Economist 4/28/14

  1. BARACK OBAMA is winding down his four-country tour of Asia this evening with a banquet in Manila.To varying degrees all four of the Asian governments were all looking for beefed-up military and diplomatic commitments from Mr Obama—in view of the rise of China and, in South Korea’s case, the threat from North Korea too. In return Mr Obama was pressing Japan and Malaysia to commit further to his cherished Trans-Pacific Partnership (TPP) trade deal, a new block that would encompass 12 countries on both sides of the Pacific—not including China.Japan welcomed a clear declaration by America’s president that the Senkaku islands, called the Diaoyu islands by the Chinese, are covered by Article Five of the US-Japan Treaty of Mutual Co-operation and Security. Likewise the Philippines’ government welcomed the signing of a new ten-year defence pact, what is called the “enhanced defence co-operation agreement”. This will give America a significant military presence in the country (and its waters) for the first time since its giant bases at Subic and Clark were shut down in the early 1990s. The most substantive outcome of Mr Obama’s two-day trip to South Korea was also military-diplomatic in nature. This was an agreement on the binational defence team, a command which would place South Korean troops under American control in the event of war. 
  2. Camisea is Peru’s most important source of energy, pumping 1.6 billion cubic feet of gas a day. Since 2004 it has provided the government with more than $6 billion in royalties. Gas from Camisea’s Block 88, which has the biggest probable reserves in the Peruvian Amazon, is sold at a regulated price of $1.80-3.30 per million British thermal units, which has helped fuel Peru’s stellar economic growth of the past dozen years.But most of the block lies in the Kugapakori-Nahua-Nanti reserve, created by the government in 1990 to protect Amerindians who have shunned contact with the outside world.So Camisea has become a test of whether hydrocarbon exploitation can coexist with fragile environments and native peoples.
  3. ONE of the most arresting things about “Capital in the 21st Century”, the best-selling economics book by Thomas Piketty, is that it caused far less of a stir in his native France when it came out last year than it has in the English-speaking world.Why did the French version of “Capital” not make the same splash? One review last year, in the left-leaning Libération newspaper, suggested that the book was not left-wing enough. A more serious explanation could be that Mr Piketty was too closely linked to a proposal by François Hollande, France’s Socialist president, during his 2012 election campaign to introduce a now-discredited 75% top income-tax rate. In short, drawing attention to resurgent inequality has a sense of novelty in America, but in France it is a political given.
  4. Alstom, a French engineering giant with global operations in power generation and transport, is concerned. Last week America’s GE put in a formal bid for Alstom’s energy arm, offering around $10 billion. Then on Saturday night Siemens came up with a proposition of its own: an asset swap. Alstom would cede to Siemens its power-generation activities and in exchange take over Siemens’s German high-speed rail and locomotives (plus an unspecified amount of cash). The idea has some appeal: Alstom virtually fathered high-speed rail, or TGV, in Europe. The idea is to build two European giants, one in transport and the other in energy.No bid involving a prominent French company would be complete without the country’s economy minister making his view of the matter plain.In fact, some such asset-shedding by Alstom has been on the cards for at least half a year. Alstom returned to profit in 2007 from four catastrophic years in the red. Its biggest sector, thermal energy, is also the most profitable (renewables are another story).
  5. MEXICO CITY shook and rattled on April 18th, as a 7.2-magnitude earthquake sent people scurrying under tables for shelter.Nowhere else in the world is able to forecast earthquakes in this way. How do the Mexicans do it? The epicentre of earthquakes hitting Mexico City, which lies roughly in the centre of the country, is usually to the south, where the North American continental plate rubs up against the Cocos plate. This means that quakes are felt first in states such as Oaxaca, on the Pacific coast. So seismologists installed sensors in the south of the country that detect the first tremors and send a warning to the capital. The seismic wave moves at about 7,000 miles per hour. That sounds fast, but it means that it takes the quake nearly two minutes to travel the 200 miles from Oaxaca to Mexico City. Meanwhile the sensors’ signal arrives virtually instantaneously in Mexico City, where alarms are sounded, giving people just enough time to scamper out into the street before the earthquake arrives.The reason is that Japan and California—and indeed most earthquake-prone places—sit right on top of faultlines, so earthquakes strike moments after the first tremors are felt.

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