Up, up and away…

The average reader of Trade & Forfaiting Review probably does not need to keep as close an eye on the weekly grocery bill as the average man or woman in the street. Even so, wherever in the world you live, it has become an unavoidable fact that prices – pretty much all prices – are going up faster than they have done since the early 1980s.

In Europe, the US and the prosperous parts of Asia and Australasia, higher incomes have shielded people from the full impact of rising prices, especially for energy and food. Elsewhere in the world, a 25% increase in the price of basic foodstuffs, such as rice, directly equates to a dispiriting 25% cut in living standards.

Governments across the world, whether democratic or despotic, also know that a cold and hungry people is a restless people, and directly threatens their rule.

But at the same time, those booming prices, combined with the continuing credit crunch – which most observers expected to be over by now – has led to the best of times for commodity trade finance.

That has been reflected at TFR, where our usual contacts (not just in investment banking, but at law firms and insurance companies, too) are outstandingly busy, strangers to both home and office as they shuttle from city to city to keep up with demand.

While those parts of the world’s major banks that caused the credit crunch with their imprudence are shedding staff, trade finance is hiring and headhunting with abandon as banks rediscover its many virtues. As Deutsche Bank’s John MacNamara says in our Commodities Q&A this month (on page 22), “I’ve waited all my career for a time like this. For those of us in structured commodity and trade finance, this is our time! Make hay.....”

Ultimately, the hard work of everyone in structured commodity and trade finance will go far to ameliorating both the high commodity prices and the credit crunch, providing liquidity for investments and, hopefully, improving capacity where it is most required.

But until the benefits feed through into the global economic system, political and other risks will undoubtedly remain high, too. Interesting times, indeed.

Graeme Burton
Managing editor

Features

Global Commodities Review: Going soft This article is for subscribers only
Soft commodity prices are going into overdrive. Paul Schuilwerve of Fortis examines the factors driving the agri-commodities ‘super cycle’.

Legal spotlight: A game of three halves This article is for subscribers only
Geoffrey Wynne, head of trade and export finance at Denton Wilde Sapte, reviews the recent ups and downs of the trade finance market.

Latin America This article is for subscribers only
Booming commodity prices – and an ‘uncoupling’ from the US economy – is helping Latin America to grow strongly. Ivan Castano Freeman reports.

Global commodities review Q&A This article is for subscribers only
Sky-high commodity prices – not just of metals and oil, but agricultural commodities too – have hit the headlines worldwide. TFR has talked to a range of top professionals in the market to find out what’s going on.

Global commodities review This article is for subscribers only
Despite the gloomy economic outlook in some parts of the world, global commodities are booming, while the credit crunch has forced banks – and their clients – to move to more vanilla trade finance, writes Ivan Castano Freeman.

Regulars

Profile: Sal Chiappinelli This article is for subscribers only
Sal Chiappinelli has had his share of ups and downs in his forfaiting career. But now, SFC Swiss Forfaiting Company is growing fast, once again.

David Sullivan's Letter from Hong Kong This article is for subscribers only
On my first day in Hong Kong my boss took me to lunch and I immediately became confused. We never went outside on the street, we just seemed to connect to one shopping centre after another like an air-conditioned commuter tunnel.

IFA world: Fully loaded This article is for subscribers only
Forfaiting is now firmly established as one of many tools in the trade financier’s armoury and is being used more and more during the credit crunch.

Market view: The IFA team This article is for subscribers only
Sal Chiappinelli, CEO of SFC Swiss Forfaiting Company, outlines how he would deal with non-payment of letters of credit.