World Economic News
Lula's Reelection Triggers War Behind Closed Doors
The war behind closed doors over the economic policy of the second Lula Administration in Brazil has begun. So commented former National Development Bank (BNDES) chief Carlos Lessa, in response to the Oct. 29 declaration by Lula's Institutional Relations Minister Tarso Genro, that the "Palocci era" was over, and "low growth rates and a neurotic concern over inflation, without consideration of income distributionthis has ended." (Wall Street lackey Antonio Palocci was the much-despised Treasury Minister for most of the first Lula Administration.)
To say the Palocci era is over, is "a very strong declaration by one wing" of the administration, and it will produce "an enormous uproar," Lessa predicted. The government has a "devastating" financial load, however, and won't be able to begin a new era without "violently compacting it," Lessa said. I've gotten hoarse repeating this, but it is impossible to control inflation and return to a growth policy while maintaining "this stupid" policy of no exchange controls, he added.
The City of London's Financial Times (Oct. 30) didn't like Genro's "end of an era" declaration, and, even less, did they like press leaks that the Central Bank would no longer report directly to the President, but instead be subordinated to the Finance Minister. This "suggests a weakening of the Central Bank and a setback for those who advocate its formal independence from ministerial oversight," the FT complained. (For more on this, see InDepth, "Why London Should Be Worried About Lula's Re-Election," by Gretchen Small.)
India IT Sector Turns to 'Near-Sourcing'
The Indian IT sector has expanded so fast it has run short of qualified labor, and is beginning to "near-source" jobs, the Financial Times reported Nov. 2. In other words, such companies are moving operations to Ibero-America and other foreign locations, and increasingly using foreign labor to staff their companies. Tata Consultancy Services, one of India's biggest IT companies, now has 8.3% foreign labor, but will up it to 15% by next year. "De-risking" of operations (by not concentrating out-sourcing jobs in India alone) is cited as a major reason for increasing foreign operations. Another is acquisitions of foreign companies, which is on the rise.
Mittal Steel Announces More Shutdowns, Now in Europe
Continuing its pattern of shutting down steel capacity in the advanced sector, Arcelor Mittal has announced it will reduce its European production of flat rolled steel by "delaying" the restart of a blast furnace in Dunkirk, France and idling a furnace in Aviles, Spain, financial express.com reported Nov. 1. These shutdowns follow Mittal's Oct. 5 announcement that it is indefinitely idling blast furnaces in Ohio and Indiana. Mittal is currently defending itself against charges levelled by a member of the Parliament of Kazakhstan that its unsafe labor practices were responsible for the death of over 80 coal miners in Mittal-owned mines in Kazakhstan over the past three years.