Thursday, June 28, 2012

The Center for Traditional Textiles of Cusco (CTTC)

Weaving New Tithes
Photographs and text by Heidi Jane M. Smith

On the Avenida del Sol, just a few blocks from Cusco’s marvelous Plaza de Armas, the Center for Traditional Textiles of Cusco (CTTC) plans to recreate the lost Incan way of life. It was here that the Spanish constructed Catholic cathedrals and imported celestial painters to rewrite Incan history. Weaving is a way of life for many, but how does one make it a livelihood?

CTTC is a non-governmental organization working to open a sales outlet and museum in Cusco, to set up a functional Web site, to computerize inventory and accounting systems, and to bring greater appreciation for indigenous textiles within the region. Pictured are weavers from Chincheros which means “birth place of the rainbow” in Quecha, the indigenous language of Peru. When the Spanish invaded, the villagers lit the buildings on fire, afraid of being conqueror. The villagres did not want their positions to be in the hands of the invaders, so they were willing to sacrifice them.

CTTC's goal is to increase the incomes and strengthen the management capacity of approximately 250 weavers in six community associations, about eighty percent of whom are women. Men typically do not weave. “They are invited to participate,” added NildaCallañaupa, executive director, “and often times do, but once they get teased by the women, then stop.”  Only in the town of Pitumarca are men involved in this traditional process. Their community association has 35 active male weavers.

The organization is using natural fibers to produce dyes and applying them to old designs and patterns.  Focusing first on recreating chochimil, made from crushing lady bugs, makes a deep red color which can easily be modified by adding acid from lemons. Indigo was next, but was difficult to obtain because the plants had been destroyed in the region. Some of the same natural dyes used by the weavers were also used in the floral designs painted on the Chincheros cathedral ceiling and walls more than 400 years ago.

CTTC was formally founded in 1996, but the first such weaving cooperative became active than 24 years ago in Chincheros. A typical piece, about the size of a table runner, sells for about $80 dollars US. From this price CTTC must pay 18 percent state tax and the community associations pays two percent into savings and seven percent for upkeep the store in Cusco.  Chincheros local markets have supported three percent of CTTC total sales.  Chincheros weaving association used the first profits to buy customary dresses and hats for the girls and women; the following year, the women bought pots, plates and flatware for their families.

Saturdays are the days that Chinchero weaving association meets to practice their craft. CTTC picks up the girls and women in the morning with their van, provides them with lunch and brings them home late in the afternoon. Most of the weavers spend the eight hour day hunched over their back-strap looms, gossiping and exchanging techniques. During the week, the weavers work on their projects, but it is Saturdays which they cherish. Many young people learn to weave as part of their cultural heritage.

Rio+20 Results for Cities

Local and Regional Governments role in the Rio Outcome Document

Despite the discouraging results of the Rio+20 Summit in terms of lacking multilateral agreements and commitments, there is a bright side to the Outcome Document when it comes to the acknowledgement of the role that local and regional governments play and need to play in the sustainable development agenda.

Seldom before, has there been an international policy document which is as far-reaching in both the recognition of the role of local and sub-national governance and as comprehensive in the thematic areas described of influence for these spheres of governments. The explicit recognition of the Habitat Agenda is also a important achievement

On the shortcomings it is worth mentioning the very few references to culture as crucial pillar for development and the lack of clear inclusive governance mechanisms for future policy development.

Summary of key issues:


1.    Acknowledgment of the work done paying tribute to progress achieved at sub-national and local levels.

2.    Acknowledgement of the role to play in the implementation of policies and the engagement of stakeholders. Article 45 recognizes critical role of governance at local and sub-national level Local and sub-national governments are explicitly mentioned in the thematic areas and cross-sectoral issues.

3.    Specific sub-heading on sustainable cities and human settlements

States acknowledge the importance of cross-sectoral planning and commit to increasing capacity and supporting municipal governments, metropolitan areas and towns to develop sustainability policies.  The text further recognizes the role of local and sub-national authorities in public service delivery, poverty alleviation and risk management. Integral approaches are supported. Partnership among cities and communities encouraged

4.    Habitat Agenda and resourceful UN Habitat identified as explicit aim.

5.    Call to strengthening financial mechanisms accessible to sub-national and local authorities

6.    Regulatory frameworks to stimulate public-private partnerships to be promoted


Follow up mechanisms where local and sub-national authorities should ensure inclusion:


1.    The Administrative Council of UNEP will have universal access and greater participation of Major Groups.

2.    A High Level Political Forum will be put in place replacing the Commission on Sustainable Development, the format will be defined by the General Assembly.

3.    An Open Working Group to define process on Sustainable Development Goals at the opening of the 67th session of the General Assembly.

4.    An Intergovernmental Committee, comprising thirty experts to assess financial needs for Sustainable Development Financing.


The outcomes of Rio will be an important milestone in the UN agenda of UCLG.  The World Secretariat and UCLG members will need to continue working in ensuring political representation in the above mentioned processes and towards Habitat III.

Monday, June 25, 2012

Goodnews for Public Debt--the US Bond Maket

US Bond Market
In general, there are three types of bonds in the U.S system[1]. The following outlines the thee broad types:

a. General obligation bonds finance government projects like parks, streets, schools and public buildings. They usually use a full government guarantee, exempting them from taxes. They must be approved by referendum.

b. Revenue bonds are issued for special purpose projects or facilities for specific usage like development or improvement of sewer and water systems, public airports, toll roads, hospitals, housing and public parking facilities. They require repayment from usage fees or charges or sale of a project generated from the financed project. The government unit that issues the reserve bond is obligated to pay for the debt services from the revenue. The revenue bonds with government guarantees are called “double-barreled” bonds.  (These are the types that were used for the BABs and PACE).

c. Industrial development bonds are purposed to promote economic development and they serve both public and private benefit. They must include job creation and strengthening of the local tax based to create a multiplier effect to help the local economy. In general, these bonds were to expand, attract, or retain existing financing for hospitals, utilities and transportation services. In the US various laws have been in acted in order to monitor what type of entities can use the tax-exempt status.

U.S. bonds are each rated on a variety of factors. Rating agencies typically appraise municipal budgets  (or enterprise’s budgets) by evaluating their financial systems, operational activities, economic profiles and another eight rating criteria (such as economic, liquidity, debt, finances, systems support, etc.). The major rating entities include Standard & Poor’s, Moody’s, Fitch but many locality also have their own commercial rating agency. Each rating agency has a different methodology for determining their rate.

For example, Fitch Ratings have a two-step approach:
  1. judgment of the Transfer and Convertibility (T$C) risk as reflected in the country ceiling rating.
  2. assess the capacity of the entities and transactions to survive the economic and financial stress associated with sovereign debt crisis.

Sovereign risk vs. country risk  (They are not the same.)  The former is assessment of risk that the government of the sovereign nation will not honor its debt obligations. The later relates to risk to cross-boarder foreign currency lending and investment arising from events in a particular country, which are outside the control of the private sector.

Important notes:
  • A country ceiling rating strengthen is positively correlated with the sovereign rating (i.e. the higher the sovereign rating, the more likely a country ceiling is fortified).
  • Corporate, banks and structured transactions can only be rated sovereigns, up to the country ceiling, if their stand-alone credit quality is judged to be sufficiently strong to withstand a sovereign debt crisis

A “Sovereign ceiling” is the long-term foreign currency rating and entities’ stand-alone credit quality is particularly strong and above to withstand sovereign debt crisis, the will of financial institutions and corporations to pay the transaction cost of the sovereign.—This is either because of substantial export earnings, foreign assets, production overseas and/or foreign parents or strategic partners will and are able to provide financial support, may be rated above the country ceiling.

Furthermore, there are many factors that affect the marketability of bonds. This may include: bond denominations, coupon rates, credit ratings, maturity schedules, and call/redemption privileges.  In general, the higher the credit rating, the more profitable the maturity structure for investors, and the further the call feature is from the issuing date, the more appealing the issue will be to investors.[2]

There are four different principal repayment options for public debt: straight serial, serial annuity, balloon, and irregular.

The “Red Book” or the Directory of Municipal Bond Dealers of the United States is a listing of investment bankers and security dealers (which may include pension funds) that participate in the municipal bond underwriting. Note: of the 450 security dealers, few than 100 underwrite 90 percent of the bonds sold in the new market.[3]

[1] Thau, Annette. (2011). The Bond book Third Edition New York: McGraw-Hill.
[2] Designing a bond issue: A Guide “Municipal Bonds” an MIS Repot, published by ICMA Vol. 19 Number 6, June 1987. A good source for criteria considered by investors and rating agencies in determining rates, etc: Clark, Terry Nichols, G. Edwards DeSeve, and J. Chester Johnson, Financial Handbook for Mayors and City Managers (New York: Van Nostrand Reinhold Company, Inc., 1985), p. 79.
[3]ibid pg 13

How can we use Pension Funds for Urban Progress?

Pension Funds
First, cities do not access pension funds, they have employees who invest into their pension systems. Some cities have their employees’ accounts on their books others have contracted out this service for larger firms to manage. Large portions of government expenditures for a city are funds to pay employees for their retirements (wage bill is one of the largest classes of expenditures for a city). For example, the City of North Miami has a Pension Trust Fund. These specific funds are used for the sole purpose to account for the accumulation of resources that are used for retirement benefits of city employees. The employee retirement plan are located under the Public Employee Retirement Systems (PERS) which include the Clair T. Singerman Employees Retirement System, also known as the CTS, and the North Miami Police Fund. These two pension plans provide employees and their beneficiaries with pension, disability, and death benefits.
Second, pension funds can serve as a source of equity for city governments to finance projects. In this regard, pension funds are used as an asset from within a city’s budget, but they also are one of the most costly expenditures. Cities may use their pension funds as collateral for public debt. In this regard, pension funds can be used for guaranteeing other financial instruments such as municipal bonds (munis for short). In developing countries, because of the status of fiscal federalism, cities use future inter-governmental transfers as a form of a grantee for municipal debt and not typically from their pension systems. Because saving rates, in general, are low in developing countries, the national government through development banks (such as BANOBRAS in Mexico) provides the financial instruments for public debt. There are two common forms of munis in the US:
a. General obligation bonds that finance government projects like parks, streets, schools and public buildings. They usually use a full government guarantee, exempting them from taxes. They must be approved by referendum. Monies to pay interest to bond holds are raised through taxes and some user fees.
b. Revenue bonds are issued for special purpose projects or facilities for specific usage like development or improvement of sewer and water systems, public airports, toll roads, hospitals, housing and public parking facilities. They require repayment from usage fees or charges or sale of a project generated from the financed project. (These are the types that were used for the BABs and PACE).
Additionally, Industrial development bonds are special purpose to promote economic development, but they serve both public and private benefit. They must include job creation and strengthening of the local tax based to create a multiplier effect to help the local economy. In the US, these bonds were to expand to attract, or retain existing financing for example hospitals, utilities and transportation services, which are entities that can use the tax-exempt status. The new type of taxable bond comes from Build America Bonds (BABs) program, which were intended to be temporary, but has continued through special appropriations in Congress through the Treasury department.  Green bonds have been proposed to model after the World War II era ‘War Bonds’ program for investments in green technology. Green bonds are just another name for the BABs program, which is described below.
Third, large-scale pension funds (off the books from a municipal governments financial statement) invest in other financial products such as munis because they are one of the safest investments (in the US second only to Treasure bills) and almost always guarantee a positive return for their beneficiaries. For example, the city of North Miami carries the Florida Retirement System (FRS), which it uses as a “cost-sharing multiple employer defined benefit pension plan.” The FRS is administered by the State of Florida. This fund provides for monthly employer contributions at actuarially determined rates that, expressed as percentages of annual covered payroll, which are adequate to accumulate sufficient assets to pay benefits when due.  This pool resource, such as the FRS, looks much like an investment fund (such as mutual funds) in which they seek to invest the employees’ savings into larger capital markets in order to have higher returns. One of the most secured investments for large pension funds are municipal bonds, but they may also invest in other financial instruments depending on the risk tolerance of the board of directors/fund managers.
Therefore, urban projects may have matching investments such as a pension fund, but first must undergo scrutiny depending on the project and loan type. A city government first contracts a feasibility study prior to accessing a municipal bond. For example, if the city seeks out a revenue bond (i.e. to improve a toll road or sewage system repairs) it is expected to generate repayment from usage fees by local residents. Forecasting is used to determine the viability of the project.  With the study, a city finds a bond issuance. In addition, each individual muni must be rated from a rating agency. Its rating is determined on the specific revenues dedicated to the debt service compared to the costs of the services themselves. Ratings rang from AAA to BBB- and each rating firm has a different methodology to determine the availability of repayment for a project.
As part of the stimulus legislation passed by the Obama Administration in 2009, BABs were proposed for infrastructure improvements some of which include “green” projects. The Treasury department offered issuers to choose either a direct subsidy of 35% of the coupon interest or buyers of the bond could benefit from a 35% tax credit. Thus, in effect, reducing the cost of the munis, in order to make them more attractive to investors.

What are green bonds?

Green Bonds
"The concept of green bonds as a financial vehicle has floated around for years. The idea comes in different forms. The World Bank has encouraged the use of green bonds as an innovative way to finance low-emissions energy technology. The U.S. Treasury Department has green bonds as a pithy name for low-interest loans to clean energy companies. Investment banks have proposed creating green bonds that can be traded for profit, just as credit default swaps and other mortgage-backed securities had been before the housing bubble popped."  NYTimes 2/7/2011

Green bonds may be used for any project that strengthens energy efficiency, green technology or climate related programs. Just as the New York Times quote above indicates, there is a wide range of projects that government, personal or pension funds can contribute to in the green economy.

Among the global leaders in pension funds are the Norwegian Government Pension Fund-Global; ABP, along with the Dutch government pension fund; and the pension fund of the British Environment Agency. Within California the two larges funds include: the California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS), which are two of the largest in the United States, with in excess of $400 billion under management. Their investment practices can impact how green projects are funded and managed. CalSTRS is one of the few American funds that have become a green investor. Denmark’s ATP, as well as the Dutch fund PGGM are also funding green programs.

In their portfolios they do not specify the types of projects that they finance, instead their annual reports indicate the sectors of investments, such as global equities, venture capital, mutual funds, etc.
Pension funds may support urban sustainability plans because they have lower risk for investors. For example with the PACE model, local governments provide the vehicle either through a municipal bond or provide the administrative support to find qualified homeowner and business owner who will repay back loans. Since the energy efficiency component of the mortgage stays with the property (located in the non ad valorem assessments agreements) the city administration is a valuable contributor of the process.

Private pension funds have up to US$1 billion in assets. State bonds provide security for those assets. Institutional investor markets seek pension funds to build capital markets and provide financing for a bond market within a country.  Non-credit risk, such as the additionality from the development banks, help access these markets and help them grow. Traditionally, rates may very from 10-20% to leverage 5 to1 with partial rate for these guarantees.

What's Additionality for Anyway?

Banks like the UK Green Investment Bank (GIB) can provide partial loan guarantees or credit enhancers for green projects. The GIB is capitalized with £3 billion and seeks to address market failures affecting green infrastructure projects in order to stimulate a step up in private investment.
Given the volatility of financial markets and bonds, which are a lower-risk option for investors, yet have been few investment-grade green bond choices. Many of which have little or lacked liquidity, which keeps institutional investors away. Therefore development banks offer investors a way to scale green by providing institutional backing and a source of liquidity, if necessary, for the market to flourish.
Work is based on the “additionality” given for projects. These include non-financial and financial benefits. For example in the financial aspect, if a loan is rated AB, the development bank may assist to lengthen the tenor to 15 years from what the10 to12 offered by a private sector option. Another example, the bank could support the structure of the loan by subordinating the debt.  In the non-financial assistance, banks can offer technical assistance or non-corporate governance. Furthermore, development banks can offer oversight and evaluations (OVE) with third parties to ensure the financial deal is complete and meets the appropriate standards.
Investment banks can also offer Non-Sovereign Guarantees for public programs without state guarantees such as para-statel apparatus.  These are big-ticket items, such as the Trans-Santiago project, a public transportation program in Santiago Chile, which was $400 million to build. Development banks also assist with quasi-state deals like EASE—State owned Electricity Companies. For example in 2008, the Inter-American Development Bank (IDB) financed loans up to $270 million and lengthened the tenor from 8 to 12 years for the loan in the Bio-Energy market and Renewable Energy market.
Additionally, development banks like GIB serve to unify finances and spend them for development projects within their own countries; such projects may include waste infrastructure and water treatment projects. The UK Government unified local government spending into a lump sum of £100 million to invest in smaller waste infrastructure projects (typically in the size range of £15-25 million), on a fully commercial basis.  The waste infrastructure projects will be transacted initially through specialized fund managers experienced in this sector, in order to ensure that government funds are deployed on equal terms with private capital. The bank manages the full procurement process of these types of loans and investments.

Greening 3Ps

Public Private Partnerships
Whereas adaptation is defined by the Intergovernmental Panel on Climate Change as “adjustment in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunities,” mitigation is “an intervention to reduce the causes of changes in climate, such as through reducing emissions of greenhouse gases to the atmosphere.”[1]
Most global reports highlight the role for cities as the center for green, but they are also important location leverage private investments for public infrastructure where much of this work takes place (i.e. transport, waste management, power, and so on).

Financing is fundamental for future progress, yet city halls might not have the direct authority to manage all projects, therefore PPP’s become ever more important.  For example, many green PPPs are public enterprises (i.e. highways, roads, electric companies, waste water treatment plants and other water management facilities, etc.) which are paid for by user fees.  Typically, these public entities are not included into a municipal budget and are often outside the City Hall’s direct control.
What City Hall does have control over:
Public information campaigns (e.g. solid waste separation and bike sharing programs)
Smart land-based instruments can simultaneously increase both urban revenues and urban density
The use of development charges to discourage sprawling development
Insuring  municipal debt is paid for and not defaulted (in order to not derail national macro-economic stability)
Setting the tax rate and bases for their property taxes, which is an important for regional economic development.
While municipalities are crucial for the appropriate execution of these greening programmes, they must rely on outside partners for implementation.  Important players include:
National Development banks (within developing countries)
International Financial Institutions like the World Bank
Land based fees (i.e. development charges and impact fees), are often passed on to the consumer after the purchase of a new home.
Municipal bonds in fact provide the securitized of risk for many public loans (which is ultimately pushed down to –and paid for--by the tax payers).
Carbon Financing  such as the Clean Development Mechanism (CDM) and Joint Implementation (JI), as well as other carbon market instruments, such carbon offsets on the voluntary carbon market.
Explain Cities and Carbon Market Finance and use an example from this report. [2]
Yet, only 1% of CDM projects have been used to fund urban sustainability.
Outline some of the models from the report such as Bogota’s BRT or the Christchurch City Landfill Gas Utilization Project
The C40 can work together to establish more of these models
Municipal loans (at least in the US) have low default rates and therefore are a good investment overall.  In the US private entities re-shape into public ones in order to get tax credits (industrial bonds). Perhaps this could use to develop future financial mechanism in developing countries.

[1] Global Climate Change Impacts in the United States, Thomas R. Karl, Jerry M. Melillo, and Thomas c. Peterson, (eds.). Cambridge University Press, 2009.

[2] Clapp C., A. Leseur, O. Sartor, G. Briner, J. Corfee-Morlot (2010), “Cities and Carbon Market Finance: Taking Stock of Cities‟ Experience with Clean Development Mechanism (CDM) and Joint Implementation (JI)”, OECD Environmental Working Paper No. 29, OECD Publishing, © OECD.

Green Urban Investment Needs

Green Urban Investment Needs

Although it is almost impossible to calculate the future needs of greening urbanization, because of the wide variation of projects, cities and levels of urban decay and renewal which is needed for each one. Kennedy et al. (2009) has suggested that cities major areas of GHG are attributable to first, transportation and land use; second, buildings and the built environment; third, energy supply and emissions from electricity consumption; fourth, waste and municipal water services; and finally, from landfill waste. Therefore in order to gain zero waste, we calculate the estimate total of these projects for one city (taking into account previous expenditures). The below chart aims to capture the massive costs of an average mega city with the intention that these figures can be multiplied by the number of mega cities in order to derive the future global costs of green infrastructure.

Sample Mega City Capital Costs
($ million US)
Annual GHG Savings
(kt CO2e)
Estimated Costs of 15 Mega Cities in 2015
($ million US)
Annual GHG Savings
(kt CO2e)
Transportation/land use

Buildings/ Built Environment



Solid Waste
















Source estimation calculations built from Kennedy et al (2009).

Italian cooking Class+4

Class 4
Risotto alla Milanese
·      2 ½ lt of beef broth
·      600 gr Italian rice (Arborio or Carnaroli)
·      large onion
·      .5 gr Safran
·      1 cup of dry white wine
·      150 gr butter
·      100 gr Parmesan cheese

First, but 3 tbs of butter with finely chopped rice, cook until rice is golden brown.  Add white whine and cook until the alcohol is gone. Next cook and add the hot beef broth (use 4 squares of beef bullion). Keep this process going using small amounts of the broth until its absorbed into the rice.  Continue to cook on medium for 20 mins.  Then add more broth until the rice is fluffy with water.  Add the saffron mixture made with the broth to the rice.  Continue to add broth until you have used it all, string continuously.  Final touch is adding 3 more tbs of butter with the shredded Parmesan cheese to the mixture for taste.


Ossobuco alla Milanese
·      6 Ossobuco (cafe hoofs)
·      2 stocks of celery/ carrots/onion
·      1 lemon to use peal
·      Fresh sage, garlic, rosemary, thyme
·      1 clove of garlic
·      1 cup of dry white wine
·      Beef broth as needed
·      Salt and pepper to taste
·      1 large can of full tomatoes (optional)

Salt and pepper the meet, cook celery/ carrots/onions, garlic, in the bottom of a large pot. (You can also cook in the oven if you prefer.) Add meat, cook for 5 min and add 1 cup of white wine for flavor and leave top off for alcohol to absorb. Then sprinkle flour on top of the meat.  The flour will add texture to the sauce and thicken it. Cook for 1½ hours with the top slightly off.

Shave lemon into a bowl and add cut up sage, garlic, rosemary, thyme; use all fresh for better flavor. Add to lemon juice made from the shaved lemon. Add this to the meat at the end of its cooking for better flavor. Cut off the heat and take meat into plates with risotto on the bottom and add sauce for flavor.

Orange Cake/Pastel de Naraja 

·      300 gr. Flour
·      180 gr. Butter
·      2 sweet oranges
·      3 spoons of Royal
·      240 gr. Power sugar
·      3 eggs
·      500 gr. Orange Marmalade
·      1 can of sweeten condensed milk
First, add flower, power sugar and melt butter. Make sure the butter is cool and add to 3 cracked eggs with 1 teaspoon of orange abstract and 1 cup of orange juice for flavor. Add shavings of the oranges into the mixture. Put in the Royal to flower mixture and then combine both mixtures into one.  Put into floured baking dish and cook for 30 min at 180 degrees.  After the cake is complete, cut into ½ and add a mixture of Marmalade with the sweeten condensed milk into both sides of the cake.  Make sure it absorbs and put back into one. Sprinkle power sugar for looks to the top and serve.

Making Bonds Work

Are governments always O ver-Indebtedness and Fiscally Irresponsible? Governmental debt and financial sustainability are pressing i...