Author Archives: Jorge Blanco

Why US companies are changing their websites to please China

07 May 18
Jorge Blanco
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By Daniel Shane and Julia Horowitz


Airline websites have become the newest battleground between the United States and China.

Washington and Beijing clashed this weekend over Chinese demands that more than 30 international airlines, including some US carriers, change their websites to remove any information that could suggest that Taiwan, Hong Kong or Macau are not part of China.

The pressure on the airlines is just the latest flashpoint over how Beijing treats American companies.

The White House, which slammed the demands as “Orwellian nonsense,” said they are “part of a growing trend by the Chinese Communist Party to impose its political views on American citizens and private companies.”

Related: White House calls China’s warning to airlines ‘Orwellian nonsense’

But some airlines, including America’s Delta (DAL) and Australia’s Qantas (QABSY), have already said they are taking steps to comply with China’s demands, highlighting the eagerness of global corporations to keep on Beijing’s good side.

‘A small price to pay’

“Air travel is growing faster in China than anywhere else and airlines are desperate to get their share,” said Clive Hamilton, a public ethics professor at Australia’s Charles Sturt University. “For them, kow-towing politically is a small price to pay.”

With its growing middle class, China is a big opportunity for global airlines. The International Air Transport Association forecast last year that China would surpass the United States as the world’s top aviation market by 2020.

China hasn’t spelled out what the punishments might be for failing to comply with its demands. But it recently blocked Marriott (MAR) websites and apps for a week in the country after the company listed Tibet, Hong Kong, Macau and Taiwan as separate countries in emails and apps. Marriott issued a profuse public apology over the matter.

Related: China tells international airlines to toe the line on Taiwan

China considers self-governed Taiwan to be an integral part of its territory, and comes down hard on any suggestions to the contrary. Hong Kong and Macau are former European colonies that were returned to China in the late 1990s, becoming regions with a large degree of administrative autonomy. Tibet has been under Beijing’s control since 1951.

“Foreign companies operating in China should respect China’s sovereignty and territorial integrity, abide by Chinese laws and respect the Chinese people’s national feelings,” Chinese Foreign Ministry spokesman Geng Shuang said in a statement Sunday responding to the criticism from the White House.

‘An intimidating presence’

Other major US companies have also been taking steps to change how they describe Taiwan.

American Express (AXP), Goldman Sachs (GS) and Citibank (C) have all updated online information in the last several months in a way that softens or removes suggestions that China and Taiwan are separate countries, according to cached versions of their sites.

Related: Mercedes-Benz hits pothole in China with Dalai Lama post

None of them admitted to making the changes because of a specific request from the Chinese government. American Express said the change was “part of a routine update,” while Goldman and Citi didn’t comment.

But experts say Beijing is effective at prompting businesses to censor themselves.

“They don’t always spell out specifically what you have to do, but they create an intimidating presence,” said William Reinsch, a senior adviser at the Center for Strategic and International Studies. “You fix it yourself before they tell you what to do.”

Trade secrets

Changing information on websites is a minor issue for companies compared with some of the choices they face over doing business in China.

International corporations have long complained that China has strong-armed them into handing over trade secrets in exchange for market access. In some sectors, Beijing will only let foreign firms operate through joint ventures in which Chinese partners have the majority stake.

Related: How China gets what it wants from American companies

The Trump administration has pointed to those kinds of practices as the reason for US plans to slap tariffs on tens of billions of dollars of Chinese goods, a move that has intensified fears of a trade war between the two countries.

But Hamilton, the ethics professor, said the recent pressure China is putting on airlines about Taiwan could be a sign of things to come.

“As long as Beijing gets away with it, its political demands on companies will only escalate,” he said.

— Nanlin Fang and Serenitie Wang contributed to this report.

44 African countries agree free trade agreement, Nigeria yet to sign

07 May 18
Jorge Blanco
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By Chris Giles

Source : 

Lagos, Nigeria (CNN)The African Continental Free Trade Area (AfCFTA) has been signed by 44 African countries at a summit of the African Union in Kigali, Rwanda.

10 of the African Union’s (AU) 55 member states did not sign the agreement.
The summit was a step forward for the AU’s 2063 project for closer African integration, with 27 member states also signing a commitment for the free movement of persons.
The AfCFTA has the potential to bring over 1.2bn people together into the same market. The bloc of 55 nations would be the largest in the world by member states.

Rwanda's President Paul Kagame signs an agreement for establishing the African Continental Free Trade Area.

African leaders signed the agreement that is predicted to boost intra-African trade. If successful, it will be the biggest trade trade agreement since the formation of the World Trade Organization in 1995.
By reducing barriers to trade, such as removing import duties and non-tariff barriers, African countries hope to boost intra-continental business.
The AfCFTA could improve trade between African countries, which in 2016 estimates stated accounted for only 10%.

Nigeria hasn’t joined the party

Nigeria's President Muhammadu Buhari.

However, it wasn’t all forward progress. In a set-back for the African Union, Nigeria, one of Africa’s largest economies and the most populous, declined to sign the agreement.
Commenting on Twitter, Nigeria’s President Buhari said: “We will not agree to anything that will undermine local manufacturers and entrepreneurs, or that may lead to Nigeria becoming a dumping ground for finished goods.”
South Africa, also one of Africa’s largest economies, did not sign the agreement, but President Ramaphosa stated his commitment to the agreement once the necessary legal processes were undertaken. The president did sign the Kigali agreement on the establishment of the AfCFTA.

H.E. Albert M. Muchanga, African Union Commissioner.

Albert M. Muchanga, AU commissioner for Trade and Industry, remained optimistic: “The other countries will come on board. We’re very very certain about that.”
“The Labor movement, civil society, parliamentarians. They need to reach out to everybody,” Muchanga said.
Jean-Louis Billon, VP of AfroChampions, a private sector group backing the initiative, told CNN: “There (are) too many barriers within the African continent and the only way for us to get to real development in the future is to boost trade and industry relations.”

A work in progress

President Paul Kagame consults with Chadian President Idriss Deby.

The idea of a continent-wide trade agreement has been work in progress for decades, but has accelerated in the past few years by African leaders committed to Pan-African integration.
“We started with the regional economic communities in the 70s and they were designated as the building blocks to the African economic community. Then in 1991 we had the Abuja Treaty in terms of the African economic community, with the indicative timeline of 34 years,” Muchanga told CNN.
“Then in 2012, we decided to fast track the process and that’s when it was it was decided that we should create the African Continental Free Trade Area,” Muchanga said.
The summit has been launched off the back of the Single African Air Transport Market (SAATM), unveiled in January. A total of 23 member states signed a commitment to bring air travel under a common regulatory framework.

Oil Faces a Month of Mayhem as Geopolitical Risks Proliferate

07 May 18
Jorge Blanco
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Plunging Venezuelan crude production; sanctions disrupting Iranian oil exports; Saudi Arabia pushing for even higher prices; North Korea peace talks — the coming weeks bring an abundance of risks for the oil market.

The geopolitical premium has already helped lift crude prices to a three-year high. There are several dates coming up which could have a significant impact on global oil supply and demand, or at the very least elevate the risk of a market-moving presidential tweet.

Iran Sanctions

Within five days, U.S. President Donald Trump must choose whether to pull out of the Iran nuclear deal and reimpose restrictions on oil shipments from the Organization of Petroleum Exporting Countries’ third-largest producer. It’s a decision that could remove a big chunk of supply from the market — about 1 million barrels a day under the previous sanctions regime — and risk further escalating regional tensions.

In early April, analysts said it was a toss-up whether Trump kills or preserves the deal. Since then, the odds have tilted toward a U.S. pullout. The friendly embrace of French President Emmanuel Macron failed to convince Trump to accept an improved version of the existing deal. Last week, Israel’s Prime Minister Benjamin Netanyahu did his best to convince the U.S. president that the pact was a mistake and Iran couldn’t be trusted.

“In our view President Trump’s decision on the waiver looks likely to be both the largest upside and downside risk to oil prices over the next 11 days,” analysts at Standard Chartered wrote in a report on May 2.

Venezuelan Election

A collapsing economy has already taken a huge toll on this South American OPEC member’s oil production. Things could get even worse if the U.S. finds cause to question the legitimacy of the presidential election on May 20 and imposes oil sanctions.

Venezuela’s industry is in a terrible state. Since 2015, daily production has plunged by about a million barrels to 1.55 million, according to data compiled by Bloomberg. It’s output has fallen five times more than required by the OPEC-Russia supply deal, helping the cartel achieve a record level of cuts.

As access to credit dries up and international companies limit their activities or pull out employees, this figure could drop to a 70-year low of about 1.38 million by year-end, according to the International Energy Agency. Former oil minister Rafael Ramirez says the state-owned oil company is on the brink of collapse.

“If you ask me what the biggest geopolitical disruption risk to oil supply between now and December, I would say Venezuela,” said Bob McNally, president of the Rapidan Energy Group. Rapidan expects the country’s output to slump to 1.1 million barrels a day by year-end. “In terms of geopolitical risk, Iran is just as important. But are we going to lose 400,000 barrels a day of Iranian production by the end of the year? I don’t think so.”

North Korea Summit

The sudden detente between Trump and North Korean leader Kim Jong-Un doesn’t directly affect the oil market, but the stakes are high for a region that’s still the largest source of demand growth.

There’s little risk priced in currently and the summit between the two leaders planned for early June would only move the market if it’s a spectacular failure, said McNally. If Trump were to walk out saying Kim was being unreasonable and “we are going to have do this the hard way” then it would be bearish for crude, he said. Northeast Asia generates 20 percent of global GDP and a significant amount of oil demand growth.

Such an outcome isn’t likely, said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S. “I would imagine that the meeting will be a kiss and hug meeting as the details will have been worked out before,” he said. The potential for an escalation in the Syrian conflict involving Israel is more worrying, Hansen said.

A Saudi Squeeze

OPEC and Russia’s production cuts have all but achieved their primary aim of eliminating surplus oil stockpiles. Yet the group’s most important member, Saudi Arabia, says the job isn’t done and is championing a push to further tighten the market and boost prices.

The weeks leading up to the June 22 OPEC meeting could bring more bullish rhetoric from Saudi Minister of Energy and Industry Khalid Al-Falih. The kingdom needs to earn $88 a barrel to balance its national budget this year, according to the International Monetary Fund, an increase of 26 percent since October. Higher prices would also ease the way for Crown Prince Mohammad bin Salman’s ambitious plans to modernize and diversify the kingdom’s economy.

“They increasingly seem determined on raising the price,” said Hansen. This strategy could disrupt the market in two ways — further accelerating the boom in production from outside OPEC or curbing global demand growth. For the Saudis, neither factor is “high on their focus list at this stage,” he said.

How office buildings are reducing their carbon footprint

07 May 18
Jorge Blanco
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By Kaya Yurieff



Office buildings are getting greener.

Companies are increasingly adding more outdoor spaces to offices for employees to enjoy, and incorporating nature into the interior design, such as living walls of plants, Zen gardens and greenhouses. Less obviously, more firms are creating buildings that are energy efficient or that even create more renewable energy than they consume.

The building that houses New York City’s Public Safety Answering Center, which fields 911 calls, is made of recycled materials such as aluminum and the surrounding landscape requires no irrigation. The building, designed by architecture firm SOM, also has a green wall of plants inside that acts as a natural air filter.

The Bill and Melinda Gates Foundation campus in Seattle — designed by architecture firm NBBJ — has also put a big emphasis on sustainability. It features a 1 million gallon underground tank that stores rainwater to use for toilets, irrigation and reflecting pools. Another tank stores chilled water at night, which is recirculated during the day to cool the buildings and minimize energy use.

“It’s good for the corporate image to be responsible and align [yourself] with sustainability,” said Dominique Bonte, vice president of end markets at ABI Research, who covers smart cities. “At the same time, it conveys an image of innovation and showcases how the company designs buildings [and uses] green technology to achieve that objective of carbon neutral.”

bill and melinda gates foundation office
The Bill and Melinda Gates Foundation headquarters in Seattle.

The goal is for buildings to become self-sufficient, and eventually be able to produce more energy than they use.

“The aim would be that they don’t require outside resources for heating or power needs,” Bonte said. “Everything is recycled or generated on the spot.”

Ryan Mullenix, workplace design partner at NBBJ, believes we will start to see such buildings in the next five years.

“The built environment is well known for having a substantial carbon impact. We have to up our game,” he said. “Right now we’re getting through the cost implications.”

More companies are expected to adapt these designs as the technology advances and prices come down, especially because, experts say, environmentally-friendly buildings can reduce a company’s long-term operating costs.

The Bullitt Center in Seattle is an example of the direction buildings could be going, Mullenix says. Some of the building’s features include solar panels on the roof and waterless toilets that transfer human waste to composters to be used as fertilizer. Rainwater is also captured in a tank and converted into drinking water.

The building is net positive, which means it has generated more energy from the solar panels on its roof than it has used over the past five years, according to a spokesperson. The Bullitt Center produced 20% more energy than it used in 2017, the spokesperson said.

Denis Hayes, the CEO of the Bullitt Foundation, says the aim of the center is to show what’s possible for a commercial building with current technology.

bullitt center seattle
The Bullitt Center in Seattle generates its own energy on-site.

A similar real-world demonstration is under way for the new office of the Sustainable Energy Fund in Pennsylvania. When complete, the aim is for the total amount of energy used by the building annually to be about equal to the renewable energy created on-site.

“The goal of that project is to test the feasibility of doing a net zero energy office building at the typical construction rate,” said Andrew Schuster, a principal at Ashley McGraw Architects, the firm behind the project. “It’s 15,000 square feet, but we’re hoping that can scale to a much larger footprint.”

Net zero energy buildings have begun to garner attention in recent years, but they are not commonplace.

There are 70 certified zero energy buildings worldwide as of 2018, according to the International Living Future Institute (ILFI), which tracks such projects and awards certification. To become certified, a building must provide documentation such as energy bills and performance data for at least 12 months. A third-party auditor works with ILFI on the certification process.

In 2013, there were just 11 certified net zero energy buildings, according to ILFI.

Currently there are 402 registered projects around the world that have not yet obtained certification.

Ultimately though, the goal is for buildings to generate more energy and resources than they need.

“We hope the future is more net positive than just net zero,” said Kate Davis, a principal at architectural design firm HKS. “It’s about actually giving something back.”

Nestle Pays $7.2 Billion to Sell Starbucks Coffee

07 May 18
Jorge Blanco
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By  and 


For years, a smoldering George Clooney would sip his espresso and ask: “Nespresso…what else?” Turns out the answer is: Starbucks.

In the third-biggest transaction in Nestle SA’s 152-year history, the Swiss food giant will spend $7.15 billion for the right to market Starbucks Corp.products from beans to capsules, marrying its international distribution network with the allure of arguably the biggest name in java.

Nestle won’t get any physical assets in the deal. Instead, Chief Executive Officer Mark Schneider is harnessing the name recognition of Starbucks, with its 28,000 outlets around the globe and massive draw in the U.S. Nestle has struggled there for years with its own products like Nespresso and Dolce Gusto.

Nestle could use a jolt — sales rose at their weakest pace in more than two decades last year. By entering a marketing pact with Starbucks, the Swiss company is revealing the limits to growing with Nescafe and Nespresso.

“Nestle needed a big brand, and they needed one fast,” said Alain Oberhuber, an analyst at MainFirst Bank in Zurich. “Starbucks is the only strong brand in roast-and-ground. It’s a rather defensive move — a bit late — but nevertheless, a strategically absolutely vital step.”

Starbucks shares rose less than 1 percent in New York trading. The company said it will use the deal proceeds to accelerate stock buybacks. Nestle gained as much as 1.8 percent in Zurich. Its shares have dropped about 7 percent this year.

Nestle’s Nespresso portioned-coffee business is one of its largest growth engines, but knockoff capsules — including Starbucks-branded ones — that are compatible with the machines have dented revenue. The new deal will give the Swiss company control of Starbucks capsules, among other products. It comes as Nestle’s Nescafe brand of instant coffees has lost market share in four of the past five years, according to Euromonitor.

Starbucks is the second-most-valuable brand in fast food, according to BrandZ’s Global 2017 report, which estimates it’s worth $44 billion. Schneider agreed to pay 3.6 times sales for the consumer-products business, higher than the average of 3 times for major global food deals, according to Andrew Wood, an analyst at Sanford C. Bernstein.

“This will be his first big M&A test,” Wood said. “Nestle’s acquisition track record over the last 10-15 years has been less than stellar.”

Nestle is making a new offensive in the U.S. a decade after Nespresso renewed a push into that market, enjoying limited success as most coffee drinkers avoid small espressos. Nestle has been struggling to gain market share in that market, given the prevalence of Starbucks and Green Mountain, which was bought out by Europe’s billionaire Reimann family. Their JAB Holding Co. has spent more than $30 billion building a coffee empire by acquiring assets such as Peet’s and combining with Mondelez International Inc.’s coffee business.

JAB is the biggest danger for Nestle, MainFirst’s Oberhuber said. The Nestle-Starbucks alliance comes just as JAB purchases Dr Pepper Snapple Group Inc. for $18.7 billion, diversifying in soft drinks.

Starbucks intends to remain in the K-Cup pod business with JAB’s Keurig and is in talks with the company, Chief Executive Officer Kevin Johnson said on a conference call with analysts.
Nestle will take over about 500 Starbucks employees who will remain based in Seattle.

Starbucks will continue to produce packaged coffee and other goods in North America, while Nestle will be in charge of the rest of the world. Sales will be booked by Nestle, which will pay royalties to the coffee chain. The agreement adds prospects for growth outside of North America, where Starbucks outlets are less prevalent.

The Swiss company gets the rights to sell packaged coffee products in supermarkets, restaurants and catering operations under the flagship Starbucks brand and others including Seattle’s Best Coffee, Starbucks VIA and Torrefazione Italia. The deal includes the Teavana tea brand as well.

Starbucks sees the deal contributing to profit by 2021 or sooner, and will use proceeds to accelerate share buybacks. The chain expects to return around $20 billion to shareholders through 2020 via buybacks and dividends, according to a statement.

The alliance with Nestle will help Starbucks gain brand recognition abroad, executives said on the call. They also said Starbucks was in talks with a number of parties, but they picked Nestle after several months of contacts with Schneider.

Slower Growth

Now one of the world’s largest restaurant chains, Starbucks has transitioned from explosive growth of past years to a steadier pace of expansion. This has left some investors underwhelmed in recent quarters, with the shares rising less then 1 percent in 2018.

Nestle is taking a page from JAB’s strategy, as it begins to build a patchwork quilt of different brands in coffee instead of focusing almost exclusively on Nescafe and Nespresso. Last year’s $425 million purchase of a stake in Blue Bottle Coffee was a step back into the roast-and-ground segment, whose growth prospects have revived as consumers become more sophisticated about coffee. Nestle also added niche brand Chameleon Cold-Brew last year to expand its portfolio in the U.S.

That added complexity may make it harder to run the coffee business, and there’s a risk that the Starbucks food-service sales cannibalize those of Nescafe.

“Being a big brand is not an automatic passport to future success,” said Peter Walshe, BrandZ global strategy director at Kantar Millward Brown in London. “We see that in the coffee category, with the rise of smaller brands. Brands that are perceived to be making people’s lives better, are innovative and deliver a great experience, are the most successful. Both Starbucks and Nestle do so very strongly.”