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As a Boom Slows, Peru Grows Uneasy

August 19, 2013 by

“This is Peru,” he said. “When you go to the shopping malls they’re full of people, they’re full. That’s a good indicator that people are really spending money.”

Peru’s economy grew an average of 6.4 percent a year from 2002-12 after adjusting for inflation, according to government figures, a remarkable period of sustained expansion that has made it one of the world’s star economies.

But suddenly growth has slowed here, and just beyond the view from Mr. Kristensen’s window, under Lima’s perpetually gray winter sky, the reason becomes clear.

At Dock 5B, ships are loaded with Peru’s mining riches, including copper ore, lead and zinc — the raw materials that fueled the Peruvian boom with their rising prices in recent years. But in the first six months of this year, mineral shipments through the port were down 12 percent by weight, according to APM Terminals, Mr. Kristensen’s company, which operates the facility for the Peruvian government.

The decrease resulted from a drop in demand in a struggling world economy and a slowdown in China, one of Peru’s top trading partners. Those factors have also caused mineral prices to plummet, sucking the wind from the sails of Peru’s economy.

This bust amid the boom has given vent to a national angst, with hand-wringing over the economy a mainstay of newspaper front pages and television news programs. Headlines bemoan soaring trade imbalances as the value of mining and other exports, including apparel and agricultural products, plunges at the same time imports are surging.

Miguel Castilla, the economy and finance minister, said he expected the economy to grow between 5.5 percent and 6 percent this year. While that was down from earlier predictions, it would maintain Peru’s place as one of the fastest-growing economies in Latin America. Even some of the most skeptical economists predict Peru’s economy will grow by nearly 5 percent this year, a rate that would be celebrated as a ripping success in many countries.

But in Peru, such predictions are being treated as something close to disaster.

“Growing for a decade at 6 percent, you get used to it,” said Gustavo Yamada, the dean of economics at the University of the Pacific in Lima. Mr. Yamada said he expected growth in Peru to settle into a range of about 4 percent to 5 percent in coming years.

“That creates a scenario,” he said, “of, ‘Hey, wait a minute, we were going to be the next Inca tiger, what a disappointment.’ ”

Polls show that consumer confidence has slipped this year, and a Peru Central Bank survey in June showed that investor confidence was at its lowest point in almost two years.

“We have become used to a sustained period of growth, and we have forgotten about cycles,” said Mr. Castilla, the economic minister.

Just as outside factors, like rising metals prices, fueled Peru’s boom, similar factors, like the slow recovery in the United States, Europe’s economic woes and China’s slowdown, are now causing it to cool down, he said.

“We’re at a crossroads,” Mr. Castilla said. “We have everything we need to cope with this less favorable world condition, but there’s an urgent need to implement the reforms that have been approved recently and to tackle other issues.”

Those changes include steps to clear away economic obstacles — like making government more efficient, making capital markets work better and improving infrastructure.

Mr. Castilla’s ministry has also chosen a list of 31 projects worth $22 billion, including mining and infrastructure, that it wants to fast-track by removing bureaucratic obstacles.

Peru’s economy is a mash-up of strengths and weaknesses. The country has robust international reserves, a large rainy day fund that can be used for economic stimulus in a crisis, and low public debt.

Poverty in Peru has been cut by more than half in recent years, falling from 59 percent of the population in 2004 to 26 percent last year, according to government figures. Millions have moved into the middle class, which the Inter-American Development Bank estimates has doubled in size from 2007-12 and now includes about half of all Peruvian families.

Article source: http://www.nytimes.com/2013/08/20/world/americas/as-a-boom-slows-peru-grows-uneasy.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Financial Fears as Street Unrest Shakes Turkey

June 5, 2013 by Leave a Comment

This curious happenstance — where both fear that the profusion of glass towers and shopping malls now overwhelming the classic Istanbul skyline is not only ugly but unsustainable — underlies the convulsive uprising in Taksim Square.

The once soaring Turkish stock market has fallen about 9 percent in the past week, interest rates are on the rise and, crucially, after a period of strength, the currency, the lira, has lost 8 percent in recent months and 1 percent just since the protests began.

For more than two years, a very small subset of investors and economists has warned that, as with other economic booms built on a mountain of debt — like the property spikes in Japan in the 1980s and more recently in the United States, Spain, Ireland and other European countries — the one in Turkey would reach a painful end.

Until recently, their warnings were ignored.

In contrast to a Europe stagnating throughout most of the past decade, Turkey has grown at a 5 percent annual rate while keeping its public finances in check.

In fact, with a budget deficit that is below 2 percent of gross domestic product and overall public-sector debt of less than half its economic output, Turkey challenges powerhouse Germany for best-in-class status when it comes to these critical benchmarks of broad economic health.

For Prime Minister Recep Tayyip Erdogan, the political crisis he is facing seems manageable precisely because of Turkey’s economic success, which has buoyed a pious entrepreneurial class that forms the core of his constituency. As the protest movement has unfurled, few analysts have suggested Mr. Erdogan’s hold on power is in jeopardy, arguing that he maintains the support of the religious masses that propelled him to power.

But that dynamic could change quickly should the economy falter, as a growing number of analysts now say is possible.

Hundreds of billions of dollars of short-term loans have been flowing into the country from investors in search of higher yielding assets, financing the very malls and skyscrapers that have so dismayed the small but growing coalition of secular intellectuals, left-of-center political activists and a smattering of the professional classes.

What worries financial experts is that this so-called hot money can leave the country just as quickly as it arrived, touching off a currency crisis and, eventually, a collapse in the property markets that could threaten the nation’s banks.

“This is a classic credit boom, with money being thrown at Turkey, especially the banks,” said Tim Lee, an independent economist at Pi Economics in Greenwich, Conn., who has warned for years of a Turkish financial bubble. “At some point, though, you reach a moment when the music stops.”

It is perhaps too soon to say if that moment has come, but the financial jitters that have followed the protests have been noticeable, especially with regard to the wobbly lira.

Mr. Lee and other skeptics point to the currency as the ultimate barometer of how foreign investors see Turkey. The country’s two previous financial implosions, in 1993 and 2001, were largely currency disasters, set off by a stampede of fleeing investors and lenders.

Two points in particular concern them.

This year, for example, Turkey’s private sector will require $221 billion in outside financing alone, with most of it coming in short-term loans.

By normal standards, that is a heady sum, about 25 percent of Turkey’s G.D.P., and it is about the size of the economy of Greece, Turkey’s longtime rival.

Moreover, in preparation for the 100th anniversary of the founding of the Turkish republic in 1923, Mr. Erdogan’s government has unveiled a $400 billion public works program, which is more than half the size of the $770 billion Turkish economy.

Many of these grand projects will have a visible aesthetic effect on Istanbul, which is what infuriates the protesters.

Planners envision a third bridge spanning the Bosporus at a cost of $3 billion, for which ground has already been broken; $10 billion to be spent on a third airport, which would be the world’s largest; and a $2 billion outlay to create a financial center in Istanbul to compete with Dubai and London. On top of a slew of equally large projects in high-speed rail, subways, ports and other amenities, Istanbul is also seen as a leading contender to secure the 2020 Olympic Games.

The decision on the Games will be announced in September, and if Turkey wins, the building and borrowing will only speed up.

Article source: http://www.nytimes.com/2013/06/06/world/europe/financial-fears-as-street-unrest-shakes-turkey.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Square Feet: In Toronto Suburb, Putting Curvaceous Into Condominiums

July 20, 2011 by Leave a Comment

But the first residents are moving into an extremely curvaceous, 56-story condominium tower in Mississauga, a city of about 738,000 people. The skyscraper, called the “Marilyn Monroe” by locals for its voluptuous curves, was the result of an international design competition initiated in 2005 by the tower’s development company, Fernbrook Cityzen.

Now, joining London’s spiraling Gherkin building and New York’s rippling 8 Spruce Street is Mississauga’s buxom Absolute tower — or rather, two of them, both designed by the Chinese architect Ma Yansong, assisted by his partner, Qun Dang. Sales were so brisk in the 428-unit “Marilyn” tower that the developers asked the architect to deliver a second, 50-story high-rise with 433 units.

This second high-rise also spirals asymmetrically, but not quite enough to steal the limelight from “Marilyn.”

The buildings were the final two towers to be developed in a five-tower condo complex, called Absolute World, built at Mississauga’s main intersection, across from the Square One Shopping Center, one of the largest shopping malls in the Toronto region. The first three towers were of more conventional high-rise design.

Mr. Ma, a founder of the MAD Architectural Design Studio in Beijing and a Beijing native, said he’d never heard of Mississauga when he discovered the design competition online in 2005.

However, he had spent several years studying in Yale University’s architectural program, so Mr. Ma said he had in mind a generic midsize North American city.

“I was imagining Mississauga as a city aiming to become Chicago or Toronto, with a lot of big towers, in the future,” he said.

Yet instead of designing a rectilinear structure, Mr. Ma decided to create something that was a bit softer and more livable.

“I was thinking maybe North American cities need something more organic, more natural, more human,” he said.

Mr. Ma said he loved the anthropomorphizing “Marilyn” nickname, which distinguishes his structures from the world’s other twisting towers, most of which are too geometrical for his tastes. A truer analogue might be Prague’s Dancing House, originally called “Fred and Ginger” for its sinuous qualities, evocative of the dancing pair. It was designed by Frank Gehry and the Croatian-Czech architect Vlado Milunic.

The unpredictable bulges of Mr. Ma’s skyscrapers, which have a slightly different appearance from every angle, created huge challenges for the towers’ builders and engineers, which translated to financial challenges for the developers. Most skyscrapers are built on straight lines for a reason: they’re more efficient to build that way.

In the “Marilyn” tower and its counterpart, “every floor is different,” said Sigmund Soudack, a principal with Sigmund Soudack Associates, a Toronto-based structural engineering firm that consulted on the project. “The challenge was to execute and make the buildings functional.”

While the floor plates are the same for all floors, they had to be rotated to various degrees, said Anthony Pignetti, a vice president and director of construction for the Dominus Construction Group, which built the Absolute towers. Support walls had to be widened and narrowed, and columns lengthened and shortened, to hold up each successive floor. Builders and engineers had to design an internal construction hoist, since curving walls wouldn’t allow an affordable external one. None of the 428 condo units are exactly alike, Mr. Pignetti said.

Each floor has a balcony that wraps fully around it, which had to be separated in some way from the main floor slab or the balcony would drain heat or cold from the units. Engineers solved that problem by designing “thermal breaks” and may seek a patent for the process, said Yury Gelman, a senior engineer with Sigmund Soudack.

In all, the five-tower Absolute World project cost 450 million Canadian dollars (about $470 million), and more than half of that went into constructing the two curvy towers, said Sergio Vacilotto, the director of site operations with Dominus Construction.

Currently, residents have moved in up to the 15th floor of the “Marilyn” tower, and occupancy is to begin on the companion tower in the fall.

If the developer had any doubts about sales, they didn’t show. Sharon Florian, the director of sales and marketing for the developer Fernbrook Cityzen, said the “Marilyn” building largely sold out in June 2006 in about 24 hours, and its companion tower largely sold out in a matter of weeks a month later, both at just under 400 Canadian dollars a square foot. In the greater Toronto area in 2006, new condos were selling in the range of 330 to 380 Canadian dollars a square foot, depending on their location.

All that remains for sale in the “Marilyn” tower is a handful of units; in the companion tower, 11 units of differing sizes are available, including three penthouses, some of which the developer recently released to the market, Ms. Florian said.

“Currently we have some never-released penthouses available in the fifth tower, in the range of 1,600 to 1,800 square feet” starting at 1.2 million Canadian dollars, she said.

Ms. Florian said that the developer initially held the international design competition to “bring some excitement to the Mississauga skyline,” but that the towers had done much more, particularly in terms of international exposure. While most of the buyers were from the Toronto region, a large number of them were also from overseas, particularly the Middle East and Asia, she said.

Hazel McCallion, Mississauga’s mayor, said it was unusual for a city struggling to build an identity through its architecture to look to a residential condominium developed privately. Typically, cities promote public projects, such as museum or opera house, which in fact Mississauga did with its architecturally distinguished City Hall, which opened in 1987, the result of a national architectural competition.

“What we’ve clearly demonstrated to all the developers that want to build in our city core, and throughout the city, is we want, if possible, architectural competition, because this is just a leading example of what can be accomplished,” she said.

Article source: http://feeds.nytimes.com/click.phdo?i=51f337da7f56275cc07dd5523200b8a3

Filed Under: Business News Tagged With: , ,