Tag Archives: Europe

Chavez warns Andean nations against free trade pact

Venezuela’s President Hugo Chavez has advised the Andean Nations to reconsider for the proposed free trade pact with Europe as he considered that it can spoil their economies. Venezuela had already turned down American free trade proposal, labeling it as a plot of America to demolish Venezuelan’s economy. Andean group, a trade bloc, which comprised the five South American countries of Bolivia, Colombia, Ecuador, Peru and Venezuela. Chavez has pulled Venezuela out from the Andean group last year after Peru and Colombia signed U.S. free trade deals. Chavez asserted that proposed free trade deal designed to only benefit the Europe and United States. Andean Nations will get nothing out of it. Venezuelan president preached Europe for providing preferential treatment to the Andean Nations, if they are really concerned about these nations economy. Chavez has already pulled his country out from the international institutions like World Bank and IMF, alleging that these institutions are established to benefit the America and European countries only. Chavez government, which has put the country on the socialism path, shut the door for the capitalism completely as government warned the private companies to honor national law; otherwise they will disappear from the country. Private Venezuelan companies can coexist with the Venezuelan socialist process, but those that try to sabotage the government, create shortages in the country and create anxiety will progressively disappear Venezuela is a major oil producer in the world and exports a huge quantity of oil. Chavez nationalizes its oil refineries and forced western investors to leave the Venezuelan land. America and its close allies impose section on it as its step increased the global oil prices. Government also nationalizes its national Bank and other major fund raiser sector, which shoots up basic items prices. Government ordered not to raise the prices of daily need items, but distributors’ marches on the road against governments price controls policy. Image Via: Chinapost

China’s trade surplus mounts to a record high

China’s trade surplus surged 85.5 percent in June, to a monthly record of $26.91 billion, potentially heightening tensions with the United States and Europe on Yuan’s market value. Exports for June jumped to $103.27 billion, whereas imports were $76.36 billion. For the first six month of the year, the country’s trade surplus was soar to record $112.53 billion. Experts allege that China’s trade surplus soared due to country’s new curbs on exports, which inevitably came under more global pressure as the surplus ballooned throughout the rest of the year. China’s top economic planners predicts that the trade surplus could cross $250-300 billion in 2007, up from a record $177.5 billion last year. The trade surplus has been a constant source of friction with its major trading partners, mainly the United States and the European Union. China is regularly accused of keeping Yuan artificially low, which helped to make domestic goods cheaper and imported articles expensive, providing an unfair competitive edge to exporters. Goldman Sachs economist Hong Liang said: This level of trade surplus is unprecedented for China or any other major economy in the world, this again highlights the ineffectiveness of the policy tinkering that has so far failed to tackle the root cause of China’s bloating trade surplus: the significantly undervalued currency. America is continuously alleging China for unnecessary manipulating its currency and pressing Chinese lawmakers to let the Yuan free in the market. Some U.S. lawmakers suggest that if country fails to do so than legislation should impose punitive tariffs or other controls on Chinese imports. Image Source

Subprime crises can push world market into recession

It’s not only America and Europe, who are battling with the subprime woes, but Asian markets are also affected by it. It’s so obvious that even single news also affects other markets dearly. Subprime dragon has already eaten up many markets and all the major and budding markets felt the heat. To end the volatility, major central banks injected money into the market. To some extent, markets feel easy, but now recession is hoping round the corner. Head of Countrywide Financial Corp raised worry on the US housing downturn and said that it could create a recession. His statement hit hard on the market, whereas Asia’s were the worse affected from it. MSCI’s measure of Asia Pacific stocks excluding Japan was down 0.6%, whereas Hong Kong’s market dithers after Bank of China’s revelation of possessing of $8.965bn in U.S. subprime mortgage-backed bonds and $682m in collateralized debt obligations at the end of June. Japan’s Nikkei average also fell 0.3% from a one-week closing high hit in the previous session. Exporters and U.S.-exposed firms contributed to declines in Australian and South Korean shares. Even Indian stock exchange could not part itself from the speculation and stocks fell in the morning trading. Statement also proved expensive for the American market as the Dow Jones industrial average ended flat, while the Standard & Poor’s 500 Index slipped 0.11% and the NASDAQ Composite Index shed 0.43%. The currency market also affected from it, the yen traded lower against the dollar. Amidst the credit crunch oil prices also fell and U.S. light crude for October delivery dipped 5c at $69.78 a barrel, after gaining 57c on Thursday, ending a three-day losing streak that had knocked prices to their lowest since late June. Analysts don’t rule out the recession speculation and Policy makers find themselves in a limbo. All their measures were effective for two or three days and than subprime generated cycle started rolling again and added another vicious chapter. Fed reduces its rates, it works for couple of days and than inflation start soaring, if fed again raise rates than story will be same as earlier. On one side economist wants to check inflation and also seek some way to dump the subprime crises, but at this point of time all economies are on the threshold. If the bubble of subprime explodes it will ruin all economy, doesn’t matter whether it’s developed and budding. Mortgage problem is 10 fold larger problem than it appears. Therefore, policy makers have to move carefully, otherwise speculations might not take much time to convert into reality. Image Source