Issue 19| April 20, 2012
Date set for entry into U.S.-Colombia trade agreement
President Obama announced that the U.S.-Colombia Trade Promotion Agreement (CTPA) will be taking effect on May 15. The CTPA will remove duties on more than 80 percent of U.S. exports of consumer and industrial products as well as on more than 50 percent of U.S. exports of agricultural products. “This agreement will provide American businesses, farmers and ranchers with significantly improved access to the third largest economy in South America,” United States Trade Representative Ron Kirk stated on April 15. The U.S. International Trade Commission projected an increase in U.S. GDP of $2.5 billion due to trade gains from the agreement.
Japanese exports buoy economic recovery
The Japanese economy enjoyed unexpectedly high export growth in March, helped along by strong exports of automobiles to the U.S. market. Toyota Motor Corp., Japan’s largest producer of motor vehicles, increased projected sales for 2012 on April 5, noting improved consumer confidence. The increasing rate of exports, along with large amounts of reconstruction expenditure by the government, strengthens expectations that Japan will meet the International Monetary Fund’s projection of as much as 2 percent of GDP growth this year.
Argentina Repsol seizure alarms investors
Many foreign investors were concerned when Argentina announced on April 16 that it would be seizing majority control over Repsol YPF. The Argentine government had alleged that Spain’s largest petroleum company had been using revenues to pay out dividends instead of adequately investing in the country. Some European leaders noted that the action could possibly set a precedent for the president of Argentina, Cristina Fernández de Kirchner, to take similar steps against other foreign companies. “I am alarmed to note that the president referred in her speech to investments in other sectors such as telecoms and banking,” remarked Catherine Ashton, the European Union’s high representative for foreign affairs.
L.A. Mayor Villaraigosa proposes sales tax extension for transportation funding
Mayor Antonio Villaraigosa proposed a November ballot measure for an indefinite half-cent sales tax extension in his State of the City address on April 18. Approval of the tax extension, named Measure R, would allow Los Angeles County to continue expanding available transportation infrastructure. While the mayor has worked to secure billions in federal loans in order to finish 30 years of transportation projects in 10, Republican opposition in Congress has stonewalled the effort. “Regardless of what Washington does, we are not going to wait another day,” Mayor Villaraigosa said.
World Bank forecasts gentle Chinese slowdown
A new World Bank report forecasts a growth rate of 8.2 percent for the Chinese GDP in 2012, soothing fears of a “hard landing” for the world’s second largest economy. Worries concerning the continuation of Chinese growth were raised in March when Premier Wen Jiabao provided a target of 7.5 percent for this year, the lowest rate since 2004. While the projected growth rate exceeds the official expectation, it is nonetheless a drop from the 9.2 percent increase of 2011, the slowdown being primarily due to lower export volume.
Euro crisis continues as France, Spain sell bonds
Concerns over the fiscal health of France and Spain grew as investors saw an increase in bond yields from March to April. Worries relating to Spain had been spurred by Prime Minister Mariano Rajoy’s announcement on March 2 that the country would not be able to meet its deficit target of 4.4 percent for 2012, later projecting a 5.3 percent shortfall. Meanwhile, French presidential contender Francois Hollande has perturbed investors by proposing an increase in minimum wage and an increase in the highest tax rate to 75 percent, policies that critics allege would decrease France’s global competitiveness and its ability to balance the budget.