CARICOM Business - Vol. 5 No. 28

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CARICOM Business
A weekly aggregation of some of the more topical business news occcuring in or likely to impact CARICOM / Caribbean

We wish to apologise for the late delivery of this week’s edition of CARICOM Business, however this was attributable to a technological challenge experienced by our Service Provider
NHT resources to target low and affordable housing
Jamaican PM Andrew Holness has indicated that as part of the reforms the housing market architecture, the resources of the National Housing Trust (NHT) will be specifically “targeted to low and affordable income housing. This means that housing for middle income and higher would have to be financed by the private sector.” Jamaican employers are required to deduct 2% of each employee’s salary along with 3% of their own wage bill and remit these funds to the NHT on a monthly basis. Self-employed persons contribute 2% or 3% of earnings depending on occupational category. (JO)
IDB: Caribbean can earn $US3.2 billion from nearshoring
The IDB has estimated that nearshoring can add some US$3.2 billion in goods exports from the Caribbean over the medium term but pointing to US$2.8 billion in potential export opportunities to the combined US and LAC markets. Specifically, potential exports from the Caribbean to the US by the IDB estimates could increase immediately by US$1.8 billion (US$507.5 m excluding the Dominican Republic) whereas potential intra-LAC exports could see a boost of US$953.6 million ( US$803.4 million excluding the DR). The principal beneficiaries are Trinidad and Tobago, Guyana, Haiti, The Bahamas and Jamaica which are poised to garner some US$1.4 billion in additional revenues if current nearshoring opportunities provided by the reconfiguration of global supply chains are embraced. According to the IDB an increase of 10% of a country´s participation in Global Value Chains (GVC) increases its per capita GDP by 11-14%. In making the case for nearshoring the IDB estimates that each dollar invested in investment promotion produces almost $42 in direct foreign investment and that a 10% reduction in international shipping costs increases the value of exports by at least 30% (IADB)
Nearshoring: Potential Opportunities for increased exports, by country 
Trade in Goods only – US$ Millions
Source: IADB
Source: IADB
LIAT looks to minimum revenue guarantees for viability
The Antigua and Barbuda government says every territory to which the cash-strapped regional airline, LIAT, flies to will be asked to purchase shares in the new company as efforts continue to revitalise the embattled airline. In a statement the Government noted that“ in the proposed new LIAT, the salaries, wages and other emoluments will take up a smaller part of its cost of operations. Currently, three aircraft are being utilised, as opposed to 10 aircraft before the collapse of LIAT.” The statement further noted that “any destination requiring more flights than has been deemed necessary, would make a special payment to realize its ambition…A minimum revenue guarantee (MRG) would be applied in or-der to determine what that cost would be. Every territory to which LIAT flies will be asked to purchase shares so that the burdens and the benefits can be equitably shared.” (LOOP)
Foreign Exchange Summary
Applicable rates as at July 8, 2022
Applicable rates as at July 8, 2022
Jamaica Mortgage Bank to be divested, 70,000 houses to be provided
The assets of the Jamaica Mortgage Bank will be divested shortly in order to finance construction of some 70,000 houses for “average” Jamaicans. That’s the declaration of PM Andrew Holness who also advised that “we will probably retain some presence in the bank, in terms of share owner-ship, but it will become a publicly owned limited liability com-pany, trading publicly on the Jamaica Stock Exchange (JSE).” This is a model of divestment successfully employed by the Government where public assets are divested by way of the stock market. The JMB mobilizes financial resources for on-lending to private and public sector developers and financial institutions thereby developing an active secondary mortgage market and providing mortgage indemnity insurance. The Prime Minister also advised that while lands have been identi-fied on which the 70,000 houses are to be constructed, the issue of construction capacity remains a challenge. (JO)
Corporate Movements
  • GraceKennedy Limited (GK) has appointed Andrew Wildish as General Manager of Grace Foods Processors NALCAN effective July 1, 2022;
  • Prestige Holdings Limited has announced that Angela Sobrian, who retired from the position of Vice President, Human Resources on March 31, 2022, officially ceased to be in the employ of the company on June 30, 2022;
  • Grace Foods UK has promoted Brian Mitchell to the post of Managing director effective July 4, 2022.
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Bahamas outlines financing strategy in borrowing plan
The government of the Bahamas does not plan to go to the international bond market for financing during this fiscal year, but will instead explore opportunities for liability management to reduce the costs, if market conditions are favorable. The Annual Borrowing Plan (ABP) for 2022/23 indicates that it will seek the bulk of its $1.76 billion in financing in domestic markets and the majority of its foreign currency financing would be in the form of policy-linked loan facilities from international financial institutions (IFIs). According to the ABP, “of the $1,760.8 million in gross financing requirements, approximately $996.1 million (56.6 %) is to be sourced in Bahamian dollars and the remaining $764.7 million (43.4%) in foreign currency. However, the government will continue to monitor domestic market conditions and investor sentiment, to capitalize on opportunities for achieving a greater proportion of the financing from domestic sources. Prospective recourse to foreign currency borrowings will leverage policy-linked loan facilities from international financial institutions (IFIs) and, to a lesser extent, commercial loans. Generally, the timing of financing activities will be aligned with the government’s cash flow requirements.” (NG)
Bermuda in debt refinancing exercise
As part of its debt management processes the Government of Bermuda has announced the commencement of offers for the purchase of its senior notes. It involves an offer to buy the outstanding 4.138% senior notes due in 2023 and the 4.854% senior notes due in 2024, the two involving principal sums that total more than three quarters of a billion dollars. The first is for the outstanding principal sum of $353,905,000 with a maturity date of January 3, 2023. The second is for the outstanding principal sum of $402,203,000. With rising interest rates, there is uncertainty about the difference between the cost of the existing notes and the replacement borrowing. The Fiscal Responsibility Panel said earlier, and the government agreed in February, that given the scale of Bermuda’s debt, the possibility of a large, sustained rise in global interest rates was one of the most serious risks facing Bermuda in renegotiating debt payments. (RG)
Jamaica’s NIR jumps to US$4.3Billion
Jamaica’s Net International Reserves (NIR) has increased by US$47.45 million to reach US$4,389.91m  as at the end of June2002 relative to the previous month but representing a 29.9 % increase over June 2021. The reserves as at the end of last month is able to support approximately 36.11 weeks of goods imported and 24.49 weeks of imported goods and services. However at the end of June 2021 was estimated to be able to support approximately 42.42 weeks of goods imported and 30.12 weeks of imported goods and services. The ARA metric moved from 128.61% in May 2022 to 129.05% in June 2022. The Assessing Reserve Adequacy Metric (ARA) is comprised of four components, each reflecting a potential drain on the external accounts. The components include Exports of Goods and Services, Broad Money, Short-Term External Debt and Other Portfolio Liabilities. Jamaica’s international reserves are held in (i) deposits with foreign institutions such as the US Federal Reserve Bank of New York, the Bank for International Settlements, and global commercial banks with a minimum credit rating of A+ from a recognised credit rating agency, (ii) investments in US Treasury bonds, and (iii) investments managed by external fund managers such as the Bank for International Settlements, Crown Agents Investment Management and the World Bank. (BOJ)
Caribbean employment lags
Results from a World Bank study has revealed that employment within the Caribbean has not yet recovered to pre-pandemic levels. The results extracted from the latest World Bank High-Frequency Phone Survey (HFPS) done in collaboration with the United Nations Development Programme (UNDP) among 24 countries across Latin America and the Caribbean (LAC) found that despite the marginal signs of recovery seen since 2021, “employment in the Caribbean still remains six percentage points below pre-pandemic levels,” an almost two percentage points larger gap than for the LAC region as a whole.” “Many workers have also left the labour force altogether after becoming unemployed. In the Caribbean, 9% of the pre-pandemic workers report that they no longer work, and 16% have exited the labour force,” the report stated. “Informality has increased in all the countries in the Caribbean,” the report stated, highlighting Haiti as having the highest growth in informality when compared to the pre-pandemic period. Other countries such as St Lucia, Belize, Guyana, Dominica and Jamaica also reflected slight growth in informality, but at similar levels.
In the meantime, according to the findings, households able to cover their basic needs were found to be in the minority. Haiti had the lowest rate at 11% followed by Jamaica at 30 %, Guyana 36%, St Lucia 42% with Dominica and Belize at 43%. On average approximately 46% of LAC households were found able to cover their most basic needs. (JO)
Global Economic News in Brief
Canada’s employment fell by 43,000, or 0.2%, in June, marking the first decline not associated with a tightening of public health restrictions since the beginning of the Covid-19 pandemic. Statistics Canada announced that the employment loss was almost entirely due to a decrease among workers aged 55 and older. Across industries, a decline in the services-producing sector, particularly in retail trade, was moderated by gains in the goods-producing sector, the national statistical agency said. Meanwhile the unemployment rate fell 0.2 percentage points to a new record low of 4.9% as fewer people searched for work. The total number of unemployed workers fell by 54,000, or 5.1%, to one million, the agency said. With both employment and unemployment falling in June, the labour force participation rate, the proportion of the working age population who were either employed or unemployed, fell 0.4 percentage points from May to 64.9%.
The US saw stronger than expected job growth in June, as the economy added 372,000 jobs and the unemployment rate remained at 3.6 per cent, according to data released by the Bureau of Labor Statistics on Friday. The data shows moderately lower but robust job growth, despite aggressive borrowing cost increases from the Federal Reserve. The leisure and hospitality industry continued to show strong growth, adding 67,000 jobs, though a slight dip from the positions added over the month prior. Jobs were also added in health care and professional and business services.
Statistics Netherlands (CBS) reports that the consumer price index (CPI) was 8.6% higher in June than in the same month last year. In May, the inflation rate stood at 8.8%. In June, the year-on-year price increase of energy (electricity, gas and district heating) was less substantial than in May. This resulted in lower inflation. In June, energy was 84% more expensive than one year previously. In May, this was 105%. In addition to energy, the price development of clothing also had a downward effect on the inflation rate. Food was 11.2% more expensive than one year previously. In May, food prices were up by 9.1%. This is mainly due to the price development of dairy products and meat. The price increase of motor fuels amounted to 34.8% relative to June 2021. In May, motor fuels were 27.3% more expensive than one year previously. Since 1996, CBS has published two different inflation rates: one based on the Consumer Price Index (CPI) and one based on the Harmonised Index of Consumer Prices (HICP). According to the European HICP, consumer goods and services in the Netherlands were 9.9% more expensive in June than in the same month last year, down from 10.2% in May. Inflation in the euro area rose from 8.1% in May to 8.6 % in June.
In an effort to fight inflation due to the ongoing economic crisis, the Monetary Board of the Central Bank of Sri Lanka’s decided to increase the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 100 basis points to 14.50 per cent and 15.50 per cent, respectively. This was done to tackle the rising domestic inflation, the bank said, adding that these rates are at the highest in 21 years. The central bank said that they had noted a higher-than-expected increase in headline inflation recently. The high inflation is expected to remain in the period ahead, thus the Monetary Board was of the view that a further monetary policy tightening would be necessary to contain any build-up of adverse inflation expectations. The central bank said that the policy adjustments would help Sri Lanka stabilise its inflation to between 4 and 6 percent in the medium term. The bank said that they considered the impact of tighter monetary conditions on overall economic activity, including the micro, small, and medium scale businesses, and the financial sector performance, among others, against far-reaching adverse consequences of any escalation of price pressures across all sectors of the economy in the near term. The bank raised rates by 700 basis points in April but made no further moves at its previous policy meeting in May. It comes as annual inflation hit a record high of 54.6% in June as the cost of food rose by more than 80% amid the crisis.
Turkey’s annual inflation surged to 78.62% in June, the highest since 1998, the Turkish Statistical Institute has announced. It said the consumer prices increased by 4.95% month-on-month in June. The highest annual price surge was in the transportation sector with 123.37%. The cost of food and non-alcoholic drinks increased 93.93%, while furnishings and household equipment prices were up 81.14%, according to the official statistics. The domestic producer price index climbed 6.77% month-on-month in June, with an annual rise of 138.31%. Turkey’s annual inflation was 73.5% in May. The Turkish lira lost more than 40% of its value in 2021 as the central bank slashed its policy rate by 500 basis points to 14 % from 19% from September to December despite high inflation. The bank has kept the same rate since then. After the dramatic plummet in 2021, the lira continues its downward trend and has lost over 20% of its value against the US dollar over the past six months.
London’s property market is in flux with house prices continuing to rise and apartments declining in value. Apartments are down more than 11% from their peak in August 2020, with the median sale now less than 400,000 pounds, according to an analysis of UK Land Registry data for April by Bloomberg News. The figures, which are smoothed to remove outlier transactions, show the median price paid for a house reached a new high of almost 634,000 pounds ($768,500). The mixed picture suggests that the steam is starting to come out of the capital’s property market. A number of boroughs are seeing price declines compared with a year earlier, as higher mortgage rates and a surge in the cost of living limit the amount buyers can pay for homes. London is the worst-performing property market, with values up 3.9% in the year through May, Zoopla said in a report on Friday. That’s less than half the UK average. It also takes longer in the capital to sell a home than in other regions, according to the property portal.
Vehicle sales crimped by semiconductor shortages may take until 2024 to recover, even assuming the global economy endures a mild recession rather than a deep slump, said the chief executive of French tiremaker Michelin. The auto industry faces a tough year as lingering shortages of chips, Russia’s invasion of Ukraine, fresh COVID-19 outbreaks in China, and rising energy and raw material costs put new strain on supply chains, he said. “As we were discussing last year, my estimate was that we will not go back into real recovery before mid-2023,” Michelin CEO Florent Menegaux said in an interview with Bloomberg Television. At this point the auto recovery looks more likely to happen in 2024 absent a deep recession, he said, adding that he foresees a “mild” global economic downturn for now. While the global car market may rebound toward its pre-pandemic level that year, European sales could lag as consumers hesitate on which type of vehicle to buy amid more stringent environmental regulations, which may affect their cars’ value on the second-hand market, he said.
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20% of T&T population unbanked
Two out of three households in T&T had their finances adversely affected as a result of the COVID-19 pandemic. This was among the findings of the 2022 National Financial Literacy Survey released by the Central Bank of Trinidad and Tobago recently. According to Financial Services Ombudsman Dominic Stoddard “two of three households earnings were negatively affected by the pandemic. So we had 39% of the population being affected by reduced earnings during the pandemic, 24% had temporary job losses, 20% permanent job losses.” He added that 45% of its respondents were unaffected but over a quarter of population—27%—found themselves in debt beyond what they felt could comfortably manage. “In our survey it was reported that 35% of adult respondents fell victim to financial fraud. 19% have reported that they have participated in what turned out to be a pyramid scheme and 43% have never experienced financial fraud,” Stoddard also noted. The survey revealed about 20% of the population remained unbanked while the age range 18 to 24 was the most challenged in terms of financial literacy. (TTG)
The Bahamas: Banks’ fee income doubles in decade
The Central Bank of The Bahamas, unveiling its latest half-yearly fee assessment for the six months to end-December 2021, noted that fee income as a percentage of total commercial bank earnings steadily increased over the decade to 2021. “After interest earnings, fees on the products and services prove to be the second most important source of revenue for banks. As such, fees also compensate for structural gaps in banks’ revenue streams, representing an expanding share of the receipts over the last decade,” the Central Bank report said. “While the net earnings margin from lending activities provide the bulk of gross returns, amounting to an average of 77.3% of the total in the last decade, the ratio fell steadily on average from just above 80% in 2012 to around 70 percent in 2021. Instead, gross fee-based receipts averaged 18.6% of earnings (net of deposit costs), rising on average from just under 15% in 2012 to approximately 23.7 percent in 2021.” The Central Bank also noted that “although a smaller share of the total, commission and foreign exchange income also increased in relative importance since 2012. In the meantime, the diminishing importance of the net interest margin coincided with a decade-long elevated average non-performing loans ratio as compared to the lower averages in the prior decade.” The Central Bank’s data shows that, between 2012 and 2021, net interest margin for the commercial banks remained relatively steady and came in at $139.53m in 2021. This compares to a decade-low of $127.53m in 2012. In contrast, fee income has more than doubled, jumping by more than 100 percent from $23.14m in 2012 to $47.27m in 2021. (T242)
ECCB registers first loss in six years
The Eastern Caribbean Central Bank, ECCB, released its annual report and statement of accounts for the financial year ended March 2022, showing a net loss of EC$49.1 million, compared to a profit of EC$25.2 million in the previous financial year. The ECCB, which serves as a central bank for the islands of Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts- Nevis, St Lucia, and St Vincent and the Grenadines, said the net loss for the year was largely driven by losses on foreign investment securities, combined with a decline in interest income earned on foreign reserve assets, as interest rates globally remained at historically low levels over the year. According to ECCB Governor, Timothy Antoine  the current complex economic and policy environment requires creative thinking, innovative solutions and urgent collective action to overcome the obstacles to recovery, resilience and transformation. (JG) /////////////////
IDB estimates unemployment at 18 percent
The Inter-American Development Bank (IDB) has estimated that the unemployment rate in The Bahamas stands at 18 percent. The estimate, the IDB said in its just released report entitled “Assessment of the effects and impacts of the COVID-19 Pandemic in The Bahamas”, was based on aggregate losses in wages of employees, which is projected to reach $2.4 billion by 2023 or 4.9% of GDP per year on average. “The impact on employment of these loses will be around 30,000 jobs. This is equivalent to 14.7% of the labour force of the country and is consistent with a raise in the unemployment rate up to 25.6% at the initial stages of the COVID-19 pandemic,” the report said. The unemployment rate in 2019 before the pandemic was 9.5%. (NG)
IEA warns of China’s dominance in solar energy
With 95% of polysilicon production and over 80% of solar PV output concentrated in China, the International Energy Agency has warned against Chinese dominance in solar energy, calling for other countries to diversify their sourcing if they are to avoid overdependence. This after oil markets saw one of the largest single-day declines in history this week, but the realities of supply and demand have since sent prices bouncing higher. However declining crude prices did not trigger any changes along the futures curve, implying that the huge drop was primarily coming from widespread profit-taking. In the meantime the US Treasury has introduced a new round of sanctions on a network of Chinese, Emirati and other firms that allegedly deal with Iranian crude oil. (OP)
International Oil Prices
Oil Prices at the close of business on July 8, 2022
Oil Prices at the close of business on July 8, 2022
Regional Stock Market Report
Jamaica Stock Exchange
Overall Market activity resulted from trading in 51 stocks of which 16 advanced, 27 declined and 8 traded firm. Market volume amounted to 9,624,890 units valued at over J$96,004,491.25. Wigton Windfarm Limited Ordinary Shares was volume leader with 2,537,104 units. The JSE Index   declined by 1,165.05 points to close at 380,737.91 .    
Jamaica Junior Stock Exchange
Overall market activity resulted from trading in 40 stocks of which 17 advanced, 18 declined and 5 traded firm. Market volume amounted to 7,385,835 units valued at over J$32,179,004.84. Index closed at 4,341.21.      
Barbados Stock Exchange
2 securities declined and 1 traded firm as 51,151 shares traded with a total value of $50,310.67. Eppley Caribbean Property Fund SCC – Value Fund was the volume leader trading 40,708 shares . Index closed at 2,494.69.
Trinidad & Tobago Stock Exchange
Overall Market activity resulted from trading in 16           securities of which 7 advanced, 4 declined and 5 traded firm. Trading activity on the First Tier Market registered a volume of 73,778 shares crossing the floor of the Exchange valued at TT$1,022,592.34. One Caribbean Media Limited was volume leader with 16,000 shares changing hands   valued at TT$65,600.00. The All T&T Index advanced by 0.59 points to close at 2038.01 and the Composite Index        advanced by 8.06 points to close at 1385.65.    
Guyana Stock Exchange
1 stock advanced, 2 traded firm and 1 declined as 22,816 units crossed the floor. Banks DIH (DIH) was volume leader with 18,478 shares. Index closed at 1,860.94.
Eastern Caribbean Securities Exchange (ECSE)
1 stock traded with 500 shares crossing the floor. Grenada Electricity Services Ltd was the sole trader.
 
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Joseph Cox
Joseph Cox @josephbbcox

A weekly aggregation of some of the more topical business news occuring in or likely to impact CARICOM / Caribbean

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