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'Social Tsunami' Slams a Top Latin American Economy – The Wall Street Journal



The burned ruins of a Walmart supermarket that was set on fire during protests and looting in Arica, Chile.


Marcela Bruna for The Wall Street Journal

ARICA, Chile—The


store here in the country’s remote northern desert would normally be packed full of shoppers buying toys and food for the holidays.

Instead, what’s left this week are charred, twisted metal beams and busted up concrete in the aftermath of nationwide, antigovernment unrest that has caused the sharpest economic contraction in a decade in one of Latin America’s most prosperous nations. The store, which helped anchor businesses in the neighborhood, was one of 18 of Walmart’s stores in Chile—part of the Lider chain—destroyed by the looting that has accompanied two months of mass protests.

“It looks like a war zone,” said

César Martínez,

whose company was contracted to clear debris after the store was sacked and torched, leaving one person dead, in November. “Thirty days ago, this place was selling bread. It’s madness.”

Few expect a quick recovery in this country of 18 million people. The unrest has paralyzed Chile’s economy, which contracted 3.4% in October, the worst showing since the 2009 global financial crisis. The central bank cut its outlook for next year’s growth to between 0.5% and 1.5%, after previously projecting a 2.75% to 3.75% expansion. Economic output will hit just 1% this year, down from 4% in 2018.

While protests have dissipated with Christmas approaching, the economic fallout is just beginning, experts say. Chile is now embroiled in political uncertainty after the government agreed to hold a referendum in April on a new constitution. Leftist activists seek to overturn the nation’s free-market economic model in favor of one they would like to be more equitable and offer more social support.

César Martinez worked on the site of the fire that gutted the Walmart in Arica.


Marcela Bruna for The Wall Street Journal

That is having an impact on business plans in what had been a stable Latin American nation. A December poll by Cadem found that 85% of business leaders have put investments on hold. About 61% of executives are pessimistic about Chile’s future as they brace for a recession and higher unemployment.

“This is a social tsunami. It will create a more permanent damage to the economy,” said

Ricardo Escobar,

a former head of Chile’s tax agency whose law firm in the capital, Santiago, works with business owners. “They will not invest until they see a clear future.”


How can the Chilean government address the concerns of its citizens and move to rebuild its economy? Join the conversation below.

The chaos began Oct. 18 in Santiago when the biggest protests in a generation erupted over an increase in subway fares and quickly expanded to a range of grievances, from anger over meager pensions to shoddy health care and schools. The government backed down on the fares. Most protests were peaceful, but violent groups wreaked havoc, prompting President

Sebastián Piñera

to cancel an international summit that would have brought thousands of foreigners to the capital, including President


Hotels were set on fire, restaurants were vandalized and subway stations were destroyed, causing $370 million in damage to the modern and efficient metro. The Santiago city center was trashed, with graffiti-covered walls reading “organize your rage.”

The demonstrations quickly spread across this 2,600-mile-long sliver of a country. In picturesque towns in southern Patagonia, banks and public property were vandalized. Here in Arica, Chile’s northernmost city some 1,300 miles from Santiago, protesters tore the heads off sculptures honoring war heroes, and tourism collapsed.

A looted supermarket in Santiago, on Nov. 28.


claudio reyes/Agence France-Presse/Getty Images

In total, the government says 14,800 businesses were damaged and 100,000 jobs were lost across the country in the past two months as business and consumer confidence tanked.

“No one escaped this,” said

Manuel Melero,

president of the National Chamber of Commerce. “These are billions of dollars in losses.”

In response, Mr. Piñera, a center-right 70-year-old former businessman, has announced a $5.5 billion stimulus package to rebuild infrastructure and help small businesses. The boost in public spending is expected to drive the fiscal deficit to 4.4% of GDP in 2020, one of the biggest since Chile’s return to democracy 30 years ago.

The central bank is stepping up interventions to support the peso after it depreciated to a historic low. It could sell as much as $20 billion, according to the central bank, including a quarter of its reserves.

Economists say Chile is in a strong position to recover. It has little debt and its copper mines, by far the world’s biggest, weren’t affected by the turmoil. Officials say they are working to address protester demands, including increasing pensions, that would reduce high inequality.

“There is a social agreement to make Chile a more-just country,” Economy Minister

Lucas Palacios

told The Wall Street Journal. “The process to overcome this crisis that began on Oct. 18 is starting to bear fruit.”

Stores that were set on fire by antigovernment protesters in Santiago, on Oct. 29.


Rodrigo Abd/Associated Press

The stimulus package is aimed at helping people like

Hector Soto,

whose pharmacy in southern Santiago was ransacked. The 33-year-old father of two was at home when looters stole nearly all the merchandise, even a digital scale.

“That left a mark on us,” said Mr. Soto, who has reopened but said sales are half of what they would normally be. “What really hurt was the level of destruction, the capacity to do damage.”

A December poll by COES, a Santiago-based think tank, said 65% of Chileans support the continuation of protests. The poll found that 89% of Chileans planned to back a new constitution. The protests have weakened, but political analysts expect a strengthened resumption in March, the end of the Southern Hemisphere’s summer break and before an April referendum on whether to replace a constitution drafted during the Pinochet dictatorship.

Politicians will struggle to maintain order as leaders across the political spectrum have lost much of their legitimacy during the crisis, analysts say. Mr. Piñera’s approval rating fell to 13%.

“This process is not finished,” said Marta Lagos, a pollster and political analyst. “There is not one single soul who can unify everyone to help Chile get out of this crisis.”

The uncertainty in Chile’s economy weighs on

Rodrigo Hevia,

whose business, supplying  restaurants with imported liquor, has suffered so much he has laid off workers. The 27-year-old and his wife have decided to hold off on buying a home and having children.

“We’re going to have to wait a bit because nothing is clear,” he said. “I’m not sure if my business is going to make it through next year.”

Alejandra Godoy lives next to the Walmart that was destroyed in Arica.


Marcela Bruna for The Wall Street Journal

People are grappling with similar anxiety in Arica.

Alejandra Godoy

said she has barely worked at her beauty salon, located behind the destroyed Walmart. At night, she still hears people scavenging metal and anything else of value.

“Clients don’t want to come here because they’re scared,” said Ms. Godoy, whose neighborhood now plans to buy a community alarm system and security cameras.

Write to Ryan Dube at

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Vietnam PM promises economy will rebound from COVID-19 hit | Saltwire – SaltWire Network



HANOI (Reuters) – Vietnam’s exports are likely to rise 10.7% in 2021, with annual inflation expected below 4%, the prime minister said on Wednesday, promising lawmakers that economic revival lay ahead.

Pham Minh Chinh told the national assembly that Vietnam, consistently one of Asia’s fastest-growing economies, had been badly hit by the coronavirus, which disrupted its supply chains and hit workers in key industries.

Vietnam’s gross domestic product (GDP) contracted 6.17% in the third quarter of 2021 from a year earlier as the containment measures hit, the sharpest quarterly decline on record.

Chinh said he expected GDP to expand 6.0% to 6.5% next year, with the government aiming to cap inflation at 4%.

“Realising 2022 targets is a heavy task, but we definitely will revive our economy,” he said, despite the pandemic having put macroeconomic stability at risk.

“Inflation is facing upward risks and there have been disruptions in the supply chains … workers’ lives have been badly hit.”

Although Vietnam had largely reined in COVID-19 until May, a fast-spreading outbreak of the Delta variant in its economic hub of Ho Chi Minh City led to wide curbs on movement and commerce, hitting key manufacturing provinces nearby.

This month, the government said Vietnam would miss its garment exports target this year, by $5 billion in the worst case, hit by curbs and a shortage of workers.

It expected $34 billion of textile exports, shy of the targeted $39 billion, and a shortage of 35% to 37% of factory workers by year-end, it said.

Ho Chi Minh City has suffered a mass exodus of workers since lockdowns eased last month, on worries they would get stuck again if there was another wave of infections.

(Writing by Martin Petty; Editing by Kim Coghill)

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Opinion | Evergrande Isn’t China’s Only Economic Worry – The New York Times



Crushed by $300 billion in debt, Evergrande, one of China’s biggest property developers, is sliding toward bankruptcy. This has prompted fears of a wider property crash or even a financial crisis.

But this is hardly the only crisis besieging the government of Xi Jinping. An unexpected electricity shortage threatens to slow down manufacturing. And for the past year, the government has waged a fierce campaign to regulate China’s vibrant internet companies, spurring hundreds of billions of dollars in investor losses.

The common feature of these crises: All were triggered by government policies. In the eyes of Beijing, these policies are meant to fix deep structural problems in the economy and lay more solid foundations for future growth. To many outsiders, they represent a dispiriting retreat from the market-oriented reforms of the past and signal the end of China’s long economic boom. But forecasts of China’s doom are most likely mistaken, as they have so often been.

True, in the latest quarter, economic growth slowed to a crawl, growing by just 0.2 percent compared with the previous quarter. The next several months will be rockier still. Slower growth in China is unwelcome news for a global economy struggling to regain its footing after the disruptions of the Covid-19 pandemic. But over the next few years, China is likely to regain momentum — in part because of the hard work it is doing now.

The biggest immediate worry is the collapse of Evergrande. Like most Chinese property developers, it relies on two key funding sources: deposits paid by home buyers before construction and huge amounts of debt.

Evergrande’s woes result from a government campaign begun last year to force property developers to reduce their liabilities. It is the latest move in a five-year effort to bring the country’s debt under control. According to the Bank for International Settlements, China’s gross debt level, at 290 percent of G.D.P., has doubled since 2008. While that level is comparable with that of rich countries with well-developed financial systems, it is high for a middle-income country. China’s leaders know that to avoid a financial crisis or avoid a repeat of Japan’s stagnation of the 1990s — the aftermath of a big debt-fueled property bubble — growth in the future must be far less reliant on debt than it has been.

Aly Song/Reuters

The problem is that by attacking debt in the property sector, regulators risk shutting off a powerful engine that directly or indirectly affects as much as a quarter of China’s economic growth. Problems are spreading beyond Evergrande. Other developers are having trouble repaying their debts. And the sales and construction of new housing are both falling.

The drive to cut real estate debt will almost certainly depress China’s growth in the coming quarters. But it will not lead to a “Lehman moment,” when the implosion of a single heavily indebted company triggers a broader financial or economic collapse: The country has an enormous pool of savings. And the government is now adept at managing meltdowns of major companies, including the private conglomerates HNA and Anbang, Baoshang Bank and Huarong, a huge state-owned asset manager.

The larger question is whether China can maintain a dynamic economy when its government, under Mr. Xi, seems increasingly intent on meddling in the market. The answer: Despite a desire for more state discipline, China has not rejected markets — dynamism will continue.

Some of this state meddling is prudent. The property crackdown is part of a serious drive to cure the economy’s addiction to debt. Similarly, the power shortages that have plagued much of industrial China are due largely to efforts to slash the country’s reliance on coal. China has said that its carbon emissions should peak by 2030 and then decline, with a goal of reaching carbon neutrality by 2060.

One response to the energy shortage has been a long-overdue deregulation of electricity prices. This has allowed generators to pass on some of the impact of higher coal prices to end users. So it is not true that Mr. Xi’s government is implacably anti-market. Beijing, as it has for decades, will continue relying on a combination of state guidance and market forces: The state sets the direction for investment, with day-to-day outcomes dictated by the market.

A more serious concern is the yearlong offensive against privately owned big tech companies, notably e-commerce and the financial technology giant Alibaba, and the ride-hailing company Didi. It’s unclear whether China can ever become a true leader in innovation if it insists on squashing its most successful entrepreneurial businesses.

Yet even here, the story is not black-and-white. The internet crackdown is not really about crushing private enterprise: Private companies in many sectors, including tech hardware, are doing just fine. Rather, the crackdown addresses — in a very authoritarian way — the same anxieties about big tech that governments around the world are grappling with: unaccountable power, monopolistic practices, shoddy consumer protection and the tendency of a tech-heavy economy to drive income inequality.

One final worry is that these moves toward greater state discipline are driven not by economic motives but by Mr. Xi’s desire to reinforce his power, ahead of a Communist Party conference in late 2022 where he expects to gain a third term as the country’s leader. In the long run there is a risk that overly centralized power could degrade the government’s ability to manage the economy. But Mr. Xi also recognizes that his power will not be worth much unless the economy keeps growing.

China will never run its economy in a way that pleases free-market purists. But it has come up with a mixed model that works. And despite the stresses of the moment, it will keep on working.

Arthur Kroeber is a partner and the head of research at Gavekal Dragonomics, a China-focused economic research firm.

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Britain’s Royal Mint to extract gold from discarded electronics



Britain’s Royal Mint said on Wednesday it planned to build a plant in  Wales that could reclaim hundreds of kilograms of gold and other precious metals from electronic waste such as mobile phones and laptops.

Gold and silver are highly conductive and small quantities are embedded in circuit boards and other hardware, along with other precious metals.

Most of this material is never recovered, with discarded electronics often dumped in landfill or incinerated.

The more than 1,100-year old mint said it had partnered with a Canadian start-up called Excir which has developed chemical solutions to extract the metals from the circuit boards.

“It’s able to selectively pull out precious metals with a high degree of purity,” said Sean Millard, the mint’s chief growth officer.

He said the mint was currently using the process at small scale while designing a plant that “would look to process hundreds of tonnes of e-waste per annum, generating hundreds of kilograms of precious metals”.

The plant should be up and running “within the next couple of years”, he said, declining to say how much it would cost.

A kilogram of gold is worth around $55,000 at current prices.


(Reporting by Peter Hobson; Editing by Jan Harvey)

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