globalEDGE Blog - By Author: Jeff Nemesi

Alas! After months of waiting and a volatile year in the global markets, the Federal Reserve announced Wednesday that it will be increasing rates from close to zero to between 0.25% and 0.5%. This is the first interest rate rise in almost a decade, and the effects of the increase will spark volatility in domestic markets as well as international markets. The rate hike is meant to signal economic strength in the United States by showing that the economy is strong enough to handle larger borrowing costs. Janet Yellen, the Federal Reserve chair, explained that further rate hikes will be “gradual” in an effort not to slow economic recovery.

Brazil’s economy shrank 1.7% between July and September, marking the third straight period of economic contraction. As Brazil’s economy has slipped further into recession, it has led to the downfall of its surrounding nations’ economies. Being the largest economy in Latin America, the slowdown could be detrimental to its neighboring nations’ economic growth.

For businesses seeking to further understand what it takes to expand operations internationally, CORE™ does just this for you. CORE™ is a self-assessment tool that will allow you to determine your company’s readiness to operate internationally and export a particular product. Upon completion of a questionnaire, CORE™ is able to identify a company’s strengths and weaknesses concerning exporting. These responses by CORE™ are separated into organizational readiness and product readiness to portray a company’s international readiness for the firm as a whole, or for an individual product.

Since 2011, Syria has had civil unrest beginning with the Arab Spring protests, which were nationwide protests against the government which resulted in violent crackdowns by the Syrian government. Soon enough, it changed from protests to armed rebellion from various groups formed during the protesting process. Groups involved include al-Qaeda affiliates, the Islamic State of Iraq and the Levant (ISIL), the Syrian Government, and the Free Syrian Army (FSA). Since the FSA is considered an opposition faction, it is able to receive support by the United States and other Gulf Countries, giving it increased fighting capacity. During the Syrian crisis, around 5 million citizens have fled the country seeking a new home. It is believed by many that the movement of Syrian refugees into many Middle Eastern and European Union countries is becoming economically unstable.

Cybersecurity remains one of the largest concerns for many of today’s largest institutions. Hackers have become more prevalent than ever and are always finding new ways around the latest internet security precautions. There are many different kinds of information that these hackers seek. It can range from medical information from hospitals, staff and donor information from universities, or inside information from public or private companies. Whatever the targeted material may be, hacking is putting companies and even countries at risk to have this information stolen. Multinational cybersecurity corporations such as Cisco and Fortinet have tackled the task of creating cybersecurity systems to protect complex data and operating systems used by many institutions. As the internet grows every day, these cybersecurity platforms need to fend off new and improved cyber threats.

The Eli Broad College of Business at Michigan State University recently published an article celebrating the 25th anniversary of Michigan State University's International Business Center (IBC). The article pays tribute to Tomas Hult, the director of the center, and provides a look into the operations that take place within the IBC. Click here to view the article!

The commercialized use of virtual reality is on the horizon, and it offers numerous opportunities beyond just video game enhancement. Virtual reality is defined as an environment that stimulates physical presence in places in the real world or imagined worlds and lets the user interact in that world. It gives users artificial sensory experiences such as sight, sound, touch, smell, and taste.  Imagine a world where one could virtually go to a conference overseas without leaving the comfort of his or her home. Or, imagine a world where you could meet a person without physically being there with them. The possibilities are endless with virtual reality, and as producers get closer to unveiling the products to the mass public, corporations are brainstorming more and more ways to utilize the software.

There is a large trade agreement under negotiation involving major economies around the Pacific. The Trans-Pacific Partnership will include the major economies of Japan and the United States, while also including the following ten countries: Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. These twelve countries account for forty percent of global gross domestic product. It has been noted that China has been left out of this partnership because it has been criticized for not following trade rules. In the future, China will be able to join the partnership pending compliance to the Trans-Pacific Partnership’s standards.

Greece needs to follow European rules if it wants aid from the Eurozone during its financial crisis. The country owes other Eurozone governments around $212 billion. Germany is owed the most money, totaling over sixty million euros, followed by France and Italy. However, Slovenia may be the most impacted country by the Greek debt crisis.  Bloomberg determined that Greece owes Slovenia over 3% of its total GDP. Greece is on the bubble of a potential exit from the European Union, and a potential default on its debt.

The Nile River is a major influence on the economies it encompasses, and in the past it has been controversial how the energy, space, and water is allocated amongst the countries it passes through. Ethiopia is constructing a massive dam costing billions of dollars on the Blue Nile, which will distort the previous allocation of water agreed by the countries surrounding the river. Most of the disagreement in the initial stages of project development stemmed from this allocation dispute, but the presidents of Egypt and Sudan, as well as the Ethiopian Prime Minister, all recently signed a contract pledging to better share the water and resources of the Nile. On Monday, Egypt agreed to a preliminary deal with Ethiopia on the construction of the dam.

As people in developed countries live longer lives, companies with pension plans are facing growing pension shortfalls. The Society of Actuaries estimates that the average 65 year old man today will live two years longer than it estimated 15 years ago. This has led to large differences in the amount budgeted for pension plans and the amount actually being spent. The increased longevity of these employees’ lives has caused many major companies’ balance sheets to be changed dramatically. Most United States companies use defined-contribution plans such as 401(K)s, and these leave workers on their own after retirement. These companies will not have to worry about increased life longevity when it comes to these payments.

January was the first time in 6 months that the MSCI Emerging Markets Index outpaced the S&P 500 as it gained 0.6%. Investors sent $18 billion into emerging market stocks and bonds, after an outflow of $11 billion in December. Analysts note that low commodity prices allow for quick growth in these emerging economies. As emerging markets go through reforms in order to stabilize their currencies or stimulate growth in their economies, investors see this as an opportunity to obtain higher returns.

The global economy had its projections cut by the World Bank, saying that the United States will not be able to hold up the global economy alone.  The global economy is now projected to grow 3.0% this year, rather than the 3.5% that was formerly projected. However, the United States had its projection increased from 3.0% growth to 3.2% growth. The World Bank cited Europe, Japan, Russia, and parts of Latin America as the source of the struggles leading to the lower projections. While oil prices are low, developing economies who import oil will receive a boost. However, oil exporters will continue to struggle, especially Russia, due to the low price of oil.

Oil prices fell 6.7% per barrel on November 27th after OPEC decided not to cut production. Currencies linked to oil such as the Canadian dollar and the Norwegian krone took a hit, as prices this low will cause many fracking companies to become unprofitable. Low cost producers in countries like Saudi Arabia will be able to sustain small profits at such low prices, but U.S. fracking companies are not profitable at a price under $70 per barrel. Falling oil prices are a positive sign for economies worldwide, since it acts like a tax cut for consumers. The current price weakness can be somewhat attributed to weak demand globally, but the rise of fracking worldwide leads us to believe that there might be an oversupply.

Global financial markets have suffered from selfish decisions made by central banks in various countries. There have been talks of currency wars coming from emerging markets trying to manipulate their currencies in order to get the best pricing for growth. Now, there has been currency competition within developed countries. The Fed recently decided to halt its quantitative easing operation which purchases bonds to lower long-term interest rates. When the government owns most of these bonds, the supply to the public is decreased which lowers yields and raises the prices of these bonds.

India has recently seen an explosion in startups, becoming the third largest country in terms of startup companies. These can be attributed to the rapid economic growth and the large amount of available capital in the country. Also, with all of the rapid growth the country has been undergoing, mergers and acquisitions activity has increased as well. The country added around 650 startups last year and more than 800 this year to reach 3,100 startups in total. India’s government has undergone many changes as of late, and once these changes are fully implemented and supportive of business owners, the startup scene is projected to grow even more.

According to a draft of a communique that the International Monetary Fund (IMF) and World Bank Development Committee plan to release on October 11, finance and development officials are warning of major current downside risks to the global economy. The major risks that are cited include potential deflation in Europe, Japanese recession, and a slowing Chinese economy.

Scotland has voted “no” to independence from the United Kingdom. The voting finished with a final count of 55.3% to 44.7% in favor of remaining a part of the United Kingdom and continuing the 307-year-old union. David Cameron, the prime minister of the United Kingdom, is now a little more comfortable in his position after helping lead the charge to keep the union together. He claims that the Scottish Referendum has settled the independence debate for a generation.

Unmanned Aerial Vehicles, or drones, are being used more and more in U.S. and U.K. military operations, where manned flight is considered too risky or difficult. Drones are making their way into everyday use as technology gets more sophisticated and regulators loosen restrictions on the usage of these unmanned aircraft vehicles. In the last month, over ten incidents have occurred where drones have interfered with a commercial flight in airspace. The Federal Aviation Administration has attempted to outlaw or limit commercial use of drones, but experts believe there are better ways to regulate usage in a safe manner.

Alibaba is a Chinese corporation that operates as a bank, marketplace and a search engine. The company is the largest online retailer in the world, handling 80% of all online retail sales in China. The company handled more money in transactions last year than Amazon and eBay put together. It’s made up of three major websites that have millions of users all over the world. The three main sites are Alibaba.com, Taobao, and Tmall.  Taobao is a shopping website that gives seven million merchants a place to sell, and Tmall is a retail site where major businesses such as Apple and Nike are able to sell products directly to Chinese shoppers. Alibaba does not currently have a date listed for its IPO, but it is expected to go public in early August. It will be listed on the New York Stock Exchange.

The Globalization of the fur industry has given Denmark’s agricultural-based economy the boost it was looking for. Fur is used as a luxurious item for clothing, decoration, comfort, etc. Being home to about one-fifth of the world’s supply of minks, it is no surprise that Denmark is the heart of the global fur industry. With all of the growth in the industry, Kopenhagen Fur has been the leader all along.  The company has used Chinese demand to fuel growth and has focused its innovation on the Chinese consumers, as demand in Europe weakens. With the greatest passion for animal-rights, the Danes have stayed out of the way of Animal Rights activists, and the buyers feel a lot more confident and humane about their purchases.

As Africa has moved itself into the investment spotlight, its lack of infrastructure has held the continent back from reaching its full potential. The unstable physical infrastructure in Africa, such as its transportation, communication, power, and water supply, is halting the growth that the country should be obtaining during this time, with its increased economic activity and competitiveness. With the proper investment and planning, Africa should be able to overcome this challenge and improve the now inadequate infrastructure it has long possessed.

Recent tremors in emerging markets have investors worried about whether or not their money is in the right place. There is a riskier alternative for investors, that being investment in frontier markets. Frontier markets are markets that are neither developed nor emerging, and with this definition, frontier markets include twenty-three of the twenty-five fastest-growing economies over the last ten years. However, most of these countries do not have stock markets nor are they listed in the MSCI frontier market index, and this is due to the countries' stocks being unable to meet size qualifications and accessibility standards.

In his 2010 State of the Union address, United States President Barack Obama announced the US National Export Initiative to improve conditions affecting exporting in the private sector. Obama hoped to double exports by 2014. This would include working to remove trade barriers abroad, help firms and farmers enter new markets, and help with financing. Since the initiative was announced, over a million export-supported jobs have been created and exports have increased by over fifty percent. In 2012, US exports set a record reaching $2.2 trillion, which was 13.9% of overall GDP.

This September, the ballot to vote on Scottish Independence will be held. Scotland’s North Sea possesses a great amount of oil revenue for the United Kingdom, which poses a threat to the United Kingdom if Scotland were to become independent.  What does this mean economically and politically for the country of Scotland, the United Kingdom, and the European Union? A lot of uncertainty. The rarity of the creation of a new state in Western Europe poses a lot of questions that economists do not know the answer to.

Just how much does it cost to host an Olympics? The 2014 Winter Olympics in Sochi, Russia are more expensive than every other Winter Olympics combined. The cost is projected to be around $51 billion, which is ten million dollars more than the 2012 Summer Olympics in Beijing, China. This money goes towards construction, transportation, hospitality, security, lodging and more. For events like the Olympics, it is starting to look like a waste of money for all of the over-extravagant, luxurious decorations and celebrations that take place. It has become less about the athletics, and more about which country can make their Olympics look the best to the world. A country like Russia has a lot larger problems that it should allocate $51 billion to, especially if they are trying to clear up their image.

The city of Detroit, Michigan was once looked at as one of the strongest cities in the United States, but due to the decline of the automobile industry and financial problems it has become a bankrupt city with a large struggle. However, the resilience and pride that its inhabitants still portray is incredible. In this day and age where a lot of the manufacturing takes place in Asia, people still want to own products made in their own country. For example, Americans take great pride in driving a car or owning an appliance that is “Made in America”. What better way is there than to use a loyal population and hopeful city to brand a product? “Made in Detroit” is a phrase that could help the city of Detroit bounce back, while boosting sales for a company.

Inflation has been credited with being the main reason for Moody’s Investor service choosing to downgrade Venezuela. In terms of currency, inflation has been more than fifty percent year to date, even after President Nicholas Maduro created the law to make businesses cut the cost of consumer goods. The high risk of a collapse and the economic imbalances of the Venezuelan economy have also been cited as a reason for the downgrade because the caused currency and bond ceiling ratings to move to a “speculative” grade. The government is planning on devaluing the Venezuelan currency in 2014. The current account surplus has also decreased by thirty five percent for the past three quarters in comparison to the three quarters last year. All of these statistics point to an economic collapse, but there might just be a way out.  

Latin America has taken big steps in the last 15 years in terms of financial stability. Since 1998, the average frequency of crises in Latin America has fallen from 0.7 crises per year to 0.29 crises per year. Economists attribute this to better fiscal management, with gross domestic product becoming less reliant of government spending and outside help. The economies are starting to run with less assistance, generating a more stable financial situation with fewer crises. Latin American economies are on an upward trend nowadays, but there is still one major setback: Crime.

The small Caribbean nation of Grenada lies around one hundred twenty-five miles north of Venezuela, between the Caribbean Sea and the Atlantic Ocean. It has always had an economy built off of its island paradise lifestyle with its beautiful blue water, beaches, and landscape. This style of economy for such a small nation can only carry it so far, but Grenada now has other plans to help it make an international presence.

The Baltic countries are known as some of the most ambitious and educated countries in the world, and they also consist of some of the most liberal policies for trade and investment. Their drive for success has been a critical factor in their success after the financial crisis plagued the European Union. The Baltic countries were a hot spot for investment before the crisis, with all of their intelligence and FDI flowing in. Possessing all of these incredible characteristics and policies would allow one to assume that they would be a good match against a global financial crisis, but that person would be wrong.

The country with over twenty-five percent of its population unemployed has finally climbed out of recession with third quarter growth up 0.1 percent. With an economy that is driven mainly by the tourism sector, automobile industry, and the energy industry, Spain has managed to slow down its rate of poverty and unemployment enough to stop the recession.  The bailed out banking sector is still far from cured and the giant amount of debt will still hold them back in the years to come, but the government has taken steps in the right direction in gaining control of these areas of the economy.

In the last five years, many economies around the world went through a recession or had their growth stunted significantly due to the financial crisis. Although Europe seemed to have the worst economic effects from the crisis, the new 2012-2013 Global Competitive Index produced by the World Economic Forum reported that European economies are still the strongest economies in the world. Switzerland grabbed the top spot in the rankings, and Europe was well represented towards the top of the list.

It has been five years since the collapse of Lehman Brothers, an investment bank in the United States, launched the global economy into one of the worst financial crises of all time. Since then, the United States and many other major global financial institutions have taken big steps in securing a safer worldwide financial state. The United States, along with many other countries, have made many reforms that will allow the global financial situation to become more protected. However, there are new areas in the world which could threaten the state of global finance.

In the five years that the globalEDGE blog has been operating, much has changed in the area of global trade and investment. It all began when the global financial crisis came about in 2008 and this led to major changes in the global trade markets. Global trade relative to GDP plummeted around thirty percent during the financial crisis, and the crisis seemed to have come from problems such as poor trade regulation, bad credit, and poor bank strategies. There are many changes that have been made to the global economy and many challenges that have been faced in the area of global trade since 2008. Here’s a look at what has happened.

Nigeria’s economy has been faltering due to struggles in the oil industry. The country is the largest oil producer in Africa, outputting around two million barrels per day and consuming just 267,000 barrels per day. Interestingly enough, Nigeria has a strong dependence on fuel imports. Their struggles stem from the fact that they simply don’t have enough refineries, and the ones that exist are not maintained well enough to work to their full capabilities. The industry has been slipping into turmoil, as industrial scale theft and inefficient fuel subsidy policies have slowed production significantly.

Since the governmental reforms and the economic reforms that Australia underwent in order to make their country more relevant in global trade, China and Australia have maintained strong trade relations. Since 2008, Australia has more than doubled its trade with China. This is due to less strict trade regulations, lower taxes on exports, and a less conservative economy. Once these reforms were made, Australia transformed from a independent, isolated and small economy to a more internationally competitive economy with a more export oriented background.

Brazil, a nation with incredible amounts of fertile land, is currently undergoing an economic boom in the agricultural industry. However, there is one problem. Two different people claim they own the land. The natives want their ancestral rights to the land, while the settlers who have been farming on them and boosting the Brazilian economy. There are 428 Indian land tracts fully registered and 178 that are in the process, but not registered yet. While the government decides what belongs to the natives and what doesn’t, there has been plenty of tension on the ground. At risk is the $124 billion industry (2011), one-fifth of the entire Brazilian economy.

The International Monetary Fund releases a yearly forecast for countries that will predict the growth of the country. For France and China, the IMF has recently lowered their growth forecast due to a number of different reasons. For France, Paris has lacked a competitive economy and been slow to reform in recent times. For China, credit has been rising too fast along with the debt, and also slow growth economically will coincide with a slower growth in China. These two countries will have to find new ways to generate expansion along with minimizing losses during this slow economic period globally.

Until now, China has never shown much interest in Middle Eastern investment. If it is able to establish a relationship with the Middle East, it can take advantage of arguably one of the most volatile areas in the world. In an area where westerners have long feared to go, China seems very interested in the diplomacy, economics, soft power and security. Upon helping in the war in the Middle East, China has begun to fully immerse themselves in the Middle East in an effort to increase their involvement in the area.

This year the spring slowdown in manufacturing may slow down more than anticipated. Following disappointing results in the manufacturing activity and industrial production worldwide, analysts are saying that with the already weak economies in China, Germany, and the United States, the slowdown could impact more than just spring. Germany has had a trend in weaker manufacturing activity, and the U.S. has been introduced to sequestration due to its weak trend in the industry. If China, Germany and the United States can’t find a way to power their manufacturing activity this slowdown could have global effects.  

The Easter holiday has passed, and as always, with its passing comes a lot of chocolate. The holidays are a great time for candy products to increase sales by offering limited edition holiday goodies. Most candy companies incorporate Easter into their products around this time of year, with the most prevalent being the bunny. What if a company could take the idea of the chocolate bunny and restrict other companies from selling it to increase their sales? For over twelve years, Swiss premium chocolate maker Lindt & Spruengli has been trying to trademark these gold-wrapped chocolate bunnies with many court cases involving different European Union members.

The European Union gave a €10 billion rescue to Cyprus, a small island country in the European Union. It is the fourth of seventeen Eurozone states to receive a bailout by the European Union and the International Monetary Fund. In order to gain more time to convince parliament to back a new tax on deposits, Cyprus said that they would not open up their banks until Thursday the 21^st of March.  This controversial tax is on bank deposits and in order for it to come into effect they must have the support of parliament.  Investors reacted poorly to the news as shares fell, and there was a run on cash machines over the past couple days.  

After last year’s scare in China with the manufacturing industry taking a step backwards with a year of contraction, it has rebounded and returned to positive growth for four straight months. However, February was China’s lowest month of positive growth since November after posting record growth in January. February’s growth was 50.4, while in January it was 52.3. On the scale, readings above 50 indicate expansion, while below 50 indicates contraction.

In the annual employment report by the International Labour Organization, analysts said that the number of unemployed people globally rose by four million last year and is expected to rise by over five million people this year to reach 203 million. This is primarily blamed on the slow labor market for youth, and as the number of jobseekers is growing, so will the number of unemployed.

In recent years, the Chinese and Latin American business relationship has done very well, especially in the South American countries.  China is now the main market for most of the exports for Latin American countries, along with being a big source of imports as well. There has been much greater investment in Latin America by Chinese companies such as mining in Argentina, Brazil and Peru, manufacturing in Brazil and Uruguay, and tourism in the Bahamas. With all of these influences from China taking place, there have been some major imbalances of different kinds.

Iceland’s application to join the European Union is being threatened by new quotas involving Iceland’s largest industry, the fishing industry. The new fish that is booming the industry in Iceland is the mackerel, and Ireland, Norway, and other European members are debating over how much mackerel Iceland should be able to fish. Scientists believe that mackerel are migrating to Icelandic waters in greater numbers, and since fishing accounts for forty percent of Iceland’s exports, the mackerel are now a vital part of Iceland’s economy. These fish led to the rebound from the crisis Iceland was going through, and if the stock allowed is increased, they will be able to lift the economy further.

For the most part, Africa struggles to develop large amounts of energy, and Ghana is striving to change this. Apart from the northern and southern parts of the continent, Africa has no major energy sources and no efforts have really been made to fix the problem. Blue Energy, a British renewable energy investment firm officially verified plans to build Africa’s largest solar panel installation. It will be a one hundred fifty five megawatt photovoltaic plant, and construction will be located in Aiwaiso, Ghana. Officials are hoping that this is the start of a revolution for renewable energy in sub-Saharan Africa, and it will show whether or not governments can unlock the large potential that Africa holds for solar energy.

The European Union is pushing back the implementation of the global banking reforms, which were supposed to take place on January 1st. It has been delayed at least six months, with talks that it may get pushed back even further. Basel III is the name of the reform plan, and it is a global response to the financial crisis from 2007-2009. Basel III is a critical step to protect large institutions against future financial shocks. Until the European Union can agree on the plan, the delay holds a risk of throwing off the recovery process. However, if the regulations in Basel III are too harsh, it could risk cutting economic growth and an increase in unemployment.

On November 9th at the Business College Complex at Michigan State University, Eli Broad spoke to students of The Eli Broad College of Business about his views on business, philanthropy, and the future of education. Eli Broad funded the The School of Business at Michigan State University, and has continued to support his alma mater throughout his life. Through his many different careers he gained a vast amount of knowledge in many aspects of business, helping to facilitate his long and successful run in the business world.

Our globalEDGE Country Comparator is now up! The Country Comparator allows our users to compare up to twenty countries across a variety of economic indicators (up to five at once) including GDP, inflation, and exports. It can be accessed by pulling up any country’s page and clicking on the Country Comparator, or by following this link: http://globaledge.msu.edu/Comparator. Please check out this new interactive tool and let us know what you think by leaving a comment below!

With people finally returning to North Africa and increasing destination trips to Eastern Europe, international tourism worldwide grew four percent in the first half of the year. Over 705 million tourists traveled abroad in this period, and if accomplished it will be the first time that over one billion people have traveled internationally. Areas such as Central and Eastern Europe, Southeast Asia and Central America had the highest growth in tourism. Egypt had a large increase after the social problems were solved, and Japan also did after the nuclear contamination concerns were solved. Interestingly enough, countries such as Sweden, South Africa, and South Korea had increases on a smaller scale, but saw the income from tourism increase by over twenty-five percent.

Without government involvement, Indonesia is experiencing good times with one of the highest economic growth rates in the world. Needless to say, things could have been even better if the government provided assistance to help the economy and take Southeast Asia’s largest economy to a whole new level. It has been estimated that if Indonesia made certain changes to its economy, each citizen would be more than forty percent wealthier by 2030. Also by this time, if it has the right reforms and remains on this path, it would be the world’s sixth largest economy. The main areas of renovation would be the outdated infrastructure along with the increase in bureaucrats.

European stocks have been struggling as Spain does not seem close to requesting a bailout soon. Spain’s debt and interest carrying costs are increasing at a rate much faster than the GDP, and it seems as though this trend will not slow down. Greece is in the same situation. Greece has incurred a lot of debt and is struggling to pay it back. Due to this, the country is in the process of securing a bailout. Both countries’ unemployment rates have risen above twenty percent, and the Eurozone in general has a combined unemployment rate of 11.4%. Talks that France is going to be next have many people worried and these worries can only lead to more problems.

After releasing its high IPO on March 18th, 2012, Facebook has fallen over 50% and does not seem to be headed in the right direction anytime soon. The costly mistake in the first day of trade of a computer malfunction placed millions of dollars in the wrong location, and there was no recovery after that. With social media on the rise worldwide, it was believed that this would be a hot stock early on.  The overly-optimistic buyers were waiting for an early 50%-60% increase, and little did they know it was about to be a failure. Was the IPO too high, or is Facebook just losing its popularity it once had?