Week in Review
December 9, 2019
China to waive tariffs on some U.S. soybeans, pork in goodwill gesture. In a positive gesture, China said on Dec. 6 that it will waive import tariffs for some soybeans and pork shipments from the United States, as the two sides try to thrash out a broader agreement to defuse their protracted trade war. (Reuters)
U.S. vows 100% tariffs on French Champagne, cheese, handbags over digital tax. The U.S. government said it may slap punitive duties of up to 100% on $2.4 billion in imports from France of Champagne, handbags, cheese and other products, after concluding that France’s new digital services tax would harm U.S. tech companies. (EurActiv)
French trains stop as mass strike begins over pensions. French trains rolled to a halt on Dec. 4 evening, kicking off massive nationwide strikes and protests against President Emmanuel Macron’s plans to overhaul the retirement system, seen as an untouchable symbol of the French way of life. (Business Mirror)
Iran is secretly moving missiles into Iraq, U.S. officials say. The buildup of a hidden arsenal of short-range missiles is the latest sign that American efforts to deter Iran have largely failed. (NY Times)
Gazing into the recession crystal ball. The protracted trade war between China and the United States and a deteriorating global growth outlook have left investors nervous that the longest expansion in American history is at risk of ending. (HSN)
Central banks set to keep pumping out cash through 2020. Major central banks are set to keep pumping money into financial markets and economies next year, although at a slower pace than recently. (Bloomberg)
France rejects U.S. proposal on international tax reform. France rejects a U.S. idea for companies to opt out of a proposed international tax reform, Finance Minister Bruno Le Maire said on Dec. 6, urging Washington to negotiate in good faith. (Reuters)
China hints U.S. blacklist imminent, creates new obstacle to trade talks. Chinese state media said the government would soon publish a list of “unreliable entities” that could lead to sanctions against U.S. companies, signaling trade talks between the two nations are increasingly under threat from disputes over human rights in Hong Kong and Xinjiang. (Business Mirror)
Subversive statecraft: The changing face of great-power conflict. The U.S. security and intelligence communities are buzzing with talk of the return of great-power competition. Beijing and Moscow increasingly vie for influence on the global stage. And in Washington and other Western capitals, policymakers and pundits fret that Chinese and Russian competition with the West could, before long, give way to conflict. (Foreign Affairs)
Zambia’s kwacha falls most in four years with more pain in store. Zambia’s kwacha fell the most against the dollar in four years and may continue to slide to record lows as “panic buying” of the U.S. currency sets in, according to FNB Zambia, the local unit of FirstRand Bank Ltd. (Bloomberg)
Brazil’s Bolsonaro under fire after Trump threatens tariffs. Brazilian President Jair Bolsonaro’s U.S.-focused foreign policy efforts suffered a severe setback on Dec. 2 when his American counterpart Donald Trump pledged to impose tariffs on steel and aluminum on the South American nation. (Business Mirror)
Robo treasury: Positives and pitfalls. Robotic process automation has the potential to be a powerful tool for treasurers—especially those looking for new ways to garner efficiency gains. What’s more, as a relatively easy-to-deploy technology, RPA can deliver significant value in a short timeframe. But is RPA really a silver bullet for treasury? (TMI)
Incoterms 2020 FAS: Spotlight on Free Alongside Ship. Incoterms 2020 rules are the latest revision of international trade terms published by the International Chamber of Commerce (ICC). They are recognized as the authoritative text for determining how costs and risks are allocated to the parties conducting international transactions. This week, the international trade blog discusses Incoterm FAS, also known as Free Alongside Ship. (Shipping Solutions)
U.S. feels the heat as Trump leaves global climate pact. President Donald J. Trump is aiming to make the annual UN-sponsored climate talks underway in Madrid the last ones for full participation by the United States, which is the world’s No. 1 economy and the second-biggest carbon emitter. (Bloomberg)
Hopes for Economic Recovery in Brazil
Chris Kuehl, Ph.D., NACM Economist
The latest data from Brazil is not about to provoke dancing in the streets. However, it is significant that Brazil’s economic growth beat expectations by a respectable margin.
Growth in the third quarter of 2019 was 0.6% and 1.2% year-over-year. The assessment was that growth would be less than half that.
Despite the positive news, the country still has a very long way to go given the severity of the recession. But the plans put in place by Finance Minister Paulo Guedes seem to be having a favorable impact. His approach has been heavily oriented towards increased privatization and deregulation. That seems to have stimulated a lot of activity in sectors such as agribusiness and construction.
The decision by U.S. President Donald Trump to impose tariffs on steel imported from Brazil may take some of the wind out of the sails of this recovery because it suggests the U.S. is no longer in the mood to back President Jair Bolsonaro.
Many of the key sectors of the Brazilian economy compete with sectors in the U.S. economy. As China halted soybean imports from the U.S., it stepped up imports from Brazil. Also, the manufacturing sector in Brazil makes much the same things as the U.S. given the focus on sectors such as aerospace and energy.
The consumer still lags in Brazil because it has been hit by higher levels of unemployment as well as by sharper hikes in inflation. The reforms that had been promised by Bolsonaro have stalled in the face of fierce opposition. Now he is dealing with a whole variety of corruption issues. Given that he campaigned on a pledge to root out this corruption, the fact that close colleagues are getting swept up does his reputation no good.
Credit Congress Spotlight Session: Take Your Game
to the Next Level—Using Emotional Intelligence to Advance Your Career
Speaker: Jake Hillemeyer, Dolese Bros. Co.
Duration: 60 minutes
Credit Congress Spotlight Session:
When and If to Help a Distressed Customer
Moderator: Chris Ring, Panelists: D'Ann Johnson, CCE, A-Core Concrete Cutting, Inc. and Eve Sahnow, CCE, OrePac Building Products
Duration: 60 minutes
Get Yourself Ready for 2024 - Goal Setting & Future Planning
Speaker: Hailey Zureich, zHailey Coaching
Duration: 60 minutes
Global Expert Briefings: Trade Credit Risks
Speaker: Jay Tenney, Trade Risk Group
Duration: 30 minutes
2019 Sees Jump in Large Insolvent German Companies
Germany has seen a 42% jump in insolvencies among large companies during the first nine months of this year, according to a new study.
The findings released by trade credit insurer Euler Hermes note 27 German companies with a turnover of more than 50 million euros filed in the first three quarters of 2019—compared with 19 for the same period the previous year.
A larger concern is the effect these insolvencies could have on suppliers. "The really dramatic thing about these major bankruptcies is the domino effect on many companies throughout the supply chain," said Ron van het Hof, CEO of Euler Hermes in Germany, Austria and Switzerland. "It's not uncommon for them to get carried away and fall into the trap downsizing, which in the worst case also ends in bankruptcy.”
The average turnover of insolvent large companies increased to 339 million euros, or 81%, compared to the same period of the previous year. Euler Hermes finds that the trend has been rising for years.
"There have been a particularly large number of major bankruptcies in the year to date in retail, automotive, service, metals, textiles and energy,” Van het Hof said.
Well-known large companies such as Loewe, Kettler or Beate Uhse have filed for bankruptcy for the second time. The largest bankruptcies in sales in the first nine months of 2019 also included many other well-known names such as Schuhpark Fascies, wind energy company Senvion, automotive supplier Eisenmann, book wholesaler Koch, Neff & Volkmar (KNV), the airline Germania and fashion company Gerry Weber. The fourth quarter of 2019 has already recorded the bankruptcies of Thomas Cook and Condor.
Euler Hermes expects bankruptcies to increase in the final four months of the year and into 2020. The credit insurer expects 3% more bankruptcies in the coming year than in 2019.
"The German economy continues to be relatively robust in view of the numerous uncertainties and risks," Van het Hof added. "However, this resilience does not come from companies as has often been the case in the past, but above all from positive impulses from domestic demand. … However, many companies are still eating from their buffers, which they have invested in good times, which is why we continue to expect stagnating bankruptcies in 2019 and then a slight increase in 2020. "
Euler Hermes expects global trade to grow 1.7% in 2020, only slightly more than in 2019 (1.5%).
Note: FCIB will present the webinar, Insolvency Proceedings in Germany, at 10 a.m. ET, Dec. 12. In-country attorney, RA Lutz Paschen will provide insight to creditors about the ins and outs of what happens before, during and after an insolvency. He will also discuss upcoming legal changes to Germany’s insolvency laws.
G20 International Merchandise Trade Slows Further
the Organisation for Economic Co-operation and Development
G20 international merchandise trade continued its downward trend in the third quarter of 2019, approaching two-year lows, according to the Organisation for Economic Co-operation and Development (OECD).
Compared with the second quarter of 2019, exports contracted by 0.7% and imports by 0.9%, partly reflecting a nearly 20% fall in oil prices and depreciations in most major currencies vis-à-vis the U.S. dollar, the intergovernmental economic organization stated.
Trade remained weak across all G20 regions in the third quarter of 2019. The slowdown was particularly pronounced in the European Union, with exports contracting by 1.8% and imports by 0.4%. Exports and imports fell across all major EU economies, with declines of 3.6% and 1.7%, respectively, in France, and of 0.4% and 1.8%, respectively, in Germany. In Italy, trade fell for the sixth-straight quarter, with exports and imports decreasing by 1.2% and 1% in Q3 2019.
In the United Kingdom, partly reflecting a significant fall in the value of Sterling (down 4.3% against the U.S. dollar) and on-going Brexit uncertainty, exports contracted by 3.3% and imports by 1.6%.
Imports were also weak across all major Asian economies, contracting by 9.7% in India, 2.3% in Korea, 1.8% in China, and 0.4% in Indonesia. However, in Japan, imports picked up by 0.5% as the yen appreciated against the U.S. dollar. Exports fared generally better in the region, picking up by 4.1%, 2.2% and 1.6%, respectively, in Indonesia, Japan and China, but they contracted in India (by 3.1%) and Korea (by 0.4%). Reflecting the fall in oil prices, Saudi Arabia’s exports dropped by 6.8%.
In North America, exports from the United States fell marginally (by 0.2%), while imports decreased by 0.7%. United States exports to China remain significantly below the levels seen before the recent bilateral trade tensions, despite a pick up in the second quarter (by 1.9%), and imports from China to the United States were down 2.1%. Mexico’s exports and imports contracted (by 0.2% and 0.4%), while Canada recorded a 1.7% decline in exports but an increase in imports (of 0.4%).
In South America, Brazil’s exports contracted by 3.5% while imports increased by 15.3%, in part reflecting a spike in imports under the Repetro regime, which provides tax incentives on the purchase of inputs to the oil and gas industry. A significant increase in shipments to China fueled Argentina’s exports (up 5.1%, the highest increase among G20 members in the third quarter of 2019).
G20 economies include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.