TheChek News Flow

Currency extends losses as sanctions weigh on export revenues

The rouble sank beyond 100 to the US dollar on Tuesday, confounding Russian authorities’ attempts to halt a steep decline this year and pushing it close to levels hit in August.

Russia’s currency has lost nearly a quarter of its value since Moscow’s full-scale invasion of Ukraine in February 2022, as western sanctions weigh on export revenues and widen the country’s budget deficit.

The rouble last broke through the 100 mark in August, sparking alarm on state media and forcing the central bank into an emergency interest rate rise of 3.5 percentage points. A further rate increase of 1 percentage point — to 13 per cent — and talk of capital controls have failed to halt the currency’s decline.

The Kremlin tried to shrug off the rouble’s fall, claiming its weakness was a fact of life.

“There are certain fluctuations. We live in the rouble zone, so this excess attention to the dollar rate may happen from an emotional standpoint, but it’s essentially an element of the past,” Kremlin spokesperson Dmitry Peskov told reporters on Tuesday.

“We need to get used to living in the rouble zone and not feel so dependent on the dollar rate,” he added, according to Interfax. “There is no reason to be alarmed.”

Analysts said the latest losses were due to the end of the favourable month-end tax period, which prompts exporters to convert foreign currency revenues to pay local liabilities and tends to temporarily support the currency.

A ban on exports of diesel and petrol that Moscow imposed in September to counter rising energy prices in Russia and which led to a decline in foreign currency inflows has also put pressure on the rouble.

“The demand for foreign currency in Russia remains much higher than the supply,” said Natalia Lavrova, chief economist at BCS Global Markets. “Companies need the currency for imports and to buy assets of foreign businesses that want to withdraw from the Russian market, while foreign currency remains attractive as a savings vehicle for consumers.”

A weaker currency fuels inflation by making imports more expensive. The 100 roubles per dollar threshold carries a particular psychological importance for Russian consumers. Breaching that level in August sparked rare public disagreements among top Russian officials, while a news agency said its ticker was hacked after a message was displayed insulting Russia’s president Vladimir Putin.

The rouble’s current decline comes at a time when policymakers are particularly sensitive to public opinion, as Putin is widely expected to soon announce he will take part in the presidential election coming up next year.

Putin last month expressed concern over the impact a weak rouble has on the country’s inflation levels. “It is obvious that one of the main issues right now is accelerating inflation,” he said.

“The main factor here is clear — it is the weakening of the rouble, and it is necessary to understand the causes behind this, and to make appropriate decisions without delay.”

The government is discussing further measures to halt the rouble’s slide, including forms of capital controls such as limiting bank transfers abroad or creating a “Chinese-style membrane between the onshore and offshore rouble markets”, as the Ministry of Economic Development proposed in late September.

If enacted, the proposals would mark the first time Russia has tightened currency controls since the early weeks when Putin ordered the full-scale invasion of Ukraine, and would indicate growing anxiety over the country’s economic prospects.

The central bank, which switched from a policy of targeting the exchange rate to a focus on inflation in 2014, has opposed the proposal. But its own instruments to limit the rouble’s slide are limited.

The economic development ministry, whose forecasts lay the basis for the country’s budget, expects the rouble to recover to an average of 90.1 per dollar in 2024, according to its most recent projections released last month. Most Russian market analysts and economists expect it to be in a range between Rbs89 and Rbs105 per dollar.

Par Guillaume Echelard le 03.10.2023 à 08h00

EXCLUSIF - Un mois après son départ de la direction générale de Carrefour France, Rami Baitiéh, qui prendra la tête de l'enseigne Morrisons au Royaume-Uni au début du mois de novembre, se confie à Challenges sur les raisons de son départ. Et sur ses nouveaux défis de l'autre côté de la Manche.

L'étoile montante du groupe Carrefour, le dirigeant de la transformation, l'influenceur omniprésent sur le réseau social LinkedIn... Depuis des années, le nom de Rami Baitiéh est sur toutes les lèvres dans le petit monde hexagonal de la grande distribution. Autant dire que l'annonce de son départ de la tête du deuxième distributeur français fin août a suscité l'étonnement, puis l'attente. Mais Rami Baitiéh n'est pas resté bien longtemps sans donner de nouvelles. Le 28 septembre, l'ancien directeur général de Carrefour France annonçait sur LinkedIn prendre la tête de Morrisons, le numéro cinq de la distribution alimentaire au Royaume-Uni.

Evidemment, on ne pouvait pas résister à l'envie de lui demander quelques explications. Quelques échanges de messages plus tard, rendez-vous est fixé le 2 octobre à midi pour un échange par téléphone pour comprendre les raisons du départ surprise de celui qui - pendant 27 ans - a été fidèle à Carrefour. Et qui dans un mois prendra la tête d'un nom emblématique du commerce britannique, fondé en 1899.

Besoin d'évolution

"Je continue à me reposer mais je me prépare aussi, raconte Rami Baitiéh. Je me documente, je cherche à connaître la culture, les sociétés - la société britannique comme la société Morrisons", sourit-il. Ne regrette-t-il pas Carrefour, cette maison qui l'a hébergé pendant près de trois décennies ? "J’ai besoin de défis, de continuer à apprendre et progresser, répond Rami Baitiéh. Cela fait partie de mes valeurs. A Carrefour, j’ai fait ce qu’il fallait faire. J’ai des résultats qui sont là. Alors, en parfait alignement avec la boîte qui m’a formé, j'ai pris cette décision". Celle aussi de s'émanciper de devenir pleinement dirigeant d'une entreprise, lui qui jusqu'à maintenant était resté sous la direction du PDG de Carrefour, Alexandre Bompard. Passer un palier, un indispensable pour celui qui reste rarement plus de trois ans au même poste.

Certains voient d'ailleurs dans le départ de Rami Baitiéh le fruit d'un désaccord avec le PDG de l'entreprise sur la politique prix de Carrefour France, jugée trop chère par l'ancien directeur général. "Dire que je serais parti à cause de la politique prix serait exagéré", répond-il, sans nier pour autant de possibles désaccords, lui qui rêvait d'appliquer à 100% la politique de prix qui avait fait son succès dans d'autres pays du groupe Carrefour. Mais Rami Baitiéh ne s'épanche pas sur les éventuels différends de la fin de son aventure avec la société du Cac 40.

"Je suis loyal à Alexandre Bompard"

Et choisit plutôt de se rappeler ce qu'il a apporté : la méthode 5-5-5, axée sur quinze points clés de la relation avec les clients ; l'école des leaders pour accélérer la promotion sociale au sein de l'entreprise ; la méthode "Maxi" dans les hypermarchés qui vise à simplifier et rendre plus lisible leur offre ; le projet Top qui vise à spécialiser les équipes des hypermarchés. "On peut être fier", conclut-il, donnant sa bénédiction à son successeur, Alexandre de Palmas. Entre 2020 et 2022, le chiffre d'affaires de Carrefour France est passé de 34 milliards à 42 milliards d'euros ; le résultat opérationnel courant, lui, est passé de 629 à 834 millions d'euros. Beaucoup voyaient dans le natif du Liban un successeur naturel à Alexandre Bompard. Lui balaye : "Ce n’est pas vous qui décidez de cela au sein d'une entreprise." Mais il refuse toute polémique : "Je suis loyal, très proche d’Alexandre Bompard. C’est lui qui m’a fait évoluer."

Rami Baitiéh préfère regarder devant lui. D'autant qu'il va y avoir du travail : à Morrisons, la situation n'est pas évidente. L'entreprise a vécu un changement d'actionnariat mouvementé, après une bataille impitoyable remportée par le fonds Clayton, Dubilier & Rice. Elle a alors racheté les plus de 1.000 boutiques des magasins de proximité McColl. Mais Morrisons reste à la peine en termes de parts de marché, récemment doublé par Aldi. Certes, son chiffre d'affaires progresse, gonflé par l'inflation ; mais il progresse moins vite que celui de ses concurrents. "Le private equity vole-t-il l’âme du supermarché Morrisons ?", se demandait le Guardian en février 2023.

Le tout nouveau dirigeant, lui, assume une première phase d'observation de ce distributeur original qui - à la manière d'Intermarché en France - produit lui-même une bonne partie de ses articles de marque propre. "La première piste que j’ai, c’est de comprendre la culture, le client, les salariés", explique-t-il. En mode "éponge". Avant d'ouvrir ses valises remplies des concepts et des projets en tous genres dont il a le secret ?

Prime minister António Costa says incentive no longer makes sense and will be eliminated next year

Portugal plans to ditch a controversial tax break for foreigners that helped attract a wave of wealthy arrivals to the country but stoked a housing crisis by driving up property prices.

Prime minister António Costa described the special tax regime, introduced to help Portugal’s recovery from the 2008 financial crisis, as a “fiscal injustice” that no longer “made sense”. It is set to be eliminated in 2024.

His announcement is the latest example of Portugal’s diminishing enthusiasm for high-income new residents, following a decision this year to abolish a “golden visa” programme for wealthy non-Europeans.

The moves have been driven by angst over the impact of foreign money in the real estate market, where a surge in house prices has left many local residents struggling to find adequate accommodation, particularly in the cities of Lisbon and Porto and in the Algarve.

Costa, head of a Socialist government facing widespread public discontent over the issue, told CNN Portugal: “To maintain this measure in the future would prolong a fiscal injustice that is not justified, and would continue to inflate the housing market in a skewed way.”

The tax breaks, available to people who become resident in Portugal by spending more than 183 days a year there, include a special tax rate of 20 per cent for work income from “high-value added” activities, which covers professors, doctors and architects among other professional roles.

Another element is a flat tax rate of 10 per cent on pensions from a foreign source. Originally a full exemption from tax on pensions, Portugal introduced the low rate to quell complaints from EU countries, including Sweden and Finland whose retirees were moving to the country.

A third benefit under the special regime is a tax exemption on foreign-source income, including rental payments from tenants, if it is taxed in the country of origin.

The benefits have also been available to Portuguese citizens who have lived abroad for at least five years.

Costa said the tax breaks would remain in place for those who have already qualified for it. More than 50,000 people had already benefited from the regime by 2020. The government said that the amount of income that went untaxed due to its provisions in 2022 was €1.5bn.

Bruno Andrade Alves, a tax partner at accounting firm PwC, said the announcement was “quite surprising” but that its full significance would not be clear until Costa unveils details in a new national budget on Tuesday next week.

“We have to wait to understand what he’s actually saying. It is not clear if he is referring to all or only parts of the regime,” said Andrade Alves.

Portugal is in a relatively strong fiscal position and recorded a budget surplus in the first half of this year equal to 1.1 per cent of gross domestic product.

But its fiscal success has drawn criticism from some voters who ask why it is not using the surplus to do more to resolve the housing crisis, invest in health and education or lower taxes. Costa is expected to try to appease them by announcing new measures in next week’s budget announcement.

Tougher rules may be held back amid increasing hostility to climate regulation

Brussels is weighing a further delay to proposals to limit harmful chemicals and microplastics amid growing hostility to climate regulation from industry and right-wing politicians.

The European Commission’s tabling of proposals for the new version of the Reach regulation on the sale and use of chemicals, which will affect substances used in semiconductors and a range of other products, could now be shelved until after EU-wide elections next June, said people briefed on the situation.

The timetable for announcing the proposals had already been shifted from last year to this. The plans would mark the first step in changing rules that would then have to be negotiated by member states and the European parliament. The current rules are vastly complex and took seven years to negotiate.

In a hearing on Tuesday morning, Maroš Šefčovič, the Slovak commissioner nominated to oversee the EU’s Green Deal climate package following the departure of its previous chief Frans Timmermans, failed to guarantee that the chemicals proposal would be brought forward on time.

He listed proposals that Brussels hoped to present, including on transport conditions for animals, before the election but said only that “work continues on Reach”.

“Reach is at a standstill,” said a senior EU diplomat. “There has been a huge growth in the administrative burden. Leaders feel there is too much red tape, too much regulation, and that is suffocating our competitiveness.”

Commission president Ursula von der Leyen has not decided whether to present the proposal on December 20, the last chance to keep her pledge to hit the 2023 deadline, two EU officials said.

If the proposal is pushed until after the EU elections, it may be scrapped altogether as a new commission will take charge.

Another EU official said that changes to the rules, which would restrict or phase out particularly harmful substances, were “highly political” because of the impact on industry.

Many of the chemicals that could be curbed are substances that are crucial to the green transition and the production of semiconductors. An outstanding question is how to regulate polymers, which can be hazardous but are ubiquitous in products from clothing to plastic bags.

“We have to find a balance to achieve all the objectives,” the official said.

Von der Leyen is under pressure from the centre-right EPP group, her own political grouping, to cut the burden of environmental regulations on businesses as they battle steep costs and geopolitical trade tensions.

She has yet to say whether she will run again for commission president, but a successful run would need the backing of both the pro-industry EPP and the French government, which has publicly backed tightening rules on hazardous chemicals.

The debate over the regulation comes amid a wider backlash against the costs of the green transition and its impact on voters ahead of the EU elections.

A proposal on microplastic pollution is also awaiting von der Leyen’s decision, one EU official said.

In written answers to the parliament’s environment committee, Šefčovič said the commission was carrying out “careful analysis” to “reduce health hazards and environmental damage from chemical pollution” while “avoiding too high an administrative burden on European businesses”.

The chemical industry has backed an update of the far-ranging Reach regulation, which currently runs to 849 pages, as long as it is “targeted and efficient”, according to industry body Cefic.

But it has said that the chemicals regulation should not be “driven by judgment instead of scientific evidence” amid fears that the revision would slow approvals for key substances. Several member states led by Denmark are, meanwhile, pushing for a tough Reach proposal.

The commission declined to comment.

European venture capital firm Atomico raises $1.1bn to defy tech slowdown

London-based group founded by Niklas Zennström nears fundraising goal despite tough economic conditions

European venture capital firm Atomico has raised $1.1bn worth of new funding to invest in start-ups, defying a broader slowdown in the tech industry.

The London-based group has raised the fresh money across its new venture and growth funds, according to US regulatory filings, nearing its goal of $1.35bn for both vehicles.

The new capital comes at a time when VCs have found it harder to raise funding as higher interest rates and falling public valuations for start-ups have led investors to retrench.

European venture capital funding for start-ups slowed in the first half of this year, with the total value of such deals down more than 60 per cent compared with the same period in the year prior, according to research from PitchBook.

In the second quarter, the amount invested by European VCs was down 40 per cent year on year to around $20bn. In North America, investment nearly halved over the same period to $42bn.

Atomico was set up in 2006 by Skype founder Niklas Zennström and has established itself as one of Europe’s most prolific tech investors, having backed more than 130 start-ups.

It has invested in companies including Klarna, the buy-now-pay-later financial technology group, and Lilium, an electric flying car start-up. Atomico, which has $5bn under management, previously raised $820mn for its fifth fund in 2020.

“I thought there was such potential in Europe for more companies like Skype to be created. Let’s break the [Silicon Valley] monopoly. We could build the same thing or even better in Europe,” Zennström recently said in a Lunch with the FT interview.

Atomico’s new funding ranks among the largest such hauls this year in Europe. In January, the VC firm Highland Europe closed its new €1bn fund, while last month the London-based software investor Dawn Capital raised $700mn.

Venture capitalists have had to navigate a number of challenges over the past 18 months, including rising inflation. Private market valuations on several prominent start-ups, such as Turkish delivery company Getir, have been dramatically marked down to reflect tough macroeconomic conditions.

Hampering the fundraising market for venture capitalists has also been a dearth of initial public offerings, which are a key route for such managers to exit their investments and generate returns for their institutional backers.

Choppy IPOs last month for a few prominent technology companies in the US, including the online grocery delivery company Instacart, have damped hopes for a rebound and led venture capitalists to advise start-ups to postpone listings until interest rates in the US begin to plateau.

Atomico declined to comment.