NEWS,28.11.2012

Wall Street reverses earlier losses

Stocks on Wall Street reversed earlier losses after US House Speaker and senior Republican John Boehner said he was optimistic that a deal could be reached to head off the looming fiscal cliff.Boehner said he was willing to put revenues on the table for negotiation if accompanied by spending cuts and that he was optimistic lawmakers could "avert this crisis sooner rather than later".The Dow Jones Industrial Average rose 0.6% and the Standard & Poor's 500 Index was up 0.3%, having been down nearly 1% earlier in the session.Yet US Treasuries also strengthened as fixed interest investors betted there was a chance negotiations would falter.The yield on the 10-year note fell 2 basis points to 1.617%.US President Barack Obama is seeking a budget agreement to avoid $US607 billion of automatic tax increases and spending cuts that kick in on January 1, just 33 days away.Obama is embarking on a series of meetings with company executives including Goldman Sachs chief Lloyd Blankfein to press his case and is set to meet his presidential election rival Mitt Romney tomorrow.But there's plenty of noise to suggest markets will be held captive to Washington for the next few weeks or longer.Erskine Bowles, who was co-chairman of Obama's 2010 fiscal commission, gave a 33% probability of a deal by the end of the year and the same odds that no deal would be reached."That still leaves that one-third that we could actually have real chaos and no deal, and I think that would be a disaster," Bowles said in breakfast meeting in Washington, Bloomberg reported."I'm really worried. I believe the probability is we're going over the cliff," Bowles told journalists on the edges of the meeting.Boehner also said he continued to oppose the expiration of tax cuts for top earners.While according to the Huffington Post, Republican Tom Cole told colleagues that even though he doesn't want the top tax rate bumped up to 39.6% from 35% his party should take that deal for now.The willingness of Republicans to take the standoff down to the wire is not clear.Last year they effectively allowed America's credit rating to be downgraded before allowing the debt ceiling to be raised and ensuring the federal government could pay its bills.The Congressional Budget Office says failure to avert the crisis could push the economy back into recession and drive the jobless rate up to 9.1% by the end of 2013 from 7.9% currently.Economic data out of the US wasn't reassuring either.Sales of new homes fell 0.3% to an annual pace of 368,000 last month, Commerce Department figures showed.That missed the forecast in a Bloomberg survey of 390,000 sales.The Federal Reserve's Beige Book business survey, based on accounts from the 12 district Fed banks, was scheduled for release at 2pm Washington time (8am NZT), and is expected to show the world's biggest economy is continuing to grow at a modest pace.On the London Stock Exchange, shares of BP slipped 0.4% to 429.40 British pence.The energy giant has been temporarily banned from new US federal contracts as part of the punishment meted out for the Deepwater Horizon oil spill in 2010.BP has already agreed to plead guilty to criminal misconduct over the spill and pay fines of $US4.5 billion.Equity markets in Europe were broadly stronger. Germany's DAX 30 gained 0.2% and France's CAC 40 was up 0.4 percent. The Stoxx 600 rose just 0.1%.In Spain, banks rescued as part of the European bailout announced they would shrink in size to regain control of their balance sheets.BFA-Bankia will eliminate 6,000 jobs, sell assets and close branches and is forecasting a 19 billion euro loss this year. It aims to return to profit next year.

Walmart, Disney used deadly factory

Amid the ash, broken glass and melted sewing machines at what is left of the Tazreen Fashions factory, there are piles of blue, red and off-white children's shorts bearing Walmart's Faded Glory brand. Shorts from hip-hop star Sean Combs' ENYCE label lay on the floor and are stacked in cartons.An Associated Press reporter searching the factory on Wednesday found these and other clothes, including sweaters from the French company Teddy Smith, among the equipment charred in the fire that killed 112 workers on Saturday. He also found entries in account books indicating that the factory took orders to produce clothes for Disney, Sears and other Western brands.Garments and documents left behind in the factory show it was used by a host of major American and European retailers, though at least one of them - Walmart - had been aware of safety problems. Walmart blames a supplier for using Tazreen Fashions without its knowledge.The fire has elevated awareness of something labour groups, retailers and governments have known for years: Bangladesh's fast-growing garment industry second only to China's in exports is rife with dangerous workplaces. More than 300 workers there have died in fires since 2006.Police on Wednesday arrested three factory officials suspected of locking in the workers who died in Saturday's fire, the deadliest in the South Asian country's less than 35-year history of exporting clothing.Local police chief Habibur Rahman said the three will be questioned amid reports that many workers trying to escape the blaze had been locked inside. He said the owner of the factory was not among those arrested.The three officials were arrested on Wednesday at their homes in Savar, the Dhaka suburb where the factory is also located. Rahman did not identify the officials or give their job status.About 1 400 workers worked at the plant, about 70% of them women. Most are from the north, the poorest region of Bangladesh.Workers who survived the fire say exit doors were locked, and a fire official has said that far fewer people would have died if there had been even one emergency exit. Of the dead, 53 bodies were burned so badly they could not be identified; they were buried anonymously.The fire started on the ground floor, where a factory worker named Nasima said stacks of yarn and clothes blocked part of the stairway.Nasima, who uses only one name, and other workers said that when they tried to flee, managers told them to go back to their work stations, but they were ignored.Dense smoke filled the stairway, making it hard to see, and when the lights went out the workers were left in total darkness. Another worker, Mohammad Rajib, said some people used their cellphones to light their way."Everyone was screaming for help," Nasima said. "Total chaos, panic and screaming. Everyone was trying to escape and come out. I was pulling the shirt of a man. I fainted and when I woke up I found myself lying on the road outside the factory."I don't know how I survived."Rajib said the factory conducted a fire drill just three days before the fire broke out, but no one used the fire extinguishers. "Only a selected group of workers are trained to use the extinguishers. Others have no idea how to use them," he said.The AP reporter who examined the factory on Wednesday saw dozens of fire extinguishers with tags indicating they were inspected early this month. Many appeared unused.Workers expressed support for the factory owner, Delwar Hossain. Rajib said he is "a gentle man" who heeded workers when they protested for more pay and against rough behaviour by some managers."He took action and fired some of them," he said. "He did not sack any worker. He told us: 'You are my people. If you survive, I will survive.'"Most the fire's devastation took place on the second and third floors. Sewing and embroidery machines and tables burned to ashes, ceiling fans melted and floor and wall tiles were broken, apparently because of excessive heat. Thick black ash covers everything in the upper floors of the eight-story building.Much of the clothing on the lower floors was incinerated. Nightgowns, children's shorts, pants, jackets and sweat shirts were strewn about, piled up in some places, boxed in others. Cartons of kids' hooded sweaters, off-white with red and black print, were marked "Disney Pixar."There were also at least four register books listing buyers including Walmart, Disney, Sears and other companies. Also listed was Li & Fung, a Hong Kong-based buying house that is among the biggest suppliers of garment products from Bangladesh. Li & Fung issued a statement Monday saying it placed orders at the factory for just one company, Kids Headquarters, and that the value of those orders totalled just $111 000.Prime Minister Sheikh Hasina and Interior Minister Muhiuddin Khan Alamgir have said arson is suspected. Police say they have not ruled out sabotage. Walmart had received an audit deeming the factory "high risk" last year, said it had decided to stop doing business with Tazreen, but that a supplier subcontracted work to the factory anyway. Walmart said it stopped working with that supplier on Monday. Calls made to The Walt Disney Company and to Sears Holdings were not immediately returned. Local TV reports said about 3 000 garment workers held protests over the fire on Wednesday, blocking roads and throwing stones at some factories and vehicles. It was the third straight day of demonstrations, and as they did previously, factories in the area closed to avoid violence. Police used batons to disperse the protesters, but no injuries were immediately reported. According to local television, most factories in the area closed after opening briefly because of the protests - a common tactic to avoid violence.

Cubans to start paying tax

Most Cubans have not paid taxes for half a century, but that will change under a new code starting January 1.The landmark regulations will change the relations of Cubans with their government and are a signal that market-oriented reforms, launched since President Raul Castro succeeded his brother, Fidel Castro, in 2008, are here to stay.The recently published code constitutes the first comprehensive taxation in Cuba since the 1959 revolution abolished just about all taxes. In the 1990s after the collapse of the Soviet Union, the country's main benefactor, the Cuban government imposed a few scattered taxes, but mostly preferred to maintain low wages so it could fund free social services.The government's free market reforms introduced over the last two years, are designed to encourage small businesses, private farming and individual initiative, along with plans to pay state workers more. Under the new tax code the state hopes to get its share of the proceeds.The government also envisions replacing subsidies for all with targeted welfare, meaning that the largely tax-free life under a paternalistic government is on its way out. "This radically changes the state's relationship with the population and taxes become an irritating issue," said Domingo Amuchastegui, a former Cuban intelligence analyst who lives in Miami and writes often about Cuba. The new code covers 19 taxes, including such things as inheritance, environment, sales, transportation and farm land, various license fees and three contributions, including social security. A sliding scale income tax - from 15% for earnings of more than 10,000 pesos (about $400) annually, to 50% for earnings of over 50,000 pesos, (about $2 000) - adopted in 1994, remains in the new code for the self-employed, small businesses and farms, but it also includes a series of new deductions to stimulate their work. For example, farmers may deduct up to 70% of income as costs, and small businessmen, who are taxed by income not profit, up to 40%, plus various fees and secondary taxes they pay. A labor tax of 20% will gradually be reduced to 5% by 2017, and small businesses with five employees or less are exempt. Eventually all workers will pay income taxes as well as a new 2% property tax, but both measures are suspended until "conditions permit" them to go into effect. The government admits, with an average pay of about 450 pesos per month, or $19, many workers do not earn enough to make ends meet. "They collect taxes for all these things around the world, it's normal," said Havana economist Isabel Fernandez. "But here we face two problems. On the one hand we are not used to paying for anything and on the other our wages are so low we can't spare a single peso," she said. Under the old system, large and small state-run companies, which accounted for more than 90 percent of economic activity, simply handed over all their revenues to the government, which then allocated resources to them. The reforms call for large state-run businesses to be moved out of the ministries and become more autonomous. Under the new tax system they will pay a 35% tax on their profits, but can take advantage of a myriad of deductions ranging from amortization and travel to sales taxes, insurance and environmental protection. Many smaller businesses will become cooperatives or be privately leased and taxed based on income. The state-owned Cuban National News Agency said Cuba had studied the tax systems of a number of other countries, including several with capitalist economies. "The experiences of China, Vietnam, Venezuela, Brazil, Spain and Mexico were taken into account, but they were refined to the particularities and conditions of the island," the new agency said. The new code is not etched in stone it can be amended each year as part of the annual budget passed by the National Assembly, and temporarily modified for different reasons by the executive branch of government. "Like the reforms, it is a work in progress, a work that has barely begun and will take time to put in place," said a Western businessman who has worked in Cuba for almost two decades. But, he added, "this is of course a major step forward toward the 21st century and a modern state."