NEWS,10.04.2013

Obama's new budget targets millionaires

The White House on Wednesday proposed a budget that sharply trims the US deficit over three years by forcing millionaires to pay more in taxes and enacting spending cuts that replace the "sequester" reductions that went into place last month.
President Barack Obama's fiscal 2014 budget blueprint ensures that those making $1m a year or more would have to pay at least 30% of their income, after gifts to charity, in taxes, officials said.
That increase, along with spending cuts and a 28% cap on tax deductions for high earners, would bring the US budget deficit down to 2.8% of GDP by 2016, senior administration officials told reporters. The nonpartisan Congressional Budget Office in February projected the US deficit to be 5.3% of GDP this year.
Obama is due to release his full budget at 11:15 a.m. and to make remarks at that time.
The president's budget stands little chance of being enacted into law. However, senior administration officials said that, in spite of Republican leaders' resistance to tax increases, they hoped it could lead to a deficit reduction accord.
"There continue to be people who are on the Republican side ... in the Senate at least, who are saying things that would give you some hope that there is a path to a deal," a senior administration official told reporters.
The president is breaking from the tradition of using the largely symbolic budget release to outline his ideal tax and spending proposals. Instead, he is trying to relaunch talks to resolve a long-running fiscal battle with his Capitol Hill adversaries.
To do so, Obama is offering a concession that has enraged many of his supporters: adopting a less generous measure of inflation to calculate cost-of-living increases for the beneficiaries of many federal programs. One result would be diminished benefits for most recipients of the popular Social Security retirement program.
Although Obama has pledged to shield some of the most vulnerable beneficiaries, the proposal has drawn strong opposition from Democrats and groups representing labor and the elderly.
At the same time, his budget proposal faces seemingly insurmountable opposition from Republican leaders, who reject any new tax revenues.
Obama's hope is to build a coalition of lawmakers willing to compromise, although most observers see that as unlikely. He has invited 12 Republicans to dinner at the White House on Wednesday in an effort to soften resistance.
"The question is, are Republicans going to be willing to come to us to do the serious thing that they say is so important in terms of reducing our deficit," a senior administration official said in a conference call with reporters the day before the budget release.
Both sides are so dug that they were unable to prevent some $85bn in across-the-board "sequestration cuts" from going into effect March 1.
Obama's budget proposal would replace those cuts with his original deficit reduction proposal from December. That offer included $930bn in spending reductions and some $580bn in tax revenues.
The president's budget includes spending on policy priorities such as infrastructure and early childhood education. He would pay for those programs with additional new taxes and the elimination of some tax breaks for the well-off.
The budget also includes a 10% tax credit for small businesses that raise wages or hire new workers.
The president's advisers said the budget proposal would achieve $1.8 trillion in deficit reduction over 10 years. Added to the $2.5 trillion in deficit cuts from past efforts, the total would be above the $4 trillion reduction both Republicans and the White House have said would be an acceptable goal.
Obama's budget is a clear contrast with a rival blueprint put forward by Representative Paul Ryan, the 2012 Republican vice presidential nominee and potential 2016 presidential candidate.
"You can invest in the middle class, create jobs, and reduce our deficits," a senior administration official said. "We don't have to choose between deficits as far as the eye can see and the sort of austerity that's in the Paul Ryan budget."

Pentagon budget asks for unpopular cuts

The Pentagon unveiled a $526.6bn budget on Wednesday that calls for base closures, program cancellations and smaller pay increases, but which is still $52bn higher than spending caps set by law, putting the department on a path toward another year of financial uncertainty.
The Defense Department request for the 2014 fiscal year beginning on October 1 asks Congress to implement a series of politically difficult cuts, involving a new round of base closure proceedings, increased healthcare fees and slower military pay increases.
While seeking ways to reduce spending in the current tight fiscal environment, the Pentagon budget would continue to fund high-priority programs and initiatives, including the strategic pivot to the Asia-Pacific announced last year.
The budget includes $8.4bn for continued development of the three variants of Lockheed Martin's F-35 Joint Strike Fighter, the Pentagon's most expensive procurement program.
It also includes $10.9bn for new ship construction, $9.2bn for missile defenses, $379m for development of a new long-range bomber, $4.7bn for cyberspace operations and $10.1bn for space technologies.
"This budget made important investments in the president's new strategic guidance including rebalancing to the Asia-Pacific region and increasing funding for critical capabilities such as cyber, special operations and global mobility," Defense Secretary Chuck Hagel said in a statement.
The budget is part of President Barack Obama's spending plan sent to Congress. The president's budget stands little chance of being enacted into law and is meant to serve largely as a negotiating tool with Republicans, who have outlined budget proposals of their own.
Obama's budget seeks new taxes and spending cuts that aim to replace the automatic, across-the-board reductions known as sequestration that went into effect on March 1. The Pentagon's share of the March 1 cuts is about $500bn over 10 years, or about $50bn a year.
The president's budget proposal unveiled on Wednesday would replace that $500bn cut under sequestration with a $150bn reduction, most of it spread over a five-year period beginning several years from now, a US official told Reuters.
Some $34bn in cuts would be implemented over the next five years, the official said, noting that the proposal would depend on Congress agreeing to eliminate the sequestration budget cuts. The White House and Republicans have been trying for two years to reach a deal on sequestration, without success.
The Pentagon budget asks Congress to begin a new round of Base Realignment and Closure proceedings, a politically unpopular request that was rejected by lawmakers last year and has already produced hearings this year, even before the decision was announced.
Base closures disrupt local economies and cost a huge amount up front, only saving money over the long run. The Pentagon is believed to have more than 20 percent surplus of infrastructure based on estimates from the last round of base closures that started in 2005.
The 2014 budget also renews a request to Congress for increased fees for pharmacy co-pays and health-care enrollment for retired military personnel. The Pentagon also proposed a 1 percent pay increase for military employees, lower than the 1.8 percent increase in the Employment Cost Index ordinarily used to determine pay increases.
Congress has been resistant in the past to increasing healthcare fees for military retirees and has often approved pay increases above those recommended by the department, a factor analysts say has led to military pay rising at an unsustainable pace over the past decade.

Chile halts construction of gold mine

A Chilean court suspended construction of what would be one of the world's biggest gold mines on Wednesday, accepting a complaint filed by indigenous groups on environmental grounds.
The project was launched in 2009 by Canadian mining company Barrick Gold, the world's largest gold producer, after an initial investment of $8bn.
It plans to spend $8.5bn more on the unfinished Pascua Lama mine, which straddles the Chile-Argentina border at an altitude of 4 000 meters (13 200 feet), and had hoped to start production next year.
But local groups have launched a legal battle to halt the plan, citing concerns over possible damage to a river and resulting in Tuesday's ruling by the Santiago Appeals Court, which was seen by AFP.
This came as crews were still removing earth to create the pit from which gold and silver would be extracted, and the order suspends construction of the open-pit mine while the court studies the broader environmental issues.
The complaint was filed by the Diaguita indians, a small community based in northern Chile. It said that the construction work "has generated a situation of imminent environmental danger" for the Estrecho River.
Interior Minister Andres Chadwick said he was not surprised by the court decision, and welcomed the idea of suspending the project while Barrick ensures it is complying with all environmental protection terms set by the government.
Lorenzo Soto, a lawyer for the Indians, said damage being caused by the construction of the mine was of "great magnitude."

Ecobank to assist Chinese investment

The Ecobank Transnational Incorporated (ETI) said on Tuesday it would facilitate Chinese investors for business in sub-Saharan Africa. 

The ETI said the opening of its representative office in Beijing, China about six months ago was to ensure that it positioned itself well to support China's drive to do business in Africa.

Answering a question from Xinhua on the floor of the Ghana Stock Exchange (GSE) after leading stakeholders through the bank's 2012 annual performance, Group chief executive Thierry Tanoh said China has become a key player in terms of investment drives in Africa. 

"It will be a big mistake if we are not able to support the Chinese investors coming to invest in the sub-region," Tanoh stressed.

"We will be the entry port to South-South investors in line with our belief in the South-South cooperation," Tanoh said, adding that, with what the bank had experienced through its Beijing representative office, he had confidence that the Chinese market had great potentials for Ecobank. 

Meanwhile, the bank, with branches in 33 African countries, reports that its Profit After Tax went up 39% to record $287m in 2012. 

Its recorded total asset base was $20bn, while customer deposits totalled $14.6bn.

Tanoh described 2012 as a transitional year for the bank as it successfully acquired and integrated two banks, The Trust Bank (TTB) in Ghana, and the Oceanic Bank in Nigeria. 

"The performance was primarily driven by the successful integration of our landmark acquisitions in Ghana and Nigeria, resulting in significantly increased market share in both countries in terms of total assets (Number 1 in Ghana and number 6 in Nigeria) including investments of $74ml in one-off restructuring costs that will enable us to benefit fully from the enlarged platform," he explained. 

Ecobank, with its headquarters in Lome, Togo, and 18 500 employees, is owned by 600 000 individual, institutional, local and international shareholders with 1 200 branches in Africa. 

It has representative offices in Dubai, London and Beijing.

Smartphone price to drop in Brazil

In the latest of a series of tax cuts aimed at revving up the economy by boosting consumption and production, the Brazilian government announced Tuesday that it was doing away with the PIS/Cofins welfare tax on smartphones. 

The tax waiver will be applied to smartphones that retail for less than 1 500 reals ($750), which excludes high-end models such as the latest iPhones and Samsung Galaxy models, but includes most smartphones sold in Brazil. 

Several companies that produce smartphones in Brazil, including Apple, Nokia, Samsung and Motorola, will benefit from the tax exemption.

Over the coming weeks, the government expects the price of Brazilian smartphones to fall as much as 30%, compared to their imported counterparts.

According to Communications Minister Paulo Bernardo, consumers will be able to buy smartphones at lower prices just in time for Mother's Day in early May.

With the move, the government expects the number of smartphones sold in the country to grow from 65 million to 130 million by next year, thus increasing digital inclusion. Brazil currently has some 240 million active cellphone lines. 

The tax cut is expected to save companies up to 500m reals ($250m) per year, starting in 2014. 

Tax cuts have already been applied to cars, computers and domestic appliances like ovens and washing machines, though they haven't always worked as expected.

Last month, President Dilma Rousseff announced tax cuts to staple foods, but the prices of several products did not drop, and some actually rose. 

Likewise, the price of tablet computers and Apple products made in Brazil did not fall as much as consumers expected following tax cuts.

WTO warns growth in trade to shrink

Global commerce is set to grow by 3.3% this year, the World Trade Organisation said on Wednesday, as persistent gloom in Europe led it to cut a previous forecast of 4.5%.
The announcement marked the second time that the WTO has reined in its figures for 2013, after initially estimating that world trade would expand by 5.6%.
"Improved economic prospects for the United States in 2013 should only partly offset the continued weakness in the European Union, whose economy is expected to remain flat or even contract slightly this year according to consensus estimates," the WTO said.
"China's growth should continue to outpace other leading economies, cushioning the slowdown, but exports will still be constrained by weak demand in Europe," it added.
As a result, this year looks set to be a "near repeat" of 2012, with both trade and output expanding slowly.
Last year, the WTO said, global commerce expanded by 2.0% from the level in 2011, compared with growth of 5.2%.
That reflected the gloomy economic picture in developed nations, as the WTO's first estimation for 2012 had been for growth of 3.7%.
"The abrupt deceleration of trade in 2012 was attributed to slow growth in developed economies and recurring bouts of uncertainty over the future of the euro," the WTO said.
"Flagging output and high unemployment in developed countries reduced imports and fed through to a lower pace of export growth in both developed and developing economies," it added.
In 2012, the dollar value of world merchandise exports only increased by 0.2% to $18.3 trillion, it underlined.
That trend was driven by falling prices for traded goods, with commodities such as coffee, cotton, iron ore and coal seeing major drops, while oil remained relatively stable.
Meanwhile, the value of world commercial services exports rose by 2.0% to $4.3 trillion.

Buyers of Iran oil seen cutting imports

The United States expects importers of Iranian crude oil to make further significant cuts in their purchases, a senior US official said on Wednesday, though she noted that there are seasonal fluctuations.
"I do expect that reductions in the importation of oil will continue," the senior State Department official told reporters on condition of anonymity. "There is seasonality, there are spikes, it does go up. There are prior contracts and seasonality to those contracts, so we know there will be fluctuations, but I expect that there will be continued reductions."
Asked if she expected these to be significant reductions, the official replied "yes."
Under US law, countries that import Iranian crude oil must make "significant reductions" - as determined by the US government - or their banks run the risk of being cut off from the US financial system under US sanctions.
The United States on March 13 granted a 180-day reprieve from such sanctions to Japan and 10 European Union nations after determining they had made such cuts. The official's comment suggested Washington may grant a further six-month reprieve when it next assesses how much countries have cut their imports.
The US sanctions aim to choke off funding for Tehran's nuclear program, which the West suspects is trying to develop weapons, by slashing Iran's crude exports. Iran says its nuclear program is for civilian purposes.