Category Archives: W-T-W

Global Finance

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The European Central Bank and national central banks started buying soveeign debt under a plan to inect 1.1 trillion euros into the economy.

Deutsche Bundesbank President Jens Weidmann’s opposition to the ECB’s move: “The most vocal critic of the European Central Bank’s quantitative easing program criticized the program as it was being launched.

The yuan is losing strength against the dollar, and now there is nervous talk about what would happen if China launched quantitative credit-easing moves.  We have noted that this uneven application of QE and the differential interest rates across the globe impacts economies in odd ways that are only beginning to be noted.  Currency wars result in some cases.

Chinese regulators are turning to Japan for lessons on how to keep the world’s second biggest economy from taking the same path of recession and deflation that has blighted its neighbor for the past 20 years.

Global Economy?

 

 

Obstructing Detente with Iran

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From economic, political and social points of view, ending the standoff with Iran seems like a worthy effort.  For the US Congress to interfere with the diplomatic efforts of the State Department is unprecedented and shows how destructive and uncivil relations between the branches of government have become.  It would be tragic if the Seretary of State, John Kerry, were not able to conclude a framework agreement.

Iran-US Talks

Tepid Growth in Latin American Cities

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Latin America houses 22 of the 300 largest metropolitan economies in the world. Together, these cities and their surrounding areas—ranging from 21 million-person Mexico City to 2.5 million-person San Juan—account for 30 percent of Latin America’s population and 40 percent of its economic output. On average, they are the most productive parts of the region and the wealthiest as a result.

For all that, however, these places are growing slower than cities in other parts of the world. Figure 1 shows that employment grew by 1.2 percent in Latin American metro areas, slower than both developing metro areas (1.7 percent) and the world’s 300 largest metro economies overall (1.5 percent).

While employment creation was tepid, GDP per capita growth actually contracted by 0.3 percent, the only global region to experience a decline. This drop looks even starker compared to average GDP per capita growth in developing metro areas (4.0 percent).

Slower employment and GDP per capita growth in Brazilian cities, which account for half the Latin American metro areas in the report, dragged down the performance of the region as a whole.

Jobs grew at a rate of 0.8 percent and GDP per capita declined by 0.9 percent, despite the stimulus associated with the World Cup. Indeed, the construction sector created jobs at the fastest rate in 2014 in Brazil’s cities, and Rio de Janeiro, a major World Cup host and the site of the 2016 Olympics, was the best performing Brazilian metro area.

However, this building boom failed to counteract a floundering commodities sector, as well as poorly performing manufacturing and business and financial services sectors. As a result, four Brazilian metro areas landed among the 60 slowest growing metro economies in the world: Campinas, Porto Alegre, São Paulo, and Salvador.

 

Educating Arab Girls

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This International Women’s Day, Arab leaders across the Middle East and North Africa (MENA), along with their partners in the international community, must reassert the right to education for every child—especially for girls.

Current efforts fall short for far too many girls and young women. More targeted initiatives, funding, research, and advocacy for education for girls and women in MENA should be among the top priorities.

Educating girls and women is one of the best investments Arab states can make in their social and economic well-being.

As more countries in the Arab world are embroiled in conflict, it is also important to consider the role that educating and empowering women can play in establishing peace and security.   Educating Arab Girls

 

Could the Japanese Become Extinct?

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With a plummeting birth rate and a rapidly aging population, Japan is facing an unprecedented population collapse with vast economic, social and political implications. This sixteen and a half minute video examines the dangers facing the nation and the apparent lack of action to address the problems that exist now and appear to be growing unchecked.  Japan’s population peaked in 2007 at 127.771 million and has declined every year since.  The projected population for 2100 is about 47 million, declining at a rate of about 2% per year.  If that were to continue to 2200 the entire population of Japan would be a little more than 6 million, and by 2300, a little more than 800,000.

Graph from Japanese Pension Funds Daabase
japan-population-1880-2100

Are More Powerful Women Less Faithful?

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Neal Mc Carthy writes:  According to a study in the Journal of Sex Research, the higher up and more powerful a person’s job, the more likely they are to be unfaithful.

Statista charted how people in positions of occupational power engage in infidelity and you can read more on the research in the Independent.

This chart shows how people in positions of occupational power engage in infidelity.

Infographic: Power increases infidelity | Statista
You will find more statistics at Statista

International Women’s Day 2015

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Internatioanl Women’s Day is a day to be celebrated every day.  WTW Women and  Finance encourages women to expand their basic fund of knowledge, to work for equal pay, represenation on corporate boards, STEM opportunities and to encourage the men our lives to support us.

This year we are particularly concerned with economic inequality and with the failure of governments to enforce the law in banking, which encourages the diversion of funds from the public sectorr.

Globalization is an inevitable and exciting prospect.  It will also take the effort and good will of women across the world.  We are trying to make a small contribution to this effort.

WTW Women and Finance celebrates Internatioanal Women’s Day.

Internatioanl Women's Day

Women Swagger to Take the Lead?

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Caron Beesley writes:  Recently, Pantene ran a series of empowerment-themed commercials that called attention to how much an apology is used to downplay female power. Whether we’re late to a meeting (“Sorry, I’m late…”) or raising our hands to ask a question (“Sorry, could I just ask…”), an apology is often the preferred prefix for women in a variety of everyday scenarios.

Women in positions of power (CEO or business owner) often struggle to be perceived as great leaders and equals to their male counterparts. After all, female CEOs are rarely recognized on any “best CEO” rankings.Despite these perceptions, women aren’t being held back. Just look at the latest statistics about female entrepreneurship:

  • Women business owners represent the fastest-growing businesses in America.
  • They generate more than $1.4 trillion in revenues per year and employ nearly 8 million people.
  • 41 percent of new entrepreneurship activity in 2013 involved women.

So what are women to do? One of the biggest challenges for women is that we expect to be recognized based on our merits – the work we do, the results we get. But oftentimes, that’s not enough. If women are to be perceived as leaders, we need to quit apologizing and start swaggering!

That’s the advice of Barri Rafferty, CEO of Ketchum, Inc. North America, a global PR firm.  Rafferty recounts how during a trip to the World Economic Forum in Davos, everyone wanted to know whose wife she was:

“It was a rude awakening for me… Until then I’d been, ‘Don’t stand out on women’s leadership. Do your job. Be recognized for your work.’ But I came back from that and thought, ‘I need to do more.’ ”

In response, Rafferty launched several initiatives to coach women and help them broaden their skills. Making it in a man’s world is a passion for Rafferty. Her advice? Try to balance authenticity and authority if you want to be seen as leaders by men. Here are her nine tips for doing so:

  • Be clear about what you stand for
  • Allow your point of view to shine
  • Adapt your style to fit your audience
  • Be open and honest to build trust and foster relationships
  • Have swagger and stop apologizing
  • Respond, don’t react
  • Don’t over-explain
  • Sell your ideas
  • Make others the hero

Women Lead

 

Germany and America versus Russia?

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Stephen Szabo writes:  One of the most important stories in the ongoing confrontation between the West and Russia has been that of Western unity. Despite a wide array of different histories, interests and geography, the U.S. and the European Union have held together in a common response to Russian President Vladimir Putin’s violation of Ukrainian territorial integrity and the larger threat it poses to the European security order. At the heart of this unity has been the German-American partnership. Berlin and German Chancellor Angela Merkel have taken the lead in both shaping that response and negotiating with Putin. This solidarity has clearly surprised Putin, who has regarded the West as weak, decadent and divided.

One of Putin’s major goals is to divide Europeans from each other and Europe from the United States. He has attempted to do this in a number of ways, waging information warfare and disinformation campaigns on social media and through the purchase of major newspapers and the financing and cultivation of anti-European political parties, most notably the National Front in France, Jobbik in Hungary and Syriza in Greece. His recent visit to Hungary, where he was warmly received by Prime Minister Viktor Orban, is another indication of fault lines opening in Europe.

Putin has tried to capitalize on the Snowden effect in German public opinion, hoping to feed a sense among Germans that both the U.S. and Russia are equivalent in their behavior and that Washington is trying to drag Germany and Europe into a confrontation. He has used his extensive business and criminal network, including a number of former members of the East German secret police who worked for him when he was a KGB agent in East Germany, to foster corruption and to buy favor among German decision-makers. This effort has largely failed.

This also reflects the deeper social and geographic connections between Germany and Russia. The American business stake in Russia is significantly lower than that of Germany, and while Germany gets about 39 percent of its oil and gas from Russia, the U.S. has no real energy dependence on that country.

Americans may have to think of Russia as Germany’s Mexico, an unavoidable neighbor. Germans should understand that Americans have a concern for anything which smacks of appeasement of an aggressive dictatorship and that the polarization of American politics is producing outsized rhetoric more directed internally than to foreign audience.

Both sides have to understand that this is going to be a long game with Putin, which requires a long-term approach, similar to the containment strategy devised by George F. Kennan in the late 1940s. Sanctions may not be sexy and require the kind of patience that an immediate, results-oriented America lacks, but they are likely to have a significant long-term impact.

Germany and America

A New Asset Class for Infrastructure? Buy and Hold Equity

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Justin Lin, Kevin Lu, and Clean Mandri-Perrott write: Infrastructure projects can be among the most productive investments a society can make, with clear links to a country’s economic growth.  Infrastructure projects can offer reliable – if lower-than-average – returns. But existing asset classes all too often fail to provide the structure needed for these projects to compete with traditional equity or debt.

Exactly, how can the world harness the potential of private money for infrastructure?

The size of the pie is huge, and so are the opportunities for private investors. The pipeline for infrastructure projects in emerging markets is estimated to have surpassed $1 trillion – $150 billion of which is expected to be raised from private sources. In mature markets, infrastructure investment is projected to reach $4 trillion by 2017.

Our analysis of investment deals over the past 18 months shows that public-private partnerships increasingly rely on capital markets to source funds, even as banks rein in lending in order to comply with the regulatory provisions of the Third Basel Accord. Liquidity remains limited in the wake of the 2008 financial crisis, the legacy of which includes a regulatory regime that is not conducive to long-term investment. Though financing for public infrastructure has returned to 2008 levels, little of it is being funneled into new projects. Most funds have targeted existing infrastructure – investments that are considered relatively safe, because they entail little or no construction risk and have demonstrated their potential to generate stable cash revenues.

In order to overcome the obstacles to investment, we propose the creation of an asset class that we call “buy-and-hold equity” (BHE). This asset class would sit between traditional equity and debt, with investors able to hold it for 15 years or longer. It would offer returns close to those yielded by equity investments, but with some of the risk offset by its long-term nature.

Risk would be further mitigated through the participation of large, influential investors, including sovereign wealth funds, pension funds, and possibly international financial institutions. Public contributions, likely backstopped by multilateral lenders, would provide projects with something close to sovereign risk profiles. Finally, the regulated nature of cash flows would allow for better pre-defined return structures than traditional private or public equity can offer.

The development of BHE would require a new private-sector investment platform, structured to provide bespoke returns for its different participants. The private sector would bring in infrastructure investment expertise, while sovereign funds and international financial institutions would provide the bulk of the capital and stability. Naturally, the platform would focus on projects with defined cash flows and contractual terms guaranteed for 20-30 years.

Not all infrastructure projects will be appropriate for this new asset class. Those best suited will be physical assets that are irreplaceable or core to a country’s economy.

Ideally, the investment platform would create a sustained project pipeline by establishing a private-sector-funded structure that does not solely rely on governments or international financial institutions to bring ventures to the market. The platform would act not only as an investment vehicle, but also as a project initiator, mining opportunities around the world and identifying and classifying them according to a systematic approach. Both greenfield and brownfield developments would be considered.

The platform would provide its own capital, as well as any technical, operational, and managerial expertise required to classify projects according to risk, thereby enabling the creation of indices that investors could monitor and study. For projects judged to be secure, the platform could act as a catalyst for long-term investments typical of institutional investors and pension funds.

Designed properly, a new BHE asset class for private and public infrastructure could unleash the power of the market in the interest of the public good. Given fiscal and other constraints on governments’ capacity, it is an asset well worth having.

Infrastructure Financing