The logo of Mexico’s Central Bank (Banco de Mexico) is seen at its building in downtown Mexico City, Mexico February 28, 2019. Picture taken February 28, 2019. REUTERS/Daniel Becerril/File Photo Acquire Licensing Rights
MEXICO CITY, Oct 11 (Reuters) – Mexico on Wednesday issued a decree to grant tax breaks for companies that relocate operations to Mexico, targeting major export industries such as carmaking and semiconductors, a move that won cautious praise from economists.
The incentives are designed to attract companies that want to shift their offshore operations closer to their customers, called nearshoring, in the wake of supply chain disruptions in Asia during the COVID pandemic.
Deputy finance minister Gabriel Yorio said in a post on X the incentives would apply to 10 sectors of the economy, including the manufacture of batteries, engines, fertilizers, pharmaceuticals, medical instruments and agribusiness.
President Andres Manuel Lopez Obrador has said Mexico should benefit from moves by industry to reduce dependence on China, but critics argue that his administration has been slow to set out clear-cut incentives to encourage investment.
Though welcomed, the measures failed to dispel concerns the government is obstructing investment by failing to provide essential infrastructure for companies, especially because of its nationalist energy policies favoring fossil fuels.
“These incentives are a good step in efforts to attract companies to the country”, said Gabriela Siller, an economist at Banco Base who is often critical of government policy.
But Mexican authorities need to spend more to guarantee power and water supply for industry and provide companies with a stable policy environment to encourage investment, Siller said.
Mexico could lure annual foreign direct investment flows of $55 billion to $60 billion if it takes better advantage of nearshoring, up from $36 billion in 2022, she said.
The new incentives include accelerated investment deductions of 89%-56% in 2023 and 2024, and additional deductions of 25% during three years for worker training, Yorio said.
The top 89% deduction will be available for machinery and equipment intended directly for research into new products or technology development in the country, the decree said.
The automotive, farm and tech sectors are among those set to receive deductions of more than 80%.
Lopez Obrador has prioritized support for Mexico’s fossil-fuel dependent and cash-strapped state power companies, feeding concerns about shortages of renewable energy that many major investors need to meet more ambitious climate targets.
That has dampened expectations Mexico could benefit from increased investment in semiconductors in North America.
Mexico’s moves to strengthen public sector control of the energy market have sparked trade disputes with Canada and the United States.
Ramse Gutierrez, vice president of investments at asset manager Franklin Templeton Mexico, said the public and private sectors needed to work together to lift the clean energy supply many companies need to win financial backing for projects.
U.S. carmaker Tesla has urged the government of Nuevo Leon state to build vital infrastructure for its planned auto assembly plant in northern Mexico, officials said this month.
Carlos Vejar, a former Mexican trade negotiator, welcomed the government’s announcement but urged it to improve infrastructure, security and the facilitation of permits.
Mexico still faces competition to win investment from both North and Central America, plus Colombia, he said.
“I don’t think this measure is a game-changer to persuade those who have doubts,” said Vejar.
Reporting by Valentine Hilaire; Additional reporting by Dave Graham; Editing by Anthony Esposito, Grant McCool and Sonali Paul
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U.S Representative Andy Barr (R-KY), Rep. Mike Gallagher (R-WI), and Rep. Blaine Luetkemeyer (R-MO) attend a House Select Committee on the Chinese Communist Party hearing entitled “The Chinese Communist Party’s Threat to America,” in Washington, U.S., February 28, 2023. REUTERS/Nathan Howard/File Photo Acquire Licensing Rights
Sept 19 (Reuters) – The chair of the U.S. House of Representatives’ committee on China on Tuesday planned to meet with a semiconductor industry group to express concerns over U.S. investments in China’s chip industry, according a source familiar with the matter.
Representative Mike Gallagher, an influential Republican lawmaker whose select committee has pressed the Biden administration to take a tougher stance on sending U.S. technology to China, planned to meet with the Semiconductor Industry Association, which represents major chip firms such as Nvidia (NVDA.O) and Intel (INTC.O) whose sales to China have been affected by U.S. export rules, the source said.
Gallagher planned to tell the group he believes that U.S. rules enacted last October that cut off the sale of advanced artificial intelligence chips to China should be tightened to cover less advanced chips, the source said. The source added that Gallagher also aimed to talk with the group about reducing the number of semiconductor manufacturing machines that could be sent to China.
Also among the planned discussion topics is U.S. investment in Chinese chip firms. Intel, Qualcomm (QCOM.O) and other firms have venture capital arms that have invested in Chinese technology companies, the source added.
Gallagher also will express his concerns that a massive Chinese effort to build up capacity to build less advanced chips used in automobiles, washing machines and other everyday products could one day result in China dumping those chips on the U.S. market and drive U.S. makers of such chips out of business, the source said.
A representative for the Semiconductor Industry Association did not immediately return a request for comment.
Reporting by Stephen Nellis in San Francisco
Editing by Nick Zieminski
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A person walks into a Signature Bank branch in New York City, U.S., March 13, 2023. REUTERS/David ‘Dee’ Delgado Acquire Licensing Rights
WASHINGTON, Sept 5 (Reuters) – The U.S. Federal Deposit Insurance Corporation (FDIC) is seeking buyers for the $33 billion commercial real estate (CRE) loan portfolio of failed New York lender Signature Bank, it said on Tuesday.
The majority of the portfolio comprises multi-family properties primarily located in New York City, the regulator said, adding that it would be marketing the asset over the next three months.
The FDIC has been seeking to sell off portions of Signature, one of three larger banks that failed in the spring, since the bank was closed in March after an exodus of depositors seeking higher returns and safer institutions.
Later that month New York Community Bancorp (NYCB.N) agreed to a deal with the FDIC to buy most deposits and certain loan portfolios along with all 40 of Signature’s former branches.
Within the CRE portfolio is about $15 billion of loans secured by residences that are rent stabilized or controlled.
Since the FDIC has a legal obligation to preserve existing affordable housing for lower-income people, the agency said it planned to place all those loans within joint ventures in which FDIC would retain a majority equity interest.
Any winning bidders for those ventures would be responsible for managing and servicing the loans but would have to meet certain requirements to preserve the loans and underlying collaterial, the FDIC said.
New York City and State housing authorities, as well as community groups, are providing input to the FDIC as it begins marketing. The FDIC said it expects to complete any portfolio sales by the end of 2023.
Reporting by Michelle Price and Pete Schroeder
Editing by David Goodman
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STOCKHOLM/FRANKFURT, July 27 (Reuters) – Sweden has the financial muscle to intervene to stem any fire sale of property from companies rushing to sell out, the head of the country’s debt agency told Reuters on Thursday.
Karolina Ekholm, Director General at the Debt Office, said the government had a light debt load and could afford to borrow more to intervene to buoy the property sector should a threat emerge to wider financial stability.
She said that if a property sell-off “ends up being something … like a fire sale … that depresses prices … to the point where fundamentally healthy real estate companies are pushed to the brink of bankruptcy … I would probably recommend some form of government intervention.”
High debts, rising interest rates and a wilting economy has produced a toxic cocktail for Sweden’s commercial property companies, with several cut to junk by rating agencies.
House prices are also down by around one-fifth since their March 2022 peak, according to the Organisation for Economic Cooperation and Development (OECD), reflecting soaring mortgage costs.
Ekholm addressed the possibility of giving credit guarantees or subsidised loans but insisted that no such step was needed yet and that it could also need the approval of parliament.
The former central bank official pointed to the government’s financial clout and that it could issue debt in either euros or U.S. dollars.
The debt office oversees government debt, provides state guarantees and manages government support for banks.
“If there are massive losses in the private sector that needs to be dealt with for financial stability reasons, the public sector has … large scope for increasing its investment,” she said.
“We’re AAA rated and so there’s a lot of interest in investing in Swedish debt,” she said. “It would have to be something that threatens financial stability in Sweden and so far we haven’t seen any of that.”
Ekholm also pointed to the scant appetite in Sweden for helping struggling property groups.
“I hope that there will be no bankruptcies but I would expect that there will be some sort of consolidation,” she said.
“I think there would be very little appetite for giving subsidies to this sector just because they face a profitability problems.”
Editing by Conor Humphries
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KYIV, July 21 (Reuters) – The World Bank’s private investment arm is considering $1.5 billion in investments in Ukraine’s banking, agribusiness and infrastructure sectors, a senior official with the International Finance Corporation (IFC) said on Friday.
Alfonso Garcia Mora, IFC’s Regional Vice President for Europe, Latin America and the Caribbean, hailed the resilience of Ukraine’s private sector during the war, and said the lender had provided nearly $400 million in support since the start of Russia’s invasion nearly 17 months ago.
The funds supported foreign trade and key agribusiness and IT sectors. Garcia Mora said the IT sector could be a “revolution in this country”, helping to drive Ukraine’s recovery and build back a more innovative and diversified economy.
The IFC will keep its focus on the agribusiness sector, plans to support the banking sector and is eying more long-term projects in infrastructure, he said.
“We have identified, we are working already on a pipeline of $1.5 billion … of companies which we can invest in,” Garcia Mora told Reuters in an interview as he visited Kyiv to mark the re-opening of the World Bank Group’s office in the capital.
“I would like to deliver this $1.5 billion in the next 12 to 18 months.”
Ukraine’s economy has been severely hit by Russia’s invasion, and shrank by about a third last year. While the government relies heavily on Western financial aid to be able to finance its budget and social spending, private companies struggle with affordable access to capital.
Garcia Mora said the banks had enough liquidity but needed support to reduce risks. The IFC was working on risk-sharing products and also sought to provide working capital to smaller businesses via Ukrainian banks, he said.
The lender announced on Friday that it was setting up a 20-million-euro ($22.24 million) risk-sharing facility for Ukrainian branches of OTP Bank and OTP Leasing.
It also said that along with its partner fund Horizon Capital, IFC had invested $5 million in Miratech, IT services and consulting company.
Reiterating the IFC’s commitment to supporting Ukraine’s private sector as the country plans for the post-war reconstruction, Garcia Mora said the biggest potential for private investors was in energy, transport and also agribusiness.
The government and the World Bank estimated in a joint assessment in March that the cost of reconstruction and recovery in Ukraine had reached about $411 billion. Garcia Mora said that about $140 billion could come from private investors.
($1 = 0.8993 euros)
Reporting by Olena Harmash, Editing by Frances Kerry and Timothy Heritage
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LONDON, July 6 (Reuters) – Iran’s Revolutionary Guards “forcibly seized” a commercial ship in international waters in the Gulf on Thursday and the vessel was possibly involved in smuggling, a U.S. Navy spokesperson said.
The U.S. Navy had monitored the situation and decided not to make any further response, U.S. 5th Fleet spokesperson Commander Tim Hawkins said.
British maritime security company Ambrey said it was aware of an attempted seizure by Iranian forces of a small Tanzanian flagged tanker, around 59 nautical miles northeast of the Saudi Arabian port city of Dammam.
“Iran regularly intercepts smaller tankers it suspects of smuggling oil,” the company added in a note.
About a fifth of the world’s supply of seaborne crude oil and oil products passes through the Strait of Hormuz, a chokepoint between Iran and Oman, according to data from analytics firm Vortexa.
The U.S. Navy said on Wednesday that it had intervened to prevent Iran from seizing two commercial tankers in the Gulf of Oman, in the latest in a series of attacks on ships in the area since 2019. read more
“U.S. forces remain vigilant and ready to protect navigational rights of lawful maritime traffic in the Middle East’s critical waters,” Hawkins said.
Iran said on Thursday it had a court order to seize one of the tankers sailing in Gulf waters on Wednesday after it collided with an Iranian vessel. The vessel, the Bahamas-flagged Richmond Voyager, was managed by U.S. oil major Chevron (CVX.N). read more
Tehran seized two other tankers in May including the Marshall Islands flagged Advantage Sweet, which had been chartered by Chevron. read more
Since 2021, “Iran has harassed, attacked or seized nearly 20 internationally flagged merchant vessels”, the U.S. Navy said this week.
Reporting by Jonathan Saul; Editing by Hugh Lawson and Andrew Heavens
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BEIJING/HONG KONG, June 16 (Reuters) – Beijing resident Hu Yongwei bought more than a dozen apartments in the small central Chinese city of Hebi for about $31,000 in all, betting they will be financially more rewarding than other investments.
Hu, who mostly acquired two- or three-bedroom apartments built about three decades ago, spent 18,000 yuan ($2,528) this month in purchasing his 15th property in Hebi, where prices have plunged over the last two years.
“The flats were sold very cheaply, like cabbage,” the 39-year-old said, adding his family’s bad experience with the stock market has made him steer clear of shares.
Real estate agents said low-cost apartments in smaller Chinese cities such as Huainan and Rushan in the east, and Gejiu in the southwest, are also being bought, largely by people living outside those locations.
The deals demonstrate that buyers are starting to turn their attention towards smaller cities in China where property prices are some of the cheapest in the country after years-long declines amid a wider sector downturn and a sluggish overall economy.
While the small-city purchases are not significant enough to impact China’s giant real estate market, and data on transaction volumes is not available, they nevertheless indicate that a tiny corner of the crisis-hit sector is exhibiting signs of life.
The deals come at a time the picture for China’s property market is getting darker. New home prices rose at a slower pace in May and property investment fell at its fastest in more than two decades, data showed.
For buyers with the means to get back into the market, the rock-bottom prices of second-hand apartments in the smaller cities have been hard to resist.
Hu paid a surprisingly low 1,000 yuan excluding taxes and fees for one of his apartments in Hebi. According to data from Anjuke, one of China’s largest real estate platforms, prices are 27% off their 2021 peak in some areas in the city.
Similarly, prices are as much as 24% below their top in parts of Huainan, Rushan and Gejiu.
By comparison, prices in top-tier Beijing, where an average second-hand home can cost tens of thousands of yuan, fell just 1.5% over a six-year period to May this year, while in tier-2 city Chongqing, they fell a little more than 10% over five years, according to Reuters calculations based on Anjuke’s data.
‘BUYERS ARE NOT LOCALS’
Real estate agents said buyers in the small cities are mostly from out of town. They range from speculators who have no intention of living in the apartments, to youth seeking a cheap place to “lie flat”, a Chinese term for doing just enough to get by, to people looking for affordable retirement.
In Huainan, “most of the buyers are not locals”, said Zhao, an agent who only gave his surname because he was not authorised to speak to media. “Due to high living costs in big cities, young people come here to buy cheap houses and lie flat.”
In Rushan, agent Liu Yong said most buyers are from elsewhere in China, aged 40-to-50 and looking to set up their retirement by the sea. An agent in Gejiu said buyers aim to move there because the cost of living is lower.
Analysts, though, are reluctant to draw bullish conclusions from the home purchases in these small cities given broader indications the world’s second-biggest economy is struggling to pick up from COVID-19 lockdowns.
Consumer sentiment remains below the range set over the past two decades. Domestic demand is weak as consumers and companies prefer paying down debt to investing. And youth unemployment is at a record high of above 20%.
“The fact that there are so many people buying low-cost flats in smaller cities reflects caution,” said Hwabao Trust economist Nie Wen. “People are not confident about their future income.”
($1 = 7.1643 Chinese yuan renminbi)
Editing by Muralikumar Anantharaman
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WASHINGTON, June 14 (Reuters) – A U.S. House of Representatives committee on Wednesday narrowly voted to raise the mandatory commercial pilot retirement age to 67 from 65.
Members of the House Transportation and Infrastructure Committee voted 32 to 31 for the pilot age amendment to a proposed five-year bill to reauthorize the Federal Aviation Administration (FAA) aviation safety and infrastructure programs for the next five years.
The proposal faces opposition from unions and an uncertain fate by a U.S. Senate committee, which will consider its version of the FAA measure on Thursday.
The Regional Airline Association (RAA) praised the pilot age hike. Earlier, the association said 324 airports have lost, on average, a third of their air service, including 14 small airports that have lost all service, with more than 400 airplanes parked due to a lack of pilots.
The Air Line Pilots Association (ALPA) opposed raising the retirement age. Even if the proposal is approved, the union noted that international rules would still prevent pilots older than 65 from flying in most countries outside the U.S.
ALPA called the proposal a “politically driven choice that betrays a fundamental understanding of airline industry operations, the pilot profession, and safety.”
Senator Lindsey Graham, a sponsor of the effort, has noted that in 2007 the United States raised the mandatory retirement age from 60 to 65, and “the sky did not fall.” Transportation Secretary Pete Buttigieg has said he does not support raising the pilot retirement age.
The House bill would bar airlines from charging family seating fees but would not set minimum seat size requirements or impose new rules to compensate for delays. It would also mandate by 2030 an increase to the recording time of cockpit voice recorders from a two-hour loop to a proposed 25-hour loop, and require a cockpit video recorder.
Reporting by David Shepardson; Editing by David Gregorio
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[1/2] Greenpeace activists hang a banner to protest Deutsche Bank and DWS investment policies on Deutsche Bank’s headquarters in Frankfurt, Germany, June 14, 2023. REUTERS/Tom Sims
FRANKFURT, June 14 (Reuters) – Greenpeace activists scaled Deutsche Bank’s (DBKGn.DE) headquarters in Frankfurt on Wednesday and strung up a large yellow banner to protest against the climate investment policies of the German lender and its asset management company DWS.
The action came a day ahead of the annual shareholder meeting of DWS (DWSG.DE), which is mostly owned by Deutsche Bank and has drawn attention from activists and regulators over allegations that it misled investors about “green” investments. DWS has disputed the allegations.
Deutsche Bank said that sustainability and climate protection were “strategic priorities”, and that it supports DWS in the development of its sustainability policies and standards.
The German-language Greenpeace banner was unfurled shortly after 6 a.m. CEST (0400 GMT) and stretched across part of the glass facade on the lower section of Deutsche Bank’s twin office towers. The banner translated as “Force DWS, protect the climate”.
The event drew a half dozen police vehicles, but an officer said there would be no arrests.
Last year, the chief executive of DWS stepped down after raids by prosecutors over the allegations of so-called “greenwashing”.
The new CEO, Stefan Hoops, plans to tell shareholders at Thursday’s meeting that DWS has been cooperating with investigations, according to a transcript of prepared remarks on its website. The company also continues to stand by its financial disclosures and its fund prospectuses, Hoops will add.
Mauricio Vargas, a Greenpeace finance expert who was standing outside Deutsche Bank’s headquarters, said: “DWS’s scandal is Deutsche Bank’s scandal.” He plans to address shareholders on Thursday.
DWS said in a statement that it agreed with Greenpeace that climate change requires decisive action but disagreed on “how to get there”. It said it had recently adopted new policies on dealing with coal companies.
Reporting by Tom Sims, Editing by Rachel More and Jamie Freed and Sharon Singleton
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LONDON, April 20 (Reuters) – European banks appear better positioned than U.S. peers to weather any stress from commercial property after an interest rate surge, but that does not mean Europe is out of the danger zone.
Aggressive rate hikes, still working their way through the system, follows a pandemic that hurt foot traffic to bricks-and-mortar retail locations and structurally changed work habits, with office occupancy rates still below pre-COVID levels.
International Monetary Fund estimates suggest banks’ direct exposure to commercial real estate (CRE) was around 6% of bank loans on average in Europe, versus about 18% in the United States last year, meaning Europe appears less vulnerable to risks, analysts say.
Yet, with policymakers alert for what buckles under much higher borrowing costs, potential fault lines are being scrutinised.
Nordic banks and CRE-specialist German banks could be pockets of weakness, especially if systemic risks emerge, Barclays said on Wednesday.
And although CRE risk was not front and centre of last week’s IMF meetings in Washington, concern was visible.
IMF Managing Director Kristalina Georgieva stressed the need “to monitor risks that may be hiding in the shadows, in banks and non-bank financial institutions or in sectors such as CRE.” In its financial stability report, the IMF noted growing concerns about CRE given a heavy dependence on smaller banks.
“Even in Europe then, there may be patches of property-
related vulnerability in the financial system, though none has yet emerged as a major threat to the banks,” said Capital Economics chief property economist Andrew Burrell, noting euro zone commercial property values were expected to fall about 20% before they bottom out.
The European Central Bank’s key rate has jumped to 3% from -0.5% a year ago, and is headed higher.
A recent JP Morgan global investor survey cited CRE as the most likely cause of the next crisis.
“If you were to rank what are the biggest risks to your outlook, for us that (CRE exposure) would be among the top three,” said Robeco portfolio manager Daniel Ender.
FAULT LINES
In Europe, where offices account for the bulk of the real estate market, German and Nordic banks most exposed to construction and real estate activities were seen as ones to watch.
Barclays said that if CRE became a larger systemic risk, Swedish banks could be more at risk. Borrowing by Swedish property companies has jumped to 2,300 billion Swedish crowns ($223 billion) in 2021 from 1,300 billion crowns in 2012.
German specialised property lenders such as Aareal Bank (ARLG.DE), Deutsche Pfandbriefbank (PBBG.DE) and Berlin Hyp, have a bigger concentration of real estate exposure, analysts added.
Aareal Bank declined to comment. Deutsche Pfandbriefbank and Berlin Hyp did not return a request for comment.
Robeco’s Ender said although big European banks did not have a “massive amount” of CRE exposure, equity market valuations signalled significant pain for real estate companies, with German names especially trading at substantial discounts to their assets as valued by third-party appraisals.
Tighter bank financing conditions reinforce the effects of higher interest rates, making refinancing tougher over the coming years, analysts said.
The ECB’s banking supervisor last year found “deficiencies” at most banks in how they assess prospective borrowers’ ability to repay. CRE accounts for as much as 30% of non-performing loans across European banks, it said.
Possible redemptions from real estate investment funds, making up 40% of the euro zone CRE market in 2022, having doubled over a decade, according to the ECB, was another worry.
It has warned that “forced liquidation of real estate assets to meet investor redemptions might lead to downward pressure on CRE prices.”
Blackstone (BX.N) recently blocked withdrawals from its $70 billion real estate income trust after facing a flurry of redemption requests. Open-ended real estate funds in Britain have also battled to meet strong demand for redemptions.
“It’s a little bit circular: if banks are finding stresses in other parts of their balance sheets and need to focus on preserving capital to reserve against those losses, this might impact their ability to refinance existing CRE loans, triggering a self-fulfilling prophecy,” said Hans Vrensen, head of research and strategy at real estate investment firm AEW.
In Europe, CRE exposure for smaller banks, more at risk of deposit flight, is estimated at under 30% of all loans, Capital Economics said. Tighter bank regulation also suggests European banks have less to fear.
“[European] banks are in a much better position this time round with larger reserves against potential losses; if you look at the tier one capital ratios, especially in countries like Italy and Spain, it has stepped up tremendously,” said Massimo Bianchi, head of special situations real estate at illimity Bank.
Unlisted global property funds meanwhile have as much as $811 billion in dry powder to support CRE investment when markets recover, Savills (SVS.L) estimates. Around $500 billion of this war chest is focused on European assets.
Even if the sector can weather the pain of higher rates, climate risks pose longer-term challenges.
“On one side, there is pressure on lenders to lend more to green projects,” said Jackie Bowie, managing partner at Chatham Financial. “On the other, real estate owners themselves are going to face quite material increase in costs.”
($1 = 10.3323 Swedish crowns)
($1 = 0.9147 euros)
Reporting by Chiara Elisei and Dhara Ranasinghe; Additional reporting by Yoruk Bahceli in Amsterdam, Sinead Cruise in London and Francesco Canepa in Frankfurt; Editing by Sharon Singleton
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