Powell Wants Rates Higher & Gilinski is on a Shopping Spree

Author

Faro Capital
June 30, 2023

Good Morning,

U.S. equities ended mostly positive as major banks in the U.S. passed the Fed’s annual stress test this week. U.S. GDP growth in Q1 was revised to 2% from 1.3%. Yesterday Fed chair Powell at the Banco de Espana Conference signaled the need to raise borrowing costs this year. With the signaling of higher rates the NASDAQ dropped a bit yesterday.

Canadian stocks rose yesterday marking a fourth straight day of gains. Canadian domestic wage growth hit a new high in five months. Energy stocks helped with the gains yesterday.

Brazilian stocks rose with investors waiting on the results of the national monetary council, which will set targets for inflation. The central bank’s inflation report reported positive projections for the economy regarding inflation & growth. Grupo Pao de Açucar shares rose around 13% on the BMF with news Gilinski wants to buyout the company’s stake in Grupo Éxito.

Markets: Before the Open

Top News Stories

Canada

  • Indigo reported a loss of C$ 49.6M in its latest financial year (BNN)

  • BMO announced 100 job cuts as dealmaking revenue drops (BNN)

  • Thomson Reuters buys legal AI tech company for $650M (BNN)

  • Investment firm Brookfield is closing in on a deal to buy American Equity Investment Life (BNN)

  • Shopify’s CEO announced he will fight CRA request for merchant records (BNN)

  • Canadians fear a low down payment might affect their chances to own a home (BNN)

  • B.C. port union announced a 72-hr strike notice (VS)

  • Nordstar & Postmedia are looking to merge (GM)

  • Canadian Pacific Kansas city plans new rail network (GM)

  • Alimentation Couche-Tard reports rising profits (GM)

  • Corus Entertainment reports Q3 loss (BNN)

  • Canopy Growth sells California facility, tries to raise cash to cover OPEX (BNN)

U.S.

  • Visa to acquire Pismo, deal valued at $1B (VS)

  • Snowflake gets U.S. DOD level 4 authorization for AWS GovCloud (VS)

  • Largest 23 banks pass annual stress test (CNBC)

  • Fanatics ups its offer for PointsBet’s U.S. assets from $150M to $225M (CNBC)

  • Lordstown Motors files for Chapter 11 (CNBC)

  • Delta raises full year earnings forecast (CNBC)

  • Home prices rose for 3rd straight month in April (CNBC)

  • Microsoft sets goal of $500B in revenue by 2030 (CNBC)

  • Costco is cracking down on membership sharing (WSJ)

  • The government considers new controls on AI chips to China (WSJ)

  • Oaktree Capital appoints two new co-CEOs (WSJ)

  • Polestar signs deal with Tesla to access their Supercharges (CNBC)

  • Fidelity to start a bitcoin ETF (CNBC)

Argentina

  • Argentina announces credit of over $1B from the World Bank (USN)

  • Dollars in short supply so the Yuan is gaining traction, hitting a record 28% of all FX transactions this month (BAT)

Brazil

  • Central bank improves 2023 GDP growth projections to 2% (USN)

  • Katayama Alimentos & Granja Faria to merge, creating the largest egg company in the world (RIO)

  • Brazil public debt fell to $1.2T in May (RIO)

Bolivia

  • Bolivia signs lithium mining agreements with Russia state firm Rosaton & China’s Citic Guoan Group (USN)

  • Analysis of Bolivia’s currency woes (USN)

Chile

  • Chile’s unemployment rose 8.5% from March-May, the 7th straight increase (RIO)

Costa Rica

  • Costa Rica unlocks $519M from the IMF (USN)

Colombia

  • Gilinski is looking to take over Grupo Éxito for $836M (PORT)

  • Exports excluding mining-derivatives rose 14% in April (PORT)

  • Ultra-Air enter liquidation (ELT)

Dominican Republic

  • Tourism, Trade, and Agricultural exports grew between January-May, increasing 16.1% (ELD)

  • Mortgage volumes grew 14.2% in April (ELD)

  • The General Directorate of Customs (DGA) reported that it has collected RD$75M this year so far (ELD)

Guatemala

  • An anti-graft candidate shakes up the elections, going into a tight run-off race (USN)

Panama

  • Panama is expected to be off financial crime watch list on October (USN)

  • Panama looks to take off substandard ships from its registry, the largest in the world (USN)

Peru

  • Promigas and Cálidda create the first liquid natural gas transporter in Peru (ELC)

  • Cemento Inka expands in Ica (ELC)

Mexico

  • E-commerce unicorn Merama cuts 10% of its staff (USN)

  • Mexico airlines lost over $1B due to U.S. safety downgrade (USN)

  • Mexico considers $4.2B debt buyback of canceled airport (USN)

  • AINDA raises stake to 8% (MB)

  • PEMEX rose crude oil exports by 12.7% y/y (MB)

Uruguay

  • Antel deploys 5G network in 4 of 19 departments in the country (RIO)

Insights

Quebec, Canada is known for its vibrant economy and diverse range of exports. The province has a strong export-oriented industry that contributes significantly to its economic growth and international trade. In 2022 Quebec exported C$ 111B worth of goods, making it the 3rd largest exporter out of all the Canadian provinces. Here are some key highlights of Quebec's exports:

Top Exports (FY 2022):

1. Aluminum Unwrought, not alloyed- Unwrought aluminum is aluminum in the form of ingots, blocks, billets, slabs, or any similar forms to be sold and transformed into finished goods. In 2021 it was the world’s 78th most traded product, with a total trade value of USD $36.8B. In 2021 Canada held 11.8% of total world trade market share.

 2. Fixed Wing Aircraft, unladen weight – This segment sector includes planes, helicopters, and spacecrafts. The sector is the world’s 19th most traded product with a total trade value of USD $93.9B. In 2021 Canada held 6.35% of total world trade market share.

3. Light petroleum distillates – Distillates include a long list of refined products like ethane, Butane, Kerosene, Naphtha, jet fuel, etc. Exports in 2022 were valued at C$ 4.04B.

 4. Iron ore, concentrate, unagglomerate – In 2021 this sector was the 12th most traded product, with a total trade value of $193B. In 2021 Canada has 2.88% of total world trade market share.

Top Quebec exports markets were (FY 2022):

1. USA – C$ 82.4B

2. China – C$ 3.34B

3. Mexico – C$ 2.05B

4. France – C$ 1.8B

5. Japan – C$ 1.64B 

Source: OEC, Institut de la statistique du Québec

Costa Rica is the perfect example of when a government has a vision, forms a plan, and executes the plan with precision. During the 1990’s CINDE, Cosa Rica’s investment promotion agency, felt like agriculture had a huge portion of the country’s exports. The agency had a goal to diversify and find a niche that can become beneficial for the Costa Rican economy.

Today medical instruments are the largest exported product of Costa Rica. Costa Rica's medical instruments industry has experienced massive growth and has established itself as a leading player in the global market. It’s the second largest medical device producer only behind Mexico as number one in Latin America. The country is the eighth largest exporter in the world. The business sector generates more than 38K jobs. The country has become renowned for its manufacturing capabilities, technological expertise, and commitment to quality in the production of medical instruments and devices. 

The country's skilled workforce, advanced infrastructure, and adherence to strict quality standards have attracted many multinational corporations to establish manufacturing operations in Costa Rica. Some of the corporations operating in Costa Rica are:

· Allergan

· Boston Scientific

· Cooper Medical

· Hologic

· Medtronic

· Styker

· Cirtec Medical

· Baxter

 Costa Rica has created specialized clusters and industrial parks that focus on medical device manufacturing. These clusters, located in regions like the Greater Metropolitan Area, Heredia, and Alajuela, provide a supportive ecosystem for the industry. The presence of multiple companies in close proximity simplifies collaboration, knowledge sharing, and the development of a skilled labor pool.

Costa Rica has a regulatory framework to ensure compliance with international quality and safety standards in the medical instruments industry. Manufacturers adhere to regulations such as ISO 13485 (Quality Management System for Medical Devices), FDA requirements (for products exported to the United States), and CE marking (for products sold in the European Union). 

The Costa Rican government, in collaboration with private sector entities, promotes research and development activities in the medical instruments industry. The Costa Rican government offers incentives for investment in the country with a tax regime implemented in the country’s economic free trade zones. To qualify for free zone tax benefits, companies that set up operations must make an investment of at least USD $150K in fixed assets. Companies that engage in medical device manufacturing & other activities in a free zone are exempt from income taxes for a period of the first eight years. After this, qualifying companies are eligible to receive a 50% percent reduction over the following four years.   

Costa Rica's medical instruments industry has emerged as a prominent player in the global market. And it seems the country will continue playing a vital role in the international market and grow its market share. 

Source: OEC, The Central American Group, Tico Times, WEF, medical device-network

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