• Mexico’s economy posted the first quarterly contraction since 2021, shrinking much more than expected on weaker domestic demand and uncertainty over tariffs by the US, the country’s top trade partner.
• Gross domestic product fell 0.6% in the fourth quarter, more than all forecasts in a Bloomberg survey of economists that had a -0.2% median estimate. From a year ago, GDP expanded 0.6%, below the 1% median projection, according to preliminary data published Thursday by the National Statistics Institute. For the full year 2024, Mexico’s GDP expanded by 1.5%.
• Latin America’s second-biggest economy is widely expected to slow for a fourth consecutive year in 2025 amid government retrenchment and tight fiscal conditions coupled with concern over policy direction in both Mexico and the US. Mexico’s President Claudia Sheinbaum — who started her term in October — is continuing to pledge strong local demand, while the threat of US tariffs on Mexico’s exports rattles markets and halts investments.
• Most Mexico-watchers had long projected a challenging year for the economy given still-high borrowing costs and concerns that the arrival of companies in the country — through a practice known as “nearshoring” — had not happened at the explosive pace some predicted.
• More recent developments, such as the election of US President Donald Trump, have pressured the exchange rate and now pose upside risks to inflation while threatening the central bank’s current easing cycle.
• Banco de Mexico Governor Victoria Rodriguez said recently that the bank could accelerate the pace of easing in the year’s first policy meetings, which start Feb. 6, following a string of quarter-point cuts.

(Source: Financial Post)

• Food security in southern Mexico and parts of Central America is at risk due to extreme weather events such as droughts, according to a report released this Monday by the United Nations Food and Agriculture Organization (FAO). According to the organization, 14 countries in Latin America and the Caribbean may see restricted access to food, known as “undernourishment,” due to the climate crisis.
• In its report “Regional Overview of Food Security and Nutrition 2024,” the FAO particularly highlights the vulnerability of Central America’s “Dry Corridor” to prolonged droughts. This strip of territory extends from southern Mexico to a region of Panama, passing through Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica.
• “Fourteen countries are considered vulnerable because they have a higher probability of experiencing an impact on undernourishment due to these extreme phenomena,” emphasized the organization, with regional headquarters in Santiago, Chile, without revealing the complete list. When consulted, the FAO office also did not detail the reasons for not identifying the other nations at risk.
• In addition to droughts, heat waves and intense storms reduce agricultural productivity, disrupt supply chains, and increase food prices, the organization said in its study. Between 2019 and 2023, food insecurity – discontinuous access to food – increased by an average of 1.5% in vulnerable countries.
• “Climate variability and extreme events are a threat to the stability of food security and nutrition,” warned Mario Lubetkin, FAO Regional Representative, in a statement. However, hunger affected fewer people in Latin America in 2023, according to the report. That year, 6.2% of the region’s 733 million inhabitants suffered from lack of food, 2.9 million fewer people than in 2022.

(Source: Tico Times)

• The Federal Reserve held interest rates steady on Wednesday and gave little insight into when further reductions in borrowing costs may take place in an economy where inflation remains above target, growth continues, and the unemployment rate is low.
• After several months in which inflation data have largely moved sideways, the U.S. central bank dropped from its latest policy statement language saying that inflation "has made progress" towards the Fed's 2% inflation goal, noting only that the pace of price increases "remains elevated."
• Recent key inflation readings remain about half a percentage point or more above the Fed's target. Fed officials say they largely believe the progress in lowering inflation will resume this year but have now put rates on hold as they await data to confirm it.
• The unanimous decision to keep the overnight interest rate in the current 4.25%-4.50% range, coupled with the new statement, puts the Fed in a holding pattern as officials await further inflation and jobs data and clarity on the impact of President Donald Trump's policies.
• The decision to hold the policy rate steady was widely anticipated following three consecutive rate cuts in 2024 that reduced the Fed's benchmark rate by a full percentage point.

(Source: Reuters)

• Prices in British shops fell a bit less sharply in January than in December and food costs rose at the fastest monthly pace since April last year, according to a survey published on Tuesday.
• Annual shop price deflation of 0.7% this month was less than in December when prices were down by 1.0%, the sharpest drop in more than three years, the British Retail Consortium (BRC) said.
• Food prices were up by a monthly 0.5% in January, a stronger rise than December's 0.1% increase. Overall prices fell by 0.4% between December and January.
• Helen Dickinson, chief executive of the BRC noted that retailers might have to push up prices in response to the higher social security contribution requirements announced by finance minister Rachel Reeves along with an increase in the minimum wage and a new packaging levy.
• "Without action, UK households will feel the effects," Dickinson said calling on the government to offset the increase in costs for the sector by ensuring retailers do not have to pay more in property taxes.
• Britain's headline rate of inflation fell to 2.5% in December but is expected to rise again with some economists forecasting that it will hit 3% in January.

(Source: Reuters)

• Tropical Battery Company Limited (Tropical) has announced that the United States Patent and Trademark Office (USPTO) has granted trademark approvals, that will enable it to sell its branded products directly on Amazon's US platform. This development represents a strategic step in bringing Tropical Battery's trusted and innovative products to a broader audience.
• The approved trademarks encompass key product categories, including solar panels, batteries, automotive oils, and coolants. Although Tropical established its Amazon account over a year ago, operations were intentionally delayed meeting the platform's rigorous standards, including obtaining these critical trademark approvals.
• These approvals align with its recent investment in the United States through Rose Batteries, further strengthening its presence in this important market. Selling directly on Amazon is expected to boost its visibility, accessibility, and customer credibility, creating new growth opportunities.
• Rose Batteries, a recent addition to Tropical Battery’s portfolio, specializes in mission-critical custom battery packs tailored for a wide range of applications, including innovative utility grid solutions, industrial systems, medical devices, robotics, drones, and other demanding high-performance sectors.
• Tropical Battery’s stock price has increased by 8.8% since the start of the calendar year, fueled by strong year-to-date earnings growth and promising growth opportunities driven by its recent strategic developments. The stock closed Monday’s trading session at $2.73 implying a P/E of 17.3x last 12 months’ earnings, which is below the Junior Market Distribution Sector Average of 20.3x.

(Sources: JSE & NCBCM Research)

• As the Government pivots to growth, Prime Minister, Dr. the Most Hon. Andrew Holness, has renewed his commitment to establishing Jamaica as an international financial services centre.
• The Prime Minister speaking at the Jamaica Stock Exchange Investments & Capital Markets Conference held at The Jamaica Pegasus Hotel in New Kingston last Tuesday (January 21) noted that while Jamaica already has a robust financial sector, further modernisation is essential to meet international standards.
• The Government has made substantial progress by passing several key laws, including the Partnership General Act and the Trust and Corporate Services Providers Act. The final legislation required is the Limited Liabilities Company Act, which has been refined to ensure it meets global expectations.
• This Act is designed to provide a more business-friendly framework than the Companies Act. The PM further emphasized that these legislative measures aim to create a modern business environment that supports both local and foreign enterprises. This suite of legislation is expected to introduce new business structures, attract investments, and strengthen Jamaica’s position as an international business hub.
• In addition, the recent legislation that raised the participating share capital limit for Junior Market companies from $500Mn to $750Mn, calling it a strong demonstration of Jamaica's commitment to becoming a leading financial and business hub.
• The Junior Market currently features 48 listed companies with a market capitalisation of $148.50Bn. Its growth could attract MSMEs and stimulate capital market activity in the country.

(Sources: JIS &NCBCM Research)

• President Donald Trump has vowed that the United States would take back the Panama Canal but has given no further details on when or how he intended to reclaim the canal - which is the sovereign territory of an ally.
• "We need to increase support for American companies seeking to do business in Panama and throughout the Americas. Chinese companies must not be the sole bidders on contracts," Federal Maritime Commission Chair Louis E. Sola said in written testimony to be presented on Tuesday at the Senate Commerce Committee hearing on the Panama Canal.
• Senate Commerce Committee Chair Ted Cruz said ahead of the hearing: "The United States paid for and built the Panama Canal, but Panama is treating America unfairly and ceding control of key infrastructure to China." Previously, Trump has refused to rule out possible use of military force, drawing criticism from Washington's Latin American friends and foes alike.
• In Sola's testimony, he said: "The United States is not without options in addressing the growing presence of China and Chinese companies in Panama and throughout the Americas. Nor are we without options as they relate to the continued viability of the Canal." He also said it was crucial to protect the independence of the Panama Canal Authority.
• Panama's president, Jose Raul Mulino, said last week that Panama has administered the canal responsibly for world trade, including for the United States, and that it "is and will continue to be Panamanian." More than 40.0% of U.S. container traffic, valued at roughly $270 billion annually, transits the Panama Canal.

(Source: Reuters)

• Few countries have been hit harder by the soaring dollar and U.S. bond yields than Brazil. However, the country has one thing going for it - as U.S. President Donald Trump prepares to levy punitive tariffs on many of America's major trading partners, Brasilia is unlikely to be in his protectionist line of fire.
• Brazil is once again the classic case of an emerging economy under pressure. Financial conditions are the tightest since 2016, according to Goldman Sachs, real yields above 10.0% are the highest in more than 15 years, and its currency has never been weaker.
• Brazil's central bank is actively intervening to stabilize the real, raising interest rates and spending US$28Bn of reserves in December—the largest decline in 19 years. Despite a healthy primary fiscal balance, high interest burdens strain public finances, while investor anxiety drove a US$12.6Bn net outflow from debt and equity funds in December, the second-largest since 1995.
• Brazil's unique trade position with the U.S. contrasts with other emerging economies, as it does not run a bilateral trade surplus. While Trump's earlier policies benefited Brazil's agriculture sector by reducing China's reliance on U.S. soybeans, his protectionist rhetoric and threats to disrupt global trade could severely impact Brazil, particularly if Chinese demand slows.
• Ideological differences between President Lula and Trump, as well as tensions with figures like Elon Musk, could exacerbate friction. Additionally, Brazil risks collateral damage from U.S.-driven global instability, and Lula's potential populist response could worsen Brazil's economic vulnerabilities.

(Source: Reuters)

• The Bank of Canada (BoC) on Wednesday trimmed its key policy rate by 25 basis points to 3%, cut growth forecasts and warned Canadians that a tariff war triggered by the United States could cause major economic damage.
• Wednesday's cut marked the sixth time in a row that the bank has reduced borrowing costs. However, while inflation has consistently stayed around the mid-point of the bank's 1-3% target range, economic growth is still sluggish.
• Canada sends 75% of all goods and services exports to the United States, and U.S. President Donald Trump is promising to impose a 25% tariff on all imports from Canada on Saturday. The bank now faces the challenge that U.S. tariffs might both drive up inflation - in theory, prompting the need for higher rates - and also cut growth, which could on paper mean more stimulus in the form of lower rates.
• If Canada and other nations slapped a retaliatory 25% tariff on the United States, this could cut Canadian growth by 2.5 percentage points in the first year and another 1.5 percentage points in the second year, the bank said, noting that this was not a forecast but a hypothetical scenario.
• "A long-lasting and broad-based trade conflict would badly hurt economic activity in Canada," Governor Tiff Macklem said in opening remarks to a press conference. The prospect of such a war is clouding the economic outlook.
• The BoC, which has been among the most aggressive top central banks in cutting rates, trimmed the country's economic growth outlook to 1.8% in 2025 from the 2.1% predicted in October. The economy is expected to grow by 1.8% in 2026, down from growth of 2.3%.
• Money markets see an almost 50% chance of another 25-basis-point cut at the BoC's next monetary policy decision announcement on Mar. 12.

(Source: Reuters)

• The U.S. trade deficit in goods widened to a record high in December, likely as businesses front-loaded imports of industrial supplies and consumer goods in anticipation of broad tariffs from President Donald Trump's new administration.
• The deterioration in the goods trade deficit reported by the Commerce Department on Wednesday raises the risk of a sharper slowdown in gross domestic product growth in the fourth quarter than economists had anticipated.
• A wider trade deficit as a result of an influx of imports is usually offset by a rise in inventories in the calculation of GDP. The government is scheduled to publish its advance estimate of fourth-quarter GDP on Thursday.
• The goods trade gap increased 18.0% to $122.1Bn last month, the largest since the government started tracking the series in 1992, the Commerce Department's Census Bureau said. Goods imports increased $10.8 billion, or 3.9%, to $289.6 billion. Exports fell $7.8Bn, or 4.5% to $167.5Bn.
• Trade has subtracted from GDP for three straight quarters. Still, the anticipated drag from trade in the October-December quarter was likely more than offset by strong consumer spending, which is keeping the economic expansion on track, thanks to a resilient labor market.

(Source: Reuters)