• During a meeting with members of Civil Society and the media, the administrator of the Panama Canal, Ricaurte Vásquez, said that the interoceanic highway one of the country's main assets "is going through difficult times."
• The canal charges by tonnage, not by transit, and statistics are being reflected where there is more traffic of small vessels, which consequently represents less tonnage and, in turn, lower collections.
• The Panama Canal Authority reiterated that the use of the water depends on the number of transits in the Canal and that a greater volume of it is being used, at a time when the waterway is generating less income. For context, every time a ship traverses the Panama Canal, about 50 million gallons of water has to be poured into the Canal’s locks—the three-stage system that gradually raises ships for their 50-mile journey across the Panamanian isthmus. Meanwhile, there will be a decrease in the number of containers that will pass through the Panama Canal, due to economic conditions in the world.
• This comes at a time when Panama's GDP is largely linked to the global growth and activity related to the Panama Canal as the normalization of trade during the post-pandemic recovery underpinned 15.3% of the nation’s growth recorded in 2021.
• The canal usage typically filters through to the wider economy in the form of service sector expansion and infrastructure improvements. Therefore, the lower volume of passages is expected to lead to a downtick in revenue and weigh on the growth outlook for Panama.

(Source: Newsroom Panama)

• The European Central Bank on Thursday (March 16, 2023) announced a further rate hike of 50 basis points, signalling it is ready to supply liquidity to banks if needed, amid recent turmoil in the banking sector.
• The ECB had signalled for several weeks that it would be raising rates again at its March meeting, as inflation across the 20-member region remains sharply above the targeted level. In February, preliminary data showed headline inflation of 8.5%, well above the central bank’s target of 2%.
• Some market players questioned whether President Christine Lagarde would still go ahead with the move, given recent shocks in the banking sector. Credit Suisse shares tumbled by as much as 30% in Wednesday intraday trade, and the whole banking sector ended the Wednesday session down by about 7%.
• This latest move brings the bank’s main rate to 3%. It was in negative territory before July last year.
• Initial pressures on the banking sector emerged last week when U.S. authorities deemed Silicon Valley Bank insolvent. The event threw international subsidiaries of the bank into collapse and raised concerns about whether central banks are increasing rates at too aggressive of a pace. Goldman Sachs quickly adjusted its rate expectations for the Federal Reserve, due to meet next week — the bank now anticipates a 25 basis point increase after previously forecasting a 50 basis point hike.
• European officials were keen to stress that the situation in Europe is different from the one in the United States. Overall, there is less deposit concentration — SVB was an important lender to the tech and health-care sectors — deposit flows seem stable, and European banks are well capitalized since the regulatory transformation that followed the global financial crisis.
• Equity action Thursday showed some relief across the banking sector after Credit Suisse said it will borrow up to $54 billion from the Swiss National Bank, the country’s central bank.

(Source: CNBC)

• The Federal Deposit Insurance Corp deposited $40Bn back into the U.S. Treasury General Account on Tuesday, reversing a $40Bn withdrawal on Friday (March 10) as the regulator took control of the failed Silicon Valley Bank, Treasury financial data released on Wednesday showed.
• On Tuesday, before the restoration of the funds was disclosed in the latest Daily Treasury Statement, the Treasury said that the $40Bn withdrawal would not affect estimates of when it would be able to pay all U.S. government bills without a debt ceiling increase.
• After the initial $40Bn withdrawal on Friday as SVB Financial was closed and put under FDIC receivership, the Treasury, FDIC, and Federal Reserve on Sunday announced guarantees for both insured and uninsured deposits at the institution to shore up confidence in the banking system.
• The same protections were offered to New York's Signature Bank, which failed on Sunday, and the Federal Reserve opened a new facility to give the banks access to emergency funds.
• The restoration of the funds to Treasury's cash balance held at the Fed came a day after SVB and Signature reopened on Monday with access to the Fed facilities, which allow them to borrow from the Fed's discount window by pledging bonds at par value as collateral, rather than at their diminished market value.

(Source: Reuters)

• For February 2023, the All-Jamaica Consumer Price Index (CPI) increased by 0.5%. The point-to-point inflation rate for the month was 7.8 per cent, and indicates that inflation has been decelerating over the last three months.
• For February, the increase in the monthly inflation was largely driven by the 2.7% increase in the index of the ‘Housing, Water, Electricity, Gas and Other Fuels’ division. The upward movement was, however tempered by a negligible decline (-0.1%) in the heavily weighted ‘Food and Non-Alcoholic Beverages’ division as prices continued to fall within the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’.
• The All-Jamaica Consumer Price Index (CPI) increased by 7.8% for the period February 2022 to February 2023. This was the smallest point-to-point increase since the period ending in December 2021. The main contributors to this upward movement were the divisions: ‘Food and Non-Alcoholic Beverages’ up by 11.3%, ‘Restaurants and Accommodation Services’ up 15.6% and ‘Housing, Water, Electricity, Gas and Other Fuels’ up by 3.7%.
• The main contributors to the Consumer Price Index (CPI) between February 2022 and February 2023 were ‘Food and Non-Alcoholic Beverages’, ‘Housing, Water, Electricity, Gas and Other Fuels’, and ‘Restaurants and Accommodation Services’. All classes within the Food division rose during the period. Further, the housing division was impacted by increased rental and ‘Electricity, Gas and Other Fuels’ costs. Increased prices for meals consumed away from home were the main cause of the increase in the ‘Restaurants and Accommodation Services’ index.
• On March 29, 2023, the BOJ will host its monetary policy meeting.  The central bank had indicated in earlier press releases that is necessary to allow the pass-through effects of previous rate hikes to take effect on deposit and loan rates. With that said, we anticipate that the bank will continue holding off on further policy rate increases at this time. Point-to-Point inflation is projected to continue falling and enter the BOJ’s target range of 4.0% to 6.0% by the December quarter.

(Source: STATIN)

• Finance Minister Dr. Nigel Clarke has indicated that the Jamaican government plans to spend more than a trillion dollars over the 2023/2024 fiscal year on the central government.
• Funds for the 2023/24 Budget are allocated across the main expenditure categories. These comprise non-debt recurrent expenditure of $657.2Bn, capital expenditure of $74.4Bn, and debt servicing of $280.6Bn. Central Government revenue and grant inflows are estimated at $897.6Bn.
• When compared to the proposed allocation for the 2022/2023 fiscal year, government expenditures for non-debt recurrent expenditure and capital expenditure have increased by $52.7Bn (+8.7%) and $10.3Bn (+14.3%), respectively. However, expenditure for debt servicing decreased by $26.9Bn (- 8.7%) given the fall in the country’s stock of debt.
• This will generate the required fiscal balance surplus of $9.9Bn or 0.3% of gross domestic product (GDP), consistent with fiscal rules.
• The corresponding primary balance required for debt service and to generate the targeted fiscal balance is approximately $165Bn or 5.6% of GDP.
• Further, the overall public debt is estimated to end the current fiscal year on March 31 at 79.7% of GDP and is expected to decline further to 74.3% of GDP by fiscal year 2023/24. Should this (projection) be achieved, it would mark the first time since the nationalisation of the financial sector crisis through FINSAC in the latter half of the 1990s that debt has entered the domain of pre-FINSAC levels.

(Source: JIS News)

• Fitch Solutions expects real GDP growth in Trinidad and Tobago (T&T) will slow from an estimated 5.6% in 2022 to 2.2% in 2023 due to a moderation in exports and private consumption. 
• Fitch expects private consumption and hydrocarbon exports will provide weaker tailwinds this year, with growth particularly slowing in H223 as the global economy decelerates. Moderating energy prices will also lead to slower hydrocarbon production growth in the quarters ahead, though the sector should remain one of the most important drivers of growth in T&T for 2023.
• Additionally, inflation was extremely elevated in Q422, reaching 8.7% y-o-y in December, and is expected to average 7.9% in 2023, up from 5.8% in 2022, which would continue to affect private consumption. Particularly, higher prices as a result of subsidy removal for fuel and equipment for fishermen, leading to higher fish prices and contributing to overall food prices will weigh on private consumption.
• Notably, government consumption is anticipated to remain modest as the government’s commitment to fiscal consolidation will constrain outlays.
• Overall, Fitch expects government consumption to slow slightly in 2023 compared to 2022, as the government remains committed to fiscal consolidation in the years ahead. Projections are that T&T will run small fiscal deficits in the next few years, as part of a broader effort to reduce its government debt.
• The upside, however, is if elevated inflation leads to public unrest, the government may bring back subsidies, thereby supporting private consumption and growth and boosting growth prospects for the nation.

(Source: Fitch Solutions)

• Tech startups in Latin America are struggling to find banking alternatives after the sudden crash of Silicon Valley Bank (SVB), one of the few banks that offered much-needed dollar accounts and catered to the specific needs of the sector.
• "This touched (almost all) venture-backed companies in Latin America," said Brian Requarth, the Mexico City-based co-founder of startup platform Latitud.
• Local startups now have few alternatives for a banking partner in the wake of SVB's collapse, Requarth said. Over the weekend, U.S. regulators announced an emergency plan allowing depositors of Santa Clara, California-based SVB to access their funds.
• In 2022, more than 1,300 startups in Latin America raked in an estimated $28.17 billion in funding, according to the Association for Private Capital Investment in Latin America.
• Vicente Garrido, the co-founder of Mexican rental property startup Roddo, told Reuters he still was not sure whether the company would make payroll this week.
• "We had all of our capital there, in the U.S.," Garrido said. "In Mexico, we held just a fifth of what we spend in a month."
• Startups in the region often relied on SVB as one of the few banks that offered them U.S. dollar accounts, a requirement from venture firms providing capital in greenbacks.
• Startups would open SVB accounts using what Requarth called a "Cayman sandwich," using holding companies in the Cayman Islands and limited liability companies (LLCs) in the U.S. state of Delaware to avoid a taxation double whammy if the firm was ever sold.

(Source: Reuters)

• In a harsh blow to an already-reeling sector, Moody’s Investors Service on Monday cut its view on the entire US banking system to negative from stable citing heightened risks for the sector after the rapid unraveling of SVB Financial Group (SIVB.O) fueled fears of contagion.
• Two deposit runs occurring at Silicon Valley Bank and Signature Bank have deteriorated the operating environment for the sector that is now battling a crisis of confidence, both from investors and depositors, the ratings agency said. Regardless of the Federal Reserve stating that they will ensure all depositors will have access to their money as of March 13, it has not mitigated the loss in depositor and investor confidence.
• Pandemic-related fiscal stimulus along with more than a decade of ultralow interest rates and quantitative easing resulted in significant excess deposit creation in the US banking sector. This has given rise to asset-liability management risks, with some banks having invested excess deposits in longer-dated fixed-income securities that have lost value during the rapid rise in US interest rates, resulting in significant unrealized losses.
• Moody's also said it was expecting the Federal Reserve to continue tightening monetary policy, in contrast to some others who are expecting the bank collapses this month to reshape the trajectory for interest rate hikes.

(Sources: Moody’s and Reuters)

• Switzerland's radical pledge to bankroll Credit Suisse Group AG has won the embattled lender the chance to resurrect itself from an almost complete collapse in confidence that rattled global markets.
• The move, tantamount to a blank cheque from one of the globe's leading central banks, is reminiscent of the promise by European Central Bank to do whatever it takes to support the euro during the financial crash more than a decade ago.
• In the years that followed, the ECB and other central banks printed billions of euros, a free-money era that spawned a global rally in asset prices. A reversal of low rates to stem rampant inflation has forced a risk rethink and exposed the vulnerability of firms such as Credit Suisse.
• The Swiss National Bank and the country's financial regulator, FINMA, in a joint statement on Wednesday night sought to draw a line under months of speculation about the bank's future that had culminated in a 30% drop in its stock price on Wednesday.
• In the early hours of Thursday, Credit Suisse said it was taking "decisive action" to strengthen its liquidity by exercising its option to borrow from the Swiss National Bank up to 50 billion Swiss francs ($54 billion).
• The move to support the group is designed to stem a crisis of confidence in Switzerland's second-biggest lender resulting from years of scandals and losses. It is one step short of a fully-fledged bailout like those seen during the financial crash more than a decade ago.
• However, it leaves the central bank, which prints the Swiss franc and underpins the Alpine nation's economy, firmly on the hook should confidence in the bank resume its spiral. Meanwhile, Credit Suisse still needs to push ahead with a radical restructuring it undertook in October to restore profitability.
• In their joint statement on Wednesday, the Swiss National Bank and financial regulator said the "current turmoil in the U.S. banking market" would not have any spillover for Switzerland's banks.
• The collapse of Silicon Valley Bank in the U.S. on Friday prompted a widespread flight to quality that saw the bigger lenders that are deemed more solid, including Swiss rival UBS Group AG, attract deposits, deepening Credit Suisse's woes.

(Source: Reuters)

• No new taxes will be introduced to finance the Government’s $1 trillion budget for the upcoming fiscal year. This was announced by Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, as he opened the 2023/24 Budget Debate in the House of Representatives on Tuesday (March 7).
• This is the sixth consecutive fiscal year in which the government has not introduced any new taxes and the eighth year of no new net taxes. Instead, expenditure will be financed with tax and non-tax receipts.
• In terms of new initiatives, Dr. Clarke announced that the Income Tax Act will be amended to incentivise households to purchase solar power generation systems. It will give a 30% tax credit on the cost of these systems up to a maximum cost of $4Mn.
• Whilst the loss in potential revenues from the implementation of this measure was estimated at $100 million, the Minister posited that the potential losses would be offset by positive socio-economic gains, including environmental gains from reducing carbon dioxide emissions, diversifying local energy supply and reducing the demand for crude oil.
• Given the increasing importance of Environmental, Social and Governance (ESG) concerns locally and internationally, environmental initiatives benefiting the productive sector would also be welcomed. Credits made available to the productive sector for environmental and social initiatives have the potential to be a game-changer in the way that Jamaican companies prioritise environmental and social issues, in keeping with international best practices.

(Source: PWC)