March 28, 2024

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

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

Multinationals Rush to Invest in Indonesia

Today, that plant is humming. About 700 people work in the plant, 16 miles east of Jakarta, compared with about 30 just 18 months ago. And next month, G.M. will start delivering its first Indonesian-built vehicle in years, the Chevrolet Spin.

Auto sales are surging in Indonesia — up 17.8 percent in the first quarter from a year earlier — rewarding G.M. for the $150 million it recently invested in the country.

Other big multinational companies are racing to invest in factories and other operations to cash in on rising consumer demand in Indonesia, Southeast Asia’s biggest economy and most populous nation, with an estimated 251 million people.

While China and India have far larger economies, investment has slowed or declined. China said last week that foreign direct investment had risen an anemic 1.44 percent in the first quarter, to $29.9 billion. In India, the figure fell 6.3 percent to $3.95 billion in the first two months of the year, the most recent data available, according to India’s Department of Industrial Policy and Promotion.

Despite investors’ concerns about an unpredictable regulatory environment, a high level of corruption, inadequate infrastructure and rising labor costs, the money is gushing into Indonesia. The government reported Monday that foreign direct investment rose 27 percent in the first quarter to a record 65.5 trillion rupiah, or nearly $7 billion.

Indonesia has been on a roll since it emerged virtually untouched from the 2008 financial crisis. In 2009, it joined the Group of 20 large economies. It won its first investment-grade credit ratings in more than a decade in late 2011 and early 2012, and its gross domestic product has expanded at a steady rate of more than 6 percent for the last three years.

While overseas capital has long flowed into the resource-rich country’s mining, oil and natural gas sectors, many of today’s new foreign investors are focusing on the Indonesian consumer.

With its large population and a young labor force, Indonesia is in the midst of a consumer spending boom that analysts say could continue for years. Last month, the Boston Consulting Group projected that middle-class and affluent consumers in Indonesia would double to 141 million by 2020 — more than the entire population of Thailand.

While Asian conglomerates from Japan, Singapore and South Korea remain the top foreign investors, American and European companies are rushing in like never before. For example, in November the cosmetics giant L’Oréal opened its biggest factory in the world in West Java Province.

A decade ago, the last of Subway’s 10 franchised restaurants in Indonesia closed, but now the group is returning, said Stefan Grbovac, an area development manager for Subway in Singapore. He declined to provide details on local franchise partners or future store openings but he said the decision to come back to the country had been easy.

“Just look at this country — all of our competitors are here,” Mr. Grbovac said, including American franchises like Burger King, KFC and McDonald’s. “We’re definitely coming.”

As for G.M., it sold only 5,600 imported Chevrolets in Indonesia last year, accounting for 0.5 percent of the market. But G.M., the largest American carmaker, sees huge opportunities in reconstructing and expanding the 1.2 million-square-foot factory complex in Bekasi, that was shut in 2006.

The investment equals “a huge vote of confidence, not only in Indonesia but the structure of the country, the economic growth in the country,” Mr. Purty said. “We just don’t throw money around. We’ve had some pretty traumatic experiences in our life.”

Still, the challenges for foreign investors trying to do business in Indonesia are formidable. It can take 80 days to get a business license. In a global survey of the ease of doing business compiled by the World Bank, Indonesia ranked 128 out of 185 economies this year, a drop of 13 places from 2010. Transparency International ranked Indonesia 118 out of 176 countries in its most recent corruption perception index.

“Indonesia is punching below its weight as a big country,” said Andrew White, the managing director at the American Chamber of Commerce in Indonesia. “Indonesia is growing by 6 percent, but it should be growing by 10 percent.”

In an effort to reduce red tape, the Indonesian Investment Coordinating Board is cutting by half the number of documents foreign companies need to apply for a business license. It has installed online and real-time tracking of applications to further attract global brand names. One such company is Apple, which was granted a business license for manufacturing or retail even though it has yet to decide whether to invest in Indonesia, said M. Chatib Basri, whose job as board chairman is to attract foreign investment.

Mr. Basri said his pitch to foreign chief executives has been pretty straightforward, though hardly glowing: Asia in general, and Indonesia in particular, look far better than most regions right now.

“Indonesia is the least-unattractive country in the world,” Mr. Basri said. “Even though they have to deal with the problems of bureaucracy and infrastructure, the returns are higher than if you invest in Europe and the U.S. now.”

Article source: http://www.nytimes.com/2013/04/24/business/global/indonesia-sees-foreign-investment-surge.html?partner=rss&emc=rss

Fitch Downgrades Italian Debt, Citing Political Turmoil

ROME — The Fitch ratings agency cut its assessment of Italy’s sovereign credit by a notch on Friday, citing the abrupt emergence of fresh political turmoil that could push one of the euro zone’s most pivotal economies, already in a deep slump, into a further slowdown.

The lower rating of BBB+, down from A- before, was still within Fitch’s scale of debt considered to be of investment grade for bondholders. But the agency gave Italy’s debt a “negative” outlook.

An inconclusive national election late last month has thrown the government into gridlock, and Fitch said it was “unlikely that a stable new government can be formed in the next few weeks.” As a result, reforms needed to reverse an economic recession that Fitch described as one of the deepest in Europe seemed unlikely to be enacted any time soon.

The downgrade comes after Moody’s, a rival ratings agency, late last month warned that the risk of prolonged political uncertainty in Rome could have implications “well beyond Italy itself,” and could threaten the ratings of other members of the union.

The Italian economy is one of the hardest-hit in the euro currency union. It contracted 2.4 percent in 2012, compared with a 1.3 percent decline in Spain. Only Portugal, which shrank 3.2 percent last year, and Greece, whose economy contracted by 6.4 percent, fared worse.

Without growth, Italy will have a harder time paying down a €2 trillion, or $2.6 trillion, mountain of public debt, which Fitch forecast would rise this year to 130 percent of gross domestic product. That would be its highest level since World War I and one of the highest in the euro zone.

Last year, more than 360,000 Italian businesses closed their doors as banks refused to lend money and austerity measures, in the form of tax increases and spending cuts imposed by the former prime minister, Mario Monti, took a toll.

Italy’s unemployment rate hit a record high of 11.7 percent in January, the government reported Monday, while youth unemployment surged to 38.7 percent. Fitch warned it could downgrade Italy’s sovereign rating further if the recession ran deeper and longer than expected, or if the euro crisis heated up again.

Italy is effectively without a functioning government after the anti-establishment Five Star movement, led by the comedian-turned-activist Beppe Grillo, made stunning electoral gains in both houses of Parliament in last month’s elections. Mr. Grillo’s party has rejected an appeal by the Democratic Party leader Pier Luigi Bersani to work together to lead the country.

Without an alliance, the Italian government could limp along for as long as a year, political analysts say, before a likely collapse would force new elections. President Giorgio Napolitano is scheduled to meet next week with Mr. Grillo, Mr. Bersani and Silvio Berlusconi, the former prime minister who sought a return to power, to determine whether a new government can be formed.

A vote of confidence would then be held, probably later in March.

Italian media have speculated that a new caretaker government could be installed, in a manner similar to the move that put Mr. Monti in power in late 2011. But analysts say such a stop-gap government could not rule for long, nor would it be in a position to carry out painful economic reforms.

Both Mr. Bersani and Mr. Grillo have mostly ruled out joining with Mr. Berlusconi, meaning that an alliance between adversaries could be the main solution. But Mr. Grillo, who rode to victory on a wave of anger against what supporters see as a corrupt government, has instead heaped insults upon his rivals, and talked of razing the current system and replacing it with a more participatory democracy.

This article has been revised to reflect the following correction:

Correction: March 8, 2013

An earlier version of this article misstated the amount of Italy’s public debt. It is 2 trillion euros, or $2.6 trillion, not 2 billion euros, or $2.6 billion.

Article source: http://www.nytimes.com/2013/03/09/business/global/09iht-fitch09.html?partner=rss&emc=rss

High & Low Finance: Sorting Out a Chinese Puzzle in Auditing

To the Canadian affiliate of Ernst Young, the answer to both questions appears to be no.

How, asked one Ernst staff member involved in the audit in an e-mail to a colleague, “do we know that the trees” the auditors were being shown “are actually trees owned by the company? E.g. could they show us trees anywhere and we would not know the difference?” The answer was yes: “I believe they could show us trees anywhere and we would not know the difference,” replied the colleague.

That did not lead Ernst to change its procedures. Nor did it bother to look at documents that it knew were crucial to answering the questions about the Sino-Forest Corporation, which was based in Canada but had its operations in China.

Until the summer of 2011, Sino-Forest appeared to be a real success story, backed by underwriters like Credit Suisse and Toronto Dominion and with shares worth billions of dollars. Its bonds were rated as just under investment grade by Standard Poor’s and Moody’s. Then a short-selling operation known as Muddy Waters said it thought the assets were greatly exaggerated. Sino-Forest appointed a group of its independent directors to investigate, and in due course they concluded they could not even be sure just what trees the company claimed to own, let alone whether it owned them.

This week brought the Sino-Forest case close to a conclusion. Ernst agreed to settle a shareholders’ suit for 117 million Canadian dollars, or about $116 million, while denying it was liable. The company agreed to come out of bankruptcy with its assets, whatever they might be, owned by the creditors. The company had tried to find buyers, and a number looked at the documents, but nobody bid. There still seems to be no certainty about how much, if any, timber the company owns.

While Ernst settled the shareholder suit, it said it would fight new charges by the Ontario Securities Commission that the audit firm failed to follow proper audit procedures. It was the commission suit, filed this week, that disclosed the e-mails exchanged by the auditors.

“We are confident that Ernst Young Canada’s work was conducted in accordance with Generally Accepted Auditing Standards (GAAS) and met all professional standards,” the firm said in a statement. “The evidence we will present to the O.S.C. will show that Ernst Young Canada did extensive audit work to verify ownership and existence of Sino-Forest’s timber assets.”

However extensive the work, the audit failed to uncover the essential truth: the assets were fake.

Frauds, and audit failures, can happen in many countries. But China is a special case because the authorities there seem to be completely uninterested in getting to the bottom of scandals whose victims are American or Canadian investors. Even regulators in Hong Kong have voiced frustration with their mainland colleagues.

Last week China sent another delegation to the United States to talk about these issues with American regulators, and a Chinese official was quoted by The Financial Times as telling a Hong Kong audience that audit working papers should be shared with other regulators — something the Chinese supposedly agreed to a decade ago but had never actually done. “I think we’ll shortly be able to work out a way to deliver those papers,” he said.

The American regulators have heard those stories before. In July, the chairman of the China Securities Regulatory Commission, Guo Shuqing, told Mary L. Schapiro, then the chairwoman of the United States Securities and Exchange Commission, that he thought an agreement could be reached. It turned out that the Chinese insisted they would provide documents only if the S.E.C. promised not to use them in an enforcement proceeding without Chinese permission.

The week the S.E.C. filed court papers, in connection with its pending case against a Chinese affiliate of Deloitte, laying out case after case in which American regulators asked for assistance through obtaining audit work papers or even something as simple as verifying that a Chinese company existed. Repeatedly, the Chinese said something could be worked out, but somehow nothing ever was.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2012/12/07/business/sorting-out-a-chinese-puzzle-in-auditing.html?partner=rss&emc=rss

Moody’s Downgrades Hungary

Moody’s said late Thursday that it was cutting Hungary to a speculative rating of Ba1 from Baa3, its lowest investment grade, and was maintaining a negative outlook on the debt. The agency cited its doubts about whether the government of Prime Minister Viktor Orban would be able “to meet its targets on fiscal consolidation and public-sector debt reduction over the medium term, in view of higher funding costs and the low-growth environment.”

The benchmark Budapest stock index fell 3 percent, while the currency, the forint, and Hungarian bond prices sagged.

While Hungarian bonds had been trading at levels suggesting investors already treated the debt as junk, Mr. Orban had said Nov. 18 that Hungary would seek “an insurance-type agreement” from the I.M.F. in a last-ditch effort to keep its investment grade.

The Economy Ministry, in a statement cited by Reuters, called the ratings agency’s move the latest in a string of “financial attacks against Hungary.”

The Hungarian downgrade was just one of several to European Union countries. On Friday, Standard Poor’s cut its rating for Belgium to AA from AA+, still investment grade, but said the outlook was negative. And Fitch Ratings on Thursday cut its rating on Portugal to junk, citing similar concerns about the trajectory of government finances.

The biggest ratings question hanging over Europe now is whether France, which holds a coveted triple-A rating from all the major agencies, will be able to hang on to its status. A downgrade of France would have painful repercussions for the European bailout fund and for the euro.

Hungary’s public debt is uncomfortably high for an emerging-market country, equivalent to about 81 percent of its gross domestic product, a figure the government hopes to reduce to 50 percent by 2018. The budget deficit is relatively benign, and Mr. Orban has made keeping it under control a hallmark of his leadership, targeting a level of 2.5 percent of G.D.P. next year.

Moody’s warned that the outlook for the economy and government finances was being increasingly clouded by slowing growth, higher interest rates stemming from the euro crisis and the weakening of key export markets. Those risks are magnified by the fact that two-thirds of government debt is denominated in foreign currencies.

Hungary got a €20 billion, or $26.5 billion, bailout from the I.M.F. and European Union in 2008; it exited the fund’s stewardship last year.

Mr. Orban has enacted tough measures, widely described as “unconventional,” to keep the economy afloat. He has nationalized pension funds, imposed new taxes on services and decreed that Hungarians, many of whom borrowed in other currencies to finance their homes during the credit boom, can pay off their foreign-currency-denominated mortgages at artificially favorable rates — at the expense of mortgage lenders.

But those measures, many of which are one-time events, have run afoul of the I.M.F. and European Union, and some of them will probably have to be dismantled as the price of any new deal.

Tathagata Ghose, an economist with Commerzbank, wrote in a research note that the credit downgrade was not unexpected, as the Economy Ministry had itself suggested the action was imminent. “The negative connotation in terms of dwindling foreign capital participation is obvious,” Mr. Ghose said. “But, there could also be a positive outcome: We think that a much needed reversal to the present policy framework may finally be in prospect.”

Article source: http://www.nytimes.com/2011/11/26/business/global/moodys-downgrades-hungary.html?partner=rss&emc=rss

DealBook: Europe’s Debt Threatens MF Global, and Corzine

MF Global, run by Jon Corzine, is losing investors concerned about the firm's ties to $6.3 billion in European debt.Lucas Jackson/ReutersMF Global, run by Jon Corzine, is losing investors concerned about the firm’s ties to $6.3 billion in European debt.

Jon S. Corzine’s return to Wall Street has run into a wall of turbulence.

Shares of his firm, the commodities and derivatives brokerage house MF Global, have plummeted 54 percent so far this week amid concerns about the firm’s exposure to European sovereign debt. On Wednesday, the price of its five-year bonds slumped to 66.5 cents on the dollar, and the upfront premium of insuring $10 million of its debt annually climbed to $4.7 million, from about $3.9 million on Tuesday.

Worries about Europe have buffeted other American financial firms in recent months, but MF Global is showing signs of becoming the first to face a full-blown panic. Investors began running to the exits after Moody’s Investors Service on Monday cut its ratings on the company to one notch above junk status and Standard Poor’s on Wednesday threatened a downgrade. A ratings reduction below investment grade would hurt the company’s futures clearing business, analysts said.

Both ratings agencies said they were concerned about MF Global’s capital position given its exposure to $6.3 billion in debt from Italy, Spain, Belgium, Ireland and Portugal — among the most troubled economies that use the common currency of the euro.

S.P., noting that the debt amount is 5.2 times the company’s total equity, said, “We consider this exposure to be very high, compared to the company’s loss absorbing capital base.” Earlier this month, MF Global disclosed that a regulator, the Financial Industry Regulatory Authority, had ordered it in August to set aside additional capital. Moody’s said the debt exposure and the need to inject capital highlighted “the firm’s increased risk appetite and raises questions about the firm’s risk governance.”

“It appears that there’s been a dramatic loss of investor confidence,” Richard Repetto, an analyst with Sandler O’Neill Partners, said.

While investors have been fleeing, it is not clear whether its clients are staying put. After the Moody’s downgrade on Monday, MF Global’s chief financial officer, Henri Steenkamp, sent a note to customers discussing the firm’s financial stability.

The firm’s woes pose a huge test for Mr. Corzine, who joined it only last year with a grand vision: to remake the four-year-old brokerage into a smaller version of his former employer, Goldman Sachs. One of Mr. Corzine’s big initiatives at MF Global was to make more trades using the firm’s own capital, a potentially more lucrative business than simply trading for clients. But regulators and analysts said that so-called principal trading bore high risks and required the firm to hold more capital.

MF Global responded this past quarter by paring back its principal trading, leading to a 73 percent drop in that unit’s revenue from the same time last year. That, coupled with volatile markets, contributed significantly to the firm’s reporting a quartelry loss of $186 million on Tuesday.

MF Global has now hired Evercore Partners as one of potentially several advisers on strategic options, including a potential sale, according to a person briefed on the matter who was not authorized to speak publicly.

A sale would almost certainly mean an abrupt exit for Mr. Corzine, age 64. His entrance, shortly after losing his bid to remain governor of New Jersey, generated enormous interest in what had been a respectable but small financial player. MF Global put such a premium on his presence that this summer, it included a “key man” provision in the sale of $325 million worth of bonds. Should Mr. Corzine leave to join the Obama administration by July 1, 2013, it agreed to pay a higher interest rate on the notes.

Now, his reputation is intertwined with MF Global’s fate.

“This is Corzine’s legacy, and this is where he’s got to step in,” Mr. Repetto said. “If you have a dominant leader like that, he needs to step in and reinvigorate the business and reassure investors and clients.”

Still, in considering a sale, MF Global is likely to look for a better-financed partner that could allay concerns about its risks. With the recent stock slide, the company has a market value of a little more than $280 million.

It is unclear what other options MF Global may seek. It has no debt payments due in the near term, though if Europe’s worst case — multiple countries defaulting — were to happen, the firm’s equity could be wiped out by its debt holdings.

One possibility is that J.C. Flowers Company, the private equity shop where Mr. Corzine is a limited partner, could help arrange a recapitalization. J.C. Flowers, whose founder is a Corzine protégé, holds about a 6.8 percent stake in the firm.

A spokeswoman for MF Global, Tiffany Galvin, declined to comment.

Formally created in 1981 as part of the Man Group, the British hedge fund giant, MF Global has long focused on a relatively unheralded part of the financial world: brokering trades in commodities and derivatives like futures contracts. It grew in large part through acquisitions, including the purchase of assets from Refco in 2005.

But since its spinoff from the Man Group in 2007, MF Global had to contend with concerns about its risk management and its size. In February of 2008, the firm disclosed that an employee who was trading in the wheat futures market in his personal account had substantially exceeded his personal limit. The breach led to a $141.5 million debt charge and millions of dollars in fines.

Weeks later, MF Global’s stock plunged after the sale of Bear Stearns, after investors questioned whether it could survive because of its small size.

Mr. Corzine’s arrival last year heralded a potential renaissance for the firm. As Goldman’s chief executive from 1994 to 1999, he led the banking titan’s responses to several challenges, including the Asian financial crisis and the collapse of the Long-Term Capital Management hedge fund. His crowning achievement was Goldman’s initial public offering in 1999, though the controversial move led to a power struggle that ultimately cost him his job.

At MF Global, Mr. Corzine devised a plan that cut costs and laid off staff even as the firm took on more trading risks to lift profits. And it remains a leader in the futures broker-dealer area.

But the firm’s holdings of European sovereign debt have prompted concerns among analysts that MF Global faces a capital shortfall. It has already sought to bolster its capital positions to satisfy regulators.

But Mr. Repetto said that MF Global did not face an immediate crisis as a result of its debt exposure, noting that the firm could rely on the European Financial Stability Facility as a backstop.

Article source: http://feeds.nytimes.com/click.phdo?i=e1200e2c1a2f7d888c33a4f1b4cd0754

Economix Blog: Making the Case for Detroit’s Future

It’s far too early to say Detroit is on the way back; its property values are still falling and its debt is still rated as speculative. But as he approaches the midpoint of a four-year term, Mayor Dave Bing is pointing to signs that the city’s breathtaking decline may have bottomed out.

Mayor Dave Bing earlier this year.Paul Sancya/Associated PressMayor Dave Bing earlier this year.

A few big companies, like Blue Cross Blue Shield of Michigan, General Motors and Quicken Loans, have agreed to move several thousand employees downtown, and more are expected to follow. Whole Foods and two new supermarket chains are setting up shop, so the new workers can get food nearby. There is not enough housing for them yet in Detroit’s ravaged inner neighborhoods, but building-permit issuing is up.

City income-tax revenue also appears to be creeping up this year, after several years of decline. And while property tax revenue is still sinking, along with property values, the decline has slowed, according to data released by Mayor Bing on Thursday.

He was in New York City to address the Municipal Analysts Group of New York, an organization whose members assess the likelihood that states and local governments can pay their debts. The mayor attracted a capacity crowd because Detroit’s problems are extreme, and previous administrations had a history of delaying and withholding data that analysts required, prompting them to downgrade its credit.

Currently, Detroit is the only major American city whose credit is below investment grade. It also has several derivatives contracts that call for it to make cash payments to counterparties if its rating falls further. The payments would range into the hundreds of millions of dollars and Detroit does not have that much available cash.

Mr. Bing said he had not come to New York to push for a higher credit rating. And if he wanted to dazzle the analysts with lists of achievements, he did not show it.

For seemingly every silver lining he cited, he could also name a cloud. Crime statistics had fallen under his administration — all except for homicide, which rose this year. Labor talks have started this month, with the prospect of savings — but there are 48 unions to deal with. There are those thousands of new workers for downtown Detroit, but the challenge of housing them.

“We don’t want to fool ourselves into thinking we have crossed any threshold,” Mayor Bing said. Detroit’s problems are so large that it will take longer than four years to fix them, he said, adding, “People are asking me already, are you going to run again? And I want to make clear, right here, yes, I am.”

Mr. Bing, a former basketball star with the Detroit Pistons who later built an auto-parts manufacturing business, became mayor by winning a special election in May 2009, to complete the term of the previous mayor, Kwame M. Kilpatrick. Mr. Kilpatrick was forced to leave office during a scandal over his romantic relationship with his chief of staff, pleaded guilty to obstruction of justice and served four months in the Wayne County jail.

“I inherited a $330 million accumulated deficit,” Mr. Bing told the analysts. “Needless to say, we were bankrupt.”

Residents disheartened by Mr. Kilpatrick’s failings seemed to see Mr. Bing as an outsider who might bring change, and re-elected him in a regular election that November.

Not long after he began a full term, data from the Census Bureau showed the city was living through a collapse of historic proportions: It had lost 25 percent of its population over the previous decade, more than any other American city above 100,000 people, aside from New Orleans, which lost 29 percent after Hurricane Katrina in 2005.

Those who left were generally those with the means to move, the mayor said. Those who remained were generally the poorest, and the least able to pay all the bills left over from better times.

Detroit's pension costs are expected to rise sharply in the 2011 fiscal year.Source: Mayor Dave Bing, Presentation to Municipal Analysts Group of New YorkDetroit’s pension costs are expected to rise sharply in the 2011 fiscal year.

The biggest bill is for the retirement benefits Detroit promised city workers back when the bargaining successes of the United Auto Workers set the scale for other local workers. Those promises must be kept, but the tax base that was supposed to support them has been decimated. The city work force is shrinking too. Currently, for every dollar Detroit spends on its payroll, it spends an additional $1.08 on pensions and health care, Mr. Bing said.

Mr. Bing said he thought public employees’ unions might be willing to make concessions because they saw the U.A.W. do so during the recent federally-led reorganizations in Chapter 11 of General Motors and Chrysler.

Michigan does not generally permit its cities to file for bankruptcy under Chapter 9. But it does allow for the appointment of an emergency financial manager, whose powers to renegotiate labor contracts were expanded this year.

“I don’t want an emergency financial manager to be called in,” Mr. Bing said. “However, it is an option.”

Article source: http://feeds.nytimes.com/click.phdo?i=0756b369b4d237564a1c8910f05177fa