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Kai Ryssdal: Las Vegas, Nev., and the global financial crisis aren’t often mentioned in the same sentence. But with the opening in Vegas this week of a brand new $8.5-billion development owned in part by a company from Dubai, the stars do seem to have aligned. The Vegas City Center Development is still scheduled to open as planned tomorrow, even though Dubai World announced a freeze in its debt repayments last Wednesday. For that company’s investors, it is still very much a roll of the dice. Our New York bureau chief Amy Scott has the latest.
AMY SCOTT: Dan Cook watched the confusion from his perch as an analyst at IG Markets in Chicago.
First, the UAE’s Central Bank said it would stand behind banks burned by Dubai World. But then a Dubai finance official said the government would not back the company’s debt and that creditors had to take responsibility for their own lending.
Cook says currency investors were not reassured.
DAN COOK: The yen, first of all, really took off as the number one safe haven currency, and the dollar also followed with strength because people were more risk averse after the conflicting statements.
Investors are worried Dubai’s state-run companies could default on their debt, and the damage could spread around the world.
But Hani Sabra with the Eurasia Group isn’t all that concerned. He says it’s just a matter of time before Dubai’s oil-rich neighbor Abu Dhabi realizes it has to step in. Its stock market fell 8 percent today.
HANI SABRA: They know that already the UAE brand has taken a big hit in the last four or five days. And I think they want to limit that damage. So they will get involved in a big way.
Abu Dhabi has bailed out its once high-flying neighbor before with a $10 billion loan. If the more conservative emirate rides to the rescue again, Sabra says Dubai will pay a price.
SABRA: Abu Dhabi will be the dominate city-state, and Dubai won’t be able to make the kind of decisions that it’s made over the last seven years without getting approval from Abu Dhabi.
Even if the damage is contained, analysts say the situation in the UAE shows just how fragile the global recovery still is.
In New York, I’m Amy Scott for Marketplace.
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