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WINNIPEG – Canwest Global Communications Corp. (TSX: CGS) says it has received $34 million from Sun-Times Media Group Inc. in a settlement tied to an arbitration award.

The payments were awarded in January by an arbitrator after a dispute with the former Hollinger International, now Sun-Times, over adjustments related to the takeover in 2000 of Hollinger's Canadian newspaper group.

The Winnipeg-based media giant said Thursday that $30.5 million of the settlement will be deposited as cash collateral under its senior credit facility for Canwest Media Inc.

Canwest said the remaining $3.5 million will go towards Canwest Publications Inc payday loans., a subsidiary of Canwest LP.

In January, Canwest won a $50.7-million arbitration award after it had originally claimed it was owed $84 million in adjustments from the $3.2-billion deal for the former Southam newspaper chain of big-city dailies and half of the National Post.

Hollinger, the media group formerly led by now-imprisoned Conrad Black, contended that Canwest owed it $116 million.

The dispute erupted in 2003 and the arbitration process began in February 2007 and concluded last June.

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Brazil’s central bank will probably cut its benchmark interest rate by the most in five years after a record contraction of Latin America’s biggest economy.

Policy makers, led by President Henrique Meirelles, will lower the so-called Selic rate today to 11.25 percent from 12.75 percent, according to 26 of 50 economists surveyed by Bloomberg. The others expect cuts ranging from a full point to two percentage points.

The central bank is seeking to revive growth as record job losses and plunging output threaten the government’s 4 percent growth target. Brazil’s economy will probably contract in 2009 for the first time in 17 years as commodities become cheaper and demand falls, according to Alexandre Lintz, chief strategist at BNP Paribas in Sao Paulo.

“The question now is not if, but when, the benchmark interest rate will reach a record low,” Robert Padovani, chief economist at Banco WestLB AG in Sao Paulo, said in a phone interview. “The country is heading toward recession.”

At the central bank’s last meeting in January, policy makers reduced the overnight interest rate for the first time in 16 months to 12.75 percent as reports indicated that the economy had come to a standstill.

A cut of 150 basis points would be the biggest since 2003. Padovani expects the rate will be cut to a record 9.75 percent by June. Policy makers last cut the rate to a record low of 11.25 percent in September 2007 and kept it at that level until April 2008.

A basis point equals 0.01 percentage point.

Shrinking Economy

Since the bank’s Jan. 20-21 policy meeting, unemployment jumped the most in seven years and industrial output has plunged.

After the government’s March 6 report showing output fell 17 percent in January from a year earlier, traders increased bets that the bank would accelerate the pace of rate cuts.

Yields on interest rate futures fell today, with the contract for January 2010 delivery dropping to 9.98 percent at 10:48 a.m. New York time.

Yesterday, the national statistics agency said that Brazil’s gross domestic product fell 3.6 percent in the fourth quarter from the previous three-month period, the biggest drop since the series started in 1996.

The drop exceeded forecasts from all 31 analysts surveyed by Bloomberg. After the report, Finance Minister Guido Mantega said the government’s 4 percent growth target would be hard to attain. A new forecast will be released March 20, he said.

‘One More Reason’

“The GDP number is one more reason to cut 150 basis points,” Jose Francisco de Lima Goncalves, chief economist at Banco Fator SA, said in a phone interview instant payday loans. “The recession is here and it makes no sense to keep the rate above 10 percent.”

Goncalves said he plans to revise his current 0.5 percent growth forecast for this year to a negative number.

The quarter-on-quarter contraction was the first for Brazil in three years as the first global recession since World War II saps demand and investment both at home and abroad.

Empresa Brasileira de Aeronautica SA, the world’s fourth- largest aircraft maker, cut 20 percent of its workforce after the outlook for sales dropped. Automakers in Brazil have dismissed 7,800 workers since the crisis started, according to Anfavea, the country’s automaker association.

‘Rock Bottom’

To be sure, Brazil’s domestic economy will help the country avoid a “profound recession,” Luiz Carlos Trabuco Cappi, chief executive officer of Banco Bradesco SA, the second-largest non- government bank by assets, said last night. “Its local market is its safeguard to get through this crisis.”

Companies eliminated jobs in January, the first time in at least seven years that positions were cut in the first month of a year, after cutting a record 655,000 government-registered jobs in December.

“Brazilian companies will keep cutting jobs and output; we haven’t hit rock bottom yet,” Paulo Mateus, economist at Barclays Capital Inc. in Sao Paulo, said. “Brazil’s most effective tool against the economic slowdown is to cut the rates that are restricting growth.”

Brazil’s annual inflation rate has slowed from a three-year high in October to 5.9 percent in February, the national statistic agency said today in a report distributed in Rio de Janeiro. It compares with a 5.84 percent rate in January.

Consumer prices rose 0.55 percent in February, led by seasonal increases in school tuitions, the agency said. The gain matched the median forecast in a Bloomberg survey of 42 economists.

“The combination of a sharper-than-expected decline in activity and the slowdown in inflation gives the central bank the scope for quite aggressive monetary easing in the short term,” Neil Dougall, chief economist for emerging markets at Dresdner Kleinwort in London, said in a telephone interview.

The central bank targets an annual inflation rate of 4.5 percent, plus or minus two percentage points.

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Vince Capatosta sees the lingering effects of a shaky auto industry every day at his Bridgeton dealership.

Cautious buyers arrive with a strict limit on what they’re willing to spend. They buy used vehicles or new ones with generous incentives. And some middle-of-the-road customers, who lost their jobs but still need vehicles, struggle to find financing.

Still, it’s better than late last year, when credit "dried up," said Capatosta, who owns All-Star Dodge Chrysler Jeep.

A bleak economy and a dramatic fall in consumer confidence have hit the auto industry hard. But sales also were been hampered by tight consumer credit conditions— particularly at financially troubled General Motors Corp. and Chrysler LLC.
Now credit is slowly loosening because of some recent actions:

— Sales of auto loan-backed securities, which are a way for companies such as GMAC to get money to loan, increased since anemic levels in October and November.

— Credit unions boosted auto loans as some banks and automakers’ finance companies pulled back.

— The federal government lent $6.5 billion in December to Chrysler Financial and GMAC LLC, the financial arms of two Detroit automakers, to spur lending.

— The government’s Term Asset-Backed Securities Loan Facility, or TALF, program launched last week could encourage investors to buy bundles of auto loans. In turn, finance companies could have more money to lend.

As credit loosens, some consumers are finding it easier to borrow. Last month the national new-vehicle loan approval rate — approvals for both purchases and leasing through finance companies, banks, credit unions and other institutions — for customers with credit scores of 750 or higher was 85.9 percent, according to CNW Research in Bandon, Ore. That’s higher than the 77.4 percent approval rate in October but still lower than the 88.4 percent rate in February 2008.

"I wouldn’t call it normal," but auto-finance companies such as GMAC are more willing to lend now versus past months, said Chris Wolfe, an analyst for Fitch Ratings.

ABS STANDSTILL

Finance companies extend loans to consumers who buy or lease vehicles, and then the companies group together those loans and sell the bundles, called asset-backed securities, to investors on Wall Street. Finance companies then use the money to make more auto loans.

The Detroit Three’s affiliated companies have relied on this method for about 50 percent of their funding needs, according to JPMorgan.

So the demise of the auto loan market roughly mirrors the auto asset-backed securities market. Sales of new securities weakened earlier in 2008, but by October, they fell to $376 million for the month, according to Asset Backed Alert, a trade publication in Hoboken, N.J. That’s less than October 2007’s sales of $7.7 billion.

This hit auto-finance companies hard. "If they can’t borrow the money, they can’t make the loan," Wolfe said.

With less money, GMAC limited its loans to consumers with credit scores of 700 or more, starting in October, said Mike Stoller, GMAC’s auto finance spokesman.

GMAC wasn’t the only company tightening its lending. Nationwide, approval rates for new-vehicle buyers with credit scores of 750 or higher shrank to 77 percent in October, from 91 percent in October 2007, according to CNW Research. Approvals for those with scores lower than 620, considered subprime, dropped to 14 percent in that month, from 64 percent a year before.

Foreign automakers’ finance units also felt the effects of tighter credit, but not at the level seen by U.S. companies. American Honda Finance Corp., for example, had some credit tightening in recent months, but the impact on sales was "minimal," said spokesman Chris Martin. Lending has been stable because Honda’s typical buyer tends to be affluent, he added payday loans.

CREDIT UNIONS

Not everyone tightened lending. Credit unions suddenly saw competition contract after some big banks and automakers’ finance companies cut back.

"The other sources of lending aren’t there," said Amy McLard, a spokeswoman for the Missouri Credit Union Association. "People are turning to credit unions, and we have money to lend."

First Community Credit Union in Chesterfield issued 25 percent more auto loans in the second half of 2008 compared with the first half, said Laura Alfeldt, vice president of marketing. January, typically slow, was the best month in auto loans of any month in the past five years.

And Credit Union Lending Systems in south St. Louis County — an intermediary between 270 new and used auto dealerships and 31 credit unions statewide — reported January as its best month ever since the company started in May 2000, according to Chief Executive Angie Anderson.

Even as other lenders loosen their grip on loans, dealerships such as Jim Butler Auto Plaza say many of their most creditworthy customers still rely on credit unions.

Kyle Kaverman, general manager for the used-vehicle dealership in south St. Louis, said he noticed credit availability tighten in August.

"Credit unions have really helped us get through this credit crunch," Kaverman said. "I can’t tell people, ‘I can’t sell you a car.’"

MONEY MATTERS

In January, the federal government injected $5 billion into GMAC and $1.5 billion into Chrysler Financial. Both companies soon offered heftier incentives than in past months.

Last month, Chrysler had the highest average monthly incentive — $5,608 — of any manufacturer ever, according to auto website Edmunds.com.

Neither GMAC nor Chrysler Financial recently would provide specific data to track any directly related upticks in sales, but spokespeople from both finance arms said the government injection helped.

The money "allowed us to get back in the game" with loans to car buyers and leasees, Stoller said. GMAC, for example, relaxed its standards to customers with a credit score of 621 or higher from the earlier requirement of 700.

Auto asset-backed securities sales inched up, too, Asset Backed Alert data shows. Investors may have been more confident about the market because of the upcoming TALF program, said Standard & Poor’s credit analyst Amy Martin.

Some analysts and automaker-affiliated finance companies think the TALF program could boost consumer lending. The Federal Reserve Bank of New York program, launched last week, will loan $200 billion to investors to buy auto, credit-card and other securities.

However, it comes with a caveat: Securities must have a AAA rating, the highest rating. Some finance companies and a consumer credit trade group have said that requirement will limit the program’s reach.

Still looming over the automakers is the even bigger unknown — the economy. Consumers are shying away from car buying not because of a credit availability; they’re worried about their own financial stability.

Consumer confidence dropped last month to the lowest-ever level since the index began in 1967, according to preliminary data released Feb. 24. The number of consumers who said they would buy a vehicle within six months fell to 4.7 percent in February from 5.4 percent a year ago.

"Affordability is not a main issue," said Itay Michaeli, an auto analyst for Citi. "I don’t know what the silver bullet is."

atablac@post-dispatch.com | 314-340-8140

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Colliers Turley Martin Tucker represented TMT Properties Inc. in the lease of 1.98 acres of land at 9044-9050 Pershall Road, Hazelwood, to JF Electric Inc.

Grubb & Ellis|Gundaker Commercial represented parties in these transactions:

— Fontbonne University in the lease of 34,000 square feet of office space at 1265-1300 Strassner Drive, Brentwood, from 1265-1300 Strassner Drive LLC.

— Holleran Duitsman Architects in the lease of 7,651 square feet of office space at 16150 Main Circle Drive, Chesterfield, from Central Park Square Inc.

— Risen Lord Community Church in the lease of 47,000 square feet of space at 1402 First Capitol Drive, St. Charles, from Ridgecrest Baptist Church.

— Lawrence W. Fick Revocable Living Trust in the sale of 41.43 acres of land at 120 N. Eatherton Road, Chesterfield, to Keller Williams Realty.

— VJH Inc. (Nail Lounge) in the lease of 1,843 square feet of retail space at 10417 Clayton Road, Frontenac, from Frontenac Grove, LLC good credit score.

— General Parts International (CarQuest) in the lease of 5,910 square feet of retail space at 1601 Washington Avenue, Alton, , from TMAAB Washington Square LLC.

Coldwell Banker Commercial CRA LLC represented parties in these transactions:

— TheWilliam L. Frein Revocable Living Trust and the Mildred A. Frein Family Trust in the sale of a 10,400 square foot retail building at 6088 Arsenal Street, St. Louis, to Fil-Con II LLC represented by ReMax Gold Commercial.

— Ungerboeck Systems International Inc. in the lease of 10,500 square feet of office space at 111 Ungerboeck Park, Dardenne Prairie, to E-Sponder LLC.

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The U.S. economy "deteriorated further" in almost all corners of the country over the last two months as consumer spending slumped and manufacturing declined, the Federal Reserve said in its regional business survey.

Ten of 12 Fed district banks reported "weaker conditions or declines" in their regional economies, and respondents didn’t expect a "significant pickup" until late this year or early next year, the Fed said Wednesday in its Beige Book release, published two weeks before officials meet in Washington to set monetary policy. Housing "remained in the doldrums in most areas," the Fed said.

Lending fell across the United States, and credit availability "remained tight," the Fed said.

"We’re in the throes of the deepest part of the recession now," Kevin Flanagan, a Purchase, N.Y.-based fixed-income strategist for Morgan Stanley’s individual-investor clients, said on Bloomberg TV.

The report reflects information reported through Feb. 23 and summarized by staffers at the San Francisco Fed, which oversees the largest portion of the U.S. economy.

"Consumer spending remained very weak on balance, albeit with slight firming noted by many districts," the Fed report said. About half of the districts said consumer demand was slower or "fell significantly" from a year earlier.

The economy shrank at a 6.2 percent annual rate in the fourth quarter, the most since 1982, revised government figures showed last week. Home construction contracted at a 22 percent pace after a 16 percent decline in the prior quarter.

The recession in U.S. manufacturing persisted for a 13th month in February, a private report showed this week. Other reports showed consumer spending rose in January with a spurt of post-holiday discounts, and construction dropped more than twice as much as anticipated totally free credit score.

"Reports on manufacturing activity suggested steep declines in activity in some sectors and pronounced declines overall," the Fed said.

Exceptions to the economy’s weakening included food production and pharmaceuticals, the Fed said.

In January, Fed officials downgraded their forecasts for growth this year, seeing a deeper contraction as the credit crunch tightens. Most forecast a contraction of 0.5 percent to 1.3 percent.

The Fed report said home prices kept falling this year "with little or no signs of a deceleration evident." Home builders "remain pessimistic regarding recovery prospects this year," the Fed said. Demand for commercial real estate "weakened significantly," and the retreat in construction is expected to continue through at least year-end, the Fed survey said.

U.S. employers probably eliminated 650,000 jobs from payrolls in February, the most since 1949, while the jobless rate may have increased to 7.9 percent from 7.6 percent, according to the median estimate of economists surveyed by Bloomberg News. The Labor Department will report the figures Friday.

The Beige Book says unemployment is up in "all areas, reducing or eliminating upward wage pressures." Weaker demand is spurring discounting of goods other than fuel and food, the Fed said. As such, "upward price pressures continued to ease across a broad spectrum of final goods and services," the Fed said.

The consumer price index was unchanged in January compared with a year before. That was the first month without a year-on-year increase since 1955.

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Federal Reserve Chairman Ben S. Bernanke’s blast at American International Group Inc. in Senate testimony yesterday suggests regulators plan further curbs on risk and concentration in the financial-services industry.

“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke told the Senate Budget Committee yesterday. The crippled insurer, which is now under government control, “exploited a huge gap in the regulatory system,” he said.

Bernanke’s remarks, echoed in separate testimony by Treasury Secretary Timothy Geithner, mean Citigroup Inc., Bank of America Corp. and Morgan Stanley can expect new restrictions as policy makers assemble what may become the broadest overhaul to financial rules since the 1930s, said Kevin Fitzsimmons, managing director at Sandler O’Neill & Partners LP in New York.

“There will either be more extensive regulation, a requirement for more capital, or a stated preference against companies getting too big, or, more likely, all of the above,” Fitzsimmons said.

The biggest obstacle may be that regulators have to keep those same conglomerates alive for now to prevent a bigger collapse in financial markets.

“AIG is a huge, complex, global insurance company attached to a very complicated investment bank, hedge fund that was allowed to build up without any adult supervision,” Geithner said yesterday during testimony to the House Ways and Means Committee.

Tumbling Shares

The Standard & Poor’s 500 Financials Index retreated 1.6 percent yesterday for its third straight drop. The index has tumbled 45 percent this year compared with a 23 percent decline for the S&P 500.

Bernanke’s comments come as President Barack Obama seeks legislative proposals within weeks for a regulatory overhaul of finance, especially companies deemed vital to the stability of the financial system. After a meeting yesterday at the White House, Obama and British Prime Minister Gordon Brown said stabilizing banks is crucial to reviving economies worldwide.

“We’ve got to isolate bad assets,” Brown told reporters. “A bad bank anywhere can affect a good bank anywhere.”

The new regulatory framework may stop short of re- instating the Glass-Steagall Act of 1933, which separated commercial and investment banking and was repealed in 1999 by the Gramm-Leach-Bliley Act. Still, banks may separate their business lines in order to avoid strong regulatory scrutiny, analysts said.

Simpler Banking

“Their models for banking are going to be simpler, and less leveraged, and they are going to have a new regulator, the Federal Reserve, that is going to take a pretty conservative stance,” Fitzsimmons of Sandler O’Neill predicted. Congress has yet to determine the federal regulator that will hold such power.

Paul Volcker, chairman of Obama’s economic advisory board and a former Fed chairman, has also advocated curtailing risk- taking by systemically vital institutions.

In January, Volcker led a panel of former central bankers, finance ministers and academics known as the Group of Thirty in calling for capital limits on proprietary trading and a ban preventing large banks from running hedge funds auto car loan.

Such restrictions would mean a change for Goldman Sachs Group Inc., which Chief Executive Officer Lloyd Blankfein has promoted as able to serve as an investor, adviser and financier.

Called for Distinctions

Volcker’s report also called for differentiation between commercial banks that take deposits and make loans and other institutions that are active primarily in capital markets.

“We are making a distinction between what appears to be institutions that are becoming larger and doing banking business,” Volcker said Jan. 15. “They should give their loyalty to their clients and customers. Those functions should not be carried out in the context of an institution that is carrying out very risky capital market activities.”

John Mack, chief executive officer of Morgan Stanley, said in an interview on the Charlie Rose Show on Feb. 23 that he anticipates the firm may have to restrict some of its business activities in response to new regulation.

“Without question some of the businesses that we have been in in the past are going to be curtailed,” he said.

FDIC Chairman Sheila Bair said regulators must construct a sound capital framework that will prevent a repeat of the credit crisis. She was critical of the Basel II model, which allows banks to deploy their capital on the basis of risk models.

Wrong Assumptions

The approach “assumes banks’ internal, quantitative risk estimates are reliable,” Bair told a banking conference in Washington on March 2. “To say the assumptions turned out to be wrong would be an understatement.”

The U.S. government has deepened its commitment to prevent AIG’s collapse three times since September as the company accumulated the worst losses of any U.S. company. AIG is getting as much as $30 billion in new government capital and relaxed terms on its bailout announced yesterday.

“We’re doing our absolute best in partnership with the Fed and Treasury to unwind the very issues that Chairman Bernanke is talking about in a way that preserves systemic stability and pays back taxpayers,” said Christina Pretto, an AIG spokeswoman.

Bernanke faced criticism from the Senate Budget Committee members yesterday for the rising cost of the federal rescues.

“The public has just about had it with continuous capitalization,” Senator Lindsey Graham, a Republican from South Carolina, told the Fed chairman. “Don’t underestimate how hard it is going to be for you and others to continue to print money to solve this problem.”

Bernanke said he understands why taxpayers are angry. “It isn’t fair that money is going to big corporations,” he said. “We need to think very hard as a country how we make sure this doesn’t happen again.”

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Maurice “Hank” Greenberg’s legacy as the man who built AIG into the world’s largest insurer was tarnished by a 2005 probe but questions about whether he created a financial monster that subsequently ran amok could cause greater damage to his image.

The former Army captain — who left AIG in 2005 amid allegations he used off-balance sheet transactions to improperly boost profits — had previously been revered for his track record of steady profit growth over a 38-year tenure.

In the years since he quit AIG, Greenberg has pursued other business interests, but much of his time has been spent defending his name and railing against a succession of CEOs who replaced him at AIG.

But AIG’s posting on Monday of a $61.7 billion quarterly loss, the biggest in corporate history, and the announcement of a third bailout by the U.S. government have prompted his critics to ask whether Greenberg planted the seeds of the financial disaster that already threatens to cost taxpayers $180 billion.

Greenberg’s creation more than two decades ago of a financial products unit, which has triggered the bulk of AIG’s massive losses, is their main focus.

Credit default swaps, or CDS, held by AIG Financial Products have been the biggest driver of AIG’s losses, which have exceeded $100 billion over the past five quarters.

“The bottom line is that Hank Greenberg wandered out of the very safe, well-capitalized world of insurance into the surreal world of credit default swaps where you can create endless amount of risk,” said Christopher Whalen, co-founder of Institutional Risk Analytics, which provides analysis and ratings to banks auto loan rates.

Greenberg has sought to distance himself from the losses at AIG, suing his former company for misrepresenting the risk of losses from credit default swaps held by AIG Financial Products. In the suit, which was filed last week but only surfaced on Monday, he claims to have been misled into buying stock at inflated prices. He said he paid more taxes than he should have because of the inflated prices, which caused him to overstate his income.

Greenberg and his lawyer could not be reached for comment.

DAMAGE CONTROL

Greenberg oversaw AIG’s growth into a company spanning 130 countries and serving more than 70 million customers.

But in 2005, amid an investigation by then New York Attorney General Eliot Spitzer, Greenberg was forced out by AIG’s board. He had refused to cooperate with the company’s own probe.

He is still fighting civil charges being pursued by New York state, as well as a string of other lawsuits outstanding between him and AIG.

But detractors say he could face a tough time saving face given the latest loss revelations since the former chieftain was sole architect of AIG Financial Products — the business that poured itself into the CDS market, and ultimately cost AIG so much.

That business “brought AIG to its knees,” said Mark Keenan, an insurance partner with law firm Anderson Kill & Olick. 

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Inflation in Europe stayed close to the lowest rate since 1999 in February as the global financial crisis undermined consumer confidence and curtailed spending.

Consumer prices in the euro area rose 1.2 percent, compared with a 1.1 percent increase in January, the European Union statistics office in Luxembourg said today. Economists expected a 1 percent inflation rate in February, according to the median of 32 forecasts in a Bloomberg News survey. The January reading was the lowest since July 1999.

Oil prices have plunged 70 percent from an all-time high last summer as the financial turmoil has curbed global growth and pushed the euro-zone economy into its worst recession since World War II. The European Central Bank has signaled it is ready to cut interest rates to a record low this week to bolster the economy.

“Today’s weak inflation data certainly provide further scope for a large cut in interest rates at the ECB’s meeting this week,” said Colin Ellis, an economist at Daiwa Securities SMBC Europe Ltd. in London. “The risk is still that 50 basis points does not provide enough of a cushion to the unraveling euro-area economy.”

All 55 economists surveyed by Bloomberg News predict the ECB to reduce the benchmark rate by 50 basis points, or one-half percentage point, to a record low 1.5 percent at its next meeting on March 5. The central bank already has cut the rate by 2 instant payday loans.5 percentage points since early October.

The euro extended losses after the inflation report was published. The European currency traded at $1.2593 at 11:03 a.m. in London, down 0.6 percent.

Largest Economy

Inflation in Germany, Europe’s largest economy, and Italy unexpectedly accelerated in February. The German inflation rate rose to 1 percent from 0.9 percent in January, led by rising prices for package vacations and motor fuels, the Federal Statistics Office in Wiesbaden said last week.

“Fluctuations are always likely around a trend and all the indications continue to be that euro-zone inflation will come down significantly further over the coming months,” said Howard Archer, an economist at IHS Global Insight in London.

Europe’s manufacturing industry shrank at a record pace in February as export orders collapsed and companies scaled back production, Markit Economics said today. A gauge of manufacturing activity declined 33.5 from 34.4 in January, falling more than initially estimated.

The inflation report released today is an estimate. The statistics office will publish a detailed breakdown of the data, including energy-price inflation as well as the core rate, on March 16.

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Southeast Asian leaders pledged to cut trade barriers and open more service industries as the bloc struggles to overcome a global recession that has eroded export demand and boosted protectionist sentiment.

“The leaders reaffirmed their determination to ensure free flow of goods, services and investment,” the 10-member Association of Southeast Asian Nations said in a statement after meeting in Cha-am, Thailand. “They agreed to stand firm against protectionism and to refrain from introducing and raising new barriers.”

Asia is being hit hard by the global economy’s worst crisis since the Great Depression as the region is almost twice as reliant on exports as the rest of the world. That’s prompted Asian governments to unveil fiscal stimulus packages worth almost $700 billion to kick-start local consumer and business spending.

Growth in Indonesia, Southeast Asia’s largest economy, was the least in two years last quarter, and Thailand is expected to enter its first recession in a decade. Singapore is in its deepest downturn ever, while Malaysia’s economy grew at the slowest pace in seven years last quarter.

Central banks have responded to weakening growth by slashing interest rates. Bank Negara Malaysia on Feb. 24 reduced its benchmark rate for a third straight meeting to 2 percent, aiming to bolster an economy that policy makers said faces an increasing risk of contracting this year. The economy last posted an annual decline in 1998.

Interest Rate Cuts

Thailand’s central bank on Feb. 25 lowered its key policy rate by 50 basis points to 1.5 percent, adding to its most aggressive cuts ever. The Bank of Thailand will probably cut rates further this year to boost growth as the country faces its first recession in 11 years and 1 million job losses, Finance Minister Korn Chatikavanij said in an interview yesterday.

Asean leaders warned of the dangers of measures aimed at shielding domestic industries and goods from overseas competition as the worldwide economic downturn threatens jobs and hurts manufacturing.

“We want to be clear that the Asean countries are firmly committed to free trade, and we’ll do whatever we can to make sure no countries resort to protectionist measures to try to ease their way out of the crisis,” Thai Prime Minister Abhisit Vejjajiva said at a news briefing today. “If any of that happens, and if all countries begin to join in, then everybody loses.”

Asean will “take assertive action” against protectionism and will emphasize the point “to the rest of the world,” including the G20 meeting in the U.K. in early April, Abhisit said.

EU-Style Integration

Asean is attempting to create an economic zone modeled after the European Union, without a common currency, by 2015 poor credit personal loans. The group has said it needs to improve its competitiveness as China and India, the world’s two fastest-growing major economies, attract an increasing chunk of global investment.

Asia’s export-dependent nations are reeling from the global slowdown, which has slashed demand for the region’s computer chips, cars and commodities.

“Regional cooperation becomes even more important as we seek to pursue joint approaches and pool our resources to cope with difficulties that we all face,” Asian Development Bank President Haruhiko Kuroda told leaders in Cha-am yesterday.

Asean together with Japan, China and South Korea last week agreed to form a $120 billion pool of foreign-exchange reserves that can be used by countries to defend their currencies to battle fallout from the global financial crisis.

Australia, New Zealand Deal

The grouping on Feb. 27 also signed a free-trade pact with Australia and New Zealand that covers trade in goods, investment and services. It will implement one with India in the next few months after years of negotiations.

“All of this standard Asean procedure amounts to very little in the current context of the global financial crisis and rising protectionism around the world,” said Razeen Sally, a director of the European Centre for International Political Economy, a Brussels research group that backs free trade. “These FTAs, bilateral or collective, are not anywhere near strong enough to limit or arrest these protectionist trends.”

Amid the free-trade agreements, some countries are putting in place policies to help domestic businesses that may come at the expense of overseas ones.

Indonesia’s Trade Ministry issued a decree ordering civil servants to use local products, Jakarta Globe reported Feb. 16, citing Trade Minister Mari Pangestu. The decree is aimed at boosting domestic demand and helping local industries including food, beverages, footwear, clothing and music, the report said.

Protectionism ‘Normal Reaction’

It is a “normal reaction” for countries to resort to protectionist measures in a slowdown, Malaysian Prime Minister Abdullah Ahmad Badawi told the Bangkok Post in an interview published Feb. 27.

“If we are not supportive of our own industries, and do not buy our own products and services we will have a serious problem,” Abdullah said. “As it is, we are told that countries which have been importing our products before are not going to be importing the same amount anymore. We have to protect our people.”

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