By Reducing Surplus, Brazil Wants To Help Argentina Avoid Economic Meltdown

Folha d S. Paulo has uncovered documents showing that Brazil wants to give its struggling neighbor a break on trade deals. It's a sign of how deep are Brazilian fears about Argentina's economic health.

Crossing from Los Ebanos, Texas to Ciudad Diaz Ordaz, Mexico
Argentina-Brazil border (seretide)
John W. Schulze
Natuza Nery and Lucas Ferraz

BRASÍLIA - Argentina is Brazil's third largest trade partner, but the neighboring country is currently facing capital flight, high inflation and a major slowdown of its industry. If the state of economy deteriorates further, some sectors, such as the automotive, textile and food industry, will suffer the consequences -- a situation Dilma Rousseff's government wants to avoid at all costs.

Folha De S. Paulo has uncovered a decision -- not publicly divulged -- to reduce the Brazilian surplus from R$ 5.8 billion ($2.9 billion) in 2011 to R$ 4 billion ($2 billion). The Brazilian government has accepted the $1 billion reduction in bilateral trade surplus with Argentina to help its troubled neighbor, whose economic woes could potentially spread across the border.

A spokesperson for the Ministry of Development, Industry and Foreign Trade denies the report, but the offer has been presented to the Argentinean side and includes establishing extra-official quotas for Brazilian product exports.

As of today, several items sold to Argentina have trade tarrifs. Non-official quotas would free products from this obstacle, even restricting sales.

In Buenos Aires, the problems faced by President Cristina Kirchner are eroding her popularity. While in Brasília, the whistle had already been blown on secret messages sent by Brazilian diplomats, which Folha managed to obtain. In a cable sent last January, the Brazilian embassy in Buenos Aires warns that capital flight will continue until the end of 2012.

Dilma Rousseff is aware that the rise in currency rates in Argentina has resulted in a loss of competitivity, and diminished reserves.

Change of tone

Brazil's decision to reduce its surplus represents a new position in dealing with the Argentinean crisis. At the beginning of the year, ministries were considering retaliating against its neighbor. The change of tone reveals how worried the country is about its trade partner.

Although both economies are closely tied to each other, the Ministry of the Treasury does not think that a currency crisis would have dramatic consequences on Brazil. Tristán Rodríguez, economist at the Center for the Opening and Development of Latin America (CADAL), says the slowdown in Brazilian industry affects Argentina more than the other way around.

Read the original article in Portuguese

Photo - seretide

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Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.

Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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