Tuesday, November 25, 2014

PEMEX and Shari’ah Law

Photo: Magister Mathematica, Wikimedia Commons
Mexico’s state-run oil company PEMEX, hurting from the global decline in oil prices, is looking for new ways to raise capital. In an attempt to spur new international investment in 2015, the Mexican government is considering the possibility of issuing Sukuk Bonds, a type of bond compliant with Shari’ah law (Islamic moral code). Because Shari’ah law forbids the charging or paying of interest, certain Islamic governments and financial institutions that seek to invest in global markets will only do so if Sukuk bonds are issued in the place of conventional bonds. Responding to the rapid growth of wealth and investment among the Islamic monarch member states of the Gulf Cooperation Council (GCC), Sukuk bonds have grown tremendously over the last 10 years.

According to Scotiabank’s Sukuk division, total outstanding Sukuk rose from US$8 billion in 2003 to well over US$243 billion in 2012. Together, the GCC and Malaysia account for over 90% of all issued Sukuk bonds. By issuing Sukuk bonds to lure Muslim investors, the Mexican government would be joining the UK, the US, Canada, Thailand, Singapore and Sri Lanka in a rising global trend of government-issued Sukuk bonds. Mexico would be the first Latin American country to issue Sukuk bonds. For more on PEMEX’s plans to boost investment, see the Nov. 19 issue of SourceMex.

The difference between sukuk and conventional bonds
Conventional bonds are paid back with interest, while sukuk bonds are paid back with a share of assets. Because the payment of interest is prohibited in shari’ah law, Sukuk bonds skirt around that prohibition by replacing interest payments with a promise to share profits. Essentially, purchasing a Sukuk bond is much more like purchasing shares in a company, while a conventional bond represents the purchase of debt to be repaid with matured interest.

Photo: Akif Sahin. Flickr
 Why does shari’ah law forbid interest?
The prohibition of interest, or Riba as it is called under sharia law, is rooted in the writing of the Quran. Saleh Majid, a lawyer representing Islamic Banking laws in Germany and the UK, explains that the prohibition of Riba came gradually, and is based on an interpretation of Verse 2:275, which states that “Allah permitted the sale and forbade Riba,” and that “Every loan which attracts benefit is Riba.”

The principle underlying this prohibition is the need to prevent usury, or the accumulation of unearned accretion of capital… essentially what we call loansharking. Due to varying interpretations of the Quranic verse, and varying methods of implementing it in modern law, each Islamic government has its own particularities. Even Jewish and Christian scripture discourages the use of interest on loans. In fact European banking laws have much to do with the rise of Islam and its medieval conquests. As it turns out, Sukuk is the plural of the Arabic sakk, translated to the medieval French, “cheque”, or our modern word “check”.

-Jake Sandler

Also in LADB on Nov. 19-21....
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Friday, November 21, 2014

Tejas Verdes

Memorial to Victims of the Dirty War in Chile  (Museum of Memory and Human Rights)
Tejas Verdes served as a hotel resort for wealthy residents of Santiago until 1973, when dictator Chilean dictators Augusto Pinochet took over the site to use for torture and murder of opponents of his regime. Tejas Verdes, which means "green roofs," is located near the coastal towns of Santo Domingo and San Antonio (about an 1 1/2 hours drive from Santiago).  When the Pinochet regime took over the site, authorities converted music rooms and lounges into torture chambers. Thus, Tejas Verdes became one of more than 1,000 sites used by the dictatorship to torture and murder opponents of the regime. The use of Tejas Verdes  for torture and murder continued until mid-1974.

The Pinochet regime appointed Manuel Contreras to oversee the torture and murder operations at Tejas Verdes. Contreras, who would later rise to become head of the infamous Dirección de Inteligencia Nacional (DINA), hired several collaborators, including Army Col. Cristian  Labbé, who went on to become mayor of the Santiago suburb of of Providencia.  Labbé's role in Tejas Verdes came to the forefront again this month, when  an appeals court judge indicted him for his alleged involvement in a string of concentration-camp killings, including those at Tejas Verdes. (Read More in the Nov. 14 issue of NotiSur)  The indictment comes just a few months after authorities  discovered of human remains at Tejas Verdes.

Book describes Tejas Verdes
There is plenty of material to document what occurred at Tejas Verdes. The camp was the subject of survivor Hernan Valdes’ 1974 book, Tejas Verdes: Diario de un campo de concentracion en Chile, which was published in Spain and drew much international attention to the Pinochet regime. Much of the pretext of the detention, torture and mass murder was that the detainees, suspected of being communists or otherwise subversive, represented a threat to the state.

The memories of those times are in many ways still fresh for much of Chile, and still very much a part of national politics. Among those affected by the brutality of the concentration camps are Chilean President Michel Bachelet and her mother, Angela Jeria, who were themselves arrested and taken to another camp, called Villa Grimaldi. Bachelet’s father, Alberto Bachelet, was a general who was held captive and tortured to death for opposing the coup that toppled Allende. 

-Jake Sandler

Also in LADB on Nov. 12-14....

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Friday, November 14, 2014

So, Why is Bluefin Tuna So Special? Well, It May Not be the Taste…

Photo: Monterey Bay Aquarium
Every January at Tokyo’s most legendary fish market, wealthy aficionados and businessmen bid on the year’ s first bluefin tuna. A symbolic, celebratory auction meant to bring excitement to the new year of one of Japan’s most prized fish, the tuna is never sold at market value; last year, a successful restaurateur bought the year’s first bluefin tuna at Tsukiji fish market for over US$1 million. Of course, that tuna will be sold at a loss, but never mind that, it would be more accurate to view the million-plus-dollar acquisition as a well-spent publicity stunt rather than a gross overpayment for a single fish.

At this year’s January sale, however, the first fish sold for a mere US$70,000 (still far above the market price, but much less than expected). According to Andrew David Thaler on his deep-sea blog Southern Fried Science, the exorbitant price of the symbolic tuna will be “presented as an argument against bluefin fishing,” and perhaps this year’s decline is an industry reaction to sharp criticism about overfishing, an attempt to mellow-out the ostentation in the face of serious international attention and pressure to stop the craze that will soon cause the species extinction.  Before brokering an agreement at the Inter-American Tropical Tuna Commission (IATTC) meeting in California a few weeks ago, Japan had proposed asking its importers to avoid buying Pacific bluefin tuna from Mexico to pressure the Mexican government to take measures to avoid overfishing of this species.  Read more in the Nov. 5 issue of SourceMex.

So, why the craze? What makes bluefin tuna so popular, and so incredibly valuable? We all know that preparing sushi and sashimi is a form of high art in Japan, so there must be an intricate, quality-based reason for bluefin tuna’s supremacy, right? Well, maybe not… turns out for quite some time, tuna (and especially the fat belly-cut we know pay so much for) was considered disgusting and at one point even used for cat food.
Photo: Flickr user Frits Ahlefeldt-Laurvig

Foul-tasting' fish
 Until after World War II, tuna was considered foul-tasting compared to the prized white flounder and mackerel fish, and tuna was mainly served as a poor-man’s food on the street. This history is strikingly similar to that of a prized delicacy in the U.S; the lobster. The crustacean was once served to prison inmates, before popularity surged in upscale, cosmopolitan markets.

Once Japanese society began absorbing a considerable influx of American culture during the 1950s and 1960s, the Japanese began demanding fattier, American style proteins, but tuna still remained largely unwanted and sold for pennies per pound. However, as Japan’s export economy entered a golden age, “Japanese airline cargo executives began promoting Atlantic bluefin for sushi so they’d have something to fill their planes with on their return trip from Tokyo.” The craze only increased, until today’s current mayhem, in which reports show that the Mitsubishi Corporation is even stockpiling frozen bluefin in order to control the world’s inventory at inflated prices once the species cannot be found any longer. That, and other shocking truths about the current state of the bluefin market can be seen in the documentary The End of the Line.

Despite the popularity and the high prices at the dinner table, real sushi aficionados in Japan still think of bluefin as a fatty, metallic tasting fish much inferior in quality to more traditional fish used for sashimi and sushi. Ironically, it seems, popularity in this market follows advertising trends, rather than the actual refined tastes of the experts.

-Jake Sandler

Also in LADB on Nov. 5-7....
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Thursday, November 6, 2014

The European Union, Belize and the Fight Against Illegal Fishing

Fishing in Belize, Flickr user anoldent, North Carolina, USA
As the world's  largest fish importer, the 28-member European Union (EU) carries a lot of weight when it comes to maritime and fishing laws. Those laws,  controlled and enforced by the Commission for Maritime Affairs and Fisheries, allow the EU to enforce bans and sanctions when it comes to imports of fish and seafood. 

These laws and regulations, formally established in 2008 by the EC under Council Regulation No. 1005, are implemented in order to “establish a community system to prevent, deter and eliminate illegal, unregulated and unreported (IUU) fishing.”

Over a half a year since the EU officially banned fish imports from Belize (read more from Louisa Reynolds in NotiCen, Oct. 30, 2014), the European Commission (EC) has rescinded the ban in recognition of Belize’s progress in bringing the Central American nation’s fisheries to compliance with EC law. According to an official press release by the EC, the decision to lift the ban on Belize was because the Central American country had demonstrated “its commitment to reforming its legal framework and adopting a new set of rules for inspection, control and monitoring of vessel.”

This press release also included news that proposed bans on Panama, Togo, Fiji and Vanuatu were also lifted because those nations had made progress in combating piracy and illegal fishing.

These laws and regulations, formally established in 2008 by the EC under Council Regulation No. 1005, are implemented in order to “establish a community system to prevent, deter and eliminate illegal, unregulated and unreported (IUU) fishing.”

The sanctions imposed over the last five years, largely under the leadership of Maritime Affairs and Fisheries Commissioner Maria Damanaki, have vastly broadened the jurisdiction of these EC regulations by enforcing import bans for violations that do not occur in the EU territory. Internationalizing the scope of enforcement of the issues represented under the EC regulations has been a central goal of Commissioner Damanaki.

Banderas Europeas en el Berlaymont Bruselas  Amio Cajander.
Russian, Chinese Connection?
Although EC sanctions seem to disproportionately affect nations with struggling economies, an investigation launched in the last week is looking into the possibility of one of the largest “pirate” fishing boats in the world as being Chinese and Russian controlled. This case includes details and examples of how a fishing vessel can become pirate, such as switching between various, false national flags while traveling between China and South America.

The European Union itself was formed in order to protect economic interest of member nations, such as the European Coal and Steel Community, regarded as the predecessor of the modern EU. The recent action by the EC’s Maritime Affairs and Fisheries Commission is an important development along this almost 70-year history of attempts to create international communities for the enforcement of transnational agreements and accords, be them economic, political or human rights-based.

In this light, the EU is not only a global rarity of a political-economic union between nations, but also represents one of the few transnational organizations (like OPEC) with the power to enforce by wielding heavy sanctions. The main difference between EU and OPEC, however, is that OPEC rarely if ever utilizes its power to enforce sanctions in the name of environmental sustainability and human rights.

In the case of the EU’s Commission on Maritime Affairs and Fisheries, the bans and sanctions are in place not in order to protect the markets of member states necessarily, but to enforce international agreements against over-fishing, piracy and other illegal practices. Despite much criticism leveled against the harsh enforcement of regulations under Damanaki’s leadership, criticism that rightfully draws to attention the unfair impact these sanctions will have on the poorest sectors of the economy, Damanaki and the EC are standing behind their position that these regulations are meant to enforce and promote maritime sustainably, and are in no way aimed at reinforcing EU’s control of international markets. -Jake Sandler

Also in LADB on Oct. 29-31

Ecuadoran Authorities Attack Nascent Student Movement

Chile Grapples With Unsettling And Unexplained Bomb Attacks

Expansion in Private Restaurant Sector Provides Relief for Cuban Entrepreneurs

New Details Emerge of Political-Criminal Links in Guerrero

Foreign Direct Investment in Mexico Down Sharply in First Half of 2014

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