Paul deLespinasse: A grand bargain between U.S. , China could save the world

Paul F. deLespinasse

Sturgis Journal
Fri, January 20, 2023

Americans are obsessed with the threat posed by China to our interests and even to our national survival. Skilled analysts at the State Department, Pentagon, think tanks and universities are engaged in identifying the dangers posed by China and possible strategies for coping with them.

Our intense focus on dangers risks overlooking the opportunities that exist for American-Chinese relations, which I would like to address here. Let's consider an extreme case of a Grand Bargain illustrating how monumental our opportunities may be. But of course there could be many lesser opportunities if we can't arrange a Grand Bargain.

The Grand Bargain would rest on the fact that cooperation in achieving our mutual interests could provide so many benefits all around that they would greatly outweigh the conflicting interests which now get all our attention.

Just consider the resources a grand Chinese-American bargain could release to fund additional investment in projects at home and around the world. Between them, the two countries currently spend about a trillion dollars every year on military forces. This is more than half of the money spent by the entire world on military forces.

Aside from Chiina, no other country poses a credible military threat to the U.S. and aside from the U.S. no country poses a credible threat to China. The two countries could not afford to disarm totally while the rest of the world remained armed. But the Grand Bargain could pick up an annual budget of half a trillion ($500 billion) by agreeing to cut Chinese and American military expenditures exactly in half.

Since the reduction would be mutual it would not threaten Chinese or American military security.

What could China and America do with half a trillion dollars every year? Are there any projects that are worth spending that much money on? Well, what about saving the planet, and all of its people, including Americans and Chinese, from a ruined climate?

To protect us all, we must phase out our prevailing ways of generating energy. We must massively shift to renewable energy. This will cost immense amounts of money, and an extra half trillion dollars annually could accelerate this needed shift very nicely.

This project would employ the best efforts of the world's skilled scientists, engineers and entrepreneurs, many of whom live in China and the United States. The experts who would lose their jobs at the Pentagon and its Chinese equivalent could easily find new employment in this more constructive work.

Although many details would remain to be worked out on the basis of experience, there are clearly two places where large amounts of extra money would be very beneficial. We could install tons of additional solar PV panels. We could also build large amounts of new grid to allow electricity generated by those PV panels to be conveyed where it is needed.

If anything, building additional grid, up to and including a grid connecting the entire planet into a single system, should have an even higher priority than speeding up the installation of PV panels. There is no use producing PV panels whose electrical output cannot be fully used because of an inadequate or non-existent grid.

Unless fusion power — the possibility of which is still far from certain — can be developed much sooner than even optimists now dream of, the world will move to run on solar energy sooner or later. But with the pace of climate degradation accelerating, later might not be soon enough.

There is already a great acceleration in PV and grid building. But a Grand Bargain between China and the United States could dramatically increase that acceleration and, ultimately, save the world.

This would be a result doing great honor to the people and leaders of both of our countries.

If the United States and China were to cooperate in this project, who could stop us?

— Paul F. deLespinasse is professor emeritus of political science and computer science at Adrian College. He can be reached at pdeles@proaxis.com.

This article originally appeared on The Petoskey News-Review: Paul deLespinasse: A grand bargain between U.S. , China could save the world

Lunar New Year tourism hopes fizzle as Chinese stay home






















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Asia Lunar New Year TourismA Chinese tourist in traditional Thai costume poses for a photograph at Wat Arun or the "Temple of Dawn" in Bangkok, Thailand on Jan. 12, 2023. A hoped-for boom in Chinese tourism in Asia over next week’s Lunar New Year holidays looks set to be more of a blip as most travelers opt to stay inside China if they go anywhere. (AP Photo/Sakchai Lalit)

TIAN MCLEOD JI, ELAINE KURTENBACH and KANIS LEUNG
Thu, January 19, 2023

BANGKOK (AP) — A hoped-for boom in Chinese tourism in Asia over next week’s Lunar New Year holidays looks set to be more of a blip as most travelers opt to stay inside China if they go anywhere.

From the beaches of Bali to Hokkaido’s powdery ski slopes, the hordes of Chinese often seen in pre-COVID days will still be missing, tour operators say.

It’s a bitter disappointment for many businesses that had been hoping lean pandemic times were over after Beijing relaxed restrictions on travel and stopped requiring weeks-long quarantines. Still, bookings for overseas travel have skyrocketed, suggesting it’s only a matter of time until the industry recovers.

“I think the tourists will return around the end of February or early March at the earliest," said Sisdivachr Cheewarattaporn, president of the Thai Travel Agents Association, noting that many Chinese lack passports, flights are limited and tour operators are still gearing up to handle group travel.

COVID-19 risks are another big factor as outbreaks persist following the policy about-face in China, he said in an interview. “People are possibly not ready, or just getting ready."

For now, the Chinese territories of Macao and Hong Kong appear to be the most favored destinations.

Just days before Sunday's start of the Lunar New Year, iconic tourist spots in the former Portuguese colony, like historic Senado Square and the Ruins of St. Paul’s, were packed. Gambling floors at two major casinos were largely full, with groups of Chinese visitors sitting around the craps tables.

“I’m so busy every day and don’t have time to rest,” said souvenir shop owner Lee Hong-soi. He said sales had recovered to about 70%-80% of the pre-pandemic days from nearly nothing just weeks ago.

Kathy Lin was visiting from Shanghai, partly because it was easy to get a visa but also because she was concerned about risks of catching COVID-19. “I don’t dare to travel overseas yet,” she said as she and a friend took photos near the ruins, originally the 17th century Church of Mater Dei.

That worry is keeping many would-be vacation goers at home even after China relaxed “zero COVID” restrictions that sought to isolate all cases with mass testing and onerous quarantines.

“The elderly in my family have not been infected, and I don’t want to take any risks. There’s also the possibility of being infected again by other variants,” said Zheng Xiaoli, 44, an elevator company employee in southern China's Guangzhou. Africa was on her bucket list before the pandemic, but despite yearning to travel overseas, she said, “There are still uncertainties, so I will exercise restraint.”

Cong Yitao, an auditor living in Beijing, wasn't worried about catching the virus since his whole family has already had COVID-19. But he was put off by testing restrictions and other limits imposed by some countries, including the U.S., Japan, South Korea and Australia, after China loosened its pandemic precautions.

“It looks like many countries don’t welcome us,” said Cong, who instead was planning to head for a subtropical destination in China, like Hainan island or Xishuangbanna, to enjoy some warm weather.

According to Trip.com, a major travel services company, overseas travel bookings for the Jan. 21-27 Lunar New Year holidays were up more than five-fold. But that was up from almost nothing the year before, when China's borders were closed to most travelers.

Reservations for travel to Southeast Asia were up 10-fold, with Thailand a top choice, followed by Singapore, Malaysia, Cambodia and Indonesia.

Travel to other favorite places, like the tropical resort island of Bali and Australia, has been constrained by a lack of flights. But that is changing, with new flights being added daily.

“You will see an increase, certainly, compared with last year, when China was still closed, but I don’t think you will see a huge surge of outbound travelers to different destinations within Asia-Pacific, let alone Europe or the Americas,” said Haiyan Song, a professor of international tourism at Hong Kong Polytechnic University.

Tourism Australia forecasts that spending by international travelers will surpass pre-pandemic levels within a year's time. Before the disruptions of COVID-19, Chinese accounted for almost one-third of tourist spending, nearly $9 billion.

Bangkok's Suvarnabhumi Airport has increased staffing to cope with more than 140,000 arrivals a day during the Lunar New Year rush, though only individual Chinese travelers will be coming for now — group tours from China have yet to resume.

As a brilliant orange sun set behind ancient Wat Arun, beside Bangkok's Chao Phraya river, a Shanghai man who would give only his surname, Zhang, posed with a companion in colorful traditional silken Thai costumes.

“It's very cold in China, and Thailand has summer weather," said Zhang, adding that he knew many people who had booked tickets to get away from his hometown's cold, damp weather.

Still, for many Chinese, the allure of world travel has been eclipsed, for now, by a desire to head to their hometowns and catch up with their families, nearly three years exactly since the first major coronavirus outbreak struck in the central city of Wuhan in one of the biggest catastrophes of modern times.

Isabelle Wang, a finance worker in Beijing, has traveled to Europe, the Middle East and parts of Asia. After three years of a slower-paced life during the pandemic, her priority is to be reunited with her family in Shangrao, a city in south-central China.

“There’s still a lot of time remaining in our lifetimes, and there will certainly be opportunities to go abroad later when we want to,” she said.

___

Leung reported from Hong Kong and Macao. News assistant Caroline Chen in Beijing and Associated Press journalists Rod McGuirk in Canberra, Tassanee Vejpongsa and Chalida Ekvitthayavechnukul in Bangkok, and Edna Tarigan in Jakarta, Indonesia, contributed to this report.

Unions press Biden administration to not change EV tax credit rules


U.S. President Biden welcomes Japanese Prime Minister Kishida at the White House in Washington

Fri, January 20, 2023 
By David Shepardson

WASHINGTON (Reuters) - Major unions and public interest and environmental groups are urging President Joe Biden to reject efforts by the European Union and other foreign governments to revise U.S. electric vehicle tax incentives.

The $430 billion U.S. Inflation Reduction Act (IRA) passed in August restricts $7,500 consumer tax credits to North American-made EVs, but the U.S Treasury in December said consumers leasing vehicles assembled outside North America could benefit from the $7,500 commercial green vehicle tax credit.

Foreign governments have been pressing the Biden administration to do more to expand credit eligibility.

"The IRA has the potential to be a gamechanger for the industrial towns hit hardest by decades of offshoring," said a made public on Friday from the United Auto Workers, International Association of Machinists and Aerospace Workers, United Steelworkers, the Sierra Club and Public Citizen.

"We strongly urge you to ensure that the IRA is implemented as intended, without delays or technical changes that erode its promises to U.S. workers and climate goals," it said.

The White House did not comment on the letter on Friday but pointed to Biden's statements in September that said the IRA bill would create "good-paying union jobs" and "increase energy security."

EU Ambassador to the United States Stavros Lambrinidis said at the Washington auto show on Thursday that he was concerned by the "discriminatory" provision of the EV tax credit, arguing it means U.S. consumers "will have much less choice in what they can buy" that can receive the $7,500 credit.

"You can move to green without discriminating," Lambrinidis said.

The letter rejected the suggestion from foreign governments that the EV tax incentives violate World Trade Organization and free trade rules. "Out-dated trade rules should not be used to undermine our laws intended to support a growing clean energy economy," the letter said.

The EU in December praised the U.S. Treasury Department decision to allow EVs leased by consumers to qualify for up to $7,500 in commercial clean vehicle tax credits.

South Korea, Europe and some automakers in December had sought approval from Treasury to use the commercial electric vehicle tax credit to boost consumer EV access.

(Reporting by David Shepardson; Editing by Bill Berkrot)

El Salvador Exposure to Bitcoin is Minimal, Lender’s Chairman Says



Esteban Duarte and Michael McDonald
Fri, January 20, 2023 

(Bloomberg) -- El Salvador’s exposure to cryptocurrencies — including Bitcoin — is minimal, according to the chairman of the Central American Bank for Economic Integration, which provided most of the funds that the country is expected to use to repay a bond next week.

“We have seen that exposure, and we consider it very small — it is a not significant one,” said Dante Mossi, executive president of the multilateral lender, which provided $450 million of loans earlier this month. “We are interested that investors also know the real situation of El Salvador.”

Uncertainty about the real exposure of El Salvador to Bitcoin, which has plummeted in value in recent months, has been among the factors weighing on the nation’s access to capital markets. President Nayib Bukele’s administration had purchased 2,381 Bitcoin through June 2022, according to his announcements on Twitter. On November 16, he said the government would buy one Bitcoin every day.

The International Monetary Fund is expected to carry out its so-called Article 4 mission — in which it provides a macroeconomic assessment and recommendations — for El Salvador, Mossi said. CABEI is working with El Salvador’s government to compile information on debt sustainability, which is expected to include disclosures on cryptocurrencies, for the IMF review.

Press officers at El Salvador’s Ministry of Finance didn’t immediately reply to a request for comment via email. The country’s $347.9 million of 5.875% bonds due in 2025 touched the highest price since November 2021 on Friday at 72.89 cents, according to Bloomberg prices.

The CABEI chief added that the covenants of the recently-provided financing bar El Salvador from using it to buy such assets.

“The use of proceeds will be audited in six months,” Mossi said.

--With assistance from Sydney Maki.

Activists call for Chicago to rule out natural gas in new buildings, citing health risks, costs and climate change

Nara Schoenberg, Chicago Tribune
Thu, January 19, 2023 at 4:00 AM MST·5 min read

Environmentalists, activists and consumer advocates are calling on Chicago politicians to pass a clean buildings ordinance that would effectively rule out the use of natural gas in most new buildings.

Speaking at a news conference Wednesday morning at City Hall, the Sierra Club’s Illinois chapter director, Jack Darin, called such an ordinance “the next bold step for climate action.”

Speakers pointed to a growing number of scientific studies linking nitrogen dioxide emitted by gas stoves to childhood asthma. And Citizens Utility Board Executive Director David Kolata said that even before winter began, 20% of Peoples Gas customers were more than 30 days past due on their bills, and they owed an average of over $600.

“Natural gas has thrown Chicago residents into a deep hole and it’s only getting deeper,” said Pastor Scott Onque’, policy director at Faith in Place, an environmental justice nonprofit. “We need to start planning now for cheaper, cleaner ways to heat our homes. We need to start for the sake of our planet, our kids, our health, and our bottom lines.”

Advocates want Chicago to join New York, Los Angeles and Boston in effectively banning the use of natural gas in most new construction. In Chicago, gas is often used to provide residential heat and hot water, and to power stoves and laundry dryers — all of which can now be done with electricity.

The news conference was in support of a “Clean Buildings, Clean Air” ordinance that organizers said was being drafted by Mayor Lori Lightfoot’s office, with their input. The clean buildings ordinance is not yet public, according to Kolata, but he expects it to be made available soon.

Lightfoot’s office did not comment on whether it was working on an ordinance but released a statement from the mayor commending the work of the clean energy groups.

“This topic is critically important, and that’s why I commissioned the Chicago Building Decarbonization Working Group in 2021 to better understand how we can move to decarbonize buildings and alleviate the energy burden for Chicagoans struggling to pay their utility bills,” Lightfoot said in the statement.

Kolata said the expected ordinance is not technically a ban on natural gas in new construction. Instead, advocates want Chicago to follow New York’s lead, and establish emissions standards for new buildings that are so high they basically rule out fossil fuels.

In New York, that approach has been widely referred to as a ban on natural gas in new construction.

Peoples Gas provided a written statement noting that the company has been serving Chicago for 170 years and called the reasoning behind the proposed clean buildings ordinance “flawed and unrealistic.”

“Electric heat pumps may help keep Chicago warm in the future, but they cannot be relied upon today,” the statement said. “Not only do they struggle to work in cold climates, but it costs up to $60,000 to convert a single home to an electric heat pump. Further, Chicago’s electric system will be powered by natural gas for years to come, which shows that these activists’ thinking is flawed and unrealistic.”

A Consumer Reports survey found that members paid a median price of $7,791 to purchase and install a heat pump, versus $6,870 for a gas furnace. Whole-house heat pumps for cold climates can easily cost more than $10,000, Consumer Reports noted, but that’s for both heating and cooling — heat pumps provide air conditioning. With state subsidies, heat pumps can cost less than gas furnaces, according to Consumer Reports.

The federal government’s Inflation Reduction Act provides a 30% tax credit of up to $2,000 for heat pumps and ComEd offers rebates.

There’s some debate over whether high-efficiency electric heat pump heating systems can stand up to subzero temperatures in regions such as Chicago, but some local early adopters recently told the Tribune that their homes stayed warm and comfortable, in some cases with the aid of automatic backup systems intended for the very coldest days.

In Maine, which has set a goal of installing 100,000 heat pumps by 2025, a small pilot study found participants were staying warm in winter.

Home energy use accounts for about 20% of greenhouse gas emissions in the U.S., according to a 2020 article in the Proceedings of the National Academy of Sciences.

Those emissions can be reduced by switching from gas to electricity. And as electricity becomes cleaner, due to increased reliance on sources such as solar energy and wind, emissions will fall further.

Every U.S. residence combined currently creates more greenhouse gas emissions than all but five entire countries, or about as much emissions as Brazil and more than Germany, according to the Proceedings of the National Academy of Sciences article.

In recent years, the link between gas stoves and childhood asthma has been of particular concern, with a growing number of scientific studies finding a link.

Gas cooking in the home was linked to a 42% higher risk that children would have asthma, in a 2013 study published in the International Journal of Epidemiology. The study, a meta-analysis combining the results of 41 previous studies, also suggested a 24% increase in children’s lifetime risk of asthma.

A subsequent study found that longer use of gas stoves caused higher nitrogen dioxide levels, which in turn were linked to increased nighttime inhaler use in children with asthma.

Homes with gas stoves have nitrogen dioxide concentrations 50% to 400% higher than homes with electric stoves, according to a report by the clean energy nonprofit RMI.

At the news conference, Adella Bass, the lead health equity organizer for the Altgeld Gardens nonprofit People for Community Recovery, said that her entire family suffers from breathing issues. She cited problems such as toxic pollution from industry, as well as gas stoves.

“We deserve to breathe,” said Bass. “We deserve to feel safe in our homes and neighborhoods. Clean air shouldn’t be a luxury that only the wealthiest neighborhoods can access.”

If Chicago moves to effectively ban gas in new construction, it would join dozens of cities and counties that have taken similarly strong measures, many of them in California, where Berkeley instated the first ban in 2019.

There’s pushback against gas bans as well. At least 20 states have passed laws prohibiting local governments from banning natural gas, according to S&P Global Market Intelligence.

States that have banned natural gas bans include Iowa, Indiana, Texas and Missouri.

New leases to significantly expand UK offshore wind power

Thu, January 19, 2023 


The UK on Thursday announced leases for six new offshore wind projects which aim to cement the country as one of the world's leading renewable energy generators in the offshore sector.

The six new sites -- three off the North Wales, Cumbria and Lancashire coast, and three in the North Sea off Yorkshire and Lincolnshire -- will be able to power more than seven million homes by 2030.

They will generate eight gigawatts (GW) of renewable electricity.

The UK currently boasts nearly 14GW of installed wind capacity across dozens of offshore sites, according to industry body RenewableUK. That places it second globally behind China, which generates 66GW.

The British government is aiming for 50GW by the end of the decade, as it bids to meet climate change targets agreed internationally.

The Crown Estate, an independently managed portfolio of land, property and other assets belonging to the monarchy, struck the agreements as part of a fourth round of leasing deals for offshore wind, which first began in 2001.

The Estate, which owns and manages most of the seabed around the UK and awards rights to extract resources, said it has now sealed offshore wind deals totalling 41GW.

Gus Jaspert, of the Estate, hailed the latest agreements as "a significant milestone... demonstrating to the world that the UK offshore wind industry is growing at pace to help meet the climate challenge".

Under the terms of the leases, which run for at least three years before the bidders eventually switch to paying rent, the projects will generate around £1 billion ($1.24 billion) annually, according to the Estate.

Its total net income is handed to the UK government under a centuries-old agreement, but the ruling monarch sees a slice of that returned through the Sovereign Grant.

It is set as equivalent to 15 percent of the profits of the Crown Estate, and goes towards funding the Royal Household.

However, it was temporarily increased to 25 percent to cover the extensive updating work on Buckingham Palace, and totalled £86.3 million in 2021-22.

Separately, Buckingham Palace said on Thursday King Charles III has asked for profits from the new wind farms to be used for the "wider public good" rather than as a funding boost for the grant.

The Keeper of the Privy Purse, Michael Stevens, who manages the monarch's finances, has contacted Prime Minister Rishi Sunak and finance minister Jeremy Hunt to request "an appropriate reduction", the palace added.

jj/phz/lcm

Sacked GM workers in India sue company, CEO Barra for unpaid compensation



Thu, January 19, 2023 

By Aditi Shah and Arpan Chaturvedi

NEW DELHI (Reuters) -A union in India has sued General Motors' local unit and its global CEO for failing to pay court-ordered compensation to sacked factory workers, deepening the U.S. automaker's struggles to exit the country years after it shuttered local operations.

GM stopped selling cars in India in 2017 after years of low sales but its complete exit from the market has been marred by complications including legal tussles with workers and failure to find a buyer for a plant in the western state of Maharashtra after talks with China's Great Wall Motor collapsed last year.

GM and the factory workers - who allege illegal termination after the company decided to exit - have been locked in legal battles since 2021. The latest filing signals an escalation in the dispute as workers accuse GM's India unit and its executives, including CEO Mary Barra, of failing to follow court orders.

In a filing to the High Court of Bombay dated Jan 16, the General Motors Employees Union of 1,086 factory workers states the company has failed to pay them compensatory wages of 50% of their monthly salary starting April last year, as ordered by a local industrial court while it continues to hear the dispute, the documents show.

A union leader told Reuters that GM so far owes the workers around 250 million rupees ($3 million) in wages, based on the industrial court's order.

A GM spokesperson said the company remains "very confident" of its legal position. Adding: "GM is continuing to explore options for the sale of the (plant) site."

In its earlier court filings, it has said the industrial court acted beyond its power in ordering the compensation. The company has previously said it has tried to settle the issue amicably and has offered workers a generous severance package.

The union disagreed, and said GM continues to "blatantly violate" the industrial court's order by not paying the workers a single cent. In its latest filing, the union urged the court to hold the company and its executives in contempt, and punish them with imprisonment.

"The workers are unable to feed their families, pay for medical expenses, pay for their children's education," the union said in the filing, which has not previously been reported.

The lawsuit is likely to be heard in the coming days.

India has been a graveyard for some Western carmakers, especially U.S. companies, that have struggled to break the dominance of Japan's Suzuki Motor and South Korea's Hyundai Motor, which together hold a market share of about 60%. Like GM, Ford Motor ceased operations in India in 2021.

GM stopped selling cars in India at the end of 2017 but one of its two factories continued to produce vehicles for export until December 2020. After that, GM ceased all operations and moved to close the plant in Maharashtra, but it has not received permission.

The state government has rejected applications by GM to close the plant - a move that the company has previously said sends a "concerning message" to potential future investors.

(Additional reporting by Aditya Kalra; Editing by Simon Cameron-Moore)

OLD FASHIONED CRIMINAL CAPITALI$M

Vanished $4 Billion Brings Down Century-Old Retailer in a Week



Vinícius Andrade, Cristiane Lucchesi and Maria Elena Vizcaino
Fri, January 20, 2023 

(Bloomberg) -- Hours after revealing a scandal that would roil Brazilian markets, Sergio Rial joined a Zoom call with hundreds of panicked investors. It was an attempt to explain the $4 billion accounting gap that pushed him to quit his new job at the helm of retailer Americanas SA.

The Jan. 12 call was a tumultuous mix of English and Portuguese that some analysts were locked out of because the meeting reached its 1,000-participant capacity. Those who were able to cram into the headquarters of Banco BTG Pactual SA — the Sao Paulo-based creditor that was hosting the event — were left “perplexed” by Rial’s presentation, as one participant put it.

Four hours later, when the shares started trading, the stock plummeted 77%, wiping out $1.6 billion in market value. By the end of the day, bonds had lost half their value.

Within a week, the company filed for bankruptcy protection with $8.2 billion of debt.

“I don’t think there’s a company whose debt has gone down this much in two to three days,” said Omotunde Lawal, a portfolio manager at Barings UK Limited who focuses on emerging-market debt. “Maybe this is the fastest plunge ever.”

The startling and rapid meltdown has left Brazilians with the prospect of losing a ubiquitous company known for its unmistakable red-and-white logo and holiday sales, including in Rio de Janeiro where it was founded in 1929. The collapse dragged down the country’s stock market, sent creditors rushing to organize and pitted some of the nation’s most famed investors against each other. Billionaire Andre Esteves’s BTG Pactual, which days before had hosted the meeting with Rial, called it “the biggest fraud in Brazil’s capital markets.”

It was a sharp reversal for a company that had seen its stock rally after Rial was named chief executive officer last August, a job he only started on Jan. 2. Investors thought Americanas, which has been backed by billionaires Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira for more than four decades, was set for improved performance under the 62-year-old former banker’s leadership.

It unraveled on the night of Jan. 11 when it announced “inconsistencies” that had artificially boosted profits and reduced reported liabilities by half. The company’s disclosures imply it misreported numbers tied to financing of debts with suppliers while also wrongly deducting interest paid to lenders from its liabilities.

In the Thursday bankruptcy protection filing — similar to a Chapter 11 in the US — lawyers for the company said, “due to unexpected reasons that rocked the group’s structure, the petitioners saw their cash and revenue expectations crumble within minutes.”

Americanas Bondholders Face $8.2 Billion Debt Restructuring

The findings set off a whirlwind week in which Rial decided to personally deliver the bad news to a group of employees. Many of them had been working at the Brazilian retailer for decades, and put all their savings in shares of the company.

“Your faces are not particularly nice. But their faces were in deep pain,” he told investors on the BTG call, recalling the meeting with employees.

Shares in other Brazilian retailers including Via SA and Magazine Luiza SA sold off immediately, but trimmed losses as the firms rushed to reassure analysts that all their debt was properly booked on their balance sheets.

Americanas saw its market value collapse 90% from its peak hit during the coronavirus pandemic. Wall Street analysts quickly put their ratings under review and ratings firms downgraded the debt, after which banks refused to advance credit card receivables, draining more than 3 billion reais from the company’s cash.

After the Thursday bankruptcy protection filing, MSCI Inc. and Brazilian stock exchange operator B3 SA removed the stock from their indexes.

Americanas was granted emergency temporary protection against creditors from a court in Rio de Janeiro on Jan. 13, which also forbade them from freezing or seizing assets. The decision surprised bankers, who rushed to file motions to overturn the decision. Days later, BTG was allowed to block 1.2 billion reais to compensate part of the company’s debt. That triggered a similar reaction from other creditors, which also cut credit lines, and accelerated the crisis.

Americanas Scandal Pits BTG Billionaire Versus 3G ‘Demigods’

The collapse threatens to tarnish the reputation of Lemann and his partners as well as lead to losses in the shares they hold in Americanas. The trio controlled the company until they were diluted in a 2021 reorganization, which left them with a stake of 31%, still the main shareholders. They told the board they plan to keep supporting the company, but investors fear that any negative outcome may hurt other firms in which they are involved, such as Kraft Heinz Co. and Anheuser-Busch InBev SA/NV.

Americanas said in its bankruptcy protection filing the move by creditors to declare the early maturity of obligations, closed “the door to any kind of viable friendly negotiation.” The firm has approximately 43 billion reais in debt and now has 48 hours to present a list of creditors, which already started to organize.

Investment banks Moelis & Co. and Seaport Global Securities LLC are separately pitching to organize bondholders into a group. Investors holding local debt have hired lawyers and are deciding whether to work with a financial adviser, according to a person familiar with the matter who requested anonymity as the discussions are private.

“It’s hard to tell what the bankruptcy process will bring,” said Omar Zeolla, an analyst at Oppenheimer & Co. It seems Americanas’s main shareholders “are willing to contribute capital, but it’s hard for me to see at the moment how that could play out in terms of recovery for bondholders.”

STATE SANCTIONED WAGE THEFT
Treasury Taps Retirement Funds to Avoid Breaching US Debt Limit

WHO IS PAYING FOR GOP STUPIDITY?

THE WORKINGCLASS

Christopher Anstey

Thu, January 19, 2023 

(Bloomberg) -- The Treasury Department is beginning the use of special measures to avoid a US payments default, after the federal debt limit was reached Thursday.

The department is altering investments in two government-run funds for retirees, in a move that will give the Treasury scope to keep making federal payments while it’s unable to boost the overall level of debt.

Treasury Secretary Janet Yellen informed congressional leaders of both parties of the step in a letter on Thursday. She had already notified them of the plan last week, when she flagged that the debt limit would be hit Jan. 19.

Yellen reiterated that the period of time that the extraordinary measures will avoid the government running out of cash is “subject to considerable uncertainty,” and urged Congress to act promptly to boost the debt limit. Last week she said the steps wouldn’t likely be exhausted before early June.

The specific funds affected by the Treasury’s move are:

• The Civil Service Retirement and Disability Fund, or CSRDF, which provides defined benefits to retired and disabled federal employees

• The Postal Service Retiree Health Benefits Fund, or PSRHBF, which provides postal-service retiree health-benefit-premium payments. The fund is also invested in special-issue Treasuries

The two funds invest in special-issue Treasury securities that count under the debt limit. After the debt limit is increased, the three will be “made whole,” with participants unaffected.

EXPLAINER: What’s the Debt Ceiling, and Will the US Raise It?

It’s far from the first time the Treasury has resorted to these moves: Since 1985, the agency has used such measures more than a dozen times.

For the CSRDF, Yellen said that the Treasury is entering a “debt-issuance suspension period” starting Thursday and lasting through June 5. The Treasury will suspend additional investments credited to the fund and redeem a portion of the investments held by it, she said.

As for the PSRHBF, the Treasury will suspend additional investments of amounts credited to that fund, Yellen said.

Last week, Yellen had advised that the Treasury also anticipated tapping — this month — the resources of a third fund, the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan, which is a defined-contribution retirement fund for federal employees.

The so-called G Fund is a defined-contribution retirement fund for federal employees, and also invests in special-issue Treasury securities that count under the debt limit. Yellen’s letter on Thursday made no mention of the G Fund.

Yellen’s letter didn’t specify the amount of headroom under the debt ceiling that would be created by the extraordinary measures she listed.

The Treasury probably now has $350 billion to $400 billion of headroom available in all, said Gennadiy Goldberg, a senior US rates strategist at TD Securities. That, along with the influx of revenue that will come from individual income taxes due in April, should let the Treasury go until sometime in the July to August window without running out of cash, he said.

Other measures the Treasury has taken in the past to conserve headroom under the debt limit include suspending the daily reinvestment of securities held by the Exchange Stabilization Fund. That’s a special vehicle that dates back to the 1930s, over which the Treasury secretary has wide discretion.

The Treasury previously has also suspended issuance of state and local government series Treasuries. Those securities are a place where state and local governments can park cash, and they count toward the federal debt limit. Those governments need to invest in other assets when SLGS issuance is suspended.

--With assistance from Sydney Maki.

WEF DAVOS

View from the top

Even amid high-profile layoffs and economic clouds, U.S. workers should be optimistic about their prospects, according to political and business leaders at Davos.

A majority of CEOs have no plans to freeze hiring or lay off workers over the next 12 months, according to new research from PricewaterhouseCoopers. “When I look at the bulk of our clients, they’re still hiring in the right areas,” said Tim Ryan, U.S. Chair at PwC.

It’s partly simple math: there are still close to two job openings for every person who’s looking for work. Longer-term demographic trends also favor workers. “We aren’t having enough babies and the U.S. immigration policy isn’t bringing in enough workers to meet the needs,” said Rachel Romer, CEO of Guild, an education, skilling, and career-mobility platform, via phone. She also noted that the current layoffs wave is concentrated in the tech and finance industries and corporate headquarters, with limited impact beyond that.

Senior executives in Davos also privately acknowledged that their efforts to drag employees back into offices more days per week are being broadly ignored. They admitted they’re unlikely to be able to enforce traditional office attendance, even as it’s less easy for workers to hop from company to company these days, theoretically diminishing some of their leverage.

U.S. Labor Secretary Martin Walsh contended that businesses need to continue increasing pay and benefits as well. “It’s going to come down to retention,” Walsh told a group of reporters. “If you have a happy workforce and a loyal workforce, then you don’t have to worry about retention.”

Business leaders in Davos discussed concerns that the accelerating application of artificial intelligence could reduce the demand for human workers. But Romer countered that AI isn’t for the foreseeable future capable of replacing many front-line workers in industries such as retail, healthcare, and services. “If you develop the right skills, the world is your oyster—and not only that, you’re going to get to do some amazing things,” said Ryan. “I think climate is exciting. I think reinventing on the backs of world class technology is exciting.”
— Kevin Delaney

Peak moment

Speaking at the Victor Pinchuk Foundation’s Ukrainian Breakfast on Thursday, Canadian Deputy Prime Minister Chrystia Freeland, invoking a Wayne Gretzky metaphor, told attendees that the “puck is going to Ukrainian victory, so let’s skate there.” Former British Prime Minister Boris Johnson added: “Tell Putin to get the puck out of Ukraine.”