Costa Rica

The monthly index of economic activity (IMAE) rose 5.9%  oya (sa) in March to post its seventh consecutive positive reading. March’s outcome, which was supported by increases in the manufacturing (+8.8%oya) and transport and communications (+6.3%oya) sectors, and constrained by mining (-6.7%oya) and construction (-4.6%oya) activity, took average growth for 1Q10 to +6.1%oya, up from +4.0%oya in 4Q09. While our current forecast calls for GDP to expand 3.2% in 2010 after contracting -1.3% last year supported by base effects and a recovery in domestic demand

Press Release: IMF Executive Board Approves US$ 735 Million Precautionary Stand-By Arrangement for Costa Rica

El Salvador

Tax revenues rose by a modest 1.9% to US$706 million in 1Q10 from US$693 million in 1Q09. The increase was supported by higher VAT (+8.0%oya) and import (+6.9%oya) taxes and constrained by declines in income (-8.7%oya) and excise (-6.9%oya) taxes. Tax earnings shrank 8.2% to US$2.84 billion in 2009 (16.4% under budget) from US$3.09 billion in 2008, and are officially projected to grow 11.2%y/y to US$3.15 billion in 2010. As a percentage of GDP, tax collections fell from 14.0% in 2008 to 13.4% in 2009, considerably lower than the 14.6% target, and are expected to climb to 14.2% in 2010 boosted by a recovery in economic activity. Given year-to-date results, we believe that meeting the official target for this year will be no easy feat. (Franco)

Press Release: IMF Executive Board Approves US$790 Million Stand-By Arrangement for El Salvador

Guatemala

The trade deficit rose 10.8%oya during the first two months of the year, as a 10.7%oya jump in exports matched a 10.8%oya increase in imports. Guatemala’s exports totaled US$1.32 billion and its imports amounted to US$1.91 billion in January-February, resulting in a trade deficit of US$594 million, up from the US$536 million shortfall posted a year earlier. The trade deficit shrank 36.7%y/y to US$4.3 billion in 2009 underpinned by a 20.8%y/y decline in imports to US$11.5 billion and a 6.8%y/y decrease in exports to US$7.2 billion. Last year’s narrowing in the trade deficit contributed to a reduction in the current account deficit to only 0.6% of GDP from 4.8% of GDP in 2008. As economic conditions normalize in the near term, we expect the trade and current account deficits to increase to US$5.2 billion and 3% of GDP, respectively, in 2010. (Franco)

Panama

According to the national statistics institute (INEC), monthly CPI climbed 0.3% in April, compared with a 0.4% rise a year earlier, leading annual inflation to decline to 2.6% from 2.7% in March to post its lowest level since December. Last month’s result took the cumulative rate for the first four months of the year to 1.7%, up from 1.1% during the same period of 2009. April’s monthly reading was underpinned by increases in the price of health (+1.0%m/m) and transportation (+0.8%m/m), which outweighed a marginal 0.1%m/m contraction in the cost of housing and public utilities. While consumer prices fell sharply last year to 1.9% after surging by an above-trend 6.8% in 2008, we expect annual inflation to close 2010 at 4.0%, bolstered by base effects and a recovery in both domestic and global demand. (Franco)

Dominican Republic

Monthly CPI rose 0.4% in April, compared with 0.1% a year earlier, taking annual inflation to 7.7%, up from 7.4% in March, and cumulative inflation for the first four months of the year to 2.7%, significantly higher than the modest 0.9% posted a year earlier. April’s increase in consumer prices was underpinned by rises in the transportation (+1.0%m/m), health (+0.6%m/m), and hotels, bars, and restaurants (+0.6%m/m) components of the CPI, which more than offset a 0.1%m/m decline in the education sub-index. The spike in transportation costs accounted for 66% of last month’s CPI increase and was related to higher gasoline prices (regular: +1.6%m/m and premium: +1.4%m/m). We expect headline inflation to close 2010 at 7.0%, up from 5.8% last year, yet in line with the official 6-7% inflation objective. (Franco)

Dominican Republic

According to preliminary central bank estimates, tourism revenues rose 4.0%oya to US$1.31 billion in 1Q10 from US$1.26 billion a year earlier, a significant improvement on the 8.0%oya contraction they had posted in 1Q09. The first-quarter increase in earnings was underpinned by a 3.2% climb in foreign tourist arrivals, which account for 82.5% of total passenger arrivals. Tourism revenues fell 2.4% to US$4.06 billion in 2009 from US$4.17 billion in 2008, as the number of foreign visitors decreased 0.9%y/y to 3.42 million. Based on recent revenue trends and our expectation that foreign tourist arrivals will increase by about 4%y/y in 2010, we believe tourism earnings will expand by as much as 8% to US$4.39 billion this year. (Franco)

Dominican Republic

The latest data confirm that the worst for Dominican remittances may be over. After shrinking 5.6% to US$3.04 billion in 2009 from US$3.22 billion in 2008, remittances rose 5.5% to US$783 million in 1Q10 from US$742 million in 1Q09, when they recorded an 8.2%oya contraction. The improvement was underpinned by positive results for every month so far this year, with remittances growing 6.5%oya in January, 5.5% in February, and 4.5%oya in March. Encouraged by recent trends, we now expect remittances to increase 7%y/y to US$3.25 billion this year, up from an earlier +3%y/y (to US$3.13 billion) estimate. Despite their increase in absolute terms, however, remittances as a percentage of GDP will probably not rise much from last year’s below-trend 6.5% level, as an expansion in nominal GDP keeps their importance relative to the size of the economy in check. (Franco)

Press Release: IMF Executive Board Approves US$1.7 Billion Stand-By Arrangement for the Dominican Republic

Jamaica

Prime Minister Golding in an address to the nation last night said that he will approve the extradition of a Jamaican national wanted in the US on drug and arms trafficking charges, ending a nine-month stand-off with the US. The immediate concern in the aftermath of the government’s decision to honor the extradition request is the risk of social unrest given the individual’s strong community ties. On the political front, the government’s handling of the case—including the recent revelation that it had hired a US law firm to lobby Washington over the extradition—has prompted calls for the prime minister’s resignation. Indeed, Golding said yesterday that he offered to resign from the post of Prime Minister at a high level meeting of the Jamaica Labor Party (JLP) over the weekend, but said his party declined to accept it. The opposition People’s National Party (PNP) is now expected to table a no-confidence motion in parliament against the Golding administration, but we do not expect the motion to pass, as the JLP enjoys a 32-28 majority in the lower house and the party’s senators have voiced strong support for the prime minister. At this point, we do not expect the latest political developments to derail the IMF program, a key anchor of Jamaica’s credit story, and stay Market weight Jamaica’s external debt in our EMBIG model portfolio (we recently downgraded Jamaica to Market weight; see CAC Daily, May 7), but note that the increased risk of early elections (not due until 2012) and possibility of social unrest may keep bond prices under pressure in the near term. (Neeraj)

Jamaica

The IMF yesterday issued a broadly positive statement following the conclusion of the first review of Jamaica’s economic program under the Stand-By Arrangement (SBA). The statement noted that all the quantitative criteria (end-March 2010) were met without the need for waivers and substantial progress was made on the structural reform agenda. Targets on net international reserves and net domestic assets of the Bank of Jamaica were exceeded by a comfortable margin owing to relative market stability and fiscal targets were met thanks to stepped up tax administration measures and expenditure restraint. On structural reforms, the IMF mission lauded the passage of the new fiscal responsibility framework, the divestment of Air Jamaica and progress in improving tax administration and treasury management. Looking ahead, the mission will now recommend that the IMF’s Executive Board complete the first review of the SBA and disburse the second tranche of the US$1.3 billion loan worth approximately US$100 million by the end of June. Jamaican authorities have also agreed on an updated IMF Letter of Intent, which will still need approval by Jamaica’s cabinet and the IMF. Looking ahead, the key targets to be met include the review of tax waivers (by December) and ongoing transformation of the public sector. The second IMF review is scheduled for August 31 for the period ending June 30. (Neeraj)

Tastee gets full clearance from Caricom

TASTEE has been given the go-ahead to export patties to all Caricom member states after meeting the regional body’s sanitary requirements.

Tastee made the announcement in a press release yesterday, saying that Caricom made the decision at a meeting held on February 8-9, 2010, acting upon recommendations of its Sanitary Evaluation Team, which visited the Tastee site in Jamaica and declared that its beef and chicken patties were fit for export throughout the region.

“This means that Tastee has become the first and only patty-manufacturing company in Jamaica to achieve this feat thus keeping Jamaica’s product strong by entering other countries,” said Tastee in the release, adding: “The standard by which patties have been judged by Jamaicans since 1966, Tastee has again taken the lead and will continue to diligently preserve its strong and solid reputation while maintaining the best quality available to consumers.”

IDB looking at funding development of public-private partnerships

The Inter-American Development Bank (IDB) is considering a US$750,000 (66.8 million) technical co-operation with Jamaica aimed at improving its business climate through greater access to finance and funding of infrastructure projects through public-private partnerships (PPPs).

The IDB expects to coordinate with the Planning Institute of Jamaica (PIOJ), which will in turn coordinate with all the relevant government stakeholders such as Jamaica Trade and Invest and the Ministry of Finance and the Public Service.

GK unveils new dividend policy

GraceKennedy’s board has approved a more generous dividend policy that will now see the conglomerate paying returns to shareholders three times per year instead of two.

Shareholders will also get a bigger share of profit – a minimum 15 per cent of net income attributable to stockholders, up from 10 per cent.

GraceKennedy last year paid dividend amounting to J$381 million on its 331.445 million listed shares, or around 14.8 per cent of profit, according to the May issue of StockTrack, a publication of the Financial Gleaner.

GraceKennedy’s next payout of J$165.7 million or 50 cents per share will be on May 27.

Jewelerama enters cash for gold trade

With the price of gold internationally at more than US$1,200 per ounce and the precious metal fetching between J$12,000 and J$14,000 per ounce on the local market, Steve Khemlani, the managing director of the Jewelerama and Khemlani group of companies, has entered the lucrative trade that is still cornered by dealers, many of whom are said to be unlicensed.

Khemlani appears to be among the first established jewellery firms to open its doors to heavy gold purchases.

The jeweler has been running daily media advertisements in an aggressive drive to elicit the business of Jamaicans, who are eager to cash in the gains from selling gold, the price of which has appreciated significantly over the last 18 months, and who may be wary of the many informal buyers who dominate the mushrooming trade.