Argentine default deal falls through

BY Matt Atkins

Latin America's third-biggest economy Argentina has defaulted for the second time in 12 years, after failing to strike a deal in time to meet a midnight deadline for a coupon payment on exchange bonds.

Argentina had sought in vain to gain a last-minute suspension of a ruling by US District Judge Thomas Griesa in New York to pay holdouts $1.33bn plus interest. Judge Griesa ruled Argentina could not service its exchange debt unless it paid holdouts at the same time.

The consequences for the struggling economy are dire. Even if the default is a relatively short one, Argentina will see raised borrowing costs, further pressure on the peso, and a drain on foreign on reserves. The default will also pour fuel on the country’s soaring inflation rates.

While the current situation is bad enough, Argentina has faced worse. Today’s troubles are a world apart from the crisis of 2001, when the economy collapsed, causing millions to lose their jobs. This time around, while the country is already in recession, the country’s government is solvent. It must now attempt to extricate itself from its obligations as quickly as possible to avoid further harm to the economy.

Argentina’s failure to strike a deal with hedge funds will not have any great impact on the global economy. The country has been isolated from global credit markets since its 2002 default on $100bn. US ratings agency Standard & Poor's has downgraded the country's long- and short-term foreign currency credit rating to ‘selective default’, which will stand until Argentina makes its overdue 30 June coupon payment on its discount bonds maturing in 2033.

News: Argentina declared in default by S&P as talks fail

Russia pays price for playing dirty

BY Matt Atkins

Shareholders of the now defunct oil giant Yukos celebrated on Monday after an international arbitration panel ordered Russia to pay $50bn in damages for bankrupting the company.

The Hague court said Russian officials had manipulated the legal system to bankrupt Yukos, and jail its founder, Mikhail Khodorkovsky, for 10 years.

The court of arbitration rejected the Kremlin’s argument that the asset seizure was due to unpaid taxes, and described Russia’s actions as “devious and calculated expropriation". The Russian finance ministry has hit back, saying said the ruling was "flawed", "one-sided" and "politically biased". The ministry added that the Permanent Court for Arbitration in The Hague "had no jurisdiction to consider the questions it was given". The country is expected to appeal against the ruling.

The claim against the state was filed by a subsidiary for the financial holding company GML, once the biggest shareholder in Yukos Oil Co. "The majority shareholders of Yukos Oil were left without compensation for the loss of their investment when Russia illegally expropriated Yukos," said GML's Executive Director Tim Osborne. "It is a major step forward for the majority shareholders, who have been battling for over 10 years for this decision."

Responding to the news, Mr Khordorkovsky, who was at one point Russia's richest man, said it was "fantastic" that shareholders were "being given chance to recover assets". Mr Khodorkovsky forged  Yukos into Russia's largest investor-owned oil company following the collapse of the Soviet Union. He was arrested in 2003 and spent a decade in jail after being convicted of fraud and tax evasion but was pardoned last December. At the time of his arrest, he had been seen as a potential political rival to Vladamir Putin.

The question now is whether Russia will pay up. The Kremlin denies any wrongdoing, and payment of the fine under the ruling would prove an acceptance of defeat. Even if the state does not voluntarily accept the ruling, it can be enforced by shareholders seizing assets abroad. Shareholders of GML, however, have said that they are prepared to discuss the matter with Russia, according to a company spokesman.

News: Yukos shareholders say would talk to Russia over $50 billion compensation

Canada emphasises home-grown talent

For a number of years, Canada has recognised the importance of immigration to its economic and cultural development. However, the country’s immigration principles place significant importance on employing home talent first – temporary foreign workers should be a last resort, and are generally viewed as a temporary solution to shortages in the labour market.

FW speaks with Howard Greenberg, a partner at KPMG, about corporate immigration in Canada.

10Questions: Corporate immigration in Canada

South Korea receives shot in arm

BY Matt Atkins

In response to a decline in economic activity, South Korea has announced a $40bn stimulus package to help turn around the country’s sluggish output. The package has been earmarked largely to support small and medium enterprises and boost the property market.

This is the second attempt to boost growth this year, after the South Korean government pushed through a $15bn stimulus plan in April.

Data released on Thursday 24 July revealed the extent of South Korea’s decline. While GDP grew 3.6 percent from a year earlier in the second quarter, the figure represents a slowdown of 0.3 percent on the first quarter of 2014.

South Korea is Asia’s fourth-largest economy, but relies heavily on exports which have suffered from low global demand. In addition, the country has been hit hard by the sinking of the Sewol ferry, which claimed the lives of 300 people. Earlier in July, South Korea’s central bank lowered its forecast for economic growth, citing the impact of the tragedy on consumption.

The country’s finance ministry lowered the country's growth forecast for this year from 3.9 percent from 3.7 percent – the second revision in recent weeks. The new stimulus package marks the first push by recently appointed finance minister, Choi Kyung-hwan, to introduce promised aggressive measures to bolster growth.

News: S Korea reveals $40bn stimulus package as growth slows

Skills gap hampers recruitment efforts

BY Matt Atkins

A PwC report suggests businesses are planning a recruitment drive in the next 12 months as growth approaches pre-2008 levels. Organisations in the emerging markets are expected to make the most net hires, particularly in the Middle East, South East Asia and China. The most active sectors are expected to be business services, insurance and technology.

Despite this positive outlook, business leaders are worried about filling the roles they need most. Almost two-thirds of firms (63 percent) are concerned about the availability of candidates with the right skills, a 5 percent increase on 2013. CEOs in Africa, South East Asia and South Africa are particularly alarmed by the lack of skills. Technology and engineering firms are feeling the brunt of the problem.

This skills gap is only expected to increase, causing continuing headaches for emerging nations. For the past few years, large multinationals have been busy cherry-picking the best talent from these regions. In countries such as China and India, where wages are increasing and working conditions improving, employees are beginning to favour domestic employers. However, western firms are now widening their search for new talent into Indonesia, Vietnam and the Philippines.

Business leaders are looking to the authorities to do more to help to plug the skills gap. Two in five CEOs say creating a skilled workforce should be a government priority and over half believe regulation is hampering their efforts to attract talent.

However, the overwhelming majority of business leaders believe they need to change their approach to attracting and retaining talent, though the majority have yet to do so.

“Business leaders are looking for people with a far wider range of skills than ever before,” says Michael Rendell, global HR consulting leader at PwC. “Gone are the days of life-time careers; chameleonlike employees who apply their skills whenever and wherever they’re needed are now in high demand. Businesses need to get out of the mindset that new skills equals new people. The most successful organisations will combine recruitment with developing their own people to be more adaptable to its changing plans.”

Report: The talent challenge: Adapting to growth