- I am sure Mr. Ryan is well-intentioned;
- fairly, in my view, he specifically said (early in his speech) that President Obama ought to be measured in his Presidency taking into account the economic chaos (my words) that he inherited;
- he was, of course, very negative with respect to the 60% increase in the U.S. National Debt under Mr. Obama’s watch (U.S.$10 trillion at the end of 2008 versus over U.S.$16 trillion currently);
- he specifically said there was not a lot of time left to ‘right America’s economic ship’ (my words);
- he said he and Mr. Romney were up for that task;
- the only number I heard him quote during his speech was when he said Mr. Romney and he would reduce the cost of American Federal Government to 20% of U.S. GDP. That currently would amount to about U.S.$3 trillion, where U.S. GDP currently is running at about U.S.$15 trillion. As I calculate it, this would be a reduction of about U.S.$750 billion (or coincidentally a 20% reduction) from fiscal 2012 – 2013 forecast Federal spending levels;
- overall I saw Mr. Ryan as a cheerleader – not a bad thing, as cheerleaders are good to have around when things aren’t going particularly well and a ‘pickup’ and ‘enthusiasm’ are the orders of the day.
All that said, while Mr. Ryan spoke repeatedly about job creation, he seemed focused on job creation through creation of small business in America. Small businesses tend to be service businesses. I was reminded once again of Thomas Friedman’s comment in his book
The World Is Flat where Friedman said something to the effect that ‘if America became reliant on service businesses to grow the U.S. economy, American’s would end up selling hamburgers to each other’.
Last evening I saw Mr. Ryan as an enthusiastic, sincere, well-intentioned, somewhat idealistic, high-energy young man without any real business experience (having spent the past 14 years in politics) –who on balance strikes me as a good running mate for Mr. Romney.
I was not left with warm and fuzzy feelings that Messrs. Romney and Ryan will be able to turn the Queen Mary around any time soon.
Topical References:
Ryan accepts VP nod: ‘Let’s get this done’, from
NBC News, Michael O’Brien, August 29, 2012 – reading time 4 minutes.
South America >> Bolivia: Watch Bolivia for developments on the country risk front
Why read: Because country risk is increasingly important, and because the Bolivian Government has been very proactive, particularly of late, in its interactions with the Bolivian Mining Industry.
Commentary: Bolivia has long been known to be rich in minerals, is said to already levy some of South America’s highest mining taxes (37% on income and 5% – 7% royalty taxes), and as a country sees mining as being very important to it, where mining is said to currently:
- represent 6.3% of Bolivia’s gross domestic product;
- represent 37% of Bolivian exports; and,
- be the 2nd largest source of hard currency after natural gas.
In the past three months the Bolivian Government has nationalized a silver mine and a tin/zinc mine. It is now contemplating building smelters to process gold, silver, zinc and other ores in Bolivia through an existing state-owned mining company.
For more detail you might want to read the referenced article. Suffice to say that Bolivia likely is being watched not only by those with direct and indirect stakeholder interests in the foreign companies currently operating there, but by other developing countries.
Going forward, it will be important to closely monitor what countries do by way of increasing royalties, taxes, joint venture rules, partnership rules, development of common processing operations, and so on – all aimed at keeping more of the discretionary cash generated by miners ‘in-country’ for the benefit of the Governments and residents of those countries.
Simply put, the difficult line:
- the countries have to walk has to do with finding an appropriate balance between being commercially sensible without appearing so greedy as to preclude foreign investment in their mining sectors; and,
- the companies who elect to invest in foreign countries have to walk is to ensure they have air-tight contracts include specific enforceable royalty, taxation, and other cost related provisions that can’t be altered by country or local governments of the day, or country and local governments of tomorrow.
These may prove in many, if not most, cases to be tasks of herculean proportions, such that as country risk escalates resource company-specific risk may result in some companies simply not being able to obtain funding – or some countries simply not being able to find companies willing to invest in their resources sector.
Topical Reference:
Bolivia Says It Wants Greater Role in Key Mining Sector, from
Fox Business, from Dow Jones Newswires, Martin Arostegui, August 24, 2012 – reading time 4 minutes.
Brief Commentaries prompted by world headlines (collective reading time 2 minutes)
Eurozone >> Spain: Inflation in Spain increases in August
Inflation in Spain is reported as having risen year/year by 2.7% in August, and may increase further in September as value-added taxes are increased. This has to compound Spain’s economic problems, which at a high level can be summarized as:
- over levered Federal and Provincial governments;
- over levered banks; and,
- an over-extended populace that currently is experiencing approximately 25% and 53% overall unemployment and youth unemployment rates respectively.
Spain is (measured by 2011 GDP) the fourth largest Eurozone economy (after Germany, France and Italy), and the 12
th largest economy in the world.
Topical References:
Inflation adds to Spanish woes with jump to 2.7 per cent, from
The Globe and Mail, from Reuters, August 30, 2012 – reading time 2 minutes
North America >> United States: U.S. Q2 GDP now reported
U.S. GDP is reported to have grown at an annualized rate of 1.7% in Q2, down from an annualized rate of 2.5% reported in Q1, and down from the 2%+ rate believed required to maintain current U.S. unemployment rates. U.S. consumer spending was also said to have increased by 1.7% in Q2, down from the 2.4% reported increase in Q1.
While there is little surprise in any of this, it may impact what Mr. Bernanke says tomorrow from the Federal Reserve’s now ongoing meeting in Jackson Hole, Wyoming.
Topical References:
U.S. GDP shows economy growing – but slowly, from
The Financial Post, from Reuters, August 29, 2012 – reading time 3 minutes; and
U.S. Grew Faster Than First Estimated In Second Quarter, from
Bloomberg, Alex Kowalski, August 29, 2012 – reading time 4 minutes
Brief Country Risk Commentaries prompted by world headlines (collective reading time 2 minutes)
South America >> Peru: Peruvian Environmental Ministry may have increased powers over new mines
Peru’s President Humala is reported as having sent a bill to Congress that, if passed (and I would expect it to be) will put Peru’s Environment Ministry in a position to approve or reject new Peruvian mines.
This is something those of you who trade or invest in mining companies that operate in Peru ought to consider in your risk assessment thinking. Increasing the power of an environmental ministry – irrespective of country – almost certainly will result in project delays, and may result in possible project cancellations, increased project development costs, and increased project operating costs from what might otherwise be the case.
Topical References:
Peru may give environment ministry more power over new mines, from
Mineweb, from Reuters, August 30, 2012 – reading time 2 minutes
