All posts by Zhloeco

In the Fight to End Modern Slavery, Machines May Hold Key

More than 20 million people are working as modern slaves, and a technology developer is hoping artificial intelligence can help clean up the world’s supply chains and root out worker abuse.

Developer Padmini Ranganathan said mobile phones, media reports and surveillance cameras can all be mined for real-time data, which can in turn be fed into machines to create artificial intelligence (AI) that helps companies see more clearly what is happening down the line.

“The time to do this now is better than ever before, with so many countries and companies focusing on modern slavery,” she said. “At the start of the decade, the driving force for compliance was fear of being penalized. Now companies are looking at social impact and saying they want to do this.”

​More scrutiny of modern-day slavery

Modern-day slavery has come under increasing scrutiny in recent years, putting regulatory and consumer pressure on companies to ensure their supply chains are free from forced labor, child workers and other forms of slavery.

Almost 21 million people are victims of forced labor, according to the International Labor Organization (ILO), with migrant workers and indigenous people particularly vulnerable.

But Ranganathan said there are new digital ways to stamp out exploitation, given humans have failed to end modern slavery.

“The technology can filter over 1 million articles a day using forced labor specific key words and highlight potential areas of risk in a supply chain,” she said.

Ranganathan works for information technology services company SAP Ariba, which helps companies better manage their procurement processes.

She said a new program could map weak links in corporate supply chains by culling data from a host of sources, from surveillance cameras to non-profits and other agencies.

“Artificial intelligence and machine learning can use these huge volumes of data and extract meaningful information,” she said.

Forced labor worth $150 billion

Forced labor in the private economy generates $150 billion in illegal profits per year, according to the ILO.

Ranganathan hopes her new program will curb that market and help create “supply chains with a conscience.”

For instance, she said it could help detect if child labor was used to pollinate cotton, which in turn was used to produce a branded shirt. Or it could help monitor labor conditions on cocoa plantations, giving companies “real-time exposure” so they can purge their supply chains of abuse right away.

“The convergence of technology will make things more transparent and real-time exposure can be created,” she said.

“In the AI world, techniques are being piloted where we could arm the lowest level supplier with a mobile app, ensure hotlines in factories, use of surveillance cameras and make this all a part of the contract.”

Ranganathan conceded that mapping the “last mile” of any supply chain was the hardest part, with many outsourcing work to homeworkers and small units, where data was harder to gather.

Hard-pedaling Soft Power, China Helps Launch $13B Belt and Road Rail Project in Malaysia

China and Malaysia broke ground on Wednesday on a $13 billion rail project linking peninsular Malaysia’s east and west, the largest such project in the country and a major part of Beijing’s Belt and Road infrastructure push.

The planned 688-km (430-mile) East Coast Rail Link will connect the South China Sea, large parts of which are claimed by China, at the Thai border in the east with the strategic shipping routes of the Straits of Malacca in the west.

It is among the most prominent projects in China’s controversial Belt and Road Initiative, which aims to build a modern-day “Silk Road” connecting the world’s second-largest economy by land corridors to Southeast Asia, Pakistan and Central Asia and maritime routes opening up trade with the Middle East and Europe.

“The ECRL is indeed yet another ‘game changer’ and a ‘mindset changer’ for Malaysia as it will significantly cut travel time to and from the east coast of the peninsula,” Malaysian Prime Minister Najib Razak said at the ceremony halfway along the route in Kuantan, which faces the South China Sea.

For China, the project is another expansion of its soft power in Malaysia, which also lays claim to some disputed South China Sea islands, and is critical for China’s geopolitical and strategic interests.

“The China government has attached great importance to the China-Malaysia relations and has always considered Malaysia a dear neighbor and trustworthy partner who is committed to seeking mutually beneficial cooperation and common development in the country,” Chinese State Councillor Wang Yong said at the ceremony, heading up a 100-strong delegation in Kuantan.

Najib said the project would be financed with an 85 percent loan from China Exim Bank and the balance through a “sukuk” Islamic bond program managed by local investment banks.

The project is being built by China Communications Construction Co. Ltd.

Beijing has repeatedly come to the rescue of Najib over the last year, as he sought foreign investment that would help him pay off a massive debt piled up by scandal-plagued state fund 1Malaysia Development Berhad (1MDB).

Najib has announced a spree of infrastructure projects in the last few months, many funded by China, as he builds up momentum for a general election that he has to call by mid-2018.

A Nomura research report last month said foreign direct investment inflows from China into Malaysia surged by 119 percent in 2016 and continued to grow at 64 percent year on year in the first quarter of 2017.

The growing closeness to China has raised eyebrows among Najib’s opponents who have argued that the country has become too reliant on Chinese funds.

But Najib dismissed the concerns in a speech on Tuesday, saying turning away from Chinese FDI made “no economic sense.”

There have been protests in Sri Lanka and Thailand over the Belt and Road initiative. A planned rail link through Thailand hit some resistance with what critics said were Beijing’s excessive demands and unfavorable financing.

But Thailand’s cabinet last month approved construction of the first phase of a $5.5 billion railway project to link the industrial eastern seaboard with southern China through landlocked Laos.

Venezuela Exchange Rate Fluctuation Sparks Price Surge

The extreme volatility of Venezuela’s exchange rate has the crisis-hit country’s shop owners hurriedly marking up their merchandise and consumers balking at the higher price tags.

Just last week, the bolivar currency fell around 70 percent on the black market, according to DolarToday, the opaque U.S.-based website that dictates the black market rate.

Although the currency roared back this week to around 10,387 bolivars to the U.S. dollar, prices for often imported products have already been adjusted, heaping more hardship on Venezuelans who often earn only a handful of dollars per month.

“How is it possible that I bought rice a few days ago at 8,000 bolivars, which was already expensive, and now it’s at 17,000,” said housewife Senovia Gonzalez, 64, standing in a line to buy food in the Paraguana Peninsula that juts out into the Caribbean.

The monthly minimum wage in Venezuela is 97,531 bolívars, or not even $1 per day on the parallel exchange rate, making it the lowest in Latin America despite President Nicolas Maduro’s frequent increases. To that is added a 153,000-bolivar food ticket.

His unpopular socialist government has dispatched inspectors to try to contain the price hikes with fines, but that strategy has been largely ineffective in the midst of an economic crisis with triple-digit inflation, recession, and food and medicine shortages.

“If we do not adjust prices, we have to close, fire employees, work for someone else or leave the country,” said Victor Moreno, a seller of home appliances at a mall in Paraguana.

The opposition-controlled parliament said Wednesday that inflation in the first seven months of the year was 248.6 percent. The Central Bank has not published official figures for almost two years, when numbers began to worsen.

Many Venezuelans are horrified at the weakening bolivar, which has lost well over 99 percent of its value in the last three years. Social media users promoted the hashtag #worktoeat this week.

‘Speculators’ threatened with jail

Maduro blames an “economic war” waged by U.S.-backed coup plotters seeking to bring him down. He has threatened to jail “speculators” who raise prices.

Critics say decade-old currency controls and excessive money printing contribute to inflation and a weakening exchange rate.

But with the government increasingly short of dollars to supply the currency control system, more imports are obtained using the black market rate.

In the first half of the year, about 25 percent of all imports were made by private companies using the black market, according to local consultancy Ecoanalitica.

That means Venezuelan prices are even more sensitive to changes on the black market.

“Prices are reacting with aggressive speed,” said the head of Ecoanalitica, Asdrubal Oliveros.

“Not only shop owners, but all the economic actors in the country see that although the rate has strengthened again, it is not sustainable in the long term and in a month will weaken again,” he added.

US Push for Freer NAFTA e-commerce Meets Growing Resistance

A U.S. proposal for Mexico and Canada to vastly raise the value of online purchases that can be imported duty-free from stores like Amazon.com and eBay is emerging as a flashpoint in an upcoming renegotiation of the NAFTA trade deal.

Vulnerable industries like footwear, textiles and bricks and mortar retail in Mexico and Canada are pushing back hard against the proposal by the U.S. trade representative to raise Mexican and Canadian duty-free import limits for e-commerce to the U.S. level of $800, from current thresholds of $50 and C$20, respectively.

For the Mexicans, the main worry is that such a move could open a back door for cheap imports from Asia and beyond. For Canadian retailers, the fear is that e-commerce companies will undercut their prices.

The U.S. plan was unveiled in July as part of the Trump administration’s goals to renegotiate the 25-year-old treaty.

While Mexico and Canada are still formulating their responses, Mexico City is leaning strongly against the proposal in its current form, and Ottawa may not be far behind.

The proposed $800 level “opens a completely unnecessary door” to imports from outside the NAFTA trading bloc, Mexican Economy Minister Ildefonso Guajardo said on Thursday on the sidelines of a NAFTA-related event, calling it “a very sensitive topic.”

The growing controversy over how to account for a burgeoning regional e-commerce sector dominated by the United States highlights a rare area where the Trump administration is pushing to liberalize trade rules rather than tightening them.

Much of Trump’s criticism of NAFTA stems from his belief it has decimated U.S. manufacturing as companies shifted production to Mexican factories with cheaper labor, creating a U.S. trade deficit with Mexico worth more than $60 billion.

Top priority

But Mexican and Canadian business leaders fear the rule change could make their industries vulnerable, arguing that unless online retailers can show products are made in North America, they should not be exempted from duties levied on other imports.

“We can’t open the door to inputs from outside the region coming in tax-free when we’re talking about the need to reduce the deficit and create jobs,” said Moises Kalach, who fronts the international negotiating arm of Mexico’s CCE business lobby. “It goes completely against that.”

Guajardo said Mexico’s retail group the National Self-service and Department Store Association, which includes powerful members such as Wal-Mart de Mexico , had visited him last week to express concerns about the proposal.

He said the group’s representative brought to the meeting a $250 jacket bought on the internet as evidence that violations to the existing limit were already threatening members’ businesses.

“Suppose there was an $800 free limit. Can you imagine how many shirts Vietnam could send to Mexico in a packet below that price? They could easily flood us with packets of 100,” he said, while recognizing the need to smooth customs processes.

Complicating efforts to agree on a common set of rules is a tangle of diverging regulations on tax and how the restrictions on imports differ in the region depending on whether they enter by air, sea or land.

Amazon.com Inc. and eBay Inc. declined to comment for this story.

eBay has previously said it supports an increase to Canada’s low-value customs “de minimis” threshold for ecommerce to promote seamless access to the global marketplace.

Increasing the threshold “absolutely” is eBay’s top priority in the NAFTA renegotiation, a person familiar with the matter said.

Canadian opposition is being led by retailers, whose industry association said it was concerned about “the behavioral shift that would inevitably result if shoppers can buy a far wider range and higher value of goods tax-free and duty-free.”

The Retail Council of Canada said in a submission to the government that clothes, books, toys, sporting goods and consumer electronics would be among the items most affected, and expressed confidence Ottawa would fend off such requests.

Not from other nations

“eBay in particular has lead this charge to three different finance ministers in a row — Jim Flaherty, Joe Oliver, and Bill Morneau — and in each case they have failed,” said Karl Littler, a spokesman for the Retail Council of Canada.

“The U.S. raised this quite frequently in the TPP [Trans-Pacific-Partnership trade] round and they also failed to secure this concession,” he added.

There have been hints from Canada’s government about a compromise under which a higher limit would exempt products ordered from e-commerce from duties but not sales taxes.

“When it comes to waiving duties and taxes, we need to carefully consider the impact that would have on Canadians and on Canadian businesses,” said Chloe Luciani-Girouard, a spokeswoman for Morneau.

Mexican firms could accept a higher import limit for goods produced in the NAFTA region — but not from other nations, said Alejandro Gomez Tamez, executive president of the Chamber of Commerce for the footwear industry in the central Mexican state of Guanajuato, a hub of textile manufacturing.

“When a product comes in, even if it’s packaged and sent from the United States, if it’s from a third country, it should pay duties,” he said.

In Croatia, Harvesting Salt the Centuries-old Way

Dozens of glistening pools in a small village on Croatia’s Adriatic coast stand testament to its annual salt harvests from seawater, which use a method largely unchanged for centuries.

The salt works facility in Ston, which says it is the oldest in Europe, consists of 58 pools and covers about 430,000 square meters where the waters of the Adriatic are allowed to seep in and then evaporate, leaving salt behind.

The first of two salt harvests this year kicked off on Tuesday, with around 35 tourists, friends and family of workers raking salt across the pans into gleaming white piles, before transferring to a nearby warehouse by wooden carts.

They expect to harvest some 200 tons of salt in the harvest, with most of it used for industrial purposes while the rest is sold in local markets for use in cooking.

Tesla Seeks $1.5B Junk Bond Issue to Fund Model 3 Production

Tesla said on Monday it would raise about $1.5 billion through its first-ever offering of junk bonds as the U.S. luxury electric carmaker seeks fresh sources of cash to ramp up production of its new Model 3 sedan.

The move to issue junk bonds — lower-quality investments that offer higher yields — represents a bet by Tesla Chief Executive Elon Musk that bond investors will be as hungry as stock investors to back the company on expectations that its Model 3 will be a hit.

Tesla shares are up 67 percent this year, pushing the company’s market value to about $60 billion, above that of top U.S. automakers General Motors and Ford Motor Co., even though Tesla has yet to make an annual profit.

“Bond investors, who typically don’t love companies that don’t make money, will be far more forgiving when it comes to Tesla,” said bond expert Robbie Goffin, managing director of FTI Consulting, citing the company’s stellar stock market value.

Automaker draws a ‘B-‘ 

Tesla was to start pitching potential investors on Monday, IFR reported, citing lead bankers on the deal.

So far, Tesla has been raising money to pay its bills with a combination of equity offerings and convertible bonds, which eventually convert into shares. In March, the company raised $1.4 billion through a convertible debt offering.

Following the announcement, Standard & Poor’s reaffirmed its negative outlook for the automaker and assigned a “B-” rating for the bond issue — deep into junk credit territory. S&P also maintained its “B-” long-term corporate credit rating on Tesla.

“We could lower our ratings on Tesla if execution issues related to the Model 3 launch later this year or the ongoing expansion of its Models S and X production lead to significant cost overruns,” S&P said in a statement on the bonds.

Rating outlook is stable

Moody’s assigned a junk “B3” rating to the bond issue and said the company’s rating outlook was stable.

The rating agency said the overall company’s “B2” rating was supported by the fact that if Tesla ends up in serious financial trouble, its brand name, products and physical assets would be of “considerable value” to other automakers.

The automaker’s debt load increased significantly last year when it bought solar panel maker SolarCity.

CFRA equity analyst Efraim Levy said the bonds provide Tesla with funds “at least into mid-2018.”

“There is a risk they could still run out of money,” he said. “Then you’d go back to the equity markets and hope it’s not too late” to raise more money.

Burning cash

The latest effective yield on single-B rated bonds maturing in seven to eight years, the class for a Tesla issue, is around 5.5 percent, according to Bank of America/Merrill Lynch Fixed Income Index data.

Tesla’s bond will price later this week after several days of meetings with credit investors, who will weigh factors including the absence of a borrowing history, its lack of profit and its high cash-burn rate against its growth potential and its attractiveness as an environmentally friendly “green” issuer.

Ultimately, the depth of investor interest will determine the bond’s interest rate.

Tesla is counting on the Model 3, its least pricey car, to become a profitable, high-volume manufacturer of electric cars.

Tesla said last week that it had 455,000 net pre-orders for the Model 3, which has a $35,000 base price, and that the sedan was averaging 1,800 reservations per day since it launched late last month.

At the launch, Musk, however, warned that Tesla would face months of “manufacturing hell” as it increases production of the sedan.

Tesla had over $3 billion in cash on hand at the end of the June quarter, compared with $4 billion on March 31.

The company has said it expects capital expenditures of $2 billion in the second half of this year to boost production at its Fremont, California assembly plant and a battery plant in Reno, Nevada.

Tesla’s cash burn has prompted short-sellers like Greenlight Capital’s David Einhorn to bet against the Palo Alto, California company.

Goldman Sachs, Morgan Stanley, Barclays, Bank of America Merrill Lynch, Citigroup, Deutsche Bank and RBC are the book-runners on the bond offering, IFR reported.

Shares of Tesla closed down 0.5 percent at $355.17 on Monday.

 

China’s Ethnic Yi Struggle Against Poverty

For Jisi Lazuo, the torch festival in her village in southwest China should be a celebration involving colorful ethnic clothes and eating freshly slaughtered pig.

Instead, it’s a time of stress.

“In my heart I always get worried when the torch festival comes along,” said Jisi, 37, who supports a family of two grandparents and four children.

“Traditional clothes are quite expensive, but for my own kids I can only buy whatever I can get,” she said.

Jisi belongs to the isolated Yi ethnic community. They have a distinct language and culture, and are among the poorest in China.

Most live in Liangshan, a mountainous district in the southwestern province of Sichuan and one of 14 areas of “concentrated poverty” identified by the central government.

Average incomes in Liangshan are just 27 percent of the national average, official data shows.

An ambitious poverty reduction campaign is seeking to change this, ensuring by 2020 that no one is living in poverty — defined by the government as less than 2,300 yuan a year.

China has lifted hundreds of millions of its citizens out of poverty over the past few decades, but doing the same for groups like the Yi poses a different set of challenges.

“A lot of that poverty is not as easily accessible for the government,” said Ben Westmore, a senior economist at the Organization for Economic Co-operation and Development (OECD).

“It’s people who live in mountainous areas who are not very well connected, or they’re more dispersed at the provincial level across the prefectures,” he said.

From road building to subsidies, the central government has spent large amounts of money on poverty relief in places like Liangshan.

In 2016, the Liangshan government distributed 940 million yuan ($139 million) in basic income assistance for the poorest in the region, according to the government website.

Officials in charge of Liangshan’s anti-poverty campaign declined to comment on the programs. The State Council poverty alleviation office in Beijing also declined to comment.

While many Yi welcome the state’s help, some question whether cash handouts are sustainable.

“Just giving out money is useless because one day the money will eventually run out,” said Emu Zhiji, one of the few people in his village to receive a university education.

Emu said he hopes to become a sports teacher, something that would be impossible for many Yi. Thirty percent are illiterate, compared to 4 percent nationally, and many do not speak Mandarin, the main language in China. As a result, they have limited options for earning a living beyond farming.

The government has tried to improve access to education for the Yi, but it struggles to recruit teachers to work in such a remote area. Many students battle to keep up with lessons taught in Mandarin.

Emu said more needs to be done to allow the Yi to develop within their own culture if they are to alleviate the poverty and a dependency on government programs.

“If we had better jobs we’d be able to feed and clothe ourselves on our own, but for that we need to be able to use our own language,” he said.

Keystone XL Pipeline Fate in Balance as Nebraska Opens Hearings

Nebraska regulators opened a final hearing on TransCanada Corp’s proposed Keystone XL pipeline on Monday, a week-long proceeding that marks the last big hurdle for the long-delayed project after President Donald Trump approved it in March.

The proposed 1,179-mile (1,897-km) pipeline linking Canada’s Alberta oil sands to U.S. refineries has been a lightning rod of controversy for nearly a decade, pitting environmentalists worried about spills and global warming against business advocates who say the project will lower fuel prices, shore up national security and bring jobs.

Nebraska has last word

Trump’s administration handed TransCanada a federal permit for the pipeline in March, reversing a decision by former President Barack Obama to reject the project on environmental grounds. But the line still needs a nod from regulators in Nebraska — which would be the last of three states to approve its proposed path into the heartland.

A lawyer for opponents of the line opened the hearing in front of the five-member Nebraska Public Service Commission on Monday morning by grilling an executive for the Canadian company about how the pipeline will be disposed of after its anticipated 50-year lifetime.

“Do we have to clean up TransCanada’s abandoned pipeline?” attorney David Domina asked TransCanada executive Tony Palmer.

On Sunday, hundreds of pipeline opponents, including members or Indian tribes, marched through downtown Lincoln under police escort, following a rally at the Nebraska Capitol.

Decision expected in November

Nebraska’s Public Service Commission is meant to weigh whether the project is in the state’s public interest, and will announce a decision by November. The arguments of opponents are constrained by the rules of the commission, however: the commission is not permitted to consider the risk of spills because the route already has an environmental permit.

Opponents — including scores of landowners on the proposed route — will instead argue the jobs are temporary and the risks of the pipeline to local industries like cattle ranching too great. They will also note that if the commission approves the line, TransCanada could seek to seize property along the route using eminent domain law — a politically unpalatable option in the conservative state.

Proponents, meanwhile, will argue the project will bring in hundreds of jobs and millions of dollars in revenue.

Job numbers different

Trump has said the project would create 28,000 jobs nationwide, but a 2014 State Department study predicted just 3,900 construction jobs and 35 permanent jobs.

The 830,000 barrel-per-day Keystone XL would link Alberta to an existing pipeline network feeding U.S. refineries and ports along the Gulf of Mexico.

The project could be a boon for Canada, which has struggled to bring its reserves to market. But demand for the line has declined since it was first proposed, due to surging U.S. production, lower prices, and other Canadian pipeline projects.