Chris Kuehl, Ph.D.
A great deal of attention has been focused on the big populist stories in Europe. There was the attempt by Scotland to break away from the United Kingdom and then there was the Brexit, which pulled the U.K. out of the European Union. If you add in the development of the Frexit plan by the National Front in France and the rise of Podemos in Spain and Syriza in Greece, then Europe has been a real hotbed of discontent and populism. However, for the most part, the ferment seemed to be limited to the states of the southern tier. These have been the countries in the most economic distress, and they have reputations for fractious and emotional politics. It has been far more worrisome to Europe as a whole to see this kind of ferment in the Netherlands as it was assumed that the stolid Dutch would somehow be immune to all of this. A cursory look at the upcoming campaign makes it obvious the Netherlands has been as affected by the mood of populism and angst as any in Europe.
The elections will take place on March 16, and the ballot will be huge—28 parties represented. More than half of these were not even in existence prior to 2014. They have been the creations of disgruntled members of the once-dominant contenders, one-issue fanatics, protest groups and others. It is expected that at least 14 of these will win enough votes to enter parliament, setting up a convoluted series of coalitions that will form on certain issues and then promptly come apart again. Three years ago, the top three parties took more than 87% of the vote between them. This year, they will be lucky to gather 40%. None of the three will have a commanding position as far as forming a coalition, and there is now talk of them combining to thwart the ambitions of the micro parties. The problem is that they are still fundamentally hostile to one another and have little in common other than their sudden loss of support.
The party that was seen as the leading voice of the disaffected has struggled, but odds are that Geert Wilders and the Party for Freedom will emerge as the most likely to try to form a government. His party evolved from being a virulent anti-immigration party to one that attacked the whole idea of the EU as well. The anti-immigrant stance is still a major part of Wilder’s message, but there are many of the newer parties that will go even further than he has been willing to.
The overall sense is that the Dutch are fed up with politics and politicians in general and now seem willing to try anything and everything to get something new. The challenge has been that very few voters can articulate what it is they want. The opinions expressed in the polls are contradictory in the extreme. They want lower taxes and far less government, but they want more spending and more benefits. They want everything they use to be free and for taxes to be levied on those things they don’t use or need. They feel culturally besieged in parts of the country where there have been very few migrants. There is just unfocused anger verging on tantrums over the loss of something that few can even really describe.
Until now, there’s been little information about how or whether mid-sized companies—$50 million to $500 million in revenues—use options for accelerating payments. These voids in information led David Gustin, president of Global Business Intelligence, to interview and survey a variety of middle-market firms to learn more about what, if anything, these companies are doing.
“The market has been full of so many solutions around companies retiring receivables early,” Gustin said. Those solutions, however, typically have targeted smaller companies. He developed the survey to learn whether companies in the middle are using early pay financing techniques and, if so, what type of value they have gained.
The data collected provides a better understanding of early pay methods, how it’s currently used and how businesses connect while developing a clearer picture of where it’s headed, he said. This type of awareness can help credit professionals prepare for the future.
While the scope of the survey was “simple,” getting the information proved more of a challenge, Gustin said. The same word among different companies often had many different meanings, he noted, which is what led to the interviews. “The biggest surprise wasn’t that there was not high usage, but the fact that large customers haven’t forced them to use portals,” to automate accounts payable procedures and other processes. Survey results only showed a few cases where customers requested extended payment terms. “It seems more of an isolated issue,” he said.
Gustin will dig deeper into the results as part of his presentation during FCIB’s “Early Pay Financing” webinar.
David Gustin provides research and advice about global trade, financial supply chain and alternative business finance matters to companies, vendors and financial companies. He is also the cofounder and editor of Trade Financing Matters, which covers trade credit and business finance issues.
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Peru’s economic growth appears to have softened a bit in the closing months of last year, in part due to reduced government spending. It has retained, however, a healthy gait and should hold up well during 2017, propelled by external demand and an upward trajectory of fixed investment.
Business confidence at 56.7 in January, though less than the 57.3 points registered by the Banco Central’s (CB) indicator in December, is still significantly above the 50 mark that constitutes the threshold between optimism and pessimism. Inflation was last reported at 3.1% in January, slightly down from 3.2% in December. It is now believed to be just within the Central Bank’s target range of 1%-3%, and the monetary authorities expect it to finish at 2%-2.5% for all of 2017. This has encouraged the CB to leave its key interest rate (the tasa de interes de referencia de la politica monetaria) unchanged at 4.25% at this month’s policy meeting.
The numbers suggest that Peru’s economy will continue to be a bright ray in South America, stable and enjoying good growth. It can no longer count on the boost it has been getting from the surge in the production of iron ore and copper due to capacity increases coming from large new mines such as La Bamba and Cerro Verde and from booming Asian (especially Chinese) demand. But the economy is now well diversified, with the services sector having become the main contributor to GDP, responsible for nearly 60%. Telecommunications and financial services account for nearly 40% of GDP. And the performance of the external sector will continue to be robust. The country has natural resources in abundance, with ores and minerals currently making up more than half of all shipments abroad with food accounting for another 21%.
These days, thousands of farm workers are planting peppers, asparagus, artichokes, grapes and mangos for export in an ongoing effort by the government to lessen the country’s reliance on mining. “Nontraditional” export products also include shoes, textiles, ceramics and chemicals. Peru has free trade accords with the United States, China and the European Union. It joined Mercosur in 2005, and between 2006 and 2016, signed a number of bilateral treaties with other Latin American and Caribbean countries. In 2016, the Pacific Alliance (a trade agreement including Chile, Colombia, Mexico and Peru) came into force. Peru has undertaken enormous water projects to irrigate dry coastal land and attract investment from abroad.
If the external sector has one key weakness, it lies in the fact that it exports natural resources that are exposed to substantial price volatility, while it imports mainly industrial goods with much less volatile prices. This means that it is vulnerable to changes in the terms of trade, when export prices fall whereas those on the import side of the ledgers stay high. Fortunately, the country has enjoyed a steady improvement in its terms of trade since 2000. Even so, the foreign trade balance swung into deficit in 2014 and 2015, but last year it was back in the black to the tune of USD 1.7 billion. It should remain positive in the current year, if to a smaller extent (USD 500-600 million). Also, Peru has been able to build up a handsome cushion of international monetary reserves that covers the cost of more than a year and a half worth of imports. The ample kitty allows Banco Central to ensure that the sol remains broadly stable in the foreign exchange markets, where official policy is a “managed float.” This is to say the Central Bank allows the market to set the trend of the exchange rate, but intervenes off and on to avoid excessive fluctuations. A stable sol is important as the financial system is still highly dollarized and companies and individuals alike frequently borrow dollars but buy and sell products in local currency.
In the political arena, all attention is currently focused on a corruption scandal that has prompted Peruvian prosecutors led by Attorney General Pablo Sanchez to request the arrest of former President Alejandro Toledo. Believed to be in Paris, he is being accused of having accepted millions of dollars in bribes from the Brazilian construction company Odebrecht (at the center also of Brazil’s “car wash” scandal swirling around Petrobras) to help the company win contracts to build the Inter-Oceanic highway linking Southern Peru with Brazil. Mr. Toledo, who denies any wrong doing, governed Peru from 2001 to 2006. He oversaw the country’s transition to a strong democracy with a flourishing economy after the ouster of ex-President Alberto Fujimori’s authoritarian regime. The affair poses no threat to the government of President Pedro Pablo Kuczynski, although his political support is weak as his Center-Right Peruvians for Change party commands only 18 of the 130 seats in Congress.
March 7 – Federated States of Micronesia, Congress
March 15 – The Netherlands, Second Chamber
March 20 – Democratic Republic of Timor-Leste, President
Liechtenstein populist party gains ground in parliamentary elections. In the race for the Liechtenstein's 25-seat parliament, the conservative FBP and VU each garnered more than 30%. Although the two ruling parties kept their majority, the populist Independents emerged the real winners.
The president of Turkmenistan wins re-election with 98% of the vote. In a nine-way race, the incumbent, Gurbanguly Berdymukhamedov, took 98% of the vote. That was an improvement on 2012, when he pulled in a mere 97%.
European Parliament gives green light to CETA. The European Parliament has voted in favor of the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada and has taken another defiant step toward greater free trade in the face of growing protectionism. The Canadian parliament will now also ratify the agreement, after which provisional application of the pact will come into play. (Global Trade Review)
Malmström: CETA done, Mexico and Mercosur next up. EU Trade Commissioner Cecilia Malmström told Euractiv Spain that the bloc’s Canada trade deal (CETA) has “the highest standards” and confirmed Mexico and Mercosur are next on the negotiating agenda. (EurActiv)
Former PM Blair urges Britons to 'rise up' against May's Brexit plan. Former British Prime Minister Tony Blair issued a battle cry against a so-called “hard Brexit” on Friday, calling on voters, businesses and campaigners to "rise up" and back a coordinated effort to temper the terms of, or even halt, Britain's EU exit. In his first major political intervention since Britons voted 52 to 48% to leave the European Union last June, Blair said Conservative Prime Minister Theresa May was pursuing "Brexit at any cost,” and must be challenged. (Reuters)
Somalia’s presidential elections: An opportunity for reform. Last Wednesday, Mohamed “Farmajo” Mohamed, a former prime minister and a dual Somali-American citizen, was elected president of Somalia. Farmajo defeated former President Hassan Mohamud in the second round of the election with a final tally of 184 votes to 97 votes. (Global Risk Insights)
French left weighs United Front against Le Pen. The left-wing laggards in France’s presidential campaign are talking about joining forces, a move that may elbow out centrists from the second round and improve the anti-euro Marine Le Pen’s chances of victory. Socialist candidate Benoît Hamon, now fourth place in polls, told France Info radio on Friday that he had begun discussions on a united effort with Jean-Luc Mélenchon, a former Socialist who now enjoys fringe backing. (Bloomberg)
Is Jordan in danger? Jordan, unlike much of the Middle East, has been a beacon of stability in the region for decades. The Kingdom has previously faced significant economic threats, but it’s always managed to postpone addressing its structural problems and kicked this debate down the road. But rising challenges within and adjacent to the Kingdom are a sobering reminder that many of Jordan’s problems cannot be ignored forever. Its structural economic problems and expanding jihadist influence could spell trouble for long-term stability. (The Interpreter)
U.S. sanctions Venezuelan vice president on drug trafficking. The Trump administration imposed sanctions against Venezuelan Vice President Tareck El Aissami on Monday, accusing him of playing a major role in international drug trafficking. The executive decree, the result of a years-long investigation, is bound to ratchet up tensions between the new Republican administration and the United States' harshest critic in Latin America. (ABC News)
Corruption scandals with Brazilian roots cascade across Latin America. A former Peruvian president is a fugitive, charged with taking bribes. In Colombia, prosecutors say its president’s re-election campaign accepted dirty money. And intelligence agents in Venezuela arrested journalists and researchers looking into scandals there. Latin America’s biggest corruption scandal is shaking the continent’s political establishment. (New York Times)
Week in Review Editorial Team:
Diana Mota, Associate Editor and David Anderson, Member Relations