• On Saturday, August 31, 2024, the Minister of Works and Prime Minister, Andrew Holness, announced the launch of the REACH Road Rehab Programme, a comprehensive national road rehabilitation initiative with a budget of $3Bn.
• The program aims to tackle essential road infrastructure requirements throughout the island, concentrating particularly on repairs necessitated by recent weather disturbances, such as Hurricane Beryl, alongside regular road upkeep.
• Under the REACH Road Rehab Programme, each of Jamaica’s 63 constituencies will see funds allocated to conduct essential road repairs and maintenance, ensuring that all regions of the country benefit equitably.
• This initiative reflects the Government's commitment to upgrading national infrastructure and boosting the safety and convenience of Jamaica’s roads. The program will unfold in two phases: the first from September 4, 2024, to November 2024, and the second from January to March 2025.
• During these phases, contractors will be mobilised to repair the most critically damaged roads and conduct necessary maintenance to prevent further deterioration. The National Works Agency will oversee the implementation, ensuring that the highest standards are met and that the work is completed efficiently and within the allocated timeframe.
• Prime Minister Holness expressed confidence in the REACH Road Rehab Programme’s potential to significantly improve road conditions across Jamaica and called on all stakeholders, including local government representatives and community members, to cooperate fully with the execution teams to ensure the programme’s success.

(Source: Office of the Prime Minister)

• On September 3, 2024, policymakers at the Banco Central de Chile (BCCh – Chile Central Bank) unanimously voted to cut its monetary policy interest rate from 5.75% to 5.50%. The cut, which occurred despite a rebound in growth in July’s economic activity index for Chile, was mostly priced in by markets.
• The BCCh implied that with the U.S. Fed’s expected September cut, interest rate differentials are likely to become less of a concern in Chile, as other markets’ central banks also cut. The BCCh also emphasised its worries regarding a sluggish growth trajectory, especially after a weak Q2 2024 growth print.
• Strong economic growth in July (+1.0%, month-over-month; +4.2% year-over-year), which came on the back of disappointing Q2 growth (-0.6% quarter-over-quarter; 1.6% year-over-year) is seen by the BCCh as a one-off. However, given the moderated growth, Fitch Solutions has revised its GDP forecast from 2.7% to 2.5% recently, and the BCCh’s more dovish tone signals that more cuts are to come in the months ahead as ‘spending shows greater weakness.’
• Given the Central Bank’s rate-cut-rationale, economic growth concerns, Fitch has kept its end-of-2024 rate prediction at 5.00%, and its 2025 rate at 4.00%. The forecast from Fitch is based on its belief that the BCCh will prioritise stimulating growth through lowering borrowing costs rather than fighting a resurgence in inflation in the next few months.
• Risks to Fitch’s forecast are balanced and are heavily reliant on Chile’s economic growth trajectory for the next few months.  If growth trends well below projections of 2.3% next year, this will lead to more cuts, perhaps five in 2025, while stronger growth is more likely to lead to only three cuts in 2025.

(Source: Fitch Solutions)

• Guyana has recorded US$10.22Bn in export earnings for the first half of 2024 (H1 2024), amidst growth in its oil and gas production and across various sectors within the local economy, according to the Mid-Year Report released by the Ministry of Finance.
• According to the report, the merchandise trade balance registered an H1 2024 surplus of US$6.976Bn,  compared to US$2.340Bn recorded for H1 2023.
• “This improvement was largely supported by a significant ramp up in crude oil production offshore, following the start-up of Guyana’s third FPSO – Prosperity,” the report highlighted. An FPSO is a floating vessel near an offshore oil field where oil is processed and stored until it can be transferred to a tanker. “Total export earnings grew by 68.7% to US$10.22Bn at the end of June 2024.”
• Importantly, H1 2024 also saw a 23.4% in non-oil export earnings. Earnings from rice and gold expanded by US$24.7Mn and US$12.2Mn, respectively, with the increase in gold reflecting favourable price developments.
• At the start of 2024, the Senior Minister in the Office of the President with responsibility for Finance and Public Service, Dr Ashni Singh, projected that Guyana’s total export receipts could grow by 41.9% for 2024. This growth, he added, was expected to be driven by a robust expansion in both oil and non-oil earnings. Dr Singh said that the government would continue its focus on developing a conducive environment to boost the country’s trade, both in importing and exporting goods and services.

(Source: Guyana Chronicle)

• Mounting unease over the U.S. economic outlook and a seasonally weak month for stocks have created another perfect storm of global market volatility, leaving investors scrambling for protection and fearing another round of currency chaos.
• Following a rapid recovery for risky assets such as stocks and high-yield bonds from a chaotic early August selloff, traders have lost their short-lived optimism that U.S. interest rate cuts would support growth.
• Instead, they appear to be already getting ahead of U.S. jobs data on Friday that may repeat last month's weak report, with Tuesday's weak U.S. manufacturing data triggering fresh selling. Wall Street's S&P 500 share index fell over 2.0% on Tuesday. Meanwhile, the VIX index of expected U.S. equity volatility has hit a one-month high, as choppy currency trading threatened the dollar and other haven currencies.
• Markets were dealing with uncertain inflation but growth was resilient," said Florian Ielpo, head of macro at Lombard Odier. "That situation seems to be changing; the new uncertainty is how deep will the slowdown be." The shaky start to September follows an early August global rout as a Japanese rate increase and the U.S. jobs data wrecked popular carry trades betting against the yen. Carry trades involve borrowing at a low cost in one currency to achieve higher returns from investments in another currency.
• Echoing August's pain, highly valued tech stocks that investors crowded into are taking a beating. The shakeout followed investor unease that stocks and bonds had started September with different stories. Stock markets had priced robust company earnings while government bonds rallied in anticipation of deep U.S. rate cuts and recession risk.

(Source: Reuters)

• Mortgage demand in the U.S. is now heavily skewed toward refinancing, as interest rates declined for the fifth straight week.
• Total mortgage application volume rose just 1.6% last week, compared with the previous week, according to the Mortgage Bankers Association’s (MBA’s) seasonally adjusted index.
• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.43% from 6.44%, with points increasing to 0.56 from 0.54 (including the origination fee) for loans with a 20.0% down payment. Mortgage points are upfront fees you can pay your mortgage lender in exchange for a lower interest rate.
• Applications to refinance a home loan fell 0.3% for the week but were 94% higher than a year ago. That might seem like a massive increase, but it is coming off a very low number. Still, it is the one bright spot in a business that fell off a cliff due to higher interest rates and very weak home buying.
• Home sales have been very slow all summer, as buyers face sky-high home prices and the drop in interest rates hasn’t been enough to get them off the fence. Applications for a mortgage to purchase a home rose 3% for the week but are still 4% lower than the same week a year ago.

(Source: CNBC)

• International Finance Corporation (IFC), a member of the World Bank Group, concluded a Memorandum of Understanding (MOU) with the Government of Jamaica (GOJ) to streamline the development and execution of key infrastructure projects across various sectors in the Caribbean nation.
• The MOU, signed in Kingston on September 3, 2024, by IFC’s Managing Director, Makhtar Diop, and Jamaica's Minister of Finance and the Public Service, Hon. Nigel Clarke, establishes a strategic framework to scale up Public-Private Partnerships (PPPs) through a programmatic approach.
• The agreement includes five PPP transactions for roads and water projects, and negotiations are underway for Transaction Advisory Services Agreements between the parties. Additionally, there are plans for the preparation of five more PPP transactions for projects in healthcare, water and sanitation, and renewable energy.
• "Leveraging IFC's experience and expertise, we are setting the stage for a new era of programmatic engagement in PPPs," said Minister Clarke. "Designed to increase market interest and capacity, this new approach will allow the Government of Jamaica to attract top quality bidders and deliver infra solutions that will improve the quality of life for the Jamaican people."
• According to Diop, "The framework, encompassing multiple PPP projects to be executed concurrently, is expected to contribute over US$2.0Bn in private sector investment to Jamaica in the next few years and, ultimately, deliver better opportunities for the people of this country."
• The programmatic approach includes multi-sector projects prepared under single or grouped mandate agreements to enhance efficiency and results. It builds on previous PPP engagements to accelerate the development of critical infrastructure. IFC advised the Government of Jamaica on the successful concession of the Norman Manley Airport in 2018, with financial close achieved in 2019. Currently, IFC is supporting authorities in the development of three road projects on the North Coast Highway and the National Broadband Network project.
• In the last 10 years, IFC, which is the largest global development institution focused on the private sector in emerging markets, has invested to boost the private sector’s role in Jamaica’s productivity, inclusion, and sustainability. In addition to its extensive work in PPPs, the institution is currently targeting investments in the energy and financial sectors.  

(Source: The International Finance Corporation)

• Brazil's economy surprised to the upside in the second quarter, increasing bets on an imminent interest rate hike to curb inflationary pressures as the central bank gears up for its upcoming policy decision this month.
• Gross domestic product expanded 1.4% in the June 2024 quarter, accelerating from the revised 1.0% growth recorded in the March 2024 quarter, statistics agency IBGE (Brazilian Institute of Geography and Statistics) said on Tuesday, September 3, 2024.
• The quarter-on-quarter performance was above the 0.9% increase expected in a Reuters poll of economists. Year-on-year growth reached 3.3%, surpassing the 2.7% increase projected in the poll.
• "Overall data suggest a resilient economy, and the exchange rate hasn't recovered. In other words, two key conditions for a rate hike are met," said Jose Francisco Goncalves, chief economist at Banco Fator. He expects a 25 basis-point increase at the central bank's next policy meeting on Sept. 17-18. The central bank has kept its benchmark interest rate steady at 10.50% since June.
• "Today’s very strong domestic demand data increase significantly the odds of a rate hike at the September meeting," said Goldman Sachs economist Alberto Ramos.  Previously, there was a stronger consensus for a 25 basis-point hike, especially after central bank chief Roberto Campos Neto said the bank remained data-dependent and that any rate adjustment, if needed, would be gradual.

(Source: Reuters)

• The Bahamian Finance Ministry reported a fiscal surplus of B$26Mn in May 2024, on the back of increases in tax and non-tax revenues as well as contained recurrent and capital expenditures. This result is particularly meaningful as May is seasonally characterised by fiscal deficits (B$76Mn last year, B$81Mn in 2022).
• Notwithstanding, the government recorded a deficit over the first 11 months of FY2023-24 of B$151Mn. The imbalance was reduced from the B$230Mn observed during the first six months. The government’s initial target for the entire year was B$131Mn and later adjusted to B$210Mn, which still looks challenging to achieve.
• To reach the fiscal target for fiscal year 2024, the authorities must deliver a deficit of no more than B$60Mn in June. However, June is typically a month with large monthly deficits (B$319Mn last year; and B$212Mn in 2022) as many public entities unveil accounts payable before the fiscal year closes. As such reaching the B$60Mn target may be challenging.
• Of note, value-added tax (VAT) collections reported by the government undershot budget projections during the first 11 months of last year, which makes reaching the annual target difficult. Prime Minister (PM) Philip Davis blamed the underperformance on high-end real estate sales. As of May, total tax collection was 87% of the total budgeted for the year. The final number, however, is still uncertain as the government could defer payments to suppliers as well as reduce capital expenditures.
• Ruling Progressive Liberal Party (PLP) chairman and foreign affairs minister Fred Mitchell acknowledged that the government adopted a “pay as you go” stance rather than borrowing. However, he added that spending was reduced meaningfully during the year, which could also help the government reach its target.

(Source: Oppenheimer)

• U.S. housing inflation is likely to ease next year as the gap between supply and demand for homes narrows, according to research published by the Federal Reserve Bank of San Francisco on Tuesday. That decline will likely add to downward pressure on inflation.
• Stubbornly high shelter inflation has added considerably to overall U.S. price pressures in recent years even as the Fed raised borrowing costs aggressively to bring down inflation.
• While higher borrowing costs reduce demand for housing, it also reduces supply by making it more costly for builders. In recent months housing inflation has come down, but it remains well above pre-pandemic levels and continues to account for a large share of overall inflation. In July, shelter inflation rose 5% from a year earlier, while overall consumer price inflation registered 2.9%.
• Research shows that rent increases eventually do slow in the face of rising borrowing costs, but it takes some time. San Francisco Fed researchers used data from before the pandemic to estimate future shelter inflation trends and found that by year's end shelter inflation may drop to as low as 2%, before reverting next year to its 3.3% pre-pandemic average.
• "This will contribute downward pressure to inflation overall, although the extent and speed of this adjustment in shelter inflation is highly uncertain". Since housing inflation constitutes a significant part of the country’s headline inflation, a short-term easing in this sector could prompt the Federal Reserve to implement more accommodative rate cuts in the future. The U.S. Fed is widely expected to start lowering its policy rate later this month after aggressive interest-rate hikes in 2022 and 2023 to its current range of 5.25%-5.50%.

(Source: Reuters)

• A record number of blue-chip firms are swarming the US corporate bond market on Tuesday, taking advantage of cheaper borrowing costs as they look to issue debt ahead of the US presidential election. 
• Ford Motor Credit Co., Target Corp. and Barclays Plc are among 29 companies tapping the bond market, the busiest single sales day on record, according to data compiled by Bloomberg. Debt underwriting professionals at banks expect corporations to borrow about $125Bn through US high-grade bond sales in September.
• The issuance deluge comes as corporate finance chiefs aim to lock in borrowing costs while yields are relatively low. Average all-in yields have fallen below 5%, and risk premiums averaged about 93 basis points on Friday, the lowest since July 31. The day after US Labour Day is usually busy for the corporate bond market. Last year, it was the most active sales day of 2023, with $36.2Bn of debt priced by 20 firms.
• Interest-rate markets expect the Federal Reserve to start cutting short-term rates this year, but those cuts are already largely reflected in longer-term bond prices. Still, companies that need to borrow this year or even next year have been looking to sell bonds before October, when bond yields might start moving in unexpected directions ahead of the November US presidential elections.
• High-grade corporate bond sales on Tuesday are expected to be a record, measured by the number of issuers. But the outlook for September of about $125Bn of issuance aligns with the total for the same month last year. The five-year average for September is $136Bn, according to Bloomberg data.
• Firms swarm the US corporate bond market at a time when bond sales have been high, partly because of investors’ eagerness to snatch up securities to lock in higher yields before the Fed cuts rates.  “Just as night follows day, massive demand globally for corporate bonds will beget supply,” said Bill Zox, a portfolio manager at Brandywine Global Investment Management. 

(Source: Bloomberg)