In this issue:

It's Official: U.S. Treasury Says China Not Manipulating Currency

Anything But an Upswing in German Industry

French Unemployment Reaches Nearly 10%; Will It Dump Maastricht?

Foreign-Owned Utilities Give Argentina 'California' Treatment

Chavez's Venezuela: Half Live Below Poverty Level; One-Fourth Go Hungry

Italian Bondholders' Rep Says Blame IMF, Not Argentina

Sony To Close Plants; Lay Off 20,000 Workers


From Volume 2, Issue Number 44 of Electronic Intelligence Weekly, Published Nov. 4, 2003

World Economic News

It's Official: U.S. Treasury Says China Not Manipulating Currency

The U.S. Treasury has ruled, in an official finding, that China is not manipulating its currency to gain an unfair trade advantage, despite hysterical pressure from lawmakers and manufacturers, who are scapegoating China's currency policy, for the free-trade-induced loss of 2.7 million U.S. manufacturing jobs since July 2000. In its annual report to Congress evaluating the economic and currency policies of major U.S. trading partners, released Oct. 30, the U.S. Treasury Department said China's decision to keep its currency pegged to the U.S. dollar—and not permit the yuan to rise in value—did not meet the "technical requirements" specified in the Omnibus Trade and Competitiveness Act of 1988. Under this law, economic sanctions could be imposed for countries found to be in violation.

The ruling comes as China is expected to announce it has agreed to purchase billions of dollars of American goods, in order to help reduce its $103 billion trade surplus with the U.S.

Yet, the report urges China to drop its peg, and instead move to "flexible market-based" exchange rates, a contention repeated by Treasury Secretary John Snow in testimony to the Senate Banking Committee.

Anything But an Upswing in German Industry

The hard facts of economic depression are hitting the German workforce in several sectors: On Oct. 28, wage cuts for about 150,000 workers and employees were announced. These cuts are coming via reductions of working hours per week, in the following companies:

* Opel, Ruesselsheim plant: 19,600 workers will have work for only 30 hours until the end of 2004, instead of the 35 hours which their working week has been, to date. As Opel will compensate some of the lost income, workers will lose only 7%-8% of their income;

* Telekom will reduce the work week from 38 to 34 hours, which affects 120,000 workers and implies a cut of 10% in income;

* EnBW, the biggest energy producer in Germany's southwest, will introduce a 4-day working week, which will affect close to 30,000 workers and even with compensation, implies a 10% cut in income, as well.

* The ZVEI, the central association of electric engineering firms, announced Oct. 30, the "necessity" to axe another 10,000 jobs in the sector, and the VDMA, the association of German machine-builders, reported that year-on-year, September sales were down by 4 percent on export markets, and even by 11 percent domestically. If there hadn't been two-digit increases of sales during the past 12 months to China, Arab and Gulf states, that compensated for some of the losses, the situation of machine-builders would be very grim.

French Unemployment Reaches Nearly 10%; Will It Dump Maastricht?

With 2.435 million registered jobless in September, France reported, on Oct. 31, an unemployment rate of 9.7%. The figure is 25,000 above the August figure, and 130,000 above the figure for September 2002. France, therefore, has as much reason to liberate itself from the Maastricht rules, as does Germany, with its unemployment rate of 10.4%.

Foreign-Owned Utilities Give Argentina 'California' Treatment

More electricity blackouts occurred in Buenos Aires on Oct. 25, affecting 400 people, and on Oct. 27, affecting 3,000—further enraging both the population and the Kirchner government. According to Edenor, owned by Electricité de France, the blackouts were caused by a medium-tension wire going out of service, in the first case, and a faulty transformer in the second.

According to Clarin, the government and allied Congressmen are planning "a surprise" for the privatized utility companies. They are preparing a bill which would allow the government to rescind privatization contracts, in the event that utilities interrupt service without adequate technical justification. According to the privatization contracts signed with the Menem government in the 1990s, had the government even considered such a move, it could be sued by foreign utilities for violating "juridical security." But the legislation now under discussion, would allow President Nestor Kirchner to rescind the contracts, particularly if foreign companies haven't invested what they had originally promised—which is clearly the case.

Chavez's Venezuela: Half Live Below Poverty Level; One-Fourth Go Hungry

More than half of Venezuelan homes are living below the poverty level, an increase of more than 10% since Hugo Chavez assumed the Presidency in February 1999, El Universal reported Oct. 18. According to the latest figures released by the National Statistical Institute, 54% of Venezuelan households are considered poor, as compared to the 42.8% at the beginning of 1999. What that means, is that only 2.54 million of Venezuela's total 5.86 million households have an income sufficient to permit them to purchase the basic market basket of food, housing, clothing, services and transport.

Of those too poor to purchase the basic market basket, 25.1%, or 1.4 million households, live in extreme poverty, which means that they cannot afford to purchase even the minimum food basket. That's an increase of more than a half-million families than were in that situation in the second half of 1999—the first year of Chavez's government.

Italian Bondholders' Rep Says Blame IMF, Not Argentina

Mauro Sandri, of the Italian Committee of Argentine Creditors, proposes that Italian bondholders of Argentine debt, wage war against the IMF, not Argentina, La Nacion of Buenos Aires reported Oct. 28. Sandri was commenting on the fact that an Italian court embargoed 2 million euros of a loan that the Italian government had made to Argentina, in order to pay back some small investors holding bonds on which Argentina had defaulted in 2001.

Although Sandri was happy that some people would get their money back, he argued that Argentina in fact has a "limited responsibility," for its debt default. The real culprits, he said, are the banks that "constructed" and marketed Argentina's public debt, and the International Monetary Fund, which, after having imposed its policies on Argentina, sat and "watched its best pupil die." Sandri said "we don't want to kill Argentina ... we want to see it live."

As for the court's ruling on behalf of the bondholders he represents, he said "I cannot be happy if I win against Argentina." When Deputy Finance Minister Guillermo Nielsen was in Italy recently to discuss the Kirchner government's debt restructuring plan, Sandri said "he should have come to propose that we do battle together against the banks."

In Germany, a regional judge in the city of Muenster, has ruled against a group of banks, for having given bad advice to a client, by recommending that he purchase Argentine bonds as a "good investment." The Kirchner government has repeatedly denounced the role of banks in causing the extraordinary increase of Argentina's foreign debt, and expects a number of legal suits to be filed against banks, especially in Italy.

Sony To Close Plants; Lay Off 20,000 Workers

Sony announced plans to eliminate 20,000 jobs, or 13% of its workforce, over the next three years, and to shut down all cathode-ray television manufacturing plants in Japan by March 2004, as well as slashing the number of its suppliers, according to news reports Oct. 28. The measures are designed to cut costs by $3 billion over the next three years. The world's second-largest consumer-electronics maker, has reported its second-quarter net income fell 25%, while operating profit dropped by 34%, sending its shares down by 22% this year. China is slated to become Sony's main manufacturing center in Asia, for cheaper mass-market goods. Japan would lose 7,000 jobs, mainly in manufacturing. The number of suppliers is to be slashed from 4,700 to 1,000 by March 2006.

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