• The Government of Jamaica (GOJ) signed a US$12Mn loan agreement with the World Bank Group’s International Bank for Reconstruction and Development (IBRD) for the Kingston Waterfront Improvement (KiWI) Project.
• The signing ceremony occurred on Friday (October 18) at the Ministry of Finance and the Public Service in Kingston.
• The KiWI Project involves the design and implementation of a modern park along the waterfront over five years. The park is intended to aesthetically enhance the downtown space and revitalise business interests in the area while fostering community development.
• Speaking during the signing ceremony, Finance Minister, Dr. the Hon. Nigel Clarke, disclosed that the project’s overall cost is US$40 million, with the Government providing joint financing.
• He emphasised that the project will benefit significantly from the World Bank’s technical support, highlighting that Jamaica lacks the kind of expertise required to execute the initiative.
• “By making such a significant investment [in] downtown [Kingston] to put a park, it is going to incentivise commercial developers. Real estate developers will follow behind this investment of the Government and, in so doing, revitalise the space of downtown,” he added.

(Source: JIS)

• Latin America is anxiously counting the days to Nov. 5, when U.S. voters will choose between relative continuity under Vice President Kamala Harris or a return to policies that triggered volatility in the region's largest markets and economies under former president Donald Trump.
• Trade and tariffs, as well as monetary policy's effect on global interest rates, are likely the largest avenues for the election to jolt the U.S.'s neighbouring region. Washington's economic war with China could particularly rock Mexico and boost Brazil, especially in a tit-for-tat scenario.
• On a broader level, a Trump victory would likely send shockwaves through the region, potentially putting the squeeze on some currencies and central banks even as countries that are more tied to commodities or trade with China could emerge largely unscathed.
• While the Biden administration did not roll back tariffs imposed by Trump on China, Harris' plan to keep them roughly as they are makes her a dove toward the world's No. 2 economy. Under Trump, tariffs on Chinese products would jump to around 60%.
• South American countries may be better positioned to dodge a stricter U.S. trade regime. In a recent client note from Lazard, the investment bank placed copper and lithium powerhouse Chile on a list of countries with high exposure to the US market that could be largely spared based on the less replaceable nature of their exports.
• Such calculations would become much less relevant in the case of a Harris victory. "If the Democratic candidate Vice President Kamala Harris wins, likely with a divided government, tariff risk would likely decline and we would expect lower growth and investment conditions in the United States, which could lead to sustained outperformance of EM assets," the investment bank said in its October outlook for emerging markets, published recently.

(Source: Reuters)

• Mexico is considering tax credits to attract foreign firms to invest and produce domestically, targeted at electric vehicle (EV), semiconductor, rare earth minerals, battery and electronics sectors, a top Mexican trade official said in an interview.
• The comments come as Mexico's new government assesses how to spark more investment as companies look to move supply chains closer to their main market, while simultaneously navigating a turbulent and more protectionist period in the U.S. ahead of presidential elections.
• "We are seriously analysing creating tax credit incentive programs very similar to those in the United States and Canada ... and we believe that would allow us to attract many companies to Mexico," Deputy Foreign Trade Minister Luis Rosendo told Reuters last Friday, October 18. Rosendo said the incentives would apply to companies from any country interested in investing in Mexico, including China.
• An internal government document seen by Reuters said Mexico had started working with companies such as Taiwanese electronics manufacturer Foxconn, chipmaker Intel, U.S. automaker General Motors, logistics firm DHL, and carmaker Stellantis, to identify products that can be manufactured in Mexico instead of being imported from Asia.
• Additionally, the administration of Mexico's new President Claudia Sheinbaum is carefully considering Washington and Ottawa's policies towards China, in order to be more aligned in addressing potential unfair Chinese trade practices ahead of a scheduled revision of the USMCA North American trade pact.
• "The pressure that we have... the question is what are we going to do with China in the face of some practices that sometimes seem to be unfair," Rosendo said. Mexico would continue to prioritise the U.S. and Canada due to their strategic alliance through USMCA, but that didn't imply Mexico would "break with China" or "deny them investments in Mexico," Rosendo said.

(Source: Reuters)

• China cut benchmark lending rates as anticipated at the monthly fixing on Monday. This follows other policy rate reductions last month as part of a package of stimulus measures to revive the economy.
• The one-year loan prime rate (LPR) was lowered by 25 basis points (bps) to 3.10% from 3.35%. The five-year LPR was also cut by 25bps to 3.6% from 3.85% previously. The lending rates were last cut in July. People's Bank of China (PBOC) Governor Pan Gongsheng told a financial forum last week that lending rates will decrease by 20 to 25 basis points on Oct. 21.
• The PBOC announced cuts to banks' reserve requirement ratio¹ by 50 basis points and the benchmark seven-day reverse repo rate by 20 basis points on Sept. 24. This kicked off the most aggressive stimulus since the pandemic that included measures to support the ailing property sector and boost consumption.
• It also cut the medium-term lending facility rate by 30 basis points last month. Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. Since the Sept. 24 measures, the CSI300 Index has broken records for daily moves and is up more than 14% overall. The yuan is down 1% against the dollar in that period.
• Stocks have wobbled in recent sessions, though, as initial enthusiasm gave way to concerns about whether policy support would be big enough to revive growth. Data on Friday showed China's economic growth was slightly better than expected in the third quarter, although property investment fell more than 10% in the first nine months of the year. Retail sales and industrial production picked up in September.
• Officials addressing a press conference on Friday expressed confidence the economy can achieve the government's full-year growth target of around 5% and flagged another cut to banks' reserve ratio by the year-end.

(Source: Reuters)

• Global finance chiefs will gather in Washington this week amid intense uncertainty over wars in the Middle East and Europe, a flagging Chinese economy and worries that a coin-toss U.S. presidential election could ignite new trade battles and erode multilateral cooperation.
• However, the elephant in the meeting rooms will be the potential for a Nov. 5 election victory by U.S. Republican presidential candidate Donald Trump. Trump’s victory could upend the international economic system with massive new U.S. tariffs and borrowing and a shift away from climate cooperation. S. Vice President Kamala Harris, the Democratic presidential candidate, is largely expected to continue the Biden administration's resumption of multilateral cooperation on climate, tax and debt relief issues if she wins next month's vote.
• Growing anti-China trade sentiment and industrial policy plans from wealthy countries, punctuated by the Biden administration's steep tariff increases on Chinese electric vehicles, semiconductors and solar products, are expected to be a key discussion topic at the meetings.
• While debt defaults among poor countries may have peaked, participants at the annual meetings are expected to discuss the growing problem of scarce liquidity that is forcing some emerging markets saddled with high debt service costs to delay development investments as overseas aid shrinks.
• Support for Ukraine will also be a major topic at the meetings, as the G7 wealth democracies aim to reach a political agreement by the end of October for a $50Bn loan for the Eastern European country backed by frozen Russian sovereign assets. The loan in part is seen as a financial bulwark against a Trump victory next month, as the former U.S. president has threatened to "get out of Ukraine."

(Source: Reuters)

• Image Plus Consultants Limited (IPCL) reported a net loss of $16.25Mn for Q2 FY 2024/25, relative to $38.66Mn for Q2 2023. This contributed to an 85.0% decline in H1 2024/25 earnings to $15.40Mn ($102.77Mn in H1 2023).
• Revenues slipped 2.8% to $539Mn for the six months ended August, largely driven by reduced scan volumes, with a 6% overall decline across all modalities. Total scans for H1 2024 slowed to 26,955, down 6.2% from 28,729 the prior year. Slowing revenues reflects IPCL's operational challenges, particularly with its CT modality, which generates higher revenue per patient.
• CT scans dropped due to machine downtime at the Ocho Rios and Winchester branches. These units required CT tube replacements, but repairs were delayed due to protracted delivery timelines from the overseas manufacturer.
• The company’s MRI and mammography services, which were launched in August 2023 and February 2024 respectively, showed growth, though both fell short of expectations. Management continues to explore strategies to increase scan volumes, particularly in the competitive Kingston and St. Andrew markets.
• IPCL's direct costs fell by 5.5% for H1 2024 which supported an improved gross profit margin of 64.9% for H1 2024 relative to 63.8% in H1 2023.
• However, administrative expenses increased over the period, amid an 80% increase in depreciation due to new imaging equipment, a 14.5% rise in salaries to $165.04Mn due to increased staff count, and a 52.3% jump in utilities owing to the MRI unit in Ocho Rios.
• Despite the 85.0% earnings decline year to date, IPCL’s management expressed optimism about its H2 2024 performance, with efforts focused on optimising scan volumes and revenue growth across its service offerings.
• IPCL’s stock price has decreased by 20.0% since the start of the calendar year. The stock closed Thursday’s trading session at $1.60 trading at a P/E of 13.33x, below the Junior Health Sector Average of 20.5x.

(Source: JSE, NCBCM Research)

• Operators of micro, small, and medium-sized enterprises (MSMEs) are being urged to contribute to shaping Jamaica’s digital future. This appeal was made by Harold Davis, the Acting Chief Executive Officer (CEO) of the Jamaica Business Development Corporation (JBDC), during his recent appearance on the JIS TV program "Get the Facts."
• “Digital transformation is no longer a nice thing to have; it’s a need to have,” Mr. Davis said, as he outlined the transformative potential of the Digital Jamaica Project that is set to enhance the country’s digital landscape. He also emphasised the urgency of digital literacy, availability, and accessibility, noting that Jamaica must embrace a digital future to compete globally.
• According to a recent JBDC survey, only 33% of MSMEs are actively utilising digital tools and recognising the benefits of digitalisation. While the figure is a start, he described it as “modest”, as the JBDC aims to raise it to at least 80%. Mr. Davis further explained that while many MSMEs are present on social media, they often lack comprehensive digital solutions that could enhance their operational processes.
• Having analysed the data, the JBDC is committed to increasing the number of MSMEs that leverage digital tools to their advantage. “The JBDC is about general transformation of your business, making sure that your business moves into this space of being globally competitive. So, the first thing that we do is a robust 360 assessment of your business, as no one size fits all,” Mr. Davis explained.
• This assessment involves the JBDC conducting thorough evaluations of businesses to determine whether a viable business model exists and ensure that companies deliver on their value propositions.
• MSMEs are encouraged to view their digital journey in three phases: digitization, which converts analogue processes to digital formats; digitalization, which employs suitable tools for e-commerce, supply chain, and human resource management; and digital transformation, which entails a complete overhaul of business models to integrate digital solutions.

(Source: JIS)

• On Wednesday, October 16, 2024, the government of the Bahamas tabled the Domestic Minimum Top-Up Tax Bill 2024 in Parliament. The Bill seeks to introduce a 15% effective tax rate for in-scope multinational enterprises operating in The Bahamas with annual consolidated revenue at or above 750Mn Euros ($818Mn USD).
• Deputy Prime Minister Chester Cooper noted that at that threshold, very few Bahamian-owned and operated businesses would be impacted. Cooper noted that the bill is designed to align with the Organisation for Economic Cooperation and Development’s Global Anti-Base Erosion Rules. These rules are aimed at ensuring a global minimum level of income tax for large multinational enterprises.
• “In addition, with the passage of this bill, The Bahamas would be allowed to retain tax revenues on profits of these entities that would otherwise be subjected to top-up tax in another jurisdiction under the OECD’s Income Inclusion Rule (IIR) or the Under-Taxed Profit Rule. As a matter of policy, this administration has already stated that the lion’s share of the revenue from this bill would be dedicated to debt reduction and reducing the cost of living for ordinary Bahamians,” Cooper noted.
• He added that, in line with the options permitted by the EU Pillar Two directive, the draft DMTT (domestic minimum top-up tax) Bill provides for the introduction of a tax intended to be a “qualified domestic minimum top-up tax.”
• “This bill reflects comments received during the public consultation period, which was extended by two weeks and ended on September 30, 2024. During the debate, the government side would go through this bill in detail and provide an analysis of the policy considerations that went into it. The consultation paper foreshadowed the government’s intention to introduce some form of incentives to reduce the cost of doing business in The Bahamas. These incentives will be laid out in a companion piece of legislation,” said Cooper.
• “The government acknowledges the importance of developing this new regime, which would need to apply broadly across businesses in The Bahamas. Consequently, the view was taken that a separate bill be crafted to reflect the final position of the government and submitted for consideration during the mid-year budget exercise,” Cooper said.

(Source: Eyewitness News)

• Chile's central bank on Thursday, October 17, cut its benchmark interest rate by 25 basis points to 5.25%, extending an easing cycle since the middle of last year, and predicted further cuts if the economic picture for the world's top producer of red metal copper remains stable.
• The cut, a unanimous decision in line with forecasts, comes as inflation cools, but as the country faces a challenge to rev up growth. Copper output has been stalling in recent years.
• The bank said that if the economic scenario continued as expected, then the Andean country's interest rate "will see further reductions to meet its neutral level."
• Pantheon Macroeconomics' Chief Latin America Economist Andres Abadia said that he expected more cuts ahead, though greater external risks and shifting domestic conditions meant a pause in the easing cycle could not be ruled out. "For now, we expect further rate cuts in upcoming meetings, targeting at least 4.0% by the late second quarter of 2025," he said. "A pause in the normalisation cycle cannot be ruled out if external conditions deteriorate sharply."
• So far, domestic activity and demand indicators are consistent with forecasts, it said, pointing to a positive mining performance and "relatively stable" consumption and investment.
• Inflation forecasts for the coming year have edged down, it added, after inflation slowed to 4.1% in September, from 4.7% the previous month. The bank also reaffirmed its commitment to a flexible policy to bring inflation towards 3% within the next two years.

(Source: Reuters)

• The European Central Bank (ECB) cut interest rates by 25 basis points (bps) on Thursday for the third time this year, saying inflation in the eurozone bloc was increasingly under control, while the outlook for the economy was worsening¹.
• ECB president Christine Lagarde did not provide hints about future moves, but four sources close to the matter told Reuters a fourth cut in December is likely unless economic or inflation data turns around in the coming weeks. The U.S. elections, and the threat of fresh trade tariffs if Donald Trump is elected president, were seen as a major source of uncertainty, the sources said. Asked about that risk, Lagarde said any trade obstacles were a "downside" for Europe.
• However, she added that the ECB did not expect a recession at present and was still working on the assumption that the economy would stage a "soft landing", jargon for lower - but still positive - growth. The quarter-point cut brings the rate that the ECB pays on banks' deposits down to 3.25%. Money markets are almost fully pricing in three further reductions through next March.
• Prices grew by just 1.7% last month, falling below the 2.0% target for the first time in three years. While inflation may edge above the ECB's target by the end of this year, it is expected to hover around that level for the foreseeable future. The ECB noted pay rises are still supporting "domestic inflation" - that is growth in the price of services and goods that don't rely much on imports - but this too was waning.
• High interest rates have sapped investment and economic growth, which has been weak for nearly two years. The most recent data, including industrial output and bank lending, is pointing to more of the same in the coming months. A resilient labour market is also starting to show cracks, with the vacancy rate - or the proportion of vacant jobs as a share of the total jobs - falling from record highs. This has fuelled calls inside the ECB and from politicians from Germany to Italy to ease policy before it is too late.
• Nonetheless, some of the economic weakness is due to structural problems, such as the high energy costs and low competitiveness hobbling Europe's industrial powerhouse Germany. Lagarde repeated the ECB's customary call on Europe's politicians to push ahead with "ambitious" reforms to make the region's economy more productive, competitive and resilient.

(Source: Reuters)