The market is telling we won't wait for official increase of interest rates.

"Federal Reserve officials have been trying to convince investors for weeks not to overreact when the central bank starts to tap its $85 billion-per-month bond-buying program. An adjustment in the program won’t mean that it will end all at once, officials say, and even more importantly it won’t mean that the Fed is anywhere near raising short-term interest rates.

Investors aren’t listening.

A wide range of indicators suggest that investors are starting to think the Fed might start raising short-term interest rates — now near zero — sooner than previously thought. Until recently many market indicators suggested investors expected the first rate increases in mid-2015, but now these indicators indicate investors think it could be sooner".

Source: WSJ

Urbanization,the road to reduce poverty in developing countries. IMF-World Bank Report.

"Urbanization helps pull people out of poverty and advances progress towards the Millennium Development Goals (MDGs), but, if not managed well, can also lead to burgeoning growth of slums, pollution, and crime, says the Global Monitoring Report (GMR) 2013, released  by the World Bank and International Monetary Fund (IMF)''.

''Urbanization has been a major force behind poverty reduction and progress towards other MDGs. With over 80 percent of global goods and services produced in cities, countries with relatively higher levels of urbanization, such as China, and many others in East Asia and Latin America, have played a major role in lowering extreme poverty[1] worldwide. In contrast, the two least urbanized regions, South Asia and Sub-Saharan Africa, have significantly higher rates of poverty and continue to lag behind on most MDGs''.

"Urban infant mortality rates range from 8-9 percentage points lower than the rural rates in Latin America and Central Asia; to 10-16 percentage points in the Middle East and North Africa, South Asia, and Sub-Saharan Africa and highest in East Asia (21 percentage points)".

“The rural-urban divide is quite evident, said Kaushik Basu, the World Bank’s Chief Economist and Senior Vice President for Development Economics. “But this does not mean unfettered urbanization is a cure-all – the urban poor in many places urgently need better services as well as infrastructure that will keep them connected to schools, jobs and decent health care.”
"Progress has been stellar on reducing extreme poverty, providing access to safe drinking water and eliminating gender disparity in primary education, with these targets already achieved several years ahead of the MDGs deadline.
Large cities and smaller towns are fast becoming home to the world’s largest slums[2], with Asia home to 61 percent of the world’s 828 million slum dwellers, Africa 25.5 percent and Latin America 13.4 percent. The developing world’s urban centers are expected to burgeon, drawing 96 percent of the additional 1.4 billion people by 2030. To cope with urban growth, a coordinated package of essential infrastructure and services is needed. Only by meeting essential needs related to transportation, housing, water and sanitation as well as education and healthcare can cities avoid becoming hubs of poverty and squalor, the report says".
"At the same time, stepped up efforts are also needed to improve development in rural areas, where 76 percent of the developing world’s 1.2 billion poor live, with inadequate access to the basic amenities defined by the MDGs.
Urbanization does matter. However, in order to harness the economic and social benefits of urbanization, policy-makers must plan for efficient land-use, match population densities with the required needs for transport, housing and other infrastructure, and arrange the financing needed for such urban development programs,” said Jos Verbeek, Lead Economist at the World Bank and lead author of the GMR".

World Bank, April 2013

Barrick's Nightmare, Pascua Lama Gold project in Chile

''Barrick will complete Pascua Lama Chile's Enviromental Requirements by December 2014,to
revive its US 8.5 billion Gold and Silver project''.

''The Pascua Lama project is situated immediately next to glaciers and on permanently frozen land and is therefore especially problematic. Roads enabling mine access have already had significant impact on glaciers and dust generated by stripping activities for the open pit have covered large glaciated areas leading to a work stoppage in late 2012.

The Pascua Lama development was originally budgeted at $3.3B - $3.6B. After a review in 2011 capex estimates were revised to $4.7B - $5.0B. The latest price tag estimated by Barrick during discussion  Q2/2012 results on July 26 2012 was approaching $8B. In the aftermath of publication of Q2/2012 results Barrick's market capitalisation lost roughly 10% of ground when compared to Goldcorp. The timing of the most recent suspension at Pascua Lama coincided with a historic drop in gold spot price in the first half of April. Barrick's market capitalisation was reduced roughly 15% further than Goldcorp's during this period which we assume was directly attributable to the Pascua Lama suspension order.
Goldcorp has recently taken the number one ranking of the largest gold miner by market capitalisation from Barrick Gold. Many would argue that the Pascua Lama disaster was to blame for this shift in positions.
 Repeated delays and ongoing court proceedings impact on capital expenditure and cause cost explosions. It was calculated that a further delay of the Pascua Lama project by one year would reduce the NPV of the project by 27% or $1.54 per share''. 

Source AP and Seeking Alpha

IMF Regional Economic Report

Asia and Pacific region Date: April 2013 Growth in the Asia-Pacific region shows signs of improving as extreme risks emanating from advanced economies have receded and domestic demand remains resilient, supported by relatively easy financial conditions and robust labor markets. A small and gradual pick-up in growth to over 5.75 percent is projected in the course of 2013. Risks to the outlook from within the region, such as rising financial imbalances and asset prices in some economies, are coming clearer into focus. Although Asia's banking and corporate sectors have solid buffers, monetary policymakers should stand ready to respond early and decisively to shifting risks, and macroprudential measures will also have a role to play. In many Asian economies, some fiscal consolidation could also rebuild the space needed to respond to future shocks and preempt potential overheating pressures from capital inflows. In particular, there is a growing need to make tax and spending policies more efficient. To sustain high growth rates and alleviate the "middle-income trap" across Emerging Asia, the policy agenda will vary by jurisdiction but will also often include strengthening infrastructure investment and reforming goods and labor markets.

Middle East and Central Asia region Date: May 2013 Two years after the onset of the arab Spring, many countries in the Middle East and North Africa continue to undergo complex political, social, and economic transitions. Economic performance across the region was mixed in 2012: although most oil-exporting countries grew at healthy rates, economic growth remained sluggish in the oil importers. In 2013, these differences are expected to narrow because of a scaling-back of hydrocarbon production among oil exporters and a mild economic recovery among oil importers. For the countries in the Caucasus and Central Asia region, the near-term outlook remains broadly favorable, reflecting high oil prices for the oil and gas exporters and strong non-oil commodity prices and robust remittances in the oil and gas importers. Risks to this favorable outlook could stem from still-subdued world demand, domestic political uncertainties, and geopolitical risks in the region. Policymakers, particularly in the oil-importing countries, should take advantage of the favorable outlook to re-establish fiscal policy buffers that were eroded in the aftermath of the global crisis.

Sub-Saharan Africa region Date: May 2013 Growth remained strong in the region in 2012, with regional GDP rates increasing in most countries (excluding Nigeria and South Africa). Projections point to a moderate, broad-based acceleration in growth to around 5½ percent in 2013¬14, reflecting a gradually strengthening global economy and robust domestic demand. Investment in export-oriented sectors remains an important economic driver, and an agriculture rebound in drought-affected areas will also help growth. Uncertainties in the global economy are the main risk to the regional outlook, but plausible adverse shocks would likely not have a large effect on the region’s overall performance.

Western Hemisphere region Date: May 2013 Growth in Latin America is set to pick up to about 3½ percent in 2013, broadly in line with potential. The region continues to benefit from favorable external financing conditions and relatively high commodity prices, but these tailwinds are unlikely to last forever. The key challenges for policymakers today are preserving macroeconomic and financial stability, and building strong foundations for sustained growth in the future. More prudent fiscal policy would help ease pressure on capacity constraints, mitigate the widening of current account deficits, and prepare the economies better to deal with adverse external shocks. Exchange rate flexibility and prudential measures should continue to be used to discourage speculative capital flows. Sustaining strong output growth will require structural reforms to raise productivity growth

Nikkei Enters Bear Market

''Markets across Asia suffered another bruising day as investors scrambled for the exits, with Japanese stocks falling over 6% and into a bear market, and heavy losses in China and across Southeast Asia. Declines continued in U.S. stock futures and in Europe.

The selloff has gripped global markets all week, fueled by uncertainty over the direction of the Federal Reserve's monetary policy and signs of cooling growth in emerging economies. The mounting worries are sending cash to traditional safe haven assets of Treasuries, the yen and Japanese government bonds while finance ministers and central banks across the region are taking steps to calm markets''.

''Core benchmark indexes in Europe were all down more than 1%. The yield on the 10-year Italian government bond fell after fairly solid Italian bond-auction results, but stocks maintained losses.

The most dramatic move was in Japan, with the Nikkei Stock Average falling 6.4% to 12445.38 and putting it 21.9% down from the intraday peak reached on May 23, the day Japan's 6-month rally turned south and begun three weeks of wild trading''.

SOURCE: WSJ