CANADA ECONOMICS
ENERGY
PETROBRAS. REUTERS. JANUARY 3, 2018. Brazil's Petrobras settles U.S. corruption class action for $2.95 billion
Brendan Pierson
NEW YORK (Reuters) - Petroleo Brasileiro SA PETR4.SA, Brazil’s state-controlled oil company, said on Wednesday it has agreed to pay $2.95 billion to settle a U.S. class action brought by investors who claim they lost money as a result of a corruption scandal.
Petrobras, as the company is known, denied any wrongdoing under the deal, which is one of the largest securities class action settlements in the United States. U.S. District Judge Jed Rakoff in Manhattan must approve the accord.
The settlement was smaller than what many analysts anticipated and was seen as a net positive for the scandal-plagued company. Preferred shares ticked up 0.3 percent to 16.60 reais by midday, roughly in line with the country’s Bovespa .BVSP equities index. U.S.-traded shares PBR.N were unchanged at $10.70.
Analysts at Brazilian bank BTG Pactual said the market had expected a settlement of $5 billion to $10 billion. Moody’s said in a note that if approved the fine “would remove the uncertainty related to the amount to be paid to plaintiffs.”
The plaintiffs were upbeat, too.
“Simply put, this litigation and its ultimate resolution has yielded an excellent result for the class,” said Jeremy Lieberman, an attorney for the investors. He called the deal “historic” and said it was the largest ever involving a foreign securities issuer.
Investors had sued Petrobras after prosecutors in Brazil accused executives of accepting more than $2 billion in bribes over a decade, mainly from construction and engineering companies.
Petrobras claimed it was itself a victim and denied wrongdoing in a securities filing on Wednesday. But its market value has plunged as its central role in a massive corruption scheme continues to be unwound by investigators.
For the past four years, Brazil has been rocked by the so-called “Car Wash” investigation, which has exposed billions of dollars in kickbacks to executives of state-run companies and politicians who appointed them to their jobs.
Petrobras said it hoped the settlement would resolve all investor claims in the United States.
The deal does not include investors who bought non U.S.-based Petrobras securities outside the United States, according to the company.
The deal came days after Brazil’s securities regulator CVM formally accused eight former Petrobras executives of corruption.
The accusations relate to possible irregularities in the contracting process for three drilling ships, according to a legal filing by the regulator last Friday.
Among the accused in CVM’s filing are former Petrobras Chief Executives Officers Maria das Gracas Foster and Jose Sergio Gabrielli. Neither could be reached for comment.
The largest securities fraud settlements in U.S. history include $7.2 billion stemming from the collapse of Enron, $6.2 billion over an accounting scandal at WorldCom and $3.2 billion over an accounting scandal at Tyco International, according to Stanford Law School’s Securities Class Action Clearinghouse.
Reporting by Brendan Pierson in New York; Additional reporting by Gram Slattery and Flavia Bohone in Sao Paulo; Editing by Jason Neely, Susan Fenton and Jeffrey Benkoe
AVIATION
REUTERS. JANUARY 2, 2018. Boeing-Embraer talks have not settled question of control: sources
SAO PAULO (Reuters) - Tie-up talks between Boeing Co BA.N and Embraer SA EMBR3.SA have not settled key questions such as control of the Brazilian planemaker or the possibility of a more narrow joint venture, two people familiar with the negotiations told Reuters, pushing back against a newspaper report on Tuesday.
Brazilian newspaper Valor Economico had reported that the talks have focused on joint ventures and joint business agreements to share costs and revenue or develop new products without changing control of Embraer.
Such an arrangement could ease approval from the Brazilian government, which holds a ‘golden share’ giving it veto rights over strategic decisions at Embraer and has expressed reservations about a foreign company taking control.
However, a joint venture may not be an effective way to combine engineering resources, explore new business opportunities and satisfy Boeing’s interest in Embraer’s portfolio of regional passenger jets, defense programs and business aircraft, said one of the sources, who requested anonymity due to the sensitivity of talks.
Boeing has worked around concerns in foreign markets before, structuring defense subsidiaries in Australia and Britain to satisfy sovereignty demands, and those cases may serve as a reference in Brazil, the sources said.
Neither Boeing nor Embraer responded to requests for comment.
On Dec. 21, the two planemakers said they were discussing a “potential combination,” in a move that could consolidate a global passenger jet duopoly.
The talks are widely seen as a way for Boeing to strengthen its position in the regional jetliner market, in which Embraer is strong, thanks largely to its 70- to 130-seat E-Jets.
Less than three months ago, Boeing’s European arch-rival Airbus SE AIR.PA agreed to buy a majority stake in Bombardier Inc’s BBDb.TO 100- to 130-seat CSeries jet, putting pressure on the U.S. planemaker to seek a similar partnership.
The Boeing-Embraer talks involve Embraer’s defense business, as well as its passenger business, sources have said.
In the Tuesday report, Valor said Boeing was confident it could convince Brazil’s government that it could safely operate in Brazil’s defense sector, partially by pointing to defense deals the U.S. planemaker has made in countries such as Australia.
Reporting by Gram Slattery; Additional reporting by Brad Haynes; Editing by Mark Potter and Nick Zieminski
SOFTWOOD LUMBER
Global Affairs Canada. January 3, 2018. Statement by the Minister of Foreign Affairs on final U.S. duties on Canadian softwood lumber
Ottawa, Ontario - The Honourable Chrystia Freeland, Minister of Foreign Affairs, issued the following statement regarding the imposition today by the United States of final countervailing and anti-dumping duties on imports of certain Canadian softwood lumber products:
“Canada’s forestry industry supports good middle-class jobs in communities across our country. The Government of Canada will continue to vigorously defend our industry and its workers against protectionist trade practices.
“U.S. duties on Canadian softwood lumber are unfair, unwarranted and troubling. They are harmful to Canada’s lumber producers, workers and communities, and they add to the cost of home building, renovations and other projects for American middle-class families.
“Canada has already begun legal challenges of these duties under NAFTA and through the WTO, where Canadian litigation has proven successful in the past.
“We will continue to work with the provinces and territories, as well as with Canadian industry and workers, to find an enduring solution. Canada will also continue to engage with the U.S. Administration and with American legislators to come to a new agreement on softwood lumber.”
REUTERS. JANUARY 3, 2018. Canada criticizes U.S. lumber duties implemented on Wednesday
WINNIPEG, Manitoba (Reuters) - The Canadian government on Wednesday criticized the United States for a decision to impose duties on certain softwood lumber exports and underlined its determination to fight the move.
FILE PHOTO: A log driver works a barge of Canadian logs at Squamish Mills Ltd in Howe Sound near Squamish, British Columbia, Canada, April 25, 2017. REUTERS/Ben Nelms/File Photo
The duties, which went into effect on Wednesday, are “unfair, unwarranted and troubling,” Foreign Minister Chrystia Freeland said in a statement. Ottawa has already launched two challenges against the duties.
(Corrects to Canada criticizing the duties, which came into effect on Wednesday. The trade challenges were launched last year, not on Wednesday)
Reporting by Rod Nickel in Winnipeg, Manitoba; and David Ljunggen in Ottawa; Editing by Chizu Nomiyama and Jim Finkle
INTERNATIONAL TRADE
Global Affairs Canada. January 3, 2018. Canada’s Minister of Public Safety and Emergency Preparedness to promote trade and NAFTA in Kentucky
Lexington, Kentucky, USA - The Honourable Ralph Goodale, Minister of Public Safety and Emergency Preparedness, will visit Kentucky on January 4 and 5, 2018, where he will participate in activities focusing on Canada-U.S. trade and business.
Minister Goodale will attend the 23rd Annual Kentucky Chamber Day, hosted by the Kentucky Chamber of Commerce, in Heritage Hall at the Lexington Convention Center in Lexington. The occasion represents the state’s largest gathering of elected officials and business executives. During his visit, Minister Goodale will also meet with Matt Bevin, Governor of Kentucky, Terry Gill, Economic Development Cabinet Secretary, John Tilley, Justice and Public Safety Cabinet Secretary, Ryan Quarles, Commissioner of Agriculture, and Kelly Craft, United States Ambassador to Canada.
“Canada and the United States share one of the closest and most prosperous bilateral relationships in the world,” said Minister Goodale. “I look forward to being in Kentucky, meeting with political and business leaders and discussing the ways we can enhance the trade and economic ties that strengthen the dynamic relationship between our two countries.”
“I am delighted to welcome Minister Goodale here in Kentucky,” said Douglas George, Consul General of Canada in Detroit also responsible for the State of Kentucky. “Minister Goodale’s experience in agriculture, finance, natural resources, public safety and border security makes him a perfect person to speak about the many ties that bind Canada and the state of Kentucky.”
Canada is Kentucky’s largest export market, with nearly 26% of Kentucky’s foreign-bound goods sold to Canada—more than the state’s next two largest markets combined. Annual trade between Kentucky and Canada totals US$10.9 billion, or nearly US$30 million per day, amounting to a US$4-billion trade surplus for Kentucky. Canada-U.S. trade and investment supports about 112,600 jobs in the “Bluegrass State”.
As Minister of the largest non-military department in Canada, Mr. Goodale’s portfolio includes the Royal Canadian Mounted Police, the Canadian Security Intelligence Service, the Canada Border Services Agency and Correctional Service Canada.
Minister Goodale will be available to media at the Annual Kentucky Chamber Day in Lexington. Should you require additional information about this event please refer to the contact section below.
ECONOMY
THE GLOBE AND MAIL. THE CANADIAN PRESS. JANUARY 3, 2018. Bank of Canada estimates 60,000 fewer jobs due to minimum wage increases
OTTAWA - The Bank of Canada estimates there will be about 60,000 fewer jobs by 2019 due to the increases in minimum wages across the country, but that labour income will be higher due to the increases.
In examining the impact of the wage increases, the report estimated that the consumer price index could be boosted by about 0.1 percentage points on average and real gross domestic product could be cut by 0.1 per cent by early 2019.
The number of jobs lost was based on a 0.3 per cent decline in the number of hours worked, while aggregate real wages were estimated to increase 0.7 per cent.
The research paper by the staff at the central bank noted that if the average working hours declined following the increase in the minimum wage, the number of jobs lost would also be lower.
The Bank of Canada estimated that about eight per cent of all employees work at minimum wage, a proportion that increases to 11 per cent if a threshold of five per cent above minimum wage is used.
Ontario raised its minimum wage to $14 per hour on Jan. 1 from $11.60 and plans to increase it to $15 in 2019, while Alberta is expected to raise its minimum wage to $15 later this year.
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