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Upside surprises

31 Dec 2013 By Breakingviews columnists

Difficult jobs abound in the global economy, finance and business in the coming year. But so do incredibly low expectations. That means getting it right could mint legacies, and surprise investors in a good way.

Think of politicians like Brazil’s Dilma Rousseff, who is about to host the world’s biggest sporting event of the year, the soccer World Cup; or John Boehner, the speaker of the U.S. House of Representatives, an institution with one of the worst public approval ratings in history. Equally, there are a few chief executives who could defy the current consensus, such as the bosses at Deutsche Bank, Barclays or Microsoft. Herewith, Breakingviews columnists compile a list of those who might surprise us.

Dilma Rousseff, president of Brazil

Brazil has had six years to prepare for World Cup hosting duties, but what was supposed to be an opportunity to showcase the country’s economic ascendance may now have global eyes peering in at just the wrong time. State meddling is undermining flagship energy giant Petrobras; Brazil’s one-time richest man Eike Batista has become a poster-boy for excess; and the country is battling inflation using a swift progression of interest rate hikes. With expectations on the descent, there’s an opportunity for President Dilma Rousseff to exceed them. If she can pull off a soccer extravaganza without any major disruptions and head off fiscal trouble, Rousseff could secure re-election in 2014 and stick around to host the 2016 Olympic Games in Rio.

Microsoft’s new chief executive

Securing a leader to replace Steve Ballmer at the helm of the software-to-games console conglomerate proved tricky. And for good reasons: Microsoft missed the shift to mobile computing, and the PC market, its mainstay, is melting down. Bill Gates remains chairman and spiritual patriarch of the firm, and Ballmer will soon be the biggest shareholder. Yet there’s a path to recovery for the newcomer – reverse the old guard’s capital-wasting strategy of chasing markets outside enterprise software. Though Ballmer and Gates remain stifling presences on the board, there’s a big opportunity for the new chief executive to create a more focused, secure and valuable Microsoft.

Kim Jong Un, supreme leader of North Korea

The baby-faced dictator has been something of a comic figure since replacing his father as North Korea’s supreme leader two years ago. The recent public purge and execution of his uncle suggests he should be taken seriously. The risk is that internal divisions force Kim – or whoever is actually in charge – to provoke a dangerous international confrontation. Another option is that the nuclear state finally decides to embrace some kind of reform. Expectations that Kim could opt for the latter could hardly be lower. But that makes any positive surprise all the more welcome.

Max Baucus, incoming U.S. ambassador to China

The world’s most important expat faces a tough year. Baucus, a retiring Montana senator, must calm nerves as territorial disputes with Japan and the Philippines intensify. China’s cack-handed treatment of U.S. media organisations also threatens otherwise healthy trade ties. He could prove a lame duck. But Baucus has been outspoken on China’s undervalued currency, and has less to lose than a younger nominee with big ambitions. If he talks tough on trade and human rights while balancing the China-Japan-U.S. military triangle, Uncle Sam’s global policeman badge may recover some of its shine.

John Boehner, speaker of the U.S. House of Representatives

After Republicans led a 16-day federal government shutdown and barely hiked the U.S. credit limit in time to avoid default, just 30 percent of Americans believed John Boehner should remain speaker, according to a CNN poll. But he has some positive momentum after rallying his party around a small budget compromise in December. And 2014’s midterm election year may hold Boehner’s greatest test yet: the debt ceiling must rise again this spring. Conservatives may brazenly resist the vital hike to impress voters. This could be Boehner’s moment to shun party radicals in favour of U.S. economic stability.

Lee Raymond, lead independent director at JPMorgan

The former chief executive of Exxon Mobil has backed boss Jamie Dimon to the hilt despite the $6 billion London Whale trading fiasco and $15 billion, and rising, of legal payments. But Raymond could dispel his image as a classic board crony by preparing the bank for life after Dimon. At a minimum, that would require instituting a succession plan. A bolder move would see Raymond appointing a new chief executive, from a bench including young frontrunners like former Chief Financial Officer Mike Cavanagh or Chief Operating Officer Matt Zames, while keeping Dimon on as chairman.

Anshu Jain, Deutsche Bank co-chief executive

Jain’s wretched first full year in charge was summed up by Deutsche’s 2.1 billion euros ($2.9 billion) of fines in December. More litigation looks likely in 2014, with probes into possible cartels in currencies and credit derivatives. Germany’s largest bank must still settle with national watchdogs over Libor, too. Yet Jain runs a top investment bank. And in the next 12 months the bulk of Deutsche’s expensive cost cutting will be complete. Investors could even see Deutsche trade close to its book value, rather than at a 40 percent discount.

Narendra Modi

Narendra Modi could be India’s prime minister of small things. Investors seem to believe the opposition politician, expected to win the 2014 general election, will usher in sweeping reforms to combat stagflation and despair. The surprise would be a focus on smaller but more meaningful issues. Easing bottlenecks – for instance, in the vegetable supply chain – that aggravate India’s chronic shortages will also go well with Modi’s carefully cultivated image as a useful handyman rather than an ineffectual visionary. Those who like headline-grabbing master plans may not like it – until they see the effect of better productivity on Indian corporate earnings.

Antony Jenkins, Barclays chief executive

The Barclays boss had a ropey 2013. Jenkins had barely set out his maiden restructuring when the UK regulator bounced him into a 6 billion pound ($9.7 billion) rights issue to meet new leverage ratio requirements. Until recently it looked a stretch for “AJ” to hit return targets while hitting a 40 percent dividend payout ratio. But recent clarity on how the UK will implement “Basel III” rules means Barclays’ capital position looks a bit better, and European Commission Libor fines were worse for other banks. The expectations aren’t high, but if AJ can start to realize his vision of a safer, more solid Barclays, he will emerge as one of the few heroes of a tarnished global banking cohort.


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