Iran-Oil Sanctions Risk Biggest OPEC Export Loss Since Libya

By Ewa Krukowska - Jul 2, 2012 2:31 AM GMT+0700

European Union sanctions on Iran entered into full force yesterday after exemptions on some contracts and insurance ended, boosting crude prices and pressure on the Persian Gulf nation to halt its nuclear- enrichment program.

The reduction in Iranian exports may become the biggest supply disruption from a member of the Organization of Petroleum Exporting Countries since an armed rebellion all but halted pumping in Libya last year, according to the International Energy Agency. It also comes as a strike by Norwegian workers is curbing flows from North Sea fields.

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A petrol station in central Tehran. Iran, the second-biggest producer in OPEC after Saudi Arabia, was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year as buyers disappear and Iranian storage tanks become full, the Paris-based IEA forecast in a June 13 report. Photographer: Behrouz Mehri/AFP/Getty Images

“We expect Brent oil prices to be supported by Iranian oil sanctions and potential loss of supplies from the North Sea,” Gordon Kwan, the head of regional energy research at Mirae Asset Securities based in Hong Kong, said in a June 28 report. “The imminent EU insurance ban on tankers carrying Iranian crude could drive up demand for Brent and Dubai crude.”

Brent futures fell below $90 a barrel on June 21 for the first time in 18 months as concern that Europe’s debt crisis would spread sapped the outlook for fuel use worldwide. Now, the Iran embargo and Norwegian strike are stoking speculation about a rebound in prices, according to analysts such as Kwan and Ole Hansen at Saxo Bank A/S. Brent for August settlement surged 7 percent on June 29 to close at $97.80 a barrel on the ICE Futures Europe exchange.

Unsold Barrels

Iran, the second-biggest producer in OPEC after Saudi Arabia, was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year as buyers disappear and Iranian storage tanks become full, the Paris-based IEA forecast in a June 13 report.

Mohammad Ali Khatibi, Iran’s governor to OPEC, warned yesterday that the EU would bear “the consequences of politicizing the market,” without specifying what he meant, the state-run Iranian Students News Agency reported.

Mahmoud Bahmani, Iran’s central bank governor, said his nation “isn’t sitting by idly” and has a “very suitable” $150 billion in foreign currency reserves to help weather the latest trade and financial curbs. “We have programs to fight the sanctions, and we will confront hostile policies,” Bahmani said yesterday, according to the state-run Mehr news agency.

Emergency Meeting

Iran urged OPEC to call an emergency meeting to address the group’s production in excess of its targeted 30 million barrels a day, Mehr reported June 30, citing Oil Minister Rostam Qasemi. Disregard of the limit by some OPEC members “will negatively impact oil prices in the international market,” Qasemi said. The 12-member organization, which decided on June 14 to retain its daily ceiling of 30 million barrels, pumped about 1.6 million barrels more than that in May, according to data compiled by Bloomberg.

The EU agreed in January to ban oil imports from Iran, offering a five-month phase-in period for existing contracts to let member states such as Greece find alternative supplies. An exemption on tanker insurance restrictions for the worldwide shipping industry also ran out today.

Foreign ministers from the 27-nation bloc decided on June 25 the exemptions shouldn’t be extended after talks between Iran and the world’s powers about the nuclear program failed to reach a breakthrough since they started in April. Iran denies that it is developing nuclear weapons.

‘Toughest Measures’

“These are the toughest measures the EU has adopted against Iran to date,” U.K. Foreign Secretary William Hague said yesterday in a statement. “It is in the power of the Iranian leadership to end Iran’s current isolation, but unless they change course, the pressure will only increase.”

The EU ban on insurance for ships carrying Iranian oil affects 95 percent of the world’s tankers because they’re covered by the 13 members of the London-based International Group of P&I Clubs, which is adhering to the EU rule.

In an effort to retain an important Asian customer, Iran offered to supply oil to South Korea using its own tankers, a government official in Seoul said June 29, asking not to be identified because the matter is confidential.

Complementing the European sanctions, a U.S. law enacted Dec. 31 cuts off international banks from the U.S. financial system if they settle oil trades with Iran. The U.S. rule gave importing nations, including China, India and Japan, until June 28 to demonstrate they had “significantly reduced” their purchases of Iranian oil in order to qualify for exemptions.

Crude Dependence

Oil and its derivatives account for nearly 80 percent of Iran’s exports and about half of government revenue, according to the U.S. Energy Information Administration, which estimates the country’s 2010 net oil export revenues at $73 billion.

Iran’s oil exports may “gradually” decline by 20 percent to 30 percent after sanctions start and amid field maintenance work, Deputy Oil Minister Ahmad Qalebani said on June 26.

Such acknowledgement hasn’t erased tensions over the sanctions. Iran warned it can strike any target in the Strait of Hormuz and the Gulf and will soon equip ships with missiles capable of firing more than 300 kilometers (186 miles), Mehr reported June 29, citing a commander of the Islamic Revolutionary Guards Corps. Tankers carrying about a fifth of globally traded oil exit the Gulf though the Hormuz chokepoint.

Iranian ‘Playground’

“The Strait of Hormuz and the Persian Gulf is Iran’s playground and no one else’s,” Mehr cited Admiral Ali Fadavi as saying. “Any issues related to the Strait of Hormuz will be a very big story that will have consequences on the price of oil.”

A survey of 42 analysts on June 28 showed that 16, or 38 percent of them, predicted crude futures will increase in the week starting today, citing the new sanctions. Among the remainder, 12 forecast little change in prices and 14 expected a decline.

“That is the wildcard, the Iranian situation,” Torbjoern Kjus, an oil analyst at Oslo-based bank DnB ASA, said by phone on June 29.

“Nobody can be totally certain how it’s really going to affect the market,” he said. “There’s probably been huge inventory builds in Iran, and this could pose a bearish effect for next year or the second half of this year if there is a resolution.”

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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Hedge Funds Win on Bull Bets Before Biggest Rally: Commodities

By Tony C. Dreibus and Joe Richter - Jul 2, 2012 3:00 AM GMT+0700

Hedge funds lifted their bullish commodity bets for a third week, just before a European agreement to contain the region’s debt crisis spurred the biggest rally in raw-material prices in three years.

Money managers increased their combined net-long positions across 18 U.S. futures and options by 15 percent to 724,783 contracts in the week ended June 26, Commodity Futures Trading Commission data show. That’s the biggest gain since January. Corn holdings rose to the most in five weeks, and sugar wagers climbed to the highest since mid-April.

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Most markets surged June 29 after European leaders agreed to a 120 billion-euro ($152 billion) plan to stimulate growth and ease terms for loans to Spanish banks. The Standard & Poor’s GSCI Spot Index of 24 commodities jumped 5.6 percent, the biggest gain since April 2009, the euro climbed the most this year and Spanish bonds rallied. Europe consumes 18 percent of the world’s copper and accounts for 22 percent of oil demand, data from Barclays Plc and BP Plc show.

Policy makers “are addressing a lot of issues that were taboo,” said Mihir Worah, who manages Pacific Investment Management Co.’s $22 billion Commodity Real Return Strategy Fund from Newport Beach, California. “Whether this plan works or not, the fact that they’re talking about them is important. Stable or growing economies support more commodity demand.”

Equities Rally

The S&P GSCI index rose 6.3 percent last week. The MSCI All-Country World Index of equities gained 2.5 percent and the U.S. Dollar Index, a measure against six trading partners, retreated 0.8 percent. Treasuries returned 0.1 percent, a Bank of America Corp. index shows.

Leaders from the 17-nation euro zone ended talks last week by dropping the requirement that governments get preferred- creditor status on crisis loans to Spain’s banks and opened the door to recapitalizing lenders directly with bailout funds once Europe sets up a single banking supervisor. Until now, they had to get aid through their governments. Germany’s parliament approved the creation of a permanent bailout fund June 29.

Orders for U.S. durable goods climbed more than forecast in May, easing concern that U.S. manufacturing is faltering. Bookings rose 1.1 percent, the first gain in three months, the Commerce Department said June 27. Business activity expanded in June at a faster pace than expected, a gauge from the Institute for Supply Management-Chicago Inc. showed June 29.

Economic Confidence

The rally in commodities may not last because “the cloud of Europe is still going to hang over the market for several quarters,” said Jack Ablin, the chief investment officer of BMO Harris Private Bank in Chicago, which oversees about $60 billion of assets. Economic confidence in the euro area slumped to the lowest in more than 2 1/2 years in June and German unemployment increased more than economists forecast, separate reports showed June 28. Spain and Cyprus became the fourth a fifth euro members to seek external aid last month.

The S&P GSCI slumped 13 percent last quarter, the most since the global recession, and tumbled into a bear market on June 21 amid the escalating fiscal crisis and after the Federal Reserve refrained from starting another round of debt buying. More than $3.6 trillion has been erased from the value of global equities since March 31, data compiled by Bloomberg show.

Money managers pulled $193 million from commodity funds in the week ended June 27, according to data from Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Investor outflows were $8.2 billion in May, the highest monthly total since a record $9.8 billion in September, Barclays said on June 25, citing its measure of exchange-traded products, index- linked funds and medium-term notes.

Morgan Stanley

Morgan Stanley stuck with recommendations that investors buy gold, copper and iron ore. As Europe’s crisis threatens growth, investors should seek “exposure only to those metals and bulk commodities that reflect the benefits of tight supply conditions and pockets of residual demand strength,” analysts Peter Richardson and Joel Crane said in a report June 28.

Rio Tinto Group, the world’s third-largest mining company, said June 29 that economic growth in China will accelerate in the second half of this year even as European turmoil escalates. The Asian country is the world’s biggest consumer of everything from aluminum to cotton to pork.

Funds boosted their bullish oil wagers for the first time in eight weeks, increasing the net-long position by 1 percent to 124,017 contracts, CFTC data show. New York futures surged 9.4 percent on June 29, the biggest gain in more than three years.

Farm Bets

A measure of 11 U.S. farm goods showed speculators raised bullish wagers in agricultural commodities by 24 percent to 533,095 contracts, the biggest gain since February. Traders switched to betting on a wheat rally with a net-long position of 40,194 contracts, compared with a net-short holding of 5,182 the prior week, the government said.

Money managers boosted wagers on higher corn prices by 53 percent to 108,542 contracts, the highest since May 22. The grain surged 15 percent last week, the biggest gain since December 2008, after a government report showed inventories tumbled the most in 16 years and as dry weather parched fields.

Crops wilted as little or no rain fell in growing areas in the past month, according to the National Weather Service. A dry spell this severe happens only once every quarter-century, said Sal Gilbertie, who helps manage $79 million of assets as the president and chief investment officer of Teucrium Trading LLC in Santa Fe, New Mexico. The U.S. is the world’s biggest corn producer and exporter.

“Commodities are priced at a very good value right now,” said Bill Greiner, who oversees $13 billion of assets as chief investment officer at Mariner Wealth Advisors in Kansas City, Missouri. “That’s traditionally the time you want to step up and buy.”

To contact the reporters on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net; Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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Barclays Chairman Said to Be Poised to Resign After Libor Fine

By Howard Mustoe - Jul 2, 2012 6:01 AM GMT+0700

Barclays Plc (BARC) Chairman Marcus Agius plans to resign after the bank was fined a record 290 million pounds ($455 million) for trying to rig interest rates, sparking a political outcry, according to a person briefed on the matter.

An announcement may come as soon as today, said the person, who asked not to be identified because the move hasn’t been made public. Agius, 65, has been chairman of Britain’s second-largest bank by assets since January 2007.

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Barclays Plc Chairman Marcus Agius. Photographer: Brian Capon/British Bankers' Association via Bloomberg

He is the most senior executive to offer to step down following probes by global regulators into whether lenders colluded to manipulate Libor. Chief Executive Officer Robert Diamond remains under pressure from lawmakers after U.K. and U.S. regulators found the lender “systematically” attempted to rig the London and euro interbank offered rates for profit.

“Politicians will see this as him taking a bullet for Bob Diamond,” said Christopher Wheeler, a London-based banking analyst at Mediobanca SpA. “They realized they needed to do something, and Agius was chairman during the time they got fined for -- but will it be enough?”

Both Diamond and Agius have been called to appear this week before British lawmakers on the Treasury Select Committee. Separately, the U.K. government is preparing an inquiry into the future of Libor, including introducing criminal penalties for people who breach rules surrounding the rate, said a Treasury spokesman, who declined to be named citing government policy.

David Cameron

Prime Minister David Cameron on June 28 called for accountability to go “all the way to the top,” while opposition Labour Party leader Ed Miliband has called for a full inquiry into the industry’s practices.

Barclays has tumbled 17 percent since the fine was announced on June 27, making it this year’s worst performer in the five-member FTSE 350 banks index.

Diamond, who built up and ran the securities unit during the period being probed by regulators, may keep his job because he has no obvious successor, according to Chirantan Barua, an analyst at Sanford Bernstein Research in London. None of the bank’s largest shareholders have publicly called for Diamond’s resignation so far.

“Shareholders will be worried that if Bob goes, the stock may go down another 10 percent,” Wheeler said.

Diamond, 60, his three top lieutenants, Chief Operating Officer Jerry del Missier, Finance Director Chris Lucas and corporate and investment banking chief Rich Ricci have already forfeited their bonuses for this year following the fines.

Michael Rake

Agius is likely to be replaced by Michael Rake, Sky News reported yesterday. Rake, 64, is chairman of BT Group Plc and has been a director of Barclays since 2008. Officials at Barclays declined to comment.

Agius joined Barclays after a 34-year career at Lazard Ltd., where he had been chairman of the firm’s London unit. There, he advised on banking takeovers including Halifax Group Plc’s 2001 merger with Bank of Scotland to create HBOS Plc. As non-executive chairman of BAA Plc, Agius helped the owner of London’s Heathrow airport negotiate a higher takeover price from Grupo Ferrovial SA in 2006.

He had already faced investor pressure when the lender raised more than 5 billion pounds in 2008 from a group of funds from Abu Dhabi and Qatar without giving existing shareholders the opportunity to buy new stock. Shareholders including Legal & General Group Plc complained at the time their pre-emption rights had been ignored, and in protest about 16 percent of investors opposed Agius’s re-election as chairman in April 2009.

BBC, BBA

He also had to apologize to shareholders for failing to communicate the firm’s pay plans to investors clearly in April after 27 percent of shareholders voted against Diamond’s 12 million-pound compensation package.

Agius is also a board member of the British Broadcasting Corp. and chairman of the British Bankers’ Association, the industry lobby group that oversees Libor.

Libor is determined by about 18 banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies. Because banks’ submissions aren’t based on real trades, the potential exists for the benchmark to be manipulated by traders.

At least a dozen firms, including Citigroup Inc., Royal Bank of Scotland Group Plc and UBS AG, are being probed by regulators worldwide for colluding to rig the rate, the benchmark for more than $360 trillion of securities, including mortgages, student loans and swaps.

False Submissions

Barclays traders routinely coordinated with counterparts from at least four other banks in an attempt to move interest rate benchmarks, according to documents released on June 27 by the U.S. Commodity Futures Trading Commission, the U.S. Justice Department and the U.K. Financial Services Authority.

Derivatives traders requested the false submissions in the Libor and Euribor setting process, as they were “motivated by profit and sought to benefit Barclays’ trading positions,” the U.K. Financial Services Authority said.

Andrew Tyrie, the chairman of Parliament’s Treasury committee, said Diamond will have to answer questions about who profited from the firm’s false submissions and who at Barclays knew about them, according to an interview with the Daily Mail.

“There appear to have been at least two motives for the rigging of Libor,” Tyrie was cited as saying in the interview. “The first was to enable traders to make a profit. The second was to support share prices at a crucial time -- and that is something that might reasonably be considered the responsibility of the relevant companies as a whole.”

SFO Probe?

The U.K. Serious Fraud Office is considering whether to open a formal investigation, its spokesman said last week. The U.S. Justice Department is conducting its own criminal probe into the attempted manipulation of interbank offered rates.

FSA Chairman Adair Turner said yesterday the Barclays fine shows regulator needs more powers to bring criminal charges.

“Further steps were made a few years ago to give us the ability to bring criminal charges in particular areas of market abuse, but they did not cover the Libor market,” Turner said in an interview on the British Broadcasting Corp.’s “Andrew Marr Show.” “We now have to look further and see whether we should strengthen these powers considerably.”

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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Limits on Spending Power Seen as Health Ruling’s Legacy

By Bob Drummond - Jul 2, 2012 5:00 AM GMT+0700

The Supreme Court decision upholding President Barack Obama’s health-care law has drawn attention for limiting Congress’s authority over interstate commerce, yet constitutional scholars say its biggest impact may be a curb on lawmakers’ ability to alter state Medicaid funding.

The justices on June 28 upheld the core of the Patient Protection and Affordable Care Act, which says Americans must have health insurance or pay a penalty. The court ruled that while Congress doesn’t have power under the Constitution’s Commerce Clause to make Americans buy health policies, it can tax people who don’t have coverage.

While the rest of the health-care decision was decided on 5-4 votes among the justices, a 7-2 majority said that while Congress may put conditions on the use of money provided for expanded Medicaid programs, it couldn’t take away existing Medicaid funding from states that don’t participate.

“The holding on the Medicaid expansion could be significant,” said Jenny Martinez, a Stanford University law professor. “It could limit the federal government’s ability to change or expand spending programs once they have been in place for a while and have reached a significant scale.”

Martinez said that the justices’ Commerce Clause finding probably wouldn’t be far-reaching. “There aren’t so many laws, after all, that are similar to the Affordable Care Act in regulating so-called inaction,” she said in an e-mail.

Claim Validated

Congress’s authority to regulate interstate commerce provides the constitutional foundation for many federal laws, creating high stakes whenever the issue hits the Supreme Court.

Opponents of the health-care law said after the ruling that, while they failed to derail the insurance requirement, the section of the high court’s decision on the commerce power represented a victory in a long-running legal argument over limits on Congress’s regulatory authority.

The ruling “validates our claim that a congressional power to compel that all Americans engage in commerce was a constitutional bridge too far,” Georgetown University law professor Randy Barnett said in a statement.

While the court ultimately upheld the law, the decision “is a tremendous victory for re-establishing constitutional limits on the power of the federal government,” Wisconsin’s Republican Attorney General J.B. Van Hollen said in a statement.

‘Modest Limitation’

Still, the specific limits outlined in the health-care decision -- that Congress can’t make Americans buy something they don’t want -- may not do much to tie the government’s hands down the road, University of Michigan law professor Richard Friedman said.

That “modest limitation” on Congress’s power to regulate interstate commerce is followed, in Chief Justice John Roberts’s decision, by a constitutional road map showing lawmakers how they can use the government’s taxing authority get around it, Friedman said in an e-mail.

“All it really does is say that the commerce power doesn’t authorize Congress to require people to buy goods or services -- but this is the first time Congress has felt the need to do so,” he said. “If the need should ever arise again -- it’s highly unlikely that Congress will ever feel the need to require people to buy broccoli -- Congress can achieve much of the same result by imposing a tax, and making sure it looks like a tax.”

Gun to Head

The separate section of the decision -- in which Roberts wrote that Congress can’t use federal funding as a “gun to the head” to force states to expand Medicaid eligibility -- “is the most important part of the decision” in terms of future implications, said Anne Joseph O’Connell, a law professor at the University of California at Berkeley.

Justices Stephen Breyer and Elena Kagan, two Democratic appointees, joined the five justices picked by Republican presidents in putting a new restriction on Congress’s spending power.

“It appears that seven justices have come to the conclusion that some federal grants to the states have become such an integral part of our political system that threatening to withhold them has gone beyond Congress merely putting conditions on money that it offers and crossed the line into coercion,” Friedman said.

While the health-care law, designed to expand health- insurance coverage to millions of uninsured Americans, is the only time the federal government has required people to buy something, Congress often requires state and local governments to comply with policy restrictions as a condition for receiving federal money. Courts have generally given the U.S. government leeway to attach strings dictating the ways that federal dollars can be spent.

Drinking Age

The Supreme Court in 1987 upheld a law that withheld some federal highway funding from states that didn’t raise their legal drinking age to at least 21. The court in that case said conditions on federal funding could, hypothetically, become so pervasive that state governments had no realistic choice but to comply -- a situation that could infringe state sovereignty. The health-care decision marked the first time the justices actually held that a federal program was too coercive.

“This is the first time that they put any teeth” into what previously had been a largely academic debate about limits on Congress’s spending power, Jesse Choper, a law professor at the University of California at Berkeley, said in a telephone interview. “In many ways that is the most significant part of the decision.”

Title IX

Congress has used conditions on federal funding as a policy tool in many areas. The law known as Title IX, for example, says that schools getting federal money must provide equal athletic opportunities for women. Some federal funding for schools and libraries requires them to install Internet filters to block obscene material. The No Child Left Behind law said states had to implement specific education reforms as a condition for getting federal funds.

“The inability to cut down on existing programs in order to force states to take on new responsibilities does indicate that, in federal-state relations, the Congress has fewer powers than most had supposed,” Richard Epstein, a professor at New York University, said in an e-mail.

While restricting Congress’s legal reach under its commerce and spending authority, the high court ultimately upheld the insurance requirement under the constitutional power to levy taxes.

That holding, in fact, “could lead to a greater expansion of federal power than if they had upheld it under the Commerce Clause,” New York University law professor Barry Friedman said in a telephone interview. The court struck down “an expansion of the commerce power that wasn’t going to be used very often” and, in its place, backed a broad interpretation of what Congress can accomplish with taxes.

To contact the reporter on this story: Bob Drummond in Washington at bdrummond@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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Mexicans Vote in Election Expected to Return PRI to Power

By Eric Martin and Nacha Cattan - Jul 2, 2012 3:27 AM GMT+0700.

Daniel Aguilar/Getty Images

Enrique Pena Nieto, presidential candidate for the Institutional Revolutionary Party (PRI), with supporters during his final campaign rally on June 27, 2012 in Monterrey City in Mexico's state of Nuevo Leon.

Mexicans are voting in an election where presidential front-runner Enrique Pena Nieto is looking to return the once-dominant Institutional Revolutionary Party to power after a 12-year hiatus.

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A citizen casts his vote in Mexico City. Photographer: Omar Torres/AFP/Getty Images

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A voter casts her ballot in Oaxaca. Photographer: Carlos Salinas/AFP/Getty Images

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Mexican presidential candidate Andres Manuel Lopez Obrador of the Democratic Revolution Party waves during a press before casting his vote in Mexico City. Photographer: Ronaldo Schemidt/AFP/Getty Images

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Mexican presidential candidate Josefina Vazquez Mota of the National Action Party (PAN) shows her ink-stained fingers after casting her vote in Huisquilucan, Mexico. Photographer: Johan Ordonez/AFP/Getty Images

The most recent poll taken last week showed the PRI candidate leading Andres Manuel Lopez Obrador of the Democratic Revolution Party by 13 percentage points. Josefina Vazquez Mota of the ruling National Action Party, or PAN, was in third. Also at stake are all 500 seats in the Chamber of Deputies, 128 in the Senate, as well as six governorships and the capital.

Pena Nieto has maintained a lead throughout the race, fueled by pledges to boost salaries held back by economic growth that averaged 1.8 percent a year, half the rate of Brazil, since President Felipe Calderon took office in 2006. The 45-year-old former governor of Mexico state, the country’s most-populous, has also promised to turn the tide in a drug war blamed for more than 47,000 deaths under Calderon and pursue tax, labor and energy overhauls to boost competitiveness.

“All three of the candidates reflect what most open political races are about, which is how do you improve people’s lives,” Thomas “Mack” McLarty, former chief of staff for U.S. President Bill Clinton and his special envoy to the Americas, said in an interview. “The real story here is that Mexico’s democracy continues to evolve and develop and progress.”

Mexico’s 79.5 million registered voters will cast ballots from 8 a.m. to 6 p.m. in each of Mexico’s three time zones. Pollsters including GEA-ISA will release exit polls as soon as voting ends at 9 p.m. New York time, while the Federal Electoral Institute will publish preliminary results at about 11:45 p.m. Mexico City time.

Conceding Defeat

Many Mexicans will be looking to see if Lopez Obrador, 58, who has focused his campaign on boosting spending for the poor, will concede defeat if he loses. After the last elections in 2006, which the PRD candidate lost by less than a percentage point after leading in most pre-election polls, his supporters occupied streets in the capital for weeks claiming fraud.

Lopez Obrador arrived before 8:00 a.m. at his voting station in Mexico City and had to wait more than 45 minutes until it was formally opened.

“I trust the people of Mexico, I believe in the people,” he said, according to the Reforma newspaper. “We are going to win.”

Celebration of Democracy

Lopez Obrador’s party has alleged the PRI is trying to buy votes by handing supporters shop gift cards, while the PAN has said Pena Nieto’s party is giving away bank cards. The PRI has denied the claims and its leadership yesterday in a press conference said it has asked all of its representatives to abide by electoral laws.

“I want in this electoral day the people of Mexico to be the winner,” Pena Nieto said after voting in his hometown of Atlacomulco, in the state of Mexico. “I want this day to be a celebration of our democracy.”

Whereas Lopez Obrador arrived in a single car to vote, Pena Nieto came in a convoy of three dark sport utility vehicles and took several photos with supporters on his way in and out.

The PRI’s 71 years in power were marked by “theft and devaluation,” said Maria Etchegaray, 82, as she lined up to vote in Mexico City. “I am going to vote for Vazquez Mota because I’ll never vote for the PRI,” she said, adding that Lopez Obrador “scares” her.

At the same polling station, Enrique Torres said he would vote for Pena Nieto, describing him as more “refined.” Lopez Obrador’s “time has passed,” he said.

Distrust

Doubts over the fairness of elections when PRI was in power and the 2006 standoff between Calderon and Lopez Obrador have fueled mistrust among Mexicans. A survey taken June 22-24 by Mexico City-based Consulta Mitofsky showed that 30 percent of voters have “a lot” of confidence in the Federal Electoral Institute’s ability to oversee the election, less than the 44 percent ahead of the 2006 vote.

In the past few weeks, Pena Nieto has faced student protests organized on the Internet and driven in part by concern he will erode civil liberties and revive corruption that thrived when the PRI ruled alone for 71 years until 2000.

Vazquez Mota, 51, has promised to continue the pro-business policies and drug crackdown initiated by Calderon, who is barred by the constitution from seeking re-election.

Opinion Polls

Pena Nieto had 38.4 percent support in the poll Mitofsky, compared with 25.4 backing for Lopez Obrador and 20.8 percent for Vazquez Mota. The poll of 1,000 registered voters had a 3.1 percentage-point margin of error.

The same poll shows the PRI and its coalition partner the Green Party garnering at least 274 of the 500 seats in the lower house of Congress, though backing for PRI legislative candidates had slipped to the lowest in the campaign. Currently, the PRI’s coalition has 262 seats.

Grupo Financiero Banorte SAB, Mexico’s third-largest bank, forecast in a June 27 note to clients that the coalition would win a majority in the Senate, where it’s currently the second- biggest plurality after Calderon’s party, while falling short of one in the lower house.

In the lower house vote, 300 lawmakers are elected directly while the remaining 200 are chosen through a system of proportional representation based on the national congressional vote. In the Senate, 96 are elected directly, with three named per state. The remaining 32 are chosen through proportional representation.

Changing Tactics

Pena Nieto has said that if elected he plans to spur growth by making it easier for companies to hire and fire workers, increasing tax collection and encouraging more businesses to join the formal economy. He also said he plans to loosen Petroleos Mexicanos’ oil monopoly, which was formed when his party nationalized the then foreign-owned industry in 1938.

Pena Nieto has said he’ll change tactics in the drug war, reducing violence by focusing on the worst crimes such as murder and kidnapping and eventually return the army to the barracks. In a Bloomberg interview in November, he rejected as “nonsense” and “propaganda” accusations by his rivals that he’ll negotiate with criminal gangs.

Vazquez Mota has tried to lift her candidacy by reminding voters of the PRI’s past, citing in a June 10 debate the 1968 massacre in Mexico City’s Tlatelolco Square when the military killed hundreds of students protesting anti-democratic practices days before the city hosted the Olympic Games. Pena Nieto was two years old at the time.

“People are going to be asking ‘Is this a new PRI?’ which his campaign suggests, or is he the young, handsome face of the old PRI,” said Diana Villiers Negroponte, a nonresident senior fellow at the Brookings Institution in Washington. “I don’t think any of us can make that conclusion with certainty until January or February,” after the new president takes office on Dec. 1.

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net; Eric Martin in Mexico City at emartin21@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

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Spain Beats Italy 4-0 to Clinch Third Straight Soccer Trophy

By Tariq Panja - Jul 2, 2012 5:01 AM GMT+0700

Laurence Griffiths/Getty Images

Xavi Hernandez of Spain lifts the trophy as he celebrates with teammates following victory in the UEFA EURO 2012 final match between Spain and Italy at the Olympic Stadium on July 1 in Kiev.

Spain beat Italy 4-0 last night to become the first nation to retain soccer’s European Championship title and the only one from the continent to win three straight major competitions.

David Silva, Jordi Alba, and substitutes Fernando Torres and Juan Mata scored at Kiev’s Olympic Stadium for the 2010 world champion, which started its winning treble at Euro 2008.

Italy was forced to play the final 30 minutes a man down after running out of substitutes when Thiago Motta left injured. The Azzurri were no match for a Spanish team that recorded the biggest victory margin in a European Championship or World Cup final, and Spain captain Iker Casillas was able to hold aloft the Henri Delaunay Trophy for the second time in his career.

“To win three titles is almost impossible,” said Spain coach Vicente del Bosque, who has now won European, world and Champions League titles. “Congratulations to the players. I didn’t really want to be the coach who wins but the coach who educates, I want to keep preparing them for the future.”

Spain also extended its record of not conceding a goal in knockout matches since a 3-1 defeat to France in the last 16 of the 2006 World Cup. That was also the last time it was eliminated from a major tournament.

“They really have made history tonight, deservedly so,” Italy coach Cesare Prandelli said. “They have been playing tremendous football for years. Once Thiago Motta went off injured we didn’t have anything left in the tank. When you’re down to 10 men you can’t carry on, the game’s over”

Keep Possession

For all its dominance of the ball Spain had struggled to score goals in knockout matches. Only once since a 3-0 victory over Russia at Euro 2008 had Las Rojas scored more than one goal in major elimination matches. That 2-0 win over France in this year’s competition was followed by a penalty-shootout victory over Portugal in the semifinal after that match finished 0-0.

Prandelli’s decision to ask his team to press higher upfield than Spain’s opponents usually do made for an open contest. Any hope of an Italy comeback was ended when Motta was stretchered off in the 61st minute.

Spain, led by Xavi Hernandez and Andres Iniesta in midfield, showed off how it could maintain possession even with opponents snapping into tackles and closing down space.

Silva Strikes

The opening goal came following a sweeping move involving 13 passes in the 14th minute. It ended when Iniesta played in Cesc Fabregas, who swept behind Giorgio Chiellini and crossed for Silva to head in. Fabregas was chosen ahead of Alvaro Negredo as Del Bosque named a team without a recognized striker.

Chiellini almost pulled Italy level three minutes later but was unable to keep his header on target. That was the Juventus defender’s last contribution before he hobbled off to become the first Italian casualty of the night.

Italy pressed without creating clear openings, and Spain continued to carry a greater threat when it countered.

The second goal arrived four minutes before halftime. Xavi exchanged passes with Alba who surged beyond a clutch of defenders to collect the ball and slot past Gianluigi Buffon.

Prandelli replaced Antonio Cassano at halftime with Antonio Di Natale, who scored Italy’s goal when the teams last met in a 1-1 draw in the group stage. Chances came at both ends. Di Natale failed to profit from two openings within six minutes of entering the game. First he headed over and was then unable to beat Casillas after receiving a pass from Riccardo Montolivo. In between those efforts Spain also went close.

Torres, Mata Score

Fabregas tricked his way past three players and was only denied by a last-gasp lunge as the goal loomed. Spain’s appeals for a handball off Leonardo Bonucci from the corner that followed were turned down by referee Pedro Proenca.

Italy’s chances effectively ended when Motta, who’d replaced Montolivo in the 57th minute, left on a stretcher.

The extra space allowed Spain to toy with its opponents and double the scoreline in the final six minutes.

First Xavi won the ball in midfield and immediately transferred it to Torres who rolled it into the corner of Buffon’s goal. Then Torres set up Chelsea teammate Mata to net in the 88th minute.

“We saw right from the start that they looked fresher, we had spent a lot of energy in the past week,” Prandelli said. “It was a fantastic tournament for us and I have to congratulate the lads.”

Spain beat Germany 1-0 at the Euro 2008 final in Vienna, when Torres got the goal. He’s now the only man to score in two Euro finals. Alba’s strike was his first for his country.

“It was my first final and we created history, I’m very happy,” Alba told reporters. “I can’t believe it, it still has to sink in. I’ve also signed for Barcelona and now I want to celebrate.”

To contact the reporter on this story: Tariq Panja at the Olympic Stadium in Kiev via the London newsroom at tpanja@bloomberg.net

To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net

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