whitehall international newsletter

Whitehall MonitorThe

Global Economic Overview

INSIDE: BRIC CountriesTop Oil ExportersGlobal Competitiveness IndexRegional Economic NewsMore

2009 Edition, Vol. 1Jan-Mar, 2009

Whitehall MonitorThe

Global Economic Overview

Contents: Introduction... New World (dis)Order 1 Gulf Cooperation Council 6Asia Region Roundup 2 Europe 7 Japan 2 Iceland 7Global Competitiveness Index 3 United Kingdom 8BRIC Countries 4 UNICEF Ranking of Child Well-being 8 Russia 4 The battle of the oligarchs behind the gas dispute 9 Brazil 4 United States 10 India 5 U.S. Industrial Overview 11 China 5 Canada 12UN Millenium Development Goals 5 Latin America and Caribbean Countries 13Middle East and Africa 6 Ten Wealthiest Countries in the Caribbean 13Africa’s Top Ten Economies 6

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New World (dis)Order Global Economic, Political Turmoil closes out 2008

Jan. 2009 Page 1 The Whitehall Monitor

mark the first contraction in any year since World War II,” The Associated Press reported. Olivier Blanchard, chief economist for the IMF says it appears the global economy has “stepped back from the brink of financial catastrophe,” although he expects the world economy to grow at a scaled down 2.2 percent pace as com-pared to the previous October projection of 3 percent for the year. In addition, the IMF scaled back forecasted growth of .5 percent for the economies of devel-oped countries to a decline by .3 percent for 2009, marking the first contraction in any year since the Great Depression. And if that’s not discouraging enough,

the World

Bank ex-pects even developing countries, for so long the bright spot in the global economy, to slow down from 7.9 per-cent growth in 2008 to a forecasted 4.5 percent in 2009. The crisis spread “across borders and capital markets to entities as diverse as Iceland, Russian banks, and Gulf prop-erty developers,” summed up Australia’s Export Finance Insurance Corporation (EFIC) which noted that several unlike-ly countries have gone begging to the IMF for financial aid, such as Hungary, Ukraine, Iceland, Pakistan, and Serbia. EFIC notes that East Asia has weath-ered the downturn better than most re-

gions “thanks to buffers like current ac-count surpluses, large foreign exchange reserves, comfortable fiscal positions, and well-capitalized banks.” Looking ahead, the danger is that invervention by the U.S. Federal Reserve and other countries’ central banks will lead to stagflation. As Nobel economist Paul Krugman expressed it, “The scenar-io I fear is that we’ll see the whole world in the equivalent of Japan’s lost decade in the 1990s, that we’ll see a world of zero interest rates and inflation and no sign of recovery, and it will just go on for a very extended period.” Commodity prices have dropped steadily, which is good news in terms of fuel costs, but discouraging for the

mining of coal, iron ore, and base metals which have

declined in some cases to a point where they are below

the marginal cost of extraction. Perhaps most discouraging of all

is the near-record low reached by the Baltic Dry Index (BDI), which

measures the cost of moving raw materials, precursors to trade, by sea.

Totally devoid of speculative content, the BDI is a good leading indicator for

economic growth and production, and its rapid decline in the second half of 2008 supports speculation of rapid dete-rioration in global trade, at the very least, and suggests a possible rapid decline in the Chinese economy, too. We’ll explore China in more depth inside. Strife and turmoil were not limited to economic problems this year. The wars in Iraq and Afghanistan continue and Israel attacked Hamas positions in the Gaza Strip during the last weeks of December, blasting away relentlessly and ensuring continued polarization of the most radical positions. A week of ter-rorism in Mumbai wreaked havoc on Indians and tourists alike, reminding the world that economic strife is nothing when compared to the shock of random attacks of this sort.

There’s a saying, when the U.S. sneezes, the rest of the world catches a cold, and the adage took

on a life of its own in the last quarter of 2008 as the sub-prime mortgage failure set off the stunning failure in mid-Sep-tember of the oldest U.S. investment company, Lehman Brothers holdings Inc., and industries and countries alike began to bleed various shades of crimson. One of the most pronounced was the U.K., first forced to bail out the Royal Bank of Scotland, then a plethora of other institu-tions. This has led to the sharp decline in the value of the Sterling. Had the economic woes halted there, most analysts believe the recession would have been of moder-ate proportions, but the credit crunch sparked by the banking crisis has led to a widespread drop in consumption in the U.S. where the auto industry was forced to go hat-in-hand to Congress for some bridge loans. Unfortu-nately, this is where the sneeze/cold theme comes in: once consumption be-gan to decline, global trade slowed too, and has, in the last quarter of 2008, come to a screeching, frightening halt. There is more discussion about the U.S. economic situation inside, but here, we reveiw the global picture. For starters, the World Bank expects global trade, the economic engine for many developing economies, will shrink by 2.1 percent in 2009, the first decline of any amount since 1982. “Conditions have deteriorated so much since the IMF’s semiannual World Economic Outlook was released in Oc-tober that it issued an update last month cutting its 2009 forecast for developed countries’ economies to a drop of 0.3 percent, from 0.5 percent growth in the previous estimate. Such a decline would

Asian Region Roundup

Generally speaking, Asia is faring better than most re-gions in the current eco-

nomic slowdown, thanks in large part to healthy foreign reserves, impressive trade surpluses, and healthier banking systems that declined to join the high-risk ventures and schemes floated by their European and North American counterparts. Still, their export-driven economies will feel a tremendous pinch moving forward from the al-most full-stop of international trade right now.

The region boasts some of the highest commercial real estate rental rates in the world, and three of its coun-tries – Brunei, Singapore, and Macau have purchasing power parity equal to or better than the U.S. and most of the rest of the world, chalking up the sixth, seventh, and eighth highest GDP’s per capita worldwide for 2006.

The region has a healthier popula-tion than most of the rest of the world and Japan, Hong Kong, and Australia have among the world’s highest life ex-pectancy rates. Asian healthcare costs are lower than most of the rest of the world, too. Speaking of healthcare, the Asian country of Turkmenistan has the

highest number of doctors per capita in the world!

New Zealand leads the pack of least corrupt countries across the globe, shar-ing the honor with Denmark and Swe-den. The agrarian island country also

ranks third worldwide in car owner sh ip

per cap-ita (and

owns the most per capita in Asia).

In a seeming con-tradiction, New

Z e a l a n d uses more clean energy per capita than Asian counterparts.

Newly elected centrist prime minis-ter John Key of the National Party said warned the economy, already in the third quarter of its first recession in a de-cade, may not emerge until 2010 due to the global slowdown as exports account for some 30% of the country’s GDP and the World Bank predicts international trade will decline in 2009 for the first time in more than 25 years.

Fortunately, the central bank has room to maneuver and will likely re-duce the discount lending rate from the current 5% to around 3% by late 2009. Unemployment, 4.2% last quarter, was the highest in five years and economists

predict a jump to 6.5% by June, 2010.Neighboring Australia is faring slight-

ly better, fueled by Chinese demand of its iron ore and other raw materials. Australia’s current account deficit as a percentage of GDP decreased from an average of 6% for 2004-2006 to the 4.75-5% range and is expected to nar-row to 4.5% this year. The economy, which grew at a 4.25% pace for 2007 grew only about 2.5% for 2008 and is expected to grow even slower, only to 2% for 2009. Unemployment fell from 4.5% in 2007 to 4.25% for 2008 but is expected to jump to 5% for 2009. In-flation, up from 2007’s 2.5% to average 4.2% for 2008, is expected to drop by one point for 2009 to 3.2%.

Australia owns more computers per capita than other Asian countries, and ranks eighth in the world overall. Sin-gapore, Japan, and Hong Kong rank 10th-12th respectively.

Singapore’s economy shrank by 6.8% in the most recent fiscal quarter, after some growth earlier in the year, pro-ducing a modest 2.2% growth in GDP for the year. Most economists expect the slowdown will continue and the economy is forecasted to shrink by 2% or more for 2009. Inflation averaged about 6.5% for the year. Unemploy-ment remains low, thanks in part to the reputation Singapore has as an attrac-

Region fares better than most during downturn, but recent halt in global trade will hurt these export-driven economies


Japan, already battered by the 1990s recession, suffers once again, this time along with the U.S., Europe, and other major industrialized countries in this current down turn.

Toyota Motor, the Japanese automotive manufacturer is expecting its first operating losses in seven decades. Citing a stronger yen, higher input prices and falling worldwide consump-

tion, Toyota expects net profits to drop some $1.7 billion for the fiscal year which ends March 31. The corporate bond market has declined despite efforts by the Bank of Japan to shore up confidence in the Markit iTraxx,

Japan’s index of credit-default swaps which is climbing as perceptions of credit quality drop. Intervention by the Bank of Japan was through direct purchase of short-term corporate debt instruments. This followed a second reduction in as many months of the overnight lending rate to .1 percent from .5 percent Dec. 19.

Toyota reflects a larger problem for the world’s third largest economy: Factory output in Japan declined by 8.1 percent in November, following a 3.1 percent drop in October. Japan’s economy inched ahead by a slim .3 for the year, and is expected to shrink by .9 percent for 2009. And although the unemployment rate at 3.9% for November is one of the best of larger economies, business confidence fell sharply in the last quarter.

Japan

Asian Region Roundup (Cont’d)tive destination for IT firms and others outsourcing although the country faces growing competition from countries of-fering lower costs and more attractive wage concessions.

By 2050, Pakistan is expected to sur-pass Indonesia to rank fourth most pop-ulous country on earth. Its economy grew by an estimated 6 percent this year, but is expected to creep along only at a 1.5% growth rate for 2009. Recognizing Pakistan’s coffers were running dry, due in part to lost tourism dollars, the IMF agreed to lend Pakistan $7.6 billion for two years. Inflation skyrocketed for the year by 20.8% and according to unof-ficial sources, unemployment jumped to around 15% this year due to closers of some 70 percent of textile businesses in 2008.

The assassination of opposition leader Benazir Bhutto last December post-poned elections but in February, the Pakistan People’s Party won a majority, forming an alliance with the Pakistan Muslim League and elected Yousaf Raza Gilani Prime Minister. Threatened with impeachment, former President and mil-itary dictator Pervez Musharif stepped down in August, replaced by Asif Ali Zardari. The financial and political situ-


ation keep the country on Washington’s radar. That the South Asian country shares critical borders with Afghanistan, Iran, China, India and Tajikistan mean it will remain there during the Obama administration.

With its reduced telecom costs and eager workforce, Vietnam has entered the top 20 countries in the Global Ser-vices Location Index which analyzes and ranks countries on remote functions, such as IT services and support, call cen-ters and back-office support. The coun-try is also the second largest producer of coffee beans in the world behind Brazil, growing more than 1 thousand tons of beans each year. Vietnam has a trade deficit but expanded exports by 4.25% year on year in December thanks to in-creased shipments of coal, electronics, garments and crude oil.

Until the global downturn, Macau was making headlines as the Las Vegas of the Pacific. In fact, gambling revenues in the territory jumped by more than 25% to record-breaking levels. “Macau has been transformed from a sleepy is-land into a legitimate rival to Las Ve-gas,” reports The Economist. China’s government, however, has taken notice as well as measures to make it harder for

Chinese mainlanders to travel there to play and spend their yuan by reducing the number of travel visas for citizens, and has halted travel to Macau through Hong Kong completely.

Affairs between Taiwan and China have warmed considerably with the Tai-wanese presidential election of Ying-Jeou MA, and subsequent arrest of Taiwan’s former president Chen Shui-bian. The former president charges the arrest was to appease the Mainland’s government. The Taiwanese economy contracted 1% for the third quarter and is expected to decline by another 2.5-3% for 2009. The unemployment rate is around 4.5% and industrial production ground to an alarming halt, falling 28.4% in Novem-ber.

Whitehall has excellent partners based throughout Asia to offer credit reports, including personal reports in some instances, debt recovery services, sector studies, and of course our coun-try risk reports offering in-depth as-sessment of a country’s risk including political and economic. For more de-tails, contact our office by e-mail at [email protected].

Global Competitiveness Index 2008-2009SOURCE: World Economic ForumThe following table ranks countries by their global competitiveness index score based on a comprehen-sive assessment of countries' competitiveness by the World Economic Forum and produced in collabora-tion with leading academics and a global network of research institutes. 2008 2007Rank Country Score Rank

1 United States 5.74 1 2 Switzerland 5.61 2 3 Denmark 5.58 3 4 Sweden 5.53 4 5 Singapore 5.53 7 6 Finland 5.50 6 7 Germany 5.46 5 8 Netherlands 5.41 10 9 Japan 5.38 810 Canada 5.37 1311 Hong Kong SAR 5.33 1212 United Kingdom 5.30 9 13 Korea, Rep. 5.28 11

2008 2007Rank Country Score Rank

14 Austria 5.23 1515 Norway 5.22 1616 France 5.22 1817 Taiwan, China 5.22 1418 Australia 5.20 1919 Belgium 5.14 2020 Iceland 5.05 2321 Malaysia 5.04 2122 Ireland 4.99 2223 Israel 4.97 1724 New Zealand 4.93 2425 Luxembourg 4.85 25

BRIC Countries

Straddling Europe and Asia, Russia is the world’s biggest supplier of energy and has the third largest reserves, some $451 billion at the end of 2007 and the economy has grown by a comfortable average of 7 percent for the past several years. But a double-edged sword has struck in the form of the ill-advised Georgian war which caused foreign investors to exit Russia causing a rapid decrease in the value of the ruble, and a recent steep drop in oil prices. In November, Prime Minister Vladimir Putin reassured the country saying his administration would be proactive to pre-vent a repeat of Russia’s 1998 oil-related financial crash. Still, Russian equity markets have lost 70% of their value and the central bank has spent more than $50 billion propping up the weakened ruble at Putin’s instruction.

Wary Russians cashed in 6 percent of their ruble deposits for U.S. dollars in October and banks are moving their depos-its away from rubles as well. Industrial production slumped by 8.7 percent in November, year on year, the steepest decline since 1998. For this reason, Putin has given the go-ahead for a gradual decline in the ruble.

“The situation is starting to look like 1998 when, in antici-pation of devaluation, the credit market is frozen and there is an enormous contraction of the economy,” Anton Strouchen-evsky, an economist at Troika Dialog, the Moscow investment bank, told The Economist in late December.

Putin, at the helm since Boris Yeltsin resigned over an economic collapse nine years ago, and Russian president Dmitri Medvevev face growing unrest internally as tensions mount over the rising unemploy-ment and also since two percent of workers

face wage arrears. Putin places the blame for the sharp eco-nomic decline at the doorstep of U.S. president George Bush, but the failure to diversify has weakened the economy which relies on the oil sector too much, analysts claim. As it now stands, GDP next year is expected to grow less than 4 percent and consumer prices have increased by a dramatic 14 percent for the year. The official unemployment rate as of October, 6.1, percent is increasing and some 400,000 Russians were out of work as of November.

The country ranks 147th least corrupt country in the world according to the Corruption Perception Index published by Transparency International, and its recent war with the coun-try of Georgia and increased tension over oil transfers with Ukraine have not won the country any new fans. Despite Breton Woods-type efforts of the world’s 20 biggest and emerging economies to stymie the global losses and jump-start global trade when it met November 15 in Washington, D.C., Russia’s government increased tariffs on imported cars two days later. So, within its borders and outside, the only thing growing in Putin’s Russia is unrest and unpopularity.

BRIC are the four economies growing so fast that by 2050, their combined economies could eclipse those of all the current wealthy countries in the world. The four are Brazil, Russia, India, and China. No formal trading bloc or associa-tion, but the four countries have explored the possibility of forming an alliance of sorts to translate their increasing eco-nomic might into greater political power.

Brazil


Taking office in 2003, president Luiz Inacio Lula da Silva introduced a pro-gressive agenda including expansion of the middle class, eradication of hunger, and production of green energy, based on principles set forth in the Millen-nium Development Goals agreed to

during the UN Millennium Summit in 2000.Brazil has reduced 675 m-tons of greenhouse gas emissions,

created a million new jobs, and significantly reduced reliance on fossil fuel imports. The Amazon notwithstanding, Brazil’s metropolitan regions are densely populated. In fact, Sao Paulo is the seventh most populous urban center in the world, and Rio de Janeiro, ranks 21st.

Brazil is the second largest food exporter, and is rated 80th least corrupt country, sandwiched between fellow BRIC coun-tries China (72nd) and India (85th). Russia, at 147th, clearly has room to improve.

Brazil’s budget deficit for 2008 ran less than 2% of its GDP, and the currency, the real, has strengthened by 10% over the

past three years. The economy grew by an average rate of 6.1% for the year to the second quarter, sparking concerns it was over-heating, so in September, the central bank raised its benchmark interest rate to 13.75 percent, the fourth rate hike since April.

Brazil’s stock market tumbled more than 35 percent in 2008 due to the global financial crisis, tighter credit, and commodity price drops. Still, the economy expanded by 5.3 to 5.6 percent for the year. It is expected to slow to 2.4 to 3.2 percent for 2009, weighed down by sluggish international demand. Industrial production inched ahead marginally in the latest figures and the unemployment rate was 7.5 percent in November. The central bank cut inflation forecast for next year due to the global finan-cial crisis to 4.7 percent. For 2008, inflation ended at about 6.2 percent.

Brazil jumped to fifth in the world’s Global Location Index growing its export services sector, thanks to a sophisticated IT sector, close proximity to North America, and growing univer-sity enrollment and quality certifications. Partly because of the growth of its service sector, Brazil’s trade surplus, at the end of November, was $26.1 billion.


China’s government has reason to be proud of the impressive showing the country had in putting on and taking the most gold medals during the summer’s Olympics held in Beijing and showcasing the country’s best features. The economy, which benefitted from the investment in infra-structure, employs ever-increasing ranks of the 800,000 rural peasants moving into urban regions for work. There is a prob-lem in this since the economy needs to grow at least 8percent per year in order to keep unemployment manageable and the masses peaceful. For this year, the country sped ahead once again at a healthy 9.6percent growth rate, but the economy may not fare as well in 2009 since it relies so much on global trade which is expected to contract for the first time in 25-plus years.Before the global trade slowdown became evident in Novem-ber, China’s exports grew 21percent for the year, compared to a huge 26percent increase for the same period in 2006-7. This, despite a 20percent increase in valuation of the yuan in the past three years, which made exports more costly. Despite the yuan’s uptick, President Hu Jintao will face increasing pressure

from the U.S. and other countries to permit an even greater rise in the yuan. And while exports remain strong, domestic spending is growing too. Low household debt and an increase in real income fueled retail sales growth of 17percent for the year to October. The rapid decline in foreign trade is expected to hit Guang-dong province in Southern China hardest and thousands of companies, footwear, toy and clothing manufacturers have had to shutter their doors, displacing thousands of workers. Indus-trial production grew by only 8.2percent for the year to Octo-ber, about half the previous year’s growth rate. Capital markets have declined, too, as have property values. The government is so alarmed it has recently announced a massive 4 trillion yuan ($586 billion) over two years aiming to address a number of priorities including reduction in corporate tax burdens, invest-ment in healthcare, education and green technologies as well as a speed up of post-earthquake reconstruction. In addition, the central bank cut its benchmark lending rate to 5.31percent in late December, the fifth decrease in three months. China’s actions in the next few months could make or break this global recession. If China’s economy continues to decline, the worldwide recession would likely deepen. More discon-certing for this most populous country on earth will be po-litical stability of its people if unemployment grows and GDP shrinks further. More than any other country on earth, China bears monitoring over the next two to four quarters.

India

India has weathered the bank-ing downturn better than most other countries thanks to the cautious guidance of its former governor of the Reserve Bank of India, Dr. Y.V. Reddy. Taking office in 2003, Reddy took a number of steps to shore up the

financial sector in the world’s second most populous country. He increased lending standards and risk weightings on com-mercial buildings and retail construction, doubled the capital reserve requirements of banks, curtailed the use of riskier securitizations and derivatives in India, counter to Ameri-can and European investment models and pre-emptively increased interest rates to more than 20 percent to fight burgeoning inflation and burst the first signs of a housing bubble in India.

“No Indian bank has come close to failing the way so many United States and European financial institutions have,” the New York Times reported recently. Reddy was of course, unpopular with his country’s financial sector. Until, that is, headlines in the West screamed of massive write-offs and emergency bailouts. Reddy retired from the post this past September.

The terrorist attacks in Mumbai in December capped a year of some insecurity for the country although grow-ing tensions with Pakistan have been defused since the attacks, thanks to efforts of senior military officials from

both countries and China, who dispatched its Deputy Foreign Minister and a delegation of six others to resolve differences once it was suspected the attacks came from a Pakistani-based terrorist group.

The country remains at the top of the Global Services Location Index and industry surveys and visiting executives agree the country offers first-rate remote services, strong technical and language skills, seasoned vendors and favorable government policies, despite worries over wage inflation and increased demand overheating the economy. The country’s main competitor right now is China, but India’s strength in language capabilities keep it far above the rest.

China

United NationsMillennium Development Goals• Goal 1: Eradicate extreme poverty and hunger • Goal 2: Achieve universal primary education • Goal 3: Promote gender equality and empower women • Goal 4: Reduce child mortality • Goal 5: Improve maternal health • Goal 6: Combat HIV/AIDS, malaria and other diseases • Goal 7: Ensure environmental sustainability • Goal 8: Develop a Global Partnership for Development For more, visit http://www.undp.org/mdg/basics.shtml

Failure to re-negotiate a six-month truce and increased mortar attacks and movements of mortars to within the West Bank, Israel went on the attack at year end striking at Hamas by air and land. More than 750 people have been killed, including many scores of ci-vilians, and at press time, there are international calls for a truce but no movement toward that end.

Israel’s economy grew at an ac-celerated 5.1 percent pace for the third quarter and average growth for the year was 4.3 percent. Despite the global slowdown, it is expected to grow another 1.7-2 percent for 2009. Productivity was up 3 percent for the year to September 30 and concerns of inflation would be greater for the central bank were it not for the worldwide recession since it hit 4.5 in November. Still, for the year, inflation only averaged 2.8 percent. The unemployment rate was 5.9 percent as of the end of September .

Israel’s trade balance for the last 12 months as of November was a deficit $14.4 billion and the current-account balance for the year was $2.6 billion, representing 1.3 percent of the GDP for 2008. The shekel traded at 3.84 against the dollar at Dec. 30 2008 and the budget deficit was .7 percent of the GDP for 2008.

Egypt’s trade deficit was in excess of $23 billion as of June, although the current account is running a marginal $900 million surplus, less than 1 percent of the GDP also. The pound traded at 5.52-5.53 per dollar at year end 2007 and 2008 respectively. The budget deficit is 6.8 percent of the nation’s economy which grew by 7.2 percent for the year and is expected to grow a healthy 5.1 percent in 2009. Industrial production grew a healthy 6.8 percent as of June 30 but inflation is barreling ahead, at 20.3 percent as of the end of

November. Unemployment is about 8.6 percent.

It should come as no surprise that Saudi Arabia, which boasts the world’s richest oil reserves, estimated at 264 billion barrels at the end of 2007, should have a strong trade surplus, which it does. It reached $150.8 billion as of the end of 2007. The current account surplus at that time was $95 bil-lion, some 30% of the country’s economy which is expected to

experience a downturn in 2009, due to a collapse in the price of oil. The riyal is pegged to the dollar at 3.75 per greenback. Inflation grew from 4.9 percent a year ago to a disconcerting 10.4 percent at the end of the third quarter of 2008, and is expected to remain at around 8.5 percent for 2009.

South Africa’s economy grew by 3.5 percent for the year 2008 and is expected to grow a respectable 2.5 percent for 2009, despite a 1.6 percent decline in productivity in Oc-tober. Inflation grew from 8.4 percent at the end of 2007 to 11.4 percent for 2008 and unemployment is very high at 23.2 percent as of the end of September. Despite a wealth of resources, South Africa imports more than it exports and the trade deficit was $9.5 billion at the beginning of November and the balance of payments deficit was $23.2 billion at the end of September, representing 7.8 percent of the economy. The rand weakened significantly against the dollar, sliding nearly 50% from 6.83 at the end of 2007 to 9.47 to the dollar at the end of 2008.

Africa’s Top Ten Economies: Source: ClickAfrique.com( GDP Figures in US $ Bilions)

Country Global Rank GDPSouth Africa 27 467.6 Egypt 29 431.9 Nigeria 40 294.8 Algeria 42 268.9Morocco 60 127Sudan 62 107.8Angola 72 80.9Libya 73 78.8Tunisia 75 77.2Kenya 83 57.7

Gulf Cooperation Council Established in 1981, the Gulf Cooperation Council (GCC) includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). The Gulf Cooperation Council was formed to protect members’ security and eco-nomic interests and led to a common market and the presi-dency of the Gulf Cooperation Council rotates yearly among members. Council headquarters are in Riyadh, Saudi Arabia. According to MEED, member states are expected to “suffer a substantial setback in 2009” with possible GDP declines of 20 percent for the year. This is in part because of the decline in oil prices which are expected to remain lower for 2009 than they were in 2008. “GCC economies will also be affected by the volatility of the dollar, to which five of the six GCC states peg their cur-rencies, the equities crash, the liquidity squeeze, the global real estate crash, the aviation and tourism slump, and lower volumes of world trade,” MEED reports.

Middle East and Africa


In mid-2007, Chris Laird, an analyst with a precious metals trading firm, was among many predicting the collapse of the global credit bubble. In March, 2008, he elaborated: “Right now, we are looking at the precipice of a total world financial collapse. When the stock markets finally let go, people will wake up to the reality of world financial bankruptcy. Millions of people will lose much of their retirement savings, in a super world stock crash... Think of (the Tech bubble crash) as mere-ly a taste of what is to come.”

While the s u b p r i m e m o r t g a g e crisis caused c o l l a p s e within the U.S. Gov-e r n m e n t -sponsored F e d e r a l N a t i o n a l H o m e Mor tg age A s s o c i a -tion (Fan-nie Mae) and Federal Home Loan Mor tg age C o r p o r a -tion (Fred-die Mac), prompting the Federal H o u s i n g F i n a n c e Author i ty into con-s e r v a t o r -ship, across the pond from Iceland to Turkey, central governments prepared for the worst.

Belgium-Netherlands-Luxembourg financial giant Fortis, was partly national-ized in late September also when finance ministers from the trio of countries agreed to invest more than $16 billion into the sinking multinational. A later selloff of the Belgian assets which was encouraged by then-Belgium Prime Minister Yves Leterme to BNP Paribas led to a court inquiry and Leterme’s resignation over al-legatnions he influenced the transaction at the cost of smaller investors. Replac-ing Leterme as Prime Minister is Herman Van Rompuy who took control in late December.

Germany’s second-largest commer-cial property lender, Hypo Real Estate,

found itself on the receiving end of a $51 billion bailout package when the Ger-man government provided guarantees by a consortium banks for the huge deal. Deutsche Bank shares are getting hit in early January due to a rumor bank loan losses may surpass the 3.4 per cent climax the bank faced during the Great Depres-sion in 1934.

Iceland and Great Britain, both ru-mored at the brink of bankruptcy when on October 8, central banks across the continent, and even China, took extraor-

dinary measures and announced simul-taneous cuts of .5 percent to their base lending rates. Still, the following day, Iceland’s economy and monetary unit collapsed. The bank rate cuts did not halt the decline and Friday, October 10, stock markets across Europe and Asia crashed in what some have called the worst week since the Wall Street Crash of 1929. While the United States appears to be epi-center of this recession, globalization has ensured all the world is dragged down. To what extent depends upon a country’s re-serves and unfortunately, most of Europe has low reserves to buffet it during this crisis.

There is some good news to balance out the bad. A few wise European banks with sufficient liquidity entered the flea market with purses open and acquired, at

Europe

ICELAND On October 9, Iceland’s financial sector collapsed completely with the

failure of Kaupthing Bank, the nation’s biggest bank, following the Septem-ber failures of the two other main banks, Glitnir and Landsbanki Island. All three have been placed in receivership by the country’s Financial Supervi-sory Authority. The collapse stemmed from inability to refinance short-term debt and a run on deposits in the U.K. following the U.K.’s forced bankruptcy of Kaupthing’s British subsidiary which has prompted the bank to file suit against the British government. On Jan. 5, Iceland’s Prime Minister Geir Haarde said his government supports the lawsuit and would be willing to help fund it.

In all, some $61 billion in deposits, about 12 times the size of the small country’s economy, is in doubt and affects more than 500,000 customers from outside the country, with frozen assets held by 12 British universities, in-cluding Oxford and Cambridge, facing £77 million in losses. Other hospitals, government municipalities and even the police force of London. Iceland has received loan guarantees of €4 billion from Russia $2.1 billion from the IMF to help guarantee the deposits.

At the same time, the Icelandic kronur has fallen sharply and the country’s stock exchange plummeted by more than 90%. A silver lining is that the devalued kronur will surely boost tourism, already booming. From January to November, 49,000 North American tourists enjoyed the volcanic island south of the Arctic Circle with a country-wide population of only 320,000.

great discount, assets of some of the failed banks. These include: Banco Santander of Spain, which acquired Bradford & Bin-gley’s for $1.1 billion. Europe’s second-largest bank, Santander is likely to expand further in the long-term.

Barclays Bank is considered one of Europe’s better-capitalized banks and ac-quired some of bankrupt Lehman Broth-ers operations at fire sale costs.

Although BNP Paribas was rocked by the subprime mortgage crisis like most other banks last year, the massive French

bank remains among the top banks in the Eurozone based on market capi-talization. And as noted earlier, since it acquired the Belgian held assets of Fortis, it will grow fur-ther.

In non-bank-ing news, after much procrasti-nation, Turkey’s g o v e r n m e n t agreed to cut its budget by some $3.6 billion at the end of the year. Turkey hopes to secure a loan from the IMF of some $25 billion and the budget cut and repayment of some $50 bil-

lion in foreign debt are conditions of the loan.

Turkey, too, is suffering from the global recession and the budget cuts come at a time when the export-reliant economy is struggling. While official projections from the government call for 4 per cent growth in GDP for next year, the Orga-nization for Economic Cooperation and Development (OECD) projects a GDP decline of 2 per cent for the country next year. The overnight lending rate lies at 17.5 per cent right now and the Turkish lira has fallen against the dollar from 1.17 to 1.52 as of December 30.

Inflation in Turkey is high at 10.6 per-cent for the year, and unemployment stood at 9 percent for the year as of Sept. 30.

For years the muslim country has been Jan. 2009 Page 7 The Whitehall Monitor

This month, the Bank of England lowered its benchmark rate to the low-est since the institution’s foundation –– nearly a century before the United States declared its Independence from the Brit-ish government –– in 1694! The cut re-duces interest rates to 1.5 percent, is the fourth in as many months, and to lend scale to the agression with which inter-est rates have been cut over the past year, consider the interest rate stood at 5.25 percent as of February, 2008.

“The availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending to the non-financial sector,” the bank’s governor, Mervyn King, announced in a statement released to the press. “Output is likely to continue to fall sharply during the first part of this year.”

Following Northern Rock PLC’s bail-out in Sept. 2007 and nationalization on February 22, 2008, the bank has taken aggressive measures to get on track, de-spite the dour economic outlook and has managed to repay more than half of the debt owed from the pre-nationalization bailout.

Unfortunately, the government was forced to nationalize another pair of financial institutions, Royal Bank of Scotland, the second largest bank in the country, and lmortgage lending giant Bradford & Bingley, in September.

“With that move, every single one

United Kingdom

EU in January, 2007, has been caught in a number of scandals and in July an EU report found that 34 of 35 EU-funded projects within Bulgaria had financial irregularities and withheld €220 million in development aid.

On the IT front, and offshore services in general, Bulgaria is doing better along with several other Central and Eastern European countries, landing within the top 51 countries on the Global Loca-tion Index. Bulgaria squeezed into the top 10 countries in the Global Location

knocking on the door of the European Union, hoping to gain entry, and for years it has been put off. In June, 2006, though, it gained preliminary approval, but is required to meet EU six year bud-getary perspectives. It is not likely to gain accession until 2013 at the earliest, and more likely, will not become a full member until 2021.

Bulgaria, which gained entry into the

of the country’s “building societies,” or smaller regional banks, has now been taken over either by the government or another big traditional bank.” Rob Gif-ford of National Public Radio reported.

Bradford & Bingley, formed in 1964 by the merger of two building societies around for more than 150 years each, was valued at more than £3 billion in early 2006. It was the largest lender to rental property owners. On Sept. 26, the share value dropped to £256 million, dragged down by the worst British hous-ing decline in 30 years.

“Hysterical claims that Britain is on the brink of ‘national bankruptcy,’ or that the Government has ‘run out of money’ or that the pound is going the way of the Icelandic krona may be a normal part of political banter, but they are absurd,” re-ported The Times associate editor Anatole Kaletsky in November. Kaletsky noted that at 40 per cent, Britain’s public debt-to-GDP ratio is the lowest among G7’s other advanced economies.

“If it were to rise to 57 per cent, as suggested by Treasury projections, this would not p r e s e n t a serious problem,” he not-ed. “Nor would it drive up i n t e r e s t rates and inflation, to judge by the experi-ence of Ja-pan, Italy, France and Germany,

all of which have public debt ratios above 57 per cent.”

Prime Minister Gordon Brown’s La-bour Party was growing in unpopularity before the financial crisis, but his per-sonal stock has arisen given his steady resolve in addressing the downturn and his ten years of experience as head of the Treasury. Besides concerns over the mid-2009 general elections, other wor-ries likely to be keeping him up at night include unfunded government and pub-lic worker pension schemes as the popu-lation continues to age, and the rapid de-cline in the sterling versus the U.S. dollar. Calls to join the Euro are growing.

The current account deficit expanded to £7.7 billion in the third quarter, repre-senting about 2.1 per cent of GDP. The economy grew by a very slight .8 per cent for the year and is projected to shrink by around 1.4 per cent for 2009. Industrial production has slumped as well, shrink-ing by 5.2 per cent as of October. Infla-tion averaged 3.7 per cent for 2008 and unemployment was 6 per cent for the

1 Netherlands2 Sweden3 Denmark4 Finland5 Spain6 Switzerland7 Norway8 Italy9 Ireland10 Belgium11 Germany

12 Greece12 Canada13 Poland14 Czech Republic15 France16 Portugal17 Austria18 Hungary19 United States20 United Kingdom

UNICEF Ranking of Child Well-Being In Advanced Countries 2007

In the chart below countries are listed in order of their average rank for these six dimensions of child well-being that were assessed: material well-being, health and safety, educational well-being, family and peer relationships, behaviours and risks, and subjective well-being.


Europe, Cont’d Index, outpacing previous placeholders Czech Republic (which ended this year in 13th), Hungary, and Poland. Slo-vakia ranked 12th, Estonia and Latvia came in at 15th and 17th places respec-tively. Lithuania even landed in 28th place. “Estonia today is what Ireland used to be ten to 15 years ago,” the GLI reports, “a relatively low-cost European location with top class, largely untapped talent and a pro-business policy envi-ronment.

Reprinted with permission.By Jérôme Guillet and John EvansA monolithic, Putin-led Kremlin us-

ing the “energy weapon” to browbeat neighbouring Ukraine and beyond threaten the rest of Europe with natural gas shortages: the image has become a commonplace during the “gas spats” of the past few years. Yet those spats have a longer history than is generally appreci-ated – they began in 1992 – and, what is more, Vladimir Putin and Gazprom can-not win a prolonged gas war, and they know it.

The Soviet gas industry was born in Ukraine in the 1930s and the infrastruc-ture was built from there. Ukraine remained a central part of the gas pipeline network even as the focus of activity moved to western Siberia. Carving up the Soviet Union along along the borders of its former republics made for an often un-workable allocation of physical assets. Vital assets for Gazprom, the Russian gas monopoly, are located in Ukraine and thus no longer under its direct control: the pipelines are an obvious item, but, just as significantly, Ukraine controls most of the storage capacity of the Rus-sian export system. On the other hand, Ukraine, a heavy industry country, has mostly depleted its gas reserves, making it dependent on gas from Siberia.

So this is a situation of mutual de-pendence. Russia needs Ukrainian infra-structure to honour its export contracts to Europe, and Ukraine needs Russian gas. In case of conflict, withholding gas (from Russia’s side) or shutting down export infrastructure (from Ukraine’s) are tempting options, which have been taken up repeatedly since the demise of the Soviet Union.

Ukraine used to get its gas allocation from Soviet planners and continued to expect the same after independence. When Russia first tried to get payment for its deliveries in the early 1990s, it failed. When it first cut off gas to Ukraine to en-force payments, Ukraine simply tapped the gas sent for export purposes; when European buyers howled, Russia relented and restored gas supplies without having managed to get paid by Ukraine. This has gone on. Yet somehow the gas con-tinues to flow every year.

Russia cannot cut off Ukraine for any lengthy period of time, because that en-dangers its exports. In practice, giving roughly 20 per cent of its gas shipments

to Ukraine as payment for transit is an acceptable deal for both sides. So why the annual charade?

Gazprom understood long ago that Ukraine would never pay for official de-liveries. The attempted “solution” was to privatise a portion of the trade. Custom-ers were offered lower rates if they paid them directly to another supplier, for-mally unrelated to either Ukrainian gas authorities or Gazprom.

The co-operation of senior G a z - prom management

and Russian and Ukrainian politicians was

required

to set up the 30bn-cubic-me-tre-a-year trade. The trade’s enablers are in a position to benefit personally from it – and in effect cut out both Kiev and Gazprom. Political infighting in Ukraine can largely be understood by the struggle to be the Ukrainian counterparty to the trade. (It is no coincidence that Yulia Ty-moshenko, the prime minister, made her fortune in gas trading in the 1990s and that Viktor Yanukovich, the pro-Russia opposition leader, represents some of the largest heavy industrial gas buyers in east-

ern Ukraine.) In Russia, similarly, both the Kremlin and Gazprom are rife with infighting between shifting coalitions.

So while the world focuses on the pre-dictable brinkmanship between Ukraine and Russia, the real fight over the share-out is taking place more discreetly be-tween a few oligarchs in Moscow and Kiev. This is perhaps the whole pur-pose of the noisy puppet show. Worries about Russia or Gaz prom using the “gas weapon” against Europe are misplaced. In their official capacity, both are keenly aware of their absolute dependency on exports to Europe for a huge share of the country’s income, and on the need for stable, reliable, long-term relationships to finance the in vestments needed in gas infrastructure.

Of far more concern is that govern-ments in Ukraine and Russia tolerate – indeed encourage – use of their upper political echelons and large parts of their infrastructure as instruments in disputes between unknown oligarchs. It suggests how little the rule of law and principles of accountability have penetrated public life in each country. And also, compared with the power of competing factions, how overstated is the strongman reputa-tion of Mr Putin, Russia’s prime minis-ter.

Jérôme Guillet, an investment banker, and John Evans, a writer, are editors of the European Tribune, a news and debate website (www.eurotrib.com)

The battle of the oligarchs behind the gas dispute

Top Exporters (thousand barrels per day) 1 Saudi Arabia 8,525 2 Russia 6,866 3 United Arab Emirates 2,564 4 Norway 2,557 5 Iran 2,469 6 Kuwait 2,340 7 Venezuela 2,134 8 Nigeria 2,131 9 Algeria 1,842 10 Mexico 1,630 11 Libya 1,530 12 Iraq 1,438 13 Angola 1,379 14 Kazakhstan 1,145 15 Qatar 1,033

Biggest Consumers(thousand barrels per day) 1 United States 20,687 2 China 7,201 3 Germany 5,410 4 Japan 5,198 5 United Kingdom 3,625 6 Russia 2,811 7 India 2,572 8 Canada 2,297 9 Brazil 2,220 10 Korea, South 2,180 11 Saudi Arabia 2,139 12 Mexico 2,078 13 France 1,981 14 Netherlands 1,951 15 Italy 1,743

Let’s Talk Oil

Source: U.S. Energy Information Administration, 2006 figures



The Decem-ber 22 Tennessee Valley Authority Fossil plant coal fly ash slurry spill seems a tragic but fitting legacy to the presidency of George W. Bush. Indicative of the neglect his admin-

istration gave to infrastructure spending across the United States, this 1.1 billion gallon slurry was the largest fly ash re-lease in United States history covering 300 acres of pristine Tennessee rivers and farmland up to six feet deep in some areas. From bridges in need of repair to wear military forces and worn out equip-ment, to schools in decline...

Rather than dwell on the Bush years, however, president-elect Barack Obama must unite the country which faces tre-mendous challenges ahead in order to right itself, economically, politically, and even physically. Not since the Great De-pression has the economy shed so many jobs so rapidly … 524,000 in December bringing 2008 total to a six-decade high of 2.589 million, the worst since 1945. The unemployment rate jumped from 6.8 to 7.2 percent, the highest level since 1993. According to the Bureau of Labor Statistics, at least 10.3 million Ameri-cans were out of work as of the end of December. At 20.4 percent, unemploy-ment among teens is highest, followed by unemployment among blacks, 11.2 percent. Those out of work for 27 weeks or more was up by 822,000 since No-vember, 2007. The Federal Reserve re-ported in meeting notes of its December meeting that unemployment is “likely to rise significantly into 2010.” The U.S. outplacement firm Challenger, Gray & Christmas reported more than 166,000 job cuts were announced in December, an 8.4 percent decline over November’s numbers, but nearly four times more than December 2007’s numbers, suggest-ing the job losses are going to continue.

“The loss of jobs is beginning to create a bit of a negative feedback loop,” Mark Vitner, senior economist at Wachovia told CNNMoney recently. But Chal-lenger’s CEO, John A. Challenger, says the economic stimulus package could stop the bleeding by mid-2009.

“The plan to rebuild the nation’s crum-bling infrastructure will benefit not only

laborers on the front lines, but it will push up through the economy, creating jobs for manufacturing workers, engi-neeers, architects, technology specialists, etc.,” Challenger told CNNMoney.

On January 8, president-elect Obama called on Congress to quickly pass his proposed $800 billion stimulus plan aimed to increase jobs by 3 million by 2011 and boost consumer spending. It includes substantial tax cuts for individ-uals and businesses alike, coupled with a large infrastructure spending pack-age geared toward creating a national energy grid, encouraging renewable re-source technology, and revamping roads,

schools and more. Nancy Pelosi, Speaker of the House

of Representatives, and fellow democrats are calling on the president to raise taxes on the wealthiest individuals and has in-dicated she will delay a vote on this pack-age until after the inauguration, prepar-ing the scene for a potential battle.

“Every day we wait, or point fingers, or drag our feet, more Americans will lose their jobs, more families will lose their savings, more dreams will be deferred and denied, and our nation will seek deeper into a crisis that at some point, we may not be able to reverse,” Obama warned.

Lenders and retailers alike hint at the negative feedback loop dilemma, as the Federal Reserve announced in early Janu-ary that consumer borrowing in Novem-ber, the latest month reported on, dropped by a record $7.9 billion as Americans, staring down both barrels of an economic shotgun, faced with job insecurity and awareness of the worst economic down-

United States

On January 20 Democrat Barack Obama will be inaugurated 44th president of the United States, facing the greatest economic challenges for the country (and the world) since the Great Depression.

turn since the Great Depression. “Today’s figures foreshadow a pro-

longed drop in consumer spending as households try to reduce debt with their net worth declining and job losses accel-lerating,” Bloomberg reported.

The tightening of credit is one part of the equation as lenders are wary of expanding their already weakend credit portfolios. And they have reason to be. According to the American Bankers As-sociation, delinquencies on indirect auto loans, which are those made through car dealerships and other third parties, were the highest ever, at 3.25 percent for the third quarter of 2008, the latest numbers available. . ABA also noted delinquent payments in eight loan categories, ranging from auto loans to home equity loans.

““The number one factor in rising con-sumer credit delinquencies is job losses,” ABA Chief Economist James Chessen said. “With one million jobs lost in the first three quarters and two and a half million expected for the year, delinquen-cies of all types of consumer loans will likely increase in the coming quarters.”

Reflecting the reluctance to spend or buy on credit, retail stores posted a 2.2 percent decline in November and De-cember, according to the International Council of Shopping Centers which has never seen a greater drop in its 39 years reporting these numbers.

Macy’s, the nation’s second-largest departement store group, is rumored to be preparing announcment of a $3 bil-lion after-tax write down of goodwill, Bloomberg reported Jan. 9. That same week, Alcoa, the world’s largest alumi-num producer, announced a $900 mil-lion reorganization writeoff. The Stan-dard & Poors Index dropped nearly 40 percent in 2008 dragged down by such writeoffs and credit losses at financial en-tities worldwide.

One of the main losers, which shed 60 percent of its market value in mid-November alone, was Citigroup. It was weighed down by $306 billion in trou-bled assets at the time, Bloomberg noted. The federal government, which earlier had provided Citigroup $45 billion of TARP Funds, agreed to guarantee the troubled bank’s entire $300-plus billion troubled asset portfolio in late Novem-ber, in exchange for preferred shares of the company’s stock.

In early January, Citigroup agreed to support legislation it had previously

U. S. (Cont’d) lobbied against that allows bankruptcy courts to reset of mortgage rates for some current homeowners to stave off foreclo-sures. The legislation was voted down in the 110th Congress, but was amended to restrict it to only current homeowners. Citibank’s support and a democratically controlled House and Senate, the bill is likely to pass and quickly get signed into law by the new president who was a sponsor of the original legislation. Shares of Citigroup, which serviced about 7 percent of all U.S. mortgages for the year as of Sept. 30, rose on the news.

Officially in a recession since last quar-

ter of 2007, the economy shrank by .5 percent for the quarter but grew 1.3 per-cent for the year. Inflation grew by its smallest amount, 1.1 percent for Novem-ber, compared to 4.1 percent for the year.

The dollar was down dramatically much of the year but toward year end, pulled back as much of the world sought greenbacks as a safe haven currency again. Because of its declining economy, the British pound is no longer the green-back’s chief competitor and the dollar’s main competition is from the ten-year-old Euro which, before the U.S. invaded Iraq, was on par with the dollar and now trades at an impressive .75 to the dollar.

The trade deficit was at $853.1 billion

for the 12 months ended Oct. 31, and the current account deficit was $697.9 billion for the latest 12 months ended Sept. 30, about 4.5 percent of the GDP.

The U.S. budget deficit reached 3.2 percent of the GDP for 2008, a worse showing than other major advanced economies with the exception of India, Japan, and the UK who posted 4.3, 3.3 and 5.3 percent deficit gaps, respectively.

Even before the new stimulus package is added, Obama will be burdened with massive national debt. As of Jan. 6, the national debt exceeded $10.6 trillion, of which $6.3 trillion is held by the public according to the U.S. treasury.

The rapid decline in auto sales is indicative of the malaise in manufacturing. Overall Productivity grew 1.5 percent in the business sector, including farming, for the third quarter, sea-sonally adjusted but Manufacturing Productivity declined by 2.7 percent. Durable goods manufacturer productivity showed growth of 2.9 percent, but was offset by a steep 10.2 percent decline in productivity of non-durable goods manufacturing.

“Economic activity in the manufacturing sector failed to grow in December for the fifth consecutive month,” Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ reported in the organization’s January Manufacturing ISM Report on Business®. “The decline covers the full breadth of manufacturing industries, as none of the industries in the sec-tor report growth at this time.” The report notes that new or-ders have declined to the lowest level on record, going back to January 1948, for 13 consecutive months straight.

“The industries failing to grow in December are: Nonmetal-lic Mineral Products; Printing & Related Support Activities; Wood Products; Machinery; Primary Metals; Paper Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Electrical Equipment, Appliances & Compo-nents; Furniture & Related Products; Plastics & Rubber Prod-ucts; Textile Mills; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufactur-

ing,” ISM reports.Order backlogs have

never been lower than they hit last month since ISM began track-ing order backlogs in January 1993. To off-set the slower demand, manufacturers are cut-ting inventories and shutting down capac-ity. Export orders de-clined too, for the third month in a row follow-ing 70 straight months

of growth in the organization’s New Export Orders Index. Four industries did report some growth in new export orders.

• Apparel, Leather & Allied Products• Textile Mills• Plastics & Rubber Products• Miscellaneous Manufacturing. No growth in export orders was noted in the following

industries: Furniture & Related Products; Primary Metals; Nonmetallic Mineral Products; Paper Products; Printing & Related Support Activities; Chemical Products; Transportation Equipment; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Elec-tronic Products; and Food, Beverage & Tobacco Products.

A bit of good news for the U.S. trade deficit, imports of materials by manufacturers decreased for the 11th consecutive month of contraction in imports.

The industries reporting growth in import activity for De-cember are:

• Apparel, Leather & Allied Products• Paper Products• Electrical Equipment, Appliances & Components. The remaining industries responding to the survey, includ-

ing Nonmetallic Mineral Products; Plastics & Rubber Prod-ucts; Transportation Equipment; Printing & Related Support Activities; Textile Mills; Fabricated Metal Products; Machin-ery; Chemical Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products did not expand import activity for the month.

As hinted in the Baltic Dry Index, shipments of manufac-tured durable goods decreased $5.0 billion or 2.4 percent to $202.9 billion for October, the third decrease in three con-secutive months. This was a marked jump over a 0.2 percent September decline.

U.S. Industrial Overview

REMINDING YOU: Information is Power! Whitehall offers U.S. sector reports to wholesale customers for $150 per sector. These reports include identification of the lead-ing companies, customers, suppliers, trends, ratios, and more.


Accounting for an estimated 90 percent of the GDP, small businesses are the backbone of the economy. They have been hurt dramatically hurt by the slow-down of major manufacturing giants.


Canada has a reputation of embracing the rule of law and is perceived as fourth least corrupt country in the world, according to Trans-parency International, and yet in a move designed to bypass a confidence vote

that would have tossed his Con-servative government out, on De-cember 4, 2008, Prime Minister Stephen Harper temporarily shut down parliament with permission of the Governor-General. It was the first time in Canada’s history for such a prorogue. Harper sur-vived an earlier election held in October, but his minority Con-servative government is under pressure from opposition who have formed a coalition which is likely to unseat him.

The confrontation erupted when Harper announced his fall economic update which would have eliminated millions in subsidies from political parties and removed the right of civil workers to strike. Harper has re-moved both of those contentious items from a revised version.

The political back-and-forth comes amidst a global crisis which saw the most dramatic deline in the Canadian dollar

quarter ending October 31.

against the U.S. dollar in more than half a century as plummet-ing commodity prices in the latter part of 2008 inflicted great damage to the resource-rich country. In fairness, the decline only served to level out gains the Canadian currency made in 2007 when it was at one point valued higher than the U.S. greenback. Analysts expect more weakness for both the Cana-dian and U.S. dollars in at least the first half of 2009.

Canada’s oil rich western provinces were strong enough to balance out economic declines in both Ontario, with its automotive industry under pressure, and Que-bec’s industry sector. Thanks to British Columbia and elsewhere, Canada has an estimated 23 years of oil reserves, in excess of 25 bil-lion barrels at the end of 2007 ac-cording to BP.

The unemployment rate rose marginally above the structur-al unemployment rate, helped along no doubt by the shedding of 1,300 jobs by Canada’s major telecom firm, Nortel. At the end of November the unemployment rate was 6.3 per cent. The econo-my barely grew, .6 percent for the

whole year, and in September industrial production fell 3.7 per cent. Fortunately, the inflation rate as of November was only 2 per cent, but that is sparking concerns of a deflationary situ-ation and zero economic growth down the road. As it is, the economy is only expected to grow .1 per cent for all of 2009.

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Canada

Pristine Vancouver ... ©John Olson, 2007

Despite a budget surplus that ac-counted for 5.9 percent of the GDP, Chile’s economy shrank by a slight .2 per-cent for the third quarter. Still, it held its own to grow by nearly 4 percent for the year. Because of a reliance on overseas trade, the GDP is expected to grow only 1 percent in 2009. Productivity shrank for October by .8 percent. Inflation grew from 7.4 percent for 2007 to 8.9 percent for 2008 and unemploy-ment was 7.5 percent at the end of October.

Columbia’s GDP grew by an average of 3.2 percent for the year 2008 and is expected to grow by another 2 percent for 2009 despite a 7.5 percent decline in productivity in Octo-ber, the latest figures available. Inflation increased from 5.4 percent for 2007 to 7.7 percent at the end of November and unemployment is in double digits – just at 10.1 percent at the end of October. At that time, the country’s trade surplus was $2.7 billion, despite a current account deficit for the last 12 months to June was $4.9 billion which amounted to 2.4 per-cent of the country’s GDP. The Colombian peso ended the year at 2,242 to the U.S. dollar, a slight decline from 2007’s year end position of 2,017. The budget deficit was 1 percent of the GDP at year’s end.

Mexico has a decent 4.5 percent unemployment rate as of November, and inflation grew modestly from 3.9 percent to 5.2 percent for 2008. But productivity declined slightly in October by 2.7 percent and the economy barely inched along growing only 1.8 percent for the year. It is expected to

do worse and post a slim.2 percent decline next year. This might be because the trade balance was $14.5 billion year

on year at the end of November, and the current account balance at the end of the third quarter was $11.8 bil-lion, representing 1.7 percent of the GDP. The peso

dropped in value against the dollar from 10.9 at 2007 year end to 13.5 at the start of 2009.

The country has no budget deficit to speak of.

With unemployment of nearly a quarter of its population, Venezuela’s

Hugo Chavez has much to worry about. The oil-rich country was coasting along

beautifully during the $120-a-barrel days in 2008, but having dipped to under $50 a barrel,

his country is not bringing in the foreign dollars to support the large number of public employees or pensioners. Still, the economy boasted a trade surplus of $50.2 billion at the end of September, and a cur-

rent account surplus of $49.4 billion for the year ended Sept. 30, contributing 15.5 percent to the economy for 2008. The boulivar strengthened in value against the dollar moving from 5.5 to 5.2 over the last two Decembers. Despite high interest rates and a budget deficit, the economy grew an estimated 4.2 percent for the year, and inflation, though high at approxi-mately 11.4 percent, is not the hyperinflation once common-place throughout Latin America.

Despite a decline in productivity of 7.2 percent for No-vember, Argentina’s economy expanded by an impressive 6.2 percent for the year and is expected to grow an additional 2.2 percent in 2009. Its trade surplus is a healthy $14.1 billion as of the end of November, and the current account balance, representing 2.9 percent of the GDP, was $9 billion as of the end of September. The Argen-tine peso dropped in value from 3.15 to 3.44 against the dollar year on year to December 31, 2008, but a budget surplus at a scant .7 percent of GDP repre-sents good management. Inter-est rates are high at 19.56 on three-month bonds and inflation fell slightly to 7.9 percent at the end of November and averaged 9 percent for the year. At the start of October 7.8 percent of the population was unemployed.

Latin America and Caribbean

Ten Richest Countries in the Caribbean

Source: U.S. Central Intelligence AgencyCountry Per Capita GDP (In US $)The Bahamas 21,300Trinidad and Tobago 19,700Barbados 18,200Antigua and Barbuda 10,900St. Kitts and Nevis 8,200Dominican Republic 8,000Saint Lucia 4,800Jamaica 4,600Cuba 3,900Grenada 3,900

Southern coast of St. Vincent.Ian Mackenzie, Photographer.


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