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Budget Watch: Jamaica on Track to Attain Lowest Debt Levels in 50 Years Published: 24 March 2023

  • Over the next two years, Jamaica is likely to attain debt levels lower than at any time in the last 50 years, says Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke. The Minister was closing the 2023/24 Budget Debate in the House of Representatives on Tuesday (March 21). “We have to keep on the trajectory to get there, but if we keep on it, we are likely to get to a point where debt levels are lower than any point in the last 50 years,” Dr. Clarke said.
  • The Minister noted that the 30-year journey of the Financial Sector Adjustment Company (FINSAC) and the longer arc of high debt over a 50-year period have taught the country a lesson that “it is easy to put debt on and very hard to take it off,” adding that a “single policy can add mountains of debt”.
  • “What that does is strangle the chances of generations, as servicing interest on top of interest over half a century has robbed generations of opportunities for a better life. And high debt has made economic crises worse, economic shocks more severe, and has reduced the fiscal space and flexibility needed to respond to economic shocks,” Dr. Clarke stated.
  • The Minister noted that this had forced Jamaica into lengthy decades-long periods of economic recovery that have impeded the country’s social, economic and national development.
  • FINSAC, is an entity that was established by the Jamaican government to address the financial sector crisis in the 1990s.
  • Jamaica’s debt-to-GDP is anticipated to end FY 2022/23 at 79.7% and fall further to 74.2% in FY2023/24. This paves the way to achieve the debt target of 60% of GDP by end-FY 2027/28.

(Sources: JIS News and Ministry of Finance)

Jamaica Producers Group Limited Acquires the Juicy Group NV and HPP Belgium NV   Published: 24 March 2023

  • Jamaica Producers Group Limited announced that it has acquired 100% of the shares of The Juicy Group NV and HPP Belgium NV. JP operates as a market leader in Europe in the business of fresh juice and is the owner of A.L. Hoogesteger Fresh Specialist B.V. in the Netherlands and is the major shareholder of Co Beverage Lab S.L. in Barcelona, Spain.
  • With this acquisition, JP strengthened its position in the European market for freshly squeezed juices and smoothies. The Group now has production facilities and commercial offices in Zwanenburg (The Netherlands), Binche (Belgium), and Barcelona (Spain). From these three state-of-the-art production locations, each with its own specialization and core customers, the JP juice group will offer a wide range of cold-pressed fresh juices and smoothies in common packaging forms and make use of advanced ultra-fresh and High-Pressure Processing technology in all its facilities.
  • "We are delighted to add The Juicy Group and HPP Belgium NV to our Pan European juice group," said Jeffrey Hall, Chief Executive Officer of JP. "This acquisition furthers our strategic objective of being a Pan-European leader in the fresh juice business. It allows us to expand our production capacity, drive innovation and serve our core customers even better. We congratulate the JP team in Europe for delivering on this project for the wider Group."
  • The acquisition of The Juicy Group NV and HPP Belgium NV was completed on March 21, 2023, and will form part of the assets that will be transferred to the Pan Jamaica Group as part of the amalgamation agreement between PanJam Investment Limited (‘PanJam’) and JP, which will see JP transferring its core businesses to PanJam in exchange for a 34.5% investment in PanJam. The amalgamation is on schedule for completion in the second quarter of 2023.

(Source: JSE)

Brazil Central Bank Holds Rates, Flags Increased Inflation Expectations Published: 24 March 2023

  • Brazil's central bank cited rising inflation expectations as it kept interest rates unchanged for the fifth consecutive policy meeting on Wednesday, March 22, drawing concern from the government and weakening bets of imminent monetary easing.
  • The bank's rate-setting committee, known as Copom, maintained its Selic benchmark interest rate at 13.75%. The decision, which defied intense pressure from the new government of President Luiz Inacio Lula da Silva to reduce borrowing costs, matched the expectations of all 30 respondents in a Reuters poll.
  • "Taking into account the uncertainty of the scenarios, the committee remains vigilant, assessing if the strategy of maintaining the Selic rate for a long period will be enough to ensure the convergence of inflation," policymakers wrote in their policy statement.
  • However, Finance Minister Fernando Haddad criticized the statement, saying it was "very concerning" and that the central bank's next decision could put the country's fiscal position "at risk."
  • Haddad also said Brazil's inflation is more controlled than that of other developing countries and that inflation expectations could rapidly be reduced in light of new events.
  • To date, inflation has cooled to 5.6% in the 12 months through February, but it is still far above this year's 3.25% official target. Meanwhile, the central bank's inflation expectations have risen to 5.8% for 2023 and 3.6% for 2024. With this in mind, the Committee emphasizes that it will continue with its approach until the disinflationary process consolidates and inflation expectations anchor around its targets.

(Source: Reuters)

Falling Inflation In The Dominican Republic To Allow For Rate Cuts In Q3 2023 Published: 24 March 2023

  • In its last policy meeting on February 28, the Banco Central de la Republica Dominicana (BCRD) decided to continue holding rates at 8.50%, in line with Fitch’s expectations.
  • The central bank’s monetary board cited the broad decline in international prices for commodities like oil and food, as well as primary materials necessary for manufacturing. This easing price growth has been underpinned by government subsidies for gasoline, utilities, and food items, as well as slowing household consumption.
  • Additionally, both headline and core inflation have shown a sustained decline since Q3 2022 towards the central bank’s inflation target range of 4.0% (+/- 1.0%). Despite pausing at a time when markets were pricing in a much more aggressive path for interest rates in developed markets, the Dominican peso has held up reasonably well.
  • Therefore, Fitch expects that headline inflation will fall from an average of 8.8% y-o-y in 2022 to 5.6% in 2023, descending to 4.9% in 2024; and will give the BCRD scope to remain in pause mode.
  • Looking forward, the central bank will likely start cutting rates in Q3 2023, setting the foundation for Fitch’s interest rate forecast of 7.50% by end-2023. However, the DR’s economy will see 3.8% GDP growth in 2023, far below the pre-pandemic average of 6.1% between 2015 and 2019, signalling that the previous elevated inflation rates have had the intended effect on domestic demand.

(Source: Fitch Solutions)

China Will Make Up Nearly 40% Of The Rise In Global Oil Demand In 2023, Wood Mackenzie Says   Published: 24 March 2023

  • China will make up a sizeable portion of the world’s demand recovery for oil as the global economy braces itself for a slowdown in the wake of interest rate hikes, Wood Mackenzie said. The research firm said in a Thursday report that it views China’s reopening as the “single biggest demand driver” for a recovery in oil demand this year — it expects the country will make up roughly 40% of the world’s recovery in demand for the commodity.
  • “A return to normal mobility in China is the single biggest demand driver, accounting for 1.0 million barrels per day (b/d) of the 2.6 million b/d increase this year,” a team of analysts led by vice president Massimo Di Odoardo said in the report, laying out its base case scenario. That means 38.5% of global oil demand recovery would come from China.
  • While Wood Mackenzie says private consumption will be the leading factor for a surge in China’s oil demand, it sees an upside to its base case scenario if economic growth were to be industry-led instead.
  • According to the Chinese government’s latest work report, they have taken a very cautious approach to its growth prospects for this year. They have set a conservative GDP of 5%. It is important to note that China has a history of outpacing their government forecasts – in 12 of the past 18 years growth has exceeded the official target.
  • Analysts at Oxford Economics, however, are of the view that government measures would have the opposite effect. They expect that Beijing’s focus on reining in local government debt problems will constrain infrastructure spending and, by extension, demand for commodities.

(Source: CNBC)


Citigroup Downgrades European Banks, Sees STOXX 600 Little Changed By Year-End Published: 24 March 2023

  • Citigroup downgraded Europe's banking sector, warning the rapid pace of interest rate hikes will further weigh on economic activity and lenders' profits, and said it expects the region-wide equities index to remain near current levels by the end of the year.
  • The Wall Street brokerage cut its rating on European banks to "neutral" from overweight" in a note dated Wednesday, saying the likely continued monetary policy tightening adds to worries stemming from the turmoil in the global banking sector.
  • "The European banking sector's fundamentals look healthy. But the ongoing confidence crisis could limit banks' risk appetite and reduce the flow of credit," equity strategists led by Beata M Manthey said in the note.
  • They, instead, prefer technology stocks and upgraded the sector to "overweight", citing healthy cash balances and several growth drivers.
  • Citigroup trimmed its 2023 year-end forecast for the pan-European STOXX 600 index by more than 5% to 445 points, which represents a 0.4% downside from current levels. Citi also cut its forecast for UK's FTSE 100 index by 5%, now expecting the blue-chip index to end the year at 7,600 points, less than 1% higher than current levels.

(Source: Reuters)


Barita Investments to be de-listed from Jamaica Stock Exchange Published: 23 March 2023

  • Barita Investments will be delisting from the Jamaica Stock Exchange, as part of its parent company’s, Cornerstone United Holdings Jamaica (CUHJL), re-organization exercise. The proposed plan to remove the shares of Barita from the Jamaica Stock Exchange comes after the Bank of Jamaica raised no objection to the re-organization of Cornerstone Group of Companies, of which Barita is a member.
  • This is in a bid to address a regulatory concern, linked to the parallel ownership of Cornerstone Trust & Merchant Bank and Barita Investments Limited by Cornerstone shareholders. Cornerstone says, under the proposed new structure, Cornerstone Trust Mutual Bank (CTMB), Barita and Barita Unit Trust Management Company, will be held under Cornerstone United Holdings, which will see a new company being formed for this purpose.
  • Barita's shares will be delisted from the Jamaica Stock Exchange, and shares of the newly formed financial holding company (FHC) will be listed in its place. Existing shareholders who own an equal number of shares in each of the Cornerstone entities will own one set of shares in Cornerstone Financial Holdings, post-merger.
  • At the end of the process, Cornerstone United Holdings Jamaica will become the direct parent of Barita and CTMB. As a key part of the process, Cornerstone says an application will be made to the Supreme Court for meetings to be had with shareholders of the companies in the group that will be reorganized, for a vote on the Scheme to be executed.

(Source: RJR)

Wigton Windfarm Limited to Supply Solar Power Systems for Essex Valley Agriculture Development Project Published: 23 March 2023

  • Wigton Windfarm Limited (WIG), along with its joint venture partner, Innovative Energy Company, entered into a US$7,328,445.17 contract with the Ministry of Agriculture and Fisheries (MOAF) for the design, supply, and installation of distributive solar photovoltaic systems plus storage at certain Essex Valley Agriculture Development Project (EVADP) locations. 
  • The Essex Valley Agricultural Development Project, which commenced in April 2017, aims to assist in the achievement of food security and the modernisation of the agricultural sector by increasing the area under formal irrigation in St. Elizabeth by 50%, and the yield of crops in Essex Valley to a minimum of 90% of their potential yield.
  • On completion, more than 700 farmers operating on 810 hectares of land in the Essex Valley region will benefit from an irrigation system that will deliver 1,700 cubic metres per hour of water. The renewable energy plant to be supplied by Wigton Windfarm Limited will be used to power this irrigation system.

(Sources: JSE & JIS News)

T&T’s Economy On the Mend – IMF Latest Stats Show Published: 23 March 2023

  • Trinidad and Tobago’s economy appears to be slowly on the mend, according to the latest stats released by the International Monetary Fund (IMF). 
  • The IMF’s country report for the twin-island republic said in 2022, its real gross domestic product (GDP) expanded by 2.5%, supported by the non-energy sector and partially offset by an unexpectedly weaker performance of its energy sector. 
  • Notably, inflation in T&T reached 8.7% at the end of last year, driven by imported energy and food prices, partial liberalization of domestic fuel prices in 2022, and domestic flooding.
  • These higher-than-expected energy prices, however, resulted in the overall fiscal balance registering a surplus of 0.3% of GDP in FY2022, for the first time in over a decade, and after a record deficit of 11.7% of GDP in FY2020.
  • Looking ahead, the organization stated that recovery is expected to gain broad-based momentum in 2023 with a 3.2% GDP expansion. However, over the medium term, as oil and gas fields mature, potential growth will slow down to 1.5%. The IMF lauded T&T for its prudent management of the energy revenue windfall and underscored the importance to continue rebuilding buffers.
  • Inflation is projected to slow down to 4.5% by the end-2023 and will continue declining with international prices, which will result in a narrower current account surplus, averaging 6.7% of GDP. Its international reserve coverage is projected to remain adequate at around 6.5 months of prospective total imports by 2028.
  • The risk to the growth outlook is tilted toward the downside. Downside risks stem from potential disruptions to domestic oil and gas production; a sharper-than-expected global slowdown affecting energy markets, and global financial instabilities. On the upside, there is the potential for higher-than-expected energy production and prices, including from a new U.S. license to Trinidad and Tobago to develop a major gas field in Venezuela.

(Source: IMF)

Bahamas Update: G.B.I.A, Another Attempt At Development Published: 23 March 2023

  • Deputy Prime Minister Chester Cooper, who is in charge of tourism, investments, and aviation, announced that the government reached an agreement with a Bahamian-English consortium to undertake a $200Mn redevelopment of the Grand Bahama International Airport (GBIA).
  • GBIA was damaged by Hurricane Dorian in September 2019. Its subpar state has been a hurdle for the economy of Grand Bahama. Following more than a year of negotiations with the US-based Electra Group, the government abandoned plans to sell and develop the Grand Lucayan resort. Cooper argued that to sell Grand Lucayan, GBIA must be fixed first to host US Customs and Border Protection Preclearance, which never returned after Dorian.
  • The consortium will therefore “build, finance, operate, maintain and redevelop” the GBIA. Cooper stated that their mandate is to develop a resilient, efficient, commercially successful world-class airport.
  • The project is expected to generate 1200 construction jobs. The UK Export Finance unit will provide financing for the project. The consortium is composed of Bahamas-based Aerodrome and British Manchester Airport Group Ltd and BHM Construction International.
  • Investment planning is set to start immediately and the first phase of the project is scheduled for completion by Q1 2025. The second phase will last another three years.
  • Once completed, the airport will be operated by Manchester Airport Group and profits generated by GBIA will go to an airport infrastructure fund.
  • If confirmed, this will be good news for the Bahamas as it will aid in improving employment and tourists arrivals. However, the plan is still subject to environmental approvals as the airport location is exposed to natural elements, and has been damaged repeatedly by all major hurricanes that hit the Bahamas; so feasibility and environmental studies will be of the essence.

(Source: Oppenheimer)