Great Things Can Happen and Not Just for America

When President Trump attended the G20 meeting in Hamburg, Germany, the aspects publicly reported were mainly uncontrolled demonstrators, burning Porsche cars and police at the end of their rope. Few benefits were attributed to the meeting. That is incorrect.

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2015 Global Markets Trends & Forecasts

Global GDP2

2014 gave us a few unexpected turns in the global economy. There was the concern over the long-lasting effects of Ebola, the ISIS, and Ukraine. Aggressive policies regarding climate change have yet to take effect. The economic recovery of Western Europe and Japan are faltering. Brazil, Russia, and China’s growth have come to a halt and are slowing down. The United States, however, has continued its positive recovery and there seems to be a lot of changes in store for international business this coming year. Let’s get ready for 2015.

  • Slow but steady growth in the global economy

The global economy is taking longer than anticipated to recover from the debt bubble. The IMF projected that the world economy would be at 4.8 percent by 2015. However, 2014 ended with only a 3 percent growth overall. While the United States has pretty much met its growth targets, the disappointments came from the BRIC (Brazil, Russia, India, China) economies, Western Europe, and Japan. Forecasts have been adjusted for the coming year with an estimated growth of 3.4 percent for 2015.

  • Emerging markets dominate

Emerging markets rather than developed economies will fuel much of the growth. The United States will still be a major player in the overall growth of the global economies. However, Western Europe and Japan will grow only an estimated 1 percent and China’s 7 percent will be its lowest in 15 years. Much of the growth will come from Asia and Africa. Specifically, Mexico, Indonesia, Nigeria and Turkey will be on the watchlist for booming economies.

  • Oil prices will continue to fall

The demand for oil will decline due to alternative sources and supply in other areas of the world. This will lead to the continued fall of oil prices affecting countries such as Iran, Nigeria, and Russia.

  • Climate change will still be a threat

Record-high temperatures continue to be seen with Antartica experiencing its coldest winter so far. Coal is still highly used and international policies to curb this practice are weak. This may lead to drastic effects such as shortages in water and the supply of world’s food system and inevitably contributing to world hunger.

  • Innovation, new technologies and hacks will continue to affect us

While spending is somewhat low and demand is weak, businesses are in a better position for recovery by investing in new technologies to get ahead of competition and for future savings. The search for more fuel-efficient machines by Boeing and Airbus is an example of this trend. Another example, is with the United States, who has contributed to innovations in oil drilling thus resulting in an oil boom and affecting world prices.

The global outlook for 2015 should be better than 2014. It may not be much, but it’s way better than negative.

How will these trends affect you and your company? Tell us what you think.

Sources:

  1. http://www.goldmansachs.com/our-thinking/outlook/2015/index.html#infographic
  2. http://www.businessweek.com/articles/2014-11-06/2015-global-economic-outlook-better-than-2014-but-not-by-much
  3. http://www.businessinsider.com/business-insider-global-20-2014-2014-1?op=1 

Of Crimea and Punishment

Governments attempt to impose comparable sanction burdens on each other. However, due to cultural and historic differences, a policy based mainly on sanctions will lead to inequities and substantially therefore increase the risk in international trade.

Key differences exist between Russia and western nations regarding profit, competition, risk and reward, private property and growth, and   how they affect the outcome of sanctions.

In the U.S., profit is the expected result of doing business, and low profits are usually blamed on management. By contrast, lower profits in Russia allow its government to shift the blame onto foreign culprits.

Private property is a key reward in the United States, while in Russia ‘private’ often means responsibility and risk exposure.  Since growth is key in the U.S., any inhibitors of growth are seen with concern. A wide variety of economic performance in Russia, makes its growth much less of a pressure point.

Sanctions against the U.S. may burden the population and lead to new candidates and policies.  In Russia, the sacrifices imposed by sanctions seem to indicate dedication and strength. Declining U.S. profits or growth cause doomsday scenarios, while time is expected to bring economic improvement.

Losing out on the very latest technology means falling behind for Americans. For Russians, pretty good technology is a pretty good achievement. Russian ownership of space ferries and satellites and their use by the U.S. makes them proud.

Russia’s size of 6.6 million square miles makes it the largest country in the world.  The 300 million U.S. population more than doubles that of Russia. Still, the Russian market is of great importance for many global firms.

There are only few historical rewards for former leaders. For example, though Greece invented the Olympic Games, no points are given for that ancient super action. Going first with the Greek flag when marching into the Olympic Stadium is just about all there is. Russia may well see its existing strength and market size as an opportunity for leadership.

We all are said to understand each other so much better than in the past. Yet, much of our thinking is based on our history, culture and outlook. They define our spheres of interest, which we aim to preserve. Ukraine, for example, will tend to be closer to Russia than to the United States. The average Russian understands as much about Columbus, Ohio as the average American does about Sevastopol.

Global relationships between Russia, Asia, Europe and the United States are being re-balanced. Key changes are likely to come from outside the United States. It would be unwise to undertake transformations without dampening the key concerns of key players on all sides.  

–

Prof. Michael R. Czinkota

China and Russia to build world’s biggest thermal power plant

The plant will be developed by Eastern Energy Company, a subsidiary of Inter RAO, the Russian state-run power utility, Vedomosti newspaper reported.

The plant will supply 30-50 kilowatts per year, which is about 5 percent of the Russian Federation’s total current production, General director of Eastern Energy Company, Mikhail Shashmurin told Vedomosti.

It will cost between $7.5 and $12 billion, according to Natalia Porokhova, an energy analyst at Gazprombank. Talking to another Russian newspaper Kommersant, Sergey Beiden from Otkrytie Financial Corporation estimated the cost to be between $12.5 – $24 billion.

At first a 5 gigawatt project was in the works, but at the request of the State Grid Corporation of China (SGCC), the joint venture will look at “additional exploration,” Shashmurin said. To deliver the energy to Beijing, where demand is strongest, an estimated 2,000 km of transmission lines will need to be installed.

A framework agreement was signed in 2013 between the two state-owned companies which explored the possibility of building power plants in Russia’s Far East with the goal of exporting 40-50 billion hours to China. The final decision will come from China’ Committee of Development and Reform, and will include a 5-year draft economic plan. The Chinese want to be shareholders, and according to Shashmurin, could own up to 49 percent in the project.

The first long-term power contract with China was inked in 2012, and stipulated 100 billion kilowatts of supply over 25 years to the Heilongjiang province. In 2013, Inter RAO delivered 3.39 billion kilowatts to China, Shashmurin said.

Inter RAO halted exports to China in February 2007 after Russia increased duties on Chinese sales. Trade resumed in 2009.

The Russian Far Eastern Amur region was devastated by floods last summer, with nearly 100,000 people were affected, and thousands of homes submerged. There was great concern that a heat power plant in Khabarovsk would be submerged by flood water. When floods hit in 2007, the reservoir of the Zeya hydroelectric plant nearly overflowed.

Russia’s biggest natural gas producer, Gazprom is negotiating gas delivery with CNPC.

 

 

Source article from RT.com here

Weekly Update: Top 5 International Business News Trends

1. U.S. deficit falls to $680 billion. The federal government’s latest annual deficit is the smallest it’s been since 2008, according to Treasury Department data released Wednesday. http://money.cnn.com/2013/10/30/news/economy/deficit-2013-treasury/index.html

2. Islamic world slipping behind economically, Pakistan PM warns. Economic and intellectual stagnation has left Islamic nations incapable of punching their weight in the wider world, the prime minister of Pakistan has warned. http://www.telegraph.co.uk/news/worldnews/asia/pakistan/10411814/Islamic-world-slipping-behind-economically-Pakistan-PM-warns.html

3. Is Puerto Rico the next Detroit? Puerto Rico has been called the next Detroit and the next Greece. It’s buried in debt and possibly teetering on the edge of bankruptcy. http://money.cnn.com/2013/10/31/investing/puerto-rico-hedge-funds/index.html

4. US criticizes Germany and China policies.The US has criticized Germany’s economic policies, saying that its export-led growth model is hurting the eurozone and the wider global economy. http://www.bbc.co.uk/news/business-24753267

5. Russia to invest $1.5 bn into new domestic energy projects in Ecuador, making the South American country a key partner in the region, President Vladimir Putin said at a meeting with Ecuadorian President Rafael Correa in Moscow. http://rt.com/business/russia-invest-ecuador%20energy-956/