• Struck by the worst drought in five decades, Costa Rica announced an electricity rationing plan on Thursday, May 9, blaming a severe lack of rainfall that has hobbled hydroelectric plants.
• The Central American nation, famed for its beaches and lush landscapes that power ecotourism normally gets about 70% of its electricity supply from the plants. State-run electricity company ICE (Instituto Costarricense de Electricidad; English: Costa Rican Institute of Electricity) has blamed the drought conditions partly on the weather phenomenon known as El Nino.
• Roberto Quiros, ICE's electricity director, described water levels at main reservoirs as "critical," adding the current El Nino is the most severe on record. He also pointed to delays in contracted deliveries from private power plants.
• The country last saw electricity rationing in 2007. The power cuts, implemented on Monday, May 13, are scheduled to last up to three hours daily but will not affect hospitals, industry or other high-voltage customers.
• ICE is also asking residential users to reduce consumption as much as possible. Widespread power cuts blamed on a heat wave also hit Mexico earlier this week, in addition to similar problems in Colombia and Ecuador.

 (Source: Reuters)

• The first of three inflation reports this week, the April producer price index (PPI), surprised to the upside, with both the headline and core rising 0.5% on the month, although there were downward revisions to some prior months.
• Energy was up notably on the month (2.0%), broadly as expected, while food unexpectedly contracted on the month (-0.7%). Excluding food and energy, today’s core reading was the firmest since last July.
• On a year-over-year basis, headline PPI inflation firmed to 2.2%, while core PPI inflation held steady at 2.4%. Within the core, final demand services rose 0.6% in April, while final demand goods were up 0.3%—both firmer than anticipated—whereas construction rose a softer-than-expected 0.1%.
• Some “pipeline pressures” can show up in PPI first and then gradually translate into consumer prices over time; likely more relevant in the near term are broad macro dynamics that suggest some cooling in an economy that is still running above potential and with a still tight labour market.
• Some PPI measures do feed directly into core PCE tracking estimates; …financial services were strong, while airfares point to a contraction; and medical costs were moderate overall.

(Source: JPMorgan)

• The Group of Seven (G7) major democracies meeting in Italy next week will discuss the risk of fragmentation in global trade after "very tough" tariffs imposed by the United States against China, Italian Economy Minister Giancarlo Giorgetti said.
• S. President Joe Biden unveiled this week a bundle of steep tariff increases on an array of Chinese imports including electric vehicle (EV) batteries, computer chips and medical products, risking an election-year standoff with Beijing in a bid to woo voters who give his economic policies low marks.
• The meeting on May 24-25 among the G7 finance ministers in the northern Italian town of Stresa will reflect on the "fragmentation of global trade, with the latest moves by the American government, which has shown its cards with very tough measures against China", Giorgetti said.
• He was being interviewed for a conference in Milan on Tuesday organised by the Italian newspaper La Verita."The world as we have known it is finishing," Giorgetti said, adding that "a trade war is underway, which reflects geopolitical tensions" and Europe still needs to carve out its role in the evolving scenario.
• Another item on the agenda for the meeting will be how to use frozen Russian assets seized after Moscow invaded Ukraine, the Italian minister said. The G7 froze around $300 billion worth of financial assets soon after Moscow's attack in February 2022. Since then, the European Union and other G7 countries have debated how and whether to use the funds to help Ukraine.

(Source: Reuters)

• Minister of Agriculture, Fisheries and Mining, Hon. Floyd Green, is urging existing and potential mining operators to place greater focus on innovation, value addition and sustainability.
• “Part of the complaint with some of our historical minerals and the things that we’ve mined for years is that we haven’t focused on carrying it to the finished product, and as such, we haven’t retained enough of the dollars that are spent on the finished product,” he said. Mr. Green was addressing Tuesday’s (May 7) Minerals Sector Investment Forum, held at the Jamaica Conference Centre in Kingston.
• The Minister encouraged operators to diversify sources of construction materials. “Significant work has been done in Jamaica about our geology, so we do know that we have these items in significant quantities, but we need more of our companies to be looking into quarrying hard volcanic rocks,” Mr. Green said.
• He further stated “We believe that there are opportunities to partner our limestone sector with what we need to do to mitigate… climate change and to limestone quarry for specific purposes, especially purposes such as coastal defences. It’s very important, as we see rising sea levels, that we look at how we are setting up these barriers to ensure that some of our low-lying towns and capitals are protected.”
• Additionally, he pointed out that the minerals sector is critical to Jamaica’s growth and development. “The mining sector is the cornerstone of our economy. For the 2.0% growth that we had last year in our GDP (gross domestic product), our mining sector contributed 1.1%” he said.
• Mr. Green further shared that the sector is responsible for about 80% of Jamaica’s earnings from traditional exports. “Last year, our earnings amounted to over US$325Mn from the exportation through our mining sector; so again, it has proven to be a really strong driving force for growth and prosperity. Thankfully, we saw the rebound of alumina exportation last year with Jamalco coming back on stream, and we have seen significant increases – in fact, over 300% increase in our limestone exportation during last year,” he informed.

(Source: JIS)

• Following fruitful discussions with Senior Executives of Emirates Airline, Minister of Tourism, Hon. Edmund Bartlett says plans are underway to leverage the airline’s routes and networks into the Caribbean and Latin America.
• Emirates Airline, based in Dubai, is one of the world’s largest airlines that connects its customers to a network of over 150 destinations. The airline’s current flights to Miami and new flights slated for Bogota, Columbia are critical to better integrating Jamaica and the Caribbean into their network.
• There is also a medium-term vision of the Minister to secure firmer arrangements with the Caribbean and the airline in the form of a hub creation. Through strong code-sharing partnerships with other airlines like Avianca, Copa and Caribbean airlines, Emirates would have several options for increasing its footprints in the region.
• “The time is right for us to tap into the regional partnerships being created through Emirates and Jamaica is ready to be inserted within the future logistics of the airline to get more from the Middle Eastern market. This would be a game changer for the destination,” said the Minister.
• Jamaica welcomed over 1200 visitors from the Middle East last year as the island continued its post-pandemic recovery and growth. The Emirates partnership will play a critical role in enabling mass visitors from the Middle East to come to the island.
• Discussions on this possible partnership were held during Arabian Travel Market, held May 6-9 in Dubai, the leading global event for the inbound and outbound travel industry in the Middle East.

(Source: JIS)

• Energy Minister, Stuart Young, is hopeful that the acquisition of Trinity Exploration and Production Plc by Canadian oil and gas company Touchstone Exploration Inc. will increase exploration and hydrocarbon production in Trinidad and Tobago.
• Young expressed his anticipation for the successful completion of the acquisition, emphasising that Trinidad and Tobago remains welcoming to international investment in the industry.
• On May 1, Touchstone announced that it had reached an agreement with Trinity on the terms of an all-share acquisition.
• Last Thursday, May 9, Young and permanent secretary Penelope Bradshaw-Niles met with executives of Trinity Exploration and Production at the energy ministry's headquarters located at the International Waterfront in Port of Spain.
• 'At the meeting, the Trinity Exploration and Production Plc executives provided an update to the energy minister on the finalisation of the company's agreement to its 'all-share acquisition' by Touchstone.
• The acquisition will allow for increased investments in Trinidad and Tobago from the combined company's cash flow into its increased production base. Additionally, post-acquisition, the existing Trinity Exploration shareholders, will own approximately 20% of the Canadian firm's shares, as each 'Trinity' share will be converted to 1.5. Touchstone shares, it stated.

 (Source: Trinidad Express Newspaper)

• The US embassy in Guyana announced on May 9 that military exercises would be held in the South American country and that US military planes would fly over Georgetown and the region on Thursday. According to the text, the embassy’s objective is to maintain its commitment to the “US-Guiana bilateral defence and security partnership.”
• The note also states that the United States is working on “deterring aggression, defeating threats, responding rapidly to crises, and working with allies and partner nations to strengthen the region’s capacity to ensure a safe, free, and prosperous Western Hemisphere.”
• A US military officer also visited Guyana recently and on May 9^th, the embassy said that US Southern Command’s Director of Strategy, Policy and Plans, Julie Nethercot, was in Guyana from May 6 to 8 to oversee “strategic planning, policy development and coordination of security cooperation for Latin America and the Caribbean.”
• The Venezuelan government responded in social media posts, in which ministers called the measure a “threat to regional peace”. Venezuelan Foreign Minister, Yván Gil, responded to the statement with a social media post saying the measure is “further proof of the provocations” that the Southern Command is waging against the Venezuelan government from a “war machine” against the country and linked the exercises to ExxonMobil’s activities in Guyana.
• In March, ExxonMobil discovered the Bluefin oil well, located in the Stabroek block, exactly off the coast of Essequibo.
• Minister Gil also asserted that ExxonMobil has taken over Guyana and now intends to destabilise the region by threatening the Peace Zone agreed between Guyana and Venezuela. For him, the Guyanese government is violating the so-called “Argyle Accords”, which provided for the non-use of force and the continuation of dialogue to resolve the Essequibo dispute.
• Venezuelan Defense Minister Vladimir Padrino López also commented that the measure “threatens regional peace” and that he rejects “forcefully” the “provocations of the Southern Command” and said that Guyana has assumed the role of a “new US colony”. “Our Aerospace Defense system remains activated against any attempt to violate Venezuelan geographic space, including the territory of Essequibo. Alert!” concluded the minister.
• Diplomatic tension between Guyana and Venezuela remains high over the disputed territory of Essequibo. In March 2024, Venezuela’s President Nicolás Maduro passed a law declaring the border region of Essequibo, which belongs to Guyana, a Venezuelan federal state.

(Source: Peoples Dispatch)

• Corporate price gouging has not been a primary driver of U.S. inflation, according to research published on Monday by economists at the Federal Reserve Bank of San Francisco. While markups for motor vehicles and petroleum products did rise sharply during the 2021-2022 inflation surge, markups across the entire spectrum of U.S. goods and services have been relatively flat during the post-pandemic recovery, the bank's latest Economic Letter showed.
• "As such, rising markups have not been a main driver of the recent surge and subsequent decline in inflation during the current recovery," wrote the bank's research chief Sylvain Leduc and colleagues Huiyu Li and Zheng Liu. Inflation by the Fed's targeted measure, the year-over-year change in the personal consumption expenditures (PCE) price index, peaked at 7.1% in June 2022 and has since fallen, registering 2.7% in March.
• S. President Joe Biden has blamed corporate greed for still-elevated prices, accusing companies of boosting profits by shrinking portion sizes, but leaving the selling price unchanged, and by failing to pass on falling costs to consumers. Fed policymakers, and many economists, say the inflation surge can be better explained by the combined effect of supply chain disruptions and a drop in labor supply during the post-pandemic recovery that occurred, just as consumer demand rose.
• They attribute the recent easing in inflation to healing supply chains and a rise in immigration that has added to the supply of workers, along with cooling demand amid higher borrowing costs as the Fed raised its policy rate. Leduc and his colleagues did not refer to Biden or use the colloquial term 'greedflation,' but their work was a clear rebuttal of the theory that corporate profiteering has been the main cause of higher prices. Other economists, using different methodologies, have drawn similar conclusions.
• "Data for the current recovery show that the increase in corporate profits is not particularly pronounced compared with previous recoveries," the San Francisco Fed researchers wrote. "Markups also have not played much of a role in the slowing of inflation since the summer of 2022."

(Source: Reuters)

• Debate among Federal Reserve officials deepened this week over whether U.S. interest rates are high enough, and may be stoked further after a key survey showed a jump in consumers' inflation expectations. "There are ... important upside risks to inflation that are on my mind, and I think there are also uncertainties about how restrictive policy is and whether it's sufficiently restrictive" to return inflation to the U.S. central bank's 2% target, Dallas Fed President Lorie Logan said at a Louisiana Bankers Association conference in New Orleans.
• "I think it's just too early to think about cutting rates. I think I need to see some of these uncertainties resolved … and we need to remain very flexible," Logan said, though she did not directly address whether she feels the Fed may need to again raise its benchmark policy rate from the 5.25%-5.50% range that has been maintained since July.
• In an appearance on CNBC, Minneapolis Fed President Neel Kashkari said he's in a "wait-and-see mode" in regards to what's next for central bank policy and the Fed can stay at current rates "as long as needed" to bring inflation down. However, he added there is a "high" bar to concluding that higher rates are needed to cool inflation. Many U.S. central bank officials, including Fed Chair Jerome Powell, have said they still think further rate hikes will prove unnecessary.
• Data on Friday provided a further jolt in the wrong direction. Year-ahead inflation expectations in the University of Michigan's survey of consumer sentiment rose from 3.2% to 3.5% in May, the highest level since November, and longer-term expectations ticked higher as well.
• While a month's reversal may not be significant, if it continues it would challenge the Fed's current assessment that expectations are "anchored"^[1] - and add to arguments made by Logan and some others that rates may not be high enough to finish the inflation fight.

(Source: Reuters)

^[1] Anchored expectations are considered by Fed officials as an important sign of the central bank's credibility and an aid in bringing inflation back to 2%.

• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, has informed that the current inflation target for the Bank of Jamaica will remain at 4%-6%. He made the announcement to the House of Representatives on Tuesday (May 7).
• The Minister further explained that the process for setting and renewing the target was codified into law via the Bank of Jamaica Amendment Act 2020, which, among other things, formally introduced Jamaica’s inflation-targeting regime.
• Clarke stated that in April 2021, after consultation with the Bank of Jamaica, documents were tabled advising of the renewal of the inflation target of 4%-6%, which was effective for three years.
• “Following consultation with the Governor of the Bank of Jamaica, who is also Chairman of the Monetary Policy Committee, I confirm and have so tabled documents advising that the inflation target for Jamaica, calculated as the 12-month point-to-point percentage change in the consumer price index as measured by STATIN, will remain at 4%-6% for the next three years,” Dr. Clarke said.
• “The midpoint of this range of 5% will be the operational target for the Monetary Policy Committee. This target remains consistent with Jamaica’s economic structure and stage of development,” he added.
• The Minister noted that a lower inflation target would require higher interest rates for longer, which could be detrimental to growth and fiscal dynamics. Furthermore, Dr. Clarke said Jamaica’s recent experience has highlighted that there are constraints to targeting a lower inflation rate at this time.
• “In particular, the frequency of economic shocks, labour market rigidities, low productivity, a weak monetary transmission system and regulated price adjustments, constrain the ability of the Bank of Jamaica to deliver a lower inflation rate than what is currently targeted in the near term,” the Minister said.

 (Source: JIS)