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For Many Filipinos, Jobs and the Good Life Are Still Scarce

June 19, 2013 by Leave a Comment

MANILA — At his vegetable stand on a busy street in the Philippine capital, Lamberto Tagarro is surrounded by gleaming, modern skyscrapers, between which a river of luxury vehicles flows.

“The Philippines is the rising tiger economy of Asia,” Mr. Tagarro said. “But only the rich people are going up and up. I’m not feeling it.”

Mr. Tagarro earns the equivalent of about $5 a day working from before dawn until after dark, battling petty corruption to maintain his improvised sidewalk stand and dealing with rising wholesale prices for the onions and tomatoes he sells.

The Philippines, with a 7.8 percent expansion of gross domestic product in the first quarter of 2013, has the fastest-growing economy in East Asia, surpassing even China’s. The country has a red-hot stock market, a surging currency and a steady stream of accolades and upgrades from international ratings agencies.

But Mr. Tagarro’s experience — of being left behind by the country’s newfound prosperity — mirrors that of many Filipinos, according to the latest government poverty and employment data.

President Benigno S. Aquino III ran on a platform of clamping down on corruption, improving the business environment in the country and addressing widespread poverty. In his first three years in office, Mr. Aquino removed high-level government officials accused of corruption, cracked down on tax evaders and aggressively courted foreign investment.

In March, Mr. Aquino’s efforts were rewarded when the country received, for the first time, an investment-grade credit rating from Fitch Ratings, one of the world’s major ratings agencies.

Though Mr. Aquino’s efforts to improve the economy have received high-profile accolades, he has had less success in addressing the country’s persistent, widespread poverty.

Indeed, Mr. Aquino’s political opponents argued in advance of recent legislative elections that his actions had further enriched the wealthy and left the poor behind.

Despite the rapidly expanding economy, the country’s unemployment rate increased to 7.5 percent in April, from 6.9 percent at the same time a year earlier. About three million Filipinos who want to work are unemployed.

“Higher rates of economic growth over recent years have not made a serious dent in the employment problem in the Philippines,” the Asian Development Bank reported in its recent Asian Development Outlook report.

An estimated seven million Filipinos, about 17 percent of the work force, have gone overseas in search of jobs, according to the Asian Development Bank. For those who stay home, there are few options.

The Philippines has a strong service sector. In 2011, it overtook India as a top provider of offshore call centers.

But the country lacks the manufacturing base that has lifted millions of people out of poverty in other Asian countries.

In countries like China, the rural poor increased their income by finding jobs in factories. That is rarely an option in the Philippines, and few poor people from the countryside are qualified to work in a call center.

The country’s latest poverty data, released in April, show almost no improvement in the past six years. About 10 percent of Filipinos live in extreme poverty, unable to meet their most basic food needs. This is the same figure as in 2006 and 2009, the previous years when poverty data were gathered, according to the National Statistical Coordination Board.

The board also estimated that 22.3 percent of families were living in poverty in the first four months of 2012, compared with 22.9 percent in 2009 and 23.4 percent in 2006.

According to government estimates, more than nine million extremely poor Filipino households are not able to earn the 5,460 pesos, or $135, needed each month to eat. That amount is about the same as the price of a back-row upper-level ticket to the recent Aerosmith concert in Manila, where many of the country’s wealthy could be found partying into the night.

Other reports confirm the government’s findings that poverty has persisted.

In a survey by the independent Manila polling group Social Weather Stations, the number of Filipino families reporting that they periodically go hungry has increased in recent months.

The survey found that 19.2 percent of survey respondents, about 3.9 million families, reported going hungry. This is up from 16.3 percent in December 2012, when a similar survey was done.

Meanwhile, the Philippines has slipped on the U.N. Human Development Index, ranking 114th of 187 countries in 2012 in categories like health, education and infant mortality. The country had a ranking of 105 in 2007.

Article source: http://www.nytimes.com/2013/06/20/business/global/for-many-filipinos-jobs-and-the-good-life-are-still-scarce.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Philippines Gets Investment-Grade Credit Rating

March 27, 2013 by Leave a Comment

HONG KONG — The Philippines was once the sick man of Asia: badly managed, corrupt and poor.

Years of efforts by the government of President Benigno S. Aquino III paid off Wednesday, when the country received, for the first time, an investment-grade credit rating from one of the world’s major ratings agencies.

The move, from Fitch Ratings, represented an important vote of confidence for the Southeast Asian island nation, which has been growing at a rapid clip for the past few years but whose per capita income is barely one-quarter that of the United States. The economy remains heavily reliant on money sent home from Filipinos working overseas, called remittances.

“This means much more than lower interest rates on our debt and more investors buying our securities,” Mr. Aquino said in a statement. “This is an institutional affirmation of our good governance agenda: Sound fiscal management and integrity-based leadership has led to a resurgent economy in the face of uncertainties in the global arena. It serves to encourage even greater interest and investments in our country.”

Fitch Ratings cited “improvements in fiscal management” begun under Mr. Aquino’s predecessor, Gloria Macapagal Arroyo, as one of the reasons for its decision to lift the Philippines’ rating from junk status, increasing it one notch, to BBB- from BB+. The rating applies to the country’s long-term debt denominated in foreign currency.

The upgrade, Fitch said, reflected a persistent current account surplus, underpinned by remittance inflows, while a “strong policy-making framework” — notably effective inflation management by the central bank — has supported the overall economy in recent years.

Investors cheered the news of the upgrade, sending the main stock market index up 2.74 percent.

The upgrade had been widely expected for some time, helping turn the Philippines into something of an investment darling last year. The Philippine stock market soared more than 30 percent in 2012, one of the best performances in the world, and has risen an additional 17.8 percent so far this year — the third best in Asia after Japan and Vietnam. The Philippine peso has climbed 7 percent against the dollar since the start of 2012.

Foreign direct investment, likewise, rose 8 percent last year to $2 billion, from $1.9 billion in 2011, as investor confidence in the country has solidified since Mr. Aquino took office nearly three years ago.

“This is an upgrade that’s overdue,” said Norio Usui, country economist for the Philippines at the Asian Development Bank, which is based in Manila. “Financial markets have already fully incorporated it. Bold governance reforms under the current administration have changed consumers’ and investors’ sentiment. Prudent macroeconomic management has laid the foundation for the strong growth. This rating will give investors the confidence they need to give the Philippines a much closer look.”

The country’s promising demographics also seem to point toward bright economic prospects. While many Asian nations, including Japan, South Korea and China, are aging rapidly, the Philippine population of 94 million is one of the youngest in the region. About one-third of Filipinos are 14 or younger, according to World Bank data. That compares with 19 percent in China and 13 percent in Japan.

“Should the government implement policy to educate and provide jobs for the burgeoning population, the Philippines could capitalize on its demographic advantages to raise economic output,” economists at HSBC wrote in a research report.

HSBC forecasts that the Philippine economy will expand 5.9 percent this year, slightly less than the 6.6 percent recorded in 2012 but well ahead of the 3.9 percent in 2011. Fitch Ratings on Wednesday estimated growth between 5 percent and 5.5 percent in coming years.

At the same time, the country faces considerable challenges. Infrastructure in much of the country remains poor and corruption widespread, despite progress under Mr. Aquino’s administration. Growth has generated pockets of urban prosperity surrounded by vast areas of grinding poverty and few jobs.

Article source: http://www.nytimes.com/2013/03/28/business/global/philippines-gets-investment-grade-credit-rating.html?partner=rss&emc=rss

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DealBook: How Much Does the Fed’s Plan Really Help Main Street?

September 14, 2012 by Leave a Comment

Ben Bernanke, the Federal Reserve chairman, said Thursday that the Fed’s new stimulus was meant to help Main Street.

One way to gauge the extent to which Main Street might benefit is to look at the interest rates ordinary people pay on their mortgages, credit cards and car loans. Those rates, however, don’t make the strongest case for Mr. Bernanke being a man of the people.

Since 2008, the Federal Reserve has purchased some $2.75 trillion of bonds. On Thursday, it promised to keep buying bonds until it felt comfortable that the jobs market was properly back on its feet.

The Fed’s purchases aim to drive down borrowing costs for companies and consumers. In theory, this will make them more likely to take out loans to buy goods and services, stimulating the wider economy in the process.

By some measures, the Fed’s policies have worked. Mortgage rates have fallen to multidecade lows, large corporations have had no trouble issuing bonds, the economy is growing and the private sector has been adding jobs for months now.

The Fed’s largess has even helped borrowers much lower down the credit scale. Lenders are making lots of subprime auto loans right now. Some $14 billion of such loans have been packaged up into bonds and sold to investors so far this year, according to Fitch Ratings. At the rate companies are lending, the 2012 total for subprime car loans could exceed $20 billion, which would put this year on par with 2005, a boom year.

But in many cases borrowers could be getting an even bigger benefit. As the Fed’s actions have pushed down some key rates, the ones that consumers borrowed at haven’t fallen anywhere near as much.

The federal funds effective rate, one short-term rate that banks use to lend to each other, is at 0.14 percent. That compares with a rate of 3.62 percent in September 2005.

The 10-year Treasury note has a yield of 1.87 percent, down from 4.2 percent in 2005. These are huge declines.

Yet the cost of credit card loans has hardly budged. The Fed’s own data shows that average credit card interest rate was 12.06 percent earlier this year; in 2005, it was 12.45 percent.

One explanation is that the banks making credit card loans have to charge that level to cover the costs of their own borrowing. But that doesn’t seem to be the case.

For instance, JPMorgan Chase, a big credit card lender, paid an average of just 0.76 percent on its liabilities in the second quarter of this year. That’s way down from 3.1 percent in 2005.

The banks’ fears of credit-card defaults could be a driver. They may want to charge more than 12 percent to cover these potential costs, which are always part and parcel of doing credit card loans. If so, that fear could prevent certain consumer rates from falling much further, limiting the impact of the Fed’s policies.

But even when fear of default is removed from the equation certain interest rates seem to be stuck too high.

Take mortgages. The federal government agrees to shoulder the cost of defaults in nearly all of the mortgages made today. Banks make mortgages to borrowers, and then take those loans and attach the government guarantee of repayment to them.

After that, they package the loans into bonds, which they then sell to investors. The Fed’s purchases of these bonds have helped their yields fall to 2.2 percent. But the cost of mortgages to borrowers hasn’t fallen anywhere near as much.

The banks are choosing not to reduce mortgage rates further. One reason: By keeping the rates elevated, they are able to earn much larger profits when they sell the mortgages into the bond market. If the level of profits on those sales stayed at recent average levels, borrowers might, for instance, pay $30,000 less in interest payments on a $300,000 mortgage, according to a recent New York Times analysis.

Based on these practices, it seems as if the banks are an obstacle to the Fed’s latest efforts to generate economic growth. It’s almost impossible to imagine the Fed forcing banks to lower credit card rates, or take lower profits on their mortgage sales.

Main Street may therefore have to wait a long time for the full effect of the Fed’s latest actions.

Article source: http://dealbook.nytimes.com/2012/09/14/how-much-does-the-feds-plan-really-help-main-street/?partner=rss&emc=rss

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Stocks & Bonds: Commodities Companies Help Lift Market

December 17, 2011 by Leave a Comment

Stock indexes were mixed on Friday as gains among commodity producers helped overcome debt-crisis concerns prompted by Fitch Ratings’ warning that it might cut ratings of European nations.

Halliburton and Chevron paced the gains among energy companies. Banking shares in the Standard Poor’s 500-stock index rose 1.2 percent as a group, trimming an earlier rally. Research in Motion fell 11 percent after the company delayed the release of a new generation of BlackBerry devices. Zynga, the largest maker of games for Facebook, declined 5 percent in its first day of trading.

“We’re seeing a market in which there’s very little long-term investor interest,” said David Kelly, chief market strategist for J. P. Morgan Funds in New York. “Europe is still dodging all the major decisions it needs to make in order to fix the problem and I think that the disappointment in that is still dogging the markets right now.”

The S. P. 500 rose 0.3 percent to 1,219.66, after jumping as much as 1.3 percent earlier. The Dow Jones industrial average slipped 2.42 points, or less than 0.1 percent, to 11,866.39. The Nasdaq composite index rose 14.32 points, to 2,555.33.

The S. P. 500 lost 2.8 percent this week. It slumped Dec. 13 after the Federal Reserve refrained from taking new actions to bolster growth, saying the American economy was maintaining its expansion even as the global economy slowed.

The Treasury’s 10-year note rose 17/32, to 101 11/32. The yield fell to 1.85 percent, from 1.91 percent late Thursday.

Stocks trimmed an early rally after Fitch Ratings lowered France’s rating outlook to negative and put the grades of Belgium, Spain, Slovenia, Italy, Ireland and Cyprus on review for a downgrade, citing Europe’s failure to find a “comprehensive solution” to the debt crisis. It also said all investment-grade countries in the euro region rated below AAA were subject to a review, which Fitch expects to complete by the end of January.

Moody’s Investors Service said on Dec. 12 that it would review the ratings of all European Union countries after a summit meeting of leaders last week did little to ease pressure on the governments in Europe. S. P. placed the ratings of 15 nations, including France and Germany, on review for possible downgrade on Dec. 5.

Energy and raw material companies advanced among groups in the S. P. 500. Chevron added 1.2 percent to $100.86. Halliburton jumped 1.6 percent to $31.76.

Banks climbed, as Wells Fargo jumped 1.4 percent to $25.98 and JPMorgan Chase rose 0.4 percent to $31.89. Bank of America lost 1.14 percent to $5.20.

Friday was the expiration of futures and options contracts on indexes and individual stocks, an event known as quadruple witching, which occurs once every three months.

Adobe Systems, the largest maker of graphic-design software, rose the most in the S. P. 500 after saying first-quarter sales forecast beat some estimates, lifted by demand for tools that design Web pages and create online video. The stock advanced 6.6 percent to $28.20.

Research in Motion dropped 11 percent to $13.44 after saying a new generation of BlackBerrys designed to fuel a comeback would not be out until the latter part of 2012. The smartphone maker, which originally planned to release the new devices in the first quarter of next year, also gave sales and profit forecasts that missed analysts’ estimates.

Cablevision Systems, the cable television provider, tumbled 8.5 percent to $12.75. Its chief operating officer, Tom Rutledge, will step down this month for undisclosed reasons. Craig Moffett, an analyst at Sanford C. Bernstein, called it a “staggering loss” for the company.

The Consumer Price Index last month was unchanged, after a 0.1 percent decline the previous month, a report from the Labor Department showed. That supported the Federal Reserve’s view that inflation remains in check.

The November figure compares with a 0.1 percent increase forecast in a Bloomberg News survey of 82 economists.

So-called core prices, which exclude food and energy costs, rose 0.2 percent, more than forecast, reflecting higher medical care and clothing costs.

Article source: http://www.nytimes.com/2011/12/17/business/daily-stock-market-activity.html?partner=rss&emc=rss

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As Tension Rises in France, Harsh Talk With Britain

December 17, 2011 by Leave a Comment

A week after the British prime minister, David Cameron, refused to sign a Europe-wide pact that leaders had hoped would stabilize the euro zone, a cross-Channel spat has escalated into a full-blown war of words. Fears in Paris have reached a fever pitch over the prospect that France is about to lose its triple-A credit rating, the highest available.

President Nicolas Sarkozy started preparing the country this week for the imminent loss of its gilt-edged status, though Fitch Ratings on Friday affirmed France’s top credit rating while changing its outlook to negative.

A downgrade by Standard Poor’s Ratings Services, which has put France on review with a negative outlook, became more likely last week after a summit meeting of European Union leaders was widely declared a flop.

But in the last two days, French officials have unleashed a diatribe suggesting that Britain, not France, is far more deserving of a downgrade.

“At this point, one would prefer to be French than British on the economic level,” the French finance minister, François Baroin, declared Friday.

The ruckus comes as Mr. Sarkozy prepares for a tense re-election campaign heading into what promises to be a gloomy year economically for the country and much of the rest of Europe.

Troubled by the crisis in the euro zone, France is probably already in a recession, the government and the central bank warned this week, with a decline in economic activity expected to continue at least through March. Business and consumer sentiment have deteriorated, and unemployment is stuck at just below 10 percent.

Paris has embraced two austerity plans since the summer in a bid to reduce the country’s chronic budget deficit and meet the demands from Berlin to set an example for the rest of Europe to follow. Officials say those steps are also necessary to prevent France’s international borrowing costs from rising to unhealthy levels because of investors’ concern that France is losing the capacity to foot a growing bill from the euro zone crisis.

The verbal onslaught seemed aimed at deflecting attention from those problems. Within hours, headlines blared from British news Web sites taking exception to the perceived French snub.

“The gall of Gaul!” read The Mail Online. An article in The Guardian accused French politicians of descending “to the level of the school playground.”

Both countries are in poor economic shape. While the French are not suffering anything like the distress being felt in Greece, Portugal and Ireland — which cannot pay their bills without help from the European Union and the International Monetary Fund — the French government is not immune to speculators who see its rising debt levels as making it vulnerable to attacks in the bond market.

France’s debt as a percentage of gross domestic product was 82.3 percent in 2010, a figure that is expected to rise in the coming years even after it tightens its belt. Britain’s debt was 75 percent of its G.D.P. and also rising fast despite a stringent austerity program that is, at least for now, only adding to the country’s economic woes.

In France, the budget deficit was 7.1 percent of G.D.P. last year. Mr. Sarkozy has pledged to reduce it to 3 percent by 2013, partly through higher taxes, but he has been reluctant to spell out which social programs may have to be cut as well, out of fear of further alienating already disenchanted voters.

A looming recession is making that fiscal dilemma even worse by adding to social costs and reducing tax revenue.

“It is very bad news for people, because it means the unemployment rate will increase as more firms will have to fire people or go bankrupt in the private sector,” said Jean-Paul Fitoussi, a professor of economics at L’Institut d’Études Politiques in Paris. “It’s also bad news for politicians. They are in a kind of a trap because they have to say to the people that there is nothing they can do for them.”

As he walked to his job in an affluent suburb of Paris, Steve Kamguea, 22, an entry-level banker at AlterValor Finances, said he saw little hope for a revival of economic growth in France.

Article source: http://feeds.nytimes.com/click.phdo?i=cb317f09d72b545a54a1e42e1698d6c1

Filed Under: Economy News Tagged With: , ,

S.E.C. Investigates S.& P. Over Mortgage Securities

September 27, 2011 by Leave a Comment

The company said in its filing that it received a so-called Wells notice from the Securities and Exchange Commission on Thursday and it was cooperating with the S.E.C. in the investigation.

If the investigation leads to a case against S. P., it would be the first federal case against a ratings company for its work evaluating the mortgage securities that toppled the nation’s financial system. Delphinus was included as an example of an egregiously bad deal in a report issued in April by the United States Senate Permanent Subcommittee on Investigations.

The S.E.C. may decide to issue a civil injunctive action against S. P. and may demand monetary fines or disgorgement of fees, the company said.

The mere existence of an investigation does not mean that there will be a law enforcement action. There have been few cases against major institutions in the financial crisis.

“The Wells notice is neither a formal allegation nor a finding of wrongdoing,” McGraw-Hill said in a statement.

S. P. has been under scrutiny for months by the commission as part of its broader look at the mortgage securities that cost banks and investors hundreds of billions of dollars in losses when the housing market collapsed.

The S.E.C. has brought cases against banks — notably Goldman Sachs — over the marketing of such mortgage deals, but has yet to bring one involving the overwhelmingly positive mortgage ratings issued by firms like Standard Poor’s, Moody’s Investors Service or Fitch Ratings.

S. P. is also at the center of a Justice Department investigation into whether the company put business interests ahead of its duty to accurately rate deals, according to people briefed on that investigation. Standard Poor’s has been criticized by prominent lawmakers since it downgraded its assessment of the long-term credit of the United States in August, and McGraw-Hill recently announced plans to separate the company into two parts in response to a shareholder uprising.

Spokesmen for Standard Poor’s and the S.E.C. declined to comment.

Companies have been quicker to disclose that they received Wells notices since last year, when Goldman was criticized for not having disclosed the one it received related to the S.E.C.’s mortgage security investigation.

Delphinus was just one of many ill-fated mortgage securities called collateralized debt obligations, or C.D.O.’s, that represented bundles of mortgage bonds which were themselves bundles of home loans. The securities were supposed to be diversified so that if some homeowners stopped paying their bills, others loans inside the securities would be unlikely to default at the same time. But many of those securities turned out to be full of poorly underwritten mortgages that defaulted at the same time.

In the past, when the S.E.C. has looked into mortgage cases, it has focused its investigations on one deal per company. Its case against Goldman, for instance, was centered on only one deal called Abacus, even though there were nearly 20 other similar deals at Goldman. It was unclear if Delphinus, which was arranged by a unit of Mizuho Financial Group, would be the only one the S.E.C. pursued to see if S. P. violated federal securities laws.

There was so much demand for the Delphinus 2007-1 deal in July 2007 that Mizuho Securities increased its size from $1.2 billion to $1.6 billion, according to a Mizuho news release. The bank’s head of structured credit for the Americas said in that release that investors wanted “better quality collateral.” A spokesman for Mizuho declined to comment.

Standard Poor’s and other rating agencies were not generally the architects of deals like Delphinus, but the AAA ratings they placed on parts of those deals were critical to the banks’ abilities to sell them to investors. S. P. and other agencies made record profits placing ratings on mortgage securities like Delphinus, but they did not provide any sort of promises to investors that their ratings were accurate.

If investigators at the S.E.C. or the Justice Department find that analysts at S. P. intentionally gave inaccurate ratings, it could be a violation of the law.

The Senate subcommittee report in April said that in 2006, S. P. made $561 million in revenue in its structured finance group, where mortgage bonds were rated, and that the firm charged from $30,000 to $750,000 to rate each deal. In the three years before the crisis, S. P. rated 5,500 mortgage bonds and 835 C.D.O.’s, many of them AAA, despite being aware of increasing risks, the report said.

Delphinus, like so many of those deals, soon began to struggle. The deal went into default by January 2008, some six months after it was created, S. P. said in a 2008 client notice.

Analysts who rated the Delphinus deal, however, noticed problems sooner than that. Within weeks of the rating, S. P. analysts e-mailed each other to say that some of the bonds that went in it were not exactly quality collateral. According to e-mails released with the Senate report, analysts saw about 25 of the assets in the deal change within one day of its closing. The creators of the deal put placeholder bonds in, as allowed, but the ones they put in were not of the appropriate quality and “would not have been passing,” one S. P. analyst wrote in the summer of 2007.

The discrepancy those analysts noted was kicked upstairs to superiors, the e-mails show.

Article source: http://feeds.nytimes.com/click.phdo?i=be054729a650252d87a9fbb26e4d2346

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