May 24, 2018

Iceland Voters Oust Government

Election officials announced Sunday afternoon that with all the votes counted from Saturday’s election, the two largest center-right parties — the Independence Party and the Progressive Party — had won at least 38 of the 63 seats in Parliament, enough to form a coalition government with a comfortable majority. Together, they won just over half the votes cast.

The two parties capitalized on unhappiness with crippling levels of personal debt that have left many homeowners owing more on their mortgages than they originally borrowed. The parties promised to forgive or renegotiate such loans and to put an end to four years of austerity by lowering taxes, ending capital controls and stimulating foreign investment.

“We are offering a different road, a road to growth, protecting social security, better welfare and job creation,” Bjarni Benediktsson, the leader of the Independence Party, said after the vote.

The Independence Party, which was the dominant force in Icelandic politics for decades, performed worse than usual in the election, but the Progressives made extensive gains, especially among voters in rural areas. Even so, the Independence Party is likely to lead a new center-right government.

Voters turned against a coalition, led by the Social Democrats, that has governed the country for the last four years, even though, in a world of troubled economies, Iceland stands out as a relative success story. Its economy grew last year, unemployment is now below 5 percent — down from a high of 10 percent during the crisis — and inflation, which peaked at about 17 percent, is now closer to 4 percent a year.

But the ruling coalition cut spending and raised taxes, and although it tried to tackle the personal debt problem, it did not do enough to reassure Icelanders who disastrously took out loans in foreign currencies or that were indexed to inflation, said Silja Omarsdottir, a professor of political science at the University of Iceland. Professor Omarsdottir said in an interview that the government’s two big initiatives — rewriting Iceland’s Constitution and applying to join the European Union — failed to seize the popular imagination.

“They completely lost control of the discourse,” she said. “They were not getting their message across. People said: ‘You’re not doing enough. You’ve put all this effort into the Constitution, which we don’t care about, and spent so much money on the E.U. application, which we don’t care about.’ ”

The center-right parties have questioned whether Iceland ought to go ahead with the application to the European Union. The prospect of membership seemed more attractive when Europe looked stable, but the Continent is now mired in its own crisis. The Progressives and Independents have said the negotiations should wait until the country holds a referendum on whether the talks should continue.

Article source: http://www.nytimes.com/2013/04/29/world/europe/iceland-voters-oust-government.html?partner=rss&emc=rss

Small-Business Guide: Businesses Going Abroad Learn to Master Currencies

Based in San Francisco, the 31-year-old company books trips to Bhutan, Tibet, Central Asia, Patagonia and the Galápagos Islands months or even more than a year in advance. In late 2006, Mr. Tennant had booked travel for eight clients who wanted to explore northern India. Then the rupee began a double-digit climb against the dollar, which prompted one Indian supplier who had already agreed to fees for hotel rooms, guides and drivers to say he needed to raise his prices. Suddenly a trip costing Geographic Expeditions $7,500 per person was going to jump to $9,000.

“As soon as we commit to a price, we are heavily exposed if we don’t know what our costs will be,” Mr. Tennant said. “It can totally kill a company like ours.” He quickly canceled the contract and found another supplier that agreed to a firm quote.

As more small companies conduct business overseas, owners are learning that volatile exchange rates can cut into profits. More of these businesses are using banks and international payment companies and creating risk management strategies that mimic those of large concerns.

Mr. Tennant said he now worked with experienced global currency traders who help Geographic Expeditions conduct transactions and lock in costs. The strategy has helped his company of 45 employees grow to expected sales of $27 million this year.

These are some tips for conducting business in foreign currencies, based on the experiences of small-business owners like Mr. Tennant.

EXTEND THE QUOTE PERIOD Many American businesses pay their overseas vendors in the local currency. But not all business owners have the time or expertise to figure out how to avoid being hit by a sudden change in the exchange rate.

Craig T. Batten is chief financial officer of S4 Inc. in Toano, Va., which imports and sells $8 million in holiday lights a year. Four years ago, the company was so small that he could not find a bank to help him, so Mr. Batten worked alone, getting quotes from Chinese manufacturers that were paid in dollars. He would make a deposit of up to 50 percent of the order when he placed it, with the balance due when the product was shipped. Quotes would be valid for up to 90 days. After that, the vendor would deliver a new quote, which was time-consuming and could force S4 to update its prices.

Now working with Citizens Bank, Mr. Batten said he got quotes six months in advance and could pay in the local currency, the renminbi.

“The U.S. dollar has been losing value compared with the renminbi,” Mr. Batten said. “The two places I deal with will hold prices for a longer time and quote better prices because they’re not hedging on the loss of the U.S. dollar.”

The bank saves him money, he said, because he has been able to develop relationships with their representatives, who look out for him. “They often reduce the wire transfer fees when dealing with funds outside of U.S. dollars,” he said.

WORK WITH A TRADER Adriana Kahane, founder and chief executive of Dream Foods International in Santa Monica, Calif., depends on a currency trading company to help her business import organic citrus juices from Sicily. Dream Foods tallies about $6 million a year in sales.

When she started in 1998, Ms. Kahane relied on a big bank to buy currency to carry out transactions. She would place an order 90 days or more in advance, committing to buy, say, 75,000 euros on a certain date to pay a supplier. When the date came, even if she did not need the product at that moment, she was obligated to buy the currency. That became a problem during the recession, she said, when “we were a little bit squeezed on our margins because of the high cost of the euro.”

Five years ago Ms. Kahane started using Associated Foreign Exchange, or AFEX, an international payment and foreign exchange company in Los Angeles. She said the company had been willing to give her extra days before she was committed to buying euros. The AFEX representative calls her regularly when he sees the euro’s value dropping and knows she may want to make a purchase. She said that had helped Dream Foods save as much as $100,000 in a year.

Article source: http://www.nytimes.com/2013/04/18/business/smallbusiness/businesses-going-abroad-learn-to-master-currencies.html?partner=rss&emc=rss