Nicaragua will build a rival to Panama Canal

        Nicaragua's Congress granted a 50-year concession to a little-known Chinese businessman to develop a new waterway that will rival the Panama Canal. The Financial Time's Kathrin Hille sits down with Wang Jing, founder and chief executive of HKND, to talk about his plans and whether his US$40bn project is a front for the Chinese government's ambitions to extend its influence in the US's backyard. 

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Panama Canal expansion

               The waterway’s $5.25bn expansion will shake up global trade routes

Eager to defend its status as one of the world’s great trade conduits, Panamanians decided to expand the canal in a national referendum almost seven years ago. That $5.25bn project is running about six months behind schedule but, when the work is finished in mid-2015, the expanded waterway will transform some of the most critical trade routes between the Atlantic and the Pacific.

Last week, celebrating the arrival of the canal’s titanic new lock gates, Ricardo Martinelli, Panama’s president, predicted that the expansion work “is going to change the global maritime industry”.

The deeper, wider channel will allow the passage of enormous vessels with up to three times the capacity of the biggest ships currently using the route. Panamanian officials predict that the canal, which celebrates its centenary next year, will increase the annual tonnage it carries to more than 600m tons in 2025 from 333.7m tons last year.

In Panama, the expansion is 60 per cent complete. Dredging of the navigational channels along the narrowest section, the Culebra Cut, is finished.

Somewhat cruelly for Panama, ship sizes keep growing. Maersk Line, operator of the world’s biggest container fleet, has 20 new ships on order that are so big that they cannot pass through even the enlarged waterway.

 “In the future, we foresee trade growing between Asia and Latin America,” says Jorge Luis Quijano, the Panama Canal administrator, “with east Asia sourcing more and more raw materials out of Latin America.”

However, Panama will not be able to profit from these trade flows unchallenged. Nicaragua has backed a $40bn proposal for a little-known Chinese company HKND to dig a rival to the Panama Canal. Many already doubt the economic feasibility of a project three-times longer than Panama’s 80km waterway.

Not to be left behind, Guatemala and Honduras have announced “land bridge” projects between the Atlantic and Pacific. There is also speculation in Mexico about Chinese investment in a connection across the Tehuantepec isthmus.

Container shipping lines such as Maersk, which has about 15 per cent market share in Latin America, are open-minded about such projects. “Any infrastructure investment that will facilitate trade between customers is welcomed,” says Robbert van Trooijen, Maersk Line chief executive for Latin America and the Caribbean. “I see myself as a user of those projects.”

Since Panama took control of the Canal in 1999, about 5 per cent of world trade has been passing through its locks. It earned $1.6bn in pre-tax profits last year on revenues of $2.4bn, and accounts for up to 10 per cent of the country’s economic output.

Panamanians are confident that regional rivals will not eat too deeply into their profits. “We don’t consider there will be any competition,” Fernando Núñez Fábrega, Panama’s foreign minister, told the Financial Times last month when asked about the Nicaraguan rival. For him, if everyone who wanted to build a canal did so, “Central America would end up like a Swiss cheese”.

Alberto Alemán, who stepped down as Panama’s canal administrator in December 2012 after 16 years at the helm, hopes that much of the new business will come to Panama’s own ports, on both coasts. Panama offers logistical advantages. It is a regional airport hub and also has a large free trade zone, like Singapore and Hong Kong. The country is also Latin America’s fastest growing economy, with annual growth rates of about 10 per cent.

The high quality of Panama’s ports sets it apart from many in Latin America. “We have to adapt ourselves, and fast, to address the big infrastructure gap we have in the region,” says Esteban Diez-Roux, principal transportation specialist at the Inter-American Development Bank, or IDB. “Logistical costs in Latin America are about 50 per cent higher than in the rest of the world.”

According to an IDB study, the region must speed up the modernization of ports, roads and other basic infrastructure “otherwise, it will not be able to take advantage of the lower costs that will be generated by increased transoceanic traffic of large ships”. After all, delivering all the cargo from one 10,000-container vessel requires 18 trains, or 5,800 trucks or 570 Boeing 747 jumbo jets.

Behind the concrete towers under construction, a vessel from Wallenius Wilhelmsen, the Scandinavian joint venture that operates the world’s largest car-carrier fleet, is lining up to cross the locks from the Pacific into the Atlantic. “There still is no other place in the world where you can be in another ocean in just a matter of hours,” Mr Alemán, the former administrator of the canal, said.

adapted from Financial Times

 

English mania (TED talk)

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Subliminal messages in corporate logos (videos)

 






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Chinese Graduates Face Tight Job Market

 BEIJING — China will see a record number of graduates moving into the job market this year. Seven million will complete their studies in 2013 and shift their attention toward building a career. With China’s economy already slowing, job prospects for many new graduates are not good.

There are not only seven million graduates this year moving into the market, but more than 200,000 who graduated last year are still looking for jobs.

“Only 30 percent of graduates can sign a contract and be employed right away," explained Hu Xingdou, an economist at the Beijing Institute of Technology. "The majority of students have to continue to look for work or remain unemployed."

And it’s not just the number of graduates that is making the search for jobs difficult. After a decade of double-digit growth, China’s economy is slowing. Chinese leaders admit they are struggling to keep growth around seven percent.

But, Hu Xingdou said the biggest problem is the unsustainable structure of China’s industry and the huge disparities between regions.

“There are many places in China where graduate students are needed, but graduate students are not willing to go. For example private enterprises in China have a strong need for graduate students, but students prefer to go to state owned enterprises, government departments, public institutions, foreign companies and so forth,” Hu said.

Recently, Chinese Premier Li Keqiang called on companies to give more opportunities to new graduates. In response, some privately run enterprises have announced increases in their hiring of new graduates.

The government is planning to give private companies tax incentives and funding to help level the playing field with state-owned enterprises. They will also encourage new graduates to work in smaller cities away from China’s coastal areas by giving them subsidies or other incentives.

adapted from VOA

Marijuana legalization in Uruguay

 AFTER more than a year’s public deliberation and a 14-hour parliamentary debate, on July 31st Uruguay took a big step and became the first country in the world to legalize marijuana. The lower house of Congress voted, by 50 to 46, to approve a bill from the left-wing ruling party to legalize and regulate the production and sale of the drug. This is now expected to be approved by the Senate. If so, Uruguayans will be able to consume marijuana by growing up to six plants at home, by joining a club or by buying up to 40 grams a month from licensed pharmacies.


The bill has faced fierce opposition: a poll last month found 63% against, and opponents claim that consumption will rise. But its supporters argue that drug prohibition has caused more problems—in the form of organized crime and the risks of clandestine consumption—than the drugs themselves.

Uruguay’s vote follows the approval of marijuana legalization in referendums in Colorado and Washington state in the United States last year.

In June foreign ministers of the 34 countries of the Organization of American States agreed “to encourage the consideration of new approaches” to the drug problem. Reformers hail these steps as breaking a taboo: in place of the universal prohibition imposed by the UN drugs conventions, the Americas are moving towards experiments with alternative policies. That, they hope, will encourage drug policy based on evidence, rather than dogma.

 

 What questions would you ask to get the following answers?




1. more than a year
2. July 31st
3. legalize and regulate the production and sale of the drug.
4. Yes, the Senate will.
5. by growing up to six plants at home, by joining a club or by buying up to 40 grams  a month from licensed pharmacies.
6. six plants
7. 40 grams
8. last month
9. that drug prohibition has caused more problems than the drugs themselves.
10. to encourage the consideration of new approaches
11. drug policy based on evidence.
12. perhaps

From The Economist

YPF - Flogging a Dead Cow

 Out of gas

LITTLE more than a year ago President Cristina Fernández de Kirchner announced the nationalisation of YPF, an oil company owned by Spain’s Repsol. Ms Fernández called it a victory for “energy sovereignty”, claiming that Repsol had plundered its Argentine holding for quick profits without investing in exploration or development. But on July 16th, after a year in which YPF’s oil and gas production continued to disappoint, the government announced that it had agreed on a big joint venture between YPF and a different foreign oil giant, Chevron.

Argentina’s energy industry is in a sad state. In 2011 the country became a net importer of energy for the first time since 1984, further eroding its foreign-currency reserves, now at their lowest in six years. Nationalisation has not helped: in the first quarter of this year YPF’s output of crude oil fell by 0.7% and of natural gas by 3.7%. April saw a fire at a refinery. Energy imports are expected to reach $14 billion this year, up from $9.2 billion in 2012.

The great hope is vast shale-oil and gas reserves in Neuquén province, which Repsol discovered shortly before the government expropriated YPF. The Vaca Muerta (“Dead Cow”) field is estimated to hold 16 billion barrels of shale oil and 308 trillion cubic feet (8.7 trillion cubic metres) of shale gas, which would give Argentina the world’s fourth-largest reserves of shale oil and second-largest of shale gas.

Extracting the deeply buried spoils is complicated, costly work. Jorge Ferioli of the World Energy Council, an industry research group, estimates that developing Vaca Muerta will require $68 billion-89 billion. YPF lacks such funds, and Argentina’s borrowing costs in effect bar it from seeking international financing.

As well as bringing expertise, Chevron has promised an initial investment of $1.24 billion in Vaca Muerta as part of its joint venture with YPF. The deal was announced after Ms Fernández issued a decree seemingly tailor-made for Chevron, which states that energy companies that invest over $1 billion will, after five years, be allowed to sell 20% of their production abroad without paying export taxes or being forced to repatriate profits.

Opposition parties, which backed the expropriation, have labelled the Chevron deal a “re-privatisation” and challenged the legality of the decree. They will make the most of the controversy in the run-up to congressional elections due in October. “A year ago the government considered energy sovereignty to mean ‘Spanish, get out’, whereas now it seems to mean ‘Yankees, come in’,” says Daniel Montamat, a former energy secretary and former head of YPF (under opposition governments).

YPF faces obstacles to attracting more collaborators. For one thing there is runaway inflation and a distorted exchange rate. More pressing is the government’s unfinished business with Repsol. Argentina has yet to compensate the company a peso for the $10.5 billion it claims it is owed. Last year, anticipating its deal with YPF, Repsol sued Chevron in Spain and the United States; on July 24th it sought an injunction to halt the deal. Keeping the lights on in Argentina is not getting any easier.

From The Economist

A magic penny (TED Talk)

 Tania Luna has an unusual title: she calls herself a “surprisologist.” The co-founder and CEO of Surprise Industries, Luna thinks deeply about how to delight, and how to help individuals and teams thrive in uncertain circumstances and develop the bonds needed to get through them.

When Luna was invited to take part in TED’s Worldwide Talent Search in 2012, she expected to give a talk about surprise and the importance of not being attached to outcomes. However, she was inspired to tell a more personal story -- one many of her closest friends didn’t know -- about her Ukrainian family getting asylum in the United States when she was 6-yeard-old and arriving in New York with virtually nothing. She sees her work as connected to her upbringing  because it gave her an appreciation for the joy of little surprises. 

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Europe's economy today

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