• 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)

• The Government is continuing the implementation of tax reforms, deemed critical to fostering sustainable inclusive economic growth in Jamaica. Among the initiatives Prime Minister, Dr. the Most Hon. Andrew Holness, indicated is the consolidation of payroll taxes into a single deduction system, with a target implementation date of January 2026.
• “By [then] we should have a single social contribution payroll system established. But I’ve given… an earlier deadline to make sure that the system is actually up. So, we are now well on our way to having it done,” Dr. Holness stated. He was addressing the Jamaica Stock Exchange (JSE) Investments and Capital Markets Conference at The Jamaica Pegasus Hotel in New Kingston on Tuesday, January 21, 2025.
• PM Holness also mentioned plans to revamp the urban renewal tax credit framework, to attract increased investments in underserved communities. He noted the Administration’s focus on, establishing new urban centres in each parish to transform them into economic hubs.
• Meanwhile, the Administration is exploring a further increase in the threshold at which small businesses must register for General Consumption Tax (GCT), following a previous increase from $3Mn to $10Mn in 2019. Additionally, there are also plans to incentivise Jamaican companies, currently domiciled overseas, to return their operations home.
• PM Holness also advised that the Government is expanding online tax payment systems and administration services to enhance efficiency.
• Overall, he emphasised the importance of reforming Jamaica’s tax system, including Customs, as a cornerstone of economic recovery and development, citing this as “a critical focus of our Government”.

(Source: JIS)

• Data from the Statistical Institute of Jamaica (STATIN) Labour Force Survey (LFS) revealed the unemployment rate stood at 3.5% in October 2024, down from 3.6% in July 2024. This marks one of the lowest unemployment rates recorded, even as disparities between genders and age groups remain evident.
• The total number of unemployed individuals amounted to 51,300, down from 52,600 in July, with females making up 60.0% of unemployed individuals. 21,600 of the unemployed persons were youth (aged 15 to 24 years), with females accounting for 12,000 or 55.6%.
• Overall, female and youth unemployment was higher. Female unemployment stood at 4.5% compared to males who had a 2.6% rate of unemployment. However, Youth unemployment was higher at 11.0%, with young adult females having a higher unemployment rate of 13.7% compared to 8.9% for young adult males.
• Of note, the labour force rose to 1,468,300 persons, after shrinking in July 2024 to 1,461,600. 789,100 (53.7%) were males, while 679,200 (46.3%) were female. The increase in the labour force reflects a lower participation rate of 68.1%, up slightly from 67.8% in July.
• Regarding employee distribution across occupation groups, the ‘Services and Sales Workers’ segment employed the highest number of individuals at 343,400 or 24.2% of the labour force. The second largest was ‘Skilled Agricultural, Forestry and Fishery Workers’ with 201,400 workers, followed by ‘Elementary Occupations’, with 176,200 workers.
• The ‘Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles’ remains the largest employer, engaging 265,600 or 18.7% of the individuals. The second largest industry group was ‘Agriculture, Forestry, and Fishing’, with 201,400 individuals.
• The latest unemployment figure continues to beat expectations for unemployment levels to inch up in 2024, given Jamaica’s economic contraction of 3.5% for Q3 2024 and the expectations for low growth in Q4 2024.
• The unemployment data for July and October reflects the new labour force series, introduced in January 2024 when unemployment amounted to 5.4%. It represents a break in the series and as such is not comparable with previous survey data. The new series incorporates the latest guidelines from the International Labour Organization (ILO), which resulted in, inter alia, a significant change in the definition of employment and unemployment.

(Sources: STATIN, RJR News & NCBCM Research)

• Mexico's annual inflation rate slowed to its lowest level in almost four years in the first half of January, official data showed on Thursday, a price level likely to encourage the central bank to keep cutting borrowing costs.
• 12-month headline inflation came in at 3.69% in early January, statistics agency INEGI announced. This was its lowest since February 2021 and was within the central bank's 3% target, plus or minus one percentage point. Annual inflation was below both the previous month's 4.44% and the 3.78% forecast by economists polled by Reuters.
• Slowing consumer price growth was driven by lower non-processed food costs, which helped offset a slightly higher-than-expected reading in the core index, which some consider more reliable as it excludes volatile energy and food prices.
• In December, the Mexican central bank - known as Banxico - delivered its fifth interest-rate cut that year, taking its key lending rate to 10.00% with a 25-basis-point reduction while citing progress on inflation.
• Mexico is bracing for additional price pressures as U.S. President Donald Trump threatens tariffs on its exports in addition to mass deportations.
• Core inflation rose 0.28% in early January, while the annualized core rate came in at 3.72%, exceeding market expectations of 3.68% and the previous month's 3.62%.
• Banxico is scheduled to announce its next rate decision on Feb. 6.

(Source: Reuters)

• The Bahamas faces significant climate risks, with rising sea levels and hurricanes potentially reducing economic output by 11% by the year 2100 but investing in climate resilience could boost economic output by 9% over the next three-quarters of a century, according to the International Monetary Fund (IMF).
• The report also noted that modernising electricity grids and increasing the share of solar energy and liquefied natural gas (LNG) in electricity production could yield major macroeconomic benefits for The Bahamas.
• These transformations, over the medium term, could reduce fossil fuel imports, decrease the country’s vulnerability to volatile global fuel prices, significantly lower Carbon Dioxide (CO₂) emissions, and substantially boost national output, eventually increasing long-term growth potential from 1.5% to 2.0%.
• The government aims to harness the abundant solar energy available year-round in The Bahamas, targeting a 30% share of solar energy by 2030.
• “Unfortunately, even with these investments, the threat of climate change is here to stay. IMF analysis suggests that rising sea levels could place up to 41% of the land in The Bahamas and 22% of its population below sea level by the end of this century”.
• The report went on to state that, “the country is positioned within the Atlantic hurricane belt, leaving it at high risk of hurricane damage. Left unaddressed, more severe natural disasters and slow-moving impacts from climate change could reduce The Bahamas’ national output by up to 11% by 2100, with larger losses in islands whose economies rely most on hospitality and real estate.”

(Source: Eyewitness News)

• U.S. President Donald Trump demanded OPEC lower oil prices and the world drop interest rates in a speech to global business and political leaders and warned them they will face tariffs if they make their products anywhere but the U.S. "I'll demand that interest rates drop immediately. And likewise, they should be dropping all over the world," Trump said via video to the World Economic Forum in Davos, Switzerland, on Thursday. "I'm also going to ask Saudi Arabia and OPEC to bring down the cost of oil."
• The remarks, Trump's first to global leaders in his four-day-old presidency, bolster the message that his second term will eschew free market norms inside the U.S. and out. Despite robust comments on the tariffs he wants to put in place, he did not provide specifics at a time when markets are on edge over his plans.
• Oil prices turned negative as Trump spoke, while the euro dipped, and the U.S. dollar swung between gains and losses against a basket of foreign currencies. The S&P 500 benchmark of U.S. stocks rose to a near-all-time high. Trump spoke to about 3,000 Davos attendees, who cheered as Trump's face appeared on the big screen. The president, a businessman whose first elected office was the White House, listed the rapid-fire changes he had made since his swearing-in on Monday that have upended U.S. government policies on diversity, climate change and immigration.
• In a subsequent conversation with conference attendees including Bank of America CEO Brian Moynihan and Blackstone Group CEO Stephen Schwarzman, the U.S. president's remarks veered between compliments and criticism.
• Trump's address was an unusual moment, affording a handful of business executives an opportunity to publicly question the U.S. president on issues that affect their businesses, or in some cases their specific investments, projects and interests.

(Source: Reuters)

• The Bank of Japan (BOJ) is expected to raise interest rates on Friday to levels unseen since the 2008 global financial crisis, as broad worldwide stocks rally calms policymakers' fears U.S. President Donald Trump's tariff threats could upend markets.
• With traders almost fully pricing in the chance of a rate hike, attention now shifts to any clues BOJ Governor Kazuo Ueda's post-meeting briefing could offer on the pace and timing of subsequent increases in borrowing costs. At the two-day meeting concluding on Friday, the BOJ is widely expected to raise its short-term policy rate from 0.25% to 0.5% - a level Japan has not seen in 17 years.
• The move would underscore the central bank's resolve to steadily push up interest rates near 1% -  a level analysts see as neither cooling nor overheating Japan's economy. "Market hasn't shown much negative reaction to Trump's comments, so the BOJ will probably proceed with a rate hike," said Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
• A hike by the BOJ would be the first since July last year when the move, coupled with weak U.S. jobs data, shocked traders and triggered a rout in global markets in early August. Keen to avoid a recurrence, the BOJ prepared markets with strong signals from Ueda and his deputy last week that a rate hike was on the cards. The remarks caused the yen to rebound as markets priced in a roughly 90% chance of a rate increase.
• In a quarterly outlook report due after the meeting, the board is expected to raise its price forecasts on growing prospects that broadening wage gains will keep Japan on track to sustainably hit the bank's 2% inflation target. Many analysts already expect the central bank to hike rates again later this year, barring a Trump-induced market shock that hits global growth and Japan's fragile economic recovery.
• Since taking the helm in April 2023, Ueda dismantled his predecessor's radical stimulus programme in March last year and pushed up short-term interest rates to 0.25% in July. BOJ policymakers have repeatedly said the bank will keep raising rate, if Japan makes progress in achieving a cycle in which rising inflation boosts wages and lifts consumption - thereby allowing firms to continue passing on higher costs.

(Source: Reuters)