Associated Press
Associated Press, 09.23.10, 10:36 AM EDT
NEW YORK -- The United States is urging Japan and China to aggressively and quickly resolve a territorial dispute that has deepened animosity between the longtime rivals.
State Department spokesman P.J. Crowley said Thursday that Secretary of State Hillary Clinton told new Japanese Foreign Minister Seiji Maehara that good ties between China and Japan are crucial to Asia's prosperity.
Crowley says the United States isn't mediating between the countries following Japan's arrest of the Chinese captain of a fishing boat that collided two weeks ago with Japanese coast guard vessels near islands in the East China Sea claimed by both nations.
Crowley says "neither side wants to see the situation escalate to the point where it has long-term regional impact."
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
The Meanest And Funniest Panda
Microfinance Or Loan Sharks? Grameen Bank And SKS Fight It Out
At the Clinton Global Initiative, FORBES was a fly in a conference room, attending a special session on: Profiting from the Poor? A Discussion on Microfinance IPOs. Vikram Akula, founder of SKS Microfinance, India’s biggest microfinance institute that is poised to become the largest in the world after its recent IPO (and has billionaire Vinod Khosla and Sequoia Capital as investors amongst others), slugs it out with his one time idol, Muhammad Yunus, the Nobel Prize founder of Grameen Bank and the father of microfinance.
Muhammad Yunus: Let’s first define what micro finance is. It’s lending money to the poorest women for income generating activity, without collateral, so she can help herself out of poverty. If you cross that boundary, then use another term because when you use the term micro credit, you confuse people. Then loan sharks can say they are doing micro credit. I say find a name for yourself: call it [Bottom of the Pyramid] BOP credit.
Vikram Akula: I see Yunus as a mentor and like Grameen Bank, SKS gives micro credit for income generating activity, collateral free…. [The question is] how do you design micro finance in a way so you don’t say no [to anyone who needs it?] You do it by accessing capital markets and yes, commercial microfinance is an important tool for inclusive access.
Yunus: I’m not opposed to profit. Grameen Bank is a bank. But ownership is the question. Grameen Bank is owned by the borrowers and the profit goes back to them. We oppose that the money of the poor people goes to someone else; [or at least] is there a rule restricting the percentage of profit that goes to someone else? We are opposed to who makes the profit and how much. If it’s 1-2%, go ahead. Vikram says he can’t give money to the poor people who need it [because there is a lack of funds.] We say, go ahead and start Grameen Bank. Each branch mobilizes its own deposits…. We live in an ocean of money. [In Bangladesh, 80% people have access to micro finance.] Instead of rushing to the capital markets, rush to the government [to demand a license] to open a bank.
Akula: In Bangladesh there was a special act by Parliament that allowed for deposit taking from borrowers. That’s not the law in India. Our urgency is how do we reach all the people we need to reach. Commercial capital markets are the only place to get those funds. Over the last 12 years SKS got 7 million clients, we have grown three times as fast as Grameen Bank…. Scale and rapid scaling is very important.
Yunus: Many branches of Grameen Bank have more money from savings of borrowers than from outstanding loans. Having external money slowed us down from our model.
Akula: Yes you increase profits by pushing up loan sizes and raising interest rates. But SKS loan officers are not incentivized by loan size; we want him to give out the right loan amount. The logic is to create great shareholder value as she [the woman who takes the loan] moves up the laddre to take multiple loans for multiple products. SKS has reduced interest rates from 36% to 24% and in the same period ROE has gone up from 5 to 22%. You can bring these two elegantly together.
Yunus: Conventional business has its own logic; there’s no getting away from that. You get caught up by “others”–other shareholders and that’s the wrong direction. Micro credit should be about local money. When you get outside money, you get the risks, the volatility of it [too.] You could’ve lobbied with the government [to pass an act similar to the one in Bangladesh.] Microcredit is not about exciting people to make money off the poor. That’s what you’re doing. That’s the wrong message completely.
Akula: Getting a banking license in India is nearly impossible…. One challenge we had was access to capital and because we went to the capital markets we could get the capital…. A woman [taking this loan] is not concerned with who is making a profit but if she’s getting her loan. Yours is maybe the more morally pure way but it’s a long way away from helping all the people who need it.
Yunus: You have to bring in patience and passionately pursue it. If you don’t even try, it’ll never happen. You go to the easier solution.
Akula: We need more than one approach with 3 billion people to save. I will take up your suggestion and lobby the government as well. But I don’t think it’s fair to make a poor woman wait while the government [changes its laws.]
Yunus: You didn’t come to me. I could’ve done that [lobbying] for you.
Muhammad Yunus: Let’s first define what micro finance is. It’s lending money to the poorest women for income generating activity, without collateral, so she can help herself out of poverty. If you cross that boundary, then use another term because when you use the term micro credit, you confuse people. Then loan sharks can say they are doing micro credit. I say find a name for yourself: call it [Bottom of the Pyramid] BOP credit.
Vikram Akula: I see Yunus as a mentor and like Grameen Bank, SKS gives micro credit for income generating activity, collateral free…. [The question is] how do you design micro finance in a way so you don’t say no [to anyone who needs it?] You do it by accessing capital markets and yes, commercial microfinance is an important tool for inclusive access.
Yunus: I’m not opposed to profit. Grameen Bank is a bank. But ownership is the question. Grameen Bank is owned by the borrowers and the profit goes back to them. We oppose that the money of the poor people goes to someone else; [or at least] is there a rule restricting the percentage of profit that goes to someone else? We are opposed to who makes the profit and how much. If it’s 1-2%, go ahead. Vikram says he can’t give money to the poor people who need it [because there is a lack of funds.] We say, go ahead and start Grameen Bank. Each branch mobilizes its own deposits…. We live in an ocean of money. [In Bangladesh, 80% people have access to micro finance.] Instead of rushing to the capital markets, rush to the government [to demand a license] to open a bank.
Akula: In Bangladesh there was a special act by Parliament that allowed for deposit taking from borrowers. That’s not the law in India. Our urgency is how do we reach all the people we need to reach. Commercial capital markets are the only place to get those funds. Over the last 12 years SKS got 7 million clients, we have grown three times as fast as Grameen Bank…. Scale and rapid scaling is very important.
Yunus: Many branches of Grameen Bank have more money from savings of borrowers than from outstanding loans. Having external money slowed us down from our model.
Akula: Yes you increase profits by pushing up loan sizes and raising interest rates. But SKS loan officers are not incentivized by loan size; we want him to give out the right loan amount. The logic is to create great shareholder value as she [the woman who takes the loan] moves up the laddre to take multiple loans for multiple products. SKS has reduced interest rates from 36% to 24% and in the same period ROE has gone up from 5 to 22%. You can bring these two elegantly together.
Yunus: Conventional business has its own logic; there’s no getting away from that. You get caught up by “others”–other shareholders and that’s the wrong direction. Micro credit should be about local money. When you get outside money, you get the risks, the volatility of it [too.] You could’ve lobbied with the government [to pass an act similar to the one in Bangladesh.] Microcredit is not about exciting people to make money off the poor. That’s what you’re doing. That’s the wrong message completely.
Akula: Getting a banking license in India is nearly impossible…. One challenge we had was access to capital and because we went to the capital markets we could get the capital…. A woman [taking this loan] is not concerned with who is making a profit but if she’s getting her loan. Yours is maybe the more morally pure way but it’s a long way away from helping all the people who need it.
Yunus: You have to bring in patience and passionately pursue it. If you don’t even try, it’ll never happen. You go to the easier solution.
Akula: We need more than one approach with 3 billion people to save. I will take up your suggestion and lobby the government as well. But I don’t think it’s fair to make a poor woman wait while the government [changes its laws.]
Yunus: You didn’t come to me. I could’ve done that [lobbying] for you.
Madoff Was Not Jeffry Picower’s First Ponzi Scheme Experience
Jeffry Picower, who died in 2009, was the biggest beneficiary of the Bernard L. Madoff Investment Securities fraud. He is accused of taking out $7.2 billion of other investors’ money in the Ponzi scheme during two-plus decades by Irving Picard, the court-appointed trustee in the liquidation of Madoff’s investment firm. Prior to his death, Picower denied any knowledge of the fraud and claimed he was a Madoff victim.
But Bernard L. Madoff Investment Securities was not Picower’s first brush with a Ponzi scheme. Picower had experienced a smaller-scale fraud that operated in a similar fashion some 30 years before Madoff pleaded guilty on all counts. According to court records stored on microfiche in the basement of Manhattan’s New York state court, Picower was a victim of a Ponzi scheme perpetrated by Adela Holzer in the 1970s.
A prominent Broadway producer who backed hits like Hair and Lenny, Holzer was also a Ponzi schemer who lured New York investors into fake business deals abroad with promised returns of 50%. The Wall Street Journal described her at the time as having “an aura about her much like that of Jay Gatsby, the F. Scott Fitzgerald character whose life and business deals were steeped in the glitter of wealth and romanticism.”
Holzer managed to get Picower to invest $616,000 in 1976, court records show. Picower thought he was investing in an Indonesian export-import business and real estate in Spain. By March 1977 Holzer reported Picower had profits of $253,000, but he was able to get back only $67,000 before the scheme imploded, according to court records. Picower sued Holzer, but the lawsuit was stayed by a bankruptcy proceeding.
Holzer was convicted in 1979 of seven counts of grand larceny and as a result spent two years in a New York state prison. In hading out his sentence, Justice Richard Denzer was quoted in the New York Times as saying Holzer had operated “the classic Ponzi scheme,” in which initial investors were paid off with the funds taken from subsequent investors.
“I was constantly being told orally, and in written communications from Holzer that ventures in which I had invested in had concluded at substantial profits,” Picower said in a 1977 affidavit. “The falsity of these representations was concealed from me.”
Picower was litigating over the Holzer scam when he made his first investments with Madoff. Three decades later Picower would again claim he had been duped by a Ponzi schemer.
Picower’s experience with Holzer only seems to add to the Picower mystery, which is explored in the current issue of Forbes. In his lawsuit against Picower, Picard claims that Picower, as a sophisticated investor, knew or should have known about the fraud because of various red flags. In legal papers, Picower’s lawyers say Picard’s “villainous portrayal of Mr. Picower is unsupported by facts.”
Does the fact that Picower got caught in a Ponzi scheme in the 1970s make it more unlikely that Picower was unaware of what was going on with Madoff since he had been put on notice about the possibility through personal life experience? Or does it show that Picower was predisposed to getting caught in such an investment scam? Or is it not really material information? He lost money the first time, but allegedly made $7 billion the second time. Both times he claims he didn’t know.
As for Holzer, she was released from her third stint in prison in June following eight years in a New York state prison. She is currently on parole supervision. She had been found guilty in 2002 of grand larceny after she took money from immigrants in return for bogus promises to help them get green cards. In 1990 she went to the New York state pokey for four years, pleading guilty to taking $4 million from investors who she promised would make a fortune from deals backed by her fake secret marriage to David Rockefeller.
But Bernard L. Madoff Investment Securities was not Picower’s first brush with a Ponzi scheme. Picower had experienced a smaller-scale fraud that operated in a similar fashion some 30 years before Madoff pleaded guilty on all counts. According to court records stored on microfiche in the basement of Manhattan’s New York state court, Picower was a victim of a Ponzi scheme perpetrated by Adela Holzer in the 1970s.
A prominent Broadway producer who backed hits like Hair and Lenny, Holzer was also a Ponzi schemer who lured New York investors into fake business deals abroad with promised returns of 50%. The Wall Street Journal described her at the time as having “an aura about her much like that of Jay Gatsby, the F. Scott Fitzgerald character whose life and business deals were steeped in the glitter of wealth and romanticism.”
Holzer managed to get Picower to invest $616,000 in 1976, court records show. Picower thought he was investing in an Indonesian export-import business and real estate in Spain. By March 1977 Holzer reported Picower had profits of $253,000, but he was able to get back only $67,000 before the scheme imploded, according to court records. Picower sued Holzer, but the lawsuit was stayed by a bankruptcy proceeding.
Holzer was convicted in 1979 of seven counts of grand larceny and as a result spent two years in a New York state prison. In hading out his sentence, Justice Richard Denzer was quoted in the New York Times as saying Holzer had operated “the classic Ponzi scheme,” in which initial investors were paid off with the funds taken from subsequent investors.
“I was constantly being told orally, and in written communications from Holzer that ventures in which I had invested in had concluded at substantial profits,” Picower said in a 1977 affidavit. “The falsity of these representations was concealed from me.”
Picower was litigating over the Holzer scam when he made his first investments with Madoff. Three decades later Picower would again claim he had been duped by a Ponzi schemer.
Picower’s experience with Holzer only seems to add to the Picower mystery, which is explored in the current issue of Forbes. In his lawsuit against Picower, Picard claims that Picower, as a sophisticated investor, knew or should have known about the fraud because of various red flags. In legal papers, Picower’s lawyers say Picard’s “villainous portrayal of Mr. Picower is unsupported by facts.”
Does the fact that Picower got caught in a Ponzi scheme in the 1970s make it more unlikely that Picower was unaware of what was going on with Madoff since he had been put on notice about the possibility through personal life experience? Or does it show that Picower was predisposed to getting caught in such an investment scam? Or is it not really material information? He lost money the first time, but allegedly made $7 billion the second time. Both times he claims he didn’t know.
As for Holzer, she was released from her third stint in prison in June following eight years in a New York state prison. She is currently on parole supervision. She had been found guilty in 2002 of grand larceny after she took money from immigrants in return for bogus promises to help them get green cards. In 1990 she went to the New York state pokey for four years, pleading guilty to taking $4 million from investors who she promised would make a fortune from deals backed by her fake secret marriage to David Rockefeller.
NYT: Seeking Bank Secrecy in Asia
September 22, 2010
By LYNNLEY BROWNING
For centuries, Switzerland has been the sanctuary of choice for wealthy people seeking to hide their fortunes and evade taxes. Now, amid a growing crackdown on Swiss private banking, the rich are flocking to Singapore and Hong Kong, which still offer some of the world’s most secret accounts.
But there is a twist in this shift to the East: Many of the banks growing in these low-tax oases have Swiss pedigrees. And their clients are not only Asia’s growing number of millionaires but also wealthy Americans and Europeans who, lawyers say, have been spooked by mounting scrutiny from the tax authorities in their own countries.
From UBS, which operates a training center in Singapore, to smaller private banks like Julius Baer, Swiss banks and those with Swiss-based operations are tripping over themselves to expand in the region.
“We have seen a massive uptick in hiring hundreds of private bankers” in Singapore and Hong Kong “to take the business leaving Switzerland,” said Raymond W. Baker, the director of Global Financial Integrity, a research institute in Washington.
Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan Law School, called the two Asian locales “the new alternative” to Swiss bank secrecy after the shackles placed on UBS by the United States last year.
UBS, the largest bank in Switzerland, has lost an estimated 200 billion Swiss francs, or about $200 billion, in assets from private banking clients over the last two years. But in Asia, it has won more new money than it has lost, according to an August presentation to investors by the bank’s chief executive of wealth management, Jürg Zeltner.
The bank would not give actual figures. But it did say it was planning to hire an additional 400 “client advisers,” or private bankers, for its Asia-Pacific region, on top of the current 867.
In February, UBS raised bonuses for Singapore bankers who bring in new clients. The Singapore government is one of the bank’s biggest shareholders, with about 9 percent, since diluted, bought in late 2007.
Credit Suisse’s top private banking executive, Walter Berchtold, said this month that net new assets coming into the bank from rich clients in Asia would grow more than 20 percent a year, more than triple the global average the bank has forecast.
At Julius Baer, whose headquarters are in Zurich, its board met in early September in Singapore, the first such convening there.
“We call it our second home market,” said Jan Vonder Muehll, a spokesman for Baer, adding that the bank planned to double its assets there and in Hong Kong, to 25 percent of its total, within five years. “Swissness is highly regarded in Asia,” he said.
Ronen Palan, a professor of political economy and an offshore finance specialist at the University of Birmingham in England, said that “all the evidence suggests that Singapore is making a concerted effort to replace Switzerland as the global center for private banking.”
The shift has taken place amid an attack on Switzerland’s private-banking industry, long a crown jewel and world leader.
In 2007, the Justice Department began a criminal investigation into UBS and, later, other Swiss banks for selling private banking services to wealthy Americans that allowed them to evade taxes.
Last year, UBS paid $780 million to settle the case. It later agreed to lift the veil of Swiss bank secrecy and disclose the names of 4,450 American clients to the Internal Revenue Service.
About the same time, European tax officials began gaining possession of discs stolen from Swiss banks that held data on thousands of clients, and a strengthened European Union directive required banks to withhold a minimum level of tax even on secret accounts.
Richard Murphy, a founder of the Tax Justice Network, a British research firm focused on offshore havens, said that amid the changes, “Singapore is where the Swiss can now find the banking secrecy they’ve lost at home.”
Hong Kong, he said, is a close second.
Critics, including Mr. Murphy, point to Singapore’s Swiss-style secrecy provisions; lack of taxes on capital gains and most foreign dividends; and system that allows depositors to open accounts in the guise of corporations, trusts and limited liability companies.
While Hong Kong does not have formal bank secrecy laws, it allows the formation of opaque companies that often serve as conduits for tax evasion. It also does not tax capital gains or deposit interest, and for corporations, it taxes only income produced in Hong Kong. “Both are serious players,” Mr. Murphy said. “Both offer serious opacity.”
But the “offshore haven” label bothers both countries.
“Banking confidentiality provisions in Singapore’s laws protect the privacy of legitimate investors while allowing for banking information to be provided to foreign authorities where crimes or investigations are involved,” said Jacqueline Ong, a spokeswoman for the Monetary Authority of Singapore, the country’s central bank and financial industry regulator.
Terry Wong, a spokeswoman for the Hong Kong Financial Services and Treasury Bureau, said that Hong Kong “should not be compared” with jurisdictions that set out to make life easy for tax evaders.
“Hong Kong maintains a simple and highly transparent tax regime,” she said. “Our relatively low tax rate is a result of our prudent fiscal policy.”
But the United States tax authorities are increasingly wary.
Several UBS clients snared in the criminal investigation of the bank used Hong Kong offshore companies or had dealings with unidentified banks based in Singapore, according to court papers.
Last July, the Justice Department began investigating whether certain United States clients of HSBC, which has its headquarters in London but has large Swiss operations, had failed to disclose accounts in Singapore and India. In the spring, the I.R.S. said it was hiring 800 employees to root out tax evasion, with a focus on Hong Kong and Singapore.
Switzerland is still the global capital of undeclared offshore wealth, with about $2 trillion.
But since 2008, $520 billion has left European offshore centers, mainly Switzerland, because of the pressure in the United States on UBS and other Swiss banks, according to Wealth Bulletin, a trade publication.
“It is my impression that lots of the money that left Switzerland went to Singapore,” said H. David Rosenbloom, a tax lawyer at Caplin Drysdale in Washington.
Singapore’s private banking assets grew sixfold, to $300 billion, from 2000 to 2008, according to the Calamander Group, an investment boutique. Singapore now has about $500 billion in private banking assets, while Hong Kong has $200 billion, according to the Boston Consulting Group.
In Singapore, UBS is one of the leading private banks, with $146.5 billion in assets in the area as of last December, according to company filings.
Last year, UBS shut down what it and prosecutors called its “United States cross-border business,” which was offshore, undeclared private banking services for Americans.
The agreement, according to Allison Chin-Leong, a UBS spokeswoman, covers UBS’s cross-border services for Americans anywhere in the world. A senior United States government official said that UBS had “cleaned house” and stopped offering the services to Americans through non-United States locales.
But cross-border banking at UBS is still available in Singapore and Hong Kong. In its 2009 annual report, UBS said that “in Asia, we are directing our cross-border business on leading financial centers within the region, specifically Hong Kong and Singapore.”
The cross-border market in Singapore and Hong Kong will swell to about $800 billion in assets by 2012, UBS estimated this year. Two UBS spokeswomen did not respond to further questions over several days on whether the bank sold undeclared banking services to Europeans and other non-Americans through Asia.
By LYNNLEY BROWNING
For centuries, Switzerland has been the sanctuary of choice for wealthy people seeking to hide their fortunes and evade taxes. Now, amid a growing crackdown on Swiss private banking, the rich are flocking to Singapore and Hong Kong, which still offer some of the world’s most secret accounts.
But there is a twist in this shift to the East: Many of the banks growing in these low-tax oases have Swiss pedigrees. And their clients are not only Asia’s growing number of millionaires but also wealthy Americans and Europeans who, lawyers say, have been spooked by mounting scrutiny from the tax authorities in their own countries.
From UBS, which operates a training center in Singapore, to smaller private banks like Julius Baer, Swiss banks and those with Swiss-based operations are tripping over themselves to expand in the region.
“We have seen a massive uptick in hiring hundreds of private bankers” in Singapore and Hong Kong “to take the business leaving Switzerland,” said Raymond W. Baker, the director of Global Financial Integrity, a research institute in Washington.
Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan Law School, called the two Asian locales “the new alternative” to Swiss bank secrecy after the shackles placed on UBS by the United States last year.
UBS, the largest bank in Switzerland, has lost an estimated 200 billion Swiss francs, or about $200 billion, in assets from private banking clients over the last two years. But in Asia, it has won more new money than it has lost, according to an August presentation to investors by the bank’s chief executive of wealth management, Jürg Zeltner.
The bank would not give actual figures. But it did say it was planning to hire an additional 400 “client advisers,” or private bankers, for its Asia-Pacific region, on top of the current 867.
In February, UBS raised bonuses for Singapore bankers who bring in new clients. The Singapore government is one of the bank’s biggest shareholders, with about 9 percent, since diluted, bought in late 2007.
Credit Suisse’s top private banking executive, Walter Berchtold, said this month that net new assets coming into the bank from rich clients in Asia would grow more than 20 percent a year, more than triple the global average the bank has forecast.
At Julius Baer, whose headquarters are in Zurich, its board met in early September in Singapore, the first such convening there.
“We call it our second home market,” said Jan Vonder Muehll, a spokesman for Baer, adding that the bank planned to double its assets there and in Hong Kong, to 25 percent of its total, within five years. “Swissness is highly regarded in Asia,” he said.
Ronen Palan, a professor of political economy and an offshore finance specialist at the University of Birmingham in England, said that “all the evidence suggests that Singapore is making a concerted effort to replace Switzerland as the global center for private banking.”
The shift has taken place amid an attack on Switzerland’s private-banking industry, long a crown jewel and world leader.
In 2007, the Justice Department began a criminal investigation into UBS and, later, other Swiss banks for selling private banking services to wealthy Americans that allowed them to evade taxes.
Last year, UBS paid $780 million to settle the case. It later agreed to lift the veil of Swiss bank secrecy and disclose the names of 4,450 American clients to the Internal Revenue Service.
About the same time, European tax officials began gaining possession of discs stolen from Swiss banks that held data on thousands of clients, and a strengthened European Union directive required banks to withhold a minimum level of tax even on secret accounts.
Richard Murphy, a founder of the Tax Justice Network, a British research firm focused on offshore havens, said that amid the changes, “Singapore is where the Swiss can now find the banking secrecy they’ve lost at home.”
Hong Kong, he said, is a close second.
Critics, including Mr. Murphy, point to Singapore’s Swiss-style secrecy provisions; lack of taxes on capital gains and most foreign dividends; and system that allows depositors to open accounts in the guise of corporations, trusts and limited liability companies.
While Hong Kong does not have formal bank secrecy laws, it allows the formation of opaque companies that often serve as conduits for tax evasion. It also does not tax capital gains or deposit interest, and for corporations, it taxes only income produced in Hong Kong. “Both are serious players,” Mr. Murphy said. “Both offer serious opacity.”
But the “offshore haven” label bothers both countries.
“Banking confidentiality provisions in Singapore’s laws protect the privacy of legitimate investors while allowing for banking information to be provided to foreign authorities where crimes or investigations are involved,” said Jacqueline Ong, a spokeswoman for the Monetary Authority of Singapore, the country’s central bank and financial industry regulator.
Terry Wong, a spokeswoman for the Hong Kong Financial Services and Treasury Bureau, said that Hong Kong “should not be compared” with jurisdictions that set out to make life easy for tax evaders.
“Hong Kong maintains a simple and highly transparent tax regime,” she said. “Our relatively low tax rate is a result of our prudent fiscal policy.”
But the United States tax authorities are increasingly wary.
Several UBS clients snared in the criminal investigation of the bank used Hong Kong offshore companies or had dealings with unidentified banks based in Singapore, according to court papers.
Last July, the Justice Department began investigating whether certain United States clients of HSBC, which has its headquarters in London but has large Swiss operations, had failed to disclose accounts in Singapore and India. In the spring, the I.R.S. said it was hiring 800 employees to root out tax evasion, with a focus on Hong Kong and Singapore.
Switzerland is still the global capital of undeclared offshore wealth, with about $2 trillion.
But since 2008, $520 billion has left European offshore centers, mainly Switzerland, because of the pressure in the United States on UBS and other Swiss banks, according to Wealth Bulletin, a trade publication.
“It is my impression that lots of the money that left Switzerland went to Singapore,” said H. David Rosenbloom, a tax lawyer at Caplin Drysdale in Washington.
Singapore’s private banking assets grew sixfold, to $300 billion, from 2000 to 2008, according to the Calamander Group, an investment boutique. Singapore now has about $500 billion in private banking assets, while Hong Kong has $200 billion, according to the Boston Consulting Group.
In Singapore, UBS is one of the leading private banks, with $146.5 billion in assets in the area as of last December, according to company filings.
Last year, UBS shut down what it and prosecutors called its “United States cross-border business,” which was offshore, undeclared private banking services for Americans.
The agreement, according to Allison Chin-Leong, a UBS spokeswoman, covers UBS’s cross-border services for Americans anywhere in the world. A senior United States government official said that UBS had “cleaned house” and stopped offering the services to Americans through non-United States locales.
But cross-border banking at UBS is still available in Singapore and Hong Kong. In its 2009 annual report, UBS said that “in Asia, we are directing our cross-border business on leading financial centers within the region, specifically Hong Kong and Singapore.”
The cross-border market in Singapore and Hong Kong will swell to about $800 billion in assets by 2012, UBS estimated this year. Two UBS spokeswomen did not respond to further questions over several days on whether the bank sold undeclared banking services to Europeans and other non-Americans through Asia.
The Tea Party: Tempest in a very small teapot
By E.J. Dionne Jr.
Thursday, September 23, 2010; A27
Is the Tea Party one of the most successful scams in American political history?
Before you dismiss the question, note that word "successful." Judge the Tea Party purely on the grounds of effectiveness and you have to admire how a very small group has shaken American political life and seized the microphone offered by the media, including the so-called liberal media.
But it's equally important to recognize that the Tea Party constitutes a sliver of opinion on the extreme end of politics receiving attention out of all proportion with its numbers.
Yes, there is a lot of discontent in America. But that discontent is better represented by the moderate voters who expressed quiet disillusionment to President Obama at the CNBC town hall meeting on Monday than by Tea Party ideologues who proclaim the unconstitutionality of the New Deal and everything since.
The Tea Party drowns out such voices because it has money -- some of it from un-populist corporate sources, as Jane Mayer documented last month in the New Yorker -- and has used modest numbers strategically in small states to magnify its impact.
Just recently, Tea Party victories in the Alaska and Delaware Senate primaries shook the nation. In Delaware, Christine O'Donnell received 30,563 votes in the Republican primary, 3,542 votes more than moderate Rep. Mike Castle. In Alaska, Joe Miller won 55,878 votes for a margin of 2,006 over incumbent Sen. Lisa Murkowski, who is now running as a write-in candidate.
Do the math. For weeks now, our national political conversation has been driven by 86,441 voters and a margin of 5,548 votes. A bit of perspective: When John McCain lost in the 2008 presidential race, he received 59.9 million votes.
Earlier this year, much was made of the defeat of Sen. Bob Bennett, a Utah conservative insufficiently conservative for the Tea Party. Bennett lost not in a primary but at a Republican convention attended by all of 3,500 delegates.
Even in larger states, the Tea Party's triumphs were built on small shares of the electorate. Rand Paul received 206,986 votes in Kentucky, where there are more than 1 million registered Republicans and nearly 2.9 million registered voters. Sharron Angle won with 70,452 votes in Nevada, a state with more than 1 million registered voters.
The media have given substantial coverage to Tea Party rallies and even small demonstrations. But how many people are actually involved in this movement?
Last April, a New York Times-CBS News poll found that 18 percent of Americans identified as supporters of the Tea Party movement, but slightly less than a fifth of these sympathizers said they had attended a Tea Party rally or meeting. That means just over 3 percent of Americans can be characterized as Tea Party activists. A more recent poll by Democracy Corps, just before Labor Day, found that 6 percent of voters said they had attended a Tea Party rally or meeting.
The Tea Party is not the only small group in history to wield more power than you'd expect from its numbers. In 2008, Barack Obama did very well in party caucuses, which draw far fewer voters than primaries. And it was Lenin who offered the classic definition of a vanguard party as involving "people who make revolutionary activity their profession" in organizations that "must perforce not be very extensive."
But something is haywire in our media and our politics. Jill Lepore, a Harvard historian whose new book is "The Whites of Their Eyes: The Tea Party's Revolution and the Battle Over American History," observed in an interview that there is a "hall of mirrors" effect created by the rise of "niche" opinion media. They magnify small movements into powerhouses, while old-fashioned journalism, which is supposed to put such movements in perspective, reacts to the same niche incentives.
There is also the decline of alternative forces in politics. The Republican establishment, such as it is, has long depended far more on big money than on troops in the field. In search of new battalions, GOP leaders stoked the Tea Party, stood largely mute in the face of its more outrageous untruths about Obama -- and now has to defend candidates such as O'Donnell and Angle.
And where are the progressives? Sulking is not an alternative to organizing, and weary resignation is the first step toward capitulation. The Tea Party may be pulling a fast one on the country and the media. But if it has more audacity than everyone else, it will, I am sorry to say, deserve to get away with it.
ejdionne@washpost.com
Thursday, September 23, 2010; A27
Is the Tea Party one of the most successful scams in American political history?
Before you dismiss the question, note that word "successful." Judge the Tea Party purely on the grounds of effectiveness and you have to admire how a very small group has shaken American political life and seized the microphone offered by the media, including the so-called liberal media.
But it's equally important to recognize that the Tea Party constitutes a sliver of opinion on the extreme end of politics receiving attention out of all proportion with its numbers.
Yes, there is a lot of discontent in America. But that discontent is better represented by the moderate voters who expressed quiet disillusionment to President Obama at the CNBC town hall meeting on Monday than by Tea Party ideologues who proclaim the unconstitutionality of the New Deal and everything since.
The Tea Party drowns out such voices because it has money -- some of it from un-populist corporate sources, as Jane Mayer documented last month in the New Yorker -- and has used modest numbers strategically in small states to magnify its impact.
Just recently, Tea Party victories in the Alaska and Delaware Senate primaries shook the nation. In Delaware, Christine O'Donnell received 30,563 votes in the Republican primary, 3,542 votes more than moderate Rep. Mike Castle. In Alaska, Joe Miller won 55,878 votes for a margin of 2,006 over incumbent Sen. Lisa Murkowski, who is now running as a write-in candidate.
Do the math. For weeks now, our national political conversation has been driven by 86,441 voters and a margin of 5,548 votes. A bit of perspective: When John McCain lost in the 2008 presidential race, he received 59.9 million votes.
Earlier this year, much was made of the defeat of Sen. Bob Bennett, a Utah conservative insufficiently conservative for the Tea Party. Bennett lost not in a primary but at a Republican convention attended by all of 3,500 delegates.
Even in larger states, the Tea Party's triumphs were built on small shares of the electorate. Rand Paul received 206,986 votes in Kentucky, where there are more than 1 million registered Republicans and nearly 2.9 million registered voters. Sharron Angle won with 70,452 votes in Nevada, a state with more than 1 million registered voters.
The media have given substantial coverage to Tea Party rallies and even small demonstrations. But how many people are actually involved in this movement?
Last April, a New York Times-CBS News poll found that 18 percent of Americans identified as supporters of the Tea Party movement, but slightly less than a fifth of these sympathizers said they had attended a Tea Party rally or meeting. That means just over 3 percent of Americans can be characterized as Tea Party activists. A more recent poll by Democracy Corps, just before Labor Day, found that 6 percent of voters said they had attended a Tea Party rally or meeting.
The Tea Party is not the only small group in history to wield more power than you'd expect from its numbers. In 2008, Barack Obama did very well in party caucuses, which draw far fewer voters than primaries. And it was Lenin who offered the classic definition of a vanguard party as involving "people who make revolutionary activity their profession" in organizations that "must perforce not be very extensive."
But something is haywire in our media and our politics. Jill Lepore, a Harvard historian whose new book is "The Whites of Their Eyes: The Tea Party's Revolution and the Battle Over American History," observed in an interview that there is a "hall of mirrors" effect created by the rise of "niche" opinion media. They magnify small movements into powerhouses, while old-fashioned journalism, which is supposed to put such movements in perspective, reacts to the same niche incentives.
There is also the decline of alternative forces in politics. The Republican establishment, such as it is, has long depended far more on big money than on troops in the field. In search of new battalions, GOP leaders stoked the Tea Party, stood largely mute in the face of its more outrageous untruths about Obama -- and now has to defend candidates such as O'Donnell and Angle.
And where are the progressives? Sulking is not an alternative to organizing, and weary resignation is the first step toward capitulation. The Tea Party may be pulling a fast one on the country and the media. But if it has more audacity than everyone else, it will, I am sorry to say, deserve to get away with it.
ejdionne@washpost.com
NYT - Too Many Hamburgers? By THOMAS L. FRIEDMAN
September 21, 2010
Tianjin, China
To visit China today as an American is to compare and to be compared. And from the very opening session of this year’s World Economic Forum here in Tianjin, our Chinese hosts did not hesitate to do some comparing. China’s CCTV aired a skit showing four children — one wearing the Chinese flag, another the American, another the Indian, and another the Brazilian — getting ready to run a race. Before they take off, the American child, “Anthony,” boasts that he will win “because I always win,” and he jumps out to a big lead. But soon Anthony doubles over with cramps. “Now is our chance to overtake him for the first time!” shouts the Chinese child. “What’s wrong with Anthony?” asks another. “He is overweight and flabby,” says another child. “He ate too many hamburgers.”
That is how they see us.
For the U.S. visitor, the comparisons start from the moment one departs Beijing’s South Station, a giant space-age building, and boards the bullet train to Tianjin. It takes just 25 minutes to make the 75-mile trip. In Tianjin, one arrives at another ultramodern train station — where, unlike New York City’s Pennsylvania Station, all the escalators actually work. From there, you drive to the Tianjin Meijiang Convention Center, a building so gigantic and well appointed that if it were in Washington, D.C., it would be a tourist site. Your hosts inform you: “It was built in nine months.”
I know, I know. With enough cheap currency, labor and capital — and authoritarianism — you can build anything in nine months. Still, it gets your attention. Some of my Chinese friends chide me for overidealizing China. I tell them: “Guilty as charged.” But have no illusions. I am not praising China because I want to emulate their system. I am praising it because I am worried about my system. In deliberately spotlighting China’s impressive growth engine, I am hoping to light a spark under America.
Studying China’s ability to invest for the future doesn’t make me feel we have the wrong system. It makes me feel that we are abusing our right system. There is absolutely no reason our democracy should not be able to generate the kind of focus, legitimacy, unity and stick-to-it-iveness to do big things — democratically — that China does autocratically. We’ve done it before. But we’re not doing it now because too many of our poll-driven, toxically partisan, cable-TV-addicted, money-corrupted political class are more interested in what keeps them in power than what would again make America powerful, more interested in defeating each other than saving the country.
“How can you compete with a country that is run like a company?” an Indian entrepreneur at the forum asked me of China. He then answered his own question: For democracy to be effective and deliver the policies and infrastructure our societies need requires the political center to be focused, united and energized. That means electing candidates who will do what is right for the country not just for their ideological wing or whoever comes with the biggest bag of money. For democracies to address big problems — and that’s all we have these days — requires a lot of people pulling in the same direction, and that is precisely what we’re lacking.
“We are not ready to act on our strength,” said my Indian friend, “so we’re waiting for them [the Chinese] to fail on their weakness.”
Will they? The Chinese system is autocratic, rife with corruption and at odds with a knowledge economy, which requires liberty. Yet China also has regular rotations of power at the top and a strong record of promoting on merit, so the average senior official is quite competent. Listening to Prime Minister Wen Jiabao of China tick off growth statistics in his speech here had the feel of a soulless corporate earnings report. Yet he has detailed plans for his people’s betterment, from universities to high-speed rail, and he’s delivering on them.
Orville Schell of the Asia Society, one of America’s best China watchers, who was with me in Tianjin, put it perfectly: “Because we have recently begun to find ourselves so unable to get things done, we tend to look with a certain overidealistic yearning when it comes to China. We see what they have done and project onto them something we miss, fearfully miss, in ourselves” — that “can-do,” “get-it-done,” “everyone-pull-together,” “whatever-it-takes” attitude that built our highways, dams and put a man on the moon.
“These were hallmarks of our childhood culture,” said Schell. “But now we view our country turning into the opposite, even as we see China becoming animated by these same kinds of energies. I don’t idealize China’s system of government. I don’t want to live in an authoritarian system. But I do feel compelled to look at China in an objective way and acknowledge the successes of this system.” That doesn’t mean advocating that we become like China. It means being alive to the challenge we are up against and even finding ways to cooperate with China. “The very retro notion that we are undisputedly still No. 1,” added Schell, “is extremely dangerous.”
Tianjin, China
To visit China today as an American is to compare and to be compared. And from the very opening session of this year’s World Economic Forum here in Tianjin, our Chinese hosts did not hesitate to do some comparing. China’s CCTV aired a skit showing four children — one wearing the Chinese flag, another the American, another the Indian, and another the Brazilian — getting ready to run a race. Before they take off, the American child, “Anthony,” boasts that he will win “because I always win,” and he jumps out to a big lead. But soon Anthony doubles over with cramps. “Now is our chance to overtake him for the first time!” shouts the Chinese child. “What’s wrong with Anthony?” asks another. “He is overweight and flabby,” says another child. “He ate too many hamburgers.”
That is how they see us.
For the U.S. visitor, the comparisons start from the moment one departs Beijing’s South Station, a giant space-age building, and boards the bullet train to Tianjin. It takes just 25 minutes to make the 75-mile trip. In Tianjin, one arrives at another ultramodern train station — where, unlike New York City’s Pennsylvania Station, all the escalators actually work. From there, you drive to the Tianjin Meijiang Convention Center, a building so gigantic and well appointed that if it were in Washington, D.C., it would be a tourist site. Your hosts inform you: “It was built in nine months.”
I know, I know. With enough cheap currency, labor and capital — and authoritarianism — you can build anything in nine months. Still, it gets your attention. Some of my Chinese friends chide me for overidealizing China. I tell them: “Guilty as charged.” But have no illusions. I am not praising China because I want to emulate their system. I am praising it because I am worried about my system. In deliberately spotlighting China’s impressive growth engine, I am hoping to light a spark under America.
Studying China’s ability to invest for the future doesn’t make me feel we have the wrong system. It makes me feel that we are abusing our right system. There is absolutely no reason our democracy should not be able to generate the kind of focus, legitimacy, unity and stick-to-it-iveness to do big things — democratically — that China does autocratically. We’ve done it before. But we’re not doing it now because too many of our poll-driven, toxically partisan, cable-TV-addicted, money-corrupted political class are more interested in what keeps them in power than what would again make America powerful, more interested in defeating each other than saving the country.
“How can you compete with a country that is run like a company?” an Indian entrepreneur at the forum asked me of China. He then answered his own question: For democracy to be effective and deliver the policies and infrastructure our societies need requires the political center to be focused, united and energized. That means electing candidates who will do what is right for the country not just for their ideological wing or whoever comes with the biggest bag of money. For democracies to address big problems — and that’s all we have these days — requires a lot of people pulling in the same direction, and that is precisely what we’re lacking.
“We are not ready to act on our strength,” said my Indian friend, “so we’re waiting for them [the Chinese] to fail on their weakness.”
Will they? The Chinese system is autocratic, rife with corruption and at odds with a knowledge economy, which requires liberty. Yet China also has regular rotations of power at the top and a strong record of promoting on merit, so the average senior official is quite competent. Listening to Prime Minister Wen Jiabao of China tick off growth statistics in his speech here had the feel of a soulless corporate earnings report. Yet he has detailed plans for his people’s betterment, from universities to high-speed rail, and he’s delivering on them.
Orville Schell of the Asia Society, one of America’s best China watchers, who was with me in Tianjin, put it perfectly: “Because we have recently begun to find ourselves so unable to get things done, we tend to look with a certain overidealistic yearning when it comes to China. We see what they have done and project onto them something we miss, fearfully miss, in ourselves” — that “can-do,” “get-it-done,” “everyone-pull-together,” “whatever-it-takes” attitude that built our highways, dams and put a man on the moon.
“These were hallmarks of our childhood culture,” said Schell. “But now we view our country turning into the opposite, even as we see China becoming animated by these same kinds of energies. I don’t idealize China’s system of government. I don’t want to live in an authoritarian system. But I do feel compelled to look at China in an objective way and acknowledge the successes of this system.” That doesn’t mean advocating that we become like China. It means being alive to the challenge we are up against and even finding ways to cooperate with China. “The very retro notion that we are undisputedly still No. 1,” added Schell, “is extremely dangerous.”
NYT Editorial - Missed Goals
September 22, 2010
Ten years ago, leaders of rich and poor countries pledged to build a better world by 2015. Among their vital goals: halving extreme poverty and hunger from 1990 levels, reducing by two-thirds the child-mortality rate and slashing maternal mortality by three-quarters and achieving universal primary education.
As they gathered at the United Nations this week, world leaders had to admit that their progress “falls far short of what is needed” to meet those targets by the deadline. The global recession set many countries back. But rich nations — including the United States — have not contributed the money needed to make this a reality.
The best way we can see of turning this around is for wealthy nations to make a generous and concrete pledge of aid for the next five years — and then deliver. The 0.7 percent of gross domestic product endorsed by world leaders in 2002 is a good place to start. Unfortunately, the United States and many others, including Italy, Germany and Japan, fall far short of that.
It was disappointing that President Obama made no hard commitment to increase development aid when he addressed the United Nations conference on Wednesday. The legalistic claims by some of his aides that the United States never really signed on to hard aid targets sends precisely the wrong message. If Washington isn’t willing to fully ante up, there is little hope others will.
Still there was a lot in Mr. Obama’s speech that made good sense to us. He made a compelling case for why foreign aid is an essential component of an effective national security strategy. And he outlined a promising new policy to bring coherence to the often incoherent American foreign aid and development system.
He said the United States would still be a major donor but would put new emphasis on using all of its tools — including trade and export credits — to help poor countries get to the point where they don’t need assistance. He also, rightly, promised to hold recipient countries accountable for improving governance and combating corruption and to be “more selective and focus our efforts where we have the best partners and where we can have the greatest impact.” That, too, is essential.
The meager progress on the so-called Millennium Development Goals underscores why more effective aid is so important but also why more money is needed.
The best news is that the share of people living on less than $1.25 a day seems on track to meet the goal of halving the extreme poverty rate. But most of those gains have occurred in China and other East Asian countries. Poverty rates in sub-Saharan Africa remain way too high. The world is far behind on many other goals.
Between 1990 and 2008, the mortality rate of children under 5 in developing countries declined only from 10 percent to 7.2 percent — far from the target of a two-thirds reduction by 2015. Maternal mortality declined only from 480 deaths per 100,000 live births in 1990 to 450 deaths in 2005. The 2015 goal is closer to 120. Enrollment in primary education reached only 89 percent in 2008, up from 80 percent in 1991.
Nobody can know how much money is needed to meet these and other urgent development goals. But, in 2002, rich donor countries agreed that contributions of 0.7 percent of their G.D.P. was, at least, politically feasible. Today, only Denmark, Sweden, Norway, Luxembourg and the Netherlands have met the goal. In 2009, the United States channeled 0.2 percent of its G.D.P. to aid. On average, development assistance amounted to only 0.31 percent of G.D.P. of developed nations last year.
On Wednesday, world leaders again urged developed countries to meet this aid target by 2015. Talk is cheap. They have to deliver.
Ten years ago, leaders of rich and poor countries pledged to build a better world by 2015. Among their vital goals: halving extreme poverty and hunger from 1990 levels, reducing by two-thirds the child-mortality rate and slashing maternal mortality by three-quarters and achieving universal primary education.
As they gathered at the United Nations this week, world leaders had to admit that their progress “falls far short of what is needed” to meet those targets by the deadline. The global recession set many countries back. But rich nations — including the United States — have not contributed the money needed to make this a reality.
The best way we can see of turning this around is for wealthy nations to make a generous and concrete pledge of aid for the next five years — and then deliver. The 0.7 percent of gross domestic product endorsed by world leaders in 2002 is a good place to start. Unfortunately, the United States and many others, including Italy, Germany and Japan, fall far short of that.
It was disappointing that President Obama made no hard commitment to increase development aid when he addressed the United Nations conference on Wednesday. The legalistic claims by some of his aides that the United States never really signed on to hard aid targets sends precisely the wrong message. If Washington isn’t willing to fully ante up, there is little hope others will.
Still there was a lot in Mr. Obama’s speech that made good sense to us. He made a compelling case for why foreign aid is an essential component of an effective national security strategy. And he outlined a promising new policy to bring coherence to the often incoherent American foreign aid and development system.
He said the United States would still be a major donor but would put new emphasis on using all of its tools — including trade and export credits — to help poor countries get to the point where they don’t need assistance. He also, rightly, promised to hold recipient countries accountable for improving governance and combating corruption and to be “more selective and focus our efforts where we have the best partners and where we can have the greatest impact.” That, too, is essential.
The meager progress on the so-called Millennium Development Goals underscores why more effective aid is so important but also why more money is needed.
The best news is that the share of people living on less than $1.25 a day seems on track to meet the goal of halving the extreme poverty rate. But most of those gains have occurred in China and other East Asian countries. Poverty rates in sub-Saharan Africa remain way too high. The world is far behind on many other goals.
Between 1990 and 2008, the mortality rate of children under 5 in developing countries declined only from 10 percent to 7.2 percent — far from the target of a two-thirds reduction by 2015. Maternal mortality declined only from 480 deaths per 100,000 live births in 1990 to 450 deaths in 2005. The 2015 goal is closer to 120. Enrollment in primary education reached only 89 percent in 2008, up from 80 percent in 1991.
Nobody can know how much money is needed to meet these and other urgent development goals. But, in 2002, rich donor countries agreed that contributions of 0.7 percent of their G.D.P. was, at least, politically feasible. Today, only Denmark, Sweden, Norway, Luxembourg and the Netherlands have met the goal. In 2009, the United States channeled 0.2 percent of its G.D.P. to aid. On average, development assistance amounted to only 0.31 percent of G.D.P. of developed nations last year.
On Wednesday, world leaders again urged developed countries to meet this aid target by 2015. Talk is cheap. They have to deliver.
Brazil quickly becoming a player in the global economy
By Juan Forero
Washington Post Foreign Service
Tuesday, September 21, 2010; 3:22 AM
IN PUERTO TIROL, ARGENTINA For a glimpse of booming Brazil's international aspirations, look no further than a two-year-old high-tech denim factory here in one of Argentina's poorest provinces.
The plant's owners, the Delfino family, launched their Santana textiles business in Brazil in 1963 with a line of hammocks. Content at first to expand at home, they retooled along the way, manufacturing denim for the lucrative jeans market and opening four factories in Brazil.
Then in 2008, Santana's chief executive, Raimundo Delfino Filho, set his sights abroad, opening the plant in this town in Argentina's far north Chaco province. Now, the firm is building a larger factory in south Texas.
Santana's moves reflect an expansionary push in recent years among entrepreneurs in Brazil, which is rapidly becoming one of the more important investors in Latin America and is making its presence felt as far away as the United States, Africa and Europe.
"Santana is a company with big plans," said Delfino's nephew, Igor Perdigao, 28, who speaks three languages and runs the factory here in Puerto Tirol. "With our four plants in Brazil, the plant in Argentina and the investment in Texas, our idea is to be the leader in the denim jean market in the Americas in 10 years."
Perdigao attributed the firm's success in part to the confidence inspired in Brazilian entrepreneurs by President Luiz Inacio Lula da Silva's government, which in the past eight years oversaw an expansion that gave Brazil the world's eighth-largest economy. On Oct. 3, a presidential election will be held, and opinion polls show that Lula's handpicked candidate, Dilma Rousseff, is expected to win.
In the early part of the past decade, Brazil's foreign investments averaged $700 million annually, said Luis Alfonso Lima, president of the Brazilian Center for the Study of Transnational Companies and Globalization in Sao Paulo. Then, from 2004 to 2008, Brazilian investment abroad shot up to $14 billion a year on average, Lima said, and is on track to surpass $20 billion this year.
"Brazil wants to be a world player," said Bernardo Kosacoff, a former U.N. economist who heads a Buenos Aires think tank. "And today, to be a world player you need a strategy of internationalization, in addition to having a potent domestic market."
Although Brazil's foreign investments remain a fraction of what U.S. companies post abroad, Brazil is challenging the United States in some of the bigger Latin American economies, such as Venezuela, Chile and Argentina. And it is solidifying itself as a leader in other nations, such as Angola, which like Brazil had been a Portuguese colony.
In 2008, U.S. companies had 25 times as much global investment as Brazil. But with nearly $130 billion invested abroad, Brazil was ahead of other countries with large, robust economies and international pretensions, among them India and South Korea.
The companies making big investments include Petrobras, the Brazilian oil behemoth that operates in nearly 20 countries, and airline manufacturer Embraer, which is assembling aircraft in China. Vale, a huge mining company, operates throughout Latin America, and construction giant Odebrecht has big projects across Africa. Gerdau, a Sao Paulo-based steelmaker, buys and revamps outdated plants as far away as the United States and Spain.
Federico Trujillo, director of the Argentine-Brazilian Chamber of Commerce in Buenos Aires, said Brazilian companies were once considered plodding and inefficient. Trujillo, a lawyer who works with transnational companies, said those companies slowly evolved as Brazil's economy stabilized, credit became readily available and the country's managerial class professionalized.
"Nowadays, Brazilian companies are considered like companies anywhere in the world, even with advantages," Trujillo said. Among those advantages are access to easy credit from Brazil's development bank and the growing value of the nation's currency (the real), which benefits Brazilians who invest abroad.
Perhaps the strongest sector for Brazil's investments and clout is food. In 2007, JBS Friboi bought Swift, the U.S. beef and pork processor then based in Greeley, Colo., for $1.4 billion. With other investments in Argentina, Britain, Egypt, Russia and Chile, Friboi controls 50 percent of the world's meat processing, according to a report by the U.N.'s Economic Commission on Latin America and the Caribbean.
"Brazil is the biggest meat producer; it has the biggest meat processors in the world, which it bought in Argentina and all over the world," Trujillo said. "No one could have predicted this 15 years ago."
Brazil's strength in the agro sector is particularly noticeable in Argentina, and it is not just in meat processing. Brazilian companies have invested heavily in the high-tech aspects of the food industry, such as biotechnology and software used by agro-businesses.
Brazil's share of foreign investments in Argentina increased from 9 percent in 2003 to 25 percent as of 2007, said Dante Sica, director of ABECEB, a Buenos Aires consultant that helps Brazilian companies invest here. "The Brazilians aren't here on a shopping spree, just looking to buy cheap," he said. "They are looking for platforms, to produce in Argentina and sell in Brazil."
Perdigao said Santana, the textile maker, certainly saw Chaco as a platform. The state government provided incentives, and Argentine President Cristina Fernandez de Kirchner attended the inauguration of the plant in May 2008.
The Santana board, which includes Perdigao's mother, Veronica Maria Rocha, the board vice president, was particularly drawn to Chaco's geography. "It's close to many countries: Chile, Bolivia, Paraguay, Uruguay and Brazil," Perdigao said. "We see it as a big platform for exporting to those countries."
The company has invested $40 million in Chaco and expects to spend an additional $30 million before beginning to export its fabric in 2012. The biggest investments Santana is planning, though, are in Edinburg, Tex., not far from Mexico.
While the factory in Chaco has more than 300 workers, the Texas plant will have 800, and Santana plans to spend $180 million. It is not lost on Perdigao that U.S. textile plants have, in recent decades, closed in droves, only to reopen in developing countries where wages are lower.
"We're going against the current in the United States, I know," he said. "We have to go to the United States of America because it's the biggest market."
Washington Post Foreign Service
Tuesday, September 21, 2010; 3:22 AM
IN PUERTO TIROL, ARGENTINA For a glimpse of booming Brazil's international aspirations, look no further than a two-year-old high-tech denim factory here in one of Argentina's poorest provinces.
The plant's owners, the Delfino family, launched their Santana textiles business in Brazil in 1963 with a line of hammocks. Content at first to expand at home, they retooled along the way, manufacturing denim for the lucrative jeans market and opening four factories in Brazil.
Then in 2008, Santana's chief executive, Raimundo Delfino Filho, set his sights abroad, opening the plant in this town in Argentina's far north Chaco province. Now, the firm is building a larger factory in south Texas.
Santana's moves reflect an expansionary push in recent years among entrepreneurs in Brazil, which is rapidly becoming one of the more important investors in Latin America and is making its presence felt as far away as the United States, Africa and Europe.
"Santana is a company with big plans," said Delfino's nephew, Igor Perdigao, 28, who speaks three languages and runs the factory here in Puerto Tirol. "With our four plants in Brazil, the plant in Argentina and the investment in Texas, our idea is to be the leader in the denim jean market in the Americas in 10 years."
Perdigao attributed the firm's success in part to the confidence inspired in Brazilian entrepreneurs by President Luiz Inacio Lula da Silva's government, which in the past eight years oversaw an expansion that gave Brazil the world's eighth-largest economy. On Oct. 3, a presidential election will be held, and opinion polls show that Lula's handpicked candidate, Dilma Rousseff, is expected to win.
In the early part of the past decade, Brazil's foreign investments averaged $700 million annually, said Luis Alfonso Lima, president of the Brazilian Center for the Study of Transnational Companies and Globalization in Sao Paulo. Then, from 2004 to 2008, Brazilian investment abroad shot up to $14 billion a year on average, Lima said, and is on track to surpass $20 billion this year.
"Brazil wants to be a world player," said Bernardo Kosacoff, a former U.N. economist who heads a Buenos Aires think tank. "And today, to be a world player you need a strategy of internationalization, in addition to having a potent domestic market."
Although Brazil's foreign investments remain a fraction of what U.S. companies post abroad, Brazil is challenging the United States in some of the bigger Latin American economies, such as Venezuela, Chile and Argentina. And it is solidifying itself as a leader in other nations, such as Angola, which like Brazil had been a Portuguese colony.
In 2008, U.S. companies had 25 times as much global investment as Brazil. But with nearly $130 billion invested abroad, Brazil was ahead of other countries with large, robust economies and international pretensions, among them India and South Korea.
The companies making big investments include Petrobras, the Brazilian oil behemoth that operates in nearly 20 countries, and airline manufacturer Embraer, which is assembling aircraft in China. Vale, a huge mining company, operates throughout Latin America, and construction giant Odebrecht has big projects across Africa. Gerdau, a Sao Paulo-based steelmaker, buys and revamps outdated plants as far away as the United States and Spain.
Federico Trujillo, director of the Argentine-Brazilian Chamber of Commerce in Buenos Aires, said Brazilian companies were once considered plodding and inefficient. Trujillo, a lawyer who works with transnational companies, said those companies slowly evolved as Brazil's economy stabilized, credit became readily available and the country's managerial class professionalized.
"Nowadays, Brazilian companies are considered like companies anywhere in the world, even with advantages," Trujillo said. Among those advantages are access to easy credit from Brazil's development bank and the growing value of the nation's currency (the real), which benefits Brazilians who invest abroad.
Perhaps the strongest sector for Brazil's investments and clout is food. In 2007, JBS Friboi bought Swift, the U.S. beef and pork processor then based in Greeley, Colo., for $1.4 billion. With other investments in Argentina, Britain, Egypt, Russia and Chile, Friboi controls 50 percent of the world's meat processing, according to a report by the U.N.'s Economic Commission on Latin America and the Caribbean.
"Brazil is the biggest meat producer; it has the biggest meat processors in the world, which it bought in Argentina and all over the world," Trujillo said. "No one could have predicted this 15 years ago."
Brazil's strength in the agro sector is particularly noticeable in Argentina, and it is not just in meat processing. Brazilian companies have invested heavily in the high-tech aspects of the food industry, such as biotechnology and software used by agro-businesses.
Brazil's share of foreign investments in Argentina increased from 9 percent in 2003 to 25 percent as of 2007, said Dante Sica, director of ABECEB, a Buenos Aires consultant that helps Brazilian companies invest here. "The Brazilians aren't here on a shopping spree, just looking to buy cheap," he said. "They are looking for platforms, to produce in Argentina and sell in Brazil."
Perdigao said Santana, the textile maker, certainly saw Chaco as a platform. The state government provided incentives, and Argentine President Cristina Fernandez de Kirchner attended the inauguration of the plant in May 2008.
The Santana board, which includes Perdigao's mother, Veronica Maria Rocha, the board vice president, was particularly drawn to Chaco's geography. "It's close to many countries: Chile, Bolivia, Paraguay, Uruguay and Brazil," Perdigao said. "We see it as a big platform for exporting to those countries."
The company has invested $40 million in Chaco and expects to spend an additional $30 million before beginning to export its fabric in 2012. The biggest investments Santana is planning, though, are in Edinburg, Tex., not far from Mexico.
While the factory in Chaco has more than 300 workers, the Texas plant will have 800, and Santana plans to spend $180 million. It is not lost on Perdigao that U.S. textile plants have, in recent decades, closed in droves, only to reopen in developing countries where wages are lower.
"We're going against the current in the United States, I know," he said. "We have to go to the United States of America because it's the biggest market."
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