In this Aug. 27, 2019, photo, an employee works on the production line of a smart electricity meter manufacturing plant in Nantong in eastern China's Jiangsu province. Two surveys of Chinese manufacturing show demand is weak amid a mounting tariff war with Washington over trade and technology. (Chinatopix via AP)
BEIJING (AP) — Two surveys of Chinese manufacturing show demand is weak amid a mounting tariff war with Washington over trade and technology.
A monthly purchasing managers' index released by a business magazine, Caixin, rose to 50.4 from July's 49.9 on a 100-point scale on which numbers above 50 show activity increasing.
That indicates "renewed improvement" but said a gauge of new orders fell to its lowest level this year, the magazine said.
A separate survey released Saturday by an industry group, the China Federation of Logistics & Purchasing, showed activity declining to 49.5 from July's 49.7. It said market demand was "relatively weak."
Chinese exporters are struggling in the face of U.S. tariff hikes. Exports to the United States, their biggest market, fell 6.5% in July.
Washington and Beijing stepped up their fight on Sunday by imposing additional tariffs on billions of dollars of each other's goods.
Beijing has propped up economic growth by boosting government spending on construction.
Economic growth sank to 6.2% over a year earlier in the quarter ending in June, its lowest level in at least 26 years.
A loss of faith in Argentina’s reform programme had been visibly demonstrated by a two-week run on the peso in spring last year. President Mauricio Macri had few options left. A long-mooted contingency plan went into action.
“When it came to it, we had discussed it so much, for Macri it was no problem,” says one senior government official recalling the events of last May. “The decision took five minutes . . . back then, Macri was fine and he was very happy with the agreement . . . after all, we had managed to get $50bn.”
Fifteen months later, the giant bailout has become a millstone around Mr Macri’s neck. Voters angry at the continuing recession delivered a stinging rebuke on August 11, handing a big victory to his Peronist rival Alberto Fernández in a primary vote. The contest is regarded as a reliable barometer for the election in October and its result panicked investors because it spelt disaster for Mr Macri’s chances.
Following days of market chaos in the wake of the vote, Mr Macri’s government bowed to the inevitable last week and asked creditors for more time to pay back Argentina’s $101bn of foreign debt, including the IMF money, as Buenos Aires struggled to avoid the country’s ninth sovereign default — and the third this century.
With the record-breaking bailout veering off track, questions are being asked about why the IMF, which has overseen 21 bailouts to Argentina, including one that ended in a historic default, lent so much money to support a programme that is crumbling after little more than a year.
“It’s another black eye for the IMF in Argentina,” says Benjamin Gedan, who leads the Argentina project at the Wilson Center in Washington. “They were caught up in the same euphoria as investors . . . They thought the number two economy in South America was embracing the Washington consensus.”
Having already disbursed $44bn of the bailout to Buenos Aires, the fund now faces a difficult choice: whether to stick with the programme and hand over another $5.4bn later this month to Mr Macri’s government or cut its losses and wait to deal with the next president. The IMF said in a statement issued after officials visited Argentina last week that it was assessing the impact of the proposed debt measures but would “continue to stand with Argentina during these challenging times”.
Its decision on the bailout’s future will be taken without the person who was instrumental in winning approval for the rescue: Christine Lagarde, who has stepped down from the IMF’s top job to lead the European Central Bank.
Ms Lagarde is unapologetic about her leading role in lending to Argentina. “We were the only game in town,” she told the Financial Times in July. “There was nobody else at the time to invest in the recovery process through which the government had decided to engage, and given the size of the challenge, we had to go big.”
The last 70 years of Argentina’s history have been punctuated with regular economic crises and Mr Macri’s inauguration in December 2015 was no different. His Peronist predecessor, Cristina Fernández de Kirchner, had emptied the government coffers, signing decrees to increase spending by an extra $27bn in her final days in power. Inflation was running close to 25 per cent, foreign exchange reserves were dangerously low and generous subsidies for utilities and transport were draining the budget.
The new president seemed well equipped for the challenge. The multimillionaire scion of an Italian immigrant who made his fortune through lucrative government contracts, he projected an image of cool competence, business savvy and sober realism which came as a relief to investors after the chaotic populism of Ms Fernández.
“I really believe that finally we have learnt from our mistakes,” Mr Macri told the Financial Times in September 2016, when asked about his economic programme. “There is no other country in the world with as much upside as Argentina.”
Something Mr Macri was keen to avoid if at all possible was being forced to seek help from the IMF, a perennial bugbear for Argentine leaders.
Buenos Aires’ troubled history with the fund stretches back six decades. Most notorious was the 2001 economic collapse, which ended with what was then the biggest debt default in history, bank runs, widespread civil unrest and the president fleeing by helicopter from the roof of the presidential palace.
Nearly a generation later, the bitterness remains. A poll last year by the Wilson Center found that 56 per cent of Argentines dislike the IMF, the worst ranking of any international organisation surveyed. The centre’s Mr Gedan compares the organisation to Superman’s arch enemy: “In Argentina, the IMF is like Lex Luthor,” he says. “Historically whenever the IMF swoops into Argentina, it leaves brutal budget cuts and economic chaos in its wake.”
So Mr Macri opted for a gradual approach to fixing the economic mess left to him by Ms Fernández, hoping to avoid another cycle of IMF-imposed austerity and political crisis.
“Macri’s political team told him he couldn’t start his term with a big [austerity plan],” says one source close to the administration. “That would be a typical rightwing government, which would end up with him leaving the presidential palace by helicopter when it failed.”
Mr Macri, who was also handicapped by his lack of a majority in congress, avoided big cuts to public spending and hoped that steady growth and restoring access to international borrowing would dig the economy out of its hole.
For a couple of years, the plan seemed to work. But the big deficits needed a constant stream of foreign money to fund them. High interest rates pushed up the value of the peso, meaning more dollars needed to be borrowed to fund the deficit. When a loss of market confidence triggered last year’s run on the peso, Mr Macri had to turn to the IMF.
Claudio Loser, who ran the IMF’s western hemisphere division at the time of Argentina’s 2001 crisis, says the main problem was excessive borrowing. “They were overconfident about their ability to continue borrowing significant amounts while adjusting [the economy] slowly,” he says. “That was the mistake.”
Kenneth Rogoff, a former chief economist at the IMF and now professor of economics at Harvard University, agrees. “Argentina made a lot of mistakes,” he says. “The general principle their programme violated was that when markets overshoot, policy has to overshoot. They didn’t do that — they tried a policy of gradualism.”
Yet despite the early mis-steps, Mr Macri secured a big IMF loan relatively quickly. Helping to smooth the way was his warm personal relationship with Donald Trump, president of the country with the biggest share of the votes on the IMF board.
“I’ve been friends with Mauricio for a long time, many years . . . we knew each other very well,” Mr Trump told reporters when he visited Argentina in 2018. “I actually did business with his family.” Mr Trump was referring to his purchase of a prime New York site for $95m in 1984 from Mr Macri’s father, Franco.
“Macri caught the ear of Trump,” says Hector Torres, a former senior IMF official now at the Centre for International Governance Innovation, a Canadian think-tank. “He got Trump to believe he needed a hand and he started [lobbying] via the [US] Treasury before going to the IMF.”
“Sure we spoke to the Treasury,” says the former senior Argentine official. “The situation was so delicate that it required a rapid response and the fund is so bureaucratic that it can’t act quickly enough.”
The fund’s initial bailout for Argentina, announced in June 2018, pledged $50bn, much more than expected. Christine Lagarde, then IMF managing director, said the money would “bolster market confidence”.
But only two months later, markets had lost confidence in the peso and Argentina went back to the Fund again.
A key flaw in the first deal, say former Macri officials and economists, was the IMF’s insistence that the peso float freely, which led to a fresh bout of selling as markets tested the currency.
“It was the chronicle of a death foretold,” says the former senior Argentina official. “The first agreement with the fund was inflationary and therefore bound to cause a recession. A depreciating currency forces you to raise interest rates and that cools down the economy.”
Following weeks of negotiations Ms Lagarde announced last September that the IMF would stump up an extra $7bn, bringing the Argentina bailout to a record $57bn, and allow the money to be spent faster. She was confident the revised plan would be “instrumental” in restoring market confidence.
This time, the IMF allowed Argentine authorities a limited amount of scope to intervene to defend the peso. But the restrictions on when and by how much it could step inwere too much for the central bank chief Luis Caputo, who resigned.
“The fund got it incredibly wrong, both the first and the second time,” says a second former Macri administration official, referring to the exchange rate decision. “It’s forgivable for the fund — they have to cover their bases and it’s what they do elsewhere — but not for the government. The government rushed and took whatever it was offered. That was a colossal mistake.”
The IMF declined to comment on Argentina beyond its published statements, saying it is reviewing the programme. Officials are understood to believe that the bailout went mostly according to plan apart from the inflation element. Buenos Aires’s inflation targeting failed, sources close to the fund say, because it was not co-ordinated with a wider government strategy to keep prices under control and because the inflationary effects of the devaluation were worse than expected. Mr Macri’s gradual approach to reining in spending was a key problem. Argentina’s statistics agency Indec says annual inflation was 54.3% in July.
Although the modified September bailout calmed markets, it did not revive the economy. As the election approached this year, interest rates of more than 70 per cent were choking businesses, unemployment was rising and inflation remained stubbornly high.
The gloomy economic picture made an easy target for the opposition Peronists as Argentina’s presidential election campaign got under way. They painted the market-friendly Mr Macri as the candidate of a privileged few who had imposed misery on the masses.
Poll predictions prior to the August 11 primary that Mr Macri was running close to his challenger Mr Fernández proved disastrously wrong. In the event, Mr Fernández trounced the president by a 15-point margin. The following day, the Buenos Aires stock market plunged 37 per cent and the peso hit a record low as investors woke up to the likelihood of a Peronist return to power.
The panic further undermined Mr Macri by reviving the instability he had promised to banish. It helped to trigger last week’s debt “reprofiling” announcement by new finance minister Hernán Lacunza under which foreign investors will be asked to agree voluntarily to delays in repayments. Standard & Poor’s labelled the move a “selective default” last Thursday, a classification it withdrew hours later.
“An Argentine sovereign debt default is now more likely than not,” said Capital Economics before the announcement. It predicted that bondholders were likely to lose about half their money in a restructuring.
Mr Fernández, the likely next president, has sent contradictory signals about his intentions towards the bailout, saying he will pay back the IMF loan but also harshly criticising the fund. “Those that have generated this crisis, the government and the IMF, are responsible for putting an end to and reversing the social catastrophe that an ever greater portion of Argentine society is suffering,” he said in a statement.
Daniel Marx, a former finance secretary, saw a political motive in the remarks. “[Fernández] is setting the stage for the next negotiation.”
Investors and business people would like to see Mr Fernández and Mr Macri work together to calm markets, stabilise the economy and minimise uncertainty during the painfully long transition until the next president is inaugurated in December. But there has been little sign that either of the two presidential candidates is prepared to do so.
Ironically, experts agree that if Mr Macri had sought IMF help from the outset, he would have fared better.
“Had Macri gone to the IMF at the start, it would probably have worked,” says Victor Bulmer-Thomas, an associate fellow at Chatham House in London. “The problem is that the history is so awful that governments delay going to the IMF until it’s almost too late. As a result, the fund is faced with an impossible situation. It then prescribes the usual remedies and they don’t work.”
Additional reporting by James Politi in Washington
An Air Canada flight from Shanghai to Vancouver was diverted to Tokyo after a crack developed in one of the pilot’s windows, the airline confirmed Sunday.Vancouver International Airport says the flight was expected to arrive at 11:40 a.m. before it was diverted to Narita International Airport.A spokesperson with Air Canada says the windows are double-paned and the diversion was a precautionary measure.The plane was a Boeing 787 carrying 287 passengers, none of whom were injured.READ MORE: 37 believed injured after turbulence forces Vancouver-Australia flight to divert to HawaiiAir Canada says the passengers are staying in hotels while the aircraft is repaired.It says the plane is set to leave Tokyo for Vancouver on Monday.The cause of the crack is not yet known. Air Canada did not share any information about what may have happened but is investigating.—With files from the Canadian PressWATCH (July 11, 2019): 37 passengers injured by turbulence on Air Canada flight
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September 02, 2019 at 06:04AM
Despite the settlement not being an admission of guilt, Volkswagen is adjusting fuel economy figures by one mile per gallon to reflect US labeling requirements on 98,000 of its vehicles sold between 2013 and 2017.
The figures being paid out are subject to court approval but, as it stands, those affected will be reimbursed for extra money spent on gas based on the alleged false fuel economy ratings. Length of legal ownership will be factored into individual payouts, but it works out from $5.40 to $24.30 per owner for each month they leased or owned their vehicle but with a maximum of $518.40 to $2,332.80. Owners will be able to submit a claim once the process to do so is ready.
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September 02, 2019 at 12:54AM
Chris Rauenbusch says he doesn't know if his employer can summon him to work on a day off after a series of sweeping federal labour reforms went into effect Sunday.
"I don't know if I am entitled to take a break during a 14-hour shift," said the 39-year-old flight attendant, who heads WestJet’s union local in Calgary.
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His quandary follows a request by employers that Ottawa make some last-minute exemptions or delays to its new rules. The request has left hundreds of thousands of workers and their bosses in sectors from airlines to trucking to telecommunications unclear about whether they are fully covered by the Canada Labour Code overhaul.
As confusion mounted in the lead-up to the changes, Employment Minister Patty Hajdu said certain interim exemptions would apply — at least until further tweaks can be made after the October election — but acknowledged the government was still hammering out who they will ultimately include.
"I can’t actually speak to which employers and which [employee] classes will be subject to these limited exemptions because that is still being worked out with the department right now, and I’m looking forward to their advice," Hajdu said days before the regulations started to kick in.
"I’m not certain exactly when I’ll have those recommendations."
The new rules, which apply to the 904,000 workers in federally regulated sectors from banking to the civil service, usher in a suite of changes that mandate new personal leaves and longer bereavement and vacation periods, among other things.
Industry representatives say some of the amendments would delay shipments, cancel flights and hurt the country's economy, while labour groups argue they are simply asking for reasonable working conditions.
"If you’re a trucking operation and your shipment gets cancelled, you can’t just send the truck anyway. If somebody is sick, you may need somebody else to go," said Dan Kelly, president of the Canadian Federation of Independent Business (CFIB).
Rules that fail to take that into account mean "the entire Canadian shipping network and supply chain is put at risk," according to a May 13 letter to the employment minister from an industry association, Federally Regulated Employers — Transportation and Communications (FETCO), and obtained by The Canadian Press.
An interim exemption will apply to several rules the transport sector says would kneecap its operations, including requirements that employers give staff a 24-hour heads-up on shift changes and four days' notice for schedules, Employment and Social Development Canada confirmed. A mandated 30-minute break every five hours and an eight-hour rest period between shifts will also exclude some workers.
But which companies and employees will remain unshielded by the new regulations remains uncertain.
"It would be very, very specific classes of employees that, if we were to determine, could be exempt. Because ultimately these changes are about increasing productivity, increasing safety standards and work-life balance," Hajdu said in a phone interview.
Rauenbusch said the Canadian Union of Public Employees (CUPE) recognizes that airline workers occupy a round-the-clock industry and that 24-hours’ notice before a shift change may not always be feasible.
"But just because we happen to be employed in a unique industry doesn’t necessitate simply stripping us of the benefits that the government is trying to afford to workers across the country," he said.
Kelly countered that wages and longer time-off stretches can compensate for demanding scheduling protocols at airlines, trucking companies and telecoms — where repair and maintenance needs can pop up unpredictably.
"It’s not like employees in these industries are prisoners. They’re often among the most sought-after jobs around because they have other commensurate benefits," said the CFIB head.
Trucking, however, already faces a serious labour shortage, despite a low barrier to entry. Better benefits could lead to "enhanced recruitment and retention," the Employment Department said.
Employers expressed frustration with the consultation process after the government agreed to push back implementation by three months from its initial date in June.
"Given that the country is mere days away from Sept. 1, implementation of some of these labour code changes are at great risk of failure. This could have easily been avoided with a proper tripartite process many months ago, or a short delay," reads an Aug. 28 email from FETCO executive director Derrick Hynes to the Employment Department.
"What we’re waiting for is to hear back from the government around what they feel would be appropriate in terms of granting some temporary relief from some of these changes," Hynes told The Canadian Press.
The employment minister, "having attended at least one funeral this summer of people that died as a result of a vehicle collision with a transport truck," stressed health and safety — and reiterated that they go hand in hand with profit and productivity.
"At the end of the day, happy employees, safe employees, well-rested employees are more productive. It leads to safer workplaces and leads to more prosperity as a country overall," Hajdu said.
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September 01, 2019 at 03:00PM
