• A Panama Supreme Court decision may allow the building of a new reservoir to supply water to the Panama Canal after facing declining water supplies. Last year, a drought dropped water supplies to critical levels, prompting canal authorities to limit traffic. At the worst point, in December 2023, only 22 ships a day were allowed to pass through the canal, down from the usual 36 to 38. More than 160 ships were stuck at anchor at both ends.
• Rains that began in May allowed the lifting of most restrictions, and in recent weeks, 35 ships passed through the canal on average. However, the concern around declining water levels still lingers in a new era influenced by climate change and frequent periods of El Niño, when ocean temperatures rise and rainfall decreases.
• Notably, during droughts, there is insufficient rainfall for the rivers and streams that supply water to the current reservoir system that fills the locks that transport ships over the terrain.
• A dam envisioned for Río Indio, southwest of Lake Gatún, which forms a major part of the Panama Canal, would create another reservoir that could replenish the canal during droughts. The project would also flood the homes of 2,000 predominantly poor people who would need to be relocated.
• Panama has long desired to construct an additional reservoir to support Lake Gatun; however, a rule implemented in 2006 prevented any expansion beyond the original watershed area. Last month, Panama’s Supreme Court struck down that limitation. The canal authority is now moving ahead with planning for the project, which is expected to take six years and cost US$1.6Bn.
• To proceed with the project, canal authorities are now focused on winning the approval of roughly 12,000 residents residing in about 200 villages in the vicinity. It is exploring places to relocate villages, opening outreach offices in affected communities, and expanding efforts to grow cash crops like coffee to replace livelihoods that will be uprooted.

(Sources: Africa News & The New York Times)

• Finance Minister of Trinidad and Tobago (T&T), Colm Imbert, has issued an order increasing the deposit insurance coverage limit by 60%, raising it from $125,000 to $200,000. The new limit will take effect from October 1. The deposit insurance coverage limit was last increased in 2012 when it moved from $75,000 to $125,000.
• According to the Deposit Insurance Corporation of T&T, the types of accounts covered have not changed. Deposit insurance will remain applicable to savings, chequing, demand, and time deposit accounts held in T&T dollars.
• Coverage continues to remain applicable for single accounts, joint accounts and irrevocable express trust accounts. Foreign currency accounts, however, are not protected by deposit insurance. 
• In addition to the coverage limit increase, Imbert also issued an order increasing the associated premiums on contributing financial institutions. The premium increase levied on member institutions from 0.2% to 0.3% will be staggered over two years, and will also take effect from October 1. This is projected to result in an accumulated incremental increase in premiums levied by the Deposit Insurance Corporation of approximately $95Mn annually.
• The Deposit Insurance Corporation stated that the increases do not mean that there is a problem with member institutions and that it conducts biennial (every other year) reviews which consider the adequacy of deposit insurance protection to ensure adherence to international best practices.
• These best practices include recommendations from the International Monetary Fund (IMF) and the International Association of Deposit Insurers' (IADI).

(Source: Trinidad Express Newspaper)

• The relationship between the 10-year and 2-year Treasury yields briefly normalised Wednesday, reversing a classic recession indicator. Following economic news that showed a sharp decline in job openings and dovish remarks from Atlanta Fed President Raphael Bostic, the benchmark 10-year yield inched above the 2-year for the first time since June 2022.
• The respective yields were both around 3.79% on the session, with just a few thousandths of a percentage point (pp) separating them. An inverted yield curve, where short-term yields are higher than long-term yields, has signalled the most recessions since World War II.
• The reason why shorter-duration yields rose above their longer-duration counterparts is essentially the result of traders pricing in slower growth out into the future. However, a normalization of the curve does not necessarily signal good times ahead. In fact, the curve usually does revert before a recession hits, meaning the U.S. could still be in for some rough economic waters ahead.
• While the market most closely watches the relationship between the 2-year and 10-year yields, the Fed more closely observes the relationship between the 3-month and 10-year. That part of the curve is still steeply inverted, with the difference now at more than 1.3pp.

(Source: CNBC)

• Jamaica’s trade deficit rose from US$1.76Bn in the January to April 2023 period to US$1.80Bn during the same period in 2024. The outturn reflects a fall in exports coupled with a slight increase in imports.
• From January to April 2024, Jamaica's import expenditure reached US$2.45Bn, a 0.5% increase over the same period in 2023. The rise was mainly attributed to a surge in the imports of "Fuels and Lubricants" and "Consumer Goods".
• “Fuels and Lubricants” expenditure totalled US$662.9Mn, 4.2% above the US$636.40Mn spent in a similar period in 2023. Under this category, the main drivers were increases in the imports of ‘‘Other Fuels and Lubricants’ (+4.6%), and ‘Motor Spirits’ (+21.8%).
• Imports of “Consumer Goods” totalled $643.0Mn, 5.5% above the US$609.50Mn recorded in the similar 2023 period, reflecting increases in all sub-categories.
• Revenue from exports amounted to US$647.2Mn for the period, a 4.1% fall from the US$674.6Mn earned in January to April 2023. This was primarily due to a 52.0% decline in the re-export of “Mineral Fuels”.
• From January to April 2024, Jamaica's primary import sources were the USA (38.6%), China (8.8), Brazil (4.4%), Japan (4.2%), and Trinidad and Tobago (3.1%). Import spending on goods from these nations dropped by 6.3% to US$1.45Mn, mainly due to a significant reduction in "Mineral Fuels" from the USA.
• On the export side, the USA (41.7%), Iceland (10.2%), Russia (7.6%), Puerto Rico (5.5%), and Canada (4.8%) were the top five destinations. Export earnings to these countries rose by 2.6% to US$452.60Mn, chiefly because of an increase in alumina exports to Iceland.

(Source: STATIN)

• 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)