Emerging debt-Spreads widen on investor unease on outlook

Reuters: [2008-05-09 22:59:00]

By Daniel Bases

NEW YORK, May 9 (Reuters) - Emerging market sovereign debt yield spreads widened marginally on Friday with investors nervous given the lack of direction in core global financial markets.

The benchmark JP Morgan Emerging Markets Bond Index Plus <11EMJ><.JPMEMBIPLUS> yield spread widened by three basis points to 265 basis points over stronger U.S. Treasuries.

A decline in U.S. stock prices did not help investment sentiment and record high prices for crude oil is intensifying the debate over how emerging market governments are handling increased inflation pressures.

Rising inflation and food shortages have caused some emerging market countries to slap new taxes on exports and institute capital controls, unnerving investors who are concerned about access to their assets.

"There is a slightly weakish tone. I think investors remain unsure of the next real move on markets globally," said Paul Biszko, senior emerging markets analyst at RBC Capital Markets in Toronto.

Biszko said the caution stems from the choppy nature to global asset price movements where a few days of rallies are followed by a few days of losses.

He also highlighted some concerns over China's April exports data due on May 12. If the growth is less than the market consensus of 20 percent versus the 30.6 percent in March, alarm bells for global growth might be triggered.

VENEZUELA, ARGENTINA, TURKEY

Venezuelan spreads widened the most on Friday, although technical factors are likely the cause as local investors in the last 48 hours have been able to sell some of the $4 billion worth of international bonds sold late last month.

Investors are selling the bonds in the secondary market in order to get their hands on U.S. dollars to protect themselves from rising domestic inflation.

Venezuela's spreads on the EMBI+ widened by 14 basis points to 655 basis points while total returns fell 1.27 percent. Venezuela's five-year credit default swap spreads widened by 12 basis points to 617 basis points <0#VENZUE5UA=>, another illustration of a decline in investor sentiment.

Venezuela's benchmark 2027 Global bond <VENGLB27=RR> fell 1.187 points in price to bid 88.688, yielding 10.637 percent.

Adding to the negative tone was confirmation by a U.S. intelligence official that Venezuelan President Hugo Chavez's ties to Colombian rebels were deeper than previously thought, according to information pulled from computer files taken off a dead guerrilla leader. Chavez says the files are fake. (To read related story, click on [ID:nN09513689])

"The computer files are adding to some of the selling pressures, but this trading is more technical due to the new issue being unloaded in the market," said one trader in New York.

Argentina's benchmark discount bonds <ARGGLB33=RR> were down just 0.063 points in price to bid 79.75. Its spreads on the EMBI+ narrowed by 4 basis points to 566 basis points despite a second strike by farmers in less than two months over a new tax system on agricultural exports.

"Nobody wants to go into the weekend with a short position were a deal to materialize over the weekend with the farmers and the government because those spreads are going to move tighter, I suspect, and I think most of the market does as well," said RBC's Biszko.

Turkey's benchmark 2030 bond <TRGLB30=RR> slipped 0.13 points in price to bid 153.125, yielding 7.053 percent. Its EMBI+ yield spread widened by six basis points to 305 basis points while five-year CDS spreads widened by three basis points to 250 <0#TURKEY5UA=>.

On Friday the International Monetary Fund approved the final review under Turkey's $10 billion loan program ahead of its expiration on Saturday but the IMF said it has not heard from Ankara on whether it will seek another IMF deal. (Editing by Leslie Adler) ((daniel.bases@reuters.com; +1 646 223 6131; Reuters Messaging: daniel.bases.reuters.com@reuters.net)) Keywords: MARKETS EMERGINGDEBT/

TAKE A LOOK-Food price inflation

Reuters: [2008-05-09 22:50:00]

    Concerns about rising food costs in developing nations are 
growing as protests flare around the globe. 
    For latest stories click on codes in brackets: 
 
LATEST STORIES 
> U.S. sees record world food crops easing crisis    [nSP136885] 
> Hungry world to get record wheat, rice crops      [nN09493590] 
> Top U.N. human rights forum to examine food crisis[nL09680383] 
> U.S. rice prices soar as supply worries linger    [nL09610424] 
> Togo to sell cheap maize, subsidise fertiliser    [nL08784852] 
> Egypt expands food ration cards to extra 17 mln[ID:nL08590245] 
> US Congress expected to spurn aid reform call  [ID:nN08383281] 
> CentAmerica hands out cash to stall food crisis[ID:nN08362836] 
 
CAUSE 
> Food crisis due to greed, says development bank [ID:nL0697279] 
> Dealers blamed for rice price jump in Iran     [ID:nDAH738179] 
> Food export barriers could worsen shortages-EU [ID:nL17797794] 
> Bad policy, not biofuel, push food price-Merkel[ID:nL17211135] 
  
EFFECT 
> Bangladesh trade deficit swells as imports soar   [nDHA248379] 
> In food price crunch, more Americans seek help [ID:nN25422740] 
> Prices change life for Ivorian cocoa farmers   [ID:nL07201647] 
> Many Haitians work to secure one meal a day    [ID:nN05376826] 
> SE Asian rice cartel plan "going nowhere"       [ID:nSP245411] 
> Food crisis still playing out on world trade-US[ID:nJAK228926] 
> Food crisis may fuel malnutrition, not famine  [ID:nL30195271] 
 
 RESPONSE 
> INTERVIEW-Go easy on biofuels until more clarity  [nL09833115] 
> Abolish wasteful world food body-Senegal's Wade[ID:nN05398705] 
> S.Africa weighs moves to curb food price impact[ID:nL05236755] 
> Central bankers doubt can act on food prices   ID:[nL05129983] 
> Manila says imported enough rice to meet demand   [ID:nSP3132] 
> Biofuels halt would ease food prices - group   [ID:nN29326737] 
> UN, World Bank tackle food crisis               [ID:nSP192236] 
> India acts to quash inflation, guard supplies   [ID:nBOM95495] 
> Concentrate on making 08 harvest a success-FAO   [ID:nSP94899] 
 
 ANALYSIS/FEATURES/BACKGROUND 
> China overseas food push not realistic            [nPEK123785] 
> Kenya's nomads feel pain of food price rises      [nL04843407] 
> Big business muddies EU's biofuels debate      [ID:nL29123749] 
> Farmers face climate test in quest for more food[ID:nSP284721] 
> Rice,wheat prices diverge as fundamentals clash[ID:nKLR229596] 
> China wary of importing food inflation           [ID:nPEK3877] 
> Japan pushes rice as solution to food fears       [ID:nT22380] 
  
 FACTBOXES 
> Food price rises spark protests, hoarding      [ID:nL05374891] 
> TAKE A LOOK-Rice prices surge                   [ID:nSP156418] 
> Why have rice prices surged to record highs?     [ID:nSP90048] 
> The ABD's plan to fight Asian food inflation   [ID:nL03417096] 
> World's main exporters and importers of food   [ID:nL18356077] 
 ((Chicago commodities desk, + 1 312 408-8144)) 
  Keywords: FOOD PRICES/LOOK  
    

UPDATE 1-Booming Brazil struggles to get a grip on crime

Reuters: [2008-05-09 22:22:00]

(Adds Friday's police raid in a slum)

By Stuart Grudgings

RIO DE JANEIRO, May 9 (Reuters) - Stretched out on a beach framed by the sparkling Atlantic Ocean and a violence-plagued slum in the background, Pedro Mena Barreto speaks of crime with a sense of hopelessness that is common in Brazil.

He remembers when he could leave his windows open at night and hear the birds in the forest behind his apartment in Rio de Janeiro's beach district of Leme. Now he is kept awake by gunfire between gangs fighting for control of the drug trade.

"You need to have drastic measures, but justice here is soft and slow," said Barreto, a 76-year-old doctor who was sunbathing on the beach near Copacabana, not far from where gang battles have terrified residents in recent days.

"I don't see anything that's going to solve this."

When police intervene, their raids in the slums often add to the climate of insecurity. On Friday, police shot dead seven suspects in Rio's Costa Barros suburb. Rights groups say summary executions are frequent in such operations, while innocent people often get wounded or killed.

Despite President Luiz Inacio Lula da Silva's achievements in nurturing a strong economy and social programs that are lifting millions out of poverty, crime remains a stubborn problem on which his government has made little impact.

After Brazil's economic policies received an international seal of approval with investment grade status last week, former union leader Lula said he wanted foreigners to put more money into factories to create more jobs.

But analysts say crime is effectively a tax on such investment in many parts of a country that has one of the world's highest murder rates and where there are more private security guards than police.

The Institute of Applied Economic Research, a government think tank, says that criminal violence cost Brazil the equivalent of 5.1 percent of its GDP in 2004, including lost income and private security measures such as the armored cars popular in big cities.

Its study estimated that 24 million crimes were committed in 2003, but only 28 percent of them were reported to police, who are poorly equipped and often accused of corruption.

"A lot of people are afraid of reporting crimes because they don't have confidence in the police -- you don't know if the police are going to accuse you," said Christiane, a teacher who said she has witnessed two gun murders in her north Rio neighborhood and who didn't want to give her surname.

SAO PAULO AHEAD

A short-lived national campaign against guns helped push the rate down for two years after 51,043 people were murdered in 2003, but the numbers are on the rise again despite the healthy economy, according to sociologist Julio Jacobo who tracks violence in Brazil for the Latin American Technological Information Network.

Lax enforcement of sentencing means that murderers sentenced to 18 years often walk free after about three, said Ib Teixeira, a researcher and writer on crime.

"Killing a person in Brazil has the same value as killing an insect," he said.

In the latest example of what critics see as a culture of impunity, a man convicted for ordering the murder of U.S. nun Dorothy Stang in the Amazon in 2005 was acquitted on Tuesday in a decision condemned by rights activists and by Lula himself.

John Fitzpatrick, a political analyst and long-time Brazil resident, said disrespect for the law is rife in Brazilian society and shows little sign of changing.

"Literally every single day there are stories in the newspapers that the laws have been broken by the very politicians who have made them or by the police who are supposed to be enforcing them," he said.

After nearly 5 years in office, Lula last year launched a crime prevention plan that will invest 6.7 billion reais ($3.9 billion) over 5 years in training police and fighting corruption, starting with 11 big cities.

It is a rare federal initiative in a country where crime has for long been treated as a problem for state governments.

The only state where violence has steadily fallen is Sao Paulo, Brazil's economic engine, where outrage over crime in the late 1990s resulted in steps such as stricter alcohol and gun controls and more investment in police and prisons.

But there has been little change in Rio's murder rate of around 40 per 100,000 residents and many towns in near lawless parts of Brazil, especially in the Amazon, have more than 100 killings per 100,000 people -- rates comparable to war zones.

"If you take out Sao Paulo from Brazil you can see that there is no national drop," said Tulio Kahn, head of analysis and planning at Sao Paulo state's public security secretariat.

He said that Sao Paulo's annual security budget of about $4.8 billion currently dwarfs the less than $250 million in similar funds the government hands to all 26 states each year. (Additional reporting by Stephanie Beasley and Pedro Fonseca; Editing by Kieran Murray) ((stuart.grudgings@thomsonreuters.com; +55 21 2223-7144; Reuters Messaging: stuart.grudgings.reuters.com@reuters.net)) Keywords: BRAZIL CRIME/

TAKE A LOOK-Global trade talks

Reuters: [2008-05-09 21:47:00]

    Trade ministers have said they are determined to finish the 
Doha round of talks to open up world trade by the end of 2008. 
The round is now in its seventh year and serious divisions 
remain. 
 
LATEST NEWS 
> WTO farm talks chair says to revise text          [nL09670918] 
> US Democrats reassure EU over stance on Doha talks[nL08893820] 
> India willing to move on services trade talks     [nN07310273] 
> WTO cannot immediately ease food crisis-Lamy       [nLA807546] 
> India unlikely to soften on farming in WTO talk[ID:nBOM240768] 
 
BACKGROUND 
> Sensitive products in the WTO's Doha round         [nL0797723] 
> Where countries stand on scope of Doha meeting [ID:nL31717915] 
> Subsidy issues in WTO's Doha round farm talks    [ID:nL039244] 
> Market issues in WTO's Doha round farm talks     [ID:nL039903] 
> Export issues in WTO's Doha round farm talks    [ID:nL0310432] 
 
 ((Compiled by London World Desk +44 207 542 2590)) 
  Keywords: TRADE WTO/LOOK  
    

FACTBOX-Sensitive products in the WTO's Doha round

Reuters: [2008-05-09 21:18:00]

May 9 (Reuters) - The treatment of politically sensitive food products is one of the trickiest issues in the agriculture talks in the World Trade Organisation's (WTO) Doha round to open up world trade.

This technical issue is extremely complex but its outcome will determine potentially the biggest gains from the round in market access for food exporters such as Australia and Uruguay.

Negotiators have been reviewing various proposals and crunching the numbers on them since November last year.

The issue is widely seen as the main stumbling block to agreement in the farm talks, which in turn are the key to a comprehensive trade deal.

TARIFFS

The draft negotiating text for agriculture, revised by the chairman of the talks, New Zealand's WTO ambassador Crawford Falconer, on Feb. 8, envisages cuts in tariffs on agricultural products according to a formula.

If a country reduces its tariffs, it makes it easier for exporters in other countries to sell in its market, but increases competition for its own producers. So lower tariffs can foster trade but with a political cost at home.

The formula prescribes steeper cuts on higher bands of tariffs. Developed countries make bigger cuts than developing countries.

These numbers are still under negotiation, as are the "flexibilities" or exceptions to them.

FLEXIBILITIES

One of the main waivers of this type is for "sensitive products". Both developed and developing countries can declare a product sensitive for political reasons, in which case that product is subject to a smaller cut in tariffs.

Developed countries would be able to designate 4-6 percent of their products as sensitive, or 6-8 percent if more than 30 percent of their products are in the top band of the tariff formula. The tariff on these products would be cut by one third, one half or two thirds of the formula cut.

Developing countries would be able to designate one third more of their products as sensitive, i.e. 5.3-8 percent. The reduced tariff cut would be the same as for developed countries.

THE PAYMENT

In return for this smaller tariff cut, countries must let in a quota of the product at a lower tariff.

For developed countries this quota would be 4-6 percent of domestic consumption of the product if the full two-thirds deviation is applied, and 3-5 percent if one third is used.

For developing countries, the quota expansion would be two thirds of the volume for developed countries.

It is this quota which is of interest to food exporters. How it is calculated is therefore crucial and that has been the focus of intricate negotiations for the past few months.

DOMESTIC CONSUMPTION

The quotas are based on domestic consumption. But often data for consumption of different products in different countries is not available. So the key issue has been to agree how to estimate domestic consumption.

A major question is whether the quota would apply to a broad category, such as wheat, or a narrower "sub-category", often processed from the raw material, such as wheat flour, or a narrower category still, such as pasta or biscuits.

Exporters prefer a broader categorisation, as it would put a broader range of products into the quota. Importers prefer the more detailed categorisation which allows them to pinpoint protection across a range of commodities.

Most food trade is in raw materials rather than processed products. Exporters keen to sell unprocessed commodities such as sugar and wheat are worried that the inclusion of processed goods like sweet drinks and biscuits would reduce consumption figures, and hence quotas, for the raw materials.

But countries keen to minimise sugar imports, say, have an interest in allocating as much of the quota as possible to processed products.

THE PROPOSAL

A proposal from a group of six big exporters and importers -- Australia, Brazil, Canada, the European Union, Japan and the United States, who acts as spokesman -- does it this way.

The proposal includes a list of about 450 products to be used by all WTO members that could be declared sensitive. (These products are at the 6-digit level of the internationally used Harmonised System of customs nomenclature (HS6). Further calculations are needed for more detailed levels of products.)

These categories include both "core" products and processed products. For instance in the wheat category, there are 28 HS6 products, including two core products -- durum wheat, and wheat other than durum, moderately processed products like wheat flour and highly processed products like pasta or biscuits. (Processed products can appear in more than one category, so biscuits also feature under sugar.)

For each product category, domestic consumption is calculated by taking production data, usually readily available, and adjusting it for exports, imports and stocks.

The consumption of the broad category is then subdivided using a set of weights to calculate consumption of processed products. This gives a major share, usually 90 percent or more, to core products and little or no weight to processed ones, so that the greatest weight goes to the most traded core products.

Separate calculations are proposed for fruit and vegetables and certain dairy products. This is a big concern for developing countries that have specialised in fruit and vegetable exports.

And a quota based on these calculations is open to all products in the category. So if wheat flour is sensitive, the quota would be based on consumption of wheat flour but products imported in the quota could be any wheat product.

A similar group of six importers -- Canada, European Union, Japan, United States, Norway and Switzerland -- has agreed to provide consumption data based on this proposal around the time that Falconer issues the next revision of his text. That will allow others to see what it means in terms of increased market access.

Several countries want to be able to add to the list but that could make it hard for major importers to produce timely data on consumption. ((For more on world trade talks, users of 3000 Xtra can click on [ID:nL01774870])) (Reporting by Jonathan Lynn) ((jonathan.lynn@reuters.com ; +41 22 733 3831; Reuters Messaging: jonathan.lynn.reuters.com@reuters.net))

Keywords: TRADE WTO/SENSITIVE PRODUCTS