%, enquanto no Sul essa taxa é de menos de 6%.
O absurdo que é tal "sobra" de bolsas num país tão necessitado como o Brasil revela serem bem maiores do que alguns imaginavam os desafios para um governo com pretensões de promover mais justiça social.
fsp 28may03
CLÓVIS ROSSI
Fala sério, PT
SÃO PAULO - Primeiro foi Tarso Genro, um dos (melhores) ideólogos do PT, confessando de público que não há nem no PT nem em parte alguma experiência prática ou teórica de transição de "um modelo de modernização conservadora vinculado ao capital financeiro para um modelo produtivista de crescimento acelerado e inclusão social".
É verdade que, dias depois, Tarso resolveu "esclarecer" o que dissera, em carta ao "Painel do Leitor". Só enrolou. Como sou paciente, fiquei quieto, mas, se fosse o Elio Gaspari, tascaria nele um curso Madame Natasha de português para que, da próxima vez, não fingisse que texto nebuloso é esclarecimento.
Agora, vem frei Betto e diz que é preciso paciência porque o PT chegou ao governo, mas não chegou ainda ao poder.
Como? O que é chegar ao poder? Betto cita o FMI como "poder", em vez de governo. Então, o PT só vai começar a governar quando o Brasil puder comprar todas as cotas do Fundo e, assim, chegar ao "poder"?
Ou só haverá governo do PT quando as tropas expedicionárias comandadas pelo notório revolucionário Henrique Meirelles tomarem o baita prédio em que funciona o FMI em Washington?
Frei Betto lembra também que vivemos numa mísera democracia burguesa. Faltou contar a ele que é a única que existe, feliz ou infelizmente. Claro que sempre se pode contar Cuba como exemplo de "ditadura do proletariado" ou "popular", mas nem o PT nem Lula acreditam agora que Cuba seja uma democracia, burguesa ou não.
Quanto tempo será necessário para que o Brasil deixe de ser uma democracia burguesa e vire sabe-se lá o que para que, enfim, o PT chegue ao poder, em vez do governo, e comece a governar?
Pode ser que leve uma eternidade, não? Então, vamos combinar o seguinte: os ideólogos do PT param com a masturbação sociopolítica e o partido começa, de fato, a governar.
Tuesday, May 27, 2003
fsp 27may03
?! calote dja?!!?!?!?!?!?!?!?
CLÓVIS ROSSI
Calote com outro nome
SÃO PAULO - Devagarinho, com muito pudor, vai voltando à agenda latino-americana um clássico dos anos 70: pagar ou não a dívida (interna ou externa).
Sinais mais recentes: o presidente do Peru, Alejandro Toledo, sugere que 20% do que os países latino-americanos pagam sirva para formar um fundo destinado a financiar obras de infra-estrutura.
Traduzindo: não dá para pagar a dívida e, ao mesmo tempo, cuidar da infra-estrutura.
Sinal 2: o discurso em que o presidente da Argentina, Néstor Kirchner, volta à retórica que usaria Tancredo Neves no discurso da posse que não houve. Algo na linha de não dá para pagar a dívida à custa da fome do povo. É uma frase clássica, que ficou esquecida nos longos anos de messianismo neoliberal.
Volta agora que o messianismo mostrou-se insuficiente ou fracassado, ao gosto de cada qual.
No Brasil, na semana passada, o Ministério da Justiça lançou o balão de ensaio da taxação sobre empresas privadas de segurança, para financiar uma força-tarefa de combate ao crime organizado.
Aí também está a confissão quase explícita de que, com o que sobra do superávit fiscal a que se comprometeu o governo Lula, não dá para combater o crime organizado. Logo, ou se reduz o superávit, de forma a liberar dinheiro para uma necessidade absolutamente inadiável, ou o crime organizado continuará lampeiro por aí. Esse é o recado subliminar.
O que tem isso a ver com a dívida? Tudo. O superávit é feito para que os credores durmam tranquilos, na certeza de que o governo vai pagar tudinho, religiosamente.
Cedo ou tarde, vai-se verificar que não dá para pagar a dívida nos termos vigentes e ainda combater o crime organizado, sem falar todos os outros combates pendentes, no Brasil como na América Latina.
Não é uma questão ideológica, mas de aritmética pura: as necessidades superam os meios.
Thursday, May 22, 2003
22may03
OTAVIO FRIAS FILHO
Chegou a hora
Parece cada vez mais comum que governos se elejam com uma plataforma e governem com outra. Sempre foi assim, mas, se a cisão aumentou, é porque ela reflete as tensões entre democracia e mercado, dois entes que deveriam reforçar-se, ao menos em tese, um ao outro. Na prática, nunca foram tão antagônicos. Como tantos governos pelo mundo, o de Lula tenta se equilibrar entre ambos. O mercado exige regras claras, condições estáveis e a menor restrição possível para os agentes realizarem lucros. Quase todo governo está atualmente empenhado em atender tais reivindicações, dado o peso que a atividade financeira desempenha na economia; todos competem para atrair recursos e essa competição mesma explica a queda de tantos limites (legais, corporativos, tarifários) outrora impostos à liberdade do capital. A cada quatro anos, porém, a grande maioria que não tem acesso ao admirável mundo dos mercados dispõe do poder fulminante de derrubar governos que a tenham decepcionado. As políticas que favorecem os mercados tendem a punir os setores mais tradicionais da economia, relegar a produção a segundo plano e impor sacrifícios ainda maiores a uma população já historicamente sacrificada. Cria-se um ciclo, assim, em que candidatos mais convincentes ao prometer "mudança de modelo" galvanizam o entusiasmo, sempre disponível, das maiorias flutuantes. Para governar sem levar os respectivos países à insolvência, porém, esses governantes são tentados a dançar conforme a música financeira. Trocam de lugar com a oposição não apenas no sentido físico mas também mental. É difícil distinguir, na ideologia dos mercados, que aspectos traduzem um avanço nas concepções de administração pública e que outros significam apenas colocar o Estado a serviço dos interesses da especulação financeira, externa e doméstica. Controle da inflação, equilíbrio fiscal e respeito aos orçamentos estão com certeza entre os primeiros. Até por sua natureza técnica, porém, deveriam ser conciliáveis com políticas diferentes. Aquela ideologia considera que esquerda e direita são posições ultrapassadas, que emergiu da ciência econômica um saber objetivo, indiscutível. Sem dúvida o debate se tornou mais técnico e menos ideológico. Sem dúvida as teses da esquerda foram desmoralizadas na prática. Isso não quer dizer que os interesses em conflito tenham desaparecido nem que deixaram de se fantasiar de ciência exata. Talvez a principal tarefa de um governo como o do PT fosse distinguir, nessa ideologia, o que é irrecusável do que é propriamente ideológico. Em tese, é o que ele está fazendo; na prática, limita-se até agora a repetir o governo anterior na economia e a repetir seus próprios chavões nas áreas de contrapartida social. Em algum momento vai-se constatar que o rei está nu.
Já se está se tornando hábito. Um candidato a prefeito (ou governador) se elege e herda o descalabro deixado pela gastança do antecessor. Tem de conter suas ambições, obedecendo a um gestor austero, que reequilibre as finanças devastadas. Então chega a hora de o novo governante empreender a própria gastança, para se reeleger a todo custo. Chegou a hora, portanto, de o secretário João Sayad deixar a equipe da prefeita Marta Suplicy.
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Otavio Frias Filho escreve às quintas-feiras nesta coluna.
Wednesday, May 21, 2003
ft 21may03
hello ecb: ease rates NOW, hello asia: let your currency appreciate, hello snow: shut up.
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The dollar's downward dance
Published: May 21 2003 5:00 | Last Updated: May 21 2003 5:00
At the weekend, John Snow, the US treasury secretary, said that recent currency realignments had been "really fairly modest". Objectively, you cannot fault his assessment. For all the comment about the plunging dollar, it has fallen less than 14 per cent over the past year on a trade-weighted basis and has spent the vast majority of the past 16 years at significantly lower levels against the currencies that constitute the euro. But Mr Snow's remarks have created the false impression that the dollar's recent falls are not particularly important.
For one thing, currency markets are extremely sensitive to nuanced changes in public rhetoric. Finance ministers feign bafflement at such attention to their words but it is hardly surprising that investors take notice, given the US need to attract more than $500bn (£310bn) net capital inflows annually to finance its current account deficit. Second, though currency markets are impossible to predict day to day, it is now becoming difficult to argue against the view that a significant dollar decline is under way. With US investment yields extremely low for foreigners, the greenback's fall from grace after a period of overvaluation has much in common with its last big drop between 1985 and 1987. Then, the dollar dropped by 40 per cent against the currencies of its main trading partners and lost half its value compared with the D-Mark.
If recent trends continue, the economic fallout should not be under- estimated. US goods would become more competitive than their eurozone counterparts in all markets, reducing profit margins of European companies and demand in eurozone economies.
These are just the circumstances the International Monetary Fund warned could spark a deflationary cycle in Germany. Its paper on deflation, also published at the weekend, highlighted the economic costs of allowing deflation to become entrenched; the importance of pre-emptive policy action to prevent it; and the high risk of a deflation in Germany. But it is not just these countries which have something to fear from dollar depreciation. The IMF study cogently concluded that "if the dollar decline were severe enough, foreign balance sheets could come under significant pressure, aggravating deflationary pressures there with effects that can rebound on the US".
The authorities' benign neglect of the dollar's fall therefore borders on reckless behaviour. Attempts to prevent its fall would probably be futile, given the huge US current account deficit, so offsetting measures are vital. The European Central Bank must loosen monetary policy now; and Asian economies with strong demand growth should allow their currencies to appreciate against the dollar. The latter would at least mean that Europe is not bearing the whole burden of adustment. Those in positions of power still express strong resistance to either move. The dollar's downward dance gets ever more dangerous.
Tuesday, May 20, 2003
ft 20may03
daunting at first, em rallies induced by global liquidity cycles eventually go bust. as this one was caused by a worsening of the global economy l-t effects are bad: lower oil prices and lower consumption of exports of em countries by developed ones. brz does not hurt with high oil nor is it a large player in global trade...
The false optimists of the emerging markets
By Desmond Lachman
Published: May 19 2003 20:11 | Last Updated: May 19 2003 20:11
Upon joining Salomon Brothers as their chief emerging market economic strategist in 1996, I was given a useful piece of advice from one of Salomon's seasoned, if cynical, emerging market bond traders. He told me that when the winds were strong, even turkeys would fly. I found that advice to be invaluable as I witnessed at close quarters a number of occasions when the winds were strong for emerging market debt, only to see those liquidity-induced rallies end badly as global liquidity conditions changed.
The current remarkably strong rally in emerging market debt appears to be no exception. However, the precise timing of the inevitable bust in emerging market debt prices is a matter of debate, as it is so intimately related to the global liquidity cycle.
Over the past six months, emerging market debt prices have rallied dramatically, making it among the best-performing asset classes over this period. From a low of 7.3 percentage points over US Treasuries immediately before the Brazilian presidential election last October, emerging market debt spreads as measured by the Salomon Emerging Market Bond Index have tightened to about 4.3 percentage points over US Treasuries at present. This is a level that was last seen in early 1998, a few months before the Russian debacle. As a result, Morning-star, the investment research firm, reports that over the past 12 months the average emerging market debt fund has provided investors with a 21 per cent rate of return.
The remarkable tightening in emerging market debt spreads has occurred despite the fact that the fundamentals in the main emerging markets appear as shaky as ever. Brazil remains saddled with an unsustainably heavy domestic and external debt burden, while its economy has yet to show any real signs of growth; Venezuela and much of the Andean region remain plagued with political instability; the central European economies are all too dependent on the fortunes of the hapless German economy; Turkey's reform effort appears to be stalled while its relations with its chief benefactor appear strained; and the once high-riding Asian economies are now threatened by the spread of the epidemic of severe acute respiratory syndrome in China.
Paradoxically, what is fuelling the rally in emerging market debt prices, at least in the near term, is the worsening of the global economic environment. That worsening allows global interest rates to decline and causes money to flee equity funds in general in favour of the safer haven of fixed income funds. In such an environment, fixed income money managers look hard for yield and begin to allocate increased sums to high-yielding asset classes such as emerging market debt. That sets in train a self-reinforcing cycle of higher emerging market debt prices that eventually sucks in even those who might be sceptical about the long-run credit fundamentals.
From a long-run point of view, the worsening of the global economic environment is unambiguously bad for the emerging markets. Perhaps the most important reason for this is the fact that slower global growth is associated with lower commodity prices in general and with lower international oil prices in particular. This is especially bad for the economic performance of those countries still highly dependent on oil revenues, such as Ecuador, Mexico, Russia and Venezuela.
Lower global growth is also associated with reduced opportunities for emerging markets to export to the more highly developed economies. This is particularly devastating for countries such as the Czech Republic, Hungary and Poland, which all export about 11 percentage points of their gross domestic product to Germany. It is also bad news for a country such as Mexico, which exports about a quarter of its GDP to the US. Another dire consequence is that foreign direct investment flows dry up. This is regrettable because FDI offers emerging markets a more stable flow of funds than the more ephemeral and shorter-term bond financing.
Ascertaining the precise timing of the inevitable large correction in emerging market debt prices is tricky. It involves either determining when the global liquidity cycle will move into a tightening mode or else judging when the longer-run damage to emerging market fundamentals caused by the global slowdown outweighs the short-run benefits from increased global liquidity. But whatever the immediate cause of the bursting of the emerging market debt bubble, burst it most certainly will. The wind is sure to abate soon - and then the turkeys will come plummeting to earth.
The writer is resident fellow of the American Enterprise Institute
Monday, May 19, 2003
fsp 18may03
ficaram bravos...saiu na capa...
SEM MEDO DE CRESCER
Há motivos para suspeitar de que a rendição do governo de Luiz Inácio Lula da Silva aos interesses financeiros que predominam na economia brasileira há mais de uma década não seja apenas uma concessão tática. Mais de quatro meses se passaram desde a posse, e a política econômica só fez apertar o torniquete sobre empresas e trabalhadores. A produção está estagnada, a renda per capita retrocede.
Na campanha, o presidente Lula, seguindo o mote de todos os candidatos, comprometeu-se com a mudança da política econômica. Prometeu colocar o país no rumo do crescimento, do aumento do emprego e da distribuição da renda. Compreende-se que o momento da posse não era propício à menor alteração de rumo. O primeiro presidente de esquerda da história assumia cercado de intensa desconfiança.
Os indicadores financeiros beiravam o descalabro. Se adotar inicialmente a cartilha do conservadorismo era inevitável, é hora de questionar não apenas a persistência da ortodoxia como seu exacerbamento. Sem que o FMI o tenha exigido, o ministro Antonio Palocci, interessado em gerar um "choque de credibilidade", ofereceu ao mercado financeiro mais superávit fiscal. Ou seja, abriu espaço no Orçamento para pagar uma conta de mais de R$ 100 bilhões em juros. Ignorando o custo já extorsivo do crédito, o Banco Central manteve a trajetória ascendente da taxa de juros. Desprezando a asfixia que os tributos exercem sobre a atividade econômica, o Executivo enviou ao Congresso propostas de reformas que, se aprovadas, aumentarão ainda mais a carga tributária.
O governo tarda em implementar a promessa de desenvolvimento que o elegeu. Se a manutenção da política anterior era imperativa no começo, está evidente que ela se esgotou. Persistir nesse caminho é intolerável. Onde está o prometido projeto alternativo, tão falado na campanha?
Manter a economia nos trilhos atuais significa estagnação, desemprego e deterioração da renda, embora agrade àquela fatia francamente minoritária de brasileiros que faz fortunas emprestando dinheiro ao Estado ou intermediando essa operação. De que lado está o governo Lula? Dos bancos ou da produção? Da mudança ou da permanência de um modelo que não consegue responder à exigência do crescimento?
Não se propõe uma mudança brusca, uma aventura populista, mas que se dêem os primeiros passos no rumo do desenvolvimento do país.
Friday, May 16, 2003
ft 16may03
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Argentina's choice
Published: May 16 2003 5:00 | Last Updated: May 16 2003 5:00
Sunday's election was supposed to draw a line under Argentina's catastrophic financial collapse and the uncertain aftermath. But with Carlos Menem's decision to back out, the contest will not take place and his rival Néstor Kirchner, a little-known centre-left provincial governor, will become president. This is bad news. By denying the new president the authority given by a resounding electoral success, Mr Menem has made it more difficult for Mr Kirchner to consolidate the nascent economic recovery.
In one sense, it is good for Argentine democracy that Mr Menem - a politician associated with corruption and mismanagement - has failed in his attempt to return to the presidency for the third time. Mr Kirchner is pledged to pursue the cautious economic policies that have begun to pull Argentina out of its long recession.
Even so, Mr Menem's withdrawal is damaging. Opinion poll results do not confer the legitimacy of real electoral success. With a 22 per cent share of the vote in last month's first round, Mr Kirchner has the weakest mandate of any president in Argentine history. His already fractious Peronist party is even more divided between supporters of Mr Menem, Mr Kirchner and other leaders. Mr Kirchner has neither a majority in congress nor firm support among the country's powerful provincial governors. Adding to the uncertainty, Argentina faces a further string of legislative and local elections.
In office Mr Kirchner will be confronted by a number of difficult tests, particularly on the economy. Argentina has been helped by its currency devaluation and firmer fiscal management but its success will not be sustainable unless the country can regain access to international financial markets.
That requires the country to come to terms with its creditors. Reducing a debt burden of 120 per cent of gross domestic product is vital. Bondholders must be persuaded to accept significant reductions in the value of their assets. Difficult decisions stemming from the unsatisfactory handling of last year's devaluation have still to be made.
Unless privatised utility companies can set realistic tariffs, they will be unable to maintain their networks or make fresh investments. Unless private banks can properly capitalise their operations, assess their liabilities and be confident that property rights will be respected, they will not make fresh loans. Mr Kirchner's supporters may harbour hopes that government intervention can set things right but the state lacks the resources to make the investments that would be necessary.
All this will make it more difficult to achieve and sustain faster growth. But without increased output it is unclear how Argentina can reverse recent very sharp falls in the value of real wages or how Mr Kirchner can meet expectations for wider social change. In short, Argentina faces daunting challenges. It would be unwise for anyone - least of all the new president and his team - to underestimate their scale.
Tuesday, May 13, 2003
ft 13may03
for changes in basel II, for lowering capital requirements on lending to developing countries on grounds that it overestimates the risk which is lower due to low correlation and diversification
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Pact that will hurt poorer countries
By Stephany Griffith-Jones
Published: May 12 2003 20:02 | Last Updated: May 12 2003 20:02
The Basel committee of banking regulators has proposed a new capital accord with the aim of more accurately aligning regulatory capital with the risks that international banks face. But the agreement could have precisely the opposite effect when it comes to developing countries.
The current Basel II proposal would significantly overestimate the risk of international bank lending to developing economies. This would excessively increase capital requirements on such lending, sharply raising the cost of bank borrowing by developing countries and reducing the supply of loans to them.
Bank lending to the developing world has already fallen sharply in the past five years, stifling growth - most recently and spectacularly in Latin America. To reinforce that trend would plainly contradict one of the aims of the Group of 10 richest countries, which wants to encourage private financial flows to developing countries and use them as an engine for stimulating and funding growth.
One of the main benefits of lending to - and investing in - developing countries is their relatively low correlation with mature markets. Spreads on syndicated loans - which reflect probability of default - tend to rise and fall together within developed regions more than between developed and developing countries; similar results are obtained for the correlation of bank profitability. Furthermore, broader macroeconomic variables - such as growth of gross domestic product, interest rates, evolution of bond prices and stock market indexes - show far more correlation within developed economies than between developed and developing ones.
A bank's loan portfolio that is diversified between developed and developing countries has a lower level of risk than one focused exclusively on lending to developed economies. Since the new Basel II rules are intended precisely to help banks cope with un- expected losses, it is surprising and unfortunate that the current proposals do not explicitly incorporate the benefits of international diversification. Unless the proposal is amended, capital requirements will not clearly reflect risk and will unfairly penalise lending to developing countries.
It is therefore imperative that the Basel committee, in its next (and almost final) revision of the proposed accord, incorporates the benefits of international diversification, for example by explicitly reducing capital requirements.
There is a clear precedent. The Basel committee has already made such a change with respect to lending to small and medium sized enterprises. Following the publication of its consultative document in January 2001, there was widespread concern - especially in Germany - that the increase in capital requirements would sharply reduce bank lending to smaller companies, with potentially devastating effects on growth and employment. Critics argued that the probability of a large number of SMEs defaulting simultaneously was lower than for a smaller group of large borrowers. After intensive lobbying by the German authorities, the Basel committee agreed to lower average capital requirements by about 10 per cent for smaller firms.
Our recent research implies that at least as large a modification is justified with respect to international diversification, in regard to lending to developing countries.* There are no practical, empirical or theoretical obstacles to a change that could greatly benefit the developing world and ensure more precise measurement of risk and capital adequacy requirements.
The Basel committee has always emphasised the technical nature of its proposals and the technical case for including the benefits of diversification is extremely strong. Furthermore, G10 governments are committed to encouraging private financial flows and therefore should avoid measures that might have the opposite effect.
Developing economies and transition countries are not represented at all in the Basel committee and so have limited leverage to make their case. However, given the committee's technical expertise and fair-mindedness, there is still a chance that it will amend the current proposal to take account of the benefits of international diversification. It would be technically wrong, economically unwise and politically insensitive not to do so.
* www.ids.ac.uk/intfinance
The writer is a professor at the Institute of Development Studies, Sussex University
Wednesday, May 07, 2003
ft editorial 06may03
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Lula's progress
Published: May 6 2003 16:16 | Last Updated: May 6 2003 16:16
After last year's financial crisis, not even the most foolhardy optimist could have expected Brazil to return to international capital markets so soon and so successfully. But euphoria should not blind Brazil's political establishment to the need for far-reaching reforms of the pension and tax system.
Last Tuesday investors were prepared to buy Brazil's $1bn (£620m) international bond six times over, even though the issue will include an innovative clause that allows for changes in its terms with less than 100 per cent approval from bondholders. Standard & Poor's, the credit rating agency, upgraded its outlook on Brazil. On May 2 the yield spread over US Treasuries (the most widely accepted measure of political risk) fell below 8 percentage points.
Caution is required for two reasons. First, investor enthusiasm is partly inspired by the depressed outlook for mainstream markets. In relative terms, Brazilian yields - still in excess of 11 per cent - are attractive and offer a premium of roughly 2 percentage points over comparable emerging market assets. Second, the appreciation of Brazil's currency that has accompanied the rally in prices could depress export growth, halting the steady current account improvement that has reduced external vulnerability. The Real has gained more than 20 per cent against the US dollar so far this year and this week fell below R$3 to the dollar for the first time since August.
Equally, however, the rally in the markets is creating the real possibility of a virtuous economic cycle. Currency strength and lower international rates will help to reduce the country's debt burden. Inflationary pressures - triggered by last year's sharp depreciation of the Real - have been damped, creating the potential for an eventual reduction in domestic interest rates from the current level of 26.5 per cent. That in turn should help increase economic growth beyond current expectations of about 2 per cent for 2003.
In this situation, it is encouraging that President Luiz Inácio Lula da Silva is pressing ahead with pension and tax reforms. Proposals submitted to congress last week envisage an increase in Brazil's retirement age to levels considered normal in richer countries. The tax plan means that Brazil is taking the first step towards changing a system that penalises productive activity and job creation. Although neither of the proposals submitted to congress last week is ideal, they are important moves in the right direction.
The biggest risk now is that the reforms could become bogged down in congress because trade unions and other groups will undoubtedly seek to dilute the package. It is important that Mr Lula da Silva and his government stick to their path and that legislators act responsibly. If Brazil is to grow faster on a sustainable basis and generate the resources it needs to tackle social problems, change in these areas is vital.
Sunday, April 06, 2003
estado 06apr03
otimista caiu o dolar. comprar dolar via diminuicao passivo cambial ao inves de aumento de reservas
Domingo, 6 de abril de 2003
Sinais auspiciosos
Dólar em queda e inflação em baixa são sinais auspiciosos para os brasileiros, neste momento. São prenúncios de maior segurança em todas as frentes da economia nacional. Ao mesmo tempo, o risco Brasil tem continuado a cair, abrindo a perspectiva de financiamento externo mais farto e mais barato, nos próximos meses. Estão-se formando as condições para um círculo virtuoso de crescimento com segurança. Essa tendência dependerá, naturalmente, da manutenção da seriedade fiscal e da continuação da política de reformas. A insegurança global causada pela guerra tem sido menos danosa à economia brasileira do que muitos temiam, apesar da instabilidade do preço do petróleo.
Sem exceção, os indicadores divulgados a partir de 15 de março vêm mostrando o arrefecimento das pressões inflacionárias. Com o dólar em queda, primeiro lentamente, depois com maior velocidade, vem desaparecendo um dos principais fatores de elevação dos preços por atacado. Além disso, as famílias continuam gastando com muita cautela, forçadas à moderação pelo aperto do orçamento doméstico.
Os últimos índices de preços ao consumidor (IPCs) mostram inequívoca tendência de acomodação nos mercados. Em São Paulo, o IPC medido pela Fipe subiu 0,67% em março, confirmando a trajetória de baixa iniciada em dezembro e só interrompida em janeiro, quando se concentraram pressões excepcionais sobre alguns preços importantes. O núcleo da inflação, que exclui variações sazonais e as tarifas e preços administrados, também continuou em queda, com variação de 0,79%. O número de itens com preços em alta diminuiu de 404 em fevereiro para 357 no mês passado. O de produtos que ficaram mais baratos aumentou de 107 para 141.
Ainda haverá pressões, no meio do ano, quando as tarifas de serviços de utilidade pública forem reajustadas. O governo está procurando renegociar os critérios de correção dessas tarifas, mas, de toda forma, a acomodação do conjunto de preços prosseguirá, se não ocorrer um acidente político ou econômico importante. Acidentes políticos podem ser causados, por exemplo, pelo comportamento irracional e imaturo da chamada ala radical do PT, que o governo terá de continuar controlando para poder cumprir seu programa.
Com o dólar na faixa de R$ 3,20 a R$ 3,30, acentuou-se a discussão sobre o câmbio necessário à manutenção de um robusto superávit comercial. As opiniões têm-se dividido. Alguns afirmam que a balança comercial será prejudicada, seriamente, se a moeda americana custar menos que R$ 3,20.
Outros admitem que não haverá problemas importantes, se a cotação se estabilizar na altura de R$ 3,00. Essa discussão conduz à pergunta: em que momento o Banco Central (BC) deverá intervir para impedir uma valorização excessiva do real?
Tanto o presidente da República quanto o ministro da Fazenda, Antônio Palocci, e o presidente do Banco Central, Henrique Meirelles, negam que haja um plano de intervenção. O BC, disse Meirelles, não tem meta para o câmbio, que deve flutuar livremente, segundo as condições do mercado. De fato, o que se pode afirmar com alguma segurança é que a autoridade monetária acabará intervindo, em algum momento, se houver alguma variação muito ampla em prazo muito curto. O objetivo principal de intervenções desse tipo é limitar a instabilidade do mercado, que atrapalha o funcionamento da economia.
Um maior ingresso de capitais, que poderá ocorrer com a redução do risco Brasil, tenderá a acentuar a valorização do real. Quando isso ocorrer, e se ocorrer, o Banco Central terá de avaliar se os objetivos comerciais do País poderão justificar uma intervenção mais séria. Mas é possível que, antes de se chegar a esse ponto, o mercado se encarregue de corrigir a cotação.
Sangue-frio continua a ser um atributo importante para a autoridade monetária.
Muito mais prudente que intervir no mercado, por enquanto, será aproveitar o dólar mais barato para liquidar parte dos títulos públicos vinculados ao câmbio. Isso facilitará a gestão das contas públicas e tornará o País menos vulnerável a pressões cambiais.
