Argentina fears new financial crisis; Tech exports to drive US trade growth; Dubai grows from refueling stop to global crossroad

1 Argentina fears new financial crisis (Uki Goni in The Guardian) Argentinians, battered by decades of apparently cyclical economic crises, fear a new one following a US supreme court ruling this week that could make the country liable for up to $15bn owed to so-called “vulture funds”. The vultures, led by a US billionaire, are mainly hedge fund investors who snapped up Argentinian bonds at rock-bottom prices following the country’s $95bn default on its foreign debt in 2001. The court in Washington DC has ordered that they be repaid in full – and that ruling threatens a new default, possibly within weeks.

Argentina descended into chaos after the 2001 financial crisis, then the largest in world history. Violence erupted across the nation after Argentina declared itself unable to meet its payments in the last week of December 2001. Argentina had lived through hyperinflation up to 12,000% in 1989. There had been economic collapse in 1975 and decades of military rule. But what happened in 2002 was unique, even in comparison to those catastrophes. Bank accounts were frozen and withdrawals banned. Barter clubs sprouted like mushrooms after rain everywhere.

Although the situation in Argentina today is a far cry from that dismal crash 12 years ago, recent supermarket lootings that left 11 dead, caused by the economic slowdown of the last year, have triggered painful memories for those who lived through the 2001 default. But with the heady days of an annual 8% growth definitely behind Argentina now, Central Bank reserves are dwindling, inflation by some estimates is close to a yearly 40%, consumption is collapsing and Argentina’s peso is steadily losing value against the US dollar.

2 Tech exports to drive US trade growth (Andrew S Ross in San Francisco Chronicle) The California Bay Area’s global footprint is growing substantially, led by high tech. The sector’s hard goods exports alone, worth $25 billion last year, is expected to grow to $30 billion by 2016, accounting for at least half of the region’s total exports. By 2020, tech-intensive goods will “become the largest single contributor to US trade growth,” according to a research report published by the Bay Area Council Economic Institute.

These numbers don’t include the contributions of software and service providers, like Google, Facebook and the current wave of disruptors with ambitions to take over the world, like Netflix, Tesla, Uber, Yelp and Airbnb. All of which puts the Bay Area “in the catbird seat” tradewise, said the institute’s CEO, Sean Randolph.

Lest we forget, California also has the highest poverty rate in the country, a bifurcated economy leaving millions of its residents behind, and, in the Bay Area, one of the biggest income gaps in the world. More generally, as Fortune notes, reflecting the top 500’s haul, “the earnings story is still one mainly about squeezing more cars, semiconductors, and grocery sales from a barely rising workforce.” And, of course, there’s that niggling issue of tax-avoidance schemes involving many of these super-successful companies.

3 Dubai grows from refueling stop to global crossroad (Jad Mouawad in The New York Times) From its humble beginning as a refueling stop for travelers with no desire to linger in an inhospitable corner of the Arabian Peninsula, Dubai’s airport has recently overtaken Heathrow Airport in London as the world’s busiest international air travel hub. Just a decade ago, Dubai ranked as the 45th-largest international hub.

Dubai’s rise as a modern crossroads connecting East and West — with the name of its hometown airline, Emirates, adorning the jerseys of the world’s best soccer teams and sponsoring Formula One car racing and the United States Open — is a tale of globalization and ambition, and an audacious bet on the future of air travel. Dubai received 67.3 million passengers in the 12 months through February, and expects to hit its capacity of 100 million in 2019.

With few natural resources, barely any oil of its own, only 168,000 Emiratis and average temperatures exceeding 100 degrees Fahrenheit from May to September, Dubai has taken on a hazardous gambit. But what Dubai lacked in climate it more than made up in geography. Situated within eight flying hours of two-thirds of the world’s population, Dubai has set up a global hub that can connect virtually any two cities in the world with just one stop. And despite the last economic downturn, it has stuck with grand plans to build a second airport that will eventually dwarf its existing one in the next decade.

The cornerstone of its strategy was creating a new airline and building an aviation infrastructure around it to support its growth. Dubai received 67.3 million passengers in the 12 months through February, jumping for the first time ahead of Heathrow’s 66.9 million international travelers, and Hong Kong’s 59.9 million. It trails Hartsfield-Jackson Atlanta International Airport and its 95 million passengers, though many of those are domestic passengers. Given Dubai’s growth rate, it should also overtake Atlanta within a few years.

Five years ago, the global credit crisis brought Dubai near bankruptcy. But the city has recovered its drive, helped partly by a $10 billion bailout from neighboring Abu Dhabi, and a return of investors from the Middle East and Eastern Europe. Dubai’s government planners expect traffic to hit 100 million passengers in 2019, at which point the current airport will reach its maximum capacity. By then Dubai will be tackling a much bigger project, a second airport with five parallel runways, and an annual capacity of 120 million passengers. Dubai World Central-Al Maktoum International Airport is expected to cost about $80 billion and should be completed in the middle of the next decade.


About joesnewspicks

This blog captures interesting news items from around the world for those strained by information overload and yet need to stay updated on global events of significance. The news items displayed are not in order of merit. (The blog takes a weekly off — normally on Sundays — and does not appear when I am on vacation or busy.) I am a journalist for nearly three decades.
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