Venezuela and the Curse of Oil

Written by Henry Martin on . Posted in FDI

With Venezuela home to the world’s largest crude oil reserves you’d be forgiven for thinking the country’s people must enjoy a super high standard of living. Sadly, however, due to chronic mismanagement and corruption, the black gold has benefitted a select few only, with ordinary citizens currently wrestling with hyper-inflation, violent crime and food shortages. With the country firmly in the grip of an economic crisis, efforts have been made to boost oil production. Yet, the same shifty dynamics, seemingly hardwired into the Venezuelan political psyche, still stubbornly prevail. Halliburton,

This is perhaps best evidenced by the torrid tale of the state oil company, Petróleos de Venezuela, S.A (PDVSA), having issued a tender for a $4.5 billion dollar Orinoco Belt project. The contract was inexplicably won by an inexperienced and inadequately capitalized firm, Trenaco, despite interest from world industry leaders, such as Weatherford and Schlumberger. As it turned out, only Schlumberger ultimately submitted an offer in time, but this was disqualified by the tender committee on the spurious and nebulous grounds that it "did not accept the conditions and terms of the type of contract”.

Dreams versus Reality

Written by Henry Martin on . Posted in FDI

 Cuba looks like a profitable investment destination, and the Caribbean country is in search of foreign funding to become the new nucleus for global trade.

Home to more than 11 million consumers, it is only 198 nautical miles from the Port of Havana to the Port of Miami, and European businesses have already set up home on the island. But is it still risky business? 

Cuba's communist government first opened to international firms in the 1990’s during the financial crisis instigated by the collapse of the Soviet Union. So far the results have been mixed, with approximately 60% of the foreign investment projects closing down. While the 2011 market-oriented reforms were meant to create a more productive economy, Cuba’s growth from 2011 - 2013 averaged at only approximately 2.3% per year, and dropped to a 1.3% expansion in 2014. Barack Obama’s visit to Cuba last month was the first time a US president visited since Calvin Coolidge in 1928, with many hoping that the island nation’s virtually non-existent foreign business investments would get a kick start. 


"Even if both sides were game, undoing half a century of opposition will be difficult at best."


The President is confident that the U.S. trade embargo on Cuba will come to an end - a move that would go a long way to normalising ties between the two nations, but a conflicting push and pull still exists between the need for capitalism and the preservation of socialism, as Cuba hopes to raise investment while retaining control over its centrally planned economy.  If Cuban leaders continue to drive foreign investment as a means to reactivate their weak economy while simultaneously ignoring some of the factors that hinder that very investment, global market integration will not get off the ground.  The Presidential visit, aimed at developing neighbourly relations, highlighted great business potential and promising economic benefits of trade with Cuba, but don't expect to see a huge U.S business presence there any time soon. Cuba’s willingness to attract external investment has increased, but even with new incentives, many investors still feel uneasy about the potential risks of doing business in Cuba.

Even if both sides were game, undoing half a century of opposition will be difficult at best. However, if the U.S. can lift restrictions and guarantee continued growth through trade and tourism it might encourage the Cubans to ease rules. Nevertheless, companies like JetBlue Airways Corp. and Carnival Corp. are the exception rather than the norm in an economy bruised by a 50 year old U.S. trade embargo, stifling Cuban labour laws and a dual currency system.  However, there is reason for cautious optimism, as some things are already changing.


"At least eight U.S. airlines have applied for approval to offer flights, opening the door for more than 100 flights per day between the U.S and Cuba."


Approximately 60 years after its hotel heyday, Cuban and U.S. hospitality companies are back in touch. Starwood Hotels and Resorts and Marriott International were amongst those allowed to run in Cuba by the U.S. Treasury Department. And on March 19th 2016, the day before President Obama’s significant visit to Cuba, Starwood was the first U.S.-based hospitality group to formally enter the market since the 1959 revolution. The Hotel Inglaterra in Havana will join the company’s luxury collection while the Hotel Quinta Avenida will become a Four Points by Sheraton. Starwood also plans to include Hotel Santa Isabel into its luxury collection.

Cuba, for better or worse, is becoming more accessible and mainstream, as relations between the U.S and the island nation continue to improve. At least eight U.S. airlines have applied for approval to offer flights, opening the door for more than 100 flights per day between the U.S and Cuba. With international interest on the up can the country cope with the commercial storm ahead? Market-oriented reforms and the easing of the U.S restrictions are already helping Cuba get ready for successful economic expansion. But with its multi-layered bureaucracy, an unpredictable legal system and a highly regimented labour market are international companies ready for Cuba? 

So much has changed with the thawing of US-Cuban relations. For investors however, only time will tell if things have stayed very much the same. 

 

 

The Road Ahead Looks Good

Written by Henry Martin on . Posted in FDI

Iran is ready and raring to go. It is opening its doors to Western companies at a time where businesses are struggling with weak growth in Europe. The story of Iran is unfolding like an exciting page-turner, packed with anticipation and promise.

For the most part, Iran has gone it alone growing its industries and if there was such a thing as an International Economic Autonomy Index, Iran would land a top spot. In spite of this earlier solitude, land and waterways in Iran offer access to 15 countries with a total population of 550 million, providing huge growth potential for foreign companies. Even with the economic sanctions on Iran's energy, trade and financial sectors, which previously prevented global companies from doing business with Iran and banned Iranian industries from trading overseas, the economy has survived, highlighting the core, inherent strength of this country and the power of the Iranian industrial base and education.

 


Greenland Moving Forward

Written by Julie Hollis Head of Geology Department; Ph.D. Ministry of Mineral Resources on . Posted in FDI

With a heavily depressed market and predictions of further drops in commodity prices into 2016, few are singing the praises of exploration and mining. But this is a cyclical industry and prices will rise again. The question is only when. In the meantime, demand for raw materials continues to rise, if more slowly than in the 2000’s, to support a high standard of living that is becoming accessible to more. In this difficult market, Greenland continues to hold firm to its plans to be a major player in the raw materials sector. Although Greenland is not a member state of the European Union, Greenland and the EU have strong ties, and Greenland is seen as a strategic partner for Europe in raw materials. Increasingly the Arctic more generally is drawing interest as a region that holds significant potential as a future supplier both for petroleum and minerals.

The New Landscape of International Tax

Written by Jörgen Haglund PwC | TAX Services | Partner PWC Sweden on . Posted in FDI

 

The changing global landscape of international tax entail challenges for multinational companies in adjusting and adopting their investment approach to the new regulatory environment. 

Regulatory changes

There are currently several ongoing regulatory changes within the international tax area. 

The OECD base erosion and profit shifting project (BEPS) - initiated in 2012 - is looking at whether and why multinational corporations’ taxable profits are being allocated to locations different from those where the actual business activities take place. A BEPS action plan was published by the OECD in July 2013. The main purposes of the BEPS action plan is to

- ensure that companies are taxed in the countries in which they are conducting their business activities, and 

- prevent double non-taxation as a result of gaps in the interaction between domestic tax systems. 

The action plan includes 15 action points within areas such as hybrid arrangements, interest and other financial payments deductions, transparency, substance and transfer pricing. The OECD issued its final reports on 5 October 2015.

Mining the future of Greenland

Written by Julie Hollis Head of Geology Department; Ph.D. Ministry of Mineral Resources on . Posted in FDI

Situated in the Arctic, between northern Canada and Europe, Greenland is one of the last frontiers of mineral and petroleum exploration. That is not to say that there is no history of mining in Greenland – far from it.

Greenland has a long mining history dating back to the 1800s, including the cryolite mine in South Greenland, which provided crucial product for extracting aluminium. In the 1900s a lead mine in East Greenland and the Maamorilik lead-zinc mine in West Greenland were active, where the latter remains an active exploitation license today. And in the 2000s gold and olivine were mined. So in looking to a mining future, Greenland builds on its past.

German Quality

Written by Dr Benno Bunse, CEO Germany Trade & Invest on . Posted in FDI

Making the grade

British companies carry out more foreign direct investment (FDI) projects in Germany than in any other European country - and by far. Between 2008 and 2013, the latest reporting period, 402 FDI projects were carried out by UK-based firms in the country, fDI Markets data shows. This compares with 293 projects in France and 270 in Ireland. BP, British Telecom, Vodafone, GlaxoSmithKline, British Airways, EasyJet as well as a diverse range of British software companies have all invested in Germany in recent years.

Greenland’s Ready

Written by Fergal Hogan on . Posted in FDI

There is extensive political agreement in Greenland that the country’s mineral sector should be developed into a principal industry contributing positively to economic development and the creation of new jobs.

This objective is a vital element of the plan for long-term economic development, which includes the development of business sectors as an alternative to the fisheries sector. Greenland’s government aims to maintain a high level of mineral exploration to further incentivise the mineral resources industry to obtain exploration and exploitation licenses. In an interview, Julie Hollis Head of Geology Department; Ph.D.Ministry of Mineral Resources and Henrik Stendal of the Ministry of Mineral Resources explain this strategy

Greenland’s Natural Resources – The Desire For a Stronger Future

Written by Julie Hollis Head of Geology Department; Ph.D. Ministry of Mineral Resources on . Posted in FDI

Situated in the heart of the arctic, midway between North America and Europe, Greenland is a country that is looking to the future. Many hope that a key foundation of that future will be the development of a strong minerals and petroleum industry.

Although tiny in populace, with only around 57,000 residents, Greenland is vast in area, covering over 2 million square kilometres. Even accounting for the extent of cover of the Inland Ice, the remaining exposed area of rock is still the size of the entirety of Sweden. A major goal of the Government of Greenland is to develop the significant potential for minerals and oil and gas to the benefit of Greenlandic society. This goal has broad political support both within government and the wider community. In 2014 the Government published a new five year Oil and Mineral Strategy for 2014 – 2018 (www.govmin.gl), the aim of which is to have five to ten long-term mines operating at any one time and to facilitate discovery of commercially viable petroleum fields. 

The Next Generation of High-Rise

Written by By Susanne Steinböck on . Posted in FDI

Demographic change means that companies today are facing a previously unknown challenge: the battle over the best employees. Only companies that are able to keep good employees are able to increase productivity, grow and survive amid the competition.

But the very employees they are in search of, the young "Generation Y", have become choosy. A commensurate salary and good career opportunities go without saying. A comparative study of the years 2004 and 2014 by the Centre of Human Resources Information Systems of the University of Bamberg established that Generation Y placed particular importance on soft factors such as work climate (2004: 53%, 2014: 94.3) flexible hours 2004: 28%, 2014: 85.9) and work/life balance (2004: 27%, 2014: 67.9%) when choosing an employer.

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