Top Links 452 The US LNG push. Central bank independence in question in Brazil. French democracy & big money. Atatürk & Lenin.

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Geta Brătescu, detail of Magnetii in Oras (Magnets in the City) (1974). Courtesy of Hauser & Wirth.

Lock-In: The USA and the Middle East are the main drivers of Liquid Natural Gas investment.

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TBrazil’s monetary policy

Brazil’s central bank was made independent in February 2021 with interest rates, in the wake of COVID, at an all time low. Already in March 2021 it began raising rates. Many economists have celebrated Brazil’s central bank for anticipating the price surge of 2021-2022 and “getting ahead of the curve” with an early hike in interest rates. Talk of a financial crisis in Brazil in final years of Bolsonaro’s trouble Presidency evaported.

Brazil’s Key selic rate:

Source: Trading Economics

But, the central bank’s conservative approach to inflation is not popular with the Lula government that came into office at the start of 2023 and almost immediately started a polemic over the left-behind Bolsonaristas in the central bank and their strategy of high interest rates. The term for the central bank leadership is set deliberately, so as not to coincide with Brazil’s Presidential terms and to help secure independence.

Now, in June 2024 the struggle has escalated.

Brazil’s fiscal and monetary framework under pressure

Brazil’s ruling party has filed a lawsuit against the head of the country’s central bank as it steps up attacks over the pace of rate cuts and alleged political bias. Senior figures in President Luiz Inácio Lula da Silva’s Workers’ party on Wednesday filed a lawsuit at a federal court in Brasília requesting that Roberto Campos Neto be banned from making political statements. The lawsuit came a day after Lula publicly criticised Campos Neto, claiming that he “works much more to harm the country than to help” by not cutting rates more quickly. “We only have one thing that’s wrong in Brazil right now — it’s the behaviour of the central bank,” Lula said on Tuesday. “We have a bank president who does not demonstrate any capacity for autonomy . . . there is no explanation for the [current] interest rate.” The legal action marks a sharp escalation of the war of words between the Workers’ party — known commonly as the PT — and the central bank chief, which has raged since Lula returned to office for a third term last year. Elected on pledges to kick-start Latin America’s largest economy and improve the livelihoods of its poorest citizens, Lula has sought to blame slow progress on Campos Neto — a respected former finance professional. The central bank has been gradually reducing the benchmark Selic interest rate for almost a year, cutting it from 13.75 per cent to 10.5 per cent. Lula has criticised the pace of the cuts for being too slow. Lula and his party have also accused Campos Neto of political bias following a series of events that appeared to show that the bank chief had links to leading rightwing politicians. The lawsuit was prompted by reports that the bank chief had attended a dinner in his honour hosted by Tarcísio de Freitas, the rightwing governor of São Paulo and a possible future presidential candidate. Media reports cited in the legal documents say Campos Neto was offered a job in a potential future De Freitas administration. Brazil’s central bank was granted formal autonomy from political control by congress in 2021, and Lula is due to appoint a new head when Campos Neto’s term expires at the end of this year. But the dispute between Lula and Campos Neto threatens to create a credibility crisis for the bank as investors fear there is a political split between monetary committee members appointed by former Brazil president Jair Bolsonaro — including Campos Neto — and those appointed by Lula. The latter have pushed for bigger rate cuts, according to minutes from the May decision. Marcelo Fonseca, chief economist at Reag Investimentos, said the spat was “noise that makes it much more costly to manage expectations, harming the efficiency of monetary policy and raising risk premiums on asset prices in general”. “It is convenient to use the bank chief as the villain and monetary policy as the root cause of the problems rather than recognise that economic policy, and fiscal policy in particular, needs to be fixed,” he added. The central bank on Wednesday kept the Selic rate steady at 10.5 per cent in a unanimous decision of its monetary committee. The central bank’s inflation target is 3 per cent and inflation is running at just under 4 per cent.

Source: FT

The EU’s tariffs on Chinese EV

The choice is really between the second and third options above — between, that is, using Chinese imports as part of the solution and protecting domestic industry even at the expense of a delayed or aborted transport decarbonisation.  The latter, unfortunately, is the path the US is going down. Its new 100 per cent tariffs in effect lock Chinese EVs out. By making cheaper EVs unavailable, they undermine the Inflation Reduction Act’s ability to convince Americans there will be a decarbonisation revolution — and therefore jeopardise EV adoption beyond those consumers who want and can afford a Tesla. Without expectations of a large domestic market, production capacity will not grow enough. The EU has avoided this trap. Its tariffs are calibrated to offset actual subsidies, and give China a justification for not retaliating, given that its carmakers can still sell large volumes in Europe at a profit. But for that very reason, Europe’s politicians must decide what they think of a slightly lesser but still massive rise in imports. The crux is whether a green-industrial trade policy to balance domestic industry promotion with decarbonisation goals works by making EVs more expensive for end consumers or less. The current direction does the former. But there is a way of doing the latter. Such an approach would explicitly tolerate significant Chinese imports but combine this with much more aggressive policies to secure a reliable EV market for domestic producers.  Tariffs should be used to offset unequal production subsidies only, and the incoming carbon tariff should be promptly extended to cars (to remove cost advantages from carbon-intensive energy). Meanwhile tax, subsidy and procurement policies should give European producers certainty that they can sell a rapidly growing number of EVs at home.  It is essential to shift tax incentives for corporate cars from conventional to electric vehicles. Germany could make a big difference by doing this, at no burden (or even a saving) to its budget. Subsidies should require low carbon footprints, in effect reserving access to European carmakers. Best would be pan-EU incentives, or failing that, EU action to require member states to offer them. In return, China should boost its own domestic EV take-up further through stronger consumer incentives. Stemming the export pressure somewhat would make it politically easier for Europe to tolerate what would keep coming in. For this to be agreed, let alone stick, it would require more trust between Europe and China than currently exists. The reasons are China’s record of actively aiming to replace European industries, and its support for Vladimir Putin’s illegal invasion and crimes in Ukraine. Regaining Europe’s friendship is largely in Beijing’s hands. But European leaders could do their bit to communicate how attractive it could be.

Source: FT

The political economy of South African agriculture

Geta Bratescu, Self-Portrait

Geta Brătescu (b. 1926 in Ploiești / Romania, ‡ 2018 in Bucharest) is considered one of the most important conceptual artists in Eastern Europe and beyond. The intellectual complexity and the vastness of references, as well as the diversity of means of expression and themes that manifest in her practice transcend preexisting boundaries and discourses. Under the socialist rule, Geta Brătescu carved out autonomous spaces and affirmed her independence vis-à-vis a stifling, conformist and repressive social system. However, she did not act underground or in isolation from other artistic circles but with reference to contemporary developments in culture

Geta Brătescu, Doamna Oliver în costum de călătorie (Lady Oliver in her travelling costume) (1980). Source: Artnet

Source: NBK

The experiment does not reveal itself - Geta Bratescu in dialogue with Raluca Alexandrescu

"The experiment does not reveal itself. Experimental art results from a curiosity, from an inner restlessness, from that tendency to take the forms and even the materials to the end, to think a lot about the materials and the space, about its qualities, until reaching the musical space, rhythms... Experimental art cannot be a program, but a vocation." This would be, in a few words (as Geta Bratescu likes it), the starting point of a discussion about what experiment and experimental art mean for Geta Bratescu. I mentioned, not by chance, the economy of words, because Geta Bratescu likes to work with few means, with breaks and with labor reduced to the essence: "I get tired of hard things, lots of them. I also made tapestry before. I did it with pleasure and in a more original, different way. But, at a certain point, there was too much manual work... I came to terms more easily with an art form where each gesture represents an act of creation... For me, an immediate connection between visual expression and ideational expression is beneficial". Matter - much, little - is governed by some secret, or "ineffable" laws: "I don't think that all things can be explained. I don't think that more or less matter matters. Necessity matters. The dialogue between the elements of the whole is also important". Dialogue consisting in the mental ordering of objects, through a process in which photographic art has a revealing role: "life has put things this way, but I no longer look casually. I don't lift a finger for this, because everything can be done with the mind. The mental structuring of given things leads to photography. Photography: magic; it takes shape by dematerializing it. Idea and eyes". … In conclusion, I would like to read you a "work" by G. Calinescu: "Someone will perhaps tell me that the radio is eminently prosaic, like any technical invention. But the object is not contrasting, I say, to the idea. Only the poet must come to emphasize the included symbol. Why, if the angels announce the catastrophe with the trumpet, would they not announce it on the radio: "Attention, attention! Woe, woe, woe, incolis terrae» and the others? Why wouldn't the device's connection with the ether receive messages from the sky itself?" (Poetry Universe).

Source: Observator Cultural

Will they? Won’t they? Did they? Didn’t they? Big business and the far-right. Yes this actually happened in the pages of the FT on June 19 2024

Meanwhile, at Bloomberg the ducks are all neatly lined up

French President Emmanuel Macron spent much of his tenure persuading bankers and fund managers to flock to Paris after Brexit. His decision to call snap elections may give some in the industry pause. Global firms such as JPMorgan Chase & Co. and Bank of America Corp. have moved billions in assets and hundreds of staff to Paris over the past years, in a wager that the French capital would one day rival London as a European finance hub. Macron has estimated the push created more than 7,000 extra jobs in the industry, where rising interest rates have fueled record earnings. None of that is likely to be reversed in the short term. In private, however, some bankers admit they’re worried about issues such as work permits and taxes. Dealmakers are bracing for transactions to stall while investment firms warn of potentially devastating economic consequences should extreme measures be adopted. French stocks and particularly banks have slumped along with government bonds. Paris has been a major beneficiary of Brexit as Macron burnished his pro-business reputation by reducing taxes on corporations and reforming the labor code. As recently as last month, he entertained some of Wall Street’s biggest names at Versailles while his government introduced more measures to boost France’s attractiveness, including a law that will make firing traders cheaper. In private, finance executives say Macron’s decision, announced after a crushing defeat in European elections, blindsided them, according to a person familiar with the matter. Some had already engaged in talks with lawmakers and the government over a potential tax on buybacks in the next budget, the person said. Renegotiating the Schengen agreement and granting priority to French nationals on the job market was part of Le Pen’s past electoral pledges. Both the far left and far right parties will likely seek a wealth tax, according to a recent note by Goldman Sachs Group Inc. In addition to revisiting tax breaks for corporations, the left-wing coalition is expected to push for a higher tax on financial transactions, they wrote. “Tax holidays and other perks to get banks and bankers to move to Paris were orchestrated by Macron,” said Vaeth, Director of Frankfurt Main Finance, a group lobbying for Frankfurt as a rival to Paris. “That will no longer work with Le Pen’s approach of appealing to blue-collar workers. Incentives that were temporary, such as individual tax advantages, will likely not be extended.”

Source: Bloomberg

The Turkish-Soviet axis in the interwar period

In the aftermath of the First World War the Western great powers sought to redefine international norms according to their liberal vision. They introduced Western-led multilateral organizations to regulate cross-border flows which became pivotal in the making of an interconnected global order. In contrast to this well-studied transformation, Hirst considers in detail for the first time the responses of the defeated interwar Soviet Union and early Republican Turkey who challenged this new order with a reactive and distinctly state-led international politics. As Mustafa Kemal Atatürk took up arms in 1920 to overturn the terms of the Paris settlement, Vladimir Lenin provided military and economic aid as part of a partnership that both sides described as anti-imperialist. Over the course of the next two decades, the Soviet and Turkish states coordinated joint measures to accelerate development in spheres ranging from aviation to linguistics. Most importantly, Soviet engineers and architects helped colleagues in Ankara launch a five-year plan and build massive state-owned factories to produce textiles and replace Western imports. Whilst the Kemalists' cooperation with the Bolsheviks has often been described as pragmatic, this book demonstrates that Moscow and Ankara actually came together in an ideological convergence rooted in anxiety about underdevelopment relative to the West, gradually arriving at statist internationalism as an alternative to Western liberal internationalism.

Source: Oxford Univ Press

Geta Bratescu, Self-Portrait in the Mirroir (2001) Source: Wikiart

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