Daily Press Cuttings

Friday 16th February 2001

WB/IMF: Rich western countries have helped condemn poor people in sub-Sahara Africa to poverty by deep cuts in official aid during the 1990s, the World Bank said yesterday. The Bank's latest figures showed that official aid from the wealthy states that make up the Organization for Economic Development (OECD) fell to $19 a head in 1998 from $32 a head in 1990. "OECD governments were cutting aid budgets to Africa during precisely the period when it started to work really well. Millions of Africans are in poverty today partly because of these cuts, which occurred at a time of unprecedented OECD prosperity," Paul Collier, research director of the Banks' development economics department said. The Bank released its figures on the eve of a joint visit to Africa by its president, James Wolfensohn, and the managing director of the IMF, Horst Kohler. African development indicators reveal that 300m people on the continent were living on less than $0.65 a day, while in 24 countries per capita GNP was less than $350 a year. It said that the decline in aid was compounded by a drop in foreign direct investment (FDI). FDI tend to reach countries with "lucrative mining and oil industries," while aid flowed to those "with sound social and economic policies". Well over half of FDI went to Angola, Lesotho and Nigeria; Tanzania was the biggest beneficiary of aid, which dropped to $10.8bn by 1999 from a record $17.9bn in 1992.

UK: If Britain is still prevaricating over the euro in 2004, it will lose decisive influence over the political shaping of the EU. That is the judgement of Romano Prodi, president of the European Commission who said yesterday in an interview with Hugo Young "To be different makes you less important in the total decision-making process…If you stay out, that's your choice, but you can't then pretend to be in." He said that selected areas of further integration are inevitable. They are the only empirical response to the facts of the modern world. By which he meant, at bottom, the danger of American hegemony brought about by economic globalisation. "The only way to express ourselves is the new world" he says "is by being together. I don't like to be a colony. If we do not get together, we will disappear from world history".

WTO/Labour: Charlotte Denny's article "Cheap labour, ruined lives" takes a look at the issue of the boycott of goods produced in sweatshop conditions in the Third World. She cites the example of Nicaraguans who although they were working in appalling conditions making jeans for department stores such as Wal-Mart and JC Penney, recently picketed the American embassy for an end to the campaign against sweatshops because their livelihoods, they said, were under threat. Kevin Watkins of Oxfam says: "There is no case you can point at where sanctions have improved labour standards. It's about a labour aristocracy in the north protecting its jobs and conditions." The National Labour Committee, a New York human rights group, tells American companies not to drop sweatshop suppliers but to work for better conditions. Its approach has been to use the media to try to embarrass companies into putting pressure on their subsidiaries, which the article says, seems to have worked.

US: US consumers are carrying more debt than previously thought, with mortgage burdens reaching their highest levels on record, revised Federal Reserve figures showed yesterday. The report underscores a potential fault line in the US economy if a recession materialises. Overall, US consumers paid debt service equal to 14.08% of their disposable incomes in the third quarter of last year. Banks generally view mortgage lending as a low risk activity because of homeowners have proved much less likely to default than businesses. Charles Peabody, banking analyst at Mitchell Securites, says that American homeowners "are leveraging against an asset that can inflate and deflate and they are acting as if it can only inflate - which is not too dissimilar to buying tech stocks on margin."

Japan: Japan's corporate sector had a rough start to the year with 1,358 companies going bankrupt in January, leaving behind record liabilities of £5.7bn, according to Teikoku Databank, an independent research house. Corporate debt rose to 60.6%. The figure underlines the pressure being exerted by the corporate sector on Japan's debt-ridden banks, struggling to write off bad loans. Japan's banks have relied on windfall gains from their share portfolio to write off bad loans, but the continuing decline in the stockmarket has eradicated nearly all of their market gains. Teikoku Databank said that they are experiencing a "state of deflation and credit crunch."

Mexico: Mexican President Vicente Fox will meet US President Bush today in Guanajuato. The White House said that the two presidents were likely to discuss "how to capitalise energy development in Mexico", but said it would remain "respectful" of Mexico's sovereignty and economic structures." The Bush administration is pushing for the completion of the Free Trade Area of the Americas (FTAA), which includes all the nations of the Americas except Cuba. However, the US tabled a proposal saying it would refuse to modify its antidumping laws. The Brazilian chief negotiator, Jose Alfredo Graca Lima, says that "You cannot agree to negotiate a treaty as a single undertaking and then argue that an issue like antidumping be treated as an internal matter." The Brazilian left rejects the agreement as another step that will further erode national sovereignty and enhance the power of US corporations.

Zambia: The IMF and WB proceeded with a $3.8bn debt relief programme for Zambia despite indications of serious irregularities in the country's mineral sales highlighted in an independent auditors'report. The IMF and WB were under pressure from western finance ministers to approve debt relief for some of the world's poorest countries before the end of last year following energetic campaigning by groups such as Jubilee 2000 that included high-profile lobbying by rock stars Bono and Bob Geldof. However, the debt-relief programmes were designed to be restricted to countries demonstrating a clear commitment to transparency and good governance.

IMF/WB: Alan Beattie, Antony Goldman and Stephen Fidler write that Africa is the region which for decades has been the testing ground for the changing theories of development of the IMF and the WB. Few economists outside the institutions believe that the HIPC initiative will on its own allow these countries to return to sustainable growth. They question whether, given the huge political capital expended on pushing the initiative through the US Congress, there will be the stomach for the necessary second round. And a lasting exit from poverty will require a permanent increase in the quality of economic governance. The institutions claim they are more selective now in choosing where they will direct resources, meaning they will avoid the mistakes of the past. Nancy Birdsall at the Carnegie Endowment in Washington says that "The institutions have to lend more money to ensure their past loans are repaid." She argues that "although HIPC will not necessarily bring down debt enough by other measures, it could help break this circle of defensive lending by the institutions." In many cases, argues the FT, the institutions are pushed into their decisions by western governments.

Bank economists David Dollar and Paul Collier say that reform can be rewarded but not demanded as a prior condition of aid. But this has also run up against disquiet from some of the bank's main shareholders, some of which still want to micromanage individual decisions by African governments.

Pharmaceuticals: GlaxoSmithKline is under pressure to make its drugs more widely available in poor countries, according to the FT, and is reviewing its approach to pricing and patent enforcement. Several investors are concerned that a bad public image could damage GSK's long-term share price. GSK was criticised for appearing to defend patents on AIDS drugs in Ghana and Uganda and for backing legal action against the South African government, which is seeking the right to import cheaper medicines.

Euro Bonds: Merrill Lynch & Co. is ranked first among book runners of all international bonds in 2000, capturing more than 10% of the market but is ranked only sixth in euro-denominated bond issuance. The company intends to beef up its presence in this sector so as to gain a stronger foothold in euro-denominated debt.

Pharmaceuticals/AIDS: Dr Peter Piot, the executive director of UNAIDS, has suggested the following program to improve access of AIDS medicines to Third World countries: Specifically he said, "tactics must include tiered pricing where drug companies make long-term commitments to offer AIDS drugs at significantly reduced prices; legislation that allows for both patented medicines and generics to compete to drive down prices; regional procurement, where groups of countries or regions collaborate to purchase larger volumes of discounted drugs; and voluntary licensing agreements between companies with patented medicines and generics to produce cheaper versions of medicines." It has been nine months since five big drug companies announced a pact to provide lower-priced drugs in poor nations, but so far deals in only three countries have been negotiated.

Russia: The Bush administration has warned Russia not to expect a break in repaying $38.7bn in Soviet-era loans from the world's major economic powers. US Treasury Secretary, Paul O'Neill told his counterpart, Finance Minister, Alexei Kudrin that Moscow "clearly has the resources" to service its debts to Western governments "in full and on time". It is an indication, says the article, that the Bush administration is likely to take a more skeptical view of aid to Russia that did its predecessor. Beyond Russia, Mr O'Neill says he plans to ask his G-7 counterparts when they meet in Palermo for their views on the bailout of economies from the former East Bloc or developing countries that get into financial trouble. He expressed greater confidence that the Clinton administration did in the power of the market to sort out financial difficulties. He also plans to discuss the related question of overhauling the main institutions that deliver international aid, the IMF and the World Bank.

Thursday 15th February 2001

US: Renewed interest in distressed securities could be a lifeline for US banks facing deteriorating loan quality. Bad loans, delinquencies and bankruptcies have been rising since 1999 and credit-rating firms predict that things will get worse before they get better. Banks have traditionally dealt with bad loans by writing them off and posting big loan-loss reserves. Looking for other ways to address the problem, some banks have turned to developing a secondary market for bank loans, where an increasing appetite for distressed debt has provided some relief. "If the distressed debt market continue to open up and banks are unable to unload some of their problem assets, it would be a very positive development for the industry," says John Otis, managing director in high-grade credit research at Bear Sterns. Born of the real estate crisis of the 1990s, the secondary market for loans has grown from about $8bn in 1991 to about $95bn during the first three quarters of 1999, according to Loan Pricing Corp, a New York research firm that tracks the loan market. Insurance companies, pension funds and hedge funds have played a growing role as buyers of bank debt and a niche market has developed for the debt of struggling companies that have failed to live up to the terms of their bank agreements or appear to be heading towards bankruptcy. Distressed-debt investors buy the bank loans and bonds of troubled companies at a fraction of their face value in the hopes that they will eventually be valued higher.

Conseco Inc, the financial services company is fighting charges of record falsification. In a suit filed last month in federal court in Indianapolis, two pension funds accuse Conseco of falsifying loan records in a bid to lower its loan-delinquency rate and bolster the value of Conseco securities. Of the ten directors and five officers named in the suit, nine remain at the company. Under their supervision, according to the suit, delinquent accounts suddenly became current, a process, the suit says, Mr Crittenden called "creative funding".

Pharmaceutical: The FT's comment is on pharmaceutical companies. By focusing so much blame on pharmaceuticals companies and patent laws, campaigners risk diverting attention from the toughest issues. In some poor countries, it would not be solved even if drugs were provided free, because the healthcare systems needed to treat patients properly do not exist. Furthermore, chronic disease is merely one symptom of the far greater scourge of poverty. Only governments of wealthy countries can lead an effort on the scale required. But, to do so, they need to be able to persuade taxpayers to provide the resources.

Holocaust: German companies will not part with any funds until they have been assured of 'legal peace' in the US, report Richard Wolffe and John Authers. "Legal peace" technically covers only the dismissal of existing class-action lawsuits. Michael Hausfeld, the lead attorney behind the IBM case, says he is looking into the wartime records of about 100 IBM US companies - including IBM - over their complicity with Nazi Germany. Other lawyers say they are planning to sue US-based investment banks and law firms that were involved with the German regime. The suit may intensify pressure on US-based companies to make their own payments for Holocaust-related issues. Wolfgang Gibowski, spokesman for the Germany industry foundation for Holocaust compensation, said "The IBM case is very serious…in Germany people are anxious …all these cases will cause further delays in the payments to the Nazis' victims."

China: China has launched a crackdown on tax fraud that many rank as the country's biggest corruption scandal since 1949. Government officials, speaking on condition of anonymity, said fraud could eclipse a smuggling scam uncovered last year involving about £4.4bn

Aids/Pharmaceuticals: Malcolm Dean in his article "Conflict between profits and philanthropy trips up industry" cites some of the philanthropic measures undertaken by the pharmaceutical industry. An example is the free donations of albendazole by SmithKline Beecham over a 20-year period for 1.2bn people at risk of contracting lymphatic filariasis, best known as elephantiasis. "What is needed", says Mr Dean, "is an international organisation, such as UNAIDS, which would receive aids drugs at cost price (or lower) from the industry, or the generic equivalent, backed by donations from bilateral donor nations. However, he is mindful that should the price of triple therapy for Aids be reduced from $10,000 a head to $600, African countries can at present only afford to spend $10 per head. If even they were given free, says Mr Dean, the support costs would be huge. So what is the main hope? - a new Aids vaccine, but just when such a breakthrough will occur is regrettably unclear.

Pharmaceuticals: Dr Peter Wilmshurst, a consultant cardiologist, gives an account of his involvement with clinical trials for amrimone, a new drug for heart failure which caused gastrointestinal disturbances and other problems."The company asked us not to publish our adverse findings. Then when we said we would publish, they threatened us with legal action." The drug was withdrawn on safety grounds in 1984, but was sold over the counter in the Philippines and Africa until 1986. Dr Wilmshurst believes little has changed and that the largesse of the drug companies is the malign influence on doctors.

Aids/Pharmaceuticals: The leader article "Millions of lives at risk" says "we should expect the highest ethical standards from drug companies because their business is the lives and deaths of human beings" rather than the business of increasing profits and enhancing their market share. The article suggests that there should be a shortening of patents in developing countries, a strengthening of the trade related intellectual property agreement (TRIPS) provisions and a greater sense of responsibility from the drug companies. Meanwhile, the drug companies insist that patent laws cannot be tailored for the needs of desperately poor countries where millions will die. Furthermore, when the US chooses to support the pharmaceutical industry, it merely circumvents TRIPS and threatens trade sanctions.

AIDS/Pharmaceuticals: Jean-Pierre Garnier, the chief executive of Glaxo SmithKline writes in yesterday's Guardian that Oxfam's proposal to weaken patent protection would do nothing to alter the issue of access by the Third World to affordable Aids drugs. Rather, he quotes the South African health minister Manto Tshagbalala-Msimang, who said that the problem of access to HIV/Aids-related treatment could not be adequately addressed by simply cutting the prices of anti-retroviral drugs. "Care….should be addressed in a holistic way including treatment for opportunistic infections and any agreement in this regard should cover issues of sustainability and accessibility as well as affordability. Mr Garnier says the major problem is "poverty and the absence of effective health systems." He advocates taking "a holistic approach in which a public/private partnership tackles the problem of HIV/Aids in developing countries," as "in Senegal, Uganda and Rwanda [who have] already obtained anti-retroviral treatments from us….at very substantially discounted prices."

Thursday 14th February 2001

Russia: German Gref, Russia's minister of economic development, and Werner Muller, the German economics minister, confirmed that progress had been made at a meeting in Berlin on "changing the foreign debts of Russia state companies for equity stakes by German investors". However, they differed sharply on crucial details. Mr Gref argued the proposals involved both Russia's so-called Paris Club debt from official lenders and borrowings from the former German Democratic Republic. However, Mr Muller said only the latter obligations were under discussion.

Indonesia: Indonesia forest product group owes nearly $1.2bn and may collapse, write Joe Leahy and Tom McCawley. After racking up nearly $12bn in borrowings, Asia Pulp and Paper (APP) has debt repayments due this year that are expected to far exceed its cash flow. One of its units, Indonesian paper maker Pabrik Kertas Tjiwi Kimia, missed deadlines on $43.25m in interest payments. APP's system of cross guarantees means that if one unit defaults, the whole group could fall. This event could trigger one of the region's most complex debt restructuring - the company has hundreds of bondholders worldwide. The question arising is why despite APP's growing indebtedness and the lessons of the recent crisis, creditors ignored the warnings signs and continued to load the company with more debt.

Peru: Peru's alpaca wool has long promised to become a vital part of the country's textile exports but old-fashioned selling practices, poor marketing and a lack of vision from previous governments are holding back trade. China has recently become a big purchaser of Peruvian alpaca fibre, together with the US, Italy and UK. The industry generates about $20m to $30m a year for farmers in some of the poorest parts of the country.

UK: Inflation has reached its lowest level for 25 years, sharply increasing the possibility that the Bank of England will have to explain why it has missed its 2.5% inflation target. Ciaran Barr, chief UK economist at Deutsche Bank, said "Even though some of the deflation in goods prices is unwinding, it is hard to see what will push inflation much above 2% in a year's time".

Japan: Japan's pharmaceutical market has long been dominated by local companies but it is now starting to open up to foreign competitors, says David Pilling. Japanese get through $50bn in prescription pharmaceuticals a year - as much as the UK, Germany, France and Italy combined.

Letter: In a letter to the FT, Carolyn Miller, Director of Programmes of Save the Children, writes on the legal action taken by 42 pharmaceutical companies against the South African government. Ms Miller says that pharmaceutical companies must direct more research and development into diseases like diarrhoea, malaria, HIV and respiratory infections - committing to fair pricing of drugs and removing obstacles to the development of generic drug industries in poor countries. She suggests that GlaxoSmithKline should establish a public health impact advisory board comprising an independent public health policy representatives from developing countries.

Re-nationalisation: Keen privatisers are now turning their backs on deregulation writes Jonathan Freedland in his article, "Ready to renationalise". Driven by an electricity crisis that has caused rolling power cuts, California is now set to "renationalise" the grid. In New Zealand, the trend has been even more dramatic. With growth slower than anywhere else in the western world and business performance at rock bottom, the New Zealand experiment in market fundamentalism had "failed" said Prime Minister Helen Clark. In a reversal of the global trend towards privatisation, her party has in little over a year increased the top rate of income tax for high earners, jacked up pensions, reduced student debts, boosted trade union rights, and proposed both the setting up a public bank and renationalising part of the railway.

Peru: The Peruvian attorney general has formally filed corruption charges against former president Alberto Fujimori, a spokesman said yesterday.

World Bank: Morale at the bank has plummeted after nearly 300 staff were made redundant to cut costs. Although staff at the Bank's Middle Eastern and North African division had also accused president James Wolfensohn of "not welcoming criticism or tolerating dissent", the Bank's 1,200 strong Africa Club have disagreed and voiced their support for Mr Wolfensohn.

South Africa: Police used tear gas and rubber bullets to evict 3,500 residents from Alexandra, Johannesburg's oldest township in what was described as a forced removal reminiscent of the past. The government has said the squatter encampment on the edge of the cholera infected Jukskei river was a deathtrap but residents are suspicious that the government wants the land in order to sell it.

Brazil: Recognising that importing expensive drugs would make its national AIDS program unsustainable, Brazil has invoked an article in its patent legislation that entitles the government, when it deems it vital, to issue a license for a local firm to make a product if the patent holder hasn't started manufacturing it in Brazil 3 years after the patent has been granted. The US has referred the matter to the WTO claiming that Brazil has violated the patents of US companies and was in breach of WTO intellectual property rules. Through the local manufacture and free distribution of cheap generic drugs, Brazil has slashed the number of AIDS-related deaths by about 50% in four years.

Emerging Markets: As the US economy slows and with the global financial crisis of the late 1990s fading, businesses are again looking to major developing nations, in particular, China, Brazil, Mexico and India as possible sites for plants and acquisitions, according to a study released yesterday.

US: US Federal Reserve Chairman, Alan Greenspan, told the Senate Banking Committee yesterday that Fed policy makers still believe, as they did when they cut rates on Jan. 31, that "for the period ahead, downside risks predominate." That suggests, says the article, that the Fed is still more likely to lower rates than leave them alone.

Tuesday 13th February 2001

AIDS: Jeffrey Sachs, director of the Center for International Development at Harvard University, says that there is perhaps no starker divide between rich and poor than that of public health. The rich are living longer and more healthily than ever, while the poor are increasingly falling victims to AIDS, malaria, tuberculosis. Money, political will, wise stewardship by the pharmaceutical companies and good science from the world's experts will all be needed. The first step is to realise that public health crisis in poor countries, especially in Africa, is international public enemy number one. Without progress on AIDS and the other diseases, economic development itself will be blocked in much of the world. Second, it must be recognised that poor countries need financial help to fight disease. The poorest countries have annual incomes of just $250 a person. Even public health spending of 5% of gross national product, more than most impoverished countries can achieve, amount to only $12.50 a person per year -grossly insufficient to tackle the multiple health crises. Africa would probably need between $10bn and $20bn a year from international donors for disease control but it receives less than $1bn.

Third, pharmaceutical companies should make their miracle drugs for AIDS and other killer diseases available at production cost to the poorest countries. The drug companies have no customers for their products in Africa at these high prices and they would lose nothing by offering to sell them to the donor agencies at cost. The agencies would then make them available for free to the poorest countries.

Fourth, any international donor effort should be based on fundamental precepts of scientific merit, transparency and independent review and evaluation. Jeffrey Sachs estimates that the cost of the overall AIDS effort would be about $5bn during the next couple of years and would rise to perhaps $10bn. This should be part of a co-ordinated disease control effort for Africa of $10bn-$20bn a year.

UK: The secretary-general of OPEC, Ali Rodriguez, says that members should set minimum taxes on international oil companies to avoid competing against each other for foreign investment. While some Opec members might regard tax harmonisation as an infringement of their sovereignty, Mr Rodriguez wanted to use the experience of his own country Venezuela to warn them of the risks of a free-for-all rush to attract foreign investment.

UK: China has replaced the UK as the world's favourite destination for foreign direct investment after the US, according to a survey of chief executives from the world's 1,000 biggest companies published today. US retains the first position, followed by China, Brazil, UK, Mexico and Germany.

Kenya: Africa Online, the panAfrican internet service provider (ISP), has acquired Egypt's MenaNet Communications for $8.7m, it announced yesterday. Africa has only 36 internet users in 10,000 inhabitants, compared with 183 in Asia, 922 in Europe and 1,167 in the Americas.

Zimbabwe: After an angry reaction from exporters and banks, Zimbabwe yesterday backtracked on Friday's surprise announcement that three-quarters of all export earnings should be paid to the central bank and one quarter to the national fuel procurement company. Money market dealers question whether the revised controls would be enough to raise the foreign exchange the central bank says it needs to pay off the bills of Zimbabwe's embassies abroad, or to remedy the increasingly serious fuel shortage.

US: President Bush is expected today to pledge more money for US military research and development as the Pentagon moves towards a faster, more efficient post-Cold War force. The administration's $310bn budget for 2002 will set aside about $42bn for research and development of weapons system, an increased of $3bn or about 8% over the amount planned by the Clinton administration, a Pentagon official said.

DRC: A summit on Congo's 30-month war has been postponed after Rwandan President Kagame refused to attend because he feels Zambian President Chiluba is no longer an impartial mediator.

Asia: The company mentioned in Robert Frank's article "Why Asia Still Lags: Thai Bankruptcy is a Cautionary Tale" is Thai Petrochemical Industries Inc. (TPI) which owes the banks more than £3.5 billion and has been placed in the hands of debt specialists, Ferrier Hodgson, on behalf of the company's creditors. But TPI is merely symptomatic of the financial crisis that has erupted from Indonesia to Thailand to Malaysia. Thailand's bad loans, which the government prefers to call "strategic nonrepayments," have reached more than $20 billion and account for about 20% of all bank lending, compared with 8.7% at the end of 1996. In Indonesia, the government has recovered only a small portion of the $30 billion in bad bank loans it took over in 1998. The Malaysian government spent more than $15 billion to patch up its banking problems, yet several of the country's largest debtors have yet to restructure. The nagging debt load has unnerved foreign investors - foreign investors withdrew nearly $1 billion from the Thai stock market last year - and choked off new bank lending, further threatening Southeast Asia's development as the world economy slows. "You have a system where companies can go on accumulating debts indefinitely, and it's very hard to remove these managements in Asia," says Anand Aithal of Goldman Sachs Group Inc.

China: China's entry into the WTO will prompt a sweeping range of reforms in an economy that is mired by sinking rural incomes, a still-bloated government bureaucracy and banks that continue to lend to unprofitable companies, according to Chi Fulin, executive director for the China Institute for Reform & Development. Mr Chi advocates giving farmers their own land and doing away with their long-term contracts. "That way, farmers can use land ownership as collateral for mortgages, thereby funding more new lines of business that can reduce an overly large agricultural population. The fresh source of loans could also wean banks away from state companies." Meanwhile, the US is among the members of the WTO pressing for deeper agricultural concessions that Beijing warns could threaten stability. Unemployment is climbing, there is a prospect of labour protests and counterpressures to reform may become intense, cautions Mr Chi.

Zimbabwe: Andrew Meldrum and Chris McGreal in their article "Mugabe tries to crush all opposition", report that the last veneer of legality has now been stripped away in Zimbabwe. In recent weeks, independent judges have been hounded from office fearing for their lives, the opposition press has been bombed, politicians who have denounced President Mugabe's abuses have been locked up on charges of promoting violence, and the mass of poor have faced tear gas and riot police for daring to protest at the rising price of bread. Beyond all the rhetoric of the judges having a "Rhodesian mentality" and that the country's institutions be "exorcised of the racist ghost of Ian Smith", Mr Mugabe, says the article, wants a free hand to appoint an entire panel of judges unlikely to challenge his controversial and - according to the present court - illegal redistribution of white-owned farms.

Monday 12th February 2001

The Economist 

Ecuador: Ecuador's government declared a state of emergency after thousands of Indian farmers staged protests against IMF-backed austerity measures. Four protesters were killed. The government later agreed to reduce the price of cooking gas. A year ago, Indian farmers protested against a plan to adopt the dollar but the dollar is now the currency. Under dollarisation, the government can no longer print money. The price increases were needed to balance the budget required by the IMF.

Peru: A judge investigating Mr Montesinos's empire of bribery and extortion has reviewed fewer than 100 of the 700 videos seized from the spy chief's home. So far 21 people have been detained on suspicion of corruption. The videos confirm that Mr Montesinos tried to manipulate last year presidential election. The videos have damaged several presidential hopefuls. Jorge Santiestevan, formerly Peru's human -rights ombudsman, dropped out of the presidential race this week.

South Africa: A typical South African company can expect a fifth of its workforce to die of AIDS in the next decade. South African miners are traditionally migrants, living in single-sex hostels far from their families for most of the year. Their regular wages attract prostitutes. By one estimate, a quarter of South African miners are HIV-positive, along with almost a fifth of workers in construction. Industries with better- educated workers are less affected: fewer than a tenth of bank employees, for example, have HIV. The impact of AIDS on profitability is unpredictable, but probably huge. By 2015, South Africa's population is expected to be 23% smaller than it would have been without AIDS, and per capita income no higher than today. This will affect demand for everything that South Africa firms sell. As workers sicken, they produce less and claim more health benefits. South African companies are hiring as many as three workers for each skilled position, to ensure that replacements are on hand when trained workers die. By one estimate, each HIV infection costs a South African firm roughly twice the infected worker's annual salary. But if the worker can be kept alive for three years longer than the average local HIV sufferer, that cost can be reduced by a quarter.

Kenya: President Daniel Arap Moi has run Kenya for 23 years. The leaders of an opposition pressure group - Muungano wa Mageuzi (movement for change) claims that Mr Moi has hijacked the process of constitutional reform, paring the president's almost unlimited powers. Kenya's solvency is also at risk. The second tranche of IMF loans agreed last year is already two months overdue. Mr Moi's government has failed to fulfil any of the key loan conditions it agreed on at the time. The heart of the problem is the demise of the Kenya Anti-Corruption Authority (KACA). This was the IMF's great hope, but Kenya's High Court ruled it unconstitutional. An IMF mission came and went last month, bringing no money. Mr Moi has played chicken with the IMF with some success. He lost the game in 1997, when the IMF cancelled its lending programme because of endemic graft, but he won fresh promises of money last year. The new programme, brokered by Mr Moi's old foe but personal appointee Richard Leakey, was said by the IMF to have an underpinning of trust. Moi fool the Fund, one might say, after decades of broken promises. Now the IMF is toughening its conditions: Mr Moi must re-establish KACA, pass laws against corruption and economic crime. The IMF programme is worth $198m. On its continuation depends a further $100m being withheld by the World Bank and $80m of bilateral loans. So does $366m of debt rescheduling. If Mr Moi chooses not to meet the IMF's conditions, his successor, or possibly himself, will have to run a country that is bankrupt.

Zimbabwe: Banking in the world's fastest-collapsing economy is rewarding. The IMF predicts that, without reforms, Zimbabwe's GDP will shrink by 10% in 2001, and that inflation will leap from 56% to 155%. Yet banks do make profits. Mr Mugabe is desperate for cash. The IMF estimates that the government took in 27% of GDP in taxes last year, and spent 50% of GDP. To make up the shortfall, the government issued treasury bills yielding up to 70%. Stanbic, a South African bank offers "zero-cost" currency swaps. This means that a firm that needs hard currency gets if by swapping Zimbabwe dollars at the prevailing rate. After an agreed period, the bank buys back American dollars for Zimbabwean dollars - at the earlier exchange rate. The bank has been earning local interest rates on the local dollars, whilst the client has shouldered the risk. With an ever-shrinking local currency, this has been a one-way bet for the bank. This year the government wants to force pension funds to buy ten-year bonds paying just 15%. That is, pensioners will be mugged to pay for Mr Mugabe's war in Congo. The IMF estimates that a fifth of the loans on commercial banks' books last September were bad, and given that some banks lend to cronies of the ruling party, the proportion is rising fast.

Africa: Africa boasts at least 11 economic blocks. The blocks are far from fulfilling their potential, and far from giving Africa its longed-for voice in world trade. Most of Africa's economies are too small on their own to negotiate with America and Europe. Protectionism is easy to justify, since less-developed countries have less diversified economies that are less able to weather the transition to free trade. The problem of overlapping memberships makes an initial agreement with Europe harder to sign.
Derivatives: The rate at which American companies are defaulting on their debts is soaring. At times like these, bankers reach for credit derivatives, instruments that allow lender to parcel the risk of default and pass it to somebody else. Record levels of so-called credit-default swaps, the most widespread form of credit derivative, have been bought and sold in recent months. Ten years ago the market for credit derivatives barely existed. It came into being partly because new international rules, introduced under the Basle Accord of 1988, required banks to set aside more capital against their loans. In 1998 when Russia defaulted on its domestic debt, some buyers of default protection brought lawsuits in order to claim the payments they believed were rightfully theirs. Indonesia's rescheduling of its sovereign debt caused similar legal tussles. Under proposed new Basle rules, credit derivatives are to receive less favourable treatment than before. The Basle proposal says that credit derivatives need higher capital charges than bank guarantees.

Energy: The World Energy Assessment (WEA) said that "the productivity of one-third of the world's people is compromised by lack of access to commercial energy, and perhaps another third suffer economic hardship an insecurity due to unreliable energy supplies." Development experts estimate that some 2 billion people, chiefly in the rural areas of poor countries, lack access to electricity. But the number may be considerably higher. This does not mean that they do not use energy. Local fuels - eg. Charcoal, crop residues, cow dung - make up perhaps a quarter of the world's total energy consumption, and three quarters of all energy used by households in less-developed countries. In India, indoor air pollution from dirty fuels causes as many as 2million premature deaths a year, particularly among women who do most of the cooking. The less-developed countries' appetite for energy will soon have a huge effect on the availability of energy markets. The liberalisation of energy market and the shift away from grandiose energy projects supported by international financial institutions and aid donors are seen like the two solutions to the future global energy crisis.




UK: In her article "Beware the manufactured case against the Euro" Kitty Ussher warns that there is a challenge ahead that cannot be ignored. The twin factors of globalisation in general and the Euro in particular are making the world a more competitive place. Although many have derided manufacturing over services, she says this attitude is mistaken. "Manufacturing matters to us. It is where innovative processes are discovered that raise the potential of our country to create wealth for its citizens. It is in this sector that productivity improves at the fastest rate." The decision she says is now clear: "If we decided now to rule out joining the Euro, we would place our manufacturing industry at a permanent competitive disadvantage." 

UK: Unilever's co-chairman, Niall FitzGerald, has warned that the Anglo-Dutch food conglomerate could scale back its investment in Britain if the public say "no" to joining the Euro. Unilever's brands include Lipton tea, Vaseline and Magnum ice creams. The group employs more than 17,000 people in Britain - its big factories include a Faberge site in Leeds and a Lever soap facility at Port Sunlight, Merseyside.

Brazil: As the World Social Forum in Porto Allegre implied, its purpose was to develop alternatives that make economics the servant of social objectives. The city itself, remarks Hilary Wainwright in her article "Never say Tina again" is that such an alternative works. For the last 12 years the radical Brazilian Workers Party has governed Porto Allegre, an industrial city with a population of 1million, on the basis of principles that run consciously counter to neo-liberal orthodoxy. One of the most celebrated results other than the process of direct popular participation in government has been the end of corruption which has been rife in most other Brazilian cities. 

United States/Slavery: Two strategies are being planned in the long-running battle for reparations to black Americans for centuries of slavery: a lawsuit against the US government by some of the country's top attorneys and a daily mass lobby of Congress. As Randall Robinson, author of "The Debt - What America Owes to Blacks" has said, "[the US] government has been complicit in the longest running crime against humanity in the world over the last 500 years - 246 years of slavery and a century of de jure discrimination based on race that followed it." 

South Africa: On March 5, 42 pharmaceutical companies, including the British giant GlaxoSmithKline (GSK) will take to court the South African government to stop it from buying medicines from countries where the prices are lowest, on the grounds that it is infringing world trade agreements. More than 2.5m people die every year from AIDS- related illnesses. There are more than 32m people infected by HIV in less-developed countries. AZT and 3TC, the basic antiretroviral drugs used in the west, would keep them alive, but the price tag is $10,000 to $15,000 per patient per year. A South African family earns less than $3,000 per year. There are now alternative cheap copies made in Brazil, India and Thailand, where national laws allow them to ignore drug patents in cases of dire human need. At the heart of the legal battle lies an international agreement called TRIPS -trade related intellectual property rights. It was agreed with the WTO in order to ensure patent rights were respected around the world. Western pharmaceutical companies want to uphold their patent rights. Today in Cape Town at least 5,000 supporters of Treatment Action Campaign will march on parliament to demand the medicines. GSK has recently threatened legal action against the Indian generics company Cipla, blocking its plans to bring a cheap version of Combivir -AZT and 3TC in one pill - into Uganda and Ghana.

WTO: In "The Profits that Kill" Madeleine Bunting ,criticises the trade related to intellectual property agreement (TRIPS), a vital protectionist plank of the WTO rules. "The unpalatable truth is that all that has changed is the form - colonialism has disappeared to be replaced by an alliance of corporate self-interest and governments eager to promote global capitalism. A ready example is the Aids pandemic. Although generic drugs can be made at a fraction of the cost, millions will die because the multinationals invoke TRIPS to protect their patents. Ms Bunting goes on to say that intellectual property protection has become a tool to make permanent the growing inequality of the global economy. The developed countries have set the ground rules for the knowledge economy so they can extract a constant flow of income from less developed countries. And should a country, whose economy is vulnerable, breach TRIPS, it faces the serious threat of trade sanctions by a major trading partner. Today, 70% of US export earnings are linked to intellectual property. Yet what rich countries choose to overlook is that their own economic development involved blatant abuse of patent law. The share of global trade represented by commodities have halved since 1980 while that of hi-tech goods has doubled. Consequently, it has become harder for developing countries to catch up because they cannot copy. They are required to import the technology and pay royalties on the licences. As a result, the flow of revenues is one way, from poor to rich with patents being used not only to protect inventions but as a strategy to scare off all competition. 
In "Evil triumphs in a sick society", Larry Elliott, reports that the US is using every possible means to close the WTO loopholes that allow countries to either manufacture cheap drugs themselves using what are known as compulsory licences to override patents. Brazil is trying to do this by importing the patented drug from wherever it was sold cheapest. 



Oxfam: Oxfam is launching today an international campaign to highlight the issue of access to medicines. "It is hard to understand GSK's reason for pursuing this particularly narrow interpretation of what is permissible …in poor countries struggling to combat the AIDS epidemic." The charity says that in Pakistan, for instance, where patents are enforced, the antibiotic ciprofloxacin, used to treat life-threatening diarrhoea, is eight times more expensive than in India. Oxfam acknowledges patents are a less significant barrier to health than poverty, decrepit health systems and governments with a penchant for army hardware. Justin Forsyth, Oxfam's director of policy says "…we are not calling for a boycott…we are just saying we think that GlaxoSmithKline and others should be taking this issue more seriously.

Letters: Ben Jackson, Director of Action for Southern Africa, writes about South Africa's crime to legislate for cheaper drugs. "The very companies that are quick to proclaim their heroic efforts to address the Aids epidemic in Africa through offers of drug donations and price reductions are also quick to use the lawyers against developing countries daring to try and improve access to treatment through the use of generic drugs." He welcomed Clare Short, the UK's international development secretary that "the legal action is very regrettable".

Papua New Guinea: The World Bank has asked Papua New Guinea to explain its decision to expel the bank's representative. PNG cancelled the visa of Dan Weise, an Australian who has been monitoring the implementation of structural reforms. PNG accused Mr Weise of interfering in domestic politics, undermining the government's efforts at reform, and discrediting its "commitment and credibility".

Angola: BP is preparing to publish new information about its operation in Angola, revealing production figures and payments made in the oil-rich country. The unprecedented move is likely to raise hackles in the Luanda government but has been welcomed by NGOs critical of secrecy and large scale corruption in Angola's fast growing oil industry. A "diagnostic study" of Angola's opaque oil sector by the consulting arm of KPMG launched in January under an IMF-monitored programme is the best channel to pursue better transparency, some oil officials argue.

South Africa: Thabo Mbeki, South African president, yesterday laid out plans for boosting the country's sluggish economic growth rate. He announced the formation of an "international task force" to focus on information technology and complement his panel of international investment advisers. Among those named for the new panel were Larry Ellison of Oracle, Serge Tchuruk of Alcatel and executives from Siemens, Hewlett-Packard, Psion, Vivendi Universal and NIIT of India.

US: Motorola, the big US communication equipment maker, is to cut a further 4,000 jobs from its semiconductor operations. The company said yesterday that it also expected to undertake further consolidation of its business operations and manufacturing plants. The announcement threatens jobs in Scotland where Motorola employs 7,000 making chips and mobile phones.

Philippines: Poor Asian countries face cuts in concessional loans from the Asian Development Bank (ADB) if they fare poorly on new performance criteria that include ratings for governance and corruption. Clay Wescott, a senior ADB said that ADB was under pressure from western donors to link soft loans from its Asian Development Fund to the performance of the recipient countries. In governance assessments completed in Thailand and Vietnam, the ADB found that approximately 30% of public expenditure in both countries "vanished via fraud and corruption," Mr Wescott said.

UK: Companies that help renegotiate loans with banks and credit agencies can leave you worse off, warns Patrick Jenkins. There are more than 100 debt management companies nationwide. They operate by renegotiating the terms of your debts. However, they are not charitable organisations, they damage your credit record and a restructured debt through a debt management company is not binding.

Russia: Sergey Kolotuchin, Russia's deputy finance minister, yesterday told his German counterpart Caio Koch-Weser, that Russia would fully meet its debt repayment obligations after passing a new budget. Mr Kolotuchin said his government would introduce an amended budget covering all outstanding payments in the coming weeks. Russia owes Germany more than £18.2bn out of total Paris Club or sovereign debt of DM117bn. Russia had demanded that its western creditors cancel at least part of this debt, a position that Germany rejected.



The editorial is dedicated to Russia's decision to honour its debt. Russia defaulted three times on its Soviet-era debts. To be recognized as a member of the Paris Club creditors, Russia was allowed to include debts owed it by other former Soviet republics - which in turn, required valuing as credit some of the military hardware "lent" to these governments against their wishes. The Paris Club then valued these debts at the old Soviet rate of 0.6 to the dollar, elevating Russia to creditor nation status

Bankruptcy: Loews Cineplex Entertainment Corporation, which is part of the struggling US movie-theatre industry is negotiating a debt-restructuring deal that would put it under the control of investors. The deal is expected to be handled through a filing for Chapter 11 bankruptcy protection.



Zimbabwe: The Central Bank has said that a quarter of all export earnings will be used to pay for fuel supplies with the rest going to pay the foreign service whose diplomats have not been paid for 5 months. Petrol and diesel queues are at their worst since international oil companies cut off supplies in late 1999. Leonard Tsumba, the Central Bank Governor, said that foreign debt repayment arrears would reach $900 million this year. Independent economists say they