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Macroeconomic Forecast Dominican Republic (Latin America Monitor - Caribbean)

Wed, 04 Nov 2009 00:00 GMT

The Dominican economy posted an impressive bounce in Q209, with real GDP growing by 5.2% q-o-q, following a 3.6% q-o-q contraction in Q109. On a year-on-year basis, the real economy posted a growth rate of 1.4% in the first half of 2009, suggesting to us that the economy will avoid a full-year contraction. Headline growth came in at 1.8% y-o-y in Q209, propelled primarily by robust private consumption growth, which added 5.5 percentage points to the headline figure. We are therefore revising up our real GDP growth forecast for 2009 to 1.9% from -1.7% previously.

Fiscal Woes To Boost Debt Levels Further (Latin America Monitor - Central America)

Wed, 04 Nov 2009 00:00 GMT

BMI View: We are becoming increasingly wary of Guatemala's rising public debt levels, with little to suggest an improvement in the near term. Without a significant uptick in economic activity and a slowdown in public expenditure next year, we see potential for a significant deterioration in the government's credit profile.

New Constitution Risks Higher Public Unrest (Latin America Monitor - Caribbean)

Wed, 04 Nov 2009 00:00 GMT

The passing of the Dominican Republic's new constitution heightens the risk of public unrest over the medium term. Immigrants with foreign parents will constitutionally not be able to claim citizenship in future, highlighting political efforts to crackdown on illegal immigration. Moreover, controversial amendments, which bar abortion and same-sex marriage threaten to further alienate large parts of society, and could keep the government's relation with the public tense for some time to come.

Negotiations For New Constitution (Latin America Monitor - Caribbean)

Wed, 04 Nov 2009 00:00 GMT

Trinidad & Tobago's Prime Minister Patrick Manning and opposition leader Basdeo Panday met on November 3 to discuss a mutual framework for constitutional reform proposals over the course of the current parliamentary term, which will last through to December 2012. While no agreement is expected at such early stages of negotiations, differences were quick to surface over Panday's proposals for proportional representation in the electoral system, to enable parties with more votes to occupy a larger number of seats in parliament. Other key issues discussed by the two leaders involved the potential formation of a Special Anti-Crime Unit, and government measures to crack down on gangs and money laundering operations.

Early Christmas For FMLN Amid Divided Opposition (Latin America Monitor - Central America)

Wed, 04 Nov 2009 00:00 GMT

The ruling left-wing Frente Farabundo Martí para la Liberación Nactional (FMLN) bloc of President Mauricio Funes received a welcome surprise in parliament in late October, when 12 deputies of the right-wing opposition Alianza Republicana Nacional (Arena) left the coalition to form a new legislative group. This created a deep rift in the opposition bloc, and has resulted in a congressional vote to rotate the presidency of congress in FMLN's favour and expand the 84-seat lower house by 11 seats. Despite the favourable legislative development for the ruling coalition, President Funes expressed his deep concern about an institutional crisis in his country and called for unity among the opposition.

Macroeconomic Forecast Panama (Latin America Monitor - Central America)

Wed, 04 Nov 2009 00:00 GMT

Headline consumer price inflation in Panama experienced a sharp decline in September, falling 0.6% m-o-m to measure 0.5% y-o-y - a multi-year low. This is in line with the ongoing decline in real GDP growth seen in recent quarters. Real GDP growth dropped to 1.9% y-o-y in Q209, from 3.0% in Q109, and 8.2% during the final quarter of 2008. With no imminent end to the economic downturn in sight, we are holding to our end-2009 inflation projection of 0.8%.

Grey-Listed Offshore Sector Hurts Reputation (Latin America Monitor - Central America)

Wed, 04 Nov 2009 00:00 GMT

Panama's offshore financial sector continues to come under strong international scrutiny for its lack of transparency and 'tax haven' status. Indeed, Panama is one of the few remaining tax havens, still grey-listed by the Organisation for Economic Cooperation and Development (OECD), with other regional offshore hubs, such as Cayman Islands, having already signed sufficient tax accords to avoid further international sanctions. With Panama now facing isolation for its failure to comply with OECD standards, we note that the country is running the risk of losing vital foreign business and investment activity.

Macroeconomic Forecast Puerto Rico (Latin America Monitor - Caribbean)

Wed, 04 Nov 2009 00:00 GMT

After a brief improvement in official unemployment levels in August, unemployment in Puerto Rico took another turn for the worse in September, rising to 16.4% from 15.8% the previous month. This signifies a plus three percentage point increase from January levels, highlighting the extent of the downturn on the commonwealth's economy. We have revised down our end-2009 unemployment projection from 20.0% to 18.0%, although hold to our view that subdued growth next year will prevent unemployment falling below the 16.0% level by end-2010.

Macroeconomic Forecast El Salvador (Latin America Monitor - Central America)

Wed, 04 Nov 2009 00:00 GMT

Consumer price inflation (CPI) in El Salvador remained on a downward trajectory in September, dropping 0.2% m-o-m, marking the third straight month of negative price growth. The year-on-year measure, too, remained negative at 1.3%, up slightly from the -1.6% y-o-y seen in August. This is largely in line with our end-2009 projection for -0.7% headline CPI, and we currently see an end-2010 inflation rate of 3.1%.

Macroeconomic Forecast Guyana (Latin America Monitor - Caribbean)

Wed, 04 Nov 2009 00:00 GMT

Guyana's foreign reserve levels have continued rising in the face of the global financial crisis, and with recent central bank data suggesting forex intervention has slowed substantially since the start of the year, we remain confident of the monetary authorities' ability to keep the Guyanese dollar within its tight trading range. The currency averaged GYD204.27/US$ in August, its weakest level since February, although has appreciated slightly since then to close at GYD203.74/US$ at the start of November. We therefore hold to our end-2009 projection of GYD204.00/US$, with little to suggest a significant change next year.

Unemployment Drives Thousands To Streets (Latin America Monitor - Caribbean)

Wed, 04 Nov 2009 00:00 GMT

In late October a drug-related shooting killed eight people and an unborn child in bar in Puerto Rico, located in the outskirts of the capital San Juan. According to local press, gunmen entered the bar and opened fire with automatic weapons, with patrons inside the bar firing back. While the authorities have pointed to several arrests of gang leaders and traffickers as evidence of progress against the drug cartels operating in the commonwealth, this is likely to cause a serious blow to Governor Luis Fortuño's popularity, which has already been suffering heavily from the massive spike in the island's unemployment levels.

Two-Tier Economy Poses Threat To Future Growth (Latin America Monitor - Central America)

Wed, 04 Nov 2009 00:00 GMT

BMI View: While Panama's economy is benefitting from robust canal-related activity, other sectors are suffering from lower global demand and restrained access to credit. The canal expansion project should continue lending impetus to headline growth going forward, but failure to address slumping activity in agriculture and manufacturing risks creating a two-tier economy, which could severely hurt growth when the expansion project finishes in 2014.

Macroeconomic Forecast Trinidad & Tobago (Latin America Monitor - Caribbean)

Wed, 04 Nov 2009 00:00 GMT

Retail price inflation in Trinidad & Tobago reversed its four-month old downward trend in September, with the year-on-year reading spiking to 4.9%, from 4.3% in the previous month. Indeed, on a month-on-month basis, retail prices experienced their highest jump since July 2008, rising by 2.1%. We continue to target 4.0% end-2009 retail price inflation, although we note that the September reading adds upside risks to our forecast. We caution that an increase in the inflation rate could augur poorly for social stability at times of heightened unemployment.

Downgrade Highlights Fiscal Woes (Latin America Monitor - Caribbean)

Wed, 04 Nov 2009 00:00 GMT

Anguilla's local and foreign currency credit rating received a downgrade from the Caribbean Information & Credit Rating Services (CariCRIS) in late September, to CariA+ from CariAA. This downgrade highlights the government's deteriorating fiscal position, something we first highlighted back in May as declining import revenue translated into lower levels of government revenue. As we argued back then, attempts by Chief Minister Osbourne Fleming to reduce public spending through his proposed US$1mn fiscal austerity package was unlikely to sufficiently compensate for lower export earnings and a rapid fall in the number of tourist arrivals, which along with the drop off in

Plenty Of Potential Beyond Crisis (Latin America Monitor - Central America)

Wed, 04 Nov 2009 00:00 GMT

Our short-term political risk ratings does see a slight improvement for Honduras this month, although this is more to do with an improved inflationary environment than confidence that the political stalemate is at an end. While we hold to our view that an agreement between both parties will be reached in the not-to-distant future, perhaps in the form of some power-sharing agreement, and general elections will proceed (in which Partido Nacional candidate Porfirio Lobo Sosa is odds on favourite to win) we remain cautious of further unrest over the short term.