• Lawmakers in Brazil's lower house of Congress approved on Tuesday, December 17, 2024, a bill that includes regulations needed to implement a constitutional tax reform, following a Senate vote to approve the bill.
• The proposal will now head to President Luiz Inacio Lula da Silva for his signature. The bill sets rules needed to consolidate five existing taxes into a single consumption levy, also known as a value-added tax (VAT), with separate federal and regional rates.
• It also provides details on a new tax on products considered harmful to human health or the environment, such as cigarettes and alcoholic beverages. Lawmakers in the lower house added sweetened beverages back to the list after the senators removed it. Lawmaker Reginaldo Lopes, bill rapporteur in the lower house, said the changes approved by the house will set the overall consumption tax rate at 26.5%.
• The eagerly anticipated tax reform was approved by lawmakers last year and is a central pillar of Lula's plans to boost productivity and economic growth in Latin America's largest economy. Previous governments have attempted and failed to implement a tax reform of their own. Lula's government has also sent to lawmakers a separate bill, which still requires Senate approval, regulating how the VAT would be managed at the state level.

(Source: Reuters)

• Chinese leaders agreed last week to raise the budget deficit to 4% of gross domestic product (GDP) next year, its highest on record, while maintaining an economic growth target of around 5%, two sources with knowledge of the matter said.
• The new deficit plan compares with an initial target of 3% of GDP for 2024 and is in line with a "more proactive" fiscal policy outlined by leading officials after December's Politburo meeting and last week's Central Economic Work Conference(CEWC), where the targets were agreed but not officially announced.
• The additional one percentage point of GDP in spending amounts to about 1.3 trillion yuan ($179.4 billion). More stimulus will be funded through issuing off-budget special bonds, said the two sources, who requested anonymity as they were not authorised to speak to the media.
• These targets are usually not announced officially until an annual parliament meeting in March. They could still change before the legislative session. The State Council Information Office, which handles media queries on behalf of the government.
• The stronger fiscal impulse planned for next year forms part of China's preparations to counter the impact of an expected increase in U.S. tariffs on Chinese imports as Donald Trump returns to the White House in January.

(Source: Reuters)

• Canada's annual inflation rate unexpectedly dropped by a tick to 1.9% in November, driven by a broad-based slowdown in prices, while the consumer price index was unchanged on a monthly basis. Analysts polled by Reuters had forecast that inflation would hold steady at the 2% rate recorded in October and the consumer price index would rise 0.1% month over month.
• The Canadian central bank's preferred measures of core inflation, CPI-median and CPI-trim, were unchanged, though the previous month's data were revised up by a notch. CPI-median remained at 2.6%, and CPI-trim - which excludes the most extreme price changes - stayed at 2.7%.
• Economists noted that continued strength in core measures could be an issue for the Bank of Canada, which has said that with inflation coming down consistently, it was important for the bank to ease rates to prop up the economy.
• "While the Bank of Canada will welcome the renewed dip below 2% for headline inflation, they would prefer that the sticky core trends stayed away this holiday season," said Douglas Porter, chief economist at BMO Capital Markets. The bank has forecast core inflation to average at 2.3% for the fourth quarter but it is currently trending around 2.7% roughly. Tuesday's data was the first of two inflation reports the BoC will get to assess before its next rate decision on Jan. 29.
• The central bank has cut interest rates by 50 basis points at each of its last two policy announcements to bring the cumulative reduction in borrowing costs to 175 basis points since June. This has helped restrict the rise in consumer prices to the mid-point of its desired target range of 1-3% for several months. BoC Governor Tiff Macklem indicated last week that further rate cuts would be more gradual.

(Source: Reuters)

• The Inter-American Development Bank (IDB) has announced the launch of a regional security alliance against crime that brings together 18 governments across Latin America and the Caribbean as well as several international finance institutions.
• "Security needs to be part of the solution for our economic progress," IDB President Ilan Goldfajn told reporters ahead of the project's launch in Barbados, saying countries worried about the cost of crime had requested the initiative.
• The IDB is set to provide US$1Bn in financing for projects aligned with the initiative next year, Goldfajn added and plans to mobilize public and private donors to raise more funds. The projects include the regional sharing of criminal records among alliance members and meetings to discuss money laundering tied to illegal mining in the Amazon.
• The alliance also includes the Organization of American States, the Caribbean Community, INTERPOL, the World Bank and regional development banks and has a strong social focus on reducing communities' vulnerabilities, as well as strengthening police, state justice institutions and hitting financial crime.

(Source: Reuters)

• The European Central Bank expects to cut interest rates further if inflation settles at its 2% target. ECB President Christine Lagarde and the bank's most influential policy hawk, Isabel Schnabel, cemented market bets on further gradual reductions in borrowing costs in the euro zone as the economy stutters and fears about high inflation fade.
• "If the incoming data continues to confirm our baseline, the direction of travel is clear and we expect to lower interest rates further," Lagarde said in a speech in Vilnius. Inflation in the euro zone was 2.3% last month and the ECB expects it to settle at its 2% target next year after hitting double digits in the wake of Russia's full-scale invasion of Ukraine in 2022.
• The euro zone's central bank lowered its key rate last week for the fourth time this year and opened the door to more reductions by removing a reference to keeping rates "sufficiently restrictive".
• Schnabel was more explicit, saying the ECB should keep cutting interest rates gradually until they reach neutral. "Price stability is within reach," Schnabel told an event in Paris. "Considering the risks and uncertainties we are still facing, lowering policy rates gradually towards a neutral level is the most appropriate course of action."
• While a neutral interest rate is a vaguely defined concept, Schnabel sees it between 2% and 3%, and Lagarde has said that ECB research puts it at 1.75%-2.5%. This indicates that several more cuts in the 3% deposit rate may come before the neutral debate heats up.

(Source: Reuters)

• Britain's economy shrank for a second month in a row in October in the run-up to the government's first budget, the first back-to-back falls in output since the onset of the COVID-19 pandemic, and a setback for new finance minister Rachel Reeves.
• Gross domestic product (GDP) contracted by 0.1% month-on-month in October, as it did in September, the Office for National Statistics said. It was the first consecutive drop in monthly GDP - which is volatile and prone to revision - since March and April 2020, when Britain enforced its first coronavirus lockdown.
• Economists polled by Reuters had forecasted a monthly expansion of 0.1%. The ONS said there was "mixed" anecdotal evidence from companies that turnover had been affected by companies waiting for the budget statement, which imposed large tax rises on businesses. Others brought forward activity.
• The services sector flatlined, while output in the manufacturing and construction industries declined in October's data, which measured the economy in the weeks before Reeves' budget statement on Oct. 30.
• Reeves and Prime Minister Keir Starmer warned that the budget would include painful tax increases. The data adds to a run of worse-than-expected figures for Britain’s economy, with business surveys and retail sales readings also falling flat.
• “While the figures this month are disappointing, we have put in place policies to deliver long-term economic growth,” Reeves said in a statement.

(Sources: Reuters & GDN Online)

• Kingston Properties Limited (KPREIT) closed on the acquisition of a 20,000 sqft fully tenanted office building in Bristol, United Kingdom on December 12, 2024. This marks the Group’s first acquisition in the UK and is part of its strategy of pursuing greater geographic diversification.
• The property is located in the Aztec West Business Park just north of Bristol – the fifth largest city in the UK, which attracts players in the aerospace, defense, engineering, financial services, media and environment services industries. KPREIT is bullish on the UK and expects the economy to see growth in 2025 with increased government spending and continuing interest rate cuts.
• According to the Organisation for Economic Cooperation and Development (OECD), UK’s GDP growth is projected to strengthen to 1.7% in 2025, boosted by the large increase in public expenditure set out in the autumn budget, before slowing to 1.3% in 2026, as the effect of fiscal expansion tapers off.
• The sub-urban small office sub sector continues to show resilience and is expected to continue to see growth with the campaign for a return to the office in the UK. The tenants in the building range in services from insurance, shipping, and service office providers to one of the largest suppliers of affordable housing and care in the UK.
• The rapid growth of the service or flexible office industry since the pandemic signals the direction of the office for the future and bodes well for the continuing demand for office space.
• This acquisition was funded using both debt and the proceeds from the sale of units at Tropic Centre in the Cayman Islands and now brings the geographic dispersion of assets to: Cayman Islands (45%), Jamaica (42%), UK (7%) and US (6%).
• KPREIT’s stock price has increased 22.9% since the start of the calendar year. The stock closed Thursday’s trading session at $9.59 and currently trades at a P/E of 10.2x, which is below the Main Market Real Estate Sector Average of 10.3x.

(Sources: JSE & NCBCM Research)

• Mexico's central bank expressed confidence in the country's financial system despite the "notable weakness" of Latin America's second-largest economy and risks from market volatility and potential trade conflicts.
• In its biannual financial stability report, the Bank of Mexico attributed the system's stability to strong institutions, highlighting its "solid and resilient" framework, with capital and liquidity levels exceeding regulatory requirements.
• "While the vulnerabilities and risks identified for financial stability are generally considered limited, unexpected or severe shocks could affect its proper functioning," Banxico, as the central bank is known, noted in the report.
• Mexican markets have experienced considerable volatility in the year's second half, amid elections in Mexico and the U.S., its top trading partner. U.S. President-elect Donald Trump has promised to levy a 25% across-the-board tariff on Mexican imports.
• Uncertainty over a slew of constitutional overhauls in Mexico also contributed to a weakened local currency. Still, Mexican markets have managed to behave in a "relatively orderly" manner, the report said.

(Source: Reuters)

• Víctor “Ito” Bisonó, the Minister of Industry, Commerce, and MSMEs (MICM), underscored the Dominican Republic's strategic strengths as a premier investment destination during the World Strategic Forum 2024: Prospering in the New Economy in Miami.
• He emphasised the nation’s transformation under President Luis Abinader, crediting strategic policies and sustainable development for what he called “the Dominican miracle.”.
• Bisonó outlined the Dominican Republic's strong post-pandemic recovery, highlighting a projected 5.1% economic growth for 2024—the highest in the region, as reported by the World Bank and IMF. He also emphasised Standard & Poor's recent credit rating upgrade to BB, reinforcing the nation’s economic stability and investor confidence.
• Foreign direct investment increased by 7.1% year-on-year in 2023, accounting for 41% of total inflows into Central America. The United States has been the leading contributor, representing 30% of investments over the past decade.
• Bisonó spotlighted the country’s readiness for nearshoring, particularly in the semiconductor and printed circuit industries. With incentives like decree 324-24 prioritizing semiconductor development, advantages include strategic location, robust logistics, eight international airports, top-ranked port connectivity, and skilled talent.
• Decree 324-24 is a Dominican Republic decree that was issued on June 13, 2024, to advance the country's semiconductor industry. Furthermore, Initiatives like “Zero Bureaucracy” and “24-hour Office” streamline processes, ensuring a business-friendly environment. “The Dominican Republic is not just a future opportunity—it’s a place to invest today,” he concluded.
• Bottom of Form

(Source: CarCris)

• U.S. producer prices increased by the most in five months in November but easing costs of services such as portfolio management fees and airline fares offered hope that the disinflationary trend remains in place despite stalled progress.
• A surge in the price of eggs amid an avian flu outbreak accounted for much of the bigger-than-expected rise in producer inflation last month. Other details of the report from the Labour Department on Thursday were, however, mostly favourable, prompting economists to sharply lower their estimates for the personal consumption expenditures (PCE) price measures tracked by the Federal Reserve for its 2.0% inflation target.
• The producer price index for final demand jumped 0.4%, the largest gain since June, after an upwardly revised 0.3% increase in October, the Labour Department's Bureau of Labour Statistics said. Economists polled by Reuters had forecast the PPI gaining 0.2% following a previously reported 0.2% rise in October.
• In the 12 months through November, the PPI shot up 3.0%. That was the biggest year-on-year increase since February 2023 and followed a 2.6% rise in October. The government reported on Wednesday that consumer prices increased by the most in seven months in November, while a measure of underlying price pressures continued to run warmer over the past four months.
• Wholesale goods prices surged 0.7%, accounting for nearly 60% of the monthly rise in the PPI, after edging up 0.1% in October. Food prices soared 3.1%, making up 80% of the increase in goods prices. Wholesale egg prices vaulted 54.6%, the most since June, after declining 20.6% in October.
• Core PCE inflation is one of the measures tracked by the Fed for monetary policy. It rose 0.3% for a second straight month in October. Core inflation was forecast to increase 2.8% year-on-year in November, matching October's advance.

(Source: Reuters)