Economist 1/29/16

  1. Chinese drink 40 billion litres of bottled water each year, up over 13-fold since 1998. That growth has a long way to go if China ever consumes as much per person as Mexico.But finding clean supplies is difficult; rivers, lakes and even groundwater in China are often foul.Thanks to massive investment in infrastructure, be taken to coastal cities: Tibetan glaciers.Tibet already sells Qomolangma Glacier water, named after the Tibetan word for Mount Everest. The Tibetan government has licensed 28 more companies to increase the province’s bottling capacity 50-fold by 2020.Assuming companies do not mine the glacier ice itself, they will bottle only the meltwater that flows out of glaciers in summer. It is true that Himalayan glaciers on the Tibet-Qinghai plateau have retreated over the past 30 years by about 15%. But this is because of climate change. Bottling will not cause them to lose mass any quicker.More worrying is the possible threat that the industry will pose to the Tibetan environment. China has an atrocious record of looking after its pristine areas.
  2. In Brazil, the economic slide continues. The number of jobs in the formal sector fell by 1.5m in 2015, the fastest pace of job destruction since comparable records began in 1992. Another 1m could be lost this year, analysts reckon. Sales of vehicles dropped by a fifth last year. The IMF now predicts that GDP will shrink by 3.5% in 2016, more than three times as much as it expected in October.Male breadwinners make up a higher proportion of the newly unemployed than in previous downturns.As misery grows, the government’s capacity to tackle its causes is diminishing.Prosecutors investigating the vast bribery scandal centred on Petrobras, the state-controlled oil-and-gas giant, are expected to file additional charges against senior figures in Ms Rousseff’s Workers’ Party.Her weakness makes her more dependent on the goodwill of the PT and trade unions aligned with it, which are viscerally opposed to the reforms needed to steady the economy.In effect she admitted that the government cannot stabilise its finances if it continues to devote 40% of (non-interest) spending to pensions.
  3. BETWEEN them Sotheby’s and Christie’s, the Western world’s two largest auction houses, have been in business for 522 years.Christie’s, a private company owned by a French luxury-goods billionaire, François Pinault, gives little away. But in a brief overview of its 2015 results, released on January 26th, it admitted that sales were down by 5% compared with 2014, to £4.8 billion ($7.4 billion).More worrying was the news that the slump was not just in Old Master paintings, in which buyers have for some time been losing interest. Sales also slipped in the areas that have been the engines of recent growth: watches, wine, even post-war and contemporary art.Sotheby’s new chief executive, Tad Smith, told analysts in New York that its sales were flat compared with 2014’s, that the firm would post fourth-quarter losses of up to $19m and that it was scrapping its dividend. Sotheby’s shares have fallen by more than half in the past six months.In part the weakness of the big two’s sales is because of the world’s wealthy, Russians especially, drawing in their horns. But in part it is because their business model is looking outdated, leaving them vulnerable to sprightlier rivals.
  4. The high cost of protecting this duopoly is most visible in guarantees that the auction houses make to sellers about the price they can expect if they sell their treasures. In deciding where to consign their works, rich collectors play off one auction house against the other to force up the guarantee.This is not the only source of pressure on the auction houses. In the past decade the contemporary-art world has ballooned, with new fairs, biennials and exhibition spaces opening everywhere. According to a recent report by Clare McAndrew, a respected art-market analyst, $33.1 billion-worth of art and antiques were sold at auction in 2014, half of all sales.
  5. The two houses realise there is much that they must do to protect their dominance.They must draw new buyers into the art market by first enticing them to buy watches, wine and other luxuries. They need to improve their online-auction platforms.Phillips, a smaller auction house, may have been founded in 1796 but it has recently showed the ambitions of a startup.The focus is on getting the new rich hooked on buying, first, watches and then contemporary art; and on finding out what such clients want and providing it.The strategy is working. From a standing start, Phillips sold $80.3m-worth of watches in 2015. Total auction sales, at $523m (mostly of contemporary art), were 34% higher than in 2014.

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