Posts in category Business and finance


ApprovedbusinessBusiness and finance

India’s huge buffalo-meat industry is in limbo

IN A corner of the state of Uttar Pradesh (UP) stands a gleaming building dedicated to animal slaughter on an industrial scale. Neatly mown lawns lead the way to a corral for hundreds of the curly-horned Murrah buffalo typical of the region. Nearby is a lorry-sized, stainless-steel machine in which the animals are killed. A Muslim cleric stands ready to oversee the incantation that ensures each carcass will be halal. Upstairs a microbiology lab monitors the progress of each beast through stages of chilling, deboning and deglanding. Each pile of disaggregated buffalo is then frozen solid and put into a loading chamber.

Such facilities are common in UP, although they do not advertise their whereabouts for fear of antagonising “cow vigilantes”, Hindu militants who harass and extort in the name of protecting cows, which a majority of Indians hold to be sacred. India earns around $4bn a year from exporting beef, and last year was the world’s biggest exporter of the product….Continue reading

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ApprovedBusiness and financeFinance and economics

Finland tests an unconditional basic income

JUHA JARVINEN, an unemployed young father in a village near Jurva, western Finland, brims with ideas for earning a living. “I’m an artist and entrepreneur. Sometimes I’m too active, I don’t have time to stop,” he says. He just agreed to paint the roofs of two neighbours’ houses. His old business, making decorative window frames, went bust a few years ago. Having paid off debts, he recently registered another, to produce videos for clients.

Mr Jarvinen says that for six years he had wanted to start a new business but it had proved impossible. The family got by on his wife’s wages as a nurse, plus unemployment and child benefits. Mr Jarvinen had a few job offers in the main local industries—forestry, furniture-making and metalwork. But taking on anything short of a permanent, well-paid post made no sense, since it would jeopardise his (generous) welfare payments. To re-enroll for benefits later, if needed, would be painfully slow. “It is crazy, so no one will…Continue reading

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Business and financeGulliver

“Basic economy” class is winning over flyers

GULLIVER wrote last week about American Airlines handing indignant flyers a notable victory. The carrier rescinded a plan to take away an inch of legroom from economy-class seats on new planes, following a public outcry. Such concessions are rare. Airlines generally worry about how customers vote with their wallets not how they grumble with their words. Hence, they cut comforts to offer the low fares that people demand.

Anyone hoping that American Airlines’ climbdown might signal a reversal of that trend should think again. Earlier this year, United Airlines introduced a new class of fare, “basic economy”. Such tickets, which strip out those few remaining comforts that economy passengers enjoy, have been derided as “last class”. But, like it or not, cost-conscious passengers are showing their approval.

The airline expanded the programme to all domestic markets last month. Andrew Levy, United’s CFO, said last week that about…Continue reading

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Business and financeGulliver

Complaints against America’s airlines are rising

LAST year, Bob Fornaro, the boss of Spirit Airlines, talked of the effort his firm had made to reduce the number of customer complaints. The ultra-low-cost carrier, dubbed the most hated airline in America by Bloomberg, had long been ranked as a primary purveyor of passenger pain, regularly propping up lists that rate airline service. Alas, Mr Fornaro’s efforts seem to have gone unrewarded. Complaints per passenger remain easily the highest of any of the big American operators. In fact, as our chart shows, things seem to be getting worse.

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ApprovedbusinessBusiness and finance

An industry shudders as Amazon buys Whole Foods for $13.7bn

AMAZON announced on June 16th that it would pay $13.7bn to buy Whole Foods, a grocer known for its organic produce. On the face of it, the purchase might not seem to upset the grocery cart, either for Amazon or for the supermarket business. Amazon controls a measly 0.2% of America’s grocery market; Whole Foods has just 1.2%, according to GlobalData, a research firm and consultancy. By Chinese standards, Amazon looks slow: Alibaba, another e-commerce titan, bought a 32% stake in a Chinese grocer last year.

Nor is Whole Foods a juggernaut. It has about 450 stores in America, Britain and Canada, but American shoppers are now buying a wide range of organic foods at other grocers, without having to put up with Whole Foods’s steep prices or its hipster clientele.

Nevertheless, the deal marks a new era for Amazon. It has run a few experiments in physical retail, including bookstores in Chicago and in New York. In Seattle it is testing a small grocer, Amazon Go, where…Continue reading

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ApprovedbusinessBusiness and finance

German deep discounters go big in America

Rummage sale

AMERICA’S economy is enjoying its third-longest period of uninterrupted expansion since the 1850s. So it is at first glance puzzling that Lidl, a German deep-discount chain whose sales soar when times are hard, is entering the market now. On June 15th Lidl opened nine stores in Virginia, North Carolina and South Carolina. Up to 90 more stores across the country are to follow within a year.

The move may be far-sighted, however. Lidl’s arch-rival, fellow-German discounter, Aldi, has been in America for four decades and has 1,600 stores across 35 states. It has had success not just among poor Americans but, increasingly, among the middle class, according to Bain, a consultancy. Aldi is preparing for an expansion: on June 12th it said it would add 900 more in the next five years, putting it third in the country by store count, behind Kroger and Walmart, America’s biggest retailer.

Unlike conventional supermarkets, which usually carry…Continue reading

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ApprovedbusinessBusiness and finance

Canadian banks don’t face a crisis. They do face a strategic trilemma

AS the global financial system was engulfed in crisis in 2008-10, only one set of banks in Europe and North America stayed serene and safe: Canada’s big five lenders. They were largely untouched by the madness south of the border and across the pond and kept churning out profits. After the crisis experts went on pilgrimages to Toronto and Ottawa to study the Canadian way. The country’s central-bank governor, Mark Carney, became a financial celebrity who was headhunted to run the Bank of England.

Canada’s banks quickly joined the select ranks of the industry’s superpowers, shooting up the global league tables in the aftermath of the crisis. Today three of them are on the list of the 20 biggest banks globally, measured by market value: Royal Bank of Canada (RBC), Scotia and Toronto Dominion (TD). RBC is worth more than Spain’s Santander, the euro zone’s biggest bank.

It has taken nearly a decade but Canadian lenders are back in the spotlight, this time accused of…Continue reading

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ApprovedbusinessBusiness and finance

Corporate Europe is giddy with optimism

IT IS remarkable what a difference a single election can make. “The way Europe is regarded by the rest of the world has changed in a few months,” says Gérard Mestrallet, chairman of both Engie and SUEZ, two big French energy firms, and a board member at Siemens of Germany, the region’s biggest engineering firm. The arrival of Emmanuel Macron as France’s reform-minded new president—his party is set for a giant victory in parliamentary elections this week—is helping to transform attitudes from gloom to cheer.

Mr Mestrallet echoes many corporate leaders in describing “real hope and enthusiasm”, amid expectations that the new president will, within months, “de-block” the euro zone’s second-largest economy. Mr Macron will start freeing business activities, he says, first with legislative reform of a rigid labour market to simplify rules on hiring and firing, and then by cutting tax rates (the corporate kind will fall from 34.4% to 25%). Measures to boost entrepreneurship…Continue reading

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ApprovedbusinessBusiness and finance

American energy firms are enjoying a bonanza south of the border

Supply chain in action

A CHEMICAL engineer at Pemex, Mexico’s state-owned oil company, opens a tap atop a maritime platform in this offshore oilfield in the southern part of the Gulf of Mexico. She decants a jar of heavy Mexican crude that comes, hot to the touch, from 3,500 metres below the seabed. It looks like a succulent chocolate sauce, but smells like the back end of a cow. “Taste it,” she laughs.

The crude that she is testing is pumped a short distance across the sea to a vast floating storage tank, known as an FPSO, where it is blended with lighter crude for export. The FPSO stores about 2m barrels—roughly the equivalent of a day’s worth of Mexican oil production. A quarter of that is fed into a supertanker tied alongside, contracted by Chevron, America’s second-largest oil firm. It then sails north across the maritime border to Texas or Louisiana where the crude runs through refineries. The refined petrol or diesel often then returns to…Continue reading

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ApprovedbusinessBusiness and finance

A high-flying Chinese dealmaker has his wings clipped

“THE total number of airline miles travelled by this team is equal to a round trip between Earth and the moon.” So bragged Wu Xiaohui at a recruiting event held at Harvard University in January 2015. The boss of Anbang, a big Chinese insurer, was dazzling potential hires with his plans to go global. Anbang had shot to prominence just weeks before with a deal worth $2bn to acquire the Waldorf Astoria hotel in New York from America’s Hilton.

Since then Mr Wu has attempted acquisitions around the world worth a total of some $38bn (see table). Political controversies have caused a number to unravel. One that recently fell apart was Anbang’s negotiation to take a $400m stake in a property in Manhattan, 666 5th Avenue, controlled by a firm owned by the family of Jared Kushner, President Donald Trump’s son-in-law. There were complaints about a potential conflict of interest on the part of Mr Kushner, who advises Mr Trump on relations with China.

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ApprovedbusinessBusiness and finance

One year before the World Cup, FIFA is shunned by sponsors

AT THE World Football Museum in Zurich, run by FIFA, football’s global governing body, visitors take their photo with the World Cup trophy, try their hand at match commentary and gawk at artefacts ranging from the original handwritten set of the rules of the game to the yellow card famously shown to Paul Gascoigne, a lachrymose English footballer, in 1990. Those wanting a glimpse of the luxurious bedsheets that were used to shield FIFA officials as they were hustled out of a ritzy Swiss hotel in 2015 having been arrested on corruption charges may feel cheated—they are not on display.

If FIFA’s shrine to itself ignores this squalid period of its history, its balance-sheet bears the traces. FIFA lost $369m in 2016, triple the losses of the year before, and forecasts a loss of $489m in 2017. Reserves, which have been above $1bn since 2008, are predicted to fall to $605m next year.

The latest loss is partly because of higher development funding for member…Continue reading

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ApprovedbusinessBusiness and finance

A Swedish activist speaks softly and carries a big stick

Gardell, smiling butcher

“SCLEROTIC companies abound in Europe,” says Christer Gardell, co-founder and managing partner of Cevian Capital, an activist hedge fund based in Sweden. That is an uncommonly pugnacious statement for a firm that operates behind the scenes and uses public pressure as a last resort. Unlike its louder American peers, such as Bill Ackman’s Pershing Square, Paul Singer’s Elliott Management or Dan Loeb’s Third Point, Cevian has never written a pointed open letter to a chief executive or waged a proxy battle (although Carl Icahn, an activist who has been known to call bosses “morons”, is one of its investors).

Its calm approach seems to suit corporate Europe. Cevian is the region’s largest activist fund, and one of the world’s biggest, with over $15.4bn in assets. It was founded by Mr Gardell and Lars Forberg in Stockholm in 2002; both still run it. Its “constructive” activism, focusing on only a dozen companies at a…Continue reading

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ApprovedbusinessBusiness and finance

Tanzania’s firebrand leader takes on its largest gold miner

“IF THEY accept that they stole from us and seek forgiveness in front of God and the angels and all Tanzanians and enter into negotiations, we are ready to do business.” As conciliatory gestures go, that one by John Magufuli, Tanzania’s president, to Acacia Mining, the country’s largest foreign investor, could hardly have been more fork-tongued.

Nonetheless, two days later John Thornton, head of Barrick Gold, Acacia’s largest shareholder, met Mr Magufuli to start talks on ending a dispute that has halved Acacia’s market value since the government in March imposed a ban on the export of gold- and copper-concentrates. It is a mark of the seriousness of the stand-off that he is ready to negotiate on all points of contention between the two sides.

The context of the row is increasingly typical of Africa’s mining industry. The Tanzanian government is seeking more tax revenue from a foreign mining firm that was initially wooed into the country by generous tax…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Inflation has not yet followed lower unemployment in America

THAT central banks cannot endlessly reduce unemployment without sparking inflation is economic gospel. It follows from “a substantial body of theory, informed by considerable historical evidence”, according to Janet Yellen, chair of the Federal Reserve. Her conviction explains why, on June 14th, the Fed raised interest rates by a quarter of a percentage point, to a range of 1-1.25%.

Excluding food and energy, prices are only 1.5% higher than a year ago; the Fed’s inflation target is 2%. But Ms Yellen thinks unemployment is below its so-called “natural” rate, so inflation should soon rise. Is she right? Or has the relationship between unemployment and inflation, dubbed the Phillips curve, gone missing?

It is not the first time the theory has failed. After the financial crisis unemployment soared to 10%. This surfeit of workers should have sent inflation tumbling. But prices held up well; in October 2009, when unemployment peaked, underlying inflation was 1.3%, only a little…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Death pools can bring financial security for the long-lived

Thinking inside the box

WHEN members of a private club in Manhattan suddenly start dropping dead at an alarming rate, Matt Scudder, a private detective, suspects more might be at play than bad luck to explain the bizarre series of suicides and violent accidents. If this sounds like the back-flap of a murder mystery, your deduction skills are as sharp as Mr Scudder’s. In Lawrence Block’s “A Long Line of Dead Men,” the cunning detective eventually uncovers the motive for the killing spree: the club of 31 men were all part of a tontine.

These ancient financial instruments are built on members paying money into a pool, which is invested and then pays out dividends once they reach a pre-agreed age. Those who live longest will see their income increase as others die; the last one standing receives the most. They are essentially a form of insurance against an unexpectedly long life.

Although most people will know them from the works of Agatha…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The perils of nationalisation

WHEN Jeremy Corbyn unveiled his Labour manifesto ahead of the recent British election, opponents gawked at pledges to renationalise the postal and rail systems. Such enthusiasm for state ownership smacks of a philosophy long since abandoned by leaders on both left and right. Despite Labour’s decent electoral performance, nationalisation is not everywhere on the march; on June 5th Donald Trump made public his desire to privatise air-traffic control. But the rise of Mr Corbyn and Bernie Sanders hints at a weakening of the rich-world consensus that the less of the economy owned by government, the better. That is a pity. Expanded state ownership is a poor way to cure economic ailments.

For much of the 20th century, economists were open to a bit of dirigisme. Maurice Allais, an (admittedly French) economist who won the Nobel prize in 1988, recommended that the government run a few firms in each industry, the better to observe the relative merits of public and private…Continue reading

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