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ECFH Closing Price as at June 14, 2018: $4.00

Market News

June 15, 2018

CCRIF Welcomes Two New Members – British Virgin Islands and Montserrat

CCRIF SPC is pleased to announce that the British Virgin Islands and Montserrat have joined the facility and purchased coverage for the 2018/19 policy year beginning June 1st. Both countries obtained tropical cyclone and excess rainfall policies and the Government of the Virgin Islands also purchased cover against earthquakes. CCRIF’s membership now stands at 19 countries - 18 Caribbean governments and 1 Central American government.

CCRIF is pleased to welcome its two newest members and CEO Mr. Isaac Anthony says “the addition of these two countries to the risk pool is consistent with our current strategic direction which is geared towards scaling up the facility by adding new members, increasing products we offer and also encouraging members to increase coverage levels”.

Governments and citizens in the region have witnessed first-hand the impacts of extreme geophysical and climate events throughout the past decade – highlighted by Hurricanes Matthew, Irma and Maria in the past two years – and have been encouraged by CCRIF’s rapid response and payouts. Since CCRIF’s inception in 2007, it has made payouts totalling US$130.5 million to 13 member governments, including US$83.6 million for Matthew, Irma and Maria, which have accounted for 64 per cent of the total. Even after these payouts, CCRIF remains financially solvent with its long-term sustainability intact.

All 36 payouts to date have been made within 14 days of the end of the event – a core principle of CCRIF SPC. In some cases, partial payouts were made within 7 days upon request by the recipient governments.

Indeed, the two new members are joining CCRIF at a time when many countries are increasing their level of coverage. While all existing member policies were renewed for the 2018/19 policy year, 12 member governments increased the value of their coverage limit by at least 10 per cent for either Tropical Cyclone or Excess Rainfall policies. These countries all recognize that climate change is likely to exacerbate the impacts of hydrometeorological events – resulting in more frequent intense storms as well as greater variability in periods of excess rainfall and drought – and that the use of parametric insurance can be applied to strengthen their climate resilience. Additionally, two countries increased the coverage limits on their Earthquake policies.

The CCRIF Story is a powerful way to demonstrate the linkages among country disaster risk management strategies, risk transfer, poverty reduction and economic resilience. CCRIF promotes the importance of the Agenda 2030 goals for sustainable development and the notion of leaving ‘no one behind’ in development. CCRIF supports CARICOM in its bold ambition to make the Caribbean the first climate-resilient zone in the world and will play its part in helping the region realize this stated ambition. The facility effectively supports the goals of promoting sustainable economic growth, ensuring environmental, social and fiscal sustainability and reducing poverty – as evidenced by its own mission statement: “A resilient Caribbean region and beyond with optimized disaster risk management and climate change adaptation practices supporting long-term sustainable development”.

Release published June 13, 2018 on ccrif.org

Antigua & Barbuda: Gov’t says Petro Caribe Board denies pulling back on region

A story that originated from the online news agency Platts, and which is now circulating on other regional news sites, is being described as false. The story claimed Venezuela is no longer able to deliver petroleum products under the Petro Caribe programme to eight Caribbean nations it serves, including Antigua and Barbuda.

Last night, the Cabinet of Antigua and Barbuda released the following statement, “The Board of Petro Caribe was also invited to Cabinet. First, it dispelled and debunked the fake news which appeared on social media and was reported in Wednesday’s June 13, 2018, print newspaper. PDVSA is not ending and will not discontinue its special sale of petroleum products to the eight countries that support Venezuela at the OAS.”

The Cabinet said that the Board confirmed that it will issue an independent statement regarding the false information. Petrocaribe is an oil alliance of 17 Caribbean states with Venezuela to purchase oil on conditions of preferential payment. The alliance was launched on June 29, 2005 in Puerto La Cruz, Venezuela.

The government’s Chief of Staff, Lionel “Max” Hurst also said that in Antigua and Barbuda, the subsidy for electricity by the Petro Caribe agreement costs $618,000 each month; the social programs cost $460,000 each month on average. There are five categories of people who qualify for the subsidies, and the rule does not allow two people in any one household to benefit from the subsidies.

Hurst, who prepares the notes of Cabinet, wrote, “There will be no wholesale removal of beneficiaries from the Petro Caribe programs, the Cabinet advised; each current recipient will be judged on the basis of his/her eligibility. The Petro Caribe program continues.” Meanwhile, earlier this week, the Antigua based West Indies Oil Company said it had no knowledge of the reported development.

WIOC issued a statement saying, “It has been drawn to the attention of the West Indies Oil Company (WIOC) that a notice purporting to come from PDVSA has been circulating on social media, stating that PDVSA has suspended oil shipments to eight countries in the Petrocaribe arrangement, including Antigua and Barbuda. WIOC advises that the Company has received no such notification from PDVSA.”

WIOC further stated that even if it were the case that PDVSA had suspended shipments, WIOC is not reliant on fuel supplies from PDVSA for the petroleum requirements of Antigua and Barbuda. It said therefore the public should not expect any disruption in services.

Article published June 14, 2018 on antiguaobserver.com

Jamaica slips one place in FDI inflows

Jamaica slipped one place to second among the English-speaking Caribbean and small-island developing states, SIDS, in terms of the value of foreign direct investment, FDI, inflows in 2017, according to the United Nations World Investment Report released last week. FDI inflows to Jamaica reached a high of US$925 million in 2015, retreated to US$856 million, down seven per cent in 2016, but the rebound to US$888 million last year was still four per cent down on the peak achievement, the report indicated.

The Bahamas was the largest recipient economy in the region in 2017 with inflows of US$928 million. FDI in the 10 Caribbean countries increased by nine per cent to US$2.7 billion in 2017, in contrast to a seven per cent reduction in all economies in the region, according to the report. Although FDI flows to the majority of states in the region shrank, the strong gains posted by Barbados, up 25 per cent to US$286 million; St Kitts-Nevis, up 50 per cent to US$127 million, and Trinidad & Tobago, up from negative US$17 million in 2016 to US$179 million in 2017 pushed the region's aggregate flows to a three-year high.

The report noted that this was also helped by the resilient FDI flows into The Bahamas and Jamaica. In the services-based economies of Barbados and St Kitts-Nevis, tourism-related construction projects were the major driver. In energy-based Trinidad, a decline in negative reinvested earnings in oil and gas activities contributed to the rebound, according to the report, noting that two projects by the United Kingdom-based BP began operation.

Despite the slowdown in the two largest FDI host states in the region - The Bahamas and Jamaica - foreign investors remained active, it said. In the Bahamas, where FDI dipped in 2017 after a 131 per cent rebound from 2015 to 2016, the opening of a mega resort project, Baha Mar, created nearly 4,000 jobs. Jamaica, where FDI fell for the second year after a record high in 2015, continued attracting diversified activities, including the US$299-million acquisition of bauxite mining company Alpart, owned by Jiuquan Iron and Steel, JISCO, in 2016 which resulted in an additional investment of US$160 million for expansion in 2017 and a strong uptick in the country's alumina production.

The report said that although China does not appear among the top 10 economies for FDI flows to small-island developing states, it has become an important source for financing capital-intensive infrastructure projects in some of those countries. In Jamaica, for instance, Gansu Province of China, the owner of Alpart through JISCO, has agreed to provide financial support to develop a US$6-billion industrial park, the report pointed out.

FDI flows will remain fragile

The report cautioned, however, that FDI flows into SIDS will remain fragile, noting that greenfield projects announced in 2016-2017 stagnated well below levels observed in 2014 and 2015. In the Caribbean, policy developments in renewable energy are expected to facilitate implementation of FDI projects in the pipeline and attract more in the coming years. Given the highly concentrated distribution of announced projects and infrastructure public-private partnerships (PPPs), however, only few SIDS are likely to see significant FDI growth going forward.

"For example, in the Caribbean, Jamaica, which hosts larger infrastructure PPPs involving multinational enterprises, continued attracting the highest value of announced greenfield projects in 2017," it said, referencing the US$330-million Old Harbour power station project. Global flows of FDI fell by 23 per cent in 2017, said the report. Cross-border investment in developed and transition economies dropped sharply, while growth was near zero in developing economies.

"With only a very modest recovery predicted for 2018, this negative trend is a long-term concern for policymakers worldwide, especially for developing countries where international investment is indispensable for sustainable industrial development," said the investment report, prepared by the United Nations Conference on Trade and Development.

Article published June 15, 2018 on Jamaica-gleaner.com

Economic Growth in U.S. Leaves World Behind

The U.S. economy is revving up just as Europe and other major economies lose steam, jeopardizing a rare period in which the world's largest economies have been accelerating in unison. The European Central Bank on Thursday took another step toward ending the massive stimulus measures it has used in an effort to boost growth since 2015. But ECB officials also said they would hold interest rates steady through summer next year, a sign that they felt the eurozone economy remains fragile.

In an indication of growing economic vigor in the U.S., the Federal Reserve on Wednesday tapped the brakes again, raising the benchmark interest rate by a quarter of a percentage point and signaling it may quicken the pace of future rate increases because of a strengthening economy and tightening labor markets. The economies' diverging paths were expressed most prominently in the euro, which on Thursday suffered its worst day against the dollar in two years. The euro lost 1.88% against the U.S. currency, its biggest drop since the day after the U.K. voted to leave the European Union.

The central bank announcements over the past two days offered the latest evidence that heady growth expectations for Europe and other major economies outside the U.S. might not be achieved, defying analysts who began the year convinced that the world economy's first synchronized expansion in years would continue. The International Monetary Fund said in January that the world's seven largest economies each grew more than 1.5% in 2017, and it predicted more solid growth this year. Global manufacturing was booming and the IHS Markit global purchasing managers index that month was its strongest in nearly seven years.

Many investors counted on a revitalized Europe to lead that growth in 2018. But recent labor strikes in France, political turmoil in Italy and softer economic data are causing investors to rethink that premise. Germany last week reported that factory orders dropped 2.5% in April, while eurozone growth was 0.4% in the first quarter, down from 0.7% in the final quarter of 2017. On Thursday, the ECB revised down its eurozone growth expectations for this year to 2.1%, from 2.4%.

"When we look at Europe, the very strong momentum we saw in data last year has been waning this year," said Holly MacDonald, chief investment strategist at Bessemer Trust. Europe isn't the only region to show signs of cooling down. The People's Bank of China this week also left a suite of key short-term interest rates unchanged. New data showed business activity, including investment and retail sales, slowed in May, suggesting the world's second-largest economy is facing growing headwinds.

The disappointing figures "warranted China to take a cautious tone," said Tommy Xie, an economist at OCBC Bank. In the U.S., meanwhile, recent data suggest an economic expansion that just became the second-longest in the nation's history is accelerating, rather than slowing down. The U.S. economy grew modestly over the winter, at a 2.2% annual rate in January through March, but seems to be ramping up further this spring. Growth is on track to exceed a 4% pace in the three months ending in June, which would be the fastest of any quarter in almost four years.

Spending at U.S. retailers soared 0.8% in May, the biggest jump in six months, according to U.S. government data released on Thursday. Consumers, spurred by tax cuts and the lowest unemployment in half a century, shelled out more for cars, clothing, building supplies, health products and bar tabs. "We may be entering a new level of consumer spending right now," said economist Robert Frick of the Navy Federal Credit Union. He pointed out that more and more blue-collar workers are finding work as the labor expansion endures, and those workers tend to spend a greater portion of their incomes, out of necessity, than higher-income workers, who save more.

He added that low unemployment, strong consumer spending and modest inflation are likely to keep the economy on strong footing this year: "We're in a Goldilocks zone right now." In the eurozone, rates have stayed pegged at negative levels, now at minus 0.4%, since 2014. Despite some initial concerns, investors have become more relaxed about possible unintended effects of negative rates on the economy.

On Thursday, investors reacted to the ECB 's announcement to end bond purchases while keeping rates low longer by selling the euro and bidding up stocks. It is the latest example of interest-rate moves returning to the driver's seat of monetary policy. In the wake of the financial crisis, central bankers rolled out a raft of unprecedented and complex measures, including bond buying and lending facilities for banks, pitching them as a way to lower long-term borrowing costs at a time when short-term rates could go no lower.

Not all investors are ready to write off Europe's growth prospects. Roland Kaloyan, head of European equity strategy at Societe Generale, believes that lackluster economic data in the first quarter is a "temporary soft patch," and that "fundamentals remain very solid for eurozone growth," whereas he expects the U.S. economy to go into a recession around 2020. Others believe the euro will continue to weaken further this year, but think that markets are swinging too far in favor of U.S. growth.

Next year, "we expect the euro to rebound against the dollar even if the ECB only hikes late in the year," said Ingvild Borgen Gjerde, an analyst at Capital Economics. "We think the Fed's tightening cycle will come to an end in mid-2019, far sooner than is discounted in the markets."

Article published June 14, 2018 on invest.ameritrade.com