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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof.

Veronica Armau

Financial Glossary
No. 1 Word / Expression Catalyst Definition An agent that provokes or speeds significant change or action Context The fire that swept through the Triangle Shirtwaist factory in New York in 1911, killing 146 people, was the catalyst for big improvements in industrial working conditions in America. Its trade unionsare suppressed more aggressively than they ever were in America. Source http://www.economist.com/news/business/21577078-after-dhakafactory-collapse-foreign-clothing-firms-are-under-pressure-improveworking

Trade union

Regulation

An organization of employees within a trade or profession that has the objective of representing its members interests, primarily through improving pay and working conditions 1. Law: Rule based on and meant to carry out a specific piece of legislation (such as for the protection of environment). Regulations are enforced usually by a regulatory agency formed or mandated to carry out the

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It already has building regulations that should have prevented the collapsebut they were not enforced.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau purpose or provisions of a legislation. Also called regulatory requirement 2. General: Principle or rule (with or without the coercive power of law employed in controlling, directing, or managing an activity, organization, or system

Retailer

A business or person that sells goods to the end consumer, as opposed to a wholesaler or supplier, who normally sell their goods to another business

Contractor

Independent entity that agrees to furnish certain number or quantity of goods, material, equipment, personnel, and/or services that meet or exceed stated requirements or specifications, at a mutually agreed upon price and within a

Primark, a low-cost British retailer, and Loblaw, the Canadian owner of the Joe Fresh brand, whose wares had been found in the rubble, have both agreed to pay compensation to victims and their families. Walmart also recently introduced stricter fire-safety audits, and a zero tolerance policy towards contractors caught using unauthorised factories to make

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http://www.economist.com/news/business/21577078-after-dhakafactory-collapse-foreign-clothing-firms-are-under-pressure-improveworking

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau specified timeframe to another independent entity called contractee, principal, or project owner. Also called construction firm Amount of money a wrongdoer is required to pay to a victim (or the victim's beneficiary) as a compensation for the damage or injury caused by his or her actions or inactions. Such damages vary with the kind of damage or injury sustained by the victim Walmart products.

Compensation

Audit

1. Quality control: Periodic (usually every six months) onsiteverification (by a certification authority) to ascertain whether or not a documented quality system is being effectively implemented 2. An unbiased examination and evaluation of the financial statements of an organization. It can be done internally (by employees of the

Primark, a low-cost British retailer, and Loblaw, the Canadian owner of the Joe Fresh brand, whose wares had been found in the rubble, have both agreed to pay compensation to victims and their families. Walmart also recently introduced stricter fire-safety audits, and a zero tolerance policy towards contractors caught using unauthorised factories to make Walmart products.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau organization) or externally (by an outside firm) 3. An IRS examination of a taxpayer's return or other transactions. The IRS performs this examination to verify the accuracy of these filings.

To gripe

To complain about something to someone

Cursory

Performed with haste and scant attention to detail

Critics gripe that the existing system for auditing the complex and constantly changing supply chain is little more than a box-ticking exercise. Scott Nova of the Worker Rights Consortium, a pressure group, says that many audits covered other important issues such as working hours and child labour but, at least until recently, lacked even cursory inspections of factories structural

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau soundness or fire exits. Scott Nova of the Worker Rights Consortium, a pressure group, says that many audits covered other important issues such as working hours and child labour but, at least until recently, lacked even cursory inspections of factories structural soundness or fire exits. The latest meeting took place on April 29th in Germany, with a couple of dozen firms and some NGOs, hosted by GIZ, a German government agency.

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Pressure group

Non-profit and usually voluntary organization whose members have a common cause for which they seek to influence political or corporate decision makers to achieve a declared objective. Whereas interest groups try to defend a cause (maintain the status quo), the pressure groups try to promote it (change the status quo)

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Non-governmental organization (NGO)

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Across-the-board

Private sector, voluntary (and usually non-profit and nonsectarian) organization that contributes to, or participates in, cooperation projects, education, training or other humanitarian, progressive, or watchdog activities. Some of them are accredited by the UN, and some collect donations for distribution among disadvantaged or distressed people 1. General: Action or decision that affects everyone (more or less

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Im not normally one to call for disinvestment in a

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau the same way) within a particular geographical area, market, or organization. 2. Broadcasting: Radio or television program scheduled to be aired for all weekdays, at the same time and on the same station. 3. Securities trading: Stockmarket movement that affects all or most stocks in the same manner country, but you have to ask if it is the right thing to do given the massive across-theboard failure in Bangladesh.

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Binding contract

An agreement in writing between two or more individuals or entities in which a court can impose penalties in the event one party attempts to negate on his or her promise as set forth in the signed document
An article of clothing

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Garment

Worker Rights Consortium sought to rally support for its proposal that foreign clothing giants sign a binding agreement to finance the upgrading of factories in Bangladesh. Spread over a few years, that would amount to only a few cents on the cost of each garment produced, he

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 15 Investment bank Financial institution that provides large amounts of long-term fixed capital, primarily for established firms. Investment banks generally take an equity stake in the borrower firm to exercise some influence on its direction and operations. They also act (often jointly) as financial intermediaries by underwriting the sale of new securities. Called merchant bank in the UK Decomposition, disease, problem calculates. FOR a few tense weeks in 2008, as investment bankexecutives huddled behind the imposing doors of the New York Federal Reserve, Wall Street seemed to be collapsing around them http://www.economist.com/news/leaders/21577370-americaninvestment-banks-dominate-global-finance-once-more-thats-notnecessarily-good

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Rot

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Comeuppance

A deserved rebuke or penalty

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Capitalism

Economic system based (to a varying degree) on private ownership of the factors of production (capital, land, and labor) employed in generation of profits. It is the oldest and most common of all economic

American International Group (AIG) and Citigroup had to be bailed out and the rotseemed to be spreading. Across the Atlantic, European politicians saw this as the timely comeuppance of American capitalism. Across the Atlantic, European politicians saw this as the timely comeuppance of American capitalism.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau systems and, in general, is synonymous with free market system Exceptionally risky and largely unregulated US investment partnership which employs aggressive leverage to multiply gains (or losses) from fluctuations in the prices of financial instruments (bonds, notes, securities). Hedge funds are restricted under US law to less than 100 investors who typically put in a minimum of one million dollars each To seize something swiftly and eagerly

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Hedge fund

Angela Merkel, Germanys chancellor, blamed her peers in Washington for not having regulated banks and hedge funds more rigorously.

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To pounce

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Carcass

A framework or basic structure

Barclays quickly pounced on the carcass of Lehman Brothers, buying its American operations in what Bob Diamond, the head of its investment bank at the time, called an incredible opportunity to gain entry to the American market. Barclays quickly pounced on the carcass of Lehman Brothers, buying its American operations

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau in what Bob Diamond, the head of its investment bank at the time, called an incredible opportunity to gain entry to the American market. Deutsche Bank, a German giant, also expanded to take market sharefrom American rivals. The dominance that American firms had long exerted over global capital markets seemed to have come to an abrupt end.

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Market share

A percentage of total sales volume in a market captured by a brand, product, or company A financial market that works as a conduit for demand and supply of debt and equity capital. It channels the money provided by savers and depository institutions (banks, credit unions, insurance companies, etc.) to borrowers and investees through a variety of financial instruments (bonds, notes, shares) called securities. A capital market is not a compact unit, but a highly decentralized system made up of three major parts: (1) stock market, (2) bond market, and (3) money market. It also works as an exchange for trading existing claims on

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Capital market

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau capital in the form of shares 24 Resurgent
Undergoing or tending to produce resurgence (a rising again into life, activity, or prominence)

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To shed

To lose, to cut

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Asset

1.

Accounting: Something that an entity has acquired or purchased, and that has money value (its cost, book value, market value, or residual value). An asset can be (1) something physical, such as cash, machinery, inventory, land and building, (2) an enforceable claim against others, such as accounts receivable, (3) right, such as copyright, patent, trademark, or (4) an assumption, such as

Almost five years on it is Europes banks that are on their knees and Wall Street that is resurgent. Switzerlands two biggest banks, UBS and Credit Suisse, which were expanding fast before the crisis, are still shedding assets. Switzerlands two biggest banks, UBS and Credit Suisse, which were expanding fast before the crisis, are still shedding assets.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau goodwill 2. Something valuable that an entity owns, benefits from, or has use of, in generating income A means of protection; a defense

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Ward

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To slump

To fall or sink suddenly To drop or slide down suddenly

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Behemoths

Something of monstrous size, power, or appearance

Royal Bank of Scotland, which for a brief time broke into the ranks of the worlds ten-biggest investment banks, remains a ward of the British government. The share of the investment-banking market held by European banks hasslumped by a fifth since the crisis (see our special report), with many of the gains going to Wall Streets surviving behemoths. The share of the investment-banking market held by European banks has slumped by a fifth since the crisis (see our special report), with many of the gains going to Wall Streets

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 30 Revenue The income generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted. Revenue is shown usually as the top item in an income (profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive at net income. Also called sales, or (in the UK) turnover To be an inhibiting or restraining influence on surviving behemoths. JPMorgan Chase, Goldman Sachs and Citigroup alone account for a third of the industrys revenues. http://www.economist.com/news/leaders/21577370-americaninvestment-banks-dominate-global-finance-once-more-thats-notnecessarily-good

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To crimp

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To reassert

Strengthen or make more firm

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Capital requirements

Total financing needs (Longterm capital + Working capital) of a firm arising from its current and future plans

Both, however, face hostile regulations at home and abroad that seem likely to crimptheir global ambitions. The industry over which Wall Street is reasserting itself is very different from the one it dominated half a decade ago. Higher capital requirementsand other regulations, including Americas absurdly complicated

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau (and still unfinished) Dodd-Frank act, are likely to erode the profitability of the industry. Higher capital requirements and other regulations, including Americas absurdly complicated (and still unfinished) Dodd-Frank act, are likely to erodethe profitability of the industry. European banks, in contrast, are continuing to shrink their balancesheetsand limp along with insufficient capital. Deutsche Bank, which had insisted it did not need more equity, has at last faced reality and is raising almost 3 billion ($4 billion).

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To erode

To diminish or destroy by degrees

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Balance - sheets

A condensed statement that shows the financial position of an entity on a specified date (usually the last day of an accounting period)

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Equity

1. In terms of

investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixedincome (bonds) and cash/cashequivalents. These are used in asset allocation planning

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau
to structure a desired risk and return profile for an investor's portfolio 2. A stock or any other security representing an ownership interest 3. On a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as "shareholders' equity"

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Base pay

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Retail banking

The most basic sum of money or hourly rate paid to an employee of a business in compensation for their work efforts or time spent on the job. An employee's base pay is generally strictly financial in nature and does not take into account any other payments, benefits or expense allowances Savings accounts, consumer loans, credit cards, etc., and other such services provided to individuals. Also called consumer banking. See also corporate banking and

First, they are specifying how much banks can pay in bonuses relative to base pay.

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Second, they are trying to force banks to hold more capital and to make it easier to allow them to fail by, for instance,

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau wholesale banking separating their retail deposits from their wholesale businesses. Second, they are trying to force banks to hold more capital and to make it easier to allow them to fail by, for instance, separating their retail deposits from their wholesale businesses.

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Wholesale banking

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Subsidy

Banking services which (in contrast to retail banking) are offered only to government agencies, pension funds, other institutional customers and to corporations with strong balance sheets and sound income statements. These services include cash management, fleet and equipment leasing, large-sum loans, loan participation, merchant banking, and trust services Economic benefit (such as a tax allowance or duty rebate) or financial aid (such as a cash grant or soft loan) provided by a government to (1) support a desirable activity (such as exports), (2) keep prices of staples low, (3) maintain the income of the producers of critical or strategic products, (4) maintain employment levels, or (5) induce investment to reduce unemployment. The basic characteristic of all subsidies is to reduce the market price of

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Switzerland and Britain are making progress in ending the implicit taxpayer subsidy that supports banks that are too big to fail.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau an item below its cost of production. Also called subvention A loan with elevated fees and interest, given to someone with a lower credit score

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Subprime loan

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Bail - outs

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IPO Initial Public Offering

A situation in which a business, individual or government offers money to a failing business in order to prevent the consequences that arise from a business's downfall. Bailouts can take the form of loans, bonds, stocks or cash. They may or may not require reimbursement First offering of a firms' stock (shares) on the stockmarket, at the time it 'goes public.' Because a stockmarket usually values the stock on the expectations of the firm's future growth and income, IPOs are typically an opportunity for the founders and other early investors to make high profits by cashing their stockholdings

Yet it is not obvious that European firms or taxpayers gain from having national banks that are good at packaging and selling American subprime loans. They bear the main risk of future bailouts.

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IPOfees are much higher in America than elsewhere (7% v 4%), mainly because the market is dominated by a few big investment banks.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 44 Buffers A means or device used as a cushion against the shock of fluctuations in business or financial activity Wall Streets new titans say they are already penalised by new international rules that insist they have somewhat bigger capital buffers than smaller banks because they pose a greater risk to economies if they fail. Increasing the capital surcharges for big banks would do more for the stability of the financial system than the thicket of DoddFrank rules ever will. Increasing the capital surcharges for big banks would do more for the stability of the financial system than the thicket of DoddFrank rules ever will. Verizon Wireless, the joint ventureof Verizon Communications VZ 0.15% and Vodafone , will distribute $7 billion to its parent companies next http://www.economist.com/news/leaders/21577370-americaninvestment-banks-dominate-global-finance-once-more-thats-notnecessarily-good

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Surcharges

Amount added on to a usual charge for a specific product, purpose, or service

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Thicket

Something resembling a thicket in density or impenetrability Density

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Joint venture

New firm formed to achieve specific objectives of a partnership like temporary arrangement between two or more firms. JVs are advantageous as a risk reducing mechanism in newmarket penetration, and in

http://www.forbes.com/sites/abrambrown/2013/05/14/verizonwireless-to-pay-a-massive-and-unepexected-7b-dividend-to-owners/

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau pooling of resource for large projects. They, however, present unique problems in equity ownership, operational control, and distribution of profits (or losses). Research indicates that two out of five JV arrangements last less than four years, and are dissolved in acrimony Firm that owns or controls other firms (called subsidiaries) which are legal entities in their own right. Also called parent corporation month, a surprise decision that adds a new wrinkle to the relationship between the owners.

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Parent company

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Dividend

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Majority stake

Verizon Wireless, the joint venture of Verizon Communications VZ 0.15% and Vodafone , will distribute $7 billion to its parent companiesnext month, a surprise decision that adds a new wrinkle to the relationship between the owners. A share of the after-tax profit The dividend will be of a company, distributed to its paid June 25. shareholders according to the number and class of shares held by them The right to control a company The payout is an because you own a group of unexpected move. shares that together are more Verizon, able to than any other shareholder dictate the dividend has. terms because of its

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau The ownership of 50% plus one of the stock in a publiclytraded company. This gives the person or company holding majority stake outright control of the company's operations, especially the election of its board of directors A duty or obligation to pay money, deliver goods, or render service under an express or implied agreement. One who owes, is a debtor or debitor; one to whom it is owed, is a debtee, creditor, or lender Law: An advantage, claim, duty, liability, right, and/or title associated with a tangible or intangible item. Legal claim or right in or over an asset or property is called a security interest Voluntary amalgamation of two firms on roughly equal terms into one new legal entity. Mergers are effected by exchange of the pre-merger stock (shares) for the stock of the new firm. Owners of each pre-merger firm continue as owners, and the resources of majority stake, two weeks ago said it might use cash this year to repay debt.

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Debt

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Interest (in a company)

The payout is an unexpected move. Verizon, able to dictate the dividend terms because of its majority stake, two weeks ago said it might use cash this year to repay debt. Verizon, in effect, is using the dividend to force Vodafone to sell its interest in the company.

http://www.forbes.com/sites/abrambrown/2013/05/14/verizonwireless-to-pay-a-massive-and-unepexected-7b-dividend-to-owners/

http://www.forbes.com/sites/abrambrown/2013/05/14/verizonwireless-to-pay-a-massive-and-unepexected-7b-dividend-to-owners/

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Merger

Verizon Wireless, created in 2000 from a merger of Bell Atlantics and Vodafones mobile businesses, is the largest U.S. carrier, followed by AT&T.

http://www.forbes.com/sites/abrambrown/2013/05/14/verizonwireless-to-pay-a-massive-and-unepexected-7b-dividend-to-owners/

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau the merging entities are pooled for the benefit of the new entity. If the merged entities were competitors, the merger is called horizontal integration, if they were supplier or customer of one another, it is called vertical integration 1. Existing situation whose result is unknown or unpredictable. 2. Possible event that must be prepared for The business of buying and selling commodities; commerce

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Contingency

Stock Exchanges Shift To Contingency Plans As Sandy Wreaks Havoc

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Trading

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Stock exchange

Organized and regulated financial market where securities (bonds, notes, shares) are bought and sold at prices governed by the forces of demand and supply. Stock exchanges basically serve as (1) primary markets where corporations, governments, municipalities, and other incorporated bodies can raise

U.S. trading came to a halt Monday morning and will remain at a standstill Tuesday, as Hurricane Sandy drenches the East Coast. The NYSE and Nasdaq stock exchangehope to reopen Wednesday, after stock and bond exchanges already called off Monday or ended early.

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http://www.forbes.com/sites/abrambrown/2012/10/29/nysenasdaq-to-shut-trading-hurricane-sandy/

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau capital by channeling savings of the investors into productive ventures; and (2) secondary markets where investors can sell their securities to other investors for cash, thus reducing the risk of investment and maintaining liquidity in the system. Stock exchanges impose stringent rules, listing requirements, and statutory requirements that are binding on all listed and trading parties A debt instrument that certifies a contract between the borrower (bond issuer) and the lender (bondholder) as spelled out in the bond indenture. The issuer (company, government, municipality) pledges to pay the loan principal (par value of the bond) to the bondholder on a fixed date (maturity date) as well as a fixed rate of interest for the life of the bond Open and organized marketplace where ownership titles to standardized quantities or volumes of certain commodities (at a specified price and to be

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Bond

The NYSE and Nasdaq stock exchange hope to reopen Wednesday, after stock and bond exchanges already called off Monday or ended early.

http://www.forbes.com/sites/abrambrown/2012/10/29/nysenasdaq-to-shut-trading-hurricane-sandy/

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Commodity exchange

Meanwhile, the CME http://www.forbes.com/sites/abrambrown/2012/10/29/nyseGroup plans to close nasdaq-to-shut-trading-hurricane-sandy/ the trading floor of the Nymex commodities exchange, moving it to

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau delivered on a specified date) are traded by its members. Although samples of the commodities are physically examined and graded, physical delivery of the commodity rarely occurs because the delivery contracts are usually exchanged or closed out (traded out) before their expiration date. Commodity exchanges are divided roughly into three main types: metals exchanges, fuels exchanges, and soft (agricultural) commodity exchanges. Other exchanges deal in currencies and commodity indices Alternate term for income statement. A summary of a management's performance as reflected in the profitability (or lack of it) of an organization over a certain period. It itemizes the revenues and expenses of past that led to the current profit or loss, and indicates what may be done to improve the results Person who serves as a trusted agent or intermediary in commercial negotiations or transactions. Brokers are an electronic platform.

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Earning report

Burger King went ahead this morning with its earnings report.

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Broker

Since then, the NYSE has developed electronic trading to keep brokers orders

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau usually licensed professionals in fields where specialized knowledge is required, such as finance, insurance, and real estate. Their rate of compensation (called brokerage or commission) is determined according to custom of the particular trade or by law, and is computed commonly either as a fixed percentage of the value of the transaction or on a sliding scale (higher the value, lower the percentage) Assumption of control of another (usually smaller) firm through purchase of 51 percent or more of its voting shares or stock 1. Complete proposal (submitted in competition with other bidders) to execute specified job(s) within prescribed time, and not exceeding a proposed amount (that usually includes labor, equipment, and materials). flowing.

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Takeover

Netflix ended up 7% after speculation about a Microsoft takeover bid. Netflix ended up 7% after speculation about a Microsoft takeover bid.

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Bid

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau The bid-receiving party may reject the bid, make a counter offer, or turn it into a binding contract by accepting it 2. Highest price at which prospective buyers are willing to buy commodities, foreign exchange, or securities Commodities or securities contracted for delivery at a stated future date at a specified price. Such a contract (called futures contract) itself can also be traded Middle ground in decision making, between total assent and total disagreement. Consensus depends on participants having shared values and goals, and on having broad agreement on specific issues and overall direction. Consensus implies that everyone accepts and supports the decision, and understands the reasons for making it

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Futures

Futures before closing indicated a lower openwhenever that does occur.

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Consensus

With the earnings season nearly over, more companies have missed consensus expectations for revenues and earnings than have beaten them.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 65 Glum Broodingly morose; Dreary, gloomy In spite of the glum outlook, which has prompted sell-side analysts to sound more bearish than they have for three years, the FTSE Eurofirst 300 index of Europes largest companies on Friday closed at its highest level since March 2008. In spite of the glum outlook, which has prompted sellsideanalysts to sound more bearish than they have for three years, the FTSE Eurofirst 300 index of Europes largest companies on Friday closed at its highest level since March 2008. In spite of the glum outlook, which has prompted sell-side analysts to sound more bearish than they have for three years, the FTSE http://www.ft.com/cms/s/0/8e64f30a-bb06-11e2-b28900144feab7de.html#axzz2TNg9xiqD

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Sell side

Methods, processes, or tools employed in selling, such as catalogs, displays, payment- or transaction-processing equipment, and distribution channels

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FTSE Eurofirst 300

A FTSE index of the share prices of the 300 largest European companies, by market capitalisation

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau Eurofirst 300 index of Europes largest companies on Friday closed at its highest level since March 2008. In spite of the glum outlook, which has prompted sell-side analysts to sound more bearish than they have for three years, the FTSE Eurofirst 300 index of Europes largest companies on Friday closed at its highest level since March 2008. US equity marketshave also been trading at record levels, but that boom has been underpinned by corporate earnings growth. US equity markets have also been trading at record levels, but that boom has been underpinned by corporate earnings growth.

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FTSE International

A company jointly owned by the London Stock Exchange and FT which creates and compiles financial indices showing the performance of stock markets

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Equity market

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To underpin

A market that gives companies a way to raise needed capital and gives investors an opportunity for gain by allowing those companies' stock shares to be traded. Also called stock market Support, substantiate; To strenghten

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 71 Asset class A category of investment such as stocks, bonds, funds, options, futures In Europe, analysts believe the contrast between more troubled corporate performance and upbeat share prices illustrates a wider trend that has seen investors, faced with limited returns from other asset classes, turn to equities. In Europe, analysts believe the contrast between more troubled corporate performance and upbeat share prices illustrates a wider trend that has seen investors, faced with limited returns from other asset classes, turn to equities. It is quite unusual; the market is going up and the main reason is not the earnings revisions, it is really this story about people moving into equities because there are few other http://www.ft.com/cms/s/0/8e64f30a-bb06-11e2-b28900144feab7de.html#axzz2TNg9xiqD

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Equities

Common stocks (ordinary shares) traded in a securities market

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Tail

Limitation of an estate so that it can be passed on only to the specified entities or relatives, such as sons or daughters (direct descendents)

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau alternatives and tail riskshave reduced, said Emmanuel Cau, equity strategist at JPMorgan. What weve seen in markets is that bond proxies, the defensive stocks, have outperformed the cyclical stocks, which is somewhat of an anomaly, said Johannes Jooste, market strategist for Merrill Lynch Wealth Management. What weve seen in markets is that bond proxies, the defensive stocks, have outperformed the cyclical stocks, which is somewhat of an anomaly, said Johannes Jooste, market strategist for Merrill Lynch Wealth Management.

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Proxy

Written authorization from an absent member (or a shareholder, called the 'principal') that confers a limited power of attorney on another person, member, or management of the firm (called 'agent' or 'proxy') to vote on behalf of, and in accordance with the directions of, the principal Shares of stock issued by companies that belong to a market sector that are less vulnerable to economic downturns due to their noncyclical nature. Companies in the food, utilities, healthcare and non-durable goods (soap, toothpaste) industries tend to perform more evenly through good and bad economic times, so their stock prices are more stable than others. Owning defensive stocks in a portfolio can reduce its overall volatility Land and anything fixed,

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Defensive stock

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Property market

Property marketsare

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau (real estate) immovable, or permanently attached to it such as appurtenances, buildings, fences, fixtures, improvements, roads, shrubs and trees (but not growing crops), sewers, structures, utility systems, and walls. Title to real estate normally includes title to air rights, mineral rights, and surface rights which can be bought, leased, sold, or transferred together or separately Capable of maintaining a satisfactorily high level generally strong in the developing world. economics/21578043-our-latest-round-up-house-prices-revealssome-sharp-contrasts-boom-and-gloom

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Buoyant

78

Prone

Having a tendency or inclination : being likely

79

Yardstick

A standard basis of calculation

80

Ratio

Result of one number or quantity divided by another. Ratios are the simplest mathematical (statistical) tools

They have also been buoyant in two big emerging economies included in our compilation for the first time: Brazil (up by 12.8%) and India (10.7%). Housing markets are notoriously prone to boom and bust. To judge whether prices are at sustainable levels we use two yardsticks. One is the ratio of prices to disposable income per person, a measure of

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http://www.economist.com/news/finance-andeconomics/21578043-our-latest-round-up-house-prices-revealssome-sharp-contrasts-boom-and-gloom http://www.economist.com/news/finance-andeconomics/21578043-our-latest-round-up-house-prices-revealssome-sharp-contrasts-boom-and-gloom http://www.economist.com/news/finance-andeconomics/21578043-our-latest-round-up-house-prices-revealssome-sharp-contrasts-boom-and-gloom

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau that reveal significant relationships hidden in mass of data, and allow meaningful comparisons. Some ratios are expressed as fractions or decimals, and some as percentages. Major types of business ratios include (1) Efficiency, (2) Liquidity, (3) Profitability, and (4) Solvency ratio Gross income of an individual or firm from which direct taxes (such as PAYE, income tax) have been deducted Conclusion drawn from the analysis of the 'life cycle cost' of a proposed acquisition, that the purchase is in accord with the resources and long term requirements of the acquirer A mathematical calculation utilized in the Trulia Rent Vs. Buy Index that compares the totals costs of homeownership with the total cost of renting a similar property affordability.

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Disposable income

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Affordability

One is the ratio of prices to disposable incomeper person, a measure of affordability. One is the ratio of prices to disposable income per person, a measure of affordability. The other is the priceto-rent ratio, which is analogous to the price-to-earnings ratio used for equities, with rents going to landlords (or saved by homeowners) equivalent to corporate profits. The other is the price-

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Price to rent ratio

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Price to

Most common measure of

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau earnings ratio how highly a firm's share is valued, it shows the premium the stockmarket puts on the stock of fast growth firms as compared with stock of those with sluggish growth-record. Formula: Market price of each share Earnings per share (EPS) An instrument for or a means of measuring or testing to-rent ratio, which is analogous to the price-to-earnings ratio used for equities, with rents going to landlords (or saved by homeowners) equivalent to corporate profits. If these gauges are higher than their historical averages, property is overvalued; if they are lower, it is undervalued. Housing startsare rising sharply. economics/21578043-our-latest-round-up-house-prices-revealssome-sharp-contrasts-boom-and-gloom

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Gauge

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Housing starts

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Valuation

Number of new single or multifamily housing units, as determined from number of permits issued for construction of residential buildings. Housing starts is an important economic indicator due to its extensive spill over benefits for the other sectors (retail, manufacturing, utilities) of the economy General: Appraising or estimating the worth of something having economic or monetary value
Range of operation

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Scope

In the crisis-stricken euro area the Spanish freefall will continue, judging by stillelevated valuations. They remain

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau undervalued judged by both rents and income, which provides scope for more gains. In a joint operation between the Bank of England and the Treasury, mortgage lenders can already get cheap funding, letting them offer more housing loans. economics/21578043-our-latest-round-up-house-prices-revealssome-sharp-contrasts-boom-and-gloom

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Mortgage

A legal agreement that conveys the conditional right of ownership on an asset or property by its owner (the mortgagor) to a lender (the mortgagee) as security for a loan. The lender's security interest is recorded in the register of title documents to make it public information, and is voided when the loan is repaid in full
Joint ownership of real estate by both lenders and property dwellers. When the property is eventually sold, the owners share in the proceeds, or equity. In the meantime the property occupants benefit from interest and property tax write-offs

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Shared equity

Buyers of new homes who cannot muster a big enough deposit are now also getting help from a sharedequityscheme.

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Guarantee

An assurance for the fulfillment of a condition

And the government will provide partial guarantees on 130 billion ($200 billion) of low-deposit and therefore riskier mortgage loans made

http://www.economist.com/news/finance-andeconomics/21578043-our-latest-round-up-house-prices-revealssome-sharp-contrasts-boom-and-gloom

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau in the three years starting next January. The blight afflicting many European property markets is one more reason why the euro area is bringing up the rear. EACH month The Economist surveys a group of economists and records the average and range of their predictions for GDP growth, consumer prices and current-account balances of 14 economies (see this month's poll). EACH month The Economist surveys a group of economists and records the average and range of their predictions for GDP growth, consumer prices and current-account balancesof 14 economies (see this month's poll). One reason is the fact

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Blight

Something that frustrates plans or hopes; A deteriorated condition

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GDP

The value of a country's overall output of goods and services (typically during one fiscal year) at market prices, excluding net income from abroad

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Current account balance

Difference between a country's total exports of goods and services, remittances from the migrant workers, and aid grants, but not capital inflows or outflows. A component of balance of payments, it is a measure of a country's competitive strengths and indicates the stability of its currency Products and services that are

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Domestic

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau consumption bought and used in the country that makes or offers them that growth is made up of more than just domestic consumption. Economic strategy chosen by a But looser monetary government in deciding policy has partly expansion or contraction in the helped reverse that, country's money-supply. and growth forecasts Applied usually through the are up 0.6 percentage central bank, a monetary points from the policy employs three major beginning of the year. tools: (1) buying or selling national debt, (2) changing credit restrictions, and (3) changing the interest rates by changing reserve requirements. Monetary policy plays the dominant role in control of the aggregatedemand and, by extension, of inflation in an economy Collusion among competitors Oil markets fall under to (1) sell a good or commodity the suspicion of priceat the same price, (2) use the fixing on a global scale same formulas for computing selling prices, (3) offer the same discounts, (4) keep the same price differentials between different order quantities, qualities, or types, and (5) not lower the prices without notifying other colluders

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Monetary policy

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Price - fixing

http://www.economist.com/news/finance-andeconomics/21578108-oil-markets-fall-under-suspicion-price-fixingglobal-scale-libor

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 98 Recession Period of general economic decline, defined usually as a contraction in the GDP for six months (two consecutive quarters) or longer. Marked by high unemployment, stagnant wages, and fall in retail sales, a recession generally does not last longer than one year and is much milder than a depression. Although recessions are considered a normal part of a capitalist economy, there is no unanimity of economists on its causes Period of general economic decline characterized by high unemployment, falling wages, and (usually) low inflation DESPITE greatly improved financial conditions over the past nine months following the pledge by Mario Draghi, head of the European Central Bank, to do whatever it takes to save the single currency, the euro area remains mired in recession. http://www.economist.com/blogs/graphicdetail/2013/05/europeaneconomy-guide

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Contraction

100

Economic reverse

Economic setback

101

Disparity

The condition or fact of being unequal, as in age, rank, or degree; difference

Forecasts from the European Commission in early May showed annual euro-zone GDP shrinking by 0.4% in 2013, following a contraction of 0.6% in 2012. The economic reversewill be much deeper on the periphery of the single-currency club than in its core. The disparity between core and periphery is particularly stark in

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 102 Labor markets The nominal market in which workers find paying work, employers find willing workers, and wage rates are determined Total number of able men and women of working age seeking paid work labour markets. The disparity between core and periphery is particularly stark in labour markets. Unemployment in Germany was just 5.4% of the workforce in March 2013, whereas in Greece and Spain it was around 27% Unemployment in Germany was just 5.4% of the workforce in March 2013, whereas in Greece and Spain it was around 27% These figures overstate the blight of youth unemployment because many young people are in full-time education and so do not count as part of the labour force(the denominator of the unemployment rate) These figures overstate the blight of youth unemployment http://www.economist.com/blogs/graphicdetail/2013/05/europeaneconomy-guide

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Unemployment

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Workforce

Total number of a country's population employed in the armed forces and civilian jobs, plus those unemployed people who are actually seeking paying work Number of individuals in an economy who either are employed or are seeking employment

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Labor force

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Denominator (from denomination)

Face value (par value) of a coin, paper currency, stamp, stamp paper, etc., as printed,

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau embossed, engraved, perforated, or stamped on it because many young people are in full-time education and so do not count as part of the labour force (the denominator of the unemployment rate) State of being disconnected; But they highlight the separation disjuncture between northern and southern Europe. A current account deficit Current-account decreases a country's net deficits which had foreign assets by the ballooned in the first corresponding amount decade of the euro have narrowed The budget balance is the Primary budget difference between balances(ie, excluding government revenues (e.g., interest payments)a tax) and spending. A positive crucial measure in balance is called a government determining the budget surplus, and a negative sustainability of public balance is called a government financesare also on budget deficit. the mend. A payment amount Primary budget determined by the interest balances (ie, excluding rate on an account. As a interest payments)a borrower, an interest payment crucial measure in represents the rate charged for determining the being lent funds. As an sustainability of public investor, interest payments financesare also on represent income on earned the mend. on cash accounts or fixed and

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Disjuncture

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Current account deficit

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Primary budget balance

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Interest payment

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 111 Sustainability variable rate securities Economics: Continued development or growth, without significant deterioration of the environment and depletion of natural resources on which human well-being depends. This definition measures income as flow of goods and services that an economy can generate indefinitely without reducing its natural productive capacity. See also sustainable development Collection of taxes from those who benefit from the provision of public goods by the government, and the use of those tax funds toward production and distribution of the public goods Amount by which a government's total expenditure exceeds its total revenue, excluding interest payments on its debt Aggregate value of bonds and other debt securities issued by a government (or one or more of its authorized agencies) backed by its full faith and Primary budget http://www.economist.com/blogs/graphicdetail/2013/05/europeanbalances (ie, excluding economy-guide interest payments)a crucial measure in determining the sustainability of public financesare also on the mend.

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Public finance

113

Primary deficit

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Government debt

Primary budget balances (ie, excluding interest payments)a crucial measure in determining the sustainability of public financesare also on the mend. Indeed the highest primary deficitin the EU this year will be run by Britain (of 3.9% of GDP). Despite these improvements, government debtlevels are worryingly high in the

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 115 Privately held debt credit The amount of debt held by private investorsm foreigners periphery. Despite a bond buyback late last year and the writedown of over half of privately held debt in March 2012, Greek debt will reach 175% of GDP by the end of this year, an untenable burden. Investors think equities are the best bet in times of expansive monetary policy. http://www.economist.com/blogs/graphicdetail/2013/05/europeaneconomy-guide

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Expansive monetary policy

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S&P 500 index

A type of fiscal policy focused on increasing the size of a country's money supply in relation to demand, taking advantage of the increased capital to announce tax cuts and higher government expenditures to spur economic growth. Reducing interest rates and allowing increased discount window lending are also indirect methods of expansionary monetary policy. See also contractionary monetary policy A stock market index tracking 500 companies in various industries with a large amount of market capitalization. It is a capitalization-weighted index, meaning that stocks with higher market caps affect the average more

http://www.economist.com/news/finance-andeconomics/21578100-investors-think-equities-are-best-bet-timesexpansive-monetary

The Dow Jones Industrial Average and the S&P 500 indexhave each notched up record highs so far this year, with investors enjoying double-digit

http://www.economist.com/news/finance-andeconomics/21578100-investors-think-equities-are-best-bet-timesexpansive-monetary

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 118 Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest US companies are performing. There are hundreds of investment indexes around the world for stocks, bonds, currencies, and commodities An index tracking 600 publiclytraded companies based in one of 18 EU countries. The index includes small cap, medium cap, and large cap companies. The countries represented in the index are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Holland, Iceland, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland, and the UK. An international organization that seeks to maintain stability in the global economy. It does this primarily by monitoring the balance of payments for gains. The Dow Jones Industrial Averageand the S&P 500 index have each notched up record highs so far this year, with investors enjoying double-digit gains. http://www.economist.com/news/finance-andeconomics/21578100-investors-think-equities-are-best-bet-timesexpansive-monetary

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Stoxx Europe 600 index

European shares, as measured by the Stoxx Europe 600 index, have reached their highest levels in almost five years.

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IMF International Monetary Fund

Last month the IMF lowered its globalgrowth forecast for the year from 3.5% to 3.3%.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau different countries and implementing restructuring agreements with countries in need of help New market structures arising from digitalization, deregulation, globalization, and open-standards, that are shifting the balance of economic power from the sellers to the buyers. In such markets information is freely and widely available, and is almost instantly accessible. To compete in these scenarios, a firm must adopt new processes based information technologies, and must keep a close watch on the price, quality, and convenience trends To increase suddenly. To improve one's performance suddenly, especially in bettering one's standing in a competition Private (shareholder-owned) or public (government-owned) organizations that, broadly speaking, act as a channel between savers and borrowers of funds (suppliers and consumers of capital)

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Emerging - market

If global growth prospects were improving, one would expect emergingmarketstockmarkets to be performing well, too; in fact, they have been flat this year (see chart).

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Surge

Nor is the rally due to a surgein profits.

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Financial company

If financial companiesare excluded, the gain was just 2.6%.

http://www.economist.com/news/finance-andeconomics/21578100-investors-think-equities-are-best-bet-timesexpansive-monetary

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 124 Management of expectations A formal process to continuously capture, document, and maintain the content, dependencies, and sureness of the expectations for persons participating in an interaction, and to apply the information to make the interaction successful First-quarter results from firms in the S&P 500 were better than expected, but they usually are (thanks to careful management of expectations) and they still showed only a 5.1% increase in profits compared with the same period of 2012. If financial companies are excluded, the gain was just 2.6%. Perhaps the most popular explanation relates to the commitment of the Bank of Japan (BOJ) to eliminate deflation with the help of a big increase in the monetary base. The banks actions have encouraged hopes that Japans economy might emerge from its doldrums. Abenomicshas already boosted growth. http://www.economist.com/news/finance-andeconomics/21578100-investors-think-equities-are-best-bet-timesexpansive-monetary

125

Monetary base

Sum of a country's liquid financial assets comprising of currency (notes and coins) in circulation held by public, and by financial institutions in their vaults and as reserve requirement with the central bank A state of inactivity and stagnation

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126

Doldrum

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127

Abenomics

refers to the economic policies advocated by Shinz Abe, the current Prime Minister of

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau Japan. It consists of monetary policy, fiscal policy, and economic growth strategies to encourage private investment To adjust or calculate so as to reflect a rate that is based on a full year. To convert (a rate of interest) to an annual rate when it is quoted for a period of less than a year Income earned from a bond. Where the bond pays periodic interest, it equals the interest collected. Where a bond is sold at a discount on the par value, it equals the difference between the purchase price and amount received on bond's maturity date Bank asset affected by changes in credit quality, interest rates, repricing opportunities, etc.

128

Annualize

129

Bond yield

Government data released on May 16th showed that GDP rose by 0.9% in the first quarter, an annualised growth of 3.5%. Such programmes push down bond yields and encourage investors to buy risky assets.

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130

Risk asset

131

Offset

Bank asset affected by changes in credit quality, interest rates, repricing opportunities, etc

132

Quantitative easing

an unconventional monetary policy used by some central

Such programmes push down bond yields and encourage investors to buy risky assets. The scale of the BOJs programme may also have offset investors concerns that the Federal Reserve could slow its quantitative easing (QE) purchases. The scale of the BOJs programme may also

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau banks to stimulate their economy. The central bank creates money which it uses to buy government bonds and other financial assets, in order to increase the money supply and the excess reserves of the banking system; this also raises the prices of the financial assets bought (which lowers their yield). Action by a central bank to reduce interest rates and boost money supply as a means to stimulate economic activity have offset investors concerns that the Federal Reserve could slow its quantitative easing (QE)purchases. expansive-monetary

133

Monetary easing

134

Fiscal tightening

Strategy used when the economy is growing quickly and is in danger of overheating

135

Risk premium

Investing: (1) Difference between a risk-free return (such as from government bonds) and the total return from a risky investment (such as equity stock). (2) Additional return or rate of interest

Investors may have taken heart, too, from monetary easingelsewhere: many central banks have cut rates in recent weeks, including the euro zones. Judging by the latest retail-sales data, consumption has held up well in America despite the recent fiscal tighteningthere. In relative terms, the convention is to compare the valuation of equities with that of government bonds or cash, and calculate the risk premium(the

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau (above the market interest rate) an investor requires for investing in a proposition or venture. Also called price of risk Securities: Amount by which a security is selling at above its par value higher return investors demand for putting money into the more volatile stockmarket). A weighted average of those models suggests that the current premium is around 5.4 percentage points, about as high as it was after the bear market of the mid-1970s and close to the recent share-price bottom in early 2009. A weighted average of those models suggests that the current premium is around 5.4 percentage points, about as high as it was after the bear marketof the mid1970s and close to the recent share-price bottom in early 2009. That makes equities look like a bargain.

136

Premium

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Bear market

138

Bargain

Period in which prices of securities or commodities fall by 20 percent or more. During such periods (1) investment interest is generally limited, (2) concerns about the state of the economy abound, and (3) dealers or speculators are more inclined in selling their investment portfolios than to increase their risk by holding Such an agreement where one of the parties thinks the price is very favourable. On a stock exchange, an agreement to buy or sell shares.

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http://www.economist.com/news/finance-andeconomics/21578100-investors-think-equities-are-best-bet-timesexpansive-monetary

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 139 Equity returns (return on equity) ROE Measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate earnings growth. A government bond is a bond issued by a national government denominated in the country's own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds. The annual income earned from an investment, expressed usually as a percentage of the money invested That valuation is well above the historical average, suggesting lower, not higher, equity returnsfrom here. http://www.economist.com/news/finance-andeconomics/21578100-investors-think-equities-are-best-bet-timesexpansive-monetary

140

Government bond

Equities may perform much better than government bonds, but only because those bonds will provide dreadful returns. The New York Fed researchers found that the main reason for the high risk premium was the exceptionally low level of yields. In particular, a 17.8% fall in the tradeweighted dollarbetween March 2009 and July 2011 boosted the value of foreign profits.

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141

Yield

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142

Trade weighted dollar

A measurement of the foreign exchange value of the U.S. dollar compared against certain foreign currencies. Trade-weighted dollars give importance - or weight - to currencies most widely used in

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau international trade, over comparing the value of the U.S. dollar to all foreign currencies To cause to spread thin or scatter and gradually vanish

143

Dissipating to dissipate

144

Boost

145

Benchmark

146

Unregulated market

The dollar has since stabilised on a tradeweighted basis, and with global trade expected to grow only slowly, the boost from foreign profits may be dissipating. Impulse The dollar has since stabilised on a tradeweighted basis, and with global trade expected to grow only slowly, the boost from foreign profits may be dissipating. Standard, or a set of standards, IT IS a lesson of the used as a point of reference past five years that for evaluating performance or benchmarks in level of quality. Benchmarks unregulated markets may be drawn from a firm's can fall victim to the own experience, from the incentives they create. experience of other firms in the industry, or from legal requirements such as environmental regulations A market structure in which IT IS a lesson of the the distribution and costs of past five years that goods and services, along with benchmarks in

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau the structure and hierarchy between capital and consumer goods, are coordinated by supply and demand unhindered by external regulation or control by government or monopolies A type of mortgage that is normally made out to borrowers with lower credit ratings. As a result of the borrower's lowered credit rating, a conventional mortgage is not offered because the lender views the borrower as having a largerthan-average risk of defaulting on the loan Interest rate at which the London banks are willing to offer funds in the inter-bank market. LIBOR is the average of rates which five major London banks are willing to lend $10 million for a period of three or six months, and is the benchmark rate for setting interest rates for adjustablerate loans and financial instruments Alteration of the original shape (or other characteristic) of an object, image, sound, unregulated marketscan fall victim to the incentives they create.

147

Subprime mortgage

Subprime mortgagesbundled into securities often won high scores from ratings agencies that stood to profit in a busy market.

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148

London Interbank Offered Rate (LIBOR)

The London Interbank Offered Rate, LIBOR, was sometimes underestimated by banks which were cast in a healthier light by lower interest rates.

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149

Distort - distortion

The commission declared that it feared oil companies had

http://www.economist.com/news/finance-andeconomics/21578108-oil-markets-fall-under-suspicion-price-fixingglobal-scale-libor

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau waveform or other form of information or representation. Distortion is usually unwanted, and often many methods are employed to minimize it in practice Petroleum in its unprocessed form colluded to distort benchmark prices for crude, oil products and biofuels.

150

Crude

151

Derivative

152

Barrel

Financial markets: Contract to buy or sell an asset or exchange cash, based on a specified condition, event, occurrence, or another contract A hollow cylindrical container, traditionally made of vertical wooden staves and bound by wooden or metal hoops. Traditionally, the barrel was a standard size of measure referring to a set capacity or weight of a given commodity.

The commission declared that it feared oil companies had colluded to distort benchmark prices for crude, oil products and biofuels. Futures and derivatives markets are also built on the price of the underlying physical commodity. At least 200 billion barrels a year, worth in the order of $20 trillion, are priced off the Brent benchmark, the worlds biggest, according to Liz Bossley, chief executive of Consilience, an energy-markets consultancy. Each day Plattss reporters establish a

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153

Bid

General: Indication of willingness to buy or sell goods

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau or services or to undertake a task, at a specific price and within a specific timeframe reference price by following the value of public bids and offers during a half-hour window before a set time4:30pm in London, for example. Each day Plattss reporters establish a reference price by following the value of public bids and offers during a half-hour window before a set time4:30pm in London, for example. global-scale-libor

154

Offer

155

Market On Close (MOC)

Voluntary but conditional promise submitted by a buyer or seller (offeror) to another (offeree) for acceptance, and which becomes legally enforceable if accepted by the offeree. An offer (unlike a solicitation) is a clear indication of the offeror's willingness to enter into an agreement under specified terms, and is made in a manner that a reasonable person would understand its acceptance will result in a binding contract. Offers normally include a closing date, otherwise a period of 30 days after the date of offer is commonly assumed An order to buy or sell a security at the best price available as close as possible to the closing of an exchange

http://www.economist.com/news/finance-andeconomics/21578108-oil-markets-fall-under-suspicion-price-fixingglobal-scale-libor

This Market-onClose (MOC)method is based on the idea that using published, verifiable deals to set the price is more

http://www.economist.com/news/finance-andeconomics/21578108-oil-markets-fall-under-suspicion-price-fixingglobal-scale-libor

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau reliable than having reporters ring around their pals, who might be tempted to talk their own books. We are not aware of any evidence that our price assessments are not reflective of market value, it says, before declaring that it stands behind its method. The International Organisation of Securities Commissions (IOSCO), a grouping of financial regulators, said last year that the potential for false reporting is not mere conjecture. The International Organisation of Securities Commissions (IOSCO), a grouping of financial regulators, said last year that the potential for false reportingis not mere conjecture. The authorities should

156

Market value

The highest estimated price that a buyer would pay and a seller would accept for an item in an open and competitive market

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157 Financial regulator- A form of regulation or financial regulation supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. This may be handled by either a government or non-government organization 158 False reporting A crime governed by federal and state laws, which vary by state, involving a person who, with intent to deceive, knowingly makes a false statement that is material to the criminal investigation of a crime and makes the statement to a peace officer or law enforcement official 159 To scour for To look carefully and

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau somebody or something thoroughly in something for someone or something be scouring firms books for trades within the half-hour window that are offset in the futures markets. The authorities should be scouring firms books for trades within the half-hour window that are offset in the futures markets. They should also check shipping registers to see that cargoes have actually changed hands, or whether deals are fictitious. Our memberswill be incandescent if what many have long suspectedthat is price fixingproves to be true, said Robert Downes, of the Forum of Private Business, a British group that backs small firms. Meanwhile, a reform of the oil markets is unlikely to come anytime soon. economics/21578108-oil-markets-fall-under-suspicion-price-fixingglobal-scale-libor

160

Offset

Accounting: To cancel an accounting entry with an equal but opposite entry

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161

Shipping

162

Incandescent

The process of transporting an item, usually through the mail. Shipping is a very basic, common way of getting an item from one place to another, or from one person to another Informal extremely angry; raging

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163

Reform

Action to improve social or economic conditions without radical or revolutionary change

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 164 To lobby The act of attempting to influence business and government leaders to create legislation or conduct an activity that will help a particular organization. People who do lobbying are called lobbyists Darkened or clouded with sediment Naturally-occurring inorganic (neither of animal nor of vegetable origin) homogenous substance with characteristic chemical composition and physical properties that make it identifiable, useful, and/or valuable. Minerals, in general, are obtained through mining, have crystalline structure, and have names ending in -ite. Strictly speaking, coal, natural gas, and petroleum (all organic substances) are not minerals Procedure used by government assessors to determine the value of a property, or the income of a person or entity, in order to charge taxes or to levy on the orders of a court Despite IOSCOs fears of price distortion, it backed away from recommending changesafter fierce lobbying from the industry. Murky Minerals Murky Minerals http://www.economist.com/news/finance-andeconomics/21578108-oil-markets-fall-under-suspicion-price-fixingglobal-scale-libor

165 166

Murky Mineral

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167

Assessment

An expert panel led by Kofi Annan, a former UN secretary-general, looked at five deals struck between 2010 and 2012, and compared the sums for which government-owned

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau mines were sold with independent assessments of their value. And these deals are just a small subset of all the bargains struck, says the report, which Mr Annan presented in Cape Town, South Africa, on May 10th.

168

Subset

169

ENRC

In mathematics, especially in set theory, a set A is a subset of a set B if A is "contained" inside B. A and B may coincide. The relationship of one set being a subset of another is called inclusion or sometimes containment. Correspondingly, set B is a superset of A since all elements of A are also elements of B Eurasian Natural Resources Corporation

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170

Waive

To give up (a claim or right) voluntarily; relinquish

For instance ENRC, a London-listed Kazakh mining firm, waived its rights to buy out a stake in a mining enterprise owned by Gcamines, Congos state miner, only to acquire it for $75m from a company owned by Dan Gertler, an Israeli businessman, which had paid $15m for it just months earlier. For instance ENRC, a London-listed Kazakh mining firm, waived

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http://www.economist.com/news/business/21578076-how-bad-itmurky-minerals

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau its rights to buy out a stake in a mining enterprise owned by Gcamines, Congos state miner, only to acquire it for $75m from a company owned by Dan Gertler, an Israeli businessman, which had paid $15m for it just months earlier. For instance ENRC, a London-listed Kazakh mining firm, waived its rights to buy outa stake in a mining enterprise owned by Gcamines, Congos state miner, only to acquire it for $75m from a company owned by Dan Gertler, an Israeli businessman, which had paid $15m for it just months earlier. The widespread use by mining firms of offshore investment vehicles as conduits for profits creates scope for tax

171

Buy out

To acquire in exchange for money or its equivalent; purchase

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Offshore

Any country other than one's own. Same as foreign

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 173 Conduit avoidance. A means by which something is The widespread use transmitted by mining firms of offshore investment vehicles as conduits for profits creates scope for tax avoidance. Very bad Even by the standards of very poor countries, Congo scores abysmally. A person who wields power The country was oppressively; a tyrant robbed into paralysis under Mobutu Sese Seko, the leopardhatted despot who ruled from 1965 to 1997. To destroy (land and buildings) It was then scorched by or as if by fire so as to leave by two civil wars nothing salvageable to an which left untold enemy army millions dead. tailings, gravel, aggregate, etc., ENRC raised eyebrows or other residue of a product, in Congo in 2010, as in mining; leavings when it bought a copper and cobalt tailings project near the town of Kolwezi that the government had controversially stripped from its previous owners, http://www.economist.com/news/business/21578076-how-bad-itmurky-minerals

174

Abysmal

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Despot

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To scorch

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178

Tailing

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau Canadas First Quantum Minerals. In January, after the IMF kerfuffle, Mr Ponyo said he would rein in the stateowned mining companies and increase transparency in the industry. In January, after the IMF kerfuffle, Mr Ponyo said he would rein in the stateowned mining companies and increase transparency in the industry. We must avoid situations where were not publishing our mining contracts, where our state assets are undervalued, and where the government doesnt know what its state mining companies are doing, he told miners and officials at a conference in January.

179

Kerfuffle

Disorder, agitation

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Industry

181

State

The manufacturing or technically productive enterprises in a particular field, country, region, or economy viewed collectively, or one of these individually. A single industry is often named after its principal product; for example, the auto industry Geographical area within defined territorial boundaries and with a distinct set of political institutions, ruled by a government through laws conformance to which is imposed by force (if necessary) in the common interest. Whereas the term 'state' emphasizes a self-governing legal and political entity, 'nation' emphasizes a particular community of people with shared culture and

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau history, and 'country' the physical dimensions and boundaries of a geographical area A senate is a deliberative assembly, often the upper house or chamber of a legislature or parliament. There have been many such bodies in history, since senate means the assembly of the eldest and wiser members of the society and ruling class

182

Senate

183

Entity

A person, partnership, organization, or business that has a legal and separately identifiable existence

On May 20th, a day before Tim Cook, the companys boss, was scheduled to appear in front of the Senates Permanent Subcommittee on Investigations, the committees investigators unveiled a report that claimed Apple had used a complex web of offshore entities to pay little or no tax on tens of billions of dollars it had earned outside America. On May 20th, a day before Tim Cook, the companys boss, was scheduled to appear in front of the Senates Permanent Subcommittee on Investigations, the committees investigators unveiled a report that claimed

http://www.economist.com/blogs/schumpeter/2013/05/apples-taxarrangements

http://www.economist.com/blogs/schumpeter/2013/05/apples-taxarrangements

Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau Apple had used a complex web of offshore entities to pay little or no tax on tens of billions of dollars it had earned outside America. According to the report, between 2009 and 2012 Apple avoided paying tax in America on at least $74 billion of profits by setting up subsidiaries in Ireland that had no purpose other than to ensure these profits were shielded from tax. One Irish subsidiary that the investigators singled out is Apple Operations International (AOI), which had not filed a tax returnin Ireland, America or any other country for the past five years. Although it was incorporated in Ireland, AOI kept its bank accounts and

184

To shield

To cut off from observation

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185

Tax return

Standard form provided by the tax authorities on which a taxpayer reports taxable income with permitted deductions and exemptions, and computes his or her tax liability

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186

Incorporate

To form a corporation under state regulations

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau other financial matters in America. Although it was http://www.economist.com/blogs/schumpeter/2013/05/apples-taxincorporated in arrangements Ireland, AOI kept its bank accountsand other financial matters in America. Given the differing ways in which both countries assess whether a firm is liable for tax, this allowed Apple to avoid paying tax on AOIs income of $30 billion between 2009 and 2012. Apple was clearly anticipating a hostile reception on Capitol Hill. Ahead of Mr Cooks appearance, the company released a copy of the testimony he plans to deliver to the subcommittee. Among other things, this notes that Apple paid nearly $6 billion in taxes in America in http://www.economist.com/blogs/schumpeter/2013/05/apples-taxarrangements

187

Bank account

188

Tax liability

A financial account with a banking institution, recording the financial transactions between the customer and the bank and the resulting financial position of the customer with the bank Debt to a government incurred by a tax payer as accrued or assessed taxes. Tax liability is shown as a short-term liability in financial statements, and takes precedence over all other liabilities

189

Testimony

A solemn attestation as to the truth of a matter

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190

Fiscal year

1. UK: Twelve-month period covered by the government's yearly budget. Also called a

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau tax year. 2. USA: Alternative term for financial year its 2012 fiscal yearand claims that this probably makes the firm the countrys biggest corporate taxpayer. And it strongly objects to the implication that AOI is nothing more than a shell company.

191

Shell company

192

Tax system

Non-trading firm formed (and often listed on a stock exchange) as a vehicle to (1) raise funds before starting operations, (2) attempt a takeover, (3) for going public, or (4) as a front for an illegal business A legal system for assessing and collecting taxes

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193

Jurisdiction

Power or right of a legal or political agency to exercise its authority over a person, subject matter, or territory

Also responding to the report Irelands deputy prime minister, Eamon Gilmore, on May 21st vigorously rejected the charge that his country encouraged companies to set up operations there to avoid tax, and instead blamed the tax systems in other jurisdictions. Also responding to the report Irelands deputy prime minister, Eamon Gilmore, on May 21st

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau vigorously rejected the charge that his country encouraged companies to set up operations there to avoid tax, and instead blamed the tax systems in other jurisdictions. Whatever the outcome of the Senate's committee hearing, the issue of corporate taxationis likely to remain a controversial one. For its part Apple, which holds more than $100 billion of cash abroad, is likely to get further scrutiny. In his testimony, Mr Cook will call for an overhaul of the tax regime in America to encourage companies to repatriate more money. Eric Schmidt, Googles executive chairman, has urged policymakers to consider reforming

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Corporate taxation

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Scrutiny

A levy placed on the profit of a firm, with different rates used for different levels of profits. Corporate taxes are taxes against profits earned by businesses during a given taxable period A searching study, inquiry, or inspection; a close watch

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Overhaul

Overtake

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Policy

Eric Schmidt, Googles executive chairman, has urged policymakers to consider reforming international tax law, too

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau international tax law, too. It is also a laboratory for applying business principles to the public sector.

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Public sector

The part of national economy providing basic goods or services that are either not, or cannot be, provided by the private sector. It consists of national and local governments, their agencies, and their chartered bodies. The public sector is one of the largest sectors of any economy; in the US, for example, it accounts for about 20 percent of the entire economy Business firm in the private (non-public) sector of an economy, controlled and operated by private individuals (and not by civil servants or government-employees). Used also as an alternative term for private limited company Short-term arrangement in which several firms (from the same or different industry sectors or countries) pool their financial and human resources to undertake a large project that benefits all members of the group. A consortium lasts

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Private company

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Consortium

The hospital is run by a private company, Capio, which in turn is run by a consortium of private-equity funds, including Nordic Capital and Apax Partners. The hospital is run by a private company, Capio, which in turn is run by a consortium of private-equity funds, including Nordic Capital and Apax Partners.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau for a period that is usually shorter than that for a syndicate Money invested in firms which have not 'gone public' and therefore are not listed on any stock exchange. Private equity is highly illiquid because sellers of private stocks (called private securities) must first locate willing buyers. Investors in private equity are generally compensated when: (1) the firm goes public, (2) it is sold or merges with another firm, or (3) it is recapitalized A fee named as a matter of form, being trifling in comparison with the actual value To designate for a specified purpose or action Termination of activity at a facility The core philosophy behind lean is that customers do not pay for mistakes or waste but value. As such, companies need to increase the value of their products or services in order to maximize profit. Lean

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Private equity

The hospital is run by a private company, Capio, which in turn is run by a consortium of private-equity funds, including Nordic Capital and Apax Partners.

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Nominal charge

203

To slate

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Closure

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Lean management

Treatment is free, after a nominal charge which is universal in Sweden. In the mid-1990s St Gorans was slated for closure. In the mid-1990s St Gorans was slated for closure. St Gorans is now a temple to lean management

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau management offers an opportunity to drive up value and promote continuous improvement To open or prepare for others to follow; to originate or take part in the development of

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To pioneer

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Chief executive

The person with overall responsibility for the efficient running of a company, organization, etc.

208

Budget airline

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Institutional

That uses charter and/or scheduled flights to offer bargain-basement fares Relating to, formulated by, or managed by an institution General: Productivity of a machine, procedure, process, or system over a unit period, expressed in a figure-of-merit or a term meaningful in the given context, such as output per hour, cash turnover, number of orders shipped

An idea that was pioneered by Toyota in the 1950s and has since spread from carmaking to services and from Japan to the rest of the world. Britta Wallgren, the hospitals chief executive, says she never heard the term lean when she was at medical school (she is an anaesthetist by training). St Gorans is the medical equivalent of a budget airline. The decor is institutional. Everything is done to maximise throughput.

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Throughput

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 211 To liken To compare Ms Wallgren likens it to a hare that sets the pace of a dog race. Ms Wallgren likens it to a hare that sets the pace of a dog race. Sweden has gone further than any other European country in embracing the purchaser-provider splitthat is, in using government money to buy public services from whichever providers, public or private, offer the best combination of price and quality. Private firms provide 20% of public hospital care in Sweden and 30% of public primary care. The firm performs 10% of all Swedish cataract operations, and much more besides. Capitalists under the bed http://www.economist.com/news/business/21578020-swedenleading-world-allowing-private-companies-run-public-institutionshospital http://www.economist.com/news/business/21578020-swedenleading-world-allowing-private-companies-run-public-institutionshospital http://www.economist.com/news/business/21578020-swedenleading-world-allowing-private-companies-run-public-institutionshospital

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Hare

Any of various swift long-eared lagomorph mammals The term purchaser-provider split refers to a model of public service delivery where the functions of paying for and delivering goods and services are separated

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Purchaser provider split

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Primary care

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Cataract

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Capitalist

First contact in a health problem situation, traditionally involving a family doctor or general practitioner, leading to a course of action in resolving the situation A clouding of the lens of the eye or its surrounding transparent membrane that obstructs the passage of light. It needs surgery A person who favors capitalism

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 217 To recoil To shrink back physically or emotionally Europeans instinctively recoil from private companies making money from health care. Even in Sweden, the mood has grown more hostile since some private-equity companies were embroiled in scandals at nursing homes. The public-health business is hardly alluring for investors, either. Leif Karnstrom, a senior figure at Stockholm County Council, is excited about a new system of outcome-based health care that allows him to claim his money back if providers perform poorly. They have more incentive to make services more efficient, since they typically keep some of http://www.economist.com/news/business/21578020-swedenleading-world-allowing-private-companies-run-public-institutionshospital

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Embroiled

To be involved in conflict or difficulties

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To allure

To entice by charm or attraction

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Senior

General: Higher ranking in action, authority, claim, repayment, or security

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Service

A valuable action, deed, or effort performed to satisfy a need or to fulfill a demand

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 222 Savings The excess of income over consumption expenditures often used in plural the savings. They have more incentive to make services more efficient, since they typically keep some of the savings. The ultimate endorsement http://www.economist.com/news/business/21578020-swedenleading-world-allowing-private-companies-run-public-institutionshospital

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Endorsement

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Pariah state

Trading: Signing a legal document in a legal capacity. Endorsement of any negotiable instrument (bill of exchange, bill of lading, delivery order, or other document of title) means the (1) endorser guarantees that he or she is the lawful owner of the instrument, (2) knows of no defect in it, (3) has received it in good faith for value received, and is (4) legally capable of transferring it to another party in the normal course of business A nation whose conduct is considered to be out of line with international norms of behavior by either the rest of the international community (such as the United Nations), or by some of its most powerful states. A pariah state may face International isolation, sanctions

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WHEN Thein Sein was picked by his fellow generals to lead Myanmar a little over two years ago, the country was a pariah state, ostracised by the West, shut off from the mainstream of Asian prosperity

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau or even an invasion by nations who find its policies or actions unacceptable. The term is closely related to the phrase "Rogue state". To exclude from a group by common consent and ground down after decades of brutal, corrupt and inept military rule. WHEN Thein Sein was picked by his fellow generals to lead Myanmar a little over two years ago, the country was a pariah state, ostracised by the West, shut off from the mainstream of Asian prosperity and ground down after decades of brutal, corrupt and inept military rule. WHEN Thein Sein was picked by his fellow generals to lead Myanmar a little over two years ago, the country was a pariah state, ostracised by the West, shut off from the mainstream of Asian prosperity and ground down after decades of brutal, corrupt and inept military rule. http://www.economist.com/news/leaders/21578395-itscommitment-reform-has-been-impressive-stern-tests-lie-aheadmyanmar-ultimate

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To ostracize

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Mainstream

Products and services which are readily available to and appealing to the general public, as opposed to being of interest only to a very specific subset of the public

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau 227 Prosperity Stage in an economic cycle in which conditions of relatively low-unemployment and high total income prevail, leading to high purchasing power (if the inflation rate is kept low) WHEN Thein Sein was picked by his fellow generals to lead Myanmar a little over two years ago, the country was a pariah state, ostracised by the West, shut off from the mainstream of Asian prosperity and ground down after decades of brutal, corrupt and inept military rule. The IRS has behaved badly, but the real villain is Congress http://www.economist.com/news/leaders/21578395-itscommitment-reform-has-been-impressive-stern-tests-lie-aheadmyanmar-ultimate

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IRS Internal Revenue Service

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To quell

The Internal Revenue Service (IRS) is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue. The IRS is responsible for collecting taxes and the interpretation and enforcement of the IRC (Internal Revenue Code) To thoroughly overwhelm and reduce to submission or passivity

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WHEN Barack Obama fired the acting head of the Internal Revenue Service (IRS) earlier this month, he doubtless hoped to

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau quell the hullabaloo about its seemingly partial treatment of applications for taxexempt status from conservative groups. WHEN Barack Obama fired the acting head of the Internal Revenue Service (IRS) earlier this month, he doubtless hoped to quell the hullabaloo about its seemingly partial treatment of applications for taxexempt status from conservative groups. WHEN Barack Obama fired the acting head of the Internal Revenue Service (IRS) earlier this month, he doubtless hoped to quell the hullabaloo about its seemingly partial treatment of applications for taxexempt status from conservative groups. WHEN Barack Obama fired the acting head of the Internal

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Hullabaloo

Din, uproar

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Tax exempt status

1. referring to a person or organisation not required to pay tax 2. not subject to tax

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Conservative

Favoring traditional views and values; tending to oppose change.

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau

Traditional or restrained in style, moderate; cautious Of or relating to the political philosophy of conservatism

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Bureaucracy

A system of administration distinguished by its (1) clear hierarchy of authority, (2) rigid division of labor, (3) written and inflexible rules, regulations, and procedures, and (4) impersonal relationships

Revenue Service (IRS) earlier this month, he doubtless hoped to quell the hullabaloo about its seemingly partial treatment of applications for taxexempt status from conservative groups. The bureaucrat at the heart of the row refused to answer questions to avoid self-incrimination.

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Impeachment

A proceeding brought against a federal government official; an accusation or charge; discredit; reproach

235

Department of Treasury

United States government agency responsible for financial security of the country, including promotion of economic prosperity and advising the President on financial issues. The

Republicans began to invoke the word impeachment, if only to say, with a show of moderation, that it was not quite justified on the evidence revealed so far. Now Mr Carney admits that Mr Obamas chief of staff, Denis McDonough, not only knew about the nature of the scandal, but had

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau Department of Treasury maintains production of currency, disbursement of money to Americans, collection of money and obtaining loans required to operate the federal government. It is also involved in improving national security through the identification and targeting of financial-based threats The assumption that taxpayers will stay in compliance with tax laws and accurately report their income amounts and tax deductions fairly and honestly discussed with Treasury staff when the report on it would be released.

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Voluntary compliance

237

Tax credit

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Tax code

That matters, since voluntary compliance, as opposed to chasing delinquent taxpayers, brings in more money at less cost. Prepaid income tax (such as A recent drive to root that deducted from dividend out fraud in claims for payment) that can be offset tax creditsrelated to against the total income tax adopting children is payable by an entity barely worth the effort, complains the Taxpayer Advocate. Official regulations provided by Congress keeps the Internal Revenue Service making the tax and enforced on American codemore complex. citizens. Tax codes provide strict guidelines and rules that must be met in terms of taxation. These rules change

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau from year to year and are published by the IRS in various booklets and on their website Standard form provided by the tax authorities on which a taxpayer reports taxable income with permitted deductions and exemptions, and computes his or her tax liability Fixed amount or percentage permitted by taxation authorities that a tax payer can subtract from his or her adjusted gross income to arrive at the taxable income. Deductions typically include allowances for home mortgage payment, home repair expenses, and higher study costs, etc. Household, personal use, or commercial goods, wares, commodities, bought and sold in wholesale and retail

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Tax returns

Nearly 90% of filers pay for help with their returns.

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Tax deduction

Politicians from both parties have long talked about simplifying the code by eliminating credits and deductions and using the proceeds to lower rates dramatically.

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Merchandise

242

Common market

Group formed by countries within a geographical area to

ON MAY 23rd in the Colombian city of Cali the presidents of four Latin American countriesChile, Colombia, Mexico and Peruwill sign an agreement removing tariffs on 90% of their merchandise trade. They have already removed visa

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau promote duty free trade and free movement of labor and capital among its members. European community (as a legal entity within the framework of European Union) is the best known example. Common markets impose common external tariff (CET) on imports from non-member countries The use of a summit conference for international negotiation requirements for each others citizens and will proclaim their aspiration to move swiftly towards setting up a common market.

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Summitry

244

Integration

General: Process of attaining close and seamless coordination between several departments, groups, organizations, systems, etc.

245

Affinity

Sympathy marked by community of interest

Behind the excitement is the sense that the Pacific Alliance is a hard-nosed business deal, rather than the usual gassy rhetoric of Latin American summitry. Under the leftist governments that rule in much of South America, there has been plenty of talk of regional integration, but precious little practice of it. It is based on affinity, rather than proximity, says Jos Antonio Garca Belaunde, a former Peruvian foreign

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau minister who was instrumental in launching the group in 2011. Where buyers and sellers can The four founding make the deals they wish to members are freemake without any marketand mainly interference, except by the fast-growing forces of demand and supply. economies which have A stockmarket comes closest embraced to this ideal globalisation, with a web of regional tradeagreements and expanding commercial ties to Asia. French term for a stock The stock exchanges exchange, used throughout the of Chile, Colombia and continental Europe Peru have created a single regional bourse. Display of information about a Negotiators are product on its container, working to smooth packaging, or the product border procedures itself. For several types of and standardise rules, consumer and industrial such as on labeling. products, the type and extent of information that must be imparted by a label is governed by the relevant safety and shipping laws Coming together of distinct This exercise in and separate factors or regulatory phenomenon such as convergence could technologies be a model for other

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Free market

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Bourse

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Labeling

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Convergence

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau parts of the world, he adds. The Pacific Alliance marks a return to the principles of open regionalismthe idea, prevalent in Latin America in the 1990s, that opening up to world trade would be more advantageous if combined with creating a deeper regional market, to reap economies of scale. The Pacific Alliance marks a return to the principles of open regionalismthe idea, prevalent in Latin America in the 1990s, that opening up to world trade would be more advantageous if combined with creating a deeper regional market, to reap economies of scale. But the left-wing governments in charge of those

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Regionalism

Consciousness of and loyalty to a distinct region with a homogeneous population

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To reap

To obtain, win

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Enterprise

A business or company

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau countries for much of the past decade have turned Mercosur into a different kind of enterprise. Under Brazils aegis, much of Chvezs antiAmerican ALBA block is being absorbed by Mercosur. Brazils two main regional partners, Argentina and Venezuela, have slowgrowing, statecontrolled economies, and their policies flirt with autarchy. That makes them captive markets for Brazilian construction companies and exporters of otherwise uncompetitive capital goods.

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Aegis

Protection, controlling influence

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Autarchy

Absolute sovereignty

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Capital good

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Trade policy

Heavy equipment (such as excavators, forklifts, generators, metal-forming or metal-working machines, vehicles) which (in contrast to consumer goods) require a relatively large investment, and are bought to be used over several years. Also called producer goods Laws related to the exchange of goods or services involved in international trade including taxes, subsidies, and import/export regulations

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In practice, trade policy is not a priority for Ms Rousseffs government, which is

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau very focused on the domestic market, says Welber Barral, a former trade official. This stance alarms Brazils opposition and some of its businessmen, who fear that the country has cut itself off from global value chains for manufactured products. This stance alarms Brazils opposition and some of its businessmen, who fear that the country has cut itself off from global value chainsfor manufactured products.

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Stance

A way of standing or being placed

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Value chain

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Supply chain

Interlinked value-adding activities that convert inputs into outputs which, in turn, add to the bottom line and help create competitive advantage. A value chain typically consists of (1) inbound distribution or logistics, (2) manufacturing operations, (3) outbound distribution or logistics, (4) marketing and selling, and (5) after-sales service. These activities are supported by (6) purchasing or procurement, (7) research and development, (8) human resource development, (9) and corporate infrastructure Entire network of entities, But the kind of

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Paula Pellegrini , 1st year of study, International Affairs Coordinator: prof. Veronica Armau directly or indirectly interlinked and interdependent in serving the same consumer or customer. It comprises of vendors that supply raw material, producers who convert the material into products, warehouses that store, distribution centers that deliver to the retailers, and retailers who bring the product to the ultimate user Period that follows recovery phase in a standard economic cycle. A boom is characterized by an economy working at full or near-full capacity, strong consumer demand, low rate of unemployment, and a rising stockmarket, usually accompanied by rapidly increasing consumer prices (inflation) regional supply chainsthat link China to its neighbours barely exist in Latin America, beyond a few niche businesses, such as some textile products. falling-behind-two-alternative-blocks-market-led-pacific-alliance-and

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Boom

With the waning of the great commodity boom, which benefited the whole of South America, future economic growth will have to come from productivity, investment and efficiency.

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