Economy hurts Deutsche Post DHL freight business

FRANKFURT, Germany (AP) — Mail and freight company Deutsche Post DHL saw its profits dip in the first quarter as a tough global economy meant companies shipped fewer goods by air.

A large one-time gain in the year-ago quarter from the sale of the Postbank business to Deutsche Bank also hurt the profit comparison, the Bonn, Germany based company said Tuesday.

Overall, Deutsche Post made a net profit of 498 million euros ($647 million) in the first three months of the year, 5.9 percent lower than the year ago equivalent of 529 million euros. The Postbank sale added 186 million euros last year.

The profit fall came despite a 0.6 percent rise in revenues to 13.44 billion euros.

Deutsche Post, which operates an air freight hub in Cincinnati, Ohio, said its freight business saw slower demand for freight in "a strained macroeconomic environment" that includes a stagnant European economy.

Air freight revenue fell 8.2 percent to 1.2 billion euros, with a particularly strong decline in the technology and manufacturing sectors. Still, operating earnings for the freight division showed a 1 percent increase due to strict cost management.

Deutsche Post, which has 473,000 employees in 220 countries and territories, emerged from the former government post office through privatization, and remains Germany's domestic mail carrier. The German government owns a 24.9 percent stake through its KfW bank.

The company maintained its full-year forecast for as much as 2.95 billion euros in earnings before interest and taxes.

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Obama blesses Mexican security plan, eyes deeper business ties

By Mark Felsenthal and Steve Holland

MEXICO CITY (Reuters) - U.S. President Barack Obama gave his blessing on Thursday to a new security arrangement with Mexican leader Enrique Pena Nieto, in which Mexico will make reducing violence a priority over hunting drug cartel kingpins in the war against organized crime.

The two presidents said they also want to step up trade and business ties that have been overshadowed by the battle against drug trafficking.

"It is obviously up to the Mexican people to determine their security structures and how it engages with other nations including the United States," Obama said at a joint press conference with Pena Nieto.

At the start of a two-day visit to Mexico, Obama sought to draw attention to the emerging might of Latin America's No.2 economy, even as worries about containing drug-trafficking and related violence remained an inescapable subtext.

The two leaders pledged to begin holding cabinet level meetings focused on boosting business between the two countries and to expand educational changes. The first high-level meeting is set for the fall.

The U.S. president pledged support for Pena Nieto's new policy of restricting contacts with the United States on drugs and drug-related violence to a single point, Mexico's Ministry of the Interior. He acknowledged that the United States can play a role with its own domestic policies.

"We look forward to continuing our good cooperation in any way," he said. "I also reaffirmed our determination in the United States to meet our responsibilities to reduce the demand for illegal drugs and to combat the southbound flow of illegal guns and cash."

Mexico's new "single-door" policy would be an abrupt change from the wide latitude the U.S. government enjoyed in working with Mexican officials across agencies under Pena Nieto's predecessor, Felipe Calderon.

The change has raised questions about Mexico's commitment to combating drug trafficking and drug-related violence.

Pena Nieto plans to shift the weight of combating organized crime from the military onto a new militarized police force, but has made few concrete changes so far, instead seeking to focus public attention on the economy rather than violence.

The Mexican government has said that killings linked to organized crime fell 14 percent in the first four months of Pena Nieto's presidency, but 4,249 people still were killed during that period.

More than 70,000 people are estimated to have been killed in drug violence in Mexico since 2007, and gang-style murders continue to provide lurid headlines.

Some question whether Calderon's aggressive policies, which focused on eradicating gang leaders, has been successful or whether it has generated additional violence as rival factions vie for control of turf.

Pena Nieto said his approach will emphasize reducing bloodshed and will operate more smoothly.

"Under this new strategy, what we are trying to do is put in order, institutionalize the security cooperation we have today with the United States, and establish clear and singular channels to help us be more efficient and achieve better results," Pena Nieto said in Spanish.

RIGHTS WORRIES

In a letter to Obama ahead of his visit, rights group Human Rights Watch urged him to review the United States' public security approach with Mexico, rapping his administration for offering "uncritical support" for Calderon's policies and citing a "dramatic increase" in rights abuses.

Both Obama and Pena Nieto have said they want the visit to focus on economic issues rather than security. Pena Nieto is eager to underscore Mexico's recent run of solid economic growth, fueled in part by its increasing attractiveness as a manufacturing hub.

The leaders pledged to conclude a trade agreement with Asia-Pacific nations, the Trans-Pacific Partnership, by the end of the year.

By highlighting Mexico's progress in moving up the economic ladder, Obama is also emphasizing that his own domestic goal of reforming U.S. immigration laws will not promote an exodus of Mexicans into the United States.

"Part of what we discussed is the importance of getting it done, precisely because we do so much business between our two countries," he said, referring to immigration reform that has drawn bipartisan support in Washington. "If we're going to get that done, now's the time to do it."

The two presidents at their meeting discussed a much publicized energy agreement that would remove obstacles to expanding deepwater drilling for oil in the Gulf of Mexico. They said in a joint statement that they looked forward to implementation of the deal.

The United States has yet to finalize the deal, known as the Transboundary Hydrocarbons Agreement, which provides guidelines for drilling in an area of the Gulf that straddles the U.S.-Mexican boundary.

The deal is seen as the key to opening a new era of cooperation on oil production between the two countries. Mexico's state-owned oil company Pemex needs technology and investment to boost its stagnant production, and U.S. companies are eager to help.

(Editing by Simon Gardner and Paul Simao)

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Senator Paul stirs business ire over blocking of tax treaties

By Patrick Temple-West

WASHINGTON (Reuters) - Senator Rand Paul is coming under pressure from some multi-national businesses to drop his opposition to tax treaties between the United States and other nations.

Citing privacy concerns about Americans' tax data, Paul, a Republican and libertarian, has single-handedly blocked Senate action on treaties with Hungary, Switzerland and Luxembourg that have been signed by authorities on both sides, but have been awaiting Senate review since 2011.

At least six other tax treaties or treaty updates -- with Chile, Spain, Poland, Japan, Norway and Britain -- may soon be added to the Senate's queue for confirmation votes.

Major U.S. businesses such as IBM Corp and Fluor Corp are lobbying for Senate action on tax treaties, according to Senate lobbying disclosure documents.

"How many treaties will be held hostage?" asked Cathy Schultz, a lobbyist for the National Foreign Trade Council, a Washington, D.C.-based group that represents companies such as Caterpillar Inc and Pfizer Inc.

Paul has said he is concerned that recent treaties would give foreign governments too much access to U.S. citizens' tax information, a stance that has some support among like-minded conservative libertarians.

"Rand Paul is not a typical senator who may bend over to business lobbyists," said Chris Edwards, director of tax policy at The Cato Institute, a libertarian think tank.

"I am very concerned about this increasingly aggressive international exchange of information," Edwards said.

NO APPROVALS SINCE 2010

No new tax treaties or treaty updates have been approved since 2010, when Paul was elected as the junior senator from Kentucky on a wave of support for Tea Party-aligned Republicans.

Paul recently declined to answer questions from a reporter in a Capitol hallway about the "hold" he has placed on the treaties. Under Senate rules, one senator can prevent a motion from reaching a vote on the Senate floor.

Paul's staff did not reply to repeated requests for comment.

"There's never really been an objection of this sort and a hold that's gone on this long," said Nancy McLernon, president of the Organization for International Investment, which lobbies in Washington on behalf of foreign companies.

In an effort to sway the senator, McLernon said her group would be lobbying both parties to draw attention to the tax treaties. "Let's stop with the self-inflicted wounds," she said.

The United States has tax treaties with more than 60 countries, ranging from China to Kyrgyzstan.

The agreements previously have routinely won Senate approval with little controversy and accomplished their main purpose of preventing double-taxation of income and profits.

In recent years, tax treaties have begun to play an increasing role in efforts by the United States and major European Union countries to crack down on tax avoidance.

The U.S. Treasury in 2012 began signing new tax pacts with countries as part of implementation of the U.S. Foreign Account Tax Compliance Act, a 2010 anti-tax-evasion law.

The law, known as FATCA, which takes effect in January 2014, will require foreign financial institutions to disclose to the United States information about Americans' accounts worth more than $50,000.

SWISS A DRIVING FORCE

Switzerland, a long-time bastion of banking secrecy, is under international pressure to change its ways, and FATCA has been a driving force in that. The United States and Switzerland in February signed a FATCA implementation agreement that would make more information available to U.S. authorities about the financial interests of Americans in Switzerland.

But the taxpayer information exchange cannot go into force without Senate approval of the U.S.-Swiss tax treaty.

The Senate's delayed action on tax treaties could convince other countries to stop negotiating with the United States on tax matters, said John Harrington, a former Treasury tax official who is now a partner at law firm SNR Denton.

Paul, seen as a possible 2016 presidential contender, has taken a position that sets up a clash of traditional Republican interest groups: big business and libertarian ideologues.

In this sense, Paul is in the forefront of the party's search for a new identity since Republicans lost the presidential race last year, as well as numerous seats in the House of Representatives.

Looking toward a possible 2016 White House bid, Paul told reporters earlier this month that he will visit early-voting states this year and make a final decision next year.

New Republicans such as Paul are shifting the party away from its business-first agenda, said Dan Holler, communications director for Heritage Action, a conservative group.

"The party is not being reflexively pro-business," he said.

(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Leslie Adler)

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