Author: Awareness News

What Priests Should Confess: the financial schemes behind the Vatican doors

November 18, 2019February 5, 2021by Awareness NewsLeave a comment

The Vatican, the world’s most powerful religious organization, has been known to spread its political influence across the globe throughout the centuries. As of recently, its involvement in several financial activities has been at the source of many fracturing scandals.

Their home in the Holy See is the Institute for the Works of Religion (IOR), commonly known as Vatican Bank. By involving many different church officials and mobilizing hefty amounts of money, its analysis has become of increasing difficulty and controversy, causing many clashes with the Italian press to arise.

For the past years, the press has been adamant on bringing the Catholic Church into the confessionary. Despite their well-known soft spot for conspiracy theories, it is undeniable that the Italian press has become a key player in the disclosure of many of the Vatican’s scams. Their involvement in the Mafia’s money laundry schemes, the misuse of funds and donations and the embezzlement of the IOR’s money are among the most relevant situations of financial misconduct.

More specifically, in 2012, the Vatican spent $200 million to convert a former Harrods warehouse into luxury apartments.

This bizarre investment came out as a substitute for another peculiar project – the injection of those same funds in an Angolan offshore oil rig, then classified as unsafe. Given that 75% of the investment was sourced from a loan from the Vatican Bank itself, its Supervisory Board ended up noticing it and launched an internal investigation to clarify the situation. Despite dating back to 2012, this irregularity was only discovered in mid-October of this year. Since then, many have been wondering what led the Vatican to explore a project which deviated immensely from its institutional purpose, questioning the IOR’s legitimacy to undertake profit-making activities.

This was one of the most striking financial scandals hitting the Holy See since the 1970s and 1980s, when the Archbishop Paul Marcinkus, as President of the Vatican Bank, engaged in perverse relationships with mobsters. Another bank, Banco Ambrosiano, was also involved in the scandal. Its mission statement claimed the goal of serving moral organizations, pious works and religious bodies set up for charitable aims. It’s main shareholder? The Vatican Bank.

Roberto Calvi, known by many as the “God’s Banker”, was chairman of the Banco Ambrosiano and had close ties with the Church. The Vatican, instrumentalizing its position as a sovereign state, was able to withhold transaction information from regulators and authorities.

This was deeply exploited by Calvi in the 1980s, who was responsible for moving the bank’s (and consequently, the Vatican’s) funds into offshore accounts, enabling Banco Ambrosiano and, therefore, the IOR to make a profit.

Ambrosiano ended up collapsing in 1982, after the authorities found a hole of around $3 billion in the bank’s finances. Roberto Calvi died hanging in London. Prosecutors believe this to have been a Mafia killing, linked to his money laundering activities via the bank.

In 2012, Father Ninni Treppiedi, priest in Alcamo, near Trapani, in the Mafia’s island stronghold of Sicily, was suspended after a series of questionable transactions of church funds and of vast sums of money passing through his personal bank accounts. Prosecutors highly suspected that this was the result of money laundering operations run by the Mafia Godfather, Matteo Messina Denaro. They investigated financial transactions that occurred between 2007 and 2009, amounting to around $1 million. Nevertheless, paperwork regarding the source of the money was said to be missing and the Vatican Bank did not want to release the records of the Father’s accounts. Ultimately, Treppiedi’s case was filed by the order of the Court of Trapani, but most people kept the suspicion about the connections with the Mafia.

The liaison between the Church and the mobsters remains until today, albeit the Vatican’s efforts to trail a path of cleaning and rebranding, focusing on increasing transparency.

Indeed, in the last decade, the Holy See has been trying to put an end to corruption in the management of the bank’s funds, through concrete reforms.

“These are scandals and they do harm.”

— Pope Francis

Thus, they need to be handled with. Accordingly, the first step towards more transparency was given with the establishment of the Financial Intelligence Authority (AIF) and with the implementation of the first anti-money laundering rules, in compliance with the European Union’s standards. These actions took place in 2009, during the Papacy of Pope Benedict XVI.

Despite some progress being made in the end of the last decade, the greatest improvements have been achieved under the control of Pope Francis, who took charge in 2013. In that same year, following a scandal of money laundering, in the value of $20 million, by Nunzio Scarano, referred to as “Monsignor Cinquecento”, the responsible for overviewing Vatican’s property holdings and investments, a Pontification Commission was established in order to review the activities of the bank. As a result, later in that year, more than 1000 customer accounts were closed.

Afterwards, in 2014, Pope Francis delivered a blunt message – the IOR would only be allowed to continue its operations as long as it committed to self-reform. In this regard, as the Holy See’s ministries, the discateries, were not controlled by the AIF (despite managing plenty of money) the Pope created the Secretariat for the Economy to keep an eye on their activity. Further policies included the transition from an internal auditing system to an external one and the requirement that the employees at the Vatican Bank worked exclusively for that institution, avoiding potentially harmful situations, such as the one involving Marcinkus in the 1970s and 1980s.

In terms of international assessment, Moneyval, a monitoring body of the Council of Europe that aims at countering money laundering practices, has praised the Vatican for its course of action in recent years in this regard.

All in all, the Holy See seems committed to carve out a new image for the Catholic Church, closer to its founding principles. Nonetheless, the Italian press argues that the increasing disclosure of scandals is instead a proof of the inefficiency of the adopted measures. Only time will tell which side the truth is on.

Sources:

Crux Now
European CEO
la Reppublica
Organized Crime and Corruption Report Project
Religion News Service
Reuters
The Economist
The Telegraph
U.S. Catholic
Wikipedia

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The Great Firewall of China

November 17, 2019February 5, 2021by Awareness NewsLeave a comment

Let us say, for instance, that, with great enthusiasm to visit such wonders as the Forbidden City or to gaze at those fabled clay soldiers, someone buys a plane ticket to the ever-so-mysterious People’s Republic of China. He sallies forth towards the unknown, and embarks both on an adventure and on an airplane. Suffering from a major case of jet-lag after a 13-hour-long flight, he falls headfirst on the hotel bed. So as to take his mind off of his nausea, he connects to the hotel’s Wi-Fi and decides to check his Gmail account or to watch a YouTube video. More knowledgeable or experienced readers in this matter will undoubtedly, understand that our hypothetical subject will find himself rather flustered at what will seem, at first, shamefully poor internet speed. Eventually, he will be cursing his naivety since this encounter with Chinese censorship could have been avoided by the timely purchase of a VPN service.

For most westerners, this reality, where a government would censor what content we can and cannot access, seems very distant. Indeed, the many humorous visual comparisons posted online between Winnie the Pooh and Xi Jinping, combined with the fact that, in 2018, the live-action movie of Winnie the Pooh was banned in China, make a lot of us laugh. However, this laughter often carries an undertone of empathy for those who live under such a regime and of relief for the fact that our country is different.

The yellow bear became, for many in China, a symbol of rebellion

Those of us with a constitution that enshrined our right to freedom of speech may breathe a sigh of relief. For example, if a government operating under such constitution were to prevent a company from operating because it printed pro-opposition propaganda, this would be, undeniably, a clear constitutional violation. However, what would happen if an outside state that doesn’t respect this fundamental right was able to exert pressure on firms to self-censor and to censor their users?

China is a giant market that many tech and media firms would profit greatly in entering. However, their biggest obstacles often are the blue-pencil-wielding bureaucrats that decide what content is permissible and what is not. As such, firms wishing to expand to China or to maintain their business there may find it profitable to do some adjustments on how they operate in order to surmount this Great Wall.

For example, many Hollywood movies, competing to get into the limited number of foreign films that can be aired in China each year, are criticized for “watering-down” some more sensitive topics that, if kept unchanged, could cause the film to be struck down by Chinese censors.

And, more recently, due to the chaotic situation in Hong Kong, there have been a few incidents which have sparked outrage online: The NBA was heavily criticized for their swift condemnation of a tweet supporting the Hong Kong protesters by one of their team’s general managers. In addition, video-game company Blizzard came under fire after banning players for expressing their support for the Hong Kong protests.

Then, one might think that, perhaps, there is a normative argument to be had about whether or not a constitution that enshrines the right to freedom of speech should or shouldn’t prevent corporations from undertaking this sort of behaviour which stem, not from a nation’s own state, but, rather, from the economic pressure exerted by foreign dictatorship.

If you are opposed to this sort of behaviour, fortunately for you, there is no need to sit around demanding government intervention or naively hoping that profit-seeking companies will stop acting in a profit-seeking way. Indeed, better than trying to teach moral lessons to corporations, you are able to vote with your money. If you find it reprehensible that these companies would bow to oppressive regimes, then through the power of the boycott, you can join hands with the protesters in Hong Kong and with those unable to ungag themselves and make it so that the profitable route for companies to take is the one of defiance, not submission to evil.

Freedom of speech is of paramount importance to the development of a society. If you yearn for a society in which corporations value the protection of that fundamental right and consider it a priority to fight for, then there is already much power in your hands to contribute towards that goal.

Catalonia and Europe: What’s next?

November 16, 2019February 5, 2021by Awareness NewsLeave a comment

On October 14th 2019, nine of the 12 separatist leaders of Catalonia stood trial for their roles on the referendum of 2017- declared illegal by Madrid- receiving prison sentences from 9 to 13 years. The crimes that they were trialed on included sedition, misuse of public funding and civil “disobedience”. Almost immediately after the verdict was made public, protests sparked in Barcelona and later on, across the entire region. On October 19th 2019, more than 500,000 people attended the pro-independence peaceful rallies that quickly became violent. The feeling of resentment by some Catalans towards Madrid is nothing new and thus, their reaction comes with no surprise.

Historical Context

Indeed, the richest region of Spain has always had a turbulent past with the Spanish capital’s centralism. With the Spanish Civil War, which ended in 1936 with the victory of the Nationalists over Republicans (mainly supported by Catalans) led by Francisco Franco, the region lost its autonomy, and its culture was heavily repressed by the central government: the public use of Catalan was prohibited, only allowed to be publicly and freely spoken in the Stadium of Barcelona, and, later, at the very well-known Camp Nou, FC Barcelona’s stadium and symbol of the independentist movement. Thus, there’s a historical resentment that arises every time the central government interferes some bit on regional matters. Also, the 2008 economic crisis contributed to the bitterness towards Madrid, as Catalans felt they had given more to the central government than what they had gotten back from it. In 2017, the region represented 20 percent of Spain’s total GDP.

2017 Referendum

The increasing discontempt in the region culminated on September 6th 2017 when Carles Puigdemont, President of Catalonia, announced to the government of Catalonia that a referendum would be held on the 1st of October 2017, questioning its citizens if they wanted Catalonia to become an independent state in the form of a republic. Unlike the 2014 referendum (which was merely informative), this one would be binding and it would be done with or without the approval of the central government. This sparked tensions between Madrid and the autonomous region, with the former declaring it illegal and denouncing the lack of democratic guarantees. Nevertheless, the referendum was held, amidst Spanish efforts to stop the voting. 90% of people who voted chose independence, even though only 43% of eligible voters actually participated. As a consequence, the central government triggered Article 155, dissolving the autonomy of the region.

An Independent Catalonia?

What would an independent Catalonia mean? To Spain, this situation would imply the loss of its most prosperous, innovative region. Regarding Catalonia, even though the region has almost complete autonomy (in economic, fiscal, social and cultural terms), the path to independence would have a major impact on many levels: firstly, its relationship with the European Union; the institution has been an important supporter of Spain’s monitoring of the situation and has declared that if Catalonia became independent, it would be automatically out. If it wanted to be part of it, it would have to join through the normal lengthy process, which could take years. Consequently, it would be out of the Europe Group and could not enjoy the backing of the ECB. Thus, the economic consequences of leaving the European Union are undeniable: with closed borders, tourism could be affected, as free movement would be constrained and demand for tourist activities could shift to other places; shipping costs would increase as well as the possibilities of tariffs, if no trade deal was struck. Jobs would, therefore, be affected. Also, foreign and internal investment would decrease, as companies would re-allocate their headquarters to more stable places. Indeed, over 2000 companies have already moved their fiscal quarters to other parts of Spain, due to the instability in the region. Thus, economically speaking, it seems that the negative effects of independence outweigh the positive ones.

Catalonia and the EU

Nevertheless, independently of the negative economic impact of leaving the EU, how do Catalonians actually feel about the institution? The support (or the lack of it) from the EU has been crucial in politically dividing separatists and unionists. The EU has actively supported Madrid and legitimized its action, which many consider “undemocratic” (as the exercise of voting was denied by the Spanish central government). On the separatist side, many have called for European mediation and action to protect fundamental rights (freedom of speech, the right to vote, which the separatist faction considers that it was not respected), which was denied by the EU. The fact that the EU has supported the Spanish central government and didn’t attend the separatist demands reflects on the trust towards the institution. Knowing this, trust in the EU has risen to those who consider that Catalonia should be a region of Spain (with no autonomy) and those who defend the current situation (as an autonomous region). On the other hand, trust in the European institution has been steeply decreasing to those who think that Catalonia should be an independent state or should be a state within Spain. Thus, as the desire for autonomy increases, so does the mistrust towards the EU and the greater is the breach between unionists and separatists. This difference was particularly sharp in 2017, especially after the referendum on October 1st. The (in)action of the EU and the Spanish authorities aggravated even more the already existent fracture in Spanish society.

Also, before 2017, Catalan regionalism and “nationalism” was very pro-Europe, unlike other nationalist movements. For instance, Catalan participation in the European elections was 13 pp above the European average. However, after 2017, the relationship with Europe has bittered. As shown by the increasing of eurosceptic electorate by the party, PDeCAT (Catalan European Democratic Party), the most pro-Europe party in the region in 2016 became the third most eurosceptic, in 2017, also, newly elected Catalan Members of the European Parliament Carles Puigdemont and former minister Toni Comín were among those whose access to the EP was denied after the 2019 European elections. With this, Catalonians felt attacked by the EU, as the MEPs chosen by 1.7 million citizens to represent them were denied accessibility to exercise their democratic rights. Naturally, this situation changed the feelings of attachment to the EU, varying among territorial preferences. Due to the events of 2017, independentists and people who identified themselves as only Catalan have naturally grown resentment towards the EU, while unionists and people who identify as only Spanish have increased their European support. Thus, the region’s relationship towards the EU has definitely depreciated.

Beyond borders

Besides having consequences within its own borders, Catalonia’s pro-independence movement could also have repercussions outside. This could strengthen other separatist movements, such as in Lombardy and Venice (in Italy), Flanders (in Belgium), Scotland, Northern Ireland and Wales (UK) or the Basque country (Spain, again). This would divide Europe even more (as the unity and cohesion of the continent is constantly being threatened over the last few years, with the growth of right-wing nationalist parties and most recently, with Brexit). For instance, in Flanders, the New Flemish Alliance, a nationalist, conservative party which has a relevant representation in parliament has been striving for a gradual and peaceful secession of the region from Belgium. It has been reported that the party even hung a Catalonia flag to support its pro-independence cause. In Lombardy and Venice, there’s more of an autonomy issue, as the northern regions of Italy feel that their taxpayer money is being used to support the poorer south rather than investing in the regions. In 2014, a non-binding referendum was held in Venice, with 89% of voters voting for independence. In the case of Scotland, the country also held a binding referendum in 2014, with separatists losing, having 45% of total votes. Nevertheless, with Brexit and the will of Scotland to remain in the European Union, the independence issue is constantly arising. Thus, pro-independence movements are still alive and the example of Catalonia can have a propeller effect and expand to other regions that have the same sentiment.

EU’s position

Generally speaking, the EU has been regarding secessionist movements as a domestic issue, meaning that these matters are out of the EU’s competences scope. If a region wants to emancipate as independent and wishes to remain in the EU, it must take all the steps, which can be a lingering, lengthy and costly process, to both parties. However, nowadays, this impartiality has to be questioned. With the rise of right-wing nationalism and populism (started with the refugee crisis of 2015) and Brexit, the very own existence of the Union is threatened, as Europe is more and more divided. Thus, an independence movement would only imply, in the short-run, a greater division and a fall-out of the ideal of a united Europe . This helps explain why the EU has been a strong supporter of Madrid and “closed its eyes” to some questionable methods used by the central government. It may explain why it didn’t let Catalonia MEPs enter the European Parliament, even though it assumed itself as “impartial” regarding the whole matter. Thus, when the unity of the EU is at stake, any domestic matter becomes a European one.

As for now, protests continue in Catalonia, whether in the form of rallies at the Plaça de la Universitat or by blocking the Spain-France highway. Scots, Venetians, Flemish and all other pro-independence regions watch carefully how the Catalonian story unfolds. Nationalist societies, such as Poland, Hungarians and Russians also observe attentively the whole situation. The rise of identity politics, on both sides of the political spectrum, is a reality that the European Union cannot ignore anymore.

Meet Cyberwrite: the next step in cybersecurity

November 15, 2019February 9, 2021by Awareness NewsLeave a comment

A brief introduction to Cybercrime

Crime and illicit activities exist since the beginning of the law-based society as we know it. In recent times, crime has taken a step forward in the way that, following the evolution of technology and the creation of private information networks, crime organizations found this technological revolution as a new approach to commit illegal actions. Cybercrime has developed massively in the last few years, evidenced by several cyber attacks and scandals that took place, in the Wikileaks case.

Cybercrime organizations, as Lazarus for example, intend to corrupt individual and collective networks, such as social media and bank accounts information systems. This activity is performed by Hackers, masters of computer handling and technological revolutionaries, that can work individually or for hacking organizations.

In 2012, The Wall Street Journal estimated loss to cybercrime to be $100M (although other reports placed that figure nearer to $1bn); Lloyds believed it to be $400M in 2015. In June 2017 the FBI reported losses had risen 24% in 2016 alone. A fundamental problem is that much of cybercrime goes undetected, causing regulators and financial services companies to change quickly, updating regulations and systems to improve detection rates and slowdown what is increasingly proving to be a cash cow for criminals

A recent case of cybercrime was the attack on SWIFT. Although it was stated that SWIFT provided a safe and reliable environment, over recent years, numerous hacks against SWIFT have been reported which has resulted in clients losing millions of dollars. Researchers have identified that a hacker group known as Lazarus were behind these hacks, linked strongly with North Korea. The attacks exploited vulnerabilities in the systems of member banks as the hacks allowed attackers to gain control of the banks’ legitimate SWIFT credentials. What’s more, these hacks can also implant malware which can remain hidden and allows a new resurgence of hacks later down the line. The hacks in 2015 and 2016 involved malware which issued unauthorized SWIFT messages which then concealed that the messages had even been sent. The malware, after moving the funds was designed to delete the database record of the transfers and basically leave the hackers to go undetected. A similar attack on Bangladesh’s central bank yielded $101m.

As U.S National Archives & Records Administration mentioned, “60% of companies that lose their data will shut down within six months of the disaster [i.e cyber attack].” Firms are becoming more aware of cyber risk and how destructive it can be. As a result, the number of firms contacting cyber insurance companies has been increasing and estimates suggest that the number will keep increasing in the future.

Forecast for sales of cyber insurance in South America. Taken from the cyber insurance market report 2019-2029

The role of Cyberwrite

Given the volatile environment around cybersecurity and consistently enhanced technology, Nir Perry, Cyberwrite’s CEO and founder, acknowledged a market failure in the cyber insurance industry, with its core in two great issues:

● Small and Medium-sized Businesses (SMBs) lack the capital to contact insurance companies and, consequently, the skills to defend from a cyber attack.

● The majority of insurance companies were not exactly “cyber experts”. Meaning that they lacked the technology to underwrite their customers with due accuracy and come up with the appropriate policy. So, at the end of the day, they failed to effectively provide assistance to its customers.

Therefore, in 2016, the Israeli company was founded with the aim of helping insurance companies increase their sales through enhanced risk profiling, with a primary focus on SMBs. They are not, however, a cyber risk consultant nor a cyber insurance company. The company is financially backed by American and Israeli angel investors, as well as global investors and accelerators such as Citibank, SpeedInvest, Plug and Play and around 500 startups.

Cyberwrite develops cyber-profiling with the aid of AI algorithms to institutions such as insurers or banks in order to assess a profile of cyber insurance risks and estimate the financial impact they are exposed to, while comparing with the benchmark in a one-page “human-readable” report. The report we used is in fact an actual report, only the company’s name was changed due to confidentiality. So, their report is divided into three parts:

Cyber Insurance Coverage scores: Cyberwrite compares the risk score of the company with the benchmark of the industry. The higher the score, the better. In Hooli´s case, their risk policy score is relatively low. From the report we can check how a large share of their risk score is explained by the lack of coverage regarding Business interruption, stolen records and data loss.

Describes the different types of cyber risk and compares with the industry benchmark

From this specific report we can see how the high risk in industry [whichever industry Hooli belongs to] and the regulatory risk (risk that a change in laws and regulations will materially impact a business) are the major source of Hooli´s cyber risk. The risk is ranked from A [no risk] to E [extremely high risk].

Provides a financial impact assessment (FIA) of a possible cyber attack.

Basically, it estimates in quantitative terms how much money the business has at risk. It also mentions the financial loss associated with each risk domain. The FIA is calculated through a simple questionnaire answered by the customer. Again, by checking Hooli´s FIA we can see how they can expect to lose from $100,000 up to $871,000 in case of a cyber attack. We can also check how a large share of this expected monetary loss is derived from the Regulatory expense. Which makes sense because, as we have seen before, Regulatory risk represents a large share of Hooli´s overall cyber risk.

It’s based on this FIA that customers can estimate how much they should pay to its insurance companies which is what, ultimately, increases cyber insurance sales.

To prepare this report, all Cyberwrite requires is the company’s name and its website. They then collect data from millions of sources all over the Internet in order to estimate the risk associated to the costumer.

This is a breakthrough in the cyber insurance industry, as it enables insurance companies to make a much more accurate estimate of how much to charge, making this market more accessible to SMBs. As a result, Cyberwrite has already received some important awards such as the UK Embassy’s British Award for Innovation in 2018 and was named a Cool Vendor in Gartner’s category “Cool Vendors in Insurance, 2018” being one in four insurtechs to ever receive this nomination.

Final comment

All in all, the insurance market is growing at a fast pace. Big budgets have been invested to ensure market-leading insurers are positioned at the forefront of change. It is estimated that approximately $1.7bn was spent in insurtech in 2016. A market that was previously known as change-averse is now developing rapidly with the aid of monetary expenditure and big data, which improves the creation and constant update of insurance models tailored to each business, as is the case of Cyberwrite. What we can expect is a continuous evolution of insurtech that is likely to improve market conditions for small and medium enterprises to emerge and grow and for big companies to continue thriving without safety constraints.

Tiago Rebelo Filipe Ferreira

Tiago Duarte Lourenço Paramés

Veganism Impact on the Environment

November 14, 2019February 9, 2021by Awareness NewsLeave a comment

In recent years, there has been a growing concern on the way we eat, being it motivated by health concerns, animal welfare or the environment. It is impossible not to have noticed the rising popularity of vegetarianism. Our generation is being strongly marked by change and the fight for what we believe in.

“Where millennials lead, businesses and governments will follow.” – The Economist

And so, markets adjusted to these growing demand for veg-friendly products. From the increasing supply of vegetarian products with even specific store sections, to the change in menus in your usual restaurants, to the emergence of new veg-friendly businesses, the change is visible everywhere. Even policy has changed. In 2017, the Portuguese Parliament approved a law making mandatory that every canteen and public cafeteria offers a vegetarian meal option.

When did this change happen?

According to Associação Vegetariana Portuguesa (AVP – Portuguese Vegetarian Association), this emerging market has increased 514% from 2008 to 2018. In this 10-year period, the number of veg-friendly stores increased 323%, existing now, in Portugal, 172 businesses of this kind (both restaurants and stores).

In Portugal, 120 000 people follow a vegetarian diet, representing 1.2% of the population. According to a study by Nielson, women and people between 25 and 34 years old are the ones representing a higher percentage of non consumption of meat, fish and dairy.

In touristic regions, vegetarianism has become a business opportunity, since these regions are not only searched for its traditional food, but more and more for the vegetarian offer, attracting a new type of consumers.

Nonetheless, there is a huge and worrying consumption of meat and fish in Portugal. Regarding meat consumption, according to Instituto Nacional de Estatística (INE – Nacional Statistics Institute), in 2018, the average Portuguese consumed 114 kilos of meat. Portugal is also the European country that registers the highest consumption of fish per capita, consuming 55 kilos, on average, per person each year.

The situation in Europe is not that different. The European Union accounts for only 6.8% of the world’s population, but are responsible for 16% of the world’s total meat consumption.

Analyzing the most recent available data (2013) from the UN Food and Agriculture Organization (FAO), Spain is the country registering the highest meat consumption per capita (94 Kg) and Georgia the lowest (28 Kg). In 2013, the average Portuguese consumed 88Kg of meat. East countries registered much lower consumption per capita, when compared with western countries, which can be a consequence of average income, since consumption of meat is socially associated with a higher purchasing power.

The impact of meat on the environment

What we eat has a huge impact on the environment, avoiding meat consumption is one of the most efficient ways to reduce the negative damage causing climate change. The amount of carbon in the atmosphere is rising every day and beef production is one of the main contributors. For every gram of protein, beef production releases 221.6 g of CO2 into the atmosphere. .

The impact of meat consumption is not limited to carbon emissions; producing beef also requires a lot of space and water. Every kg of beef requires 15 400 liters of water, lamb consumes 8 736 liters, while pig and chicken consume 6 000 liters. Vegetables, on the other hand, consume only 300 liters per kg. Furthermore, livestock provides only 18% of the calories we eat, farming them uses 83% of farmland.

A study by the University of Oxford, showed meat and dairy produces 60% of agriculture’s greenhouse gas emissions and takes ups 83% of farmland, but delivers just 18% of daily calories and 37% of protein. On top of that, early this year, Greenpeace stated that over 70% of EU farmland is used to feed livestock which means, for the production of meat and dairy.

A major downside of meat production occurred during the 1990’s, when 94 000 square km of forests a year were destroyed to plant crops for livestock, according to FAO. This has dangerous consequences for the environment. Nowadays, land retains just 1% of total CO2, while in the past, it was able to retain 7%. The UN recalls the importance of stopping deforestation, one of the causes of erosion and climate change.

The impacts of consuming meat are huge, starting by greenhouse emissions, passing through the large amount of natural resources needed, and ending with pollution. In fact, water pollution is one of the main consequences of meat production. Besides, animal waste and fertilizers end up degrading water suppliers, which causes severe negative impact on biodiversity.

BBC states that, eating a steak a day, in one year, is equivalent to driving 11 571 km or taking 8 flights from London to Malaga, and it uses the space equivalent to 31 tennis courts.

What can we do about it?

United Nations agencies such as Food and Agriculture Organization and the World Health Organization recognize that decreasing meat consumption would positively impact the environmental problems. Furthermore, the European Union agriculture outlook showed a study pointing out that reducing 50% of meat consumption as well as dairy products and eggs, would allow for a reduction of around 25% to 40% of agriculture greenhouse gas emissions.

For this ending, there are several movements promoting a lower meat consumption. One of them is the Meat Free Mondays movement, which was occurring in 29 countries worldwide in the beginning of 2014. Plus, there are several organizations established around the world with the purpose of promoting a Meat Free life and animal welfare. Some names to consider are Eurogroup for Animals and People for the Ethical Treatment of Animals which are directed to the developed countries, mostly the wealthy and middle-class citizens. However, there are also organizations whose target involves worldwide population and which promote sustainable agriculture and food consumption such as La Via Campesina in 79 countries within 5 continents worldwide, such as More and Better, and Food Sovereignty Movement.

Another major contribution to reduce the negative impact of meat on the environment is the protein substitution. This is a solution mostly targeted at the wealthy and middle-class populations who are typically more concerned about having a healthy diet and who can afford for these alternative products. To reduce this impact created, there are several protein alternatives to opt for such as tofu, quinoa, lentils, nuts and nut butters, seeds and tempeh; other than that, there are also high protein vegetable sources which are affordable to everyone such as some vegetables (spinach, broccoli) and legumes (beans, chickpeas). An interesting example is South Korea, a country where plant protein is highly demanded through the consumption of aquatic plants.

Nowadays, it is even easier to avoid meat consumption since there are several companies creating alternatives. Examples are Tofurky with a wide range of plant-based proteins such as beef, chorizo, sausages, or non-beef burgers from Beyond Meat and Impossible Burger. In fact, the demand for plant-based foods has grown from 8% in 2017 to 20% last year in America.

“If the average American cut just a quarter pound of beef a week from their diet, it would be the equivalent of taking 10 million cars off the road for a year”.

— Bergen Sujatha

Lastly, the promotion of local feed production also decreases ecological footprint: it does not only avoid the transport of live animals and the typically highly and unhealthy processed meat products, but also has a lower impact on the environment than the mass production of the meat industry.

Studies show that in the United States food typically travels up to 4000 km before getting to one’s plate and in the UK, food is traveling 50% farther than it used to twenty years ago.

The number of vegetarians has been rising since the last decade. It shows that society is becoming more aware about how we can tackle the issue of climate change. The way we eat has a huge impact on the environment. It is one of the most powerful drivers behind most of the world’s major environmental issues, whether it’s climate change or biodiversity loss. Changing your diet can make a big difference on your personal environmental footprint, from saving water to reducing pollution and deforestation. It is imperative to do something to stop greenhouse gas emissions and it can start from small changes. Every small change has a huge impact if we’re all committed to a bigger cause. Together we can cut our footprint just by doing small changes in the way we eat. It is in our hands to stop climate change.

Sources:O Jornal Económico, Público, BBC News, Euronews, The Guardian, The Conversation, Vegetarian Center, New Food Economy, Portuguese Vegetarian Association, Medium

Making Money in a Recession

November 13, 2019February 5, 2021by Awareness NewsLeave a comment

Despite not agreeing exactly when will the next recession hit, most economists agree that it isn’t far in the future. The longest Bull Market is coming to an end, so investors should transform their portfolios to gain or reduce losses during the next economic downturn. The options are diverse, and we tried to narrow them down to the most common and effective.

Short selling

Everybody has heard of the renowned movie Big Short and how rich Michael Burry and Steve Eisman (known in the movie as Mark Baum) got, but few understand what a short sale is.

Michael Burry: The genius behind the Big Short Source: CNBC

This investment mechanism consists in selling an asset or stock that the investor doesn’t own. Anticipating a price decline, an investor sells the previously borrowed securities having to return the same number at a later date, meaning that he intends to sell when the price is high and buy back when the securities are cheaper. The lender of the securities is the broker-dealer that the investor relies on to place a sell order. This trade is made on the margin and is leveraged, meaning an investor can make much more money than the amount of the securities, but it also represents a risk if the price increases instead of declining. This type of investment requires that 150% of the value of the securities stays in an account.

Due to its risks and margin requirements, short selling is not adequate for amateur investors or small investors due to its raised expenses: costs of borrowing the security to sell, the interest payable on the margin account that holds it, and high trading commissions.

In times of recession, short selling poses high returns, particularly for experienced investors that predict Bear Markets before they happen. Overpriced securities are the most targeted by short sales since they fall the most in an economic downturn.

Gold

Gold has been perceived has a safe haven investment for hundreds or even thousands of years, especially in times of uncertainty in the financial markets similar to the ones we live today.

Historically it has always been used as a physical store of value due to its rarity and traded back and forth to protect value in times of war, recession, political turmoil, etc. Since gold cannot be printed and its price is resistant to changes in interest rates, gold has tended to maintain its value throughout time.

When we compare it with stock indexes (S&P 500 or Dow Jones Industrial Average), it is evident that the price of gold has continuously increased, but with much lower variations. Another aspect that stands out is the negative correlation between stocks and gold notably in times of recession: in the Dot Com Bubble in the 2000’s and in the Subprime Crisis of 2008, investors withdrew their money from stocks and stockpiled it in gold and gold derivatives. This last statement can be verified in the graph when the stock market takes a dip, gold prices raised especially before and during periods of recession.

But how do we invest in gold? The easiest way is to buy physical gold or goods made using this rare mineral, like jewellery or coins, in the private market. But the amount we can buy this way is very limited and may not be correctly priced. Therefore, to bet on the variation of gold’s price or of other physical commodity in the public market, an investor can buy/sell Gold Futures, ETFs, Mutual Funds or stocks belonging to Gold Companies.

Even during bull markets, gold-related assets are essential in a well-diversified portfolio to guarantee stability and steady returns.

Variation in Dow Jones Industrial Average (Blue) and Gold’s Price (Orange) Source: Macrotrends

What are consumer staples?

Consumer Staples are everyday used products by households that will continue to be used regardless of their cost or the state of the economy. These types of products are unlikely to be cut from any individual budget as the consumer is unable or unwilling to do so. The level of demand on these products tends to be rather constant. Consumer staples go from foods, beverages and drugs to basic household goods like hygiene products.

These type of good are less volatile during economic cycles (non-cyclical) due to its high demand and level of utility, revealing its constant level of demand. Hence, sales and earnings growth in the consumer staples sector tend to remain constant both in good and bad times. Price elasticity of demand is very low, as the demand in this type of product doesn’t react much from changes in the prices of these goods.

What are utility stocks?

Well, utility stocks are stocks related to firms in the Utility sector, a sector in which companies provide basic amenities such as gas, water, electricity or even renewable energies. Investors often include these types of stocks in their portfolio due to their relative stability. Thus, like consumer staples, these utility goods are less volatile during economic turmoil due to their necessity and utility provided.

Utilities are often associated with stable and consistent dividends and the betas of these type of companies are usually less than 1 due to their ability to be less volatile than the equity markets. Hence, during economic slowdowns or even recessionary times of the economy, utilities tend to perform well under these hard circumstances. However, in the opposite case of an expansionary period, utilities might be stocks that will underperform the average. Not only because of the beta’s value but also because utility companies usually have high levels of debt (due to infrastructure needs) and during economic improvements, interest rates increase and investors are able to find better yielding in other alternatives such as Treasury bills. Therefore, utilities perform well under economic slowdowns since interest rates decrease and the yield related to utility stocks is greater than the risk-free assets.

What are healthcare stocks?

Healthcare stocks are stocks in this case related to firms in the Healthcare Sector which consists of businesses that provide medical services, manufacture medical equipment or drugs and/or provide medical insurance to patients. In the U.S., the healthcare sector is one of the largest accounting for one fifth of the total annual GDP. Healthcare services are associated with highly price inelastic meaning changes in prices have a little effect have on the quantity demanded.

Holding an all-stock portfolio such as the S&P 500 index fund can be improved by simply adding a value-weighted healthcare portfolio, resulting in both a higher return and a lower standard deviation (diversification-effect). Healthcare stocks were the strongest performer in this index in 2018. However, this sector is becoming more volatile with the slowing of corporate earnings, trade wars and rising interest rates.

ETF

An Exchange-trade fund is a security made of a basket of different securities combined in a single entity, which then gets traded like an ordinary stock in the major stock exchange markets.

The ETFs generally can track an infinite range of benchmarks, from commodities to every possible stock, with the purpose of getting has much return has possible in all the different segments of the markets chosen. They are most usually focused on the same type of security and so they can be characterized as Stock, Bond or Commodity ETFs.

To invest in an ETF, you first need to choose the benchmarks you are willing to risk your money on as the economies they’re in, while also bearing in mind the proportion each company takes on that ETF.

ETFs have its pros and cons which, on the good side, offer horizontal diversification of securities and transparency, since with the help of the internet we can see its true value based on what’s inside of it, but on the other side you have trading costs related with expense ratios and commissions to brokers and the fact that very specific ETFs may not have high demand levels, making it harder to sell it in the short-run and so, less liquid.

Some of the most well-known can be the SPDR S&P 500 ETF that replicates the famous S&P 500 index, which is the general overlook of the biggest 500 public companies in the world, the SPDR Dow Jones Industrial Average ETF and the Invesco QQQ, which also track the Dow Jones and the Nasdaq-100 indexes, respectively, both providing the industrial and technological overlook of the US economy. These three ETFs have positive correlations with the evolution of most relevant global economies and so, they deal with a great variety of market segments, making you invest not in any particular benchmark but in an economy, which is not the case for the majority of them.

REITS

A real estate investment trust (REIT) is a corporation that owns and manage income-producing properties

They can be characterized in three different ways, them being:

Equity REITS

It is the most common one, which owns and manages real estate directly, being the revenues from the leasing and rents of tenants the primarily form of income and not the reselling of portfolio.

Mortgage REITS

It is mainly focused on financing real estate and the revenues are generally made by what’s earned from the interests of those mortgage loans. Also, they invest in and own residential and commercial mortgage-backed securities for their portfolios.

Hybrid REITS

It performs both equity and mortgage operations.

REITS can either publicly traded or private whilst the traded ones provide more liquidity to the investor than the private ones.

Investing in REITS may have its risks and most of them are directly related with the real estate current market: if property assets start to lose value, their investor will be harmed with that.; the volatility of interest rates, given that a decline in them will consequently give an opportunity to decline as well the assets rate of return; and the fact that real estate isn’t a liquid asset; However, this market shows that real estate tends to appreciate over time. In most cases there are steady flows of income from tenants if the properties are being rented and that in the long-term real estate tend to be quite profitable.

US Treasury Bonds (T-Bonds)

A US Treasury bond (T-bond) is a government debt security that ranges from 10 to 30 years maturity wise and it is known to be one of the safest investments worldwide.

The US Treasury has been around since 1776 and not once has failed to pay its lenders. Also, given that this security is backed by the “Full Faith in Credit“ clause of the United States, it faces a default risk of almost nothing, so, if the main goal to invest is to not lose money, then they are the right security to invest.

However, although being acknowledged as a risk-free asset, there are still some factors that need to be accounted before investing in it.

The Opportunity Cost

Considering T-Bonds are evaluated as AAA assets (risk-free), then, that will have an effect on its yields, which will consequently be lower than other potentially profitable assets with higher defaulting risk. The urge to not lose any money may let investors ignoring other safe and with high returns investments.

The Inflation Risk

If the T-Bond is not linked with a TIPS (Treasury Inflation-Protected Securities), the inflation risk must be acknowledged by the investor. For example, if the security provides a return of 3% and 5% inflation is occurred, then the investor will come out short since the return is not keeping up with inflation.

The Interest Rate Risk

If the investor hopes to hold the bond until its maturity, then this risk does not need to be accounted. However, if that is not the case, then the investor may have serious problems to liquidate its investment if the Fed decides to increase the interest rates. This happens because, if new bonds are being issued at higher levels of return, then the demand for the original ones will fall causing the price of the bond to follow that same direction.

China at a crossroads: when will it be too late?

November 12, 2019February 9, 2021by Awareness NewsLeave a comment

“China will strengthen green and low-carbon policies and regulations with a view to strictly control public investment flowing into projects with high pollution and carbon emissions both domestically and internationally”. These were the words of President Xi Jinping in 2014. Later on, in July 2019, China committed to “update” its climate target “in a manner representing a progression beyond the current one”. Furthermore, it also vowed to publish a long term decarbonization strategy by next year.

But can this nation live up to the promises?

Indeed, China made an effort in promoting green development: in 2015, it increased its wind power capacity by over 30 gigawatts, becoming the number one leader in this parameter.

In that same year, China saw a huge growth in solar power production, moving into first place, surpassing the previous solar leader, Germany.

Image from REN21 Renewables 2016 Global Status report — Image from *REN21 Renewables 2016 Global Status* report

China has been the world’s leading country in electricity production for renewable energy sources, according to Global Commission on the Geopolitics of Energy Transformation, establishing itself as a global pacemaker in driving a domestic decarbonization agenda.

On the one hand, tension arises upon the fact that the country finances clean energy, representing 11% of its budget spent on electric power generation. On the other hand, investment in coal production amounts to a total of 36% of the Belt and Road Initiative. [1]

Conflicts of interest have emerged between the promise to reduce coal production and the fact that it has been one of the biggest contributors to the growth in the power sector. In fact, China is responsible for 51% of coal’s global demand as well as 46% of its global production – if the country continues to go down this path, its reliance on coal will not fall not even close to the promised value.

Demand-side: China’s coal consumption has been growing at a slower rate and not necessarily declining. It could indeed be said that Chinese coal demand has been relatively flat for a few years now, but it has not been falling in the absolute sense.
Supply-side: Coal power generation has been rising at 6% per year and China has reached 1.76 billion tonnes of this fossil fuel in the first half of 2019 – which represents a 2.6% increase from the same period last year.

On top of that, China’s financial institutions are providing $36 billion in funding to build coal power plants outside the country.

A unit-by-unit analysis of all global coal plants under development, based in 2018, shows that Chinese investment has had a significant increasing role in supporting and funding new coal plants in international markets as shown in the image below:

Source: Global Coal Plant Tracker (July 2018) IEEF analysis

Moreover, Chinese financial institutions and corporations have agreed to fund over one-quarter of the 399 gigawatts (GW) of coal plants currently under development outside China. This comes at a time where many financial institutions such as the World Bank are shifting away from the coal industry.

According to research organization Climate Action Tracker (CAT) China’s actions and policies are highly insufficient to meet the challenge of holding global warming below even 2ºC, let alone the Paris Agreement limit of 1.5ºC.

As the world’s leading greenhouse gas emitter, CAT also predicts that China’s emissions will rise at least until 2030, at a point which is likely to be too late to curb the country’s impact on climate change.

Nonetheless, another question arises: will China be able to successfully decrease its coal production so fast as it pledges?

With Beijing’s push to reduce coal burning, nearly 13 million households in northern China have switched to electric or gas-heating since 2016.

In 2017, when northern China experienced the biggest ever campaign to replace coal with natural gas it was reported that, in Beijing alone, 140,000 households, across 336 villages bid farewell to coal.

In addition, the toughest restrictions ever on industry were also put in place, from mid-November to mid-March: 15 key cities had to cut steel manufacturing output by 50% which was a big improvement regarding environmental changes, since over 71% of the steel produced uses coal. Also, aluminium production was cut by 30 % as the energy for its digestion plant is derived from steam raised by using coal.

Despite the major decline in atmospheric pollution in those areas and the decrease in the national coal capacity, the rushed measures caused serious problems, since China’s infrastructures were not prepared for this significant change.

Since there was not enough time to install the gas pipes underground in Shijing, they were left above ground causing safety risks for civilians.

Furthermore, widespread reports from the winter of 2016 disclosed heating problems caused by failures to complete the switch to gas on schedule. As a result, some schools in rural zones had no heating, given that coal-fired boilers had been removed before natural gas pipes were installed. Similarly, in Linfen, a village located in Shanxi, had a 155 square kilometer “no coal zone” where residents had to remove coal stoves and they were not even allowed to keep coal at home – yet no alternative heating was provided, despite sub-zero temperatures.

Also, market-wise, as many firms and industries were highly dependent on coal, these restrictions placed them on the verge of shutting down. Eventually, gas heating increased, resulting in supply shortages and causing inadequate heating for many households.

All in all, the world’s success in bringing down global warming is dependent on China’s action, the world’s largest carbon emitter.

Yet, it appears that China’s interests are ebbing as its economy slows. Combined with an ongoing trade war with the United States as well as Trump Administration’s withdrawal from the Paris Agreement, this economic slowdown has reduced China’s enthusiasm to lead in this global battle. The aforementioned is no excuse for China to forgo a leading role in the fight against global warming. Indeed, embodying the “torchbearer” may be the country’s best bet for a sustainable transition to a stronger and low-carbon economy.

[1] The Belt and Road Initiative (BRI) development strategy aims to build connectivity and co-operation across six main economic corridors encompassing China and: Mongolia and Russia; Eurasian countries; Central and West Asia; Pakistan; other countries of the Indian sub-continent; and Indochina, quoted from OECD Business and Finance Outlook 2018

Sources: The World Economic Forum, The New York Times, Climate Change News, The Diplomat, Forbes, Institute for Energy Economics & Financial Analysis, Reuters, Chinadialogue, OECD

Risk: Are we “Picking up nickles in front of a steamroller?”

November 11, 2019February 5, 2021by Awareness NewsLeave a comment

When we think about risk usually we do not associate it with biology. “It’s another parameter to consider when making an Investment” – is what we tell ourselves. We tend to perceive risk as an external factor internal to the asset or portfolio we are analysing and not to us. And why is that? Why do we associate risk to an irrational set of things when its existence is solely our making?

Risk is a very hard concept to define. Some perceive it as being the unpredictability of our returns whilst others are more inclined to defining it as the loss we suffer when we don’t choose the safe bet. Whatever is the real risk definition it surely has lead to absolutely catastrophic situations. Elise Payzan-LeNestour, a behavioral scientist in the field of neurofinance, made an interesting experiment to test whether risk behavior comes from human incapability of perceiving it or human recklessness of taking it either way. In the final stages of her experiment she asked around 400 students to play a game called “The Bowman Game”. The students had to choose between two options: skip – the safe bet – or bet – the risky choice. If they chose to bet, the bowman could hit the mark, and they would win 2$, or miss it, and they would lose 40$. Also, there were two different types of bowmans: a novice – more likely to miss the mark – and an expert – more likely to hit it. After collecting all the experiment data, Elise discovered that students were actually very smart in the understanding whereas their bowman was a novice or an expert.

However, she also concluded that even when the bowman was a novice, 40% of the students took the risk of losing 40$ either way. With this, Elise was able to extrapolate to the financial market and conclude that, even though we are perfectly aware of the risks of choosing to gamble instead of the safe option, “we are greedy and lack self-control” in the sense that we evaluate those risks and still accept them when the perfectly rational choice would be to back away and choose safely.

After this discovery, Elise went deeper and associated our human need for this risky gamble to our brain functions, finding the culprit in Dopamine, a hormone triggered by potential reward opportunities.

The presence of this greed makes us put our necks on the line without backup plans or emergency exits. Taking these risks can lead to the loss of irreplaceable or non-recoverable resources, not only financially but also environmentally, for example. Our overconfidence on the market that never goes down is lost when it inevitably does and the public money goes down the drain. When we are taking part in an investment and building a continuous flow of renewable income we have to be aware of the notion of risk and of how it is not exterior to us but actually very much correlated to our reasoning and individuality. Joe Wiggins, winner of the Brian Abel-Smith Prize for outstanding performance at MSc in Behavioural Science at the London School of Economics, tells us that when we manage a set of financial assets, the risk lies as much on the asset’s trading market performance as on how frequently we check our portfolio, our individual incentives, our differences and our past experiences, to name a few. The possibility to trade at any given moment in time makes public equity investments more risky than private ones where we are less faced with price fluctuations and so have less emotional reaction. In sum, the risk of making bad decisions is lower since the immediate forces are less known. On investment, Wiggins states, “We can think of this as our erratic perception of risk continually shifting our personal discount rates”.

Risk goes beyond the convention of possible capital loss, it goes far from being only related to the asset or market characteristics, it lies much more on the human conscious action to ignore the possible (maybe less probable) consequences of losing it all. Behavioral Science & Economics alerts for the need to find tools able to deter investors from taking actions with possible “collapsing economy side-effects” because with risk “surely you will be harmed, you don’t know when, but surely you will”, says Elise Payzan-LeNestour. Investors shouldn’t continue to be rolled over for picking up nickels.

Sources:

Ted Talks
Behavioural Investment

Surprise mechanics: Payment as the new Default

November 10, 2019February 5, 2021by Awareness NewsLeave a comment

Inertia, a word that makes all the difference. We might be uncertain, the decision might be difficult or we might not even care, we simply follow the recommended or pre-set, and without understanding we are under the influence of default opinions. In a simplified way, default options are pre-defined or recommended courses of action established before any reaction from the decision maker. Even though it can look scary and invasive when presented in a more theoretical perspective, the truth is that examples of this phenomenon are immersed in our reality. They are in our phones in the form of strange ringtones, alarm sounds or even pulse notification lights, they are in the way we pay our purchases and even in the games we play.

The industry that will be subjected to a more detailed analysis will be the video-game industry which has been startled by an increasing concern with changes in defaults and the way it influences gamers as economic agents. Default, by principal, is all over gaming from subscriptions that renew automatically to more technical details – such as the way games adapt to the user’s individuality.

Nevertheless, the increasing concern is related to the way these practises have become more aggressive and privacy-breaking as a new, premium source of purchases. Since the past generation of video games (that existed and dominated the market between 2004 and 2011- Playstation 3, Xbox 360 and Nintendo Wii) the cost of producing games has increased in an almost exponential rate, tendency which has been aggravated by the required usage of more expensive technologies and techniques. Games are no longer pixelated images, they are fotogenic forms of interactive art and as such require more and more production time and impose proportionally complex cost structures to firms. This is illustrated by the almost unimaginable and gigantic production costs. Let’s use as an example 2015’s game of the year, “The Witcher 3” (Image 1). Its production costs were around 81 million dollars and it took about three and a half years to produce it. As reasonable as it might seem, it puts a lot of pressure on companies, and here is the catch, because of a strong and rigid market structure firms are not able to increase the consumer-end price of their product and so they have to find other ways to do it. They found that if they could incentivize their customers to spend more money inside the game having already purchased it, games would become more profitable. As a consequence practices, such as microtransactions, DLCs (downloadable content) and loot boxes, appeared. First they were used in mobile games – as “Candy Crush” – where users had incentives to spend real world money in the game in order to accelerate progression. Since they proved to be effective, they were moved to “triple AAA” games with high budgets and lots of marketing.

The most apparent way of how invasive it became is by comparing it to gambling. The most recent cases of such facts are EA’s games like “Star Wars battlefront 2” that had its progression based on loot boxes that could be purchased using real world money or “2k’s 2k20” that had explicit slot machines inside the game (the image 2 illustrates such practise). Recently, this practice has become so invasive that governments felt the necessity of intervening in order to understand if such behavior is not harming consumers. In the end, it all falls into the British government asking EA’s and King’s representatives about these practices and possibly unethical behavior.

To sum up, and making use of the EA’s representative words, “surprise mechanics” represent a shift in the default of this industry from a more consumer friendly to a more aggressive consumption, incentivizing industry, that in its attempt to overcome the pressure created by the market’s structure, has been moving closer and closer to gambling. Consequently, it has been accused of creating structures that focus increasingly more in getting money out of their customers and less in providing value added. As governments started to worry and fans stopped buying these games, the industry is again trying to adapt. Games as a service are proof of this reaction. But until when will we have to sustain and tolerate such economic behavior that set defaults that are no longer recommended actions and are now predefined payments?

The November 2019 Spanish Elections: What to Expect

November 9, 2019March 3, 2021by Awareness NewsLeave a comment

In December 2015, the conservative Popular Party’s government of Mariano Rajoy, while it won the general election, lost its absolute majority in the Congress of Deputies and had the party’s worst result since 1989. From that year onwards, no party has been able to form a long-lasting government. This political instability has led Spain to hold its fourth general election in four years tomorrow. Will this election finally relieve Spain from the ongoing period of political crisis?

April’s Elections

A minority government, Pedro Sanchez’s Spanish Socialist and Worker’s Party (PSOE) took office in June 2018, following a motion of no confidence1 that took down the government of Mariano Rajoy. The ousted prime-minister’s Popular Party (PP) was involved in a corruption scandal involving several of its high-ranking members, leading to a severe drop in its popularity. However, Sanchez called for a new general election in April of this year, after he failed to gather support in the Congress of Deputies to pass his budget for 2019.

In the last elections, the PSOE gathered a substantial 29% of the votes, but although it was the party’s first win since 2008, it was short of a majority to govern2. Vox, a far-right party opposing unrestricted migration and multiculturalism, won 10% of the votes and entered the Chamber of Deputies for the first time. The Popular Party (PP) met a historical defeat (16.7% of the votes).

Since the PSOE failed to win an absolute majority in the Chamber of Deputies, it needed backing from other parties. Once again, Sanchez’s inability to secure support this time to form a government is what led to the new November 2019 elections. He called for the elections after failed discussions with Unidas Podemos (UP), a coalition of left-wing parties and Sanchez’s most obvious choice, after disagreements over government ministers and the amount of involvement of the UP in the new government.

Polls: analysis of most likely results

The latest polls by the Office for Social Studies and Public Opinion (GESOP) for the newspaper El Periòdic d’Andorra suggest that we will not see a significantly different political landscape with the November elections, and even report increasing fragmentation, with a smaller win for the PSOE at 26.8%. The PP is expected to see its share of the vote increase to 19.9% after successfully stealing votes from Ciudadanos, a center-right party who surprisingly gathered 16% of the votes in the April elections, and will now see its share more than halved, with the polls predicting a result of 7%. The far-right party VOX is met with a significant increase and should obtain 15.6% of the vote.

Más País, a new far-left splinter party, founded on September 25th, has decided not to run in the constituencies where it could not gather enough support to win seats but could contribute to the loss of seats by other left-wing parties, such as PSOE and UP. Más País is expected to obtain 2.6% of the votes, which has led to the further decrease of the far-left coalition Unidas Podemos to 13% of the vote.

All in all, the PSOE wins without an absolute majority, and probably with fewer seats in the Cortes. The PP will come second, followed by the UP. Ciudadanos will suffer a considerable decrease in votes and seats, as Vox will achieve the opposite. Regarding regionalist and nationalist parties, we do not expect meaningful changes from the previous results.

What’s next?

After the elections, we can expect that King Felipe will ask Pedro Sánchez to be the next Prime Minister, and a new round of negotiations among the parties will follow. In order to be PM, Sánchez needs the majority in the Cortes3 to be able to win the investiture vote or at least have most of the opposition MPs abstain during that vote. As for now, it is not expected that those negotiations will produce a different outcome than the ones that followed the elections in April.

PSOE’s best hope to achieve a majority in parliament is to partner with regionalist parties and the left-wing coalition UP. Even though this might be plausible in mathematical terms, the disagreement points between the PSOE and UP from the last round of negotiations are still valid, making achieving a different outcome unlikely. It does not seem that left-wing parties are ready to make the necessary concessions: the UP wishes to have some ministers of their own, whereas the PSOE wants to form the government alone but backed by parliamentary support. Furthermore, Sánchez recently pointed out that even if an agreement had been reached to form a PSOE-UP government, it would have crumbled during the Catalonian crisis, amid which the UP and its Catalonian coalition Comú Podem have criticized the government’s actions and police intervention. The PSOE is also dependent on the unlikely event that the PP and Ciudadanos do not vote against Sánchez’s investiture. This seems improbable, as the Catalonian crisis accentuated the parties’ differences, and total support from the moderate right-wing opposition to a socialist minority government in the Cortes seems to be an almost unimaginable scenario.

Without concession, diplomacy and statesmanship, the path to a stable government will be hard to find.

Either a PSOE minority government will be formed, unable to count with a majority and likely to fall at the first difficulty, or Spain will have to face yet another General Election in a few months.

1 Vote about whether a person in a position of responsibility (government, managerial, etc.) is no longer deemed fit to hold that position.

2 It won an absolute majority in the senate for the first time since 1989, but to govern, they would need 175 out of 350 seats in the Chamber of Deputies

3 Bicameral legislative chambers of Spain – Congress of Deputies and Senate.

Sources:

El Periòdic
Wikipedia
BBC News
The Guardian
Vox

Article Written By:

Ana Catarina Salgado

Ana Maria Terenas

Christian Weber

João Maria Sande e Castro

Rui Ramalhão