The World Today for August 03, 2018

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NEED TO KNOW

The Big Boys

Seventeen years ago, the term “BRIC” generated a lot of buzz.

It was an acronym for Brazil, Russia, India and China – four large countries whose economies were making them increasingly important on the global stage. (South Africa joined the group later, and the term expanded to BRICS.)

Many believed the BRICS nations might someday challenge the economic, and therefore political, dominance of the United States, where unscrupulous financiers and the real estate industry helped trigger the worldwide recession in 2008, undermining the prestige of American capitalism.

Today, the Economist is asking whether the buzz was justified. “The widespread perception is that the group has failed to live up to the hype the acronym helped to generate,” the British magazine wrote. “But that is only half true.”

BRICS economies have grown substantially since 2001. Russia has sparked crises in Ukraine and political scandals have rocked Brazil and South Africa. But China has been a model of stability. India has embarked on serious business reforms.

Countries like Turkey are clamoring to be included in the club. Turkish President Recep Tayyip Erdogan recently said the BRICS should create new international institutions to challenge the World Bank and the International Monetary Fund, which Americans and Europeans established to run the world economy as World War II was ending.

“The present system satisfies no one, except the privileged few whose interests were guaranteed,” Erdogan said, according to the state-run Anadolu Agency.

It was, therefore, no surprise when the leaders of the five BRICS countries issued a statement during their July 26 summit in Johannesburg that challenged current US trade policies, the BBC reported.

“We reaffirm the centrality of the rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system,” said the declaration.

But the BRICS still lack one or more important qualities that define the best economies, like diverse industries, an enormous middle-class, the rule of law, labor standards, civic society, academic freedom and infrastructure. Those things make the US, Europe and Japan the marquee economies and political honchos of the planet.

Bloomberg also noted that companies in the BRICS countries are over-leveraged. Governments have stockpiled foreign reserves as a buffer against international disruptions that occur from currency devaluations and bank bailouts. But BRICS businesses have borrowed bigtime in the last decade when interest rates around the world dropped. Now interest rates are climbing.

Brazilian corporations, for example, are carrying a debt-to-equity ratio – or liabilities compared to total shareholder value – of almost 180 percent now, compared to around 40 percent in 1997. Might a bunch of Brazilian companies go bust if they can’t pay their debts, and could that trigger a worldwide recession? Nobody knows.

The BRICS deserve their place in the sun. But the bigger they are, the harder they fall.

WANT TO KNOW

RUSSIA

Not So Secret

US counterintelligence believes that a woman who worked for the Secret Service at the American embassy in Moscow for more than a decade was, in fact, a Russian spy.

The woman came under suspicion in 2016 during a routine security sweep conducted by two investigators from the US Department of State’s Regional Security Office (RSO), the UK’s Guardian newspaper reported. Investigators found she had been holding regular, unauthorized meetings with members of the FSB, Russia’s principal security agency. Her access to the agency’s intranet and email systems might have allowed her to pass on highly confidential material including the schedules of the president and vice-president.

The report comes amid a Senate push for tough new sanctions against Russia and a warning from senior US intelligence officials about “pervasive” Russian efforts to disrupt the 2018 US midterm elections.

MEXICO

Hopes for Sunrise

Mexico and the US have agreed on some 20 different points related to the revamping of the North American Free Trade Agreement (NAFTA), but some of the toughest issues remain unresolved following economy minister Ildefonso Guajardo’s initial meeting with US Trade Representative Robert Lighthizer this week.

Among the issues yet to be ironed out: The so-called “sunset clause” that America is demanding, which would require the deal to be renegotiated every five years, Reuters reported.

Holding bilateral talks with Mexico over a deal that also involves Canada appears to be a US negotiating tactic, with the Edmonton Journal noting that Canada’s request for an invite was rebuffed. But Guajardo told reporters that he is keeping Canadian Foreign Minister Chrystia Freeland informed on the  discussions and that Canada may join the talks as early as next week. Some analysts indicated the issues the US and Mexico are hashing out – mostly related to auto industry wages – aren’t of great concern to Canada.

GERMANY

Protecting the Family Jewels

Chancellor Angela Merkel’s government vetoed a Chinese takeover of German machine tool manufacturer Leifeld Metal Spinning AG this week, signaling a tougher stance on investments that have long been seen as a threat to Germany’s leadership in manufacturing technology.

China’s Yantai Taihai Group had already pulled out of the deal at the last minute, Bloomberg reported. But the veto marked Germany’s first move to prohibit such an acquisition since it tightened its measures blocking unwanted takeovers in July 2017, the agency noted.

Germany has investigated some 80 deals, about a third of which involved Chinese investors, since the rule change, Bloomberg reported. Leifield Metal Spinning likely raised a red flag because it is one of the leading producers of high-strength metals for the car, space and nuclear industries.

Last week, the German government also bought a stake in one of the country’s largest power-grid operators to prevent a Chinese company from doing so.

DISCOVERIES

The Song Remains the Same

Hong Kong rock band Beyond came out with its song “Boundless Oceans Vast Skies” in 1993.

But the song took on more relevance in 2014 during protests against the encroachments of government officials in Beijing who now rule the former British enclave.

“Forgive me for being unrestrained and loving freedom all my life,” goes the tune.

The band’s lead singer, Wong Ka Keung, told the BBC that the song helps him and his fellow citizens vent their frustration and grievances against those who want to curb Hong Kong’s unique blend of Eastern culture and Western politics.

“This song was about our inner world,” he said. “It’s a song about personal freedom and the pursuit of dreams.”

Lately, however, the uplifting song has also become a hit on the mainland. Chinese soccer fans sing it at games. Drinkers around the massive country howl it out in pubs.

The success of the song is bittersweet. The band’s former lead singer, 31-year-old Wong Ka Kui – Wong Ka Keung’s brother – died in a stage accident shortly after the song was released.

Many fans in Hong Kong and mainland China cry when they sing the song, too, keeping in mind what the late artist left behind and what they have lost.

Still, some wonder now if the song can bridge the divide and bring new unity.

Click here to listen to the song.