Around the World News Roundup October 2012

Europe and North America

Drinks groups sue over New York’s ‘supersize’ ban

In early October the US drinks industry filed a law suit against the administration of Michael Bloomberg, the New York mayor, over its decision to ban sales of “supersized” sugary drinks. Trade groups led by the American Beverage Association filed the suit in an attempt to block the rule, set to be imposed next spring. The approved proposal would ban the sale of sugary drinks in portions larger than 475ml. The group filing the lawsuit claim that it will damage thousands of small businesses in the city. The action comes as the US drinks industry faces regulations over labelling and taxation of their products, in response to their poor health record. Opponents of the ban, such as Coca-Cola and PepsiCo, fear that it harms the reputation of their products, and that other cities will follow New York. (Financial Times*, Reuters)

Action over Libor in the UK; in the US a woman takes on the banks over their mishandling of the rate

The Royal Bank of Scotland suspended one of its most senior traders in a new wave of developments in the Libor fixing scandal, which led to the departure of Barclays’ chief executive, Bob Diamond, in July this year. RBS is still awaiting a fine from regulatory bodies including the Financial Services Authority (FSA) for its involvement in the scandal. Following this news the UK Treasury announced that it would move to make tampering with the Libor rate a criminal offence, as part of the ‘Financial Services Reform Bill’ currently before parliament. Meanwhile in New York, a pensioner has been the first of many to file a class action against some of the world’s leading banks, including Barclays, Bank of America and UBS, for their part in widespread Libor manipulation which led to artificially inflated mortgage repayments. The plaintiffs, who could number 100,000, have lost thousands of dollars each, said their attorney, John Sharbrough. (Financial Times*, CNBC, Guardian, Telegraph, Financial Times*)

Asia (Asia Pacific)

Fukushima disaster could have been avoided, nuclear plant operator admits

The company at the centre of last year’s nuclear crisis in Japan, Tokyo Electric Power (Tepco), has acknowledged for the first time that it could have avoided the disaster. The company previously insisted that nothing could have been done to protect the Fukushima Daiichi power plant from the earthquake and tsunami that killed almost 20,000 in March last year. However, in a statement published in October, an internal task force led by Tepco’s president, Naomi Hirose, said that the company knew that safety improvements were needed before the disaster but had failed to implement them. The admission comes after a damning report released in July by a parliament-appointed panel criticised years of “collusion” between Tepco, industry regulators and politicians, describing the disaster as “manmade”. (Guardian, Bangkok Post)

Protests in Malaysia at proposed Petronas petrochemical project

Plans by Petronas to build a major refinery and petrochemical development project in Johor, in Southern Peninsula Malaysia were met by protests from thousands of locals in early October. The protest is part of a recent wave of environmental opposition against projects such as a rare earths plant and gold mine planned by the Australian mining company, Lynas.  The Johor protest comes after months of complaints from villagers that the RM60bn ($24bn) Petronas petrochemical project in south-east Johor would cause them severe losses, and would force 2,000 to relocate. (Eco-Business)

Africa

Strikes in South Africa spread and worsen

The ongoing crisis in South Africa worsened when staff at a Toyota factory in Durban, in the east of the country, went on an illegal pay strike which forced the plant to close for four days. The impasse only ended when the Japanese car company agreed to a 5.4 percent wage increase for the workers. Signs that the unrest had spread beyond the mining industry were also felt in the transport sector, when 20,000 truck drivers went on a two week strike over pay. This forced Royal Dutch Shell  to declare a ‘force majeure’ on fuel deliveries in South Africa’s northern economic hub of Guateng province, which includes Johannesberg and Pretoria. This allowed the company and its customers to break contracts due to situations beyond their control.

Meanwhile, in the mining sector, which has seen a wave of strikes and disruption since the beginning of September there was action by a number of companies in an attempt to stop the strikes and restart production. Anglo American Platinum (Amplats) threatened 26,000 striking workers with dismissal if they did not attend disciplinary hearings or return to work. This resulted in 12,000 workers being fired by the company, when they refused to appear. Strikes also hit the iron ore sector, where Kumba Iron Ore, a subsidiary of Anglo American said 300 of its workers had  staged a wildcat strike. In the gold industry, AngloGold Ashanti, Gold Fields and Harmony Gold – all affected by strikes – agreed to wage increases in an attempt to get miners back to work. Decisions were delayed when the South African Chamber of Mines, leading the negotiations, called for more time.

As a result of the widespread unrest and economic disruption, on the 12^th of October Standard & Poor downgraded South Africa’s sovereign rating from BBB+ to BBB. The rating action followed a similar move by Moody’s who also felt that widespread industrial unrest threatened the economic and political stability of the country. In an effort to resolve the crisis, Jacob Zuma called on miners to return to work and for  mining production to be "normalised", he also called on business leaders to take a year-long salary freeze.(Financial Times*, Guardian, Financial Times*, Times*, BBC, Financial Times*, BBC, Reuters, Telegraph)

Latin America

Chevron faces pressure and further court action in Ecuador

There have been further developments in the on-going case of Texaco, bought by Chevron in 2001, and the people of the Lago Agrio region of Northeastern Ecuador. Early on in October, the US Supreme Court declined to block a judgement from an Ecuadorean court that Chevron, the US oil firm, should pay $19bn in damages for pollution in the Amazon. In response to the US court action, Chevron’s CEO, John Watson, affirmed his belief that the judgement, handed down by a court in Ecuador in February 2011, was fraudulent and not enforceable under New York law. Since the Supreme Court’s refusal to block the judgement, Chevron has come under mounting pressure from shareholders, environmental groups and politicians, to settle the case. At the end of October, an Ecuador court froze all bank accounts of Chevron and its subsidiaries in the country – an estimated $200bn – over suspicions that Watson lied to shareholders by claiming that the company had no assets in Ecuador. (CSR Wire, BBC, CSR Wire)