Magnitogorsk the Revival of Stalin's Tired Steel City Meteorite Hunters

The Credit Suisse Magazine Since 1895 Issue 4 Oct./Nov. 2008 International Edition

Metal Magnitogorsk The Revival of Stalin’s Tired Steel City Meteorite Hunters Targeting Extraterrestrial Treasures

Medical Textiles The Future Is a Silver Thread Mighty Gold History of a Metal’s Rule of the World Market Central Asia The Renaissance of the Silk Road Microﬁ nance A Talk With Women’s World Banking Head Periodic Table of the Elements

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 1. Hg 8. Hg 1.00794 IUPAC recommendation 4.002602 1s1 Group number 1s2 1 1 H 2 He –1.1 –259 2.2 –272 – –253 13.6 –269 24.6 Hydrogen 2. Hg 3. Hg 4. Hg 5. Hg 6. Hg 7. Hg Helium 6.941 9.012182 Relative atomic mass 243.0614 * Artificial element 10.811 12.0107 14.00674 15.9994 18.9984032 20.1797 [He]2s1 [He]2s2 [Mean relative mass of [Rn]5f77s2 Electron configuration [He]2s22p1 [He]2s22p2 [He]2s22p3 [He]2s22p4 [He]2s22p5 [He]2s22p6 the longest-lived isotope] 2 3 Li 4 Be Atomic number 95 Am Element symbol 5 B 6 C 7 N 8 O 9 F 10 Ne 1 2 3,4,5,6 Oxidation numbers 3 –4,2,4 –3,2,3,4,5 –2,–1 –1 181 1.0 1278 1.5 Melting point [°C] 994 ~1.2 Electronegativity 2300 2.0 3550 2.5 –210 3.1 –218 3.5 –220 4.1 –249 – 1317 5.4 2970 9.3 Boiling point [°C] 2607 6.0 Initial ionization energy [eV] 2550 8.3 4827 11.3 –196 14.5 –183 13.6 –188 17.4 –246 21.6 Lithium Beryllium Element name Americium Boron Carbon Nitrogen Oxygen Fluorine Neon 22.989770 24.3050 26.981538 28.0855 30.973761 32.066 35.4527 39.948 Metals [Ne]3s1 [Ne]3s2 [Ne]3s23p1 [Ne]3s23p2 [Ne]3s23p3 [Ne]3s23p4 [Ne]3s23p5 [Ne]3s23p6 Metalloids 3 11 Na 12 Mg 13 Al 14 Si 15 P 16 S 17 Cl 18 Ar 1 2 3 –4,4 –3,3,5 –2,2,4,6 –1,1,3,5,7 98 1.0 649 1.2 661 1.5 1410 1.7 44 2.1 113 2.4 –101 2.8 –189 – 892 5.1 1107 7.6 2467 6.0 2355 8.2 280 10.5 445 10.4 –35 13.0 –186 15.8 Sodium Magnesium 3. Ng 4. Ng 5. Ng 6. Ng 7. Ng 8. Ng 8. Ng 8. Ng 1. Ng 2. Ng Aluminum Silicon Phosphorus Sulfur Chlorine Argon 39.0983 40.078 44.955910 47.867 50.9415 51.9961 54.938049 55.845 58.93320 58.6934 63.546 65.39 69.723 72.61 74.92160 78.96 79.904 83.80 [Ar]4s1 [Ar]4s2 [Ar]3d14s2 [Ar]3d24s2 [Ar]3d34s2 [Ar]3d54s1 [Ar]3d54s2 [Ar]3d64s2 [Ar]3d74s2 [Ar]3d84s2 [Ar]3d104s1 [Ar]3d104s2 [Ar]3d104s24p1 [Ar]3d104s24p2 [Ar]3d104s24p3 [Ar]3d104s24p4 [Ar]3d104s24p5 [Ar]3d104s24p6

4 19 K 20 Ca 21 Sc 22 Ti 23 V 24 Cr 25 Mn 26 Fe 27 Co 28 Ni 29 Cu 30 Zn 31 Ga 32 Ge 33 As 34 Se 35 Br 36 Kr 1 2 3 3,4 0,2,3,4,5 0,2,3,6 –1,0,2,3,4,6,7 –2,0,2,3,6 –1,0,2,3 0,2,3 1,2 2 3 4 –3,3,5 –2,4,6 –1,1,3,5,7 2 64 0.9 839 1.0 1539 1.2 1660 1.3 1890 1.5 1857 1.6 1244 1.6 1535 1.6 1495 1.7 1453 1.8 1084 1.8 420 1.7 30 1.8 937 2.0 613(subl.) 2.2 217 2.5 –7 2.7 –157 – 774 4.3 1487 6.1 2832 6.5 3260 6.8 3380 6.7 2482 6.8 2097 7.4 2750 7.9 2870 7.9 2732 7.6 2595 7.7 907 9.4 2403 6.0 2830 7.9 – 9.8 685 9.8 59 11.8 –152 14.0 Potassium Calcium Scandium Titanium Vanadium Chromium Manganese Iron Cobalt Nickel Copper Zinc Gallium Germanium Arsenic Selenium Bromine Krypton 85.4678 87.62 88.90585 91.224 92.90638 95.94 [98] 101.07 102.90550 106.42 107.8682 112.411 114.818 118.710 121.760 127.60 126.90447 131.29 [Kr]5s1 [Kr]5s2 [Kr]4d15s2 [Kr]4d25s2 [Kr]4d45s1 [Kr]4d55s1 [Kr]4d65s1 [Kr]4d75s1 [Kr]4d85s1 [Kr]4d10 [Kr]4d105s1 [Kr]4d105s2 [Kr]4d105s25p1 [Kr]4d105s25p2 [Kr]4d105s25p3 [Kr]4d105s25p4 [Kr]4d105s25p5 [Kr]4d105s25p6

5 37 Rb 38 Sr 39 Y 40 Zr 41 Nb 42 Mo 43 Tc 44 Ru 45 Rh 46 Pd 47 Ag 48 Cd 49 In 50 Sn 51 Sb 52 Te 53 I 54 Xe 1 2 3 4 3,5 0,2,3,4,5,6 7 –2,0,2,3,4,6,8 0,1,2,3,4,5 0,2,4 1,2 2 3 2,4 –3,3,5 –2,4,6 –1,1,5,7 2,4,6 39 0.9 769 1.0 1523 1.1 1852 1.2 2468 1.2 2617 1.3 2172 1.4 2310 1.4 1966 1.5 1552 1.4 962 1.4 321 1.5 157 1.5 232 1.7 631 1.8 450 2.0 114 2.2 –112 – 688 4.2 1384 5.7 3337 6.4 4377 6.8 4927 6.9 5560 7.1 5030 7.3 3900 7.4 3727 7.5 3140 8.3 2212 7.6 765 9.0 2080 5.8 2270 7.3 1750 8.6 990 9.0 184 10.5 –107 12.1 Rubidium Strontium Yttrium Zirconium Niobium Molybdenum Technetium Ruthenium Rhodium Palladium Silver Cadmium Indium Tin Antimony Tellurium Iodine Xenon 132.90545 137.327 57 – 7 1 178.49 180.9479 183.84 186.207 190.23 192.217 195.078 196.96655 200.59 204.3833 207.2 208.98038 [209] [210] [222] [Xe]6s1 [Xe]6s2 [Xe]4f145d26s2 [Xe]4f145d36s2 [Xe]4f145d46s2 [Xe]4f145d56s2 [Xe]4f145d66s2 [Xe]4f145d76s2 [Xe]4f145d96s1 [Xe]4f145d106s1 [Xe]4f145d106s2 [Xe]4f145d106s26p1 [Xe]4f145d106s26p2 [Xe]4f145d106s26p3 [Xe]4f145d106s26p4 [Xe]4f145d106s26p5 [Xe]4f145d106s26p6

6 55 Cs 56 Ba La–Lu 72 Hf 73 Ta 74 W 75 Re 76 Os 77 Ir 78 Pt 79 Au 80 Hg 81 Tl 82 Pb 83 Bi 84 Po 85 At 86 Rn 1 2 4 5 0,2,3,4,5,6 –1,2,4,6,7 –2,0,2,3,4,6,8 –1,0,1,2,3,4,6 0,2,4 1,3 1,2 1,3 2,4 3,5 2,4,6 –1,1,3,5,7 2 28 0.9 725 1.0 2150 1.2 2996 1.3 3407 1.4 3180 1.5 3045 1.5 2410 1.6 1772 1.4 1064 1.4 –39 1.5 304 1.4 328 1.6 271 1.7 254 1.8 302 2.0 –71 – 690 3.9 1640 5.2 5400 7.0 5425 7.9 5927 8.0 5627 7.9 5027 8.7 4130 9.1 3827 9.0 2940 9.2 357 10.4 1457 6.1 1740 7.4 1560 7.3 962 8.4 337 9.5 –62 10.7 Cesium Barium Lanthanoids Hafnium Tantalum Tungsten Rhenium Osmium Iridium Platinum Gold Mercury Thallium Lead Bismuth Polonium Astatine Radon [223] [226] 89 – 1 03 [261] * [262] * [263] * [264] * [265] * [268] * [269] * [272] * [277] * [289] * [289] * [293] * [Rn]7s1 [Rn]7s2 [Rn]5f146d27s2 [Rn]5f146d37s2 [Rn]5f146d47s2 [Rn]5f146d57s2 [Rn]5f146d67s2 [Rn]5f146d77s2 [Rn]5f146d97s1 [Rn]5f146d107s1

7 87 Fr 88 Ra Ac–Lr 104 Rf 105 Db 106 Sg 107 Bh 108 Hs 109 Mt 110 Ds 111 Rg 112 Uub 113 Uut 114 Uuq 115 Uup 116 Uuh 117 Uus 118 Uuo 1 2 27 0.9 700 1.0 677 4.0 1140 5.3 Francium Radium Actinoids Rutherfordium Dubnium Seaborgium Bohrium Hassium Meitnerium Darmstadtium Roentgenium Ununbium Ununtrium1 Ununquadium Ununpentium1 Ununhexium Ununseptium1 Ununoctium

138.9055 140.116 140.90765 144.24 [145] 150.36 151.964 157.25 158.92534 162.50 164.93032 167.26 168.93421 173.04 174.967 [Xe]5d16s2 [Xe]4f26s2 [Xe]4f36s2 [Xe]4f46s2 [Xe]4f56s2 [Xe]4f66s2 [Xe]4f76s2 [Xe]4f75d16s2 [Xe]4f96s2 [Xe]4f106s2 [Xe]4f116s2 [Xe]4f126s2 [Xe]4f136s2 [Xe]4f146s2 [Xe]4f145d16s2

6 57 La 58 Ce 59 Pr 60 Nd 61 Pm 62 Sm 63 Eu 64 Gd 65 Tb 66 Dy 67 Ho 68 Er 69 Tm 70 Yb 71 Lu 3 3,4 3,4 3 3 2,3 2,3 3 3,4 3 3 3 2,3 2,3 3 920 1.1 798 1.1 931 1.1 1010 1.1 1080 1.1 1072 1.1 822 1.0 1311 1.1 1360 1.1 1406 1470 1.1 1522 1.1 1545 1.1 824 1.1 1656 1.1 3454 5.6 3257 5.5 3212 5.4 3127 5.5 2730 5.6 1778 5.6 1597 5.7 3233 6.1 3041 5.9 2335 5.9 2720 6.0 2510 6.1 1727 6.2 1193 6.3 3315 5.4 Lanthanum Cerium Praseodymium Neodymium Promethium Samarium Europium Gadolinium Terbium Dysprosium Holmium Erbium Thulium Ytterbium Lutetium [227] [232] [231] [238] [237] [244] [243] * [247] * [247] * [251] * [252] * [257] * [258] * [259] * [262] * [Rn]6d17s2 [Rn]6d27s2 [Rn]5f26d17s2 [Rn]5f36d17s2 [Rn]5f46d17s2 [Rn]5f67s2 [Rn]5f77s2 [Rn]5f76d17s2 [Rn]5f97s2 [Rn]5f107s2 [Rn]5f117s2 [Rn]5f127s2 [Rn]5f137s2 [Rn]5f147s2 [Rn]5f146d17s2

7 89 Ac 90 Th 91 Pa 92 U 93 Np 94 Pu 95 Am 96 Cm 97 Bk 98 Cf 99 Es 100 Fm 101 Md 102 No 103 Lr 3 4 4,5 3,4,5,6 3,4,5,6 3,4,5,6 3,4,5,6 3,4 3,4 3,4 3 3 3 2,3 3 1047 1.0 1750 1.1 1554 1.1 1132 1.2 640 1.2 641 1.2 994 ~1.2 1340 ~1.2 986 ~1.2 900 ~1.2 860 ~1.2 ~1.2 ~1.2 3197 6.9 4787 7.0 4030 – 3818 6.1 3902 3327 5.8 2607 6.0 3100 Actinium Thorium Protactinium Uranium Neptunium Plutonium Americium Curium Berkelium Californium Einsteinium Fermium Mendelevium Nobelium Lawrencium

All known terrestrial chemical materials, whether rocks, metals or gases, are organized in the periodic table of the elements. The positioning of each element explains its properties and reactivity. The rows are known as “periods” and illustrate the number of electron shells (so, for example, the element iron [Fe] appears in the fourth row and therefore has four electron shells). The columns organize the elements into groups. Elements in the same column tend to have similar chemical properties.

Precious Metals Industrial Metals Gold Silver Palladium Platinum Aluminum Copper Nickel Z i n c T i n Lead 196.96655 107.8682 106.42 195.078 26.981538 63.546 58.6934 65.39 118.710 207.2 [Xe]4f145d106s1 [Kr]4d105s1 [Kr]4d10 [Xe]4f145d96s1 [Ne]3s23p1 [Ar]3d104s1 [Ar]3d84s2 [Ar]3d104s2 [Kr]4d105s25p2 [Xe]4f145d106s26p2 79 Au 47 Ag 46 Pd 78 Pt 13 Al 29 Cu 28 Ni 30 Zn 50 Sn 82 Pb 1,3 1,2 0,2,4 0,2,4 3 1,2 0,2,3 2 2,4 2,4 1064 1.4 962 1.4 1552 1.4 1772 1.4 661 1.5 1084 1.8 1453 1.8 420 1.7 232 1.7 328 1.6 2940 9.2 2212 7.6 3140 8.3 3827 9.0 2467 6.0 2595 7.7 2732 7.6 907 9.4 2270 7.3 1740 7.4 Gold Silver Palladium Platinum Aluminum Copper Nickel Zinc Tin Lead

Gold has been coveted for Silver conducts heat and elec‑ Palladium is one of the six Platinum, another of the six Aluminum is the second most Copper is used in a wide range About 70 % of nickel is used Zinc is used primarily as a coat- Most tin is used as a protective Lead is a corrosion-resistant, centuries for its unique blend tricity better than any other platinum-group metals (PGMs). platinum-group metals (PGMs), abundant metal element after of domestic, industrial, and tech- to make austenitic stainless steel, ing on iron and steel to protect coating or as an alloy with other dense, malleable metal that has of rarity, beauty and near metal. It is usually found as PGMs usually are found together is the most expensive. Like silicon. Aluminum and its alloys nology applications. It is ductile, 10 % for superalloys, and 20 % against corrosion. It is also metals. Tin is essential to many been used for at least 5,000 indestructibility. Central banks by-product of copper, lead and are the rarest metallic palladium, it is used for “green” are used for wide range of indus- corrosion resistant, and a good for alloy steels, rechargeable a micronutrient essential for applications for which there years. Today, it is in demand for hold physical gold reserves and zinc processing, or along elements. It is currently less applications, such as auto trial and commercial products. conductor of heat and electricity. batteries, catalysts, chemicals, human, animal and plant health. are no satisfactory substitutes. starting-lighting-ignition (SLI) as a store of wealth. with gold discoveries. costly than platinum. catalysts. and coins. batteries.

Biggest Producers (tonnes) Biggest Producers (tonnes) Biggest Producers (tonnes) Biggest Producers (tonnes) Biggest Producers (000 tonnes) Biggest Producers (000 tonnes) Biggest Producers (000 tonnes) Biggest Producers (000 tonnes) Biggest Producers (000 tonnes) Biggest Producers (000 tonnes) Australia Peru Russia South Africa China Chile Russia China China China 280 3,400 95 183 12,000 5,700 322 3,013 136 1,592 South Africa Mexico South Africa Russia Canada Peru Canada Peru Indonesia Australia 270 3,000 93 27 3,10 0 1, 20 0 258 1,444 102 642 China China Canada Canada US US US US Peru US 250 2,700 18 9 2,600 1,19 0 180 783 39 410 US Australia US Zimbabwe Russia China Indonesia Canada Bolivia Peru 240 2,000 14 5 2,000 920 145 622 16 329 Peru Chile Zimbabwe US Australia Australia Colombia Mexico Congo Mexico 170 1,40 0 4 3 1,90 0 860 100 572 12 135

2007: World Gold Council, GFMS Metals Consulting 2008: US Geological Survey (USGS) 2007: Johnson Matthey Noble Metals, 2008: US Geological Survey (USGS) 2008: US Geological Survey (USGS) 2008: US Geological Survey (USGS) 2008: US Geological Survey (USGS) 2007: World Bureau of Metal Statistics (WBMS) 2007: World Bureau of Metal Statistics (WBMS) 2007: World Bureau of Metal Statistics (WBMS) 2008: Credit Suisse Standard Securities Supply continued to tighten in Global silver mine production Lower South-African output of The largest reserves of PGMs World aluminum production Labor strikes in Canada, Chile, World nickel mine production On the supply side, global China continued to be the leading World smelter production of lead, 2007 to 3,369 tonnes globally, rose in 2007. Output in Latin palladium in 2007 compared with are in the Bushveld Complex in for 2007 rose to 38,000,000 Mexico and Peru and lower was at all-time high in 2007, just zinc mine production rose to tin producer in 2007. Indonesia, both primary and secondary in down 3 % from 2006 primarily America, the world’s biggest silver 2006 was largely due to safety South Africa, according to the tonnes, compared with than anticipated production in meeting demand. About 119,000 11,115,100 tonnes in 2007 from the world’s second leading 2006 rose 4.3 % year-on-year due to falls in production in the producing region, expanded by shutdowns, geological and equip- USGS. South Africa accounts 33,700,000 tonnes in 2006, ac- Africa, Indonesia and the US tonnes of nickel were recovered 10,008,300 tonnes in 2006. tin producer, was wracked by a to 8,030,000 metric tonnes, US, Indonesia and South Africa. 9 %, according to the 2008 World ment problems and a difficult for nearly 80 % of world supply. cording to the USGS. China and led to lower copper supply; from purchased scrap metal in This is owed to increases in series of events that served to reaching a new record production In South Africa, several mines Silver Survey. China’s growth labor environment, according to The country’s mining industry saw Eastern Asia producers account however, by the end of 2007 a 2007, representing 52 % of sec- production in Australia, Bolivia, interrupt tin output and created level. The world’s largest smelter closed in efforts to improve the was spurred by its base metal Johnson Matthey Noble Metals. a turbulent 12 months in 2007, for the bulk of this growth. China modest surplus was recorded. ondary plus primary consumption Brazil, Canada, China, India, market uncertainty. producer of both primary country’s mine safety. producers, who generate silver with mine closings. has been the world’s leading for the year, according to USGS. Ireland, Kazakhstan, Mexico, and secondary lead for 2006 as a by-product. aluminum producer since 2003. Peru, Portugal and the US. was China.

Biggest Consumers (tonnes) Biggest Consumers (tonnes) Biggest Consumers (tonnes) Biggest Consumers (tonnes) Biggest Consumers (000 tonnes) Biggest Consumers (000 tonnes) Biggest Consumers (000 tonnes) Biggest Consumers (000 tonnes) Biggest Consumers (000 tonnes) Biggest Consumers (000 tonnes) India US Rest of world including China Europe China China China China China China 774 4,670 65 71 12,347 4,861 328 3,585 132 2,506 China Japan Japan Japan US US Japan US Japan US 326 3,540 47 71 5,580 2,170 196 1,016 34 1,572 WolfgangMaria TV-yesterdayWeber,

US India North America Rest of world including China Japan Germany US Japan Peru Germany |

278 2,240 46 59 2,197 1,392 162 589 34 400 Turkey Italy Europe North America Germany Japan Germany Germany Germany South Korea 249 1,5 6 0 29 31 2,008 1, 252 110 534 23 336

Saudi Arabia UK Italy South Korea Taiwan South Korea South Korean Italy

129 1,470 1,020 857 76 470 16 305 GettyImages, SwissPress

2008: US Geological Survey (USGS) 2008: The Silver Institute, Commodity Research Bureau 2007: Johnson Matthey Noble Metals, 2007: Johnson Matthey Noble Metals, 2007: World Bureau of Metal Statistics (WBMS) 2007: World Bureau of Metal Statistics (WBMS) 2007: World Bureau of Metal Statistics (WBMS) 2008: Commodity Research Bureau 2007: World Bureau of Metal Statistics (WBMS) 2007: World Bureau of Metal Statistics (WBMS) 2008: Credit Suisse Standard Securities 2008: Credit Suisse Standard Securities In 2007, India continued to Demand for silver is built on Demand for palladium from jew- Tightening of emissions standards Chinese consumption grew to The global consumption in‑ Demand was buoyed by spiralling Strong demand for zinc, largely China’s tin consumption jumped The lead-acid battery industry is MatthiasKulka

| be the leading consumer for gold three main pillars: industrial and elry manufacturers decreased in in China, Europe, Japan and 12,347,000 tonnes in 2007 from creased to 17,963,000 tonnes consumption in China, which supported by China’s growing to 132,000 tonnes in 2007 from the main user of lead, accounting thanks to a robust economy. decorative uses, photography 2007 with reduced purchases other countries is likely to lead to 8,648,000 tonnes in 2006. This in 2007 compared with had risen to 328,000 tonnes economy and infrastructure, out- 20,600 in 2006, largely due for 89 % of 2007’s lead con- 558 tonnes were used for jewelry. and jewelry and silverware. from Chinese manufacturers increased platinum use, according sharp increase is primarily due 16,988,000 tonnes in 2006, in 2007 from 42,000 tonnes in paced production in 2007. The the demand for electronics. Tin sumption. Global demand was China overtook the US in 2007 These pillars represent more largely responsible. The strongest to the USGS. With the increased to investment in infrastructure. according to the World Bureau 1998. Asian consumption was the World Bureau of Metal Statistics solder accounted for approxi- virtually unchanged from the to become the second largest than 95 percent of annual demand stems from the auto price of platinum, it is increasingly Consumption is likely to drop in of Metal Statistics. A dramatic highest in 2007, followed by Eu- lists China’s use at 3,585,400 mately 72 % of total consumption, previous year, with increases www.coproduktion.ch

| retail market for jewelry. silver consumption, according catalyst industry. likely that manufacturers will 2009, post-Olympics, according rise in Chinese copper imports rope and the Americas. Stainless tonnes in 2007, compared with according to the International in Asia offsetting declines in both

to The Silver Institute. use palladium as a substitute. to the Aluminium Association. gave rise to concern over supply steel accounts for two-thirds just 1,402,000 tonnes in 2000. Tin Research Institute. Europe and Africa. Corbis

| adequacy. of nickel use.

Primary Uses Primary Uses Primary Uses Primary Uses Primary Uses Primary Uses Primary Uses Primary Uses Primary Uses Primary Uses Jewelry, electronics, coins, den- Antibacterial uses, electronics, Auto catalysts, electronics, Auto catalysts, jewelry, chemicals, Soda cans, airplanes, foil and Electricity, coins, water pipes, Aerospace and chemical industry, Galvanizing, pharmaceuticals, die Cans and containers, electronics, Construction, power systems, tistry and decoration (architecture) jewelry, silverware and photography jewelry, dental and chemical electronics, glass and petroleum high-tension power lines microprocessors and construction rechargeable batteries and coins casting, construction and brass and transportation batteries and radiation shields ImageSource, Getty Images

Trends Trends Trends Trends Trends Trends Trends Trends Trends Trends Gold production rose by more than In 2007, silver prices averaged at Palladium purchased for the In 2007, Johnson Matthey’s Global demand for aluminum is In 2007, strong Chinese demand Acquisitions and mergers have Strong demand for zinc, largely Tin producers responded to the Sales of refined lead metal for 30 % in 2007 to 3,547 tonnes, USD 13.40 per troy ounce, the electronics industry grew strongly statistics showed that the platinum on the rise. A total of 37,246,000 offset lower demand from the completely changed the structure supported by China’s growing higher tin prices and strong automotive batteries, and indus- the largest increase since 1979. highest average annual price since for the sixth successive year market moved from surplus tonnes were consumed in 2007, weak US housing and automobile of the global nickel industry since economy and infrastructure, demand of the past several years trial batteries for the telecom‑ Annual demand in the electronics 1980, according to the USGS. The according to Johnson Matthey of 10 tonnes in 2006 to a deficit according to the WBMS. This sectors, which are both heavy 2004, according to the USGS. continued to outpace production with tin mine and tin smelter munications and information sector reached about 315 tonnes, rise in silver prices corresponded Noble Metals 2008. Global of 13 tonnes in 2007, driving

figure has risen since 1998, when copper users. Projections for Many new mining projects are in 2007. The supply deficit for openings and expansions. Sev- technology industries are expect- Photos:Chris Collins, Corbis compared with 306 tonnes in to investment interest in the Silver demand for palladium has been the price higher throughout the just 21,889,000 tonnes were 2008 indicate a small copper currently underway globally, as refined zinc, narrowed in 2007 eral closed or partially disabled ed to continue to be a prominent 2006, mainly due to rising sales Exchange-Traded Fund established generally strong over the past year. The deficit in platinum was consumed. More and more auto- surplus of around 80,000 tonnes, consumers were concerned that from that of 2006, and a surplus tin mines were reopened. Environ factor spurring future growth in in semiconductors for products in 2006. Uses in superconduc- 15 years depending on application, due to a series of safety-related makers have turned to aluminum according to the International demand would outstrip supply. is forecast in 2008 by the USGS. mental pressure put on solder global lead consumption, accord- such as MP3 players and flat- tivity and water purification are according to Credit Suisse shutdowns, industrial actions and to build lighter and more fuel- Copper Studies Group. Rising production was driven manufacturers to cut out lead in ing to the 2007 USGS report. panel monitors. expected to increase. Standard Securities. delays in South Africa.

efficient cars. by increases in China and India. solder greatly increased demand. Text:Michèle Bodmer Editorial 03

As the son of a carpenter, I like wood. I have fond memories of romping in the sawdust shed and of the smell of sawed tree trunks and freshly glued wood furniture. Wood has a soft, warm touch to it. Much unlike metal, which is cold, hard, and smells of – nothing at all. It is heated in a furnace and cast into the selected mold, where it solidifies for “eternity.”

It is precisely this rigidity and frigid permanence that made metals so precious early on in human history. The winner of the prehistorical race to make the first weapons, but also tools, out of bronze had a crucial advantage over rival tribes. Swords forged from bronze were superior to clumsy stone axes. To be sure, the arms race didn’t end with the bronze age: Iron swords were to shatter blades of bronze, and all later weaponry that dominated the course of warfare from the 16th century on, such as cannons and rifles, have been made of iron and steel.

However, metals were also put to use for other purposes than belligerent quests for power – metals also enabled the transportation of wealth. Artistically designed jewelry made of shining copper and gold were luxuries that only a few wealthy people could afford, even in stone-age times. Metals made it possible to take such treasures along on a journey – often also on the final journey, as burial finds reveal.

In the modern era, metals are the ultimate drivers of our progress, and thus our prosperity. Steam engines made of steel are what set the age of industrialization in motion. People and commodities are also transported in metal vehicles.

But the greater the number of people participating in modern prosperity gets, the clearer metals’ limits become.

Fierce competition is already under way to tap the last large reserves. New Gold Winner technologies are continually being developed to improve efficiency with respect to resource exploitation and use, yet more needs to be done. We must all become more aware of the importance of conserving finite raw materials such Gold Winner as metals – and this is what metals share with wood. Daniel Huber, Bulletin Editor-in-Chief

1. R a n g Photo: Cédric Widmer Sustainability in Private Banking.

As a traditional Swiss private bank, Clariden Leu focuses on investments that produce returns over the long term. We apply the same far-sighted approach to the continual development of innovative investment products, tailoring our customized financial services to your exact requirements and objectives by means of a personal, multi-level consultancy process. Because Clariden Leu strives to meet your needs at all times. We are happy to speak to you personally about successful private banking. Please give us a call on +41 58 205 21 11.

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27 _ Business 06 28 _ Walter Berchtold The Private Banking CEO sees opportunities in volatile times 3 1 _ “Best Bank” in Switzerland Euromoney gives Credit Suisse highest honors for second time 32 _ Key Market India CEO Brady Dougan tours India, a region of strategic importance 34 _ Natural Resources in Demand Commodity prices are at their highest level since 1973

35 _ Economy 36 _ Inflation Immunity? Switzerland’s competitive market structure keeps inflation at bay 39 _ Metals and Production Metals are an attractive portfolio diversifier in challenging markets 40 _ As Good as Gold This precious metal holds its rank of prominence in global financial affairs 43 _ Silk Road Renaissance Commodities-rich Central Asia is back on the growth trail 46 _ Coal Enters Revival As global energy requirements rise, so does the demand for coal

49 _ Sponsorship 50 _ Salzburg Festival A look back at Austria’s Metals have shaped the progression of humankind since most famous summer opera festival 6000 BC. Since then, industrial societies have had an insatia- 52 _ Hilary Hahn Every performance is unique ble appetite for metals. Today, reliance on metals continues for this Grammy-Award-winning violinist to surge with the growth of emerging economies. And traders, 54 _ Echo Classic Prize Basel Chamber Orchestra such as those from the London Metal Exchange, negotiate gets top award for classical recording the global market prices for many of these commodities. 55 _ Credit Suisse in Society 06 _ Historic Trading The London Metal Exchange is steeped 56 _ Full Throttle for Charity Credit Suisse staff in 130 -year-old traditions that no computer can replace sets off on motorcycle ride to benefit charity 58 _ Climate Concerns Financial institutions are 09 _ Metal Market Trends The growth trend in prices doing their part to tackle climate change issues for industrial and precious metals is expected to slow 61 _ Cancer Awareness Credit Suisse is supporting an information campaign on prostate cancer 10 _ Stalin’s Steel City The global demand for steel is invigorating the once sleepy town of Magnitogorsk 62 _ Leader Mary Ellen Iskenderian An interview 16 _ Choice Metals on Four Wheels Rolls-Royce has rolled with the head of Women’s World Banking

out a legendary vehicle with state-of-the-art metal work In Every Issue 20 _ Extraterrestrial Treasures Collectors scavenge 35 _ Good to Know the Earth for meteorites – alien rocks valued for their rarity 48 _ Reading Up Photo: ThomasPhoto:Eugster

54 _ Masthead |

24 _ Miracles of Silver Thread Nanotechnology gives 66 _ @propos and In Focus the antibacterial and conductive properties of silver a boost

The Forest Stewardship Council (FSC) sets the standard for environmentally and socially responsible forest management. Swiss paper (Z offset, with 30 % FSC component), from European pulp, produced by Ziegler Papier

Coverphoto: Creativ Studio Heinemann, Westend61 AG, Grellingen (ISO 14001-certified). Your link to our know-how: www.credit-suisse.com/infocus 26.981538 [Ne]3s23p1

13 Al 3 661 1.5 2467 6.0 Aluminum 63.546 [Ar]3d104s1

29 Cu 1,2 1084 1.8 2595 7.7 Copper

65.39 [Ar]3d104s2 207.2 30 Zn [Xe]4f145d106s26p2 2 420 1.7 907 9.4 82 Pb Zinc 2,4 328 1.6 1740 7.4 Lead

58.6934 [Ar]3d84s2

28 Ni 0,2,3 1453 1.8 2732 7.6 Nickel

118.710 [Kr]4d105s25p2

50 Sn 2,4 232 1.7 2270 7.3 Tin Metal Metal Exchange 07 Global Metal Prices Still Settled by Open Outcry At the London Metal Exchange, the method of trading remains just as it was 130 years ago. In five-minute sessions, frenzied traders cry out their bids and thereby negotiate global market prices for aluminum, copper, zinc and nickel, as well as tin and lead alloys.

Text: Axel Reiserer

One fascinating aspect of London is the way in which the most bidding for a shipload of copper from, say, Chile, no one could disparate of worlds rub shoulders with one another. The East End accurately predict what the market price of this cargo would be of the capital, traditionally one of its poorest areas, starts just a when it finally arrived in the country. A revolution took place at the stone’s throw from the City of London, where the world’s leading Metal Exchange: Contracts were now drawn up on a three-month financial institutions move billions around the globe day in, day basis, the typical duration of a ship’s passage from South America out. It is precisely at this urban interface that the London Metal or Southeast Asia. This removed the main element of risk for both Exchange (LME) has its impressive premises. The LME was found- seller and buyer alike, leading to the development of a business ed in 1877 for the trading of base metals: non-ferrous metals model that essentially remains in place even today, despite all the such as copper, tin, nickel and lead. However, the history of this innovations and modifications that have occurred since. exchange stretches much further back into the past, namely to A “Ring” of Leather Seats the official opening of the Royal Exchange in 1571, during the reign of Queen Elizabeth I. This was the first time that traders For even in today’s LME, traders enter the “ring,” in the literal sense began the process of regulated exchange. Many of the traditions of the word, to determine the global market prices for aluminum, and customs of that era remain in practice even today, existing copper, zinc, nickel and tin, as well as lead alloys in their daily alongside the ultramodern tools of electronic trading. But then sessions between 11:15 a.m. and 5 p.m. Today’s ring in the trading that’s London for you. area of the LME looks rather different, and is composed of red Although first England and then Great Britain had long been leather seats on which only first-class exchange members are commodity exporters, the industrial revolution and Britain’s emer- permitted to sit. They alone have the final say. However, in the gence as a world power brought with it a virtually insatiable appetite trading sessions that each last five minutes, the 12 current ring for raw materials. Along with this development, a multitude of sales- traders have the support of a large number of assistants. The men, traders and financiers from all over the world descended upon interplay of supply and demand works up to a crescendo, the ges- London, to the point where the Royal Exchange became a scene ticulations get ever wilder, information is exchanged at a frenetic of pure chaos. Specialization was urgently needed. So the metal pace, and the heightened tension manifests itself in an ever louder traders duly sat down together in a coffee house called Jerusalem, clamor – until after precisely 300 seconds when a bell brings the just next to what is now the home of the LME, and plied their trade session to a close. Strict rules also apply. For example, there are there instead. severe punishments for any ring trader who stands up or takes off his jacket. The etiquette in place at the LME makes no concessions Sellers Draw a Circle in this respect. The traders then developed the practice that still gives the London However, the trading fraternity, an almost exclusively male Metal Exchange its particular character today: A trader with metal domain, has no time to recover, for the next metal will soon be up to sell would draw a circle in the sawdust on the floor and cry out for trading. “We are the last exchange in Europe to practice open “change,” whereupon everyone wishing to bid for the metal in ques- outcry,” explains Chris Evans of the LME. “But as long as this is tion would gather round the circle. For a long time, the price that the will of our members, who are also our proprietors, we see resulted from this process of open outcry was the guideline price no reason to change anything. Many people believe that direct for the metal in question. transactions, in which buyers and sellers look each other in the However, everything changed when imported metals started eye, create transparency and trust. This is the basis of our entire entering the country in huge quantities. This presented the traders existence, and trust is not something that a computer can

Photo: Thomas Eugster Thomas Photo: with unprecedented new opportunities, but also a problem: Upon generate.” >

Credit Suisse Bulletin 4/08 08 Metal Metal Exchange

There is physical coverage for every contract agreed on the London Metal Exchange, and the metals are stored in more than 400 warehouses around the world. On these pictures, metals such as copper, zinc and nickel pile up at a shipper in Hamburg, Germany.

Almost nothing is as important as For the traders, the ring has a decisive advantage over elec- tradition at the London Metal Exchange. tronics: there is no time delay. In a monopoly exchange such as It wasn’t until the end of 2003 that the the LME, this means that whatever price is finally determined by a frantic cry in the last second of trading applies worldwide, and electronic platform LSE Select was launched, with immediate effect, from Malaysia to Chile. and even then it took another couple To complement the process of open outcry, the LME of course of years for the system to work without any now also has state-of-the-art technology that allows operations hitch. Complaints were limited in number, to continue around the clock. The LME terminals are ready long however, as the only “true” trading on before Australia wakes up, just as they are still whirring as the US the LME continues to be through open outcry. goes to sleep. In addition, telephone trading functions 24 hours Anyone joining the most important session a day. The explosion in demand for commodities in countries such in the ring at midday must feel like they’re as China and India has catapulted the LME to new heights in entering a boxing ring. The spectacle for any recent years. Last year, transactions totaling 9.4 billion dollars were concluded, while in the first six months of 2008 a new record visitor is one of pure adrenalin for 300 seconds. was set in the form of 54 million contracts with a value of 5.6 bil- Whoever earns their place in this illustrious lion dollars (18 percent up on 2007). circle needs a fairly thick skin. In bygone days, rules were drawn up to forbid the traders Hard Metal Available if Required from engaging in acts such as spitting. A particular feature of the LME is that there is physical coverage Up until a few years ago, the center of the for every contract agreed. To achieve this, there are 400 ware- six-meter-diameter circle was dominated by houses around the world that the exchange “has recourse to if a giant ashtray, something that is quite required,” as Evans puts it, “even if this only occurs in a fraction unimaginable today. But this vice was actually of a percent of all contracts in practice.” Three-month contracts still exist, though contracts can be up to 63 months. banned at the exchange before the Just recently, the LME successfully launched its first steel general smoking ban in public buildings in contract, despite a certain amount of resistance from the industry. Britain entered into force a year ago. And although the two plastic contracts that have been on offer since 2005 have hardly generated serious demand, the authorities are currently toying with the idea of introducing both cobalt and molybdenum on the exchange. “We’re taking the long-term view here,” says Evans calmly. As may they well: Whatever innovations come their way, it’s not difficult to imagine global market prices for metals still being determined through a handful of men and open

outcry in 130 years’ time. < Eugster Thomas Photos:

Credit Suisse Bulletin 4/08 Metal Market Overview 09

Trends in the Metal Markets: What Gold and Lead Have in Common The prices of metals have risen dramatically in recent years. However, there are considerable differences between the different types of metal in terms of their market structure and application.

Over the last five years, the prices of both tween the economic cycle and industrial subject to change (see graph on the left). industrial (or base) metals and precious metal prices is very high, at 0.6. The favorable macroeconomic environment metals have increased more than threefold. Precious metals react strongly to other of recent years aside, metals have also ben- This is all the more remarkable as the mar- factors. Although precious metal prices al- efited from structural factors. The econom- kets for industrial metals and precious met- so benefit from higher economic growth, ic boom in emerging markets, particularly als differ from one another significantly. they react above all to developments in in- in China, has been accompanied by an un- Industrial metals are key components in terest rates, as they are used mainly as fi- precedented rise in investment in infrastruc- the manufacture of consumer and capital nancial investments. An investment in pre- ture. Investments of this nature require huge goods. For example, copper is primarily cious metals yields neither interest nor div- quantities of metals. This in turn has caused used in electrical items such as wiring. Alu- idends and are therefore most attractive in a scarcity of such commodities, adding im- minum is mainly used in the production of an environment in which interest rates and petus to the upward trend in prices. parts for the automotive and air travel indus- dividend distributions are low. Upward Trend Set to Slow try. Nickel, meanwhile, is used mainly in the In their capacity as value-retaining as- manufacture of stainless steel. For their sets, precious metals also react sensitively Over the next few months, we are expecting part, precious metals are used predomi- to changes in the value of the dollar, as well the upward trend in both precious metal and nantly in the jewelry industry, and have virtu- as to changes in the rate of inflation. Low industrial metal prices to slow. The real es- ally no industrial applications. Precious met- interest rates, a weak dollar and high infla- tate and credit crisis in the US are currently als are often used as financial investments, tion typically result in rising precious metal weighing on the country’s economic growth. or as means of safeguarding assets. This is prices. Precious metal prices, as a result, At the same time, inflation rates around the particularly true of gold and silver. have a negative correlation with the level of world are on the rise, driven by the record As a result, these two metal groups re- interest rates (see graph on the right). price of crude oil. As a reaction to this devel- spond in different ways to developments in opment, a number of central banks have al- Favorable Environment for Metals interest rate and economic cycles. Indus- ready initiated interest rate hikes. Both these trial metals react ver y sensitively to changes The environment of the last few years – factors negatively influence metal prices. in the economic cycle. When economic namely high economic growth, a weak dollar Although we do not anticipate these growth picks up, the production of consum- and low interest rates – has been generally changes to be of such magnitude that they er goods and capital goods also increases. favorable for both precious metals and in- will bring about a reversal in the upward This leads to a rise in demand for industrial dustrial metals. Divergences in the price de- trend of recent years, investors should none- metals and to a corresponding rise in prices. velopments of these two metal groups theless anticipate a significantly reduced When the global economy weakens, prices occurred above all when economic growth upward momentum in metal prices. typically fall. As a result, the correlation be- weakened, or when interest rates were Tobias Merath, commodities analyst, Singapore

Precious Metal Versus Industrial Metal Prices Precious Metal, Industrial Metal Price Drivers Over the last five years, both precious and industrial metal Precious metal prices have a negative correlation with prices have increased threefold. Source: Bloomberg, Credit Suisse the level of interest rates. Source: Bloomberg, Credit Suisse

Index, January 2000 = 100 Correlation Since 1991 450 0.8 400 0.6 350 0.4 300 250 0.2

200 0.0 150 –0.2 100 50 –0.4

0 –0.6 00 01 02 03 04 05 06 07 08 Economic Cycle Interest Rates

Industrial Metals Precious Metals Industrial Metals Precious Metals

Credit Suisse Bulletin 4/08 12.0107 [He]2s22p2

6 C –4,2,4 3550 2.5 4827 11.3 Carbon

Dreams Are Made of Steel in Magnitogorsk In 1929, Stalin started building the steel city of Magnitogorsk out of nothing in the middle of the Urals, on the border between Europe and Asia. Up to 100,000 workers would come here with dreams of a better future. Much has changed in recent decades, but the atmosphere is still defined by the smokestacks of the steelworks.

Text: Ingo Petz 55.845 [Ar]3d64s2

26 Fe –2,0,2,3,6 1535 1.6 2750 7.9 Iron 12 The moment they came into contact with the water, they disinte they water, the with contact into came they moment The As As Galina Djurjagina observes, the steelworks never sleep. At night, A smile then passes across the face of the the of face the across passes then smile A ful “Metallurg Magnitogorsk” ice hockey club is the steel giant’s steel the is club hockey ice Magnitogorsk” “Metallurg ful the steelworks, things are good for people. for good are things steelworks, the today today is a huge that conglomerate also owns hotels, skihospitals, theater theater bear the name of that has been cast from hardship. “The air pollution today is no is today pollution air hardship. from “The cast been has that then burst out laughing. Credit Suisse Metal Metal very own. On the annual “Metalworkers Day,” the second most second Day,” the “Metalworkers annual the On own. very Pictures in the museum often show the chimneys of the old Martins Martins old the of chimneys the show often museum the in Pictures Honecker, made the journey into the Russian steppe from the the from steppe Russian the into journey the made Honecker, In winter the snow was black from soot, and as a child I can still can I child a as and soot, from black was snow the winter In Chelyabinsk region. As the locals say, when things are good for good are things say,when locals the As region. Chelyabinsk March March Metallurgichesky Kombinat”). Metallurgichesky Posters promoting shows in the local Magnet Mountain. Magnet Mountain. this “But place was pure hell until recently.fairly Mountain Mountain – ofthe landmark the city – we can still hear the sounds river to the European side, as if trying to flee from the steelworks steelworks the from flee to trying if as side, European the to river remember throwing leaves into a stream in one of the city parks. city the of one in stream a into leaves throwing remember side here – as well as life itself. It’s a combination that can be seen seen be can that a combination It’s itself. life as – here well as side small mischievous eyes and the voice of a general. The residents residents The general. a of voice the and eyes mischievous small sidiaries. sidiaries. The figure in the Soviet era often reached smells at times – hardly like a spring meadow, as Galina points out. primeval of sort some from if as rattling, and snorting of sounds matic matic history. The first manual laborers, communists, enthusiasts, gulag inmates and inmates gulag enthusiasts, communists, laborers, manual and pipes kilns, smokestacks, mills, of jumble a amid mirage 60,000 monster, can be heard on the Asian side of the Ural river. Its breath countless factory buildings. factory countless - dominate The steelworks the country can then be smelled too. Acrid to the core. This is how Magnitogorsk Everyone in the City Is Steelworks to the in City the Tied Everyone is the city’s largest employer, as well as the largest taxpayer in the the in taxpayer largest the as well as employer, largest city’s the is and radio lifts, hockey ice the around festival the at seen be can people itself, Year’sDay New after Magnitogorsk in holiday public important longer so bad,” says the taxi driver who has chauffeured us to to us chauffeured has who driver taxi the says bad,” so longer kilns kilns in the background. The huge letters describing the steelworks just just make out a few flat buildings and classic Soviet constructions of this city of city this of can we river, dammed-up the of side European the on distance, arena sporting the with words arena sporting T-shirts “I love even foreigners, including the late East German party leader Eric leader party German late East the including even foreigners, arena was built by Culture”:ofthe on “Palace emblazoned are and the filth they produce. the of side Asian the on boundaries original its beyond extended now has which city, the in just not And everywhere. felt and of this steel city in the Urals, created by Stalin from from by Stalin created Urals, the in city steel of this out of the dust of the Russian steppe, have a dark sense of humor humor of sense dark a have steppe, Russian the of dust the of out grated. grated. one of was pastimes.”That our favorite Galina he and And an an area of land measuring Magnet on up of work going now, on in complex industrial that the coversMoloch-like Even sky. blue the into smokestacks the of out The sun shines brightly. Orange, reddish and black clouds spew spew clouds black and reddish Orange, brightly. shines sun The Everyone in this city is connected to the steelworks and its dra its and steelworks the to connected is city this in Everyone

people work for Russia’s largest steelworks and its sub Bulletin 4/08 ,

1929 430,000 . By TV MMK broadcasters, even whole resorts. Around resorts. whole even broadcasters, 1931 256 inhabitants, shimmering like some sort of . And of course, the famous and success and famous the course, of And . MMK there were more than than more were there 10 workers arrived at Magnet Mountain on Mountain Magnet at arrived workers square kilometers. Further out in the the in out Further kilometers. square as sponsor. The city’s modern sports 55 MMK MMK -year-old, who has 100,000 (“Magnitogorsk .” The business 100,000 1929 . Farmers, Farmers, . onward onward . MMK > - - - -

Photos on pages 10–15: Max Sher 1 3 2 Metal Magnitogorsk 13

4 6

5 7

1 Galina Djurjagina was born in a gulag in Siberia in 1953, where her mother was serving a 10-year sentence. When she was released, mother and daughter moved to Magnitogorsk. Galina began studying to become an engineer in St. Petersburg, but had to give up studying when she became pregnant. She returned to Magnitogorsk and was employed by MMK as an electrician at the end of the 1970s. Since then she has worked in the steel mill. Her own daughter is an enthusiastic world traveler, and the two women have been on countless trips together, including hitchhiking journeys through Siberia, China, Tibet and India. 2 Natasha Semenenkova works as a crane driver in the new MMK steelworks. 3 Vladimir Romanov worked in the steelworks for nine years, and has set up various companies since 1992. Today he manufactures high-quality forged products. 4 The production buildings remain filled with safety signs and propaganda posters from the Soviet era. 5 One of the MMK production buildings. 6 One of the oxygen blow-molding devices in the steelworks. 7 Steel cable production.

Credit Suisse Bulletin 4/08 14 Metal Magnitogorsk

late 1920s onward, to create the steelworks and later the city itself 8 from nothing – often with the dream of building a better society. It was as if the steelworks came from out of the blue. Stalin had made Magnitogorsk the prestige project of his first five-year plan – with no consideration of people or materials. The first cast iron appeared in 1931, the first steel in 1932. Radical industrialization was the priority, so man and his dreams would have to wait. “But the factory aside, the city of the future was never built,” writes Stephen Kotkin, a historian who at the end of the 1980s became the first American to visit the city for more than half a century. Up until the 1960s, people still lived in barrack accommodations, frequently under unimaginable conditions. In the Second World War, more than half of the steel produced for the Red Army was cast in Magnitogorsk. The town was awarded Hero City status and became a symbol for the national struggle that was fully exploited by Soviet propaganda. The works were “our provider and destroyer,” as Magnitogorsk poet Rima Dyshalenkova once summed up the importance of the Janus-faced steel colos- sus for this city in the Urals. Magnitogorsk is without a doubt no beauty, but a bizarre sort of magic radiates from the city in which so many dreams and aspirations were born only to perish soon afterward. “Magnitogorsk became the benchmark example of how nothing was beyond reach if workers could master machines and technology,” writes historian Karl Schlögel. “It was almost as if a backward Russia conquered itself in Magnitogorsk.”

Life, Culture and Destiny Rolled Into One

Galina has worked for 30 years as an electrician in “Mordor,” as the city’s youth now refers to the steelworks – Mordor being the then? It might have been the death of the city.” And indeed, life in land of evil in Tolkien’s epic novel “Lord of the Rings.” “There’s no Magnitogorsk today is geared toward the future. And not just be- escaping the steelworks. They are our life, our culture, our destiny,” cause this much is proclaimed on advertising posters at the city Galina notes. And she then points to the negative repercussions airport, which enthuse of “a new epoch” in Magnitogorsk. It is evident of this fatal relationship: the diseases that affect locals so severely, that Magnitka – as the city is known by its residents – has achieved such as asthma and cancer. The corruption that is so widespread in a modest level of prosperity. city and countryside alike. The close political links between the works’ The streets and parks are clean. There are many new playgrounds. management and the city’s local government. Few are under any There is the smell of fresh paint in museums and in local government illusion that the city will see another mayor like Vadim Kluvgant, who offices. Flowers bloom in many places, renovations and building between 1991 and 1994 tried to usher in reforms and legal pro- work are under way, including new apartments. This is needed, as ceedings to free the city from the clutches of the steelworks, and Magnitka has suffered from an acute shortage of residential build- thereby secure it a greater degree of independence. ings ever since it was founded. Entire new housing areas with large “The steelworks is the city,” concedes Galina. “It was already the and stylish single-family homes are springing up in the suburbs. case in the Soviet era. Just as formerly we were beholden to com- Numerous clothing stores line Lenin Prospekt, testifying to the fact munism, so today we are beholden to patriotic fervor for the gov- that this is now one of the most affluent provincial cities in Russia. ernment and for Russia.” But then she interrupts her tirade, pauses It has benefited from the country’s economic boom of recent years, for a moment, and adds: “But life in this city has, of course, im- and the official unemployment rate is just 0.8 percent. proved. Particularly after the harsh period ushered in by Perestroika, In the Midst of a Great Process of Change when we had to learn to stand on our own two feet.” This combination of remarkable proximity to reality and proud loyalty to the The lean times of the 1990s, when the future was uncertain and steelworks is something one frequently encounters in discussions the steelworks had to pay its employees partly in cash and partly with local residents and metalworkers. It is as if people here have in food coupons, appear to be a thing of the past for the time being. firmly undertaken not to be separated from the steelworks under “Yes, the city is blooming,” says Vladimir Romanov, who worked in any circumstances. the steelworks for nine years and has founded various companies Engineer Tatyana Terenteva, whose family has worked in the since 1992. Nowadays he manufactures high-quality forged prod- steelworks for generations, also says that “the sense of loyalty here ucts. He employs 80 staff, and has just purchased a large plot of is very pronounced. Even when there was little work and above all land containing old factory buildings. Chaos still reigns. “The de- little money in the 1990s, many people still stood by the steelworks. mand in Russia is huge,” says Romanov, as he walks through the There were a number of takeover attempts back then, but these buildings and explains his ideas for modernizing his new property. were fortunately fought off. Who knows what would have happened Entrepreneurs like him show that Magnitogorsk is in the process of

Credit Suisse Bulletin 4/08 Metal Magnitogorsk 15

9 10

8 Passersby in the center of Magnitogorsk. 9 A tram crossing the bridge over the Ural river. It passes an obelisk that marks the geographical boundary between Europe and Asia. Magnitogorsk has a foot in both Asia and Europe, as it straddles both sides of the river. 10 A balloon seller at the annual market, celebrating Metalworkers Day.

transforming itself, and seeking a new face independent of the all- high-quality 5,000-mm sheet steel – to cover an area of more than dominant steelworks. A road that is long and difficult, as Romanov 120,000 square meters. That the technology is state-of-the-art points out. “We are totally inundated with orders. But I need to goes without saying. It will be ready next year. For more than four borrow money to expand the business. And with inflation as high decades there was no investment here at all. So we’re trying to as it currently is, the interest rates are punitive. Which means I can make up for lost time. Today’s focus is on quality, efficiency and only develop the business slowly. Unfortunately.” modernization.” Like many other government businesses, the By contrast, in the steelworks that lie directly next to the land steelworks were privatized once the Soviet era came to an end. occupied by Romanov’s company, the future has already arrived. Kindergartens, agriculture businesses, bakeries – everything that “We are undergoing a great process of change,” says Alexander belonged to the steelworks was hived off. Yakovlev with passion. And it sounds not unlike one of the Soviet A Call for Qualified Workers propaganda pieces disseminated over the decades to motivate people. This kind of enthusiasm is expected. This small wiry man Since then, many billions have been invested in modernizing the has now worked for more than three decades at the steelworks, former “wheezing dinosaur,” as Stephen Kotkin dubbed MMK. The formerly in production, today in the communications department. It aim of Viktor Raschnikov, billionaire, majority shareholder and chair- is impossible to gain an overview of the steelworks’ development, man of MMK, is to have invested more than 10 billion dollars by 2013. however. Only on the periphery of this huge area can one still find By then, MMK is looking to produce around 15 million tons of steel the ruins, the rusting steel and fissured concrete that whisper of a annually, compared with 13.6 million tons in 2007. MMK, which was bygone era. Elsewhere in these vast expanses, construction and transformed into a stock corporation in 2005, generated earnings renovation work continues apace. It is clean. of 1.6 billion dollars in 2007. The company has benefited from There are plenty of young people around, such as 20-year-old exceptionally high steel prices and a booming Russian market, which Natasha Semenenkova, a budding crane driver with a cheerful face accounts for around 80 percent of its production. “We’ve had many who says that she hopes to remain with MMK for the rest of her crises,” says Yakovlev. “First there was no work, then there were no working life. “New steel, new Magnitogorsk,” proclaims one poster. salaries. Today we’ve got a different kind of crisis. We don’t have Everywhere you look there is evidence of the latest technology and enough qualified workers.” equipment from leading European manufacturers, whose giant In her small two-room apartment on the outskirts of Magnitogorsk, detailed models now stand in the factory museum where they seem Galina ser ves tea, jam and cookies. Pictures of the Dalai Lama and to be ousting the heroic tales of the old Soviet era from center stage. souvenirs from Tibet adorn her walls. She traveled there, hitching “That’s our latest billion-dollar project,” bellows Yakovlev in order the whole way. She wants to retire soon and dreams of “becoming to make himself heard against the thunderous noise of the con- an independent astrologist, and arrange tours to Magnet Mountain.” struction site. “This is where we’re building an ultramodern mill for Hardly a conceivable ambition in the Magnitogorsk of old. <

Credit Suisse Bulletin 4/08 24.3050 [Ne]3s2

12 Mg 2 649 1.2 1107 7.6 Magnesium 26.981538 [Ne]3s23p1

13 Al 3 661 1.5 2467 6.0 Aluminum 51.9961 [Ar]3d54s1

24 Cr 0,2,3,6 1857 1.6 2482 6.8 Chrome 55.845 [Ar]3d64s2

26 Fe –2,0,2,3,6 1535 1.6 2750 7.9 Iron Metal Rolls-Royce 17 High-Grade Metals for Four Wheels Motorized coaches made of sheet metal and steel have been transporting people for more than a century now. Soon after its founding in 1904, the British manufacturer Rolls-Royce secured a reputation for not only making the best, but also the most expensive automobiles in the world. Today, the dignified exterior of the latest Rolls-Royce Phantom Coupé conceals state-of-the-art lightweight technology in aluminum and magnesium.

Text: Daniel Huber

When engineer Henry Royce and entrepreneur Charles Rolls first make the following assertion in his book “Seven Pillars of Wisdom”: met in Manchester’s Midland Hotel in 1904 to discuss a possible “A Rolls in the desert was above rubies.” The success of Rolls-Royce, collaboration to manufacture and sell a new kind of motor vehicle, however, was not based entirely on the technical reputation of its Royce, a perfectionist at heart, had only one goal in mind: to build cars. Just as important were the myths and legends surrounding automobiles that were far ahead of their time. Rolls, an aristocratic the marque. One of these is the origin of the hood ornament. entrepreneur, was doubtful at first whether Royce, the simple son After various customers started attaching “undignified” ornaments of a miller, would be up to the task. To be sure, F.H. Royce & Co. to the hoods of their Rolls-Royces, Claude Johnson, a partner in the had been successfully producing cranes and dynamos, but auto- company, commissioned the sculptor Charles Sykes to create an mobiles, even back then, were a vastly more complex endeavor. official mascot that would reflect the car’s elegance and exclusivity. But when Royce showed him the first prototype, Rolls was excited. Sykes designed the figure of a woman, her arms draped in billowing The two-cylinder motor started at the mere touch of a button, and cloth and outstretched behind her. The model was said to have been was amazingly quiet and smooth. Eleanor Velasco Thornton. She was the secretary and secret mistress Already the same year, in early December, Royce’s car was a of the wealthy John Montagu, who launched “The Car” magazine in huge hit at the Paris Salon. Then came the historic contract which 1905. The mascot was given the name “Spirit of Ecstasy.” Why it was gave C.S. Rolls & Co. in the UK the exclusive distribution rights to also called Emily in German-speaking countries (and nowhere else) Royce’s cars. From now on they would bear the Rolls-Royce marque. is anybody’s guess. It was the birth of an automotive legend. No other consumer good Original “Spirit of Ecstasy” Mold Reconstructed in the modern era is so closely associated with high society and extravagant wealth as the Rolls-Royce. In terms of brand recogni- By the time BMW acquired the rights to the Rolls-Royce Motor Cars tion, it is right up there with Coca-Cola or McDonalds. From marque in 1998, the original mold for the Spirit of Ecstasy had be- Vladivostok to Calcutta, Bologna, Boston or Lima, the “RR” emblem come quite badly worn. Using old photographs of Eleanor Velasco with its winged hood ornament is iconic. Thornton and the latest computer animation technology, a new design There are many reasons for this. It most certainly started with was created that very closely reflected the original. The figurine is Henry Royce’s incredible pursuit of perfection. The engineer now manufactured in a small family-owned enterprise in southern designed his cars in line with the adage that details help define England using a traditional negative casting technique. Although perfection, but perfection itself is not a mere detail. Initially this normally in highly polished stainless steel, the ornament can also be was most evident in what was for those days an astounding de- cast in silver or plated in gold. For reasons of safety, the figurine gree of reliability. As early as 1907, the first Rolls-Royce for sale, retracts into the radiator grille either at the touch of a button, or the “40/50 HP Silver Ghost,” posted a long-distance record of automatically when the key is removed from the ignition. 14,372 miles. That permanently cemented the marque’s reputation In the early days of the automobile, the rolling chassis (composed for building the best automobiles in the world. The Silver Ghost of the engine, transmission, axles, driveshaft, fuel tank and steer- was also deployed by the British army in World War I and led ing column) and coachwork were usually made by different manu-

Photo: BMW AG Lt. Col. T.E. Lawrence, better known as “Lawrence of Arabia,” to facturers. For a long time, the bodywork was made by coach- >

Credit Suisse Bulletin 4/08 18 Metal Rolls-Royce

1 4

2 3

1 The Phantom Sedan is based on an aluminum spaceframe. The coupé doesn’t have a central B-pillar. 2 Elegant door handles in die-cast zinc. The two rear-hinged doors of the coupé open backwards like old-style coach doors. 3 The stainless steel hood of the Phantom Coupé can also be ordered unpainted in a brushed steel finish. 4 The legendary Silver Ghost laid the foundation for the success of the Rolls-Royce marque.

builders, and the situation at Rolls-Royce was no different. The turn out right.” Each morning every team member first performs a 1949 Silver Dawn became the first model manufactured entirely by 300-mm test weld to ascertain atmospheric effects on the metal Rolls-Royce, marking a certain degree of standardization. Never- they are working. Using aluminum has trimmed around 100 k il o s of f theless, the Pressed Steel company continued to make the bodies. the coupé. Considering the total weight of 2,590 kilos that doesn’t Finally, with the launch of the Silver Seraph in 1998, the first seem like major progress. “But this technology gives us extreme Rolls-Royce was produced from start to finish under one roof. That flexibility when it comes to accommodating special requests, some- was also the year that BMW acquired the rights to this distinguished thing that has always been very important at Rolls-Royce,” says marque. The actual Rolls-Royce plant in Crewe and the Bentley Riedl. What’s more, with the current output of only around 1,000 name passed into the hands of Volkswagen at the same time. BMW vehicles a year, it wouldn’t make sense to develop and use special now had to find a greenfield site, as quickly as possible, to build a pressing equipment. new factory and at the same time develop a new model. Biggest Steel Component in the Auto Industry The great day arrived on January 1, 2003, when the brand-new Rolls-Royce Phantom celebrated its world debut at the new factory Unlike the sedan, which is made entirely of aluminum, the coupé in Goodwood, West Sussex. The new Phantom was designed to uses stainless steel for its hood, A-frame (including the windshield continue the tradition of combining first-class materials and fine surround), and the fold-down section of the trunk lid. The hood is craftsmanship with the latest automotive technology, just as Henry another masterpiece of craftsmanship. It can also be ordered in Royce would have wanted. unpainted brushed steel. To produce this finish, the blank hood The renewed drive for superior technology is also reflected in delivered from Belgium has to be brushed first by machine, and the choice of metals. The bodywork of the new Rolls-Royce mod- then by hand, in a process that takes around five hours. This makes els is made largely of aluminum. The aluminum spaceframe of the every hood unique, because the structure that emerges during the new Phantom Coupé is composed of over 200 sections and more process of brushing is always different. than 300 alloy sheet components, welded together by hand at The hood, the largest stainless steel component currently used 2,728 points. The frame inevitably suffers a certain amount of in the auto industry, requires no special treatment. However, over distortion in this process, so the various points where the drive time it will take on a natural patina that the owner can choose to train is attached are drilled into the completed frame to the precise leave untreated, or not, as they desire. Another technical highlight hundredth of a millimeter in a huge milling machine. Then comes is the skeleton of cast magnesium (a third of the weight of aluminum) the tricky job of welding the aluminum body panels to the frame. which carries the dashboard. Only you do not even see this high- “The roof in particular is a job for real experts,” enthuses Helmut tech carrier under the fine veneers, hide panels and chrome of Riedl, engineering director of Rolls-Royce Motor Cars. “Two weld- the dashboard and – of course – the mundane controls that even ers have to work simultaneously on two sides – otherwise it won’t a Rolls-Royce driver can’t always do without. <

Credit Suisse Bulletin 4/08 Metal Rolls-Royce 19

Out and About in the New Phantom Coupé In a quest to understand the allure of Rolls-Royce, the Bulletin’s editor-in-chief, a former automobile journalist, was given the opportunity to drive the new Phantom Coupé across France to Goodwood, in the south of England, to the home of the Rolls-Royce factory.

“The customs officers at the border may well horsepower was growling – no, purring – from the view of Rolls-Royce passengers ask you to stop briefly,” said Tony, picking under that distinctive stainless steel hood. under a flap. After all, the luxury dashboard us up at the Geneva airport in an impressive It’s also new for Rolls-Royce to be so free in wood and leather should only be disfigured Rolls- Royce before driving us to our starting with something as profane as handing out by the modern electronics available when point in Crozet, France. “They usually don’t engine performance data. absolutely necessary. In the coupé you are even look at the passports. They’ll just want The company used to be politely reticent surrounded by traditional craftsmanship. to see who’s in the back seat.” when asked for information: “The model will Everything you touch feels solid. A Rolls-Royce is an object of interest. be found to be adequately powered” was Where other cars have plastic air vents Unlike expensive sports cars or, more the laconic reply. that only cost a few cents to make to ensure recently, big off-road vehicles, passers-by the flow of fresh air, the Phantom Coupé Dashboard Reduced to the Essential respond to a Rolls (which is not exactly has elegant round nozzles and a little con- eco-friendly) with neither suspicion nor What has not changed is the way the dash- trol knob in solid stainless steel that you can aggression, but with a surprising measure board and other controls are reduced to the operate with just two fingertips. Why make of goodwill mixed with intrigue. absolute essentials. You will for example not life harder than it already is? find a rev counter on the dashboard. But a And so for all those hours on the highway A Head Turning Experience little meter does show your current power and on countr y roads, you feel like you’re just That’s how it was five hours later when we reserves in percent. There’s of course also floating along. Very much in harmony with stopped for a quick coffee at a bland high- an on-board computer and navigation sys- the “Spirit of Ecstasy,” which guides our way way rest area south of Reims. Heads turned tem, but these will usually be well hidden from the radiator grille. dhu unabashedly to look at the new Phantom Coupé, and also to greet us with a friendly smile. Some even gave us an approving thumbs-up. When you’re traveling in a car 5 that costs more than 650,000 Swiss francs, you transcend the ordinary perceptual norms. “A Rolls-Royce is so far out of bounds that it’s acceptable,” remarked a chatty neighbor at the next table in the bistro. For a long time it was rare to be driving your own Rolls-Royce. After the English manufacturer took over Bentley in 1931, driving pleasure was sold under the “B” logo of the sportier sister marque. The pompous Rolls-Royce models developed more and more toward chauffeur-driven luxury se- dans. Driving and ownership – that’s the small but telling difference between the 6 7 “Bentley Drivers Club” and the “Rolls-Royce Owners’ Club.”

Successful Launch of a New Model

The Phantom Coupé launched this June is intended to echo the grand tourer models of the company’s early years, and amply demonstrated this affinity on a 1,000 kilometer long test drive. Despite its great bulk – the car is 5.61 meters long, 1.9 9 meters wide, and weighs 2,670 kilograms with a full tank DanielHuber

| of fuel – it actually felt quite sporty tackling the curves of the French Jura. After all, 5 The new Phantom Coupé is meant to continue the tradition of the grand tourers a powerful 12-cylinder motor with 720 of the company’s early years. 6 No sign of plastic in the luxurious coupé interior. 7 Attention to visual and tactile detail. Air vents in stainless steel. Photos:BMW AG Newton meters of torque and of 453 brake

Credit Suisse Bulletin 4/08 20 Metall Meteoriten

58.6934 [Ar]3d84s2

28 Ni 0,2,3 1453 1.8 2732 7.6 Nickel

55.845 [Ar]3d64s2

26 Fe –2,0,2,3,6 1535 1.6 2750 7.9 Iron

In September 2007, a large meteorite slammed into the Earth near Carancas in the Southern Highlands of Peru. It left a crater that was more than 13 meters across and around five meters deep. Initially water bubbled up from underground and foul-smelling gases were emitted. Many of those who rushed to see the impact crater afterwards suffered from headaches and nausea.

Credit Suisse Bulletin 4/08 Metal Meteorites 21 Hunting for Treasure From Outer Space The Earth is under continual bombardment from meteorites, but the vast majority of these metal-bearing lumps of rock from faraway planets burn up in the Earth’s atmosphere or fall unnoticed into the oceans or onto remote areas of the Earth’s surface. This makes meteorites very desirable and therefore very valuable objects for collectors.

Text: Ute Eberle

The fireball appeared without warning. It happened on a Sat- Argentina, California, Colombia and other places that he doesn’t urday in the middle of September 2007 in Carancas, a village have time to list. He’s already planning his next trip. This time his in Peru’s highlands, 1,300 kilometers south of Lima. Suddenly an destination is Australia, where he intends to spend a month. He’s object from the sky rushed towards them, recalled the peasants just back from Sweden. And he still has to go to Mexico. All that after the event. Then there was a big bang and earth was flying effort for the sake of a few unprepossessing rocks. Farmer’s collec- through the air. One particularly large chunk landed with a clang on tion, which he keeps at his home in Tucson, Arizona, contains the roof of Javier Valle Sarmiento’s house. The corrugated iron thousands of them. Most of them are brown or gray. And many are was so badly dented that it looked as if it had been involved in a burnt and blackened. Even if it’s not obvious at first sight, these celestial fender bender. When the inhabitants of Carancas went to stones are not of this world. They are meteorites. And Mike Farmer see what had happened they found a crater in the dried-out river- spends his days finding them. bed. It was the size of a swimming pool and water was bubbling up A Good Metal Detector Is Crucial into it from underground. There was a foul smell and some villagers began to suffer from headaches. They also began to feel nauseous. Meteorites are fragments of other planets. Most of them originate Alarmed officials declared a state of emergency. in the asteroid belt, a graveyard of shattered material that orbits the Sun between Mars and Jupiter. Depending on whether they Strangers Flock to Impact Sites come from the crust or the core of a planet, meteorites consist But that wasn’t the only remarkable thing that happened in Caran- predominantly of minerals or of metal respectively. However, they cas last September. Just a few days after the impact the first strang- all contain iron. A keen eye is an important tool for any meteorite ers began to arrive in the village. They waved dollar bills around and hunter, but a good metal detector is even better. started to gather rocks from the ground, until finally word got around: When Steve Arnold made headlines in October 2005 by finding The strangers were looking for fragments of the object that had and excavating a 650-kilogram pallasite from two meters under the fallen from the sky. A rumor that the chief of police himself had sold ground in Kansas, it didn’t happen by chance. A pallasite is a rare a four-kilogram chunk to one of the strangers quickly made the kind of meteorite in which translucent olivine crystals are suspended rounds. There was another report that one of the newcomers – a in a nickel-iron matrix. Arnold had been searching for precisely this stocky, fair-haired American – was stealing fragments from the kind of meteorite. Like Farmer, he is a professional meteorite hunter crater. The police mounted guard on the impact location and the and had spent weeks scanning the Brenham strewn field using a situation became so highly charged that the stranger hastily jumped special metal detector that he built himself and which is sensitive into a taxi and disappeared over the border into Bolivia. This “inter- to approximately five meters. He hopes that his find will make him national incident” was destined to occupy some people in Peru for a millionaire. weeks afterwards. But for Mike Farmer – the American in the taxi – Of course, nickel and iron as such are common – and hence it was “just another day in the life of a meteorite hunter.” cheap – metals. But in this case they come from deep space. For Mike Farmer has one of the most unusual professions in the thousands of years they have hurtled blindly through the void before world. Last year he traveled 370,000 kilometers – almost 10 times being pulled into the Earth’s gravitational field and entering the

Photo: Keystone, La Republica Newspaper Republica La Keystone, Photo: the circumference of the Earth. As well as in Peru, he was in Spain, atmosphere where they were heated to incredible temperatures >

Credit Suisse Bulletin 4/08 22 Metal Meteorites

1 3

2 4

1 Mike Farmer often travels for days to reach distant desert 3 Approximately 50,000 years ago an enormous chunk of nickel- destinations in search of new meteorite finds. 2 Meteorite iron 35 to 40 meters across fell from space and smashed into Allan Hills 84001 is kept in a special pressurized chamber a desert region of Arizona. It left a crater of about 1.5 kilometers in the Johnson Space Center laboratory in Houston. In 1996, across and 170 meters deep. The site remains well preserved scientists from NASA and three universities made a statement to this day because erosion takes place very slowly in the desert. that has remained controversial to this day, namely that this 4 Example of an iron meteorite, found in Henbury, Australia. piece of rock from Mars contains organic material which points It weighs 1.8 kilograms. The composition of meteorites differs in to the existence of primitive life on that planet. According some fundamental ways from the minerals found on Earth. to the scientists this particular rock began its journey to Earth Iron meteorites consist of camacite, taenite and troilite. Their around 15 million years ago. surface generally shows signs of melting.

Credit Suisse Bulletin 4/08 Metal Meteorites 23

and plunged to the ground. Apart from the rocks that the Apollo Haag is one of the most famous professional meteorite hunters. In astronauts brought back from the Moon, meteorites are the only the 30 years that he has been in the business he has had to cope extraterrestrial materials that humanity possesses. And that is ex- with landslides, searing heat and bandits. In Chile, he scanned the actly what makes them so desirable. It is estimated that between 40 surface of the Atacama Desert from a paraglider. In Spain, he marched and a few hundred people worldwide work as professional meteor- unwittingly through the minefield around a military base. In Mexico, ite hunters. the light aircraft he was traveling in crashed. In Argentina, he ended The core of this exotic profession – together with the dealers and up in prison (and made good friends with the warders). collectors – forms an intimate brotherhood that is rich in eccentric- School Kids Join Meteorite Hunt ity and petty jealousies. For example, there’s a former plumber who appears with his cowboy hat at all the major conferences and is One day Haag turned up in Gibeon, Namibia, where a massive now a recognized scientific authority on the subject. There’s the meteorite had landed many years before. It was thought that the New Yorker who only wants elegantly shaped meteorites. And the whole area had been thoroughly searched and stripped bare. Haag former barkeeper who for a while sold meteorites at far below their marched into the village school and showed the headmaster a market value just to annoy the others. bundle of dollar notes. The headmaster then allowed all 400 children “This can be a brutal business, because demand often exceeds to take a close look at a sample meteorite that Haag had also supply,” says Farmer, who has already received death threats. He brought along. A little time later the American left the area with became fascinated with extraterrestrial rocks as an arts student 500 pounds of newly discovered fragments. after acquiring a pebble-sized stone at a mineral show. “Up to that Every day 52-year-old Haag sells an average of 1,000 dollars’ time I had collected coins. But, all of a sudden, objects that people worth of stones that he has somehow managed to find himself or had created 150 years before didn’t interest me any more.” Although bilk, charm and trade from others because – despite their often his wife didn’t like it and Farmer was practically broke, he dropped unprepossessing exterior – meteorites are much sought after by out of college and became a meteorite hunter. collectors. Nicholas Cage, Steven Spielberg, US cellist Yo-Yo Ma and Sheik Saud bin Mohammed al-Thani are among those who Earth Bombarded by 50,000 Tons of Rock a Year have allegedly acquired some. It is a job that demands flexibility, a love of adventure, good nerves Depending on their size and rarity, meteorites can fetch hundreds and plenty of stamina. It’s true that our planet is bombarded with of thousands of dollars. The absolute top of the market is in the 50,000 tons of cosmic debris every year. But most of it is so small very rare meteorites that come from Mars and the Moon. Collectors that it burns up in the atmosphere. Each year only a few thousand have been willing to pay as much as 30,000 dollars per gram for chunks of rock survive to reach the surface, and most of them these – around 1,000 times the price of gold. disappear without trace into oceans, jungles or uninhabited forests, Discoveries Are Valuable for Research where they start to weather. As soon as a meteorite hunter hears that an impact has been This often makes researchers uncomfortable. “Meteorites contain registered somewhere, he dashes off. Farmer – a true Arizonian the history of our solar system,” says David Kring, associate profes- who is proud of the fact that he never wears long trousers – heard sor of Cosmochemistry and Planetary Geology at the University of about a “fresh impact” in Canada. He rushed from his home, bought Arizona. “Often they are completely unique. That’s why it’s important 2,000 dollars’ worth of winter equipment and was on an airplane for for us to study them.” Because meteorites – unlike stones on Earth – Canada at five in the morning. On another occasion Farmer drove have been subjected to few geological processes since they were almost 900 kilometers in one night because there had been a repor t created as much as four and a half billion years ago, researchers of an impact in New Mexico. He arrived bleary-eyed early the next hope that they can provide valuable insights into the creation of our morning – in time to see a rival just 50 meters away from him trip cosmic environment. In 1996, NASA researchers even believed that over a fragment. “It was a 200,000 dollar find,” says Farmer, adding they had discovered signs of primitive life in a Mars meteorite with that the thought still kills him. the name Allan Hills 84001 (though this assertion still remains In the absence of new eyewitness reports meteorite hunters controversial today). scour the only regions of the planet in which rocks are preserved Discoveries of this kind appear to be jeopardized if meteorites for long periods and are highly visible: the deserts. They don’t mind are chopped up and polished by private individuals and sold at eye- ThomasStephan

that the people traveling next to them on the airplane give them watering prices to grace the mantelpieces of the rich and famous. funny looks when they explain how they pass their days. Around It’s true that meteorite hunters are obliged to provide specimens to

Martin,laif desert campfires they politely chew the goat meat they are offered researchers if they want to have their finds classified. “But they

| when they trade with Bedouins for meteorites that they have dis- don’t all do it and there often isn’t enough material for studies,” covered on their travels. They pay hundreds of dollars in excess Kring acknowledges. baggage charges for their rock-filled travel bags. On the other hand, even the researchers appreciate that – thanks Phillip,Keystone They learn to live with the disappointment of traveling light when to meteorite hunters – many more cosmic fragments are being DavidJ.

they come home empty-handed. Like the year when Farmer spent found than ever before. And they are realistic enough to know that |

more than 60,000 dollars on airline tickets alone and returned home they themselves have neither the time nor the money to jet off to time after time with nothing to show. The fact is that the area to be every new impact. Or to hit golf balls through the desert for weeks searched is gigantic. To give the searching some structure, mete- on end. Or to make a run for the border in a taxi carrying a few orite hunter Robert Haag sometimes hits a golf ball in a random kilograms of extraterrestrial rocks that just fell out of the sky one

Photos:Will van Overbeek direction into the desert. Then he follows it, scanning the ground. Saturday in September. <

Credit Suisse Bulletin 4/08 107.8682 [Kr]4d105s1

47 Ag 1,2 962 1.4 2212 7.6 Silver Metal Nanotechnology 25 The Future Is a Silver Thread Silver is beautiful – but it can be much more than that. This precious metal has long been used in technology and medicine, but now nanotechnology makes it possible to coat fibers and materials with a very fine layer of silver particles. ECG measurements taken by your T-shirt, odorless sportswear, data exchange via your jacket – these ideas are not as far-fetched as you might think.

Text: Regula Gerber

The Chinese have been using silver needles for acupuncture for bacterial effect. But, because the textile properties also remain around 7,000 years. And in medieval times, if a nobleman feared unchanged, it can be processed just like an uncoated fiber. “Silver for his life, he would simply test his wine with a little silver rod: if nanoparticles can also be bought and melted into polymers. In this the metal turned black, it meant that his drink was spiked with case the silver is present throughout the fiber, but it only takes ef- arsenic. The special properties of this metal were recognized early fect on the surface when it interacts with an aqueous environment. on. We now know that in addition to a very high light-reflecting In theory, yarn that has been coated using our process can release capacity of 98 percent, silver also offers unbeatable conductivity, silver ions continuously for up to a year. The quantity of ions released combined with antistatic and antibacterial effects. depends on the structure and size of the surface, so the application The applications for this precious metal range from coins and is the key factor here,” Hegemann says. jewelry to the automotive industry, photography, electronics and Changing Rooms – Odor-Free at Last ! even antibiotics. Several years ago researchers at Empa (see p. 26) decided to focus on the unique properties of silver, developing a Niklaus Zemp, managing director of Tersuisse Multifils SA, is new nanotechnique known as low-pressure plasma technology. convinced that there is no shortage of applications. Last year the Using this technology, silver-coated fibers can be produced in a company from Emmenbrücke in Switzerland took over Empa’s more environmentally friendly way, using less metal than was pos- patent rights for the fiber-coating process along with the pilot sible with previous methods. system. “Clean and constant release of silver ions is essential if Dirk Hegemann, head of the Plasma-Modified Surfaces group we are to meet the quality requirements. We are currently in the and holder of a doctorate in materials science, explains the main middle of developing these metallized fibers. We have lots of ideas, differences: “The galvanic bath, as we know it today, is a wet elec- but it’s a new area and we now need additional partners to help trochemical procedure that is ideal for producing layers a few micro us develop projects – in the field of antibacterial applications, for meters thick – a human hair, by comparison, is 50 micrometers thick. example,” Zemp explains. Textiles treated in this way are currently available on the market and Here he touches on the sector with probably the greatest po- are used to combat neurodermatitis, for example. After a few wash- tential: In itself, silver has no antibacterial effect. But when it comes es, however, these products show little or no effect because much into contact with water – whether in the body, on the skin, with of the silver has been washed out. sweat or airborne moisture – the metal surface oxidizes and anti- Our technology, in contrast, is a dry physical process by which bacterial silver ions are washed out of this layer. The amount of the silver particles are applied only to the surface of the fiber in a silver that is released from a matrix depends on the particle den- thin, highly adhesive layer.” In the world of nanotechnology a “thin sity: The more ions are released, the greater the antibacterial layer” can be anything from a few to several hundred nanometers, effect. However, we also have to bear in mind that while some forms or millionths of a millimeter. This means that 0.5 grams of silver are of bacteria can be destroyed very easily, others are almost impos- applied to one kilometer of synthetic yarn. A fiber like this retains sible to kill, or can only be eradicated by using large amounts of

Photo: Empa the properties of the silver, in particular its conductivity and anti- silver. It can therefore be employed effectively in specific loca- >

Credit Suisse Bulletin 4/08 26 Metal Nanotechnology

Empa is the interdisciplinary research and service user interface for a mobile phone or jackets that can transmit MP3 institution of the Swiss Federal Institute of Technology data – are no longer a futuristic vision: They’re already on the mar- (ETH). Its aim is to convert research findings into ket. Anything’s possible, provided it doesn’t involve high voltages marketable innovations, thereby boosting the com- and the associated risk of overheating. Imagine a T-shirt that not petitiveness of the Swiss economy and enhancing only measures bodily functions such as your pulse, but also can the quality of life in society. www.empa.ch perform an ECG. Another potential application: A silver thread could be sewn into another material and used to test its integrity by moni toring the electrical resistance. A detector like this could save costs, particularly on the expensive filter materials used in industrial tions, for example hospitals, where the types of bacteria to be processes, where filters are routinely replaced without checking. combated are known. However, the market for medical textiles is After the Research It’s Time for Innovation still very small. At present, only dressings for wounds are available. Research is still being carried out on bandages, for example, where Having researched and developed the plasma process, Empa is the amount of silver released must be appropriate to the injury so already working on how to refine the fibers even further. Hegemann as to avoid toxic effects. On the other hand, Hegemann sees enor- explains: “We’re looking at how they react in contact with the skin mous potential in the development of implants: “Silver nanoparticles and whether discoloration, for example, can be avoided. But we’re embedded in a polymer matrix can produce an antibacterial effect also working on new developments: applying multiple layers, refin- for two or three days without the silver inhibiting cell growth. This ing the data transfer technology, trying out different fibers. And would be very helpful after an operation.” Other more futuristic pos- we’re thinking about using other metals, like gold, palladium or tita sibilities include antibacterial clothing – and sportswear in particular. nium. We also have ideas for using multiple coatings of different What about “odor-neutral” dancers in nightclubs, or changing rooms metals. If we could manufacture insulated textile wires and incor- where your nose isn’t assailed as soon as you walk in? Nice idea! porate luminescent materials, you could even have television or Silver has even more to offer. It’s also one of the best conductors computer screens integrated into your curtains.” of electricity and can therefore have an antistatic effect. “This would Hegemann eventually unveils his ultimate vision: “At present, be ideal for work clothing,” says Hegemann, “perhaps for surgeons textiles are often applied to the outside of Chinese high-rise build- in the operating room or for jobs involving microelectronic compo- ings instead of plaster. If you used these to operate photovoltaic nents. Or for filters in cars; or in industry, where it’s essential to systems and harnessed the surface area of the building to generate avoid the build-up of electrical charges.” According to Hegemann, power, this would make a clean and efficient contribution to the Empa tests show that silver-coated fibers incorporated into textiles energy problem in Asia.” Given the visionary quality of these ideas are extremely durable and can survive more than 50 washes. Prod- it’s reassuring to know that the original idea is already being put ucts made from conductive fibers – like gloves with an integrated into practice. <

1 2

1 The Empa system can coat several meters of fiber per hour, without producing any environmentally harmful waste. 2 Thanks to its visual appeal, the yarn is currently also being used for trial projects in the fashion industry.

Credit Suisse Bulletin 4/08 Credit Suisse Business 27

B u s i n e s s News From the World of Credit Suisse

Overview 28_A Talk With the CEO of Private Banking 31_Kudos From Euromoney 32_Brady Dougan in India 34_Commodities Platform Expanded

Private Banking to Open Stronger Presence in China in Japan Credit Suisse will be With New Appointments Credit Suisse launching Private Banking oper China is one of Credit Suisse’s ations in Japan by end of 2008. most successful markets in the Pakistan Offers Junya Tani has been appointed head region. The bank therefore contin- Opportunities of Private Banking in Japan and ues to strengthen its Chinese joined the Tokyo Branch on July presence, by stepping up its senior In July, the bank opened its 22. For nearly 40 years, Credit client coverage in Investment Suisse has been operating Invest- Banking. Liping Zhang, who has operations in Pakistan ment Banking and Asset Manage- been named vice chairman of through a wholly-owned sub- ment operations in Japan. The the Non Japan Asia Investment sidiary, Credit Suisse Paki- launch of the Private Banking Banking department, will take on stan (Private) Limited based operations in Japan complements additional regional client coverage in Karachi. It will initially offer these operations. As the world’s Meister Appointed responsibilities. He remains the equity research and research second largest economy, Japan CEO Switzerland Hans-Ulrich bank’s China country manager. sales to institutional clients, has a huge amount of accumulat- Meister, the previous head of Janice Hu and Jeremy Xiao have and plans to expand its oper- ed wealth and is therefore a criti- Business Banking at UBS, joined both been appointed co-chairmen ations to full broking-dealing cally important market in Credit Credit Suisse on September 1 of the China Investment Banking services. Kai Nargolwala, Suisse’s strategy of enhancing as its CEO Switzerland. He re- department, while Paul Su will CEO of Credit Suisse in Asia its onshore Private Banking foot- places Ulrich Körner who decided assume the role of chief represen- Pacific, commented: “The print globally. mb to pursue other opportunities tative of Credit Suisse Hong Kong outside the bank. Meister directly and the Shanghai Representative launch is evidence of our strong reports to Credit Suisse’s CEO Office, as well as run the Shang- commitment to Pakistan and Brady Dougan and to the CEO hai Investment Banking depart- signals our intent to serve of the Private Banking division, ment. These bankers “represent as a bridge between Pakistan Walter Berchtold. He will also be some of the most talented China and the international investor a member of the Credit Suisse’s bankers in the industry,” says community.” Farid Ahmed Executive Board. “Our Swiss Paul Raphael, head of Investment Khan, director at Credit Suisse, franchise is a consistent and Banking for Asia Pacific. de will lead the efforts to grow strong cont r i butor to our earnings the bank‘s equities business and growth. Meister is an expe in Pakistan. Khan joined rienced banker with an excellent Direct Market Access Trades Credit Suisse in 2007 from track record who is capable In Indonesia Credit Suisse on MCB Asset Management of further building this important August 19 became the first foreign Company, and has previously business,” Dougan said. de broker to complete an equity trade for an external client on Indone- worked in Malaysia, Turkey New Head of Economic sia’s Stock Exchange using Direct and the UK for major interna- Research Switzerland Martin New CEO of the UK Market Access (DMA). This tool tional financial institutions. Neff has been promoted to head Named James Leigh-Pember- offers clients the ability to trade Credit Suisse has already put of Economic Research Switzerland, ton was named CEO of Credit equities and futures directly into in place a research team for following the retirement of Alois Suisse in the UK. He will report exchanges, without the delays Pakistan, with active coverage Bischofberger on June 30 after a to Eric Varvel, CEO of the Europe, associated with routing orders of the country’s equity mar- 35-year career at Credit Suisse. Middle East and Africa (EMEA) through a sales trader. “As an effi- ket. Credit Suisse has been Neff most recently held the posi- region. Leigh-Pemberton will be ciency tool we are expecting our active in the Pakistan financial tion as head of the Swiss Economic responsible for the Private Bank- clients to take greater control of markets since 19 94 – 95, Research, a subdepartment of ing, Investment Banking and Asset their orders and feel comfortable when it advised the Govern- Economic Research Switzerland. Management client business in in the anonymity DMA affords In this function, he analyzed the the UK. “James is one of our most them,” said Brook Teeter, head of ment of Pakistan on the Swiss economy as a whole, as well respected bankers in the UK. Advanced Execution Services privatization of the Kot Addu as its individual sectors and re- Having served as a mentor to many Sales for Asia Pacific. Earlier this Independent Power Plant. mb gions. Neff, a trained economist, of our bankers in London, he is year, Credit Suisse became CreditSuisse

| also teaches at the Institute for also uniquely well-positioned the first broker to execute a DMA Financial Services in Zug and is a to assume a leadership role in the order in the Malaysian market, GeeLy

lecturer in real estate economics UK business,” said Varvel. mb and it remains the only broker at the Danube University Krems offering this service there. de in Austria. de Photos:Empa

Credit Suisse Bulletin 4/08 28 Credit Suisse Business

Credit Suisse Private Banking Current Market Environment Creates Opportunities for Private Banking

The current credit crisis sets the basis for healthier growth. “This volatile environment creates great opportunities for the financial institutions who have managed it well,” says Walter Berchtold, the CEO of Credit Suisse’s Private Banking division. It also highlights the importance of close client contact.

Bulletin: What are the greatest effects the various risks again and that needs more you see more families who have been build- of the ongoing credit crisis on the private time because they are wary due to the fallout ing wealth over generations. Their concerns banking industry? of the credit crisis. are more about inheritance and how to pass Walter Berchtold: The main impact has been How well has Credit Suisse weathered on their fortunes to the next generation. on trust. Clients are asking themselves: Am this turbulent market environment? How does Credit Suisse ensure that it I banking with the right counterparty? How Although we did not escape the turmoil a meets the different needs of its clients? safe is my institution? How resilient is the 100 percent unscathed, we had the right Clients must be so pleased with our service safety net of the whole financial system? This approach going into this crisis. Our write- that they entrust us with a more profound re- situation requires us to build on the trust fac- downs have been very contained and Credit lationship, one that takes into account all as- tor and be very close to our clients. We must Suisse is one of the only financial institutions pects of their financial lives. explain the latest developments and give with a strong capital base which has not In order to do so we have created the assurance that Credit Suisse continues to be diluted its shareholders. Credit Suisse Advisory Process to set new a safe haven for clients. This volatile environ- What is the general outlook for standards in partnering with our clients ment also creates great opportunities for Credit Suisse’s Private Banking division? around the world. It helps us to understand the financial institutions who have managed The integrated bank model provides us with the clients’ needs and demands and translate it well, as it will certainly redirect some of the the necessary tools to offer our clients excep- them into integrated, tailored solutions from assets. Another consequence is the impact tional solutions, today and in the future. We across the whole bank. on the wealth-creation process. I would ex- should emerge as one of the main beneficia- But the ultimate key for success still is to pect it to decelerate at least temporarily. ries of the credit crisis. Our strong position have the right relationship managers. They Growth is slowing around the world and and attractive brand attract new clients. act as a gateway to our clients, ensuring that financial markets still have to correct further. Where are the division’s main trust is established and the appropriate solu- This will lead to a certain deceleration of growth opportunities? tions are provided. With the integrated bank- the recent strong trend in wealth creation. Capital flows have dramatically shifted into ing model put in place two years ago, our But the medium- to long-term prospects are emerging market countries, certainly making clients have access to all of the bank’s re- very promising. these a growth area for wealth creation. But sources and tools. By using these, we strive Are clients changing their investment Europe and the US remain by far the biggest to make a big difference for our existing and strategies and investing more cautiously? pools of wealth. Credit Suisse with its glob- new clients. The clients have, especially since the first al reach is well positioned to take a major You mentioned the importance of half of the year, become a lot more cautious. share of the available wealth pools in all the relationship managers. Is the Private In 2007, they were still quite confident that the regions. Banking division still hiring? this crisis was isolated and would be re- When you meet with clients around We have an aggressive hiring target of solved quickly. It instead spread. We are the globe, do you see a different invest- 1,000 new relationship managers over the witnessing some selling of securities, dele- ment behavior in the various regions next three years, with a focus on Asia, the veraging and raising of cash positions. New in which Credit Suisse operates? US, and Europe. Our platform, brand and investments are mainly being made in prod- There are regional differences. Asian and processes help us attract the right talents. ucts which have capital protection features Latin American clients are mainly composed As the relationship managers are the in- and stable returns across the cycles. of entrepreneurs who have started busi- terface to our clients, it’s crucial that they What is your outlook considering the nesses over the last decades and who are understand our advisory philosophy and current state of the markets? in the process of building up wealth. Their pose the right questions. This might sound The markets will stay difficult for some time main concerns are how to extract value from very trivial, but isn’t that easy. They need to to come before a sustainable recovery will their businesses and how to reinvest the understand the financial situation of the cli- take place. People have to be able to assess proceeds. If you look at Europe and the US, ent and be kept constantly updated about

Credit Suisse Bulletin 4/08 Credit Suisse Business 29

the organization, new products, understand the financial and political environment, and know rules and regulations applicable in the various jurisdictions. When hearing the term private banking, most people automatically think about ultra-high-net-worth (UHNW) clients. Is that correct? Private banking isn’t only about serving the very wealthy. Ultra-high-net-worth clients certainly are a very important client segment which needs additional services such as trust structures, private equity and quite often also capital market services. But overall private banking is still predominantly an offering to all people who have accumulated a certain level of wealth and need solutions which go beyond the normal banking services. Is the UHNW segment still growing despite the challenging market conditions? This client segment is one of the fastest growing areas in the world for Credit Suisse. Approximately half of our net new assets come from this segment. UHNWs come from all over the world, with Asia and especially the Middle East and Eastern Europe growing enormously thanks to their “We should emerge as one of the main beneficiaries of the credit crisis. Our strong position and attractive brand attract new clients,” says Walter Berchtold, the CEO of Private Banking. natural resources. Is it still possible to grow in Credit Suisse’s home market, Switzerland? Despite the fact that the Swiss market is sat- urated, if not “overbanked,” we’re still growing above market average in Switzerland. We are doing very well in corporate and private banking due to our ability to develop and provide new products and services – many of them facilitated by our integrated business model. Another growth driver for the Swiss private banking business are the inflows from retail clients who – by increasing their accumulated wealth – move to become private banking clients. We also do a lot for our retail clients in Switzerland. Our retail offering is of such high quality that it can easily be compared to what other banks refer to as private banking services. Profile Switzerland’s client confidentiality Walter Berchtold is the CEO of the Private Banking division of Credit Suisse. is often being questioned. Is it still crucial? He is a member of the Executive Board and the Group Executive Board The protection of individuals and their data is one of the foundation pillars of our demo- of Credit Suisse. He is also a member of the Board of the Swiss Bankers cratic society and needs to persist. Many Association. Berchtold joined Credit Suisse First Boston in 1982 and measures have been taken in order to pre- notably served as head of Arbitrage in the Securities Trading department, vent violation with regard to client confiden- head of Trading and Sales at Credit Suisse Financial Services and as tiality. Today, we have strict compliance requirements, which prevent criminal money CEO of Banking at Credit Suisse Financial Services.

Photo: Eva-MariaZüllig Photo: from entering the system. Dorothée Enskog

Credit Suisse Bulletin 4/08 The Online Magazine of Credit Suisse

In Fowww.credit-suisse.com/cusinfocus

The Credit Suisse magazine In Focus reports on current topics in the areas of business, finance, culture and sport – with in-depth analyses, interviews and feature articles. Subscribe to our free newsletter and stay up to date. The newsletter is published weekly in English, French and German.

Economy Our editorial team regularly Investments Credit Suisse analysts give Culture The culture section of In Focus portrays innovative companies, conducts their views on the most important com- is just as varied as the commitment interviews with recognized economic ex- panies, sectors and markets, give tips for of Credit Suisse, with articles on topics perts and presents recent Credit Suisse optimal wealth management, and pro- ranging from art, cinema and classical Research studies. vide information on new products. music to jazz and pop music.

Football Credit Suisse has been the Formula One In Focus takes a peek Competitions Win a notebook? Concert main sponsor of Switzerland’s national behind the scenes of the Formula One tickets? Tickets to a football match? football team for almost 13 years – racing world: race analyses, audio inter- Or a visit to the Formula One paddock? and In Focus has been the official infor- views, photo galleries and reports In Focus regularly gives away attractive mation platform for the “beautiful game” on the BMW Sauber F1 Team keep motor- prizes. It’s worth taking a look. for more than three years. sports fans up to date. Credit Suisse Business 31

Concept of the Integrated Bank Proving Successful Credit Suisse Named “Best Bank” In Switzerland

The renowned British financial magazine Euromoney has named Credit Suisse “Best Bank” in Switzerland for the second successive year. Special mention was made of the innovative power of the private clients and corporate clients business areas, the expertise in wealth management, and the sophisticated investment and advisory solutions.

Credit Suisse wants to be the leading bank ment, as evidenced by the sophisticated Private Banking in Switzerland (and in Ger- in terms of client satisfaction and profitable investment and advisory solutions geared many) its ultimate “summa cum laude” acco- growth. At the same time, the bank’s guiding around the needs and corresponding life lade in its Elite Report. principles continue to apply, namely that the stages of the bank’s various client groups. The Award for Excellence’ citation under- focus should always be on the client’s needs, scores the bank’s outstanding market posi- that teamwork should form the basis of busi- Number One in Overall Assessment The tion in a highly competitive and economically ness, and that a good reputation is crucial. award is all the more gratifying as it repre- challenging environment. At the same time, The concept of the integrated business sents confirmation of last year’s impressive it further drives Credit Suisse’s efforts to model, introduced in early 2006, has en- Euromoney ratings for Credit Suisse. In ad- systematically implement its integrated bank abled Credit Suisse to take a decisive step dition, the “Award for Excellence” from Euro- strategy, to exploit the growth potential that forward. The Private Banking, Investment money confirms the other awards that the this releases, and to continually develop the Banking, and Asset Management divisions bank has received in recent months. For ex- best solutions for its clients. work hand in hand. This enables client advi- ample, the magazine Global Finance likewise Region Switzerland is of great importance sors to ser ve their clients from a single source awarded Credit Suisse the “Best Bank in in this drive. The “Best Bank” citation is there- and to offer them access to all services of Switzerland” at its “World’s Best Developed fore not only a boost for the 21,000 employ- the global bank through a single interface. Market Banks Awards 2008.” ees of Credit Suisse in Switzerland, but also Global Investor Magazine in turn selected very much an accolade for the numerous loyal Innovation Rewarded Specifically, Euro- Credit Suisse as “Wealth Manager of the clients who motivate and strengthen Credit money has underlined the innovation seen in Year 2008,” while Handelsblatt awarded Suisse in its home market. Andreas Schiendorfer the private client and corporate client business areas. The customized derivative products for small - and medium - sized enterprises and the prize-winning branch concept with respect to client service and branch design were cited as exemplary. In addition, Euromoney praised the expertise of Credit Suisse in wealth manage-

Credit Suisse wins Euromoney’s top Swiss Credit Suisse’s main Basel branch has implemented a new reception and honor for the second consecutive year. service concept for clients, offering advice that is more personalized.

Credit Suisse Bulletin 4/08 32 Credit Suisse Business

CEO Visits India Indian Market Remains Key To Credit Suisse’s Strategy

In August, Brady Dougan, CEO of Credit Suisse, embarked on a three-day tour of India signaling the strategic importance of the bank’s presence in this fast-growing market in the Asia Pacific region and beyond.

The trip included visits with staff in Mumbai the strength and diversity of talent that has Europe,” he said. In the long term, the outlook and Pune, as well as meetings with the CEOs made India such a center of new industry for the Indian economy remains positive. Four of some of India’s leading corporations. He and innovation,” said Dougan on his visit to key factors have been driving such expansion, also met with senior government officials, the city. Established in November 2006, the including deregulation, privatization and liber- including India’s Finance Minister P. Chidam- Pune CoE provides support for IT, operations alization reforms; a rapidly increasing work- baran, and its Commerce and Trade Minister, and financial accounting, as well as a range force; a growing middle class, which is fuel- Kamal Nath. of front office functions, including equity re- ling domestic demand; and higher capital During his visit, Dougan commented on search and other analytic functions. availability. Research suggests that India has the country’s prospects: “India remains Today, 1,300 employees and consultants the potential to be the world’s third largest poised to grow at a near double - digit rate for work at the Pune CoE. “Global institutions economic power by 2050. several years now, even if the growth is punc- that have already made the investment in tuated from time to time by brief pauses.” a flexible, scaleable operating platform and Dealing With Inflation However, in line have the ability to tap high-quality talent to with the world economy, India is experiencing Building Business in India Dougan be- serve local, regional and global needs will be a trend toward rising inflation, which current- lieves Credit Suisse’s India franchise is off those that succeed,” Dougan added. ly stands at a 13-year high. As the economy to a good start. “In 2007, we reestablished has been slowing, gross domestic product Stock Brokerage operations and local In Emerging New Player In a recent inter- (GDP) growth and industrial production vestment Banking coverage. In 2008, we es- view with the Financial Times, Asia Pacific growth have also been experiencing a down- tablished a wealth management business,” (APAC) CEO Kai Nargolwala, who accompa- ward trend. he explained. nied Dougan on his tour of India, compared Regardless, figures suggest that the “With an annual growth rate of 30 percent, the issues India is facing with that of the market is expected to remain on a 6-percent the wealth market is a significant component US and Europe. to 9-percent growth trajectory in the me- of Credit Suisse’s business in the region “India is facing some significant chal- dium - to long term. “Given Asia’s importance and is driven by the increased demand for lenges in terms of inflation and oil prices, but in driving economic growth globally, the more sophisticated financial solutions. In the while there will be some slowdown in growth, strides we take today to advance our Asian next three years, Credit Suisse is looking to we don’t see it as anywhere near as severe businesses will pay long-term dividends,” position itself as one of the top three play- as one might expect to see in the US or in concluded Dougan. Alex Pilton and Sarah Lukashok ers in India’s wealth management market,” Dougan said. “When we look at markets in India, the grow th prospects over the near, medium, and longer terms are excellent and there will be Centers of Excellence Credit Suisse currently has almost great opportunities as a result. With regard 5,000 employees working in its four global CoEs located in Pune, to the opportunities that we see in India, India, Singapore, Wroclaw, Poland, and Raleigh-Durham, North our global capabilities match very well with Carolina. The graphic positioning of the CoEs was chosen in order the business here,” said Dougan in a recent interview with India’s financial newspaper to optimize processes across different time zones. As a result, client The Economic Times. needs around the world can be met more rapidly. Today, Pune is the Pune is at the heart of the bank’s global fastest growing of the CoEs, and provides support for Credit Suisse’s Center of Excellence (CoE) strategy. “The information technology, financial accounting, investment banking, diversity of our activities in Pune underscores equites and client-centricity operations.

Credit Suisse Bulletin 4/08 Credit Suisse Business 33

1 2

3 4

1 Pune CoE Site Head, Gopa Subramonian, and Credit Suisse Country Manager for India Mihir Doshi join CEO Brady Dougan on a tour of the CoE. 2 Dougan is presented with a sandalwood garland on arrival at the Pune CoE. 3 Traditional lamp lighting ceremony. 4 Pune employs more than 1,300 staff. Over 700 staff members gathered to hear Dougan speak. Photos: Credit Suisse Credit Photos:

Credit Suisse Bulletin 4/08 34 Credit Suisse Business

Commodities Trading Credit Suisse Continues to Expand Commodities Platform

Commodities had their best first half since1973 this year, as the prices for oil, coal, copper, aluminum and other natural resources hit new records. Even though the global economy is currently slowing, the commodity market continues to grow at annual rates exceeding 15 percent.

The global commodity market is currently ment of the commodities business,” Knight partnership began in 2005 with oil and oil estimated to generate more than 23 billion explains. The trading desk built up by the products, and was later extended to cover dollars of annual revenues, out of which Commodities Group today offers a full spec- base and precious metals, as well as agricul- approximately 40 percent, or 10 billion dol- trum of commodity underlyings including tural products. It combines Glencore’s lead- lars, are earned by financial institutions oil and refined products, coal, metals, agri- ing position in physical commodity trading active in the sector. Proprietary trading – cultural commodities such as wheat, soy- with Credit Suisse’s expertise and strength transactions that affect a firm’s accounts – beans, milk and sugar, in addition to North in derivatives, emerging markets, structured make up nearly half of the revenues that American gas and power, and emissions. The products and risk management. “It is a huge- financial institutions reap from the commod- range of investment products involving these ly differentiating factor. Our partnership with ity markets. The remainder of the revenue commodities span from commodity indices Glencore allows us to offer – and provide – comes from structured products and trading to physical precious metals, structured notes, a commodities platform that most other banks flows. “It’s a large and growing opportunity warrants, funds and certificates. can’t. We can not only do hedging versus a for financial players, as they can be active benchmark, but can also hedge the exact in proprietary trading, structuring transac- Partnership With Glencore A key element product clients are producing,” says Knight. tions and offering traditional market-making of Credit Suisse’s offering is the alliance with “The alliance covers a fully integrated com- services. That’s why Credit Suisse decided Glencore International AG, one of the world’s modities platform spanning a wide range of to partner with Glencore to establish a full- largest natural resources companies. The underlyings.” Dorothée Enskog fledged commodities platform,” says Adam Knight, co-head of Global Commodities at Credit Suisse. The headcount in the bank’s Commodities Group now exceeds 130 people globally, and the team will continue to expand as the bank further invests in its commodities platform.

At the Forefront of Innovation Since executing its first power trade in June 2005, Credit Suisse’s commodities team has been at the forefront of developing new commodity markets. In September 2007, Credit Suisse for instance set up a market in cobalt, followed by the establishment of an over-the- counter market in iron ore, one of the world’s largest physical commodity markets in May 2008. “Commodities are expanding as an asset class, with the complexity of trades that can be done increasing and the number of commodities that can be traded rising too,” says Knight. If someone wanted to trade in iron ore or cobalt just a couple of months ago, this person would have had to get a physical contract with a producer. “Now, we trade swaps in each of these commodities. This is Iron ore, mined above, is one of the largest physical commodities markets. evidence of increasing maturity and develop- Credit Suisse set up an over-the-counter market in iron ore in May.

Credit Suisse Bulletin 4/08 Economy Credit Suisse 35

Good to Know Financial Market Jargon

The term “sovereign ” suggests supremacy – a concept very befitting of the coin carrying Sovereign the same name. Due to the large number of colonies in the British Empire, the sovereign Worlds Most Popular Gold Coin was produced on all five continents and enjoyed worldwide circulation. As a result, it has long been considered the mother of all coins, both as an investment vehicle and as legal tender. Its high profile is due in no small part to its distinctive characteristics. The sovereign, weighing the equivalent of one pound in pieces of silver, was first struck in 1489 during the reign of Henry VII. Today’s 22-carat-gold equivalent was introduced as the United Kingdom’s principal gold coin in the 19th century, with St. George slaying the dragon depicted on its reverse side. This image has withstood the test of time almost without interruption, whereas the portrait on the front side of the coin has changed to reflect the reigning English monarch of the time. For the last50 years, this has been Queen Elizabeth II. The coin has lived up to its princely name over the years, as its material value has risen to a multiple of the original one pound. rg

The age of the gold rush – such as in California in the 19th century – is long gone; today, Precious Metals precious metals are almost exclusively procured by industrial means. Reserves of these Collective Name for precious metals can be found in the US, in Canada, in the CIS countries, in Australia, Extraordinary Metals and the Republic of South Africa. Home to 40 percent of the world’s known gold supplies in ore body and more than 90 percent of the world’s platinum group metal supplies, South Africa is considered the major precious-metal provider in the world. Precious metals are metals which demonstrate exceptional chemical stability and have an appealing exterior due to their precious physical properties. These include platinum group metals such as iridium, rhodium, osmium, ruthenium, platinum, palladium, as well as the elements silver and gold. However, only the last four of these metals are used as investment vehicles and traded around the clock by means of forward or spot transactions. In economically unstable times, precious metals are considered a solid, value-retaining, long-term financial investment and are available as bars or coins. Precious metal StevenPuetzer, Prisma

| options are available for hedging. rg GettyImages

| Precious metals do not have to be stored as bars or coins in a safe place at home or

Precious Metal locked in a bank safe. Instead, investors can acquire a claim to delivery of a specific Account amount of a precious metal (usually gold or silver), or a specific number of precious Puchasing Only a Claim to a Metal metal coins, and have it booked to a “precious metal account.” Such an account is not calculated in euros, US dollars or Swiss francs, but in a specific amount of precious metal. Rather than being physically transferred to the account holder, the metal remains part of the bank’s holdings. Yellow DogYellowProductions, Getty Images

At the client’s request, however, the respective financial institution is obliged to hand |

over to the client the designated amount of metal on a given account within a specified processing period at the counter. Precious metal accounts are ideal for investors who do not wish to physically purchase and store a supply of precious metal but who never- theless wish to benefit from its performance. dhu WalterBibikow, Getty Images

Photos:Keystone, Landov

Credit Suisse Bulletin 4/08 36 Economy Swiss Research High Oil Price Yet to Stoke Inflation It’s a common theme in the media right now: The specter of inflation is rearing its ugly head. Particularly widespread is the assertion that the rocketing oil price is driving inflation. But there are plenty of reasons to believe that theinflation climate in Switzerland will remain benign when viewed from an overall perspective, despite sporadic commodity-driven price surges.

Text: Claude Maurer, research analyst, Zurich

Inflation

Credit Suisse Bulletin 4/08 Economy Swiss Research 37

Not long ago, inflation was seen as a prob- of oil products are carried over to other a triumphant return. The wage-setting lem of the past. And yet now this word is goods. For the time being there is cause power of employers and the price-setting back on everyone’s lips. As consumers, the for optimism – there has been no automatic power of companies are therefore clearly Swiss have become accustomed to inflation knock-on effect of crude-oil prices on oth- both catalysts of inflation. The actual insti- rates of less than 2 percent. The concept of er prices. Even highly complex econometric gators of inflation are inflationary expecta- the “Great Moderation” – the disappearance models can find no stable and clear correlations. In an uncompetitive environment, of inflation despite a buzzing economy – tion between the LIK category “oil products” this can turn into a self-fulfilling prophecy: entered into vogue. With China at its head, and the remaining 95.3 percent of goods Higher inflationary expectations lead to ac- globalization resulted in favorable price in the benchmark basket. Put another way, tual higher inflation via wage demands and developments that preserved purchasing this means that higher oil prices do not au- price increases. power, while central banks managed price tomatically lead to general price increases But how are inflationary expectations stability with a steady hand. in the stores. formed? They are based largely on the Now all this has been turned upside down: currently perceived rate of inflation, the evo- Oil Is a Potential Inflation Driver Where once we enjoyed the golden scenar- lution of which can in turn be illustrated the- io of high growth and low inflation, today we Oil does however clearly have the potential oretically using “prospect theory.” According have just the opposite. In July of this year, to be a driver of inflation, as it is a commod- to this theory, in an initial perception phase inflation in Switzerland broke through the ity obtained exclusively through imports. consumers translate the prices of goods three -percent barrier for the first time since Rising import prices equate to a direct fall with which they are confronted into “gains” the 1990s. The key culprit here was the run- in prosperity of a country vis-à-vis the out- and “losses” relative to a particular item - spe- away price of crude oil. Although the relative side world. Switzerland must accept this cific reference price. significance of oil products in the country’s real-income loss, at least for the short and Illustrating the Prospect Theory basket of goods has declined continuously medium term, as these imports cannot be since the 1970s, the oil price volatility of replaced quickly or fully. The cost of 100 francs for a full tank of fuel recent times has once again had a signifi- A highly charged allocation battle is flar- at the local gas station may strike individual cant impact on the development of the LIK, ing up, in which the buck being passed car owners as relatively expensive or rela- the Swiss consumer price index. Converted around is the “adjustment burden.” Not only tively cheap, depending on their personal into figures, the “oil products” category has are unions calling for full compensation for reference point. If a driver is expecting to been responsible for about half of the rise inflation, they are also taking advantage of pay a price of 100 francs – this level is his in the price index since 2001. the opportunity this affords to demand real reference point – but ends up paying 120 wage increases. Companies, meanwhile, francs when he goes to the cashier, this is Defining Inflation are pushing up their own prices on the basis mentally processed as a loss. By contrast, In the lexicon of economics, inflation is of higher input costs. This is the combination if he ends up paying 80 francs, he perceives defined as a persistent increase in the over- that can lead to the infamous “wage-price this as a gain. In the evaluation of gains and all price level. Accordingly, inflation is not spiral.” Were this to occur, prices would rise losses, it is argued that consumers behave deemed to have taken hold if only individu- across the board and inflation would make asymmetrically, attaching greater impor- > al prices are rising. Technically speaking, the price rises of individual goods only result in a change in relative prices, and cause virtually no pain to the overall economy, even if Development of Inflation certain consumers or manufacturers feel the Year-on-year change in percent: The recent fluctuations in the oil price have had a strong impact on the development of the country’s consumer price index. pinch. There have always been price surges Source: Swiss Federal Statistics Office of this nature for individual goods. For example, milk producers have recent- % ly put up their prices. The only thing new 14 about the rise in the price of crude oil has 12 been its extent and duration. On the other 10 side of the equation, there will always be some products that become cheaper, such 8 as numerous electronic devices, to give a 6 recent example. Price signals of this nature reflect relative scarcities, and ensure that 4 goods and capital are efficiently distributed 2 in the economy. 0 Even if we find ourselves reluctantly reaching deeper into our wallets when filling –2 up at the pump, price increases in oil prod- 1970 1980 1990 2000 2008 ucts do not automatically mean inflation. Country index of consumer prices This is only the case if the price increases

Credit Suisse Bulletin 4/08 38 Economy Swiss Research

Inflationary Pressure Affects Households in Different Ways then, it should be remembered that inflation- In Switzerland, the official yardstick for the rate of inflation ary expectations only lead to a higher de- is the consumer price index (CPI). It is surveyed on gree of inflationary pressure. It is only in an a monthly basis by the Swiss Federal Statistics Office, and uncompetitive economic environment that companies can actually hike prices and em- measures the development of prices for the goods ployees can get away with higher wages – and services consumed by private households. The basket the real drivers of inflation. But the prereq- of goods used to calculate the CPI is divided into 12 main uisites for such a scenario in Switzerland expenditure categories and 83 subcategories, together with have been radically altered in the wake of 218 index positions and 1,046 survey positions. the relentless march of globalization, liber- The basket weightings are based on the annual Income and alization in the politico-economic sphere, Consumption Survey (EVE). 3,300 households are selected and increased domestic competition. at random from the telephone directory and surveyed in Viewed in this light, companies clearly have restricted room for maneuver when it detail, with the findings then extrapolated across the average comes to passing on price increases. A look spending structure. The basket of goods calculated in this at the statistics book shows that it has been way results in a representative picture of the spending rather more difficult to pass on price rises habits of the average Swiss consumer. However, an individ- since the mid -1990s. At the same time, the ual’s basket of goods may differ significantly from the labor market has changed. The Swiss labor official basket of goods, which is why the level of inflation market has swelled significantly, above all experienced by an individual can deviate significantly as a result of the bilateral treaties between from the official rate of inflation. Switzerland and the EU. A Watchful Eye on Developments

Overall, the impact of the labor market on tance to losses and lower importance to Information on the inflationary expectations inflation has fallen, as can be seen by the gains. As a consequence, price increases of private households in Switzerland can “Phillips Curve,” a now commonly used yard- are perceived more strongly. Added to this be gleaned from the quarterly consumer stick developed by Nobel prizewinners Fried- is the fact that perceived inflation will rise to survey of the State Secretariat for Econom- man and Phelps. Inflation may not be on the keep up with the frequency of perceived ic Affairs. These expectations have recently verge of making a comeback, but it is also price increases. risen dramatically, and in the second quarter not dead and buried. A watchful eye is there- A fall in the prices of goods that are rare- of 2008 reached their highest level in 16 fore called for in all areas to prevent boom- ly or never the object of an explicit purchas- years – if one disregards the figures recording oil prices from leading to inflation. ing act will have no effect on the inflationary ed in the run-up to the introduction of value- The ingredients for inflation are very perception of the consumer. Where goods added tax in 1995. However, this survey- much in place now that the surges evident that are consumed on a daily basis such as based figure provides only a snapshot in the oil markets have recently driven up bread, for example, become more expensive picture, and needs to be viewed over sev- inflationary expectations. We remain confi- while long-living consumer durables – for eral quarters if a meaningful assessment is dent that an end to the oil price bubble will example IT hardware, or services such as to be made. improve the recent picture painted by the telephone charges that are paid only once a As is shown in comparison with the most inflationary barometer. As long as the struc- month via direct debit – become cheaper, dramatic oil price shocks of the past, infla- ture of the country’s competitive environment the perceived rate of inflation still rises. tionary expectations may have risen relative- continues to improve, the inflationary cli- ly strongly in the last few months, but they mate will generally remain mild, despite spo- Media Influence remain at a comparatively low level. Even radic commodity-driven price shocks. < Media reporting on the issue of inflation also has a role to play in the creation of inflationary expectations. The KOF economic research unit of the Swiss Federal Insti- Inflationary Expectations and Oil Price Shocks tute of Technology in Zurich has illustrated Research shows that frequent reports of inflation in the media can lead to how great the media’s impact be on inflation- differentiated expectations. Source: SECO, Credit Suisse Economic Research ary expectations using German data. The more the topic of inflation is reported in the newspapers, the more differentiated First Oil Second Oil Persian Current Oil Crisis Crisis Gulf War Crisis inflationary expectations become. However, (1973) (1979/80) (1990/91) ( 2007/08) the type of reporting is crucial in this respect. Increase in inflationary expectations 24% 95% 21% 107% Front-page headlines about strongly rising Average level of inflationary prices, whether perceived or actual, have a expectations 131 87 111 70 visible impact on inflationary expectations.

Credit Suisse Bulletin 4/08 Economy Base Metals 39 Metals Are at the Core Of Production These days, one has to score high in Internet search engines to be considered important. Searching for “metal” uncovers some 600 million hits within 0.05 sec. For “economic growth,” by comparison, the results are roughly 25 million hits, which is almost the same as what pops up for “metal” as powerful style of rock music alone.

Text: Anja Hochberg, head of Global Economy, FX, Commodities and Real Estate, Zurich

Metallurgy, as the process of metal extrac- lution of the 18th and 19th century is close- in these markets. Admittedly, financial vari- tion from ore, purifying and alloying them ly related with industrial metals. First, manu ables will also influence these trends al- and then creating useful objects, can be facturing processes shifted from manual though for the different metal to a different traced back many thousands of years. Most to machine-driven. Steam power and rail- degree. Precious metals such as gold show studies agree on 6000 BC, though some ways followed and finally – all based also on a powerful correlation based on their strong have determined an even earlier date. Inter- metallic components – the electrical power investment use. estingly, gold, the glittering precious metal generation provided the basis for today’s Precious metals have been closely con- whose price prospects are heavily discussed production structures. nected to financial markets bases on their in today’s financial world, seems to have historic function as a means of exchange, Metals Enter New Renaissance been the first metal discovered. From tools store of value and nominal anchor of mon- to weapons, to decorations and coins, met- The new industrialization in emerging mar- etary policy. However, commodities are als have played a pivotal role in history. kets has in a similar fashion but in time- still a rather young asset class (chart below The historic role of metals comes to mind lapse mode provided the ground for the right) – an asset class, however, with low when looking at very important prehistoric most recent renaissance of base metal correlations to traditional asset classes. This periods. The Chalcolithic (copper and stone prices (chart below left). Even if this upward makes commodities – with all their hetero- period), Bronze and Iron ages have been trend might slow down somewhat on the geneity – an attractive portfolio diversifier. instrumental in the innovations of the means back of current economic uncertainties, the The need for such a diversifier becomes very of production in general, and specifically in rebalancing process of the world economy obvious in a lower return/higher risk envi- hunting and agriculture. But one does not with emerging markets contributing increas- ronment. One can expect search engine have to look so far back in time to recognize ingly to economic growth has just started hits for “commodities” and “investments” to the impacts of metals. The industrial revo- thus contributing to the longer term uptrend feature this development. <

Industrialization Boosts Base Metal Prices Commodities As an Asset Class Base metal prices at the London Metal Exchange surged amid Investments in commodities is still low compared to other strong demand from emerging markets like China. asset classes, though they are an attractive portfolio diversifier. Source: Bloomberg, Credit Suisse Source: Bloomberg, Credit Suisse

Index 5000 Commodity investments 4500 Outstanding sub-prime mortgage 4000 Hedge funds 3500 CDOs 3000 Sovereign wealth funds 2500 2000 Resource equity market cap 1500 Bond investments 1000 Pension funds 500 Stock market cap

01/02 01/03 01/04 01/05 01/06 01/07 01/08 0 5 10 15 20

London Metals Exchange Index Trillion USD

Credit Suisse Bulletin 4/08 40 Economy Gold Gold Continues to Subjugate the World For millennia, gold has been a symbol and a store of wealth. But why does gold hold such allure? What makes this precious metal a valuable commodity in its own right? Matthew Rees looks at gold from a historical perspective.

75% Private Citizens

25% Central Banks

Text: Matthew Rees

Social elites in nearly every society have discovered and abundant sources of gold age of increasingly sophisticated and inno- sought gold as a way to advertise their rar- that could enhance the global stature of vative currency markets and vast global efied status. Among more ordinary citizens kings and queens. It spurred Americans (and trade, do many investors, some politicians, and merchants, gold has facilitated busi- explorers from around the world) to Califor- and a few economists continue to believe ness transactions where no common cur- nia in the mid-19 th century to scoop tiny that a return to the gold standard – making rency has existed. The quest for gold has specs out of rushing rivers. currencies “as good as gold” – would benefit driven people deep into the earth to extract But why does gold continue to inspire national economies? The simple answer to the metal from barely accessible veins. It led confidence when many other commodities these questions is that gold has served as a Europeans across the seas in search of un- are intrinsically more valuable? Why, in an benchmark of stability throughout history.

Credit Suisse Bulletin 4/08 Economy Gold 41

When trouble loomed for local currencies, Future Money,” it comes in only one form silver, or risk a loss of confidence (the Brit- gold quickly emerged as a bulwark against and it does not chemically combine with oth- ish pound takes its name from a pound of eroding wealth. Accepted nearly every- er elements. It does not tarnish or rust … silver). Bernstein notes an early test of Brit- where and easy to transport, gold has not Because of its extraordinary density, it can- ain’s ability to marry gold and paper cur- been vulnerable to a loss of confidence that not be counterfeited.” The fact that gold also rency came during its war with France in the would render it worthless. has relatively few alternative uses is another late 18th century. The French Revolution benefit. As Bernstein posits, “Gold … has was still fresh in the minds of many, and Greenspan, an Advocate of Gold always been useless for most practical pur- combined with fears of a possible French Alan Greenspan, the former chairman of the poses that call for metal because it is so invasion, holders of English currency fretted US Federal Reserve ( Fed ), has been a long- soft.” Gold can’t be used for building, nor over the value of their notes in the event of time advocate of gold. “Gold and economic can it be consumed. Given the choice of us- a change in government. In sum, would the freedom are inseparable,” he wrote in 1966. ing corn or gold as a currency, it makes new sovereign authority honor notes issued “In the absence of the gold standard, there sense to eat the corn and trade the gold. by the old? The concern prompted a run on is no way to protect savings from confisca- gold, which, as Bernstein highlights, “was A Metal With No Real Utility tion through inflation. Gold stands as the perceived as the ultimate money, indestruc- protector of property rights.” At the same time, gold’s general lack of util- tible in value and forever acceptable no mat- In his best-selling book “The Power of ity makes its value something of a mystery. ter who would be running the government.” Gold,” economic historian Peter Bernstein Compared with a commodity such as oil, Rapidly shrinking gold holdings at the traces humanity’s interest in gold from the which has real worth to an energy-depen- Bank of England forced the government earliest ages. Ancient Egyptians mined gold dent world, gold can only be valuable if peo- of King George III to stop converting gold from the Nubian territories to their south – ple find something inherently appealing on demand. In 1797, Parliament passed a indeed the place-name Nubia is thought to about it. Its shine and luster – which led to Restriction Bill, which codified the arrange- derive from the Egyptian word for gold. The its early association with luxury and wealth – ment and insisted that bank notes be ac- Lydians, whose culture existed in what is have rendered it desirable across cultures. cepted at face value in all transactions. As today Turkey, were reported by the ancient The use of gold coins as currency – often gold proponents would expect, currency is- Greek historian Herodotus to be the first in conjunction with silver – was popular until suance rose during the next t wo decades as civilization to use gold coins, around 600 recent centuries. Metallic coins represented the government funded the war with France. B.C., spurring the growth of a thriving trade tangible wealth. They didn’t rely on the value Prices of goods and gold rose as well, gen- culture. Since that time, countless societies assigned by sovereign authorities, but they erating stronger calls for a return to full gold have used gold or silver as a medium of ex- could be traded within towns and across convertibility – and price stability, which change or as a support for other forms of borders because people knew the coins occurred in 1821. currency, notably paper notes. had value as physical products. Yet metallic The Gold Standard coins also encountered problems that un- A Rare and Stable Metal dermined their ability to hold value. Govern This gold standard remained basically Gold’s universal appeal is rooted in several ments issuing coins realized they could earn intact throughout the 19 th century, with Brit- factors, chief among them its rarity and sta- profit by mixing gold with less precious met- ain, the world’s financial leader, providing bility. Since 1492, the supply of gold has als, making a coin less valuable than indi- the economic muscle to maintain the stan- never increased by more than 5 percent per cated on its face. dard as the architecture of international year, and over the past century the annual In addition, early coins, which were usu- trade and finance. Benn Steil of the US- increase has remained steady at around 2 ally made with smooth edges, were tempt- based Council on Foreign Relations wrote percent. Today, there are about 4 billion ing sources of wealth for unscrupulous char- in Foreign Affairs last summer, “Adherence ounces of gold in existence; central banks acters who would remove trace bits of gold. to the nineteenth-century gold standard, hold about 25 percent of the total supply The result was that coins would get gradu- with the Bank of England at the helm of the and private citizens hold the rest. From the ally smaller over time and lose their value. In system, severely restricted national mone- standpoint of political economy, the rela “The Power of Gold,” Bernstein notes that tary autonomy, yet governments voluntarily tively stable supply of gold, when linked to these “clipped” coins could put a dent in per- subjected themselves to it precisely because a national currency, has served as a check sonal and national finances: When Eng- it meant cheaper capital and greater trade on inflation and a moderating influence on land’s government sought to replace clipped opportunities.” balance of payments accounts. silver coins with new ones in 1696, the 4.7 The gold standard held firm until the con- No less important, throughout history million pounds received by the Exchequer clusion of World War I, at which point conti- gold has functioned as a de facto global cur- contained no more than 2.5 million pounds nental Europe was so wracked by debt and rency, since countries (or merchants) had no of silver by weight. devastation that some economists, including other common medium of exchange. As such, Of course these minor problems did noth- a young John Maynard Keynes, questioned it has been growth catalyst for cross-border ing to dampen enthusiasm for precious met- the wisdom of returning to the pre-war stan- trade, contributing to economic efficiency al. When Western governments began issu- dard, since doing so would require fixing the and greater global prosperity. Gold also has ing paper currency in greater quantities pound sterling at 4.86 dollars. In the imme- appealing physical attributes. As Nathan around 300 years ago, they had to be backed diate aftermath of the war, the pound was Lewis points out in “Gold: The Once and by a guarantee of convertibility to gold or trading as low as 3.40 dollars. >

Credit Suisse Bulletin 4/08 42 Economy Gold

The US maintained the Bretton Woods sys- is determined in international markets – and tem with full dollar convertibility to gold because no government has an incentive at 35 dollars an ounce for more than two to manipulate the price of gold to benefit decades. But in the late 1960s, with mount- its currency – gold continues to exhibit a ing budget pressures and current accounts degree of immunity to national inflationary that had swung from surplus to deficit as a measures. result of economic recovery in Europe and Extreme Market Swings Japan, President Johnson relaxed the dollar Matthew Rees is a regular link to gold. And in 1971, President Nixon At the same time, gold is subject to extreme columnist for Bulletin. abandoned the link altogether. This marked market swings, which means that while it The former speech writer the end of a gold-based standard for cur- may be a defense against wealth-diminish- for the US President rency. As Benn Steil writes, “When [Nixon] ing inflation, money invested in gold is no currently freelances for a number of the most formally untethered the dollar from gold … sure thing. In addition, gold skeptics point respected publications monies flowing around the globe … ceased out that limited supplies of gold – which in the US. to be claims on anything real. All the world’s have served to make it valuable throughout currencies are now pure manifestations of history – make the prospect of ever again sovereignty conjured by governments.” linking currency to gold a non-starter: The Yet British authorities determined that a Global investors continue to search for a global economy is too large to be regulated sound money standard was necessary to re- store of value that approximates gold’s sta- by a finite product pulled out of the earth. A tain the nation’s status as the world’s bility while also acting as a hedge against similar case is made that the usually mild financial center, to attract needed capital, inflation. Since rebounding in the 1980s, the inflation of managed currencies is prefera- and to revive British exports. In 1925 Britain dollar has essentially served this role. Sev- ble to the boom-and-bust inflation and de- affirmed the pre-war price of gold. The eral national currencies are directly linked flation cycles that have in the past accom- Chancellor of the Exchequer, a rising star in to the dollar, while most major international panied discoveries of large pockets of gold, British politics named Winston Churchill, re- transactions are denominated in dollars. as in the 16 th century with the expansion of mained concerned about the broader eco- Backing the dollar has been nothing more trade in the Americas and the gold rushes of nomic implications. Worn down by months than the full faith and credit of the US gov- the 19 th century. In other words, internation- of discussion, Churchill remarked that Bank ernment, as expressed through the steward- al finance without gold might actually be of England Governor Montagu Norman ship of the Federal Reserve, which controls more stable than any gold-based system. “shows himself perfectly happy in the spec- the flow of dollars into the global financial And yet gold endures. If the pharaohs of tacle of Britain possessing the finest credit system. Yet the Fed’s domestic mandate is Egypt, the merchants of the ancient Medi- in the world simultaneously with a quarter not solely to maintain low inflation (and thus terranean and the courtiers of King George and a million unemployed.” a sound dollar). The Fed governors are also III were to return today, amidst all the mys- As the United States and the nations of tasked, by law, with promoting “maximum tifying technology and terminology, they Europe devised independent strategies for employment.” would understand the concept of gold picking up the pieces after World War I, (though they might have trouble understand- The Dollar’s Steep Decline some remaining with gold, others abandon- ing why so little of it appears in public). And ing it, economic turbulence and chaos swept The dollar’s steep decline in recent years, they would see that gold markets continue through Europe and into the US. The dev- relative to other currencies, has prompted to thrive as a destination for investors seek- astating consequences convinced policy- international investors to question whether ing protections against inflation and eco- makers in the aftermath of World War II that the dollar will continue to earn the “good as nomic uncertainty. the global economy required concerted gold” label. Already some sovereign holders After millennia of human history and management of currency and trade. of US debt have begun turning toward euro- countless forms of currency, gold maintains denominated holdings. And the sharp rise in its place of prominence in global financial Bretton Woods Agreement oil prices in 2007 and 2008 have led to affairs. Longevity, perhaps as much as any Meeting at Bretton Woods in New Hamp- speculation about whether it would be ben- other reason, may be why gold continues to shire in 1944, leaders of the global financial eficial to price oil in a currency other than inspire confidence. < system devised a strategy to return stability dollars. Unsurprisingly, the price of gold to international finance by pegging the US internationally has spiked. dollar to gold at a fixed rate of 35 dollars per Between August 2007 and March 2008, ounce, and then linking other currencies to gold rose from around 650 dollars an ounce the dollar within narrow-banded exchange to more than 1,030 dollars an ounce – shat- rates. Whatever the merits and pitfalls of the tering the previous record-high of 850 dol- Bretton Woods agreement, it expressed the lars established two decades earlier. In the desire of economic policymakers to devise spring and early summer of this year, gold a sound international currency regime that re-tested the 850 dollar boundary, and set- would be less prone to manipulation on the tled into a prolonged period of trading above

basis of domestic political exigencies. 900 dollars an ounce. Because gold’s value Suisse Credit Photo:

Credit Suisse Bulletin 4/08 Economy Kazakhstan 43 Dissecting Central Asian Markets As Central Asia goes through the gradual transformation from a formerly state- controlled Soviet relic to an open, market-oriented economy, the region’s growth prospects continue to attract frontier market investors. The key question astute frontier market investors ask in this context is how to best invest in the Central Asian frontier market region.

Average Economic Growth Since 2000

Russia

Central Asia 8% Kazakhstan

World 4.2% Uzbekistan Kyrgyzstan

Turkmenistan China Tajikistan

Afghanistan Pakistan

Text: Eric Güller, head of Equity Research EMEA & I n d i a

As with any other frontier market, Central Soviet creations, which before 1991 had no liberalization differs substantially across Asia, as a foreign investment destination, is history of being separate, independent states. While Kazakhstan quickly embraced still at a very early stage of development. countries. After decades of Soviet rule, a culture of structural reform and economic Gaining an understanding of current invest- involving the careful manipulation of lan- liberalism, other countries such as Uzbeki- ment opportunities in Central Asia requires guage, history, and territorial borders, the stan were slower to reform, and a country an appreciation of the complex sociopolitical Central Asian states carry with them a like Turkmenistan has declined to implement context of the region’s past. After the Soviet legacy of tight state control over the any macroeconomic reform policies. While decline of the ancient Silk Road, alternating economies and politics. For instance, the the transition from Soviet control certainly imperial powers – from Persia, Britain to transition from socialism to a market econ- weighed on the region’s economic promise Russia – vied for dominion over Central Asia. omy still impacts the business climate in during the 1990s, economic growth in Cen- Today’s regional states as we know them are Central Asia since the degree of market tral Asia has accelerated markedly since >

Credit Suisse Bulletin 4/08 44 Economy Kazakhstan

Focus on the Silk Road Many countries along the old Silk Road have than the emerging markets universe. But, as been enjoying an economic renaissance since the turn of the with most other frontier markets, Kazakh- millennium, especially the commodities giant Kazakhstan, but also stan’s financial markets are still small and its similarly commodities-rich neighbors Uzbekistan and Tajikistan. illiquid. For instance, while Kazakhstan’s To give a selected group of investors a first-hand impression, Arthur equity market capitalization of 53 billion dol- Vayloyan, head of Investment Services and Products in the Private lars dwarfs those of its Central Asian neigh- Banking division, invited them to take part in an Interactive Field Trip bors, on a global scale, this value makes up to the region at the beginning of September. Extensive research merely a third of the market capitalization of and the intensive exchanges with local experts provided the partici- a single stock such as Google. Indeed, it is pants with an exclusive insight into these exciting “frontier markets.” due to the fact that the Kazakh stock market The journey to Central Asia is already the fifth field trip organized by is still small and illiquid that many Kazakh Credit Suisse. The previous trips were to Estonia (on the topic companies have sought to raise funds for “Baltic Tigers”), Boston (nanotechnology), Bulgaria (new EU states) their growth on foreign stock exchanges, and Vietnam. mostly in London. But apart from portfolio investments, Kazakhstan has also sought to attract foreign direct investors. 2000. Compared to world economic average most advanced frameworks in the emerging The government grants tax and regula- growth of 4.2 percent, Central Asian growth market universe, with its foreign currency tory incentives for investments in various has averaged 8 percent annually since 2000, market, a government securities market, industries, especially in industrial infrastruc- mostly attributed to increased commodity a stock and bond market, and even a de- ture, processing industries, housing con- production and skyrocketing energy prices. rivatives market for more sophisticated in- struction and tourism. In a further effort to Given this backdrop, it is also clear that en- vestors. In addition to these diverse invest- attract international investors to Kazakh- ergy exporting states in Central Asia, such ment opportunities, the KASE stock market stan, the government has even sought the as Kazakhstan, Uzbekistan and Azerbaijan, has also performed particularly well. Since support of western lawyers and develop- have benefited proportionately more from 2003, for example, the KASE index has re- ment agencies to create a relatively pro- this growth than their resource-poor neigh- turned a dramatic 2,300 percent in absolute gressive legislative environment, which is bors Tajikistan and Kyrgyzstan. dollar terms. designed to improve conditions for doing These discrepancies in growth highlight Compared to the MSCI Emerging Mar- business in Kazakhstan. the fact that Central Asian states offer fron- kets Index performance at 290 percent, this Uzbekistan as Investment Destination tier market investors as many common at- astounding outperformance is a good ex- tributes as they do differences. All in all, ample of the growth opportunities of today’s Uzbekistan also offers investors a variety of countries in the region are at different frontier markets relative to the traditional attractive investment opportunities. While stages of development, so frontier market emerging market universe. This growth mo- Uzbekistan’s capital markets are still unde- investors should be sure to consider the mentum is further underscored by the fact veloped (the market capitalization of the investment opportunities of each country on that the KASE index – despite its 2,300 Tashkent Stock Exchange is only 1.6 billion an individual basis, without neglecting to percent price explosion – continues to trade dollars), the government has gone to great perform the necessary due diligence on today at less expensive valuation multiples lengths to attract foreign direct investors. In each opportunity.

Kazakh Markets, the Most Advanced KZKAK Versus MSCI Market Indices Kazakhstan’s capital markets offer the most The Kazakhstan Stock Exchange has performed particularly well since 2003 compared advanced investing opportunities in Central to the MSCI Emerging Markets Index illustrating the growth opportunities of today’s Asia. The reason for this remarkable prog- frontier markets. Source: National Bank of Kazakhstan, Credit Suisse ress in Kazakhstan can be traced back to the country’s rapid reform progress, which Price in USD 30 started almost immediately after the nation achieved its independence in 1991. In this 25 context, Kazakhstan introduced its own 20 national currency in November 1993.

At the same time, the National Bank of 15 Kazakhstan and 23 leading commercial banks of Kazakhstan established the cur- 10

rency exchange. This event would be the 5 impetus for the creation of the Kazakhstan Stock Exchange (KASE), which was founded 0 in the same year. In the meantime, Kazakh- 0 7/0 0 0 7/01 0 7/0 2 0 7/0 3 0 7/0 4 0 7/0 5 0 7/0 6 07/07

stan’s capital market has undergone tre- KZKAK MSCI EM (rebased on MZKAK) MSCI World (rebased on MZKAK) mendous development, boasting one of the

Credit Suisse Bulletin 4/08 Economy Kazakhstan 45

Uzbekistan’s industrial base currently accounts for almost 25 percent of GDP. Sitting on huge reserves of natural gas, the country produces over 60 billion cubic meters of gas, with a pact to build a 530-kilometer pipeline to China.

light of this, the Uzbek government has un- underlining the promising and investor- a short time span. Yet for all the opportuni- dertaken several initiatives to develop an friendly conditions Uzbekistan offers poten- ties in Central Asia, the region is also char- investor-friendly operating environment – for tial investors. These and similar initiatives acterized by the typical risks of any frontier example, ultra-low tax rates of 10 percent have already produced positive results, with market: inflationary pressure, political un- for investors, a seven-year income tax “hol- foreign direct investments in Uzbekistan certainty, currency non-convertibility and iday” for several key industry investments, growing by more than 100 percent since illiquidity. and a considerable privatization program, in 2000 to over 164 million dollars. At the same time, Kazakhstan’s remark- which the government has invited foreign While these facts certainly indicate that able stock returns since 2003 are a good investors to participate in the auctions of Uzbekistan is open to foreign investors, a example of the excess return with which formerly state-owned companies. Besides large investment hurdle continues to be the early frontier market investors are compen- these incentive structures, the government de facto non-convertibility of the currency, sated for assuming more above-average risk also supports its investment drive by distrib- which still makes it difficult for investors profiles. All in all, Central Asia’s growth pro-

Photo: Denis Sinyakov, AFP Photo uting comprehensive marketing materials to repatriate their funds from Uzbekistan in file will continue to attract investors. < >

Credit Suisse Bulletin 4/08 46 Economy Coal Coal in Demand Like Never Before Despite concerns over carbon emissions, coal has recently been experiencing a renaissance. It is viewed as a key fossil fuel for generating energy, and there are vast global coal reserves that have yet to be tapped.

Import Export

Credit Suisse Bulletin 4/08 Economy Coal 47

Text: Eliane Tanner, Commodity Research, Zurich

Despite the huge global reser ves of coal, the energy needs. This is particularly true of virtually been reached. The infrastructure for coal market is currently as heated as it’s coal, as the Indian economy is strongly coal transportation from the Hunter Valley ever been, and the price of this commodity dependent on this energy source – around mining area is likely to remain under strain has skyrocketed accordingly. Two important 39 percent of all primary energy demand until 2010 at the earliest, as only then will factors suggest that this trend is set to con- was accounted for by coal in 2005. work on a third coal terminal in the port of tinue: First, the strong rise in the consumption Both in terms of quality and quantity, Newcastle have been completed. of coal – particularly by China and India – and Indian coal production is insufficient to meet Eliminating Transportation Problems second, infrastructure problems that are domestic requirements, which is why coal manifesting themselves in important pro- imports have risen dramatically in recent South Africa’s limited capacity in terms of ducing countries. years. The country does actually have large railway and shipping infrastructure means The main reason for the structural tension coal reserves of its own, but for the most part that it too cannot meet the increasing glob- in the coal market is the continued rise in these have a high ash content. Indian coal al demand for coal. Capacity problems in demand for energy, a demand that is increas- therefore needs to be supplemented with im- the coal terminal of Richards Bay are likely ingly being driven by coal-burning power ported coal to reduce pollution. to have been responsible for the slight stations. In its World Energy Outlook 2007, While developments on the supply side decline in coal exports to 67. 2 million mt the International Energy Agency (IEA) pre- are supporting prices over the long term, the in 2007. dicted that coal would see the sharpest in- recent powerful surge in coal prices is due Extra capacity here is expected to be crease in demand of any primary energy to a number of short-term supply shortages freed up from the end of 2009 onward, once source, at a rate of 1.4 percent, yearly. in China, Australia and South Africa. The another expansion project is complete. As three most important events at the begin- Australia and South Africa have not been Asian Energy Requirements Soar ning of 2008 were flooding and rainfall in able to increase their exports significantly Strong economic growth, industrialization Australia, resulting in an interruption to in the short term, the growing requirement and urbanization, combined with a higher exports, production outages in South Africa, for coal has to be met by greater production standard of living, are causing a dramatic and heavy blizzards in China, which also from Indonesia, the US and Russia. These surge in demand for energy in both India and resulted in export bottlenecks. These short- players alone are, however, unlikely to be China. According to the base scenario of the term supply problems are symptoms of an able to keep up with the global growth in IEA, China and India will together account insufficient global infrastructure to transport coal demand. for approximately 60 percent of global coal, a serious flaw that will take years In our view, coal will continue to play an demand for coal by 2030 – from a starting to eliminate. important role in meeting the increasing point of 45 percent in 2005. Australia is among the world’s largest global energy requirements. A greater chal- To meet its significantly growing need for exporters of coal, shipping out around 112 lenge, however, lies in the reduction of energy, China is increasingly turning to coal million metric tons (mt) annually. Given the greenhouse gases and other emissions pro- imports, particularly as there are still major strong increase in export volumes that has duced by the burning of coal through tech- challenges to be mastered on the supply already occurred, the capacity limits of the nological innovations such as “clean coal” side in its own country. China’s coal produc- Australian coal transportation system have and zero-emission technologies. < tion is increasingly centered around mining areas in the north of the country that lie far away from the key consumer regions of its Strong Demand Drives Prices Up southern coast. Despite concerns over carbon emissions, the coal price indices API #2 and API #4, The increased need for transportation in as well as the Newcastle Coal Price Index, have been rising. Source: Bloomberg, Credit Suisse turn causes logjams on the railways and in ports, which not only limits domestic supply USD/metric ton but also results in a rise in the costs of inland 230 transportation. This makes imported coal 210 more attractive. China has been a net 190 importer of coal since the beginning of 2007, 170 despite the country’s traditional role as one 150 of the most important exporters of sea- 130 borne coal. 110 According to figures produced by the IEA, 90 India’s demand for energy rose by approxi- 70 mately 3.2 percent annually between 2000 50 and 2005. However, in per capita terms this 07/07 09/07 11/07 01/08 03/08 05/08 0 7/0 8 represents only a 10th of the OECD aver- API #2 (cif, Europe) API #4 (fob, South Africa) Newcastle (fob Australia) age, so it is still extremely low. India too is cif = cost, insurance and freight fob = free on board increasingly reliant on imports to meet its

Credit Suisse Bulletin 4/08 48 Economy Reading Up

Andrew Carnegie On February 4, 1901, Andrew Carnegie sold his steelmaking business for an unprecedented 400 million dollars (worth about 120 billion dollars now). With that By David Nasaw sale, he became “The Richest Man in the World,” according to J. P. Morgan, who Penguin, 2006 bought Carnegie’s company and used it as the basis of U. S. Steel. But if you want 800 pages to learn how to become the richest person in the world, that’s not the purpose of ISBN-13: 978-1594201042 this biography. Instead, David Nasaw minutely depicts an authentic tragic comedy © getAbstract. You’ll find a on more than 800 pages, the life of an impoverished, painfully short immigrant lad five-page summary of this book who succeeded during the Gilded Age of capitalism, becoming a robber baron, on www.getabstract.com philanthropist and “peacenik.” The author uncovers many of the secret operations Carnegie used to exploit his early employers and, later, his gullible investors. This account corrects biographies that omit Carnegie’s shady railroad bonds and union busting. The author also explains how Carnegie used his wealth to become one of the world’s greatest philanthropists, a significant legacy that endures through the institutions and libraries he endowed. This detailed history is well worth a read thanks to its iconoclastic scholarship, profound soul-searching and fasci nating portrait of a unique and contradictory person. © getAbstract

Gold Author Nathan Lewis drops the dismal science of economics to another level The Once and Future Money of despair by interpreting it as the “cruel science” of “realpolitik.” True believers in the gold standard, known as “gold bugs,” believe the US could face hyperinflation By Nathan Lewis because it destroyed the gold standard and made every nation vulnerable to John Wiley & Sons, 2007 contagious inflation. As Lewis explains, gold provided the backing for most cur- 447 pages ISBN-13: 978-0470047668 rencies for 300 years, and the stability of the system allowed the US to prosper and grow. Ever since President Richard Nixon left the gold standard in 1971, © getAbstract. You’ll find a the dollar has been backed by the US government’s “full faith and credit,” and not five-page summary of this book its gold reserves. However, Lewis also introduces theorists who do not advocate on www.getabstract.com the gold standard, since nations can realize its advantages only by pegging their currencies to short-term interest rates. As shown in this thorough, readable history, national treasuries must reassure the timid that global gold and currency markets are so huge and fast that “gold vulture” speculators cannot attack major currencies, and thus force a return to the gold standard (even though the author might wish that they could). This title will appeal to gold buffs, economic historians and anyone who might enjoy the debates it could provoke. © getAbstract

The End of Detroit For about 100 years, Detroit, Michigan, has fueled America’s love affair with the How the Big Three Lost automobile. Though this passion helped build and change the entire country, it now Their Grip on the American exists for vehicles themselves rather than for American vehicles. Author Micheline Car Market Maynard writes that Detroit has lost its grip on US drivers by relying on overgrown distribution systems, styling myopia, reduced quality, brand mismanagement and By Micheline Maynard Doubleday Broadway Publishing family ownership. These factors, to varying degrees, combined to weaken the Group, 2003 Big Three (Ford, General Motors and Chrysler). Seizing the opportunity, foreign 336 pages automakers wooed the US market. Their vehicles incorporated different engi ISBN-13: 978-0385507691 neering, styles, performance standards and prices than those rolling off Detroit’s © getAbstract. You’ll find a assembly lines. By the 1990s, Americans had become familiar with Honda, Toyota, five-page summary of this book BMW and Volkswagen. As an automotive journalist, Maynard has all the facts, on www.getabstract.com. interviews and trade-show vignettes to tell the story, but still she includes interviews with car shoppers and others who are not completely relevant to her tale. Nonetheless, this is a powerful chronicle on the threatened, imminent demise of more American icons. It will prove valuable reading for marketing and human resource professionals, corporate change-management executives and anyone interested in buying a car. © getAbstract

Credit Suisse Bulletin 4/08 Credit Suisse Sponsorship 49

Sponsorship Information From the World of Credit Suisse

Overview 50_Salzburg Festival in Retrospect 52_Interview With Hilary Hahn 54_Echo Classic Prize Awarded

Herbie Hancock and Monty New York Philharmonic Alexander As part of the Jazz European Tour The New York Credit Suisse Classics & Recitals series, the Philharmonic embarked on their Herbie Hancock Group will be per final European tour under the Round-the-World forming on Sunday, November 2 at baton of their music director Lorin Trips in Music the Victoria Hall in Geneva and the Maazel between August 28 and following evening at the Lucerne September 12. The nine-city, 14- “There are people who think Culture and Convention Center. concert tour took the orchestra of jazz as primitive, third- Herbie Hancock (below) has been to nine different cities, with the BBC forging new pathways in jazz for Proms in London being the first rate music: I feel compelled to over 40 years, whether through his stop. This is the first time in 12 defend the genre against bold crossover concepts, develop years that the Philharmonic has per them,” explains jazz saxophon ed with Miles Davis, or as a pia- formed at the BBC Proms. The ist Jan Garbarek, who play- nist in his own style. His sensitive A New Season Underway at tour’s first two concerts were held ed at the Credit Suisse homage to Joni Mitchell is proof of the Bolshoi The Bolshoi The at the Royal Albert Hall, with the sponsored Live at Sunset fes Hancock’s unending creativity atre has just returned to its home world premiere of the American tival in July and also toured and curiosity, which have enabled stage in Moscow, after having composer Steven Stucky’s “Rhap Switzerland last winter as part him to create the album – The Joni been on a two-month-long sum sodies for Orchestra” on the pro of the All Blues Jazz Classics Letters – that has finally brought the mer tour. This year’s tour took the gram. This work is a commission & Recitals program. “The fact orchestra and opera company to made by the New York Philharmo is that all music is primitive Greece, Germany, the Nether nics and the BBC Proms. The Phil lands and France, with the six per harmonic also performed at the when taken back to its ori- formances of Pyotr Tchaikovsky’s Rheingau Music Festival in Frank gins, because it comes from Eugene Onegin at the Opera de furt, in Hamburg as part of the folk music which is necessari- Paris as one of the summer tour’s Schleswig-Holstein Music Festival, ly simple and natural.” Credit highlights. The Bolshoi Theatre’s and at the Lucerne Festival in Swit Suisse’s cultural commitment 233rd season began on Septem zerland; and later in Essen, Paris, has included jazz alongside ber 4 with its exclusive version of Stuttgart, and Baden-Baden; classical music and the visual Modest Mussorgsky’s “Boris and at the Beethovenfest in Bonn. arts for around 15 years. The Godunov.” Five new productions The tour repertoire also included varied and high-quality Swiss will be staged during the 2008/ works by Bruckner, Mendels- jazz scene is supported most 2009 season, with the first pre sohn, Ravel, Stravinsky and Tchai notably at the Schaffhausen miere, “The Legend of the Invisible kovsky. The tour markets the Jazz Festival. The atmosphere Grammy for Album of the Year back City of Kitezh” by Nikolai Rimsky- Philharmonic’s first European tour to the genre of jazz. Another high- Korsakov, taking place on October with Credit Suisse as its global at the Stanser Musiktage, caliber pianist coming to Switzer 10. This opera is somewhat the sponsor. de/mb on the other hand, is far more land is Monty Alexander, who will “Russian Parsifal,” according to the www.nyphil.org/europe2008 about building bridges to be playing on Friday, November 21 Bolshoi Theatre’s head of Artistic world music. With free entry, in Geneva and on Wednesday, No Planning Programming, Vadim the Estival Jazz Lugano is

vember 26 in Lucerne. His latest Zhuravlev. The other opera pre also about making jazz more work, entitled Jazz & Roots, has led miere is Guiseppe Verdi’s “Otello.”

Chris Lee popular, while Live at Sunset

| the Jamaican performer to supple The three new productions will be provides a high-profile setting ment his trio with three roots reggae performed by the Bolshoi’s ballet in which jazz can be billed musicians from his homeland. And company: “Paquita Grand Pas” in combination with classical it’s not just fans of this cool custom by Marius Petipa, the modern bal music, but most of all with er whose pulses will be racing at the let “Russian Seasons” by Alexey thought of this new project. Con Ratmansky, and “Coppélia” by rock and pop. Since 1996 certs in 2008: Count Basie Orches Delibes-Petipa. de the All Blues Jazz Classics & tra (Friday, October 31, Kultur- Recitals program of concerts Damir Yusupiov,The BolshoiTheatre

has given the likes of Herbie

| Casino concert hall, Berne), Michel

Camilo Trio (Thursday, November Hancock and Monty Alexand- 20, L’Heure bleue, La Chaux-de- er the chance to make their Fonds; Friday, November 21, Stadt- music heard once again. In casino concert hall, Basel), Sonny early 2009, it will be the turn Rollins (Tuesday, December 9, of Al Di Meola, Rebekka Bak- Tonhalle concert hall, Zurich). schi ken and Biréli Lagrène. schi

Photos: Rafa Rivas, AFP Photo www.allblues.ch

Credit Suisse Bulletin 4/08 50 Credit Suisse Sponsorship

Salzburg Festival 2008 For Art Is Stronger Than Death

The motto of this year’s Salzburg Festival was “For Love Is as Strong as Death.” Credit Suisse has been the main sponsor of this international cultural event since 2006, and has backed the Salzburg Foundation since 2002.

“We shall pass, love will pass, death takes all,” “Caldera” by the British artist Anthony Cragg, (who, incidentally, also demonstrated his ath noted German author Elke Heidenreich, a volcanic crater in the form of a 5-meter high, letic prowess in the traditional football match who spoke at the festival. “Stories, pictures bronze sculpture on the Makartplatz. between the Vienna Philharmonic and the and music will endure. They will tell of us for Mozarteum Salzburg). Machaidze, of course, centuries, for millennia to come. Though they Everyman’s New Paramour Literature is was stepping in for pregnant soprano Anna may change over time, they will endure. For also an integral part of the Salzburg expe Netrebko, whose career really picked up 1,001 years and beyond, it is art that will rience. The role of Paramour (“Buhlschaft”) speed with her 2002 performance as Donna save humanity.” in “Everyman” by Hugo von Hofmannsthal, Anna in Mozart’s “Don Giovanni.” The 2008 Salzburg Festival, which encom the man who founded the festival, is now Netrebko also sang in this year’s extreme passed 202 events at 14 venues in 36 days, played by Sophie von Kessel. A diplomat’s ly successful new production by Claus Guth, ended on August 31. But the show goes on. daughter born in Mexico and raised in differ receiving storms of applause for her perfor Maybe some of the many people from more ent countries, she perfectly embodies the mance alongside fiancé Erwin Schrott, who than 70 countries who attended would also international flavor of a festival that hosts played Leporello. It was hard to believe that have something to say about the saving of performers from 27 countries. She is al- the Uruguayan baritone was singing at the humankind and their own experience of being ready the fourth actress to play the role of Salzburg Festival for the very first time. human. As they return to their busy lives, they Paramour opposite Peter Simonischek. Love Those who missed Christopher Maltman will draw on the images they imbibed, images is indeed ephemeral. as Don Giovanni can rest assured that this that are especially precious because each Love and death, ephemerality and per won’t be his last gripping portrayal of mor person paints their very own picture. manence were of course also the themes of tally wounded humanity at Salzburg. the operas, so dear to the heart of Credit CreditSuisse

Modern Sculptures in the Old Town But Suisse. As head of Credit Suisse Central Promoting Young Talent Many produc |

Salzburg also offers shared experiences: the Europe (which also includes the Czech tions and performers deserve special Wildbild

experience of strolling through the old town, Republic), Michael M. Rüdiger invited guests mention. “Othello,” “The Magic Flute,” “Duke |

feeling part of the crowd, chatting about this to the House for Mozart for a “summer Bluebeard’s Castle” – there is simply no or that event, or being lost in contemplation encounter” before the premiere of Antonin space here to list all the great performances. of the Salzburg Foundation’s artworks. And Dvořák’s “Rusalka.” But we have to mention the success of GunterLepkowski

| of course there are also other things besides Given the controversial staging of the op Markus Hinterhäuser’s “Continent” project, a the festival itself that are part of the Salzburg era, in a kind of underwater brothel, the nu program dedicated to the Italian composer experience: visiting Mario Merz’s igloo or the merous media representatives who attended Salvatore Sciarrino. Next year’s “Continent” A.T. Schaefer A.T.

| “Numbers in the Woods” up on the Mönchs appreciated the background information pro project will be devoted to the late French berg mountain. vided by the opera’s directors, Jossi Wieler composer Edgard Varèse. Not everyone manages to find this, but and Sergio Morabito. Festival president Helga Rabl-Stadler there’s certainly no avoiding Anselm Kiefer’s There were nothing but compliments for and artistic director Jürgen Flimm have MonikaRittershaus

| “A.E.I.O.U” or Stephan Balkenhols “Sphaera.” the Cleveland Orchestra under the baton of made a major effort to promote young talent And who would want to? The vision, kindled Franz Welser-Möst. Camilla Nylund as the and attract youthful audiences to the festival. in 2002, of making the World Heritage site water nymph Rusalka and Emily Magee as the One innovation was for instance the per of Salzburg a groundbreaking work of art in foreign princess earned the highest praise, formance of a children’s choir at the Salz itself, is increasingly taking shape. and the reception accorded to Piotr Beczala burg Festival. Rabl-Stadler summed up this It’s a fascinating process, even if almost as the prince was – deservedly – nothing new Young Singers Project and the need all the works are as scandalous as they are short of exuberant. The same can be said for for developing young talent in a nutshell: thought-provoking – the Lüpertz Mozart the young Georgian singer Nino Machaidze “Salzburg not only brings in stars, it makes

statue is a good example. A new addition is as Juliette alongside Roméo Rolando Villazón them.” Andreas Schiendorfer Photos:Clärchen Baus-Mattar Matthias& Baus

Credit Suisse Bulletin 4/08 Credit Suisse Sponsorship 51

1 2

3 4

5 6 7

8 9

1 “Roméo et Juliette” was one of the highlights of the Salzburg Festival. 2 Juliette (Nino Machaidze) won the audience’s hearts. 3 + 4 You had to be there: Christopher Maltman as Don Giovanni. 5 Prince Piotr Beczala with water nymph Camilla Nylund as Rusalka in the opera by Antonin Dvořák. 6 The “Rusalka” staging was controversial. 7 Continent Sciarrino – a successful project. Anna Radziejewska as Malaspina in “Luci mie traditrici.” 8 Just before the festival opened, the Salzburg Foundation officiallyunveiled the sculpture “Caldera” by Tony Cragg. 9 Informative discussions at Credit Suisse’s “Summer Encounter 2008” (left to right): “Rusalka” directors Sergio Morabito and Jossi Wieler, host Wolfgang Herles, the editor-in-chief of Aspekte and artistic director Jürgen Flimm.

Credit Suisse Bulletin 4/08 52 Credit Suisse Sponsorship

Orchestre de la Suisse Romande Hilary Hahn Focuses on Tchaikovsky During the 2008 Fall Season

The Grammy-Award-winning American violinist Hilary Hahn will focus on Tchaikovsky’s violin concert in D Major during the 2008 fall season. In an interview, the 28-year-old musician explains what makes this work so special and how each performance varies. She also speaks of how she feels going on stage and about her future CDs.

The 2008 fall season kicked off on Septem- “It is a different experience every time. Even excitement. I play better when my adrenaline ber 4 for Hilary Hahn. That evening, she per- in the same city, in the same hall, with the is pumping. It’s also more fun. To me, even formed Ludwig Spohr’s violin concerto No 8 same orchestra and conductor, performanc- the scariest performing situation is relatively in A Minor Opus 47 and Pyotr Tchaikovsky’s es vary in unexpected ways from night to harmless. Unlike in sky-diving, if something violin concerto in D Major, Opus 35 together night. Part of this is the audience: Every com- goes wrong onstage, no one risks a life. May- with l’Orchestre de la Suisse Romande bination of people conveys a different energy be just a little embarrassment and a laugh – (OSR). Some 20 other concerts across Eu- and personality to the stage. nothing too different from walking down rope, North America and Asia follow during The other part of it is the people onstage. the street and bumping into a lamppost,” the fall, each featuring Tchaikovsky’s violin When you think of how different any individ- Hahn notes. concerto. ual person feels from day to day and magnify That said she tries to be as prepared as “Until last year, I had not performed it that by at least 50 (because an orchestra possible ahead of every concert. “Doing a since I was a student – more than a decade rarely has less than fifty people onstage at bad job and knowing I could have done much before! It has been wonderful for me to any time), you can only begin to imagine how better is the worst feeling in the world. Every rediscover the Tchaikovsky (concert) as if it a collaborative, spontaneous interpretation human being makes mistakes, and mistakes were a new piece. It has long lines and an can develop in an instant,” Hahn explains. can be learned from. But neglectfulness is a overarching structure that are both classic waste of everyone’s time.” and romantic in nature,” says the violinist. Absence of Stage Fright Hahn, who has “This piece has been played by so many peo- been playing the violin since the age of 3, Brain as Her Insurance Hahn has been ple in so many different ways. Most interpre- now practices an average of four hours a playing on a Jean-Baptiste Vuillaume violin tations I’ve heard have been hyper-expres- day – in addition to rehearsing and perform- from 1864 since the age of 14. “It’s really the sive. I try to keep the emotion at the front ing. “It depends on my daily schedule, how ideal musical companion for me. It has a while pacing its development throughout the much energy I have, and what is coming up. warm tone that lends itself well to both solo entire piece, so that the dramatic feelings Of course, if I have to learn a lot of new piec- and chamber music, to both recording under don’t peak too soon or lose intensity as the es, that adds a couple of extra hours of prac- a microphone and in huge halls, and to all performance progresses.” tice each day. I never want to play more than sorts of repertoire from all eras,” she explains. She will not only perform the work with six hours in a day; that’s hard on the body and The Vuillaume is insured, while her fingers the OSR, but also with the Bergen Philhar- difficult to maintain for very long,” Hahn under aren’t. “I think the money would be the least monic Orchestra, the Vancouver Symphony lines. She has never had stage fright. “Going of my worries if I suddenly couldn’t play. I do Orchestra and the San Francisco Symphony. onstage, I’m glad if I feel that little edge of have a lot of other interests, so I’m sure I’d find something else I’d like fairly quickly and be off and running in that new direction. In a business context, I know it means nothing – Credit Suisse Concert Series With OSR but the way I see it, my brain is my insurance,” Hilary Hahn performed as soloist together with l’Orchestre de la Suisse Hahn says. GrégoryMaillot

Romande (OSR) at Geneva’s Victoria Hall on September 4. This concert Meanwhile she is currently recording two |

was the fourth in a series of five concerts exclusively sponsored by CDs; Bach arias with voice and violin solos, from the cantatas with Matthias Goerne and Credit Suisse, within the framework of the orchestra’s 90th anniversary. Christine Schaefer and the Tchaikovsky con- Bettmann,Corbis

| The Credit Suisse Concert series each time features a renowned young certo with a newly commissioned concerto artist. The violinist Arabella Steinbacher will be the soloist during the by Jennifer Higdon. Higdon taught Hahn fifth and last concert of the series, to be held on December 5 in Geneva. 20th-century music history. “My attitude toward newer music was greatly influenced Credit Suisse has been the sponsor of the OSR since 1991.

by what she taught,” Hahn underlines. < Photos:Mathias Bothor

Credit Suisse Bulletin 4/08 Credit Suisse Sponsorship 53

Above Hilary Hahn has played more than 1,100 concerts and worked with more than 160 conductors, since her first major concert appearance with orchestra in 1991. Below left Pyotr Tchaikovsky’s violin concerto is considered to be one of the technically most difficult works written for violin. Below right L’Orchestre de la Suisse Romande accompanied Hilary Hahn during her only Swiss concert this fall season.

Credit Suisse Bulletin 4/08 54 Credit Suisse Sponsorship

The 15th Echo Classic Prizes Masthead

Accolades for the Basel Publisher Credit Suisse Chamber Orchestra P.O. Box 2 CH-8070 Zurich On October 19, the German Phono Academy will award the 2008 Echo Classic Telephone +41 44 333 11 11 Fax +41 44 332 55 55 Prizes. The prizewinners include the Basel Chamber Orchestra, which is Editors sponsored by Credit Suisse, and Cecilia Bartoli with the Orchestra La Scintilla. Daniel Huber (dhu) (editor-in-chief), Marcus Balogh (ba), Michèle Bodmer (mb) (head international edition), Dorothée Enskog (de), Regula Gerber (rg), Mandana Razavi (mar), Andreas Schiendorfer (schi)

E-mail [email protected]

“Composers such as Beethoven were people under David Zinman (awarded the Prize of Contributors to this issue Ute Eberle, Eric Güller, Anja Hochberg, Ian Lewis, like you and me. In their music, they tried to the German Record Critics in 1999). The Sarah Lukashok, Claude Maurer, Anja Papp, describe the world in a metaphysical way – in Echo Classic Prizes have been awarded Ingo Petz, Alexandra Pilton, Matthew Rees, Rob Scott, Sebastian Schiendorfer (seb), Eliane Tanner, a way that you can’t with words,” explains since 1994 in 21 categories. Thanks to the Andreas Thomann (ath)

conductor Giovanni Antonini. This year, he live broadcast of the ceremony on the Ger- Internet included Beethoven’s Symphony No. 6 (the man TV channel ZDF (“Echo of the Stars”), www.credit-suisse.com/infocus “Pastoral”) in his touring program with the the musicians and their recordings are Marketing Basel Chamber Orchestra, and in July they brought before a public of millions. Veronica Zimnic (vz) recorded the Fifth Symphony for CD at Proofreading text control, Zurich the Lucerne Culture and Convention Center, Bartoli’s Tribute to Malibran The most Translations Switzerland. By joining the long list of re- attention is always given to the prizes for Credit Suisse Language Services nowned orchestras that have recorded the “Singer of the Year” (male and female). In Design/Layout complete symphonies of Beethoven, the Ba- 2008, the honor will be given to Philippe www.arnold.inhaltundform.com: Arno Bandli, Monika Häﬂ iger, sel orchestra is showing a high degree of Jaroussky and Cecilia Bartoli. This spirited Petra Siegenthaler, Petra Feusi (project management) self-assurance. Indeed, Antonini and the or- Italian soprano offered a tribute to Maria Advertising Pauletto GmbH, Miriam Dudek, Kleinstrasse 16, chestra understand that they have to offer a Malibran, who was born 200 years ago. CH-8008 Zurich, tel. and fax +41 43 268 54 56 completely individual interpretation of these Bartoli’s CD thrilled not only the public, but Certiﬁ ed WEMF circulation in 2007 well-known symphonies. And this they have also the high-powered Echo jury. Cecilia 145,733

achieved on the highest artistic level, as is Bartoli’s successful tour with the Basel ISSN registration now proven by the Echo Classic Prize in the Chamber Orchestra will close on November ISSN 1423-1360 category “Ensemble/Orchestra of the Year” 22 with a concert in Abu Dhabi. Her prizewin- Printing NZZ Fretz AG (“Symphony Orchestra”) for their recording ning recording, however, was made with the of the symphonies Nos. 3 (the “Eroica”) and Orchestra La Scintilla, the ensemble derived Editorial committee René Buholzer (Head of Public Policy), Monika Dunant (Head 4. Swiss classical music fans will delight from the Zurich Opera Orchestra that spe- of Communications Private Banking), Urs P. Gauch (Head of in comparing them with the highly popular cializes in old music. Corporate Clients Switzerland – Large Corporates), Fritz Gutbrodt (Head of Chairman’s Ofﬁ ce), Angelika Jahn (Invest- recordings by the Zurich Tonhalle Orchestra ment Services & Products), Hubert Lienhard (Asset Manage- Salzburg Opera Performance As one of ment Distribution Services), Andrés Luther (Head of Group Communications), Charles Naylor (Head of Corporate Commu- the main sponsors of the Salzburg Festival, nications), Fritz Stahel (Credit Suisse Economic Research), Credit Suisse has even more reason to be Christian Vonesch (Head of Private & Business Banking Aarau) pleased with this year’s Echo Classic Prizes. 114th year of publication (4 issues per year in English), (5 issues per year in German, The “Music DVD Production of the Year” was French, and Italian). awarded to the opera “Le Nozze di Figaro” Reprinting of texts permitted with acknowledgement of source (Credit Suisse Bulletin). as recorded at the Salzburg Festival in Changes of address 2006. Nikolaus Harnoncourt conducted the Please send notiﬁ cation in writing, accompanied by the original Vienna Philharmonic in this production, which envelope, to your Credit Suisse branch or to: Credit Suisse, ULAZ 12, P.O. Box 100, CH-8070 Zurich. featured the singing and acting talents of Anna Netrebko, Dorothea Röschmann, Chris- This publication is for information purposes only. It does not tine Schäfer and Ildebrando D’Arcangelo. constitute an offer and is not a recommendation by Credit Suisse The Echo Classic Prize for the “Song to buy or sell securities. Indications of past performance are no guarantee of a positive performance in the future. The Recording of the Year” goes to Christianne analysis and conclusions contained in this publication were Stotijn, for the masterly interpretation of “Die established by Credit Suisse and may already have been used for transactions by Credit Suisse Group companies prior to being Weise von Liebe und Tod des Cornets Chris- made known to clients of Credit Suisse. The opinions expressed toph Rilke” by Frank Martin, with the Orchestra in this document are those of Credit Suisse at the time The Basel Chamber Orchestra has developed of going to press. (We reserve the right to make amendments.) into one of the top orchestras in Europe of the Musikkollegium Winterthur under their Credit Suisse is a Swiss bank.

in recent years. conductor Jac van Steen. Andreas Schiendorfer kammerorchesterbasel Photos: | Macdonald Rogan

Credit Suisse Bulletin 4/08 Credit Suisse in Society 55

In Society Credit Suisse is convinced that corporate responsibility toward the environment and society at large is a key factor for economic success.

Overview 56_Full Throttle for Charity 58_Addressing Climate Change 60_In Brief 61_Supporting Cancer Awareness

Each year, the Credit Suisse London office selects a Charity of the Year and organizes various employee-led campaigns to raise money for it. This year, it chose The Place2Be, which supports troubled children in schools giving them the means to cope with their problems. This summer, a group of motorcycle enthusiasts raised over 80,000 dollars for covering a 1,300-kilometer route, beginning near the bank’s London headquarters.

Credit Suisse Bulletin 4/08 56 Credit Suisse in Society Charity Event At Full Throttle For Charity Take a group of motorcycle enthusiasts from Credit Suisse, devise a 1,300 -kilometer route covering a large stretch of England over one weekend, then add torrential rain and a few mishaps and you have the recipe for Moto2Be, an event held in July to raise funds for the bank’s Charity of the Year.

Text: Ian Lewis

Sponsorship for the riders raised more than they can talk, work and play to explore and hotel at 5 a. m. on Saturday, but he still man- 80,000 dollars for the bank’s Charity of the cope with their problems in a way which is aged to shrug off adversity and leave with Year, The Place2Be, bringing the amount often not open to them elsewhere in their the rest of the team just four hours later. raised for the charity by Credit Suisse em- lives. “What was striking to us was how The second day saw the team reach the ployees so far this year to around 348,000 much the kids wanted to explain to us that most northerly point of their route, traveling dollars. “The rain made the trip something they loved The Place2Be and how much it up to Durham, on a route chosen to pass of an endurance test, but the team had a helps them,” says Kelly. through other areas where The Place2Be fabulous time and arrived back in London The children at Abbotsweld and Milwards is active in schools, before heading west grinning from ear to ear,” says Sally Kelly, primary schools were clearly thrilled by the across country to the scenic Lake District, a director in London, who took part in the Credit Suisse team’s visit, which featured a where they spent Saturday night. The Sun- ride from July 4 to 6. “We all agreed it was parade of bikes around the playgrounds and day stage should have been a fairly straight- one of the best team bonding experiences some fancy riding in the sidecars, which forward run back down to London, but the you could possibly have.” were owned and driven by members of the weather intervened to spice up conditions. The buildings around Columbus Court- UK’s only sidecar stunt team. “There was some spirited riding in torrential yard, close to the bank’s London offices in rain,” observes Kelly. Laughing in the Face of Adversity Canary Wharf, echoed with the sound of The poor weather contributed to a low- revving engines, as the posse of motorbikes, After dropping off the two sidecar passen- speed “shunt” involving four bikes in the the two sidecars and a BMW support vehicle gers in Harlow to save them from further Peak District national park, but the team got set out on their journey on Friday morning. discomfort, the Moto2Be team carried on back to London safely. All, that is, except They were spurred on their way by a 14- northwards, mainly along the back roads. for Deneux. His run of bad luck continued, strong choir of Credit Suisse employees Blazing a trail for much of the weekend was when his bike ran into further problems on singing a medley of songs from the film James Leigh-Pemberton, the new Chief the southerly leg of the lengthy journey. He “Grease.” “The choice of musical seems ap- Executive Officer of Credit Suisse in the didn’t get home to Paris until a day after the propriate,” one onlooker observed. UK and an experienced motorcyclist. “James event was over. It is, perhaps, unsurprising refused to use GPS to navigate, preferring that he has suggested that any repeat run- Seeing the Results Firsthand to use maps, and since the people using ning of the event should be held in France The men in the passenger seats of the two GPS got us lost a number of times, his ap- next time round. Ural 750cc Gear-Up sidecars, wearing old- proach was often vindicated,” says Kelly. That may not happen, but a series of fur- style helmets and goggles, looked some- The team ended the first day at Retford ther events are planned this year to raise what apprehensive as they left. They were in the English Midlands. But, while most of more money for The Place2Be. “Moto2Be Managing Directors Sergio Di-Lieto and Ian them tucked into their evening meals and was a fantastic event and a further terrific Marcus, who had been nominated to take prepared for a good night’s sleep, another example of the tremendous commitment by part in the challenge through a vote on the team member was not so lucky. Philippe Credit Suisse to the work of The Place2Be,” Credit Suisse intranet, based on the size of Deneux, a managing director based in Credit says Benita Refson, Chief Executive of The charity pledges from employees. Suisse’s Paris office, had been unable to Place2Be. She said that, thanks to Moto- The team’s first stops were the most join the team for the start of the challenge 2Be and other Charity of the Year events, important of their journey, as they dropped in London, due to work commitments. In- The Place2Be could now look forward to in at two schools where The Place2Be is stead he rode directly from Paris to Retford supporting many more children, parents active in Harlow, some 40 kilometers north via the Channel Tunnel rail link to meet and teachers in London. < of London. The charity helps troubled chil- the rest of the team at the end of day one. dren at schools around the UK, through ses- Unfortunately, a stop for a repair to an elec- More information is available at:

sions with trained counselors, during which trical fault meant he finally made it to the http://www.theplace2be.org.uk Macdonald Rogan Photo:

Credit Suisse Bulletin 4/08 Credit Suisse in Society Charity Event 57

Credit Suisse staff about to set off on a sponsored motorcycle ride from Canary Wharf in London to Durham in northeast England. This will raise money for the bank’s Charity of the Year, the Place2Be, which provides counseling in schools.

Credit Suisse Bulletin 4/08 58 Credit Suisse in Society Climate Concerns International Banks Address Climate Concerns Climate change is one of the greatest challenges facing the planet. But what is the industry doing to address these concerns? John Tobin, head of Sustainability Affairs at Credit Suisse, explains how financial institutions are tackling the issue and how they are making a positive contribution through their operations and business activities.

Text: Dorothée Enskog

Bulletin: What is the current trend in the Credit Suisse was the first bank that set Another recent initiative is the Carbon financial industry when it comes to up its own carbon trading desk in the US. Principles, adopted by six leading banks. reducing greenhouse gas emissions? Also, a variety of indices tracking alternative Could you explain what these are? John Tobin: The industry has taken strong energy firms are being developed. The Carbon Principles represent an attempt measures over the last few years to reduce Haven’t voluntary agreements by the leading banks in the US power sector

the CO2 emissions associated with its also been adopted by the industry ? to manage the risks associated with new operations and its business activities. Inter- The Equator Principles, adopted in 2003, financings in the sector. Given there is no

nally many banks have greatly improved are a good example. They address infra- regulatory framework applicable to CO2 their operational energy efficiency, for structure financing and the potential en emissions at a federal level in the US today, instance by buying more green energy or by vironmental and social consequences of and that a cap-and-trade system for carbon reducing the number of computer servers financing, including projects such as oil emissions is likely to be adopted by the new used. Others are cutting down on air travel refineries and mining operations. Over 90 US Congress, these regulatory risks need and relying more on video conferencing. Cer- percent of the project finance industry has to be addressed. At the heart of the Carbon tain leading banks, including Credit Suisse, adopted these principles. Principles is an enhanced due diligence are becoming carbon neutral by offsetting The objective was to agree on a strong process that requires the adopting banks to whatever emissions they do produce by buy- set of standards of environmental and social evaluate and discuss these risks with the ing carbon credits. Credit Suisse pioneered protection that would be required to be met projects sponsors. Credit Suisse is the only this approach in 2006 by becoming carbon or exceeded before banks agree to finance European bank that is part of this initiative. neutral in Switzerland, and we plan to be- a project. This is to prevent a race to the Are there other voluntary agreements come carbon neutral globally in 2009. bottom among some banks and to ensure in the pipeline? But financial institutions are not only act- that appropriate standards of environmental Various additional measures are currently ing in their own backyards. They are also and social protection are applied to projects being contemplated by the industry. If im putting in place policies and pursuing busi- located in jurisdictions where they may not plemented, some could have substantial ness opportunities that have the effect of be the highest. effects in terms of the commitments that cutting greenhouse gas emissions. Some Could you tell us more about The banks would make to increase the efficien- banks for example will not finance projects Gleneagles Dialogue on Climate Change? cy of their own operations and how they that result in substantial tropical defores About 100 chief executives of companies would conduct their business. tation. The financing of investments in clean representing over 10 percent of the total Such voluntary agreements are all technologies and alternative energy sources market capitalization of all publicly traded very well. But are they really followed? such as solar and wind power is also becom- firms in the world, including Credit Suisse’s Reputation is crucial for financial institu- ing more widespread. CEO, delivered a statement to the G8 lead- tions. If they agree to a set of commitments Aren’t climate-related financial ers on the occasion of their June meeting. such as these, I would expect them to abide products being developed as well? It called on them to address climate change by them, even if they are not legally binding. Some banks offer “green mortgages,” where head on, and presented them a detailed set Financial institutions have come to realize better interest rates are offered to clients of business guidance on the design of the that they can be effective, positive agents that intend to build or buy energy-efficient climate policy framework to succeed the for change and that they are able to make real estate. Another example is carbon trad- Kyoto Protocol. The statement offered the a measurable contribution toward the ing, a business that is growing exponen‑ G8 leaders a new vision of how to develop a health of the planet and its climate, while at tially. The likely adoption of a cap-and-trade future policy framework that would involve the same time being successful financially. system in the US during the new Congress the private sector more closely in the design Early indications are that they are taking

may lead to a huge increase in this market. and implementation of the framework. these opportunities seriously. < Eva-Maria Photo: Züllig

Credit Suisse Bulletin 4/08 Credit Suisse in Society Climate Concerns 59

Credit Suisse Cares for Climate Credit Suisse at an early stage recognized the seriousness of climate change and the need to address it. One of the bank’s initiatives, “Credit Suisse Cares for Climate,” was established in 2007 with the aim of achieving global carbon neutrality by 2009.

The question is not whether we should act or why we should tackle climate change, but how. Governments and individuals have an important role to play when it comes to dealing with this pressing issue, but so do businesses. This is why Credit Suisse supports various climate change initiatives and projects on a number of levels. In 2006, Credit Suisse was the first major company in Switzerland to become carbon neutral for all its Swiss operations. This goal should be achieved globally in 2009. The commitment to greenhouse gas neutrality and to measures aimed at increasing energy efficiency has reduced the bank’s net global emissions by about 20 percent. By becoming car- “The industry has taken strong measures over the last few years to reduce the CO2 emissions associated with its operations and its business activities,” says John Tobin, bon neutral worldwide, approximately 287,000 head of Public Policy-Sustainability Affairs at Credit Suisse. “Various additional tons of CO2 will be saved or offset every year. measures are currently being contemplated by the financial industry.” But how does Credit Suisse cut its carbon footprint? Much emphasis is put on ensuring that new electricity contracts focus on renewable energy sources such as wind power. But it’s not enough to substitute energy types. Given that 64 percent of the bank’s emissions stem from energy consumption used to run its offices, it is crucial to install energy-efficient technologies on its premises. In Switzerland, Credit Suisse adheres to Minergie low-energy consumption standards when building new offices or renovating older ones. On the IT front, 12 percent of the bank’s total servers were disconnected in 2007 thanks to technological

optimization. Not all CO2 emissions can be neutralized through energy optimization efforts and renewable electricity. The remainder is compensated through the purchase of emission reduction certificates. Not only operational measures are being taken. An awareness-raising campaign for employees will be undertaken, providing them with information on how each one can contribute to reducing our collective carbon footprint, both at work and at home. Credit Suisse is also an active participant in the global climate change debate, for instance through its participation in industry-wide initiatives. de

Credit Suisse Bulletin 4/08 60 Credit Suisse in Society News

News in Brief

New York – Utopia for Cyclists Microloans in Vietnam How can New York reduce its pollution? The Dariu Foundation’s “Investment in By motivating as many of its eight million in Education” project will make a decisive con habitants as possible to get on their bikes. tribution to overcoming global poverty and “We want to double the number of cycle has therefore received over 150,000 dollars commuters,” declared Janette Sadik-Khan, to date from the charitable foundation Ac commissioner of the New York City Depart centus. As the school system in rural areas ment of Transportation. “Cycling routes and of Vietnam is underdeveloped, and poverty bike parking facilities are helping to make the bicycle part of New widespread, many children from deprived families work to help their York’s urban infrastructure.” Paul Steely White, executive director parents instead of going to school. This is where the Dariu project of Transportation Alternatives, stresses the role companies play in comes in: Vietnamese women are eligible for a microfinance fund promoting the bike: “Employers hold many of the cards when it ing to run their own small business only if they can prove that their comes to making New York City a bike-friendly place.” children go to school. So that this does not become an unafford These remarks were made at the ceremony in July to present able additional strain on the family’s finances, the child receives Credit Suisse with the “Best Company that Encourages Employ a grant in the form of school supplies, school uniform, a bicycle, ees to Bike to Work” award. Credit Suisse office buildings in food and, if necessary, eyeglasses. The principle also applies in Manhattan are easily accessible by bike, and the bank now provides reverse: Only those who are also part of the microfinance program its sporty staff with secure bike parking areas that only registered get a grant. The project has been a phenomenal success so far. individuals can access. What’s more, they can use the showers and While around 2,000 families took part in 2007, numbers should be lockers at a nearby fitness club at special rates. In Switzerland, as high as 10,000 as early as next year. And the repayment rate is Credit Suisse was involved in the “bike to work” campaign in which an impressive 99 percent. schi no fewer than 950 employees took part. Combined, they rode some 145,000 environmentally friendly kilometers to and from work on A New Home for the Baboons 12,000 working days. Added to the distance cycled by employees Some of the residents at the Zurich Zoo of the other 872 companies involved, and 1,291 tonnes of CO2 were will be moving to a new home at the end saved over the month. schi of October. The geladas (gelada baboons), Nubian ibex, blue-winged geese and the Airtricity Deal Rewarded dassies, or rock hyrax, are sure to feel at The sale of the Irish wind energy developer and utility Airtricity has home in the “African Mountains” enclosure. been named “Renewable Energy Transaction of the Year” by the The Basel Zoo is also thinking big: Its “World magazine Environmental Finance. Credit Suisse acted as advisor of the Great Apes” project will enter a crucial phase in the spring to Airtricity, guiding it through the two-part sale process to E.ON of 2009. Both zoo projects are supported by the Credit Suisse and Scottish & Southern Energy. It’s the wind power sector’s Jubilee Fund. mar largest merger and acquisition deal ever. de Gold and Silver for Credit Suisse Credit Suisse Award for Best Teaching As Credit Suisse believes that corporate responsibility toward the In 2006, the Jubilee Foundation launched the Credit Suisse Award environment and society at large is a key factor in business success, for Best Teaching in close collaboration with Switzerland’s uni- the bank pursues a policy of prudent risk assessment, responsibil versities, institutes of technology and universities of applied sci ity and sustainability with regard to its business activities. In its new ences. With this annual prize, Credit Suisse aims to promote the Corporate Citizenship Report, Credit Suisse presents its programs quality of tertiary education and strengthen Switzerland as a center in this important field to interested parties, both internally and of excellence for research and knowledge. So far this year, the externally. The report was recently awarded the gold medal in the Best Teaching Award has been presented to professor Filippo “Social and Public Responsibility Reports: Banks” category at the Carlo Wezel (University of the Ticino), Marc-Joachim Wasmer well-regarded MerComm Annual Report Competition in New York. (University of Zurich) and professor Rolf Peter Sieferle (University At the same competition, Credit Suisse also received a silver medal of St. Gallen). The prize honors lecturers who encourage and for its annual report, which summarizes the main issues and events support their students. Responsibility for the selection and nomina of the 2007 financial year. The two reports can be ordered online tion rests with the higher education institutions themselves. mar at www.credit-suisse.com, or using the Bulletin order form. schi Photos: Pierre Desrosiers, Bruno Morandi, Paul Souders, Getty Images

Credit Suisse Bulletin 4/08 Credit Suisse in Society Cancer Prevention 61 Cancer Info Initiative Prostate cancer is almost as common among men as breast cancer is among women. The Insurance Service of Credit Suisse Group (Switzerland) is supporting the information campaign of the Prostate Cancer Research Foundation to raise public awareness.

Text: Andreas Schiendorfer

The health of its employees is an issue that tate,” Bracher says. “That is more than dou- age, or genetic predispositions, are of course Credit Suisse takes very seriously and there- ble the number of lung cancer cases, al- something that one can do very little about. fore it supports various campaigns and ac- though the latter is much more frequently However, there are ways of reducing the risk. tivities designed to improve the well-being fatal.” “By exercising regularly, eating healthily and of its staff. This is the background to its sup- Malign prostate cancer develops in four not smoking, every man can do his bit to- port of the Swiss Prostate Cancer Research stages, although it can be cured relatively ward staying healthy longer and reducing Foundation, which aims to provide the pub- easily in the first two of these. “The problem prostate problems,” stresses Bacher. lic with valuable information in order to raise is that patients recognize the illness too late, And Recker adds that Mediterranean and awareness of prostate cancer. because prostate cancer does not cause Asian food are particularly helpful in pre any pain in the early stages,” says Profes- venting the illness. As there are significant- 15 Men Diagnosed Every Day sor Franz Recker, chairman of the Prostate ly fewer cases of prostate cancer in the The first anatomical description of the pros- Cancer Research Foundation. southern hemisphere, it is assumed that tate dates back to 300 BC and was written “That’s why preventive examinations in sunshine – and the resulting formation of by Herophilos of Chalcedon. He gave it the form of a simple blood test are of vital vitamin D – are also good for the prostate. the Greek name “prostatēs,” which trans- importance. Ideally, screening should take Professionals to Meet Up lates as “something that stands in front.” place every year from the age of 45. The Rather inappropriately, therefore, prostate truth is, unfortunately, that examinations On November 8, 2008, the Dolder Grand cancer is a topic that tends to be internalized are made much less frequently,” Recker ex- Hotel in Zurich will host a charity ball for the and is still subject to taboo. plains. Over half of all men aged over 45 in benefit of prostate cancer, to be followed by Every day an average of 15 men in Swit- Switzerland have never undergone a screen- a public event involving a variety of profes- zerland are diagnosed with prostate cancer, ing examination. sional experts on November 18. explains Urs Bracher, managing director of By the way: Do you know what Nelson Regular Exercise Diminishes Risk the Pension Fund of Credit Suisse Group Mandela, Roger Moore and Robert de Niro (Switzerland), to which the Insurance Ser- Various factors increase the likelihood of have in common? You’ve got no idea? They vice is affiliated. “Almost one-third of all suffering from prostate cancer, according all three successfully overcame prostate cancer illnesses among men affect the pros- to the foundation. The risk factors such as cancer. <

How Many Men Undergo Preventative Examinations? The Most Common Cancer “When did you last undergo a preventative prostate cancer examination?” Types Among Men Source: Swiss Federal Statistics Office, 2002 Health Questionnaire Source: Swiss Association of Cancer Registries, www.vskr.ch, period 2001–2003

In the past More than 12 months 12 months ago Never 45–54 years old 16.8% 17.7% 65.4% Prostate cancer 2 9.1% 55–64 years old 32.3% 26.6% 41.1% Lung cancer 13.7% 65–74 years old 36.8% 36.0% 2 7.1% Colon cancer 12.2% 75 years old and older 3 0.1% 4 4.1% 25.9% Skin cancer 4.6% Total 23.4% 24.2% 52.4% Bladder cancer 4.6%

Credit Suisse Bulletin 4/08

Leader Mary Ellen Iskenderian 63

Investing in the Empowerment Of Women for the Benefit of Society

Interview: Michèle Bodmer As the president and CEO of Women’s World Banking, the world’s largest network of microfinance institutions and banks, Mary Ellen Iskenderian has seen the dreams of many poor business people – mainly women – realized. By giving women access to working capital, WWB fuels economic and social progress.

Bulletin: What was the catalyst What would you say are the most tions in their respective countries and, in behind your involvement in significant changes that have taken place 2007, 10 of our network members were Women’s World Banking (WWB)? recently at WWB? named to Forbes’ first-ever list of the world’s Mary Ellen Iskenderian: My first encounter WWB’s strength lies in the power of our net- top 50 MFIs. with microfinance was in Eastern Europe, work, so in the last few years, there was a But in the process of strengthening in- where I saw how small amounts of capital concerted focus on creating really strong stitutional capacity, the focus on women be could unleash a person’s entrepreneurial microfinance institutions. WWB was one of came a bit obscured. With me joining WWB spirit and have an extraordinary impact on the first microfinance networks to introduce and developing our three-year strategic families and communities. The capacity for financial operating performance standards plan – we work in three-year blocks – refo- microfinance to provide access to people in order to maintain membership in the net- cusing on women has become the center- who have no way into the formal banking work. This move was supported by our mem- piece of WWB. This is particularly important sector was very compelling. My personal bers – even those who knew that they would due to the increased commercialization in motivation was that WWB presented a real not be able to comply with the standards – microfinance, which has huge positive ben- leadership opportunity. I looked forward to because they knew that improving institu- efits for all microfinance clients, but could the challenge of taking on this global orga- tional capacity would strengthen their orga- have some negative impacts on women. nization that was at a crossroads in an in- nizations, the WWB network and the micro- As the microfinance industry matures, dustry that was changing so dynamically. finance industry as a whole. what measures is WWB taking to And how important was the women’s What was the impact of the decision? ensure that women continue to benefit ? empowerment aspect for you? Initially, this move resulted in several of our Achieving the double bottom line of social I’ve worked on Wall Street and at the World members leaving the network, because they mission and profitability, and ensuring that Bank, which are primarily male-dominated could not comply with the standards. How- women remain at the core of our mission – organizations at the executive level. Running ever, some of those institutions have since as well as that of our network members and an organization that’s mainly female and that rejoined in a stronger position than before. the larger microfinance community – is at also has as a core part of its mission to Now, the microfinance institutions (MFIs) the heart of our strategy. We have launched promote women’s leadership in the financial in the WWB network consistently rank a Women in Leadership program that aims

Photo: John Abbott sector, means a great deal to me. among the top three microfinance institu- to increase women’s leadership and rep- >

Credit Suisse Bulletin 4/08 64 Leader Mary Ellen Iskenderian

resentation at all levels of the industry, in- Are there also drawbacks to this cluding senior and mid-level staff, manage- commercialization? ment and board members of microfinance Commercialism and commercial capital is institutions. We just received a grant from not de facto a problem by any means, and the Nike Foundation to create savings prod- there’s also very clear data that the growth ucts and services geared toward the needs rates we’ve seen in institutions really spike of young women and girls, who are under- after the transformation into regulated finan- represented in the microfinance industry. cial institutions. That is good for women and We are also shifting the role we play with men clients. However, while the trend of our network members. To date, we have commercialization holds great promise for always played the role of trusted advisor, closing the demand gap that currently exists providing a lot of strategic advice to our and expanding microfinance services to a members. What we have begun to explore greater number of people around the world, as the network members make the decision there is a risk of losing a focus on women. to become regulated institutions, is whether This year we conducted a study that WWB can take a more active role in that found that as MFIs formalize, the absolute Mary Ellen Iskenderian is president process by joining them as a shareholder. number of women being served by micro- and CEO of Women’s World Banking Is that a surprising shift in this field? finance is rising (because more people are (WWB), a global network of microfinan If you had come to me five years ago, this being served overall), but the percentage of ce institutions and banks. She leads would never have even been possible in our women being served relative to men is de- the WWB team based in New York, in providing hands-on technical ser‑ network; there was such a strong belief in creasing. There is a need to make sure that vices and strategic support to more the autonomy of the institutions that WWB MFIs, and the microfinance industry as a than 50 microfinance institutions and could only be an advisor. But today our net- whole, maintain a focus on women. banks in 30 countries in Africa, Asia, work is concerned about the loss of mission Another concern is if the institutions re- Eastern Europe, Latin America and focus as they become regulated institutions, main very credit-focused. The industry be- the Middle East. Iskenderian, who and are asking WWB to join them as a gan as microcredit, and that really was the joined WWB in 2006, has more than shareholder of conscience. innovation – the lending of very small loans 20 years of experience in building WWB has been a pioneer in promoting to the poor without collateral. However, if global financial systems throughout the entry of commercial banks into the these organizations remain credit-centric, it the developing world. She has become microfinance sector. Why? will probably result in the lending of larger a leading voice for women’s leader‑ As my farsighted predecessor Nancy Berry amounts to more established businesses, ship and participation in microfinance recognized, bank entry into microfinance which means moving away from very poor and a strong advocate for the greater was inevitable. She believed that we might clients. And that means moving away by partnership between mainstream as well engage them and have them enter default from women clients, as they make investors and the microfinance in this field in a responsible way. up a disproportionate number of the poor. dustry, and for responsible bank entry What are some of the benefits of this How are you dealing with this issue? into this rapidly expanding sector. commercialization? Our proposal to our network is to broaden Prior to WWB, Iskenderian worked for We’ve seen extraordinary amounts of com- their array of products while still offering 17 years in senior management at mercial capital coming into the sector. 2005 small loans. For example, housing improve- the International Finance Corporation, was the first year industry-wide when more ment loans are a great product for some the private-sector arm of the World than half of the microfinance institutions clients because they can become a tremen- Bank, where she held numerous worldwide financed more than half of their dous source of rental income and business- leadership positions. Previously, she operations from commercial sources; since related income for the microborrower. worked for the investment bank, then, commercial funding has continued to Savings is also another very empowering Lehman Brothers. She holds an MBA from the Yale School of Organization increase significantly. So donor funding is product that is particularly of interest to and Management and a Bachelor becoming a thing of the past, which posi- women, and saving toward certain goals, of Science in International Economics tively impacts transparency. such as education, is something that wom- from the Georgetown University The reporting we get from our network en want. This year WWB is also conducting School of Foreign Service. members that have more commercial capi- a pilot on health microinsurance, especially tal than donor capital is without question for childbirth – an overwhelming need for our better, clearer, more concise, and timelier target client population. We want to prove than the reporting from institutions that are that it’s possible to design an insurance still reliant on donor money. We’ve actively product for low-income families that meets been trying to move more of our institutions their needs and is profitable. into the capital markets and into borrowing What is the importance of focusing from commercial banks. The growth rates on supplying loans to women? in the microfinance sector require them to When you lend to a woman entrepreneur,

be able to tap a broad array of sources. the impact on family welfare is far greater Photo: John Abbott

Credit Suisse Bulletin 4/08 Leader Mary Ellen Iskenderian 65

than if you had loaned to a man. Women across the globe tend to invest the proceeds A History of Breaking the Poverty Cycle of their microbusinesses into the education Thanks to the efforts of the Women’s World Banking network, of their children or into the improvement of 21 million low-income people globally have gained a new lease on life. their homes, while men statistically spend more on consumer goods. Women also tend not to vertically grow businesses that would Thirty-three years ago, a group of 10 innova- While WWB also provides financial services require them to be away long from the home tors met at the first United Nations World for men, it has always placed priority on in- or to expand into more distant markets. Conference on Women to discuss the means creasing women’s access to microfinance So the downside of this is that most of for helping women lift themselves out of services. The rationale behind this, accord- the businesses women establish will only poverty. Their concept was to provide small ing to WWB president and CEO Mary Ellen grow horizontally? loans and other financial services to these Iskenderian, is that studies have shown that WWB has spent a considerable amount of low-income entrepreneurs, and in doing so providing a small business credit to one time researching how women’s businesses put a major dent in global poverty. woman can transform the lives of many. “In differ from men’s and why. Growing horizon- A year later, Women’s World Banking societies throughout the world, women are tally is not a downside if it leads to improved (WWB) was founded, with an all female responsible for their families’ well-being,” livelihoods, old age security and more op- board of directors made up of leaders from she explains. “When women earn money, portunities for the next generation. How- a variety of cultures, including Ela Bhatt, they invest their earnings in improving the ever, there has to be an understanding of founder and president of India’s Self Em- lives of their children and families – in better the financial products that will best suit ployed Women’s Association. The mission food, clothing, shelter, health care and edu- horizontal growth, and a recognition of how of the international nonprofit organization, cational opportunities. When women earn, much these home-based businesses in the as conceived at the UN conference, was to everyone benefits.” informal sector are contributing to the over- offer poor women the capital and informa- Though Iskenderian prefers not to roman- all economy of a community and country. tion necessary to build viable businesses. ticize microfinance, the story of one woman What is WWB doing to address this WWB has grown into a global network of she met during her first trip in late 2006 as issue of horizontal growth? more than 50 microfinance institutions head of the WWB made a lasting impres- We know that a woman’s household respon- (MFIs) and banks that offer credit and other sion. While visiting one of the WWB’s oldest sibilities, including child care, don’t go away financial services to 21 million low-income affiliates in Africa, the Kenya Women’s when she gets a loan to start a microbusi- people in 30 countries. Finance Trust, she met Joyce Wafukho. Wa- ness. We are educating our members in The WWB network includes 24 commer- fukho had used all her savings and borrowed recognizing women’s innovation in keeping cial banks and other financial institutions, from the family to set up a very rudimentary businesses around their households that who are members of its Global Network for hardware store in her remote village. She allow them to carry on the rest of their lives; Banking Innovation (GNBI). The members of really wanted to grow her inventory, and she but also on how to address some more in- the GNBI share best practices, innovations could not get a loan from a bank. Eventu- frastructural and institutional concerns. For and knowledge about microfinance intern ally, she found Kenya Women’s Finance example: How can women get greater ac- ally and with the wider banking industry. Trust, got a 70 dollar loan and took basic cess to markets ? How can we work on some Several of these members are helping WWB bookkeeping and financial literacy classes of those other obstacles that might keep develop products beyond traditional lending with the money. them from growing the business? to provide financial services such as savings “Joyce has had seven one-year loans, and What’s WWB’s future? and investment and insurance products. has a fully stocked hardware store, and a The microfinance sector is so dynamic right Small grassroots organizations and wom- lumber business that she contracts with the now, creating both challenges and opportu- en’s groups worldwide also receive guidance provincial government to build classrooms nities. I believe that WWB is well poised to from the New York City-based WWB global around the region,” says Iskenderian of this continue as an innovator and thought leader team, which helps them to become estab- success story. Wafukho’s microbusiness in this space. We aim to be the preeminent lished financial entities. has grown so much that she employs 25 voice for women in microfinance, and WWB has been a pioneer in setting per- people along with her husband, who has left through that lens, help to both expand the formance standards in the microfinance his job as a policeman to join her. With her outreach of our member institutions and industry and holds the organizations in its earnings, she has put her children through deepen their impact on poor women. network to high performance standards. In primary and secondary education, and built With the increased attention and monies fact, about 70 percent of its members rank a new home for the family. coming into the microfinance sector, we among the top three microfinance institu- “I realize that not all microborrowers have believe that we can reach the billion or so tions (MFIs) in their countries, and over 75 this kind of a stellar story,” explains Iskende people who are still lacking access to the percent of their clients are women. Cur- rian. “However, microfinance has the poten- most basic of financial ser vices. It will require rently, WWB Network members are growing tial to change lives by helping individuals all of us – commercial banks, non-profits, their financial resources, and therefore their break out of the cycle of poverty.” mb interested individuals – working together to customer base, at a rate of 30 percent a get there, but I believe we can reach this year, and have an outstanding loan portfolio More information about Women’s World goal in our lifetime. < of over 1.4 billion dollars. Banking is available at: www.swwb.org

Credit Suisse Bulletin 4/08 66 At a Click www.credit-suisse.com/infocus

@propos

The Wonderful New World of IT – and Me [email protected]

A few days ago, I was asked if I would like to tricks I’d learned so you’d never forget a pass- off the feeling that there’s a huge gap between write for this Bulletin column. I felt honored, word again. I considered which of the latest, me and the wonderful world of IT – a gap that especially since I joined the editorial team only great time-saving free programs I’d recom- is likely to remain unbridgeable for some time a few months ago. At the same time, I had to mend... But I couldn’t think of anything I could to come.That’s why I admire all my friends who ask myself if I was the right person to be talking write about even halfway convincingly. So keep the rest of the world up to date on their about the Internet. After all, I freely admit to I tried to come up with a story that wouldn’t lives via their own Web sites. I listen enthralled knowing nothing about information technology give away my big secret – the true limitations to their stories. Their networks extend in all or about the latest trends in the virtual wold. to my technical talents. directions via Facebook, MySpace and Small- And frankly, I doubt I’ll ever learn them, as they Mind you, not even I would like to give up world, and they always know who to ask about are so far out of my realm of interest. the Internet now. I’m someone who often anything. And nobody is better informed, thanks So I thought long and hard about what spends hours trawling search engines. Even to blogs, podcasts and RSS services. I should write. I asked for advice. And, I wrote I have a personal e-mail address, and I’m no With them, I do take a few tentative steps several versions, all of which I deleted without stranger to extended shopping trips through toward the wonderful wide world of IT. Some showing them to anyone. I tried to think of orig- the World Wide Web. I’ve even been paying my day, I might even venture to journey further in- inal Web sites I knew that Bulletin readers just bills electronically for some time too – thanks to foreign territory on my own. For now, though, had to visit. I pondered what amazingly easy to online banking. Yet somehow I can’t shake I’m happy right where I am.

credit-suisse.com/infocus

Volker Krajewski, president of the Swiss PGA, answers your questions Online Forum: Golf Taking Off on golf

Of all sports played in Switzerland, golf is growing the fastest. The For all golf aficionados – and all those who want to become one – Credit country now has 95 golf clubs and around 100,000 players – more Suisse is organizing a dedicated online forum about the sport on its than half of whom are active members of the Swiss Golf Association sponsorship Web site. Do you have any questions or comments about (ASG). Switzerland is in 15th place in the European rankings. In addition the basic direction of golf in Switzerland? Are you perhaps toying with to member clubs, the ASG has 10 associations as members. The Swiss the idea of setting out on a new career as a golf pro? What do you think PGA (Swiss Professional Golfers Association) is one of them. Its mem- about the number, quality and location of Switzerland’s golf courses? bership is made up of golf professionals in Switzerland. With their expert What exactly are clubs and associations doing to promote the sport knowledge and experience, these members help to shape the sport of among the next generation? And how do Switzerland’s golfers com- golf and are a factor for success in its continued development and pare to the international competition? Put these and other questions positioning as a popular pastime. to Volker Krajewski. ath Volker Krajewski, head professional at the Schinznach-Bad Golf Club, has been president of the Swiss PGA for six years now. He has How it works: The forum begins on October 6 and questions can SwissPGA

almost entirely revised the association’s articles of incorporation, never be submitted up to October 17. Questions and answers will be | losing sight of his goal to make golf a better game. In practical terms, published on the Internet about two weeks later. At the same time, a better game means a sound foundation of technique, etiquette and those submitting questions will be informed by e-mail as soon tactics but, above all, fun and enjoyment. Training is therefore partic as their questions have been answered. ularly close to Krajewski’s heart. He wants players to live golf and to

be enthusiastic about passing on the golfing spirit. More information is available at: www.credit-suisse.com/golf Photos:Martin Stollenwerk

Credit Suisse Bulletin 4/08 Drive a Formula 1

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Donations Swisscontact fosters and promotes small enterprises in developing countries. All too often, Bank: Credit Suisse these people are being denied access to secure savings and credit opportunities. This hinders CH-8070 Zürich the development of their businesses. To counter this, our projects in Africa, Asia and Latin IBAN: CH42 0483 5045 6813 2100 1 America are supporting microfinance institutions by providing training and dispensing advice. Clearing-Nr.: 4835 In this way, small enterprises are able to profit from improved financial services, which are SWIFT Code: CRESCHZZ80A specially tailored to meet their needs and enable them to grow. Your contribution is creating jobs and income in developing countries. We would like to thank you!