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Different strategies pursued by BHP Billiton and Rio Tinto in 2015 as the mining boom cools off.

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Brazil faces a debt crisis in 2015-2016. Between 2010 and 2015 foreign debt of local governments and Brazilian firms increased from $100 billion to $250 billion, and dollar debt in local currency from 210 billion reas to 655 billion reas, according to Bank of International Settlements data. State banking institutions BNDES and Caixa Economica Federal financed 35% of loans in 2010, by 2015 this increased to 55%. Subsidized loans at 5.5% by BNDES to firms make Brazilian banking a fiscal operation, requiring additional funding. Petrobras increased debt issuance enormously during this period, and now needs government support as its debt is now one notch above junk status. Interest payments on Brazil's debt is 6% of GDP in 2014. Public sector debt is 66% of GDP, and credit to the private sector is 55% of GDP up from 25% in 2005. It will take Brazil years to recover from a huge borrowing binge.

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As BP reports large losses in the second quarter resulting from its focus on safety, and building a smaller but more profitable company, BP's CEO Dudley says- "One of the things we are not going to do is drift off the path of focus on safety." He emphasized this by adding that "stepping up the accelerator of performance in place of that is not going to happen." BP has cut overall production from 3 million barrels a day in 2009 to 2.3 million barrrels as it focuses on safety and profitability. Dudley says "its going to be value over safety." As it finishes repair and improvement work in the Gulf of Mexico, BP will repeat the exercize in its North Sea fields. Extensive maintenace work is leading to extended shutdown periods.

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Max Fisher of the NYT points out the unique approach taken by Canada in the U.S.-Canada relationship - to cultivate a grassroots network of Americans in legislatures, business, and at different levels of government. This has enabled the Trudeau government to build a relationship with president Trump, and at the same time have relationships at different levels of government and with business in the U.S. to tackle issues where the Trump administration has acted in ways unfavorable for Canada. Provincial governments in Ontario and Quebec lobbied against a New York state government provision for Buying American on state contracts worth over $100,000. By emphasizing the $10 billion in exports from New York to Ontario this lobbying persuaded the New York legislature to cancel the provision. Premier Trudeau's popularity helps and the proximity to the U.S. means Canadians can visit quickly and understand the U.S. as a close neighbor. Still Premier Kathleen Wynne of Ontario says Canadian businesses are nervous about the uncertainty from the Trump administration.   ...

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Pearlstein says American Airlines (AMR) management had hoped to reduce employees count by 13,000, reduce benefits for employees and retirees and reform work rules by going through bankruptcy in the manner of other airlines such as Delta and Northwest. As it turns out AMR's unions and US Airways have made their own deal and come up with labor agreements that are likely to result in a merger deal with AMR with 1.2 billion in savings from synergies, instead of relying on labor savings for $800 million as AMR management had planned. This is because US Airways CEO, Doug Parker, sees increased savings and revenue from a new combined airline and a better hands on management team. Part of the reason is also the the way the combined airline provides additional feeder traffic from smaller cities to hubs in the east coast and midwest markets and in the Miami routes to South America. The Pension Benefit Guarantee Corporation also tacitly sees the benefit of a stronger airline so that its funds are not depleted further by having to support AMR's underfunded pension plan. The creditors have also realized what all this means by increasing the value of AMR bonds to 50 cents on the dollar from 30 cents on the dollar....

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This report in the NYT by Halbfinger and Kershner shows a Israel that is divided in its views about prime minister Netanyahu. In early 2018 with the police report on the investigation into Mr. Netanyahu on campaign finances, half of Israelis support Netanyahu, with the other half thinking that Netanyahu should resign. Mr. Netanyahu has dismissed the investigation as full of holes like Swiss cheese. His supporters see it as part of a left wing conspiracy including state prosecutors and police. Supporters of Netanyahu see him as having improved Israel's security in its region, people who oppose him see him as being too divisive, using divisive rhetoric to improve his own position.  Younger voters in particular have a distaste for divisive politics practiced under Netanyahu, which extends to the supporters of Israel in America, and the policies leading to delaying of the peace project.  That peace project is also seen as part of the nation's mission to seek peace with its immediate neighbors, an unfinished project for Israel as a nation. After many years in office Netanyahu's party lacks the dynamic vision needed and it now appears only to see remaining in office as its goal, according to this NYT report. This is happening at a time when a larger centrist constituency is developing in Israel as most of the moderates are outside government. ...

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Reliance Industries plan for new 4G telecom network in India using the latest technologies.

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BHP Billiton was known as Broken Hill Proprietary in the 1990's. The largest Australian mining company, it was based in Melbourne and simply known as the Big Australian. It had huge losses in that period - $3 billion in 1998-1999. The turnaround at BHP Billiton comes as a remarkable turnaround for the whole mining sector. BHP made $6.5 billion in profit in the year ending June 2005. Its not just rising Chinese demand that has made this possible. Billiton has taken steps to avoid past boom bust cycles in mining by taking a conservative approach to investing in new mines that might create an oversupply in the market. The company is run buy a banker. CEO Charles Goodyear avoids taking on large risky projects and has announced plans to return $2 billion to shareholders in stock buybacks. Even with this discipline compared to the past, some mining analysts believe the boom bust cycle will occur over time. HP has $10 billion worth of projects in different stages of development. One advantage the mining companies enjoy is the concentration of mining in a few companies- BHP, Rio Tinto, Xstrata PLC. This makes it possible to price aggressively for the nickel, copper, iron ore, and other metals. A 72% price increase was negotiated with steelmakers in 2005. Another part of the transformation is the use of risk-analysis tools. BHP uses "Monte Carlo analysis" to check all potential outcomes once a range of parameters- commodity prices, currency vales, interest rate scenarios- are entered that affect financial performance of a new mine or a new investment. Goodyear came in as CFO under a new team led by Paul Anderson, a former executive of Duke Energy Corporation, after the huge losses in failed copper mining investments in the late 1990's. Even with the recent success and the careful investing discipline there is a sense that things could change quickly if rising demand slows in China and other developing countries. And in that situation this discipline may prove insufficient and the models may only be good as the assumptions and information entered....

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Japan's Business Federation Keidanren chairman, Sadayuki Sakakibara, says he "expects companies to make aggressive action" to increase wages. Keidanren says wage increases of at least 2.2% should be given. Prime minister Abe attended the new year's eve party hosted by Japan's three business lobbies and asked business leaders "to make a brave decision, when can you take action if not now?" Bank of Japan chief has talked to corporate leaders asking for wage increases. He also visited the new year's eve reception of the Japan Trade Union Confederation, as a way of supporting labor's demands for higher wages. BOJ's target is for 2% inflation, and Kuroda says wage movement is critical. About 17.5% of the total workforce are union workers at large companies who are affected by union-company wage negotiations in spring. Non-regular workers make up 38% of the workforce, and the wages for this group also need to be raised to have a serious impact on overall wages.

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Steven Mufson reports in the Washington Post that oil exports from Iran will only gradually increase by 400,000 barrels a day in the next 6 months, because Iran does not want to depress prices further than $30 a barrel. Foreign investment in Iran is also likely to improve gradually because of the remaining sanctions and the slowly improving economy.

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Complacency from the Bush Administration reflected in the remarks of Edward Lazear the Chairman of the Council of Economic Advisors in the outgoing Bush administration. He sees no recession in the USA. "I would be very surprised if the NBER looking back at this period would date this as a recession" is what he is quoted as saying to reporters. He went on to say that the $152 billion stimulus of government checks mailed to the people, and Fed interest rate cuts should make the second half of the year a "solid growth period." What this means is that the moves by Congress to help homeowners stave off a new wave of foreclosures through a bill that just passed through Congress on May 7, 2008, is likely to be vetoed by Bush and efforts along the lines suggested by Martin Feldstein, Chairman of Council of Economic Advisors under Reagan, and Sheila Bair at FDIC, to help homeowners avoid foreclosure in her proposal may remain just that as proposals. This situation is likely to be turned over to a new President and make for an election that may revolve around economic issues, as the next wave of foreclosures lead to the start of a declining spiral in home prices leading to further loses in the credit markets and corporate bankruptcies of weaker firms and resulting losses in employment. Rising crude oil prices may result in much of the stimulus being eaten up by paying of some of the debt burden of consumers and rising costs of gasoline at the gas pump. And Feldstein has been very vocal, as have others, about the ineffectiveness of interest rate cuts in the current situation, even doing an oped piece titled "Enough of Interest Rate Cuts." In this sense the current spell of calm in the financial markets may be deceiving, giving Paulson an others in the administration a false sense of hope, and deprive the world economy of some reasonable action to prevent the wave of foreclosures and falling home prices that could set things distinctly downward in the world's largest economy and impacting the rest of the world....

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To meet the budget deficit Russia plans to issue $50 billion worth of ruble denominated bonds and privatize $10 billion in state assets every year until 2014. Russia is also changing its policy to attract foreign investment. For the first time since the 1998 financial crisis Russia will turn to international banks and pension funds in the US and Europe to maintain financing for a whole range of activities- from modernizing the military to paying high public sector wages. Russia is planning the sale of a stake in state bank VTB. And shares in oil companies, hydroelectric dams and shipping lines are also expected to go on the market.

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A anti-corruption campaign in Saudi Arabia that led to settlements reaching $106 billion and a series of prosecutions in 2017, as reported in the WSJ. The government says this was done to ensure transparency, and a better business environment.  The effort was unusual compared to anti-corruption efforts in other countries such as China because it was conducted with the use of the Ritz Carlton and the settlements made with the most affluent Saudis, as covered in the WSJ. It happened as the Saudi government needed to raise funds including through sale in IPO of state assets such as the Saudi oil company Aramco. The Aramco IPO did not take place. Saudis lost oil revenue with the collapse of negotiations to set oil prices, and the lack of cooperation from Russia.