The pipeline of new hotel openings in the Caribbean is expected to weaken in 2011 and 2012 in comparison to 2010, Lodging Econometrics says in a report. The firm notes that this year, only 12 new hotels with a total 1,383 rooms are expected to open in the region. In 2012, activity is expected to drop to an extra 7 hotels with a total of 809 rooms. The pipeline has been weakening every year since 2008, the US-based hospitality research firm says. In 2008, 22 hotels with 5,848 rooms opened, while in 2009, some 25 hotels opened, but they had 5,443 rooms. Last year, 16 hotels with 3,129 rooms opened. “The Caribbean continues to struggle to regain footing,” the report notes. “The Caribbean pipeline is in a bottoming formation and will decline further as new project announcements into the pipeline are at the lowest Lodging Econometrics has recorded in the past 3 years,” it adds. The study includes all of the Caribbean islands and does not include countries like Guyana or Belize, which are sometimes considered part of the region.
Category: Economy & Policy
Famsa Local Bond Prices In-line with Guidance
Mexico’s Grupo Famsa on Friday issued MXP1bn in 3-year bonds, at TIIE +280bp, in-line with guidance, according to a banker on the deal. Private banks, treasuries and mutual funds were the main participants in the BBB rated deal. Proceeds will be used to repay an 18-month bond for the same amount that was issued in 2009. Ixe was the lead bank on the deal.
Bancomext Comes In-Line to Guidance
Mexico’s Banco Nacional de Comercio Exterior, has priced MXP5bn of 2015 bonds at 1bp through TIIE, in-line with guidance in the TIIE area, according to a banker on the deal. Investors say the deal was attractive, providing an opportunity for investors to diversify their portfolios while offering a government guarantee, they say. The bank is backed by the federal government and is rated AAA on a national scale. It has been 6 years since Bancomext last came to the bond market. The deal received MXP11.4bn of demand, the banker says, attracting 53 orders, with 45 tickets being assigned. Demand came from a wide range of investors including insurance companies, pension funds, mutual funds, bank treasuries and private banks, says the banker. Proceeds will be used to generate export loans. Banamex and HSBC were managing the sale.
Chile Surprises with 50bp Rate Hike
Chile’s central bank tightened its policy rate by 50bp to 4.00%, 25bp more than expected by the market. The bank cites uncertainty and market volatility caused by the natural disasters in Japan and the political turmoil in Arab countries. However, it points out that on the domestic front, demand and employment figures continue to evolve positively. “Clearly they are trying to pull down inflation expectations,” says Nomura. Goldman Sachs had warned of a possible 50bp hike, although it predicted a 25bp hike, as did most market participants. “At this stage we assess a 20% probability of a 50bp rate hike (down from a probability of 35% due to the high uncertainty around the outlook for the global and Japanese economy following the recent devastating developments),” Goldman had said.
Colombia Seen Tightening Rate
Market consensus points to Colombia’s central bank tightening its rate by 25bp to 3.50% today. However, Nomura is forecasting the central bank will keep the rate unchanged at 3.25%. It cites a 1.9% appreciation in the COP after having peaked at 1,915 per USD on March 1 and decreased inflation expectations. It expects the rate to hit 4.00% by the end of 2011. Celfin says there is a chance the central bank will leave rates untouched given lower inflation expectations.
Japan Will Not Impact LatAm
The earthquake and tsunami that devastated Japan are not expected to have a significant impact on LatAm. The trade link between Japan and LatAm is fairly weak, according to Nomura, which adds that as of 2009, Japanese trade with LatAm accounted for only 4.7% of its total. The sum of exports and imports from LatAm to Japan only amounts to 3.0% of the total trade to the region. In addition, Nomura says there is almost no outward FDI from LatAm to Japan. Meanwhile, Deutsche Bank says that “the main channel of transmission of weakness in Japan for LatAm equities would be via potential pressure on commodities prices.” According to BCP “in the short run, [the disaster] will depress commodity prices as the [Japanese] government decides how to address the public’s safety concerns about the nuclear generating facilities.” Nevertheless, this may not be a sign of trouble for LatAm commodity exporters, according to Nomura. Chile, which sends about 12% of its exports to Japan could benefit from a rise in demand, even if commodities prices are lower, Nomura says. Peru may also benefit, albeit to a lesser extent. About 6% of Peru’s exports go to Japan. Brazil, another important commodity producer, only sends about 3% of its total exports to Japan, according to Nomura. RBC says fears of Japanese repatriation of Brazilian financial assets is unwarranted, though there is a risk of a slowdown of further Japanese flows into Brazil in the short term as money is needed to finance local reconstruction.
Hike Expected for Chile Rate
Market consensus points to Chile’s central bank tightening its rate by 25bp, bringing it to 3.75% today. “Though the minutes from the February meeting – in addition to recent comments by central bank officials – suggest rising concerns about the inflation outlook, the central bank seems committed to continuing its tightening cycle at a gradual pace, most likely in 25bp increments,” says Morgan Stanley. “At this stage we assess a 20% probability of a 50bp rate hike (down from a probability of 35% due to the high uncertainty around the outlook for the global and Japanese economy following the recent devastating developments),” according to Goldman Sachs.
Peru Cement Sector Booms
Peru’s cement sector is growing at a record pace, according to the Association of Cement Producers (Asocem). The country needs approximately $38bn of investment in the next 5 years in energy, sanitation and transportation infrastructure to ensure annual economic growth of 6% or more. Meanwhile, Peru faces a deficit of 1.2m housing units as of the start of 2011, according to the Peruvian Construction Chamber (Capeco). The twin deficits, on top of forecasts of more than $56bn in new mining and energy projects through 2020, is fueling significant growth. Cement consumption in November 2010 jumped 22.9%, to 754,422 metric tons compared to the same month in 2009. In 2010, cement dispatched from the 7 companies with factories in Peru reached 8.1m metric tons, 15.1% more than 2009, according to Ascocem. This year, the cement sector is expected to grow by 12% in the first quarter, slower than for the corresponding period in 2009, according to Pablo Nano, a sector analyst with the economic research unit of the Peruvian branch of Canada’s Scotiabank. “There is dynamic growth [in the cement market] with rates well above 10% annually,” says Juan Carolos Cardenas, general manager of Mexico’s Cemex in Peru.
Remittances to LatAm, Caribbean Increasing
Remittances to LatAm and the Caribbean are likely to rise this year after stabilizing in 2010, according to the IDB’s Multilateral Investment Fund. Measured in USD, money transfers made by LatAm and Caribbean migrants to their countries of origin reached $58.9bn in 2010, virtually unchanged from $58.8bn in 2009, when remittances saw a 15% drop due to the effects of the global economic crisis, the MIF says. Although remittances stabilized in 2010, the MIF says they increased in some sub-regions. Transfers to CentAm jumped 3.1% while those to Haiti increased 20%, largely due to the humanitarian crisis caused by the earthquake. “Remittances to LatAm and the Caribbean are likely to continue rising in volume in 2011, although still below the double-digit rates they attained in years prior to the global crisis,” the MIF says, adding that the pace of growth will depend principally on how strongly the job markets in source countries such as the US and Spain recover.
DomRep Power Could Suffer Oil Shock
The Dominican Republic’s power generation sector is highly exposed to rising oil prices, according to Fitch. The vast majority of the country’s power, 82% of installed generation, comes from fuel oil and natural gas-fired thermoelectric plants, it says. That makes it the most highly exposed country in the CentAm and Caribbean. El Salvador comes in second place, as nearly 70% of power generation comes from fossil fuels, Fitch says. Less exposed to rising energy prices are Costa Rica, where 72% of power comes from renewable resources, and Panama, where 50% of total capacity is provided by hydroelectric sources. On average, the power generation system in CentAm generates more than half (54%) of its electricity is generated by thermoelectric sources, says Fitch. This exposure could translate into higher expenses this year. “Prices could briefly surpass $140 per barrel within the next 3 months,” Bank of America Merrill Lynch says. It expects the price of oil to average $108 per barrel for the year.