/raid1/www/Hosts/bankrupt/TCRLA_Public/231130.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, November 30, 2023, Vol. 24, No. 240
Headlines
A R G E N T I N A
ARGENTINA: Banks Flee to One-Day Notes Amid Government Transition
B R A Z I L
BRAZIL: Deficit Soars, Far Surpassing Initial Promises
BRAZIL: Inflation Dips Back Toward Target Range
PETROLEO BRASILEIRO: Targets $102BB Investment in Five-Year Plan
C O L O M B I A
FEDEICOMISO PA PACIFICO: Fitch Affirms 'BB+' Rating on $260.4M Bond
D O M I N I C A N R E P U B L I C
[*] DOMINICAN REPUBLIC: Predicts Foreign Investment to Reach $4.4BB
J A M A I C A
JAMAICA: Climate Change Robs Agriculture Sector of Growth
- - - - -
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A R G E N T I N A
=================
ARGENTINA: Banks Flee to One-Day Notes Amid Government Transition
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Buenos Aires Times reports that Argentina's banks are fleeing to
short-term notes issued by the country's Central Bank for even more
liquid securities as President-Elect Javier Milei's vague comments
on the debt have stoked concern over how he'll handle the assets
once in office.
Lenders are preferring to replace so-called Leliq notes with
shorter, lower-yielding securities in order to boost liquidity,
according to Buenos Aires Times. They rolled over only 10 percent
of the 1.8 trillion pesos of debt instruments offered by the
Central Bank at auction, according to people with direct knowledge
of the matter, the report notes. That's down from 40 percent in
the auction, which was already a sharp pullback from before the
vote, the report relays.
The retreat comes as Argentines await for Milei, who was elected in
a landslide, to give clues about his plans to pull the country from
the brink of yet another recession, Buenos Aires Times discloses.
The libertarian has said the Leliqs expand the supply of pesos in
the future and therefore stoke inflation, calling them "a problem"
but giving no further detail about his policies, the report says.
"The idea is to be as liquid as possible and to go through the
uncertainty in the absence of definitions of Milei's plan," said
Diego Chameides, chief economist at Banco Galicia, the report
notes.
While markets welcomed Milei's election and concerns about a surge
in withdrawals amid his pledge to dollarise the economy failed to
materialise, the pullback is beginning to cause tension in local
markets, the report relays. If banks continue to flee Leliqs,
which have 28-day maturities and are used by the central bank to
absorb pesos, the move could unleash more pesos into the economy
and boost inflation that's already at 143 percent a year, the
report discloses.
The parallel peso, which Argentines use to skirt currency controls,
plunged 20 percent to a record low of 1050 per dollar - that
compares with 357 per dollar on the official rate, the report
notes.
For weeks now, lenders have been reducing their holdings of Leliqs
and increasing their positions in so-called "repos," one-day peso
notes, to ensure that they could accommodate potential policy
changes around the election or an increase in peso withdrawals, the
report relays. Repos, which yield less than the Leliqs, now
account for around half of the interest-bearing liabilities held by
banks, from less than 30% at the beginning of October, the report
notes.
Argentine banks currently have US$34.6 billion invested in Leliqs,
considering the official exchange rate, the report relays.
The unwinding from the instruments has already led some lenders to
start rejecting or offering lower remuneration for corporate
deposits, according to two people with direct knowledge of the
matter, who asked not to be named as the information is not public,
the report discloses.
If the trend continues, "it can be potential headache" for the
parallel FX market, said Pedro Siaba Serrate, chief strategist at
local broker PPI, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He will be succeeded by Javier Milei who won the
presidential election on November 19, 2023. Milei is scheduled to
be sworn in as President of Argentina on December 10, 2023.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on June 13, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
0its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC-/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is negative. S&P's
'CCC-' transfer and convertibility assessment is unchanged. None of
its rated bond issues are affected.
S&P said the negative outlook on the long-term ratings is based on
the risks surrounding pronounced economic imbalances and policy
uncertainties before and after the 2023 national elections.
Divisions within the government coalition, and infighting among the
opposition, constrain the sovereign's ability to implement timely
changes in economic policy.
Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
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B R A Z I L
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BRAZIL: Deficit Soars, Far Surpassing Initial Promises
------------------------------------------------------
Richard Mann at Rio Times Online reports that under the Lula
government, the $10 billion surplus achieved by the Bolsonaro
administration in 2022, the best since 2013, was depleted within a
year.
Brazil updated its deficit forecast for 2023, according to Rio
Times Online. The new figure is BRL177.4 billion ($36 billion), up
from September's BRL141.4 billion ($29 billion) prediction, the
report notes.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
Fitch Ratings upgraded on July 26, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to 'BB', from 'BB-',
with a Stable Outlook. The upgrade reflects better-than-expected
macroeconomic and fiscal performance amid successive shocks in
recent years, proactive policies and reforms that have supported
this, and Fitch's expectation that the new government will work
toward further improvements.
In mid-June 2023, S&P Global Ratings, revised the outlook on its
long-term global scale ratings on Brazil to positive from stable.
S&P affirmed its 'BB-/B' long- and short-term foreign and local
currency sovereign credit ratings on Brazil. S&P also affirmed its
'brAAA' national scale rating, and the outlook remains stable. The
transfer and convertibility assessment remains 'BB+'. The positive
outlook reflects signs of greater certainty about stable fiscal and
monetary policy that could benefit Brazil's still-low GDP growth
prospects. Continued GDP growth plus the emerging framework for
fiscal policy could result in a smaller government debt burden than
expected, which could support monetary flexibility and sustain the
country's net external position.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-Term
Foreign and Local Currency - Issuer Ratings to BB from BB (low).
At the same time, DBRS Morningstar confirmed Brazil's
Short-term Foreign and Local Currency - Issuer Ratings at R-4.
The trend on all ratings is Stable (March 2018).
BRAZIL: Inflation Dips Back Toward Target Range
-----------------------------------------------
Bloomberg News reports that Brazil's annual inflation rate dropped
more than expected, nearing the target range after policymakers
committed to maintaining their current pace of interest rate cuts
for the coming months.
Official data released November 10, showed consumer prices rose
4.82% in October from a year earlier, below the 4.87% median
estimate of analysts surveyed by Bloomberg. Monthly inflation hit
0.24%, the report notes.
The central bank is set to deliver two more half-point cuts in as
many meetings and bring the benchmark Selic to 11.25% by the end of
January, the report relays. Double-digit borrowing costs are
starting to cool economic activity while favorable base effects and
waning transportation pressures are helping rein in year-on-year
inflation readings, the report adds.
The report relates that in Brazil, a slowdown in price increases
combined with signals of weaker growth led central bankers to begin
lowering the Selic from a six-year high in August to its current
level of 12.25%. But some key indicators such as retail and the
labor market continue to outperform economists' forecasts.
Bloomberg notes that eight of the nine groups of goods and services
monitored by the statistics agency became more expensive in
October. Transportation costs gained 0.35% on higher air fares and
food and beverages increased 0.31%, while communication prices
dropped 0.19%, it adds.
Overall, lower wholesale fuel prices set by state-controlled oil
giant Petroleo Brasileiro S.A., including a 1.53% drop in gasoline
and a 0.96% decline in ethanol, helped to ease price pressures
throughout the economy, the report relay.
Main Threat
According to Bloomberg News, policymakers say progress has been
made in controlling the price surge that ensued following the
re-opening of the region's biggest economy, though they remain
concerned about pressures at home and abroad that could complicate
the path of monetary easing.
Brazil President Luiz Inacio Lula da Silva is eyeing increasing
public spending next year, Israel's military offensive is raging in
Gaza and US Treasury yields remain high, notes the report.
The annual inflation rate remains above both the 4.5% ceiling and
3% mid-point of the central bank's inflation target range that will
be in force starting in 2024, Bloomberg News relays. Analysts in a
weekly central bank survey also see price increases remaining above
the mid-point goal through 2026.
Andres Abadia, chief Latin America economist at Pantheon
Macroeconomics, said easing price pressures from a weaker economy
could keep the disinflation trend going for up to six months,
according to the report.
"The main threat to this relatively benign outlook is potentially
deteriorating financial conditions, on the back of increased fiscal
uncertainty and geopolitical risk," he wrote in a research note,
the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
Fitch Ratings upgraded on July 26, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to 'BB', from 'BB-',
with a Stable Outlook. The upgrade reflects better-than-expected
macroeconomic and fiscal performance amid successive shocks in
recent years, proactive policies and reforms that have supported
this, and Fitch's expectation that the new government will work
toward further improvements.
In mid-June 2023, S&P Global Ratings, revised the outlook on its
long-term global scale ratings on Brazil to positive from stable.
S&P affirmed its 'BB-/B' long- and short-term foreign and local
currency sovereign credit ratings on Brazil. S&P also affirmed its
'brAAA' national scale rating, and the outlook remains stable. The
transfer and convertibility assessment remains 'BB+'. The positive
outlook reflects signs of greater certainty about stable fiscal and
monetary policy that could benefit Brazil's still-low GDP growth
prospects. Continued GDP growth plus the emerging framework for
fiscal policy could result in a smaller government debt burden than
expected, which could support monetary flexibility and sustain the
country's net external position.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and senior
unsecured bond ratings in April 2022.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-Term Foreign
and Local Currency - Issuer Ratings to BB from BB (low). At the
same time, DBRS Morningstar confirmed Brazil's Short-term Foreign
and Local Currency - Issuer Ratings at R-4. The trend on all
ratings is Stable (March 2018).
PETROLEO BRASILEIRO: Targets $102BB Investment in Five-Year Plan
----------------------------------------------------------------
Richard Mann at Rio Times Online reports that Petroleo Brasileiro
S.A. or Petrobras has set a bold goal to invest $102 billion from
2024 to 2028.
This decision reflects a 31% increase in investment compared to the
previous plan, according to Rio Times Online. The company's new
direction comes under President Lula's government, the report
notes.
The increase in funds will focus on new projects and re-evaluating
assets once considered for sale, the report relays. Inflation also
plays a role, affecting the cost of the entire supply chain, the
report adds.
About Petrobras
Petroleo Brasileiro S.A. or Petrobras (in English, Brazilian
Petroleum Corporation - Petrobras) is a semi-public Brazilian
multinational corporation in the petroleum industry headquartered
in Rio de Janeiro, Brazil. Petrobras control significant oil and
energy assets in 16 countries in Africa, the Americas, Europe and
Asia. But, Brazil represents majority of its production.
The Brazilian government directly owns 54% of Petrobras' common
shares with voting rights, while the Brazilian Development Bank
and Brazil's Sovereign Wealth Fund (Fundo Soberano) each control
5%, bringing the State's direct and indirect ownership to 64%.
A corruption scandal was uncovered in 2014 that involved
Petrobras.
The scandal related to money laundering that involved Petrobras
executives. The executives were alleged to get received kickbacks
from overpriced contracts, to the tune of about $3 billion in
total. Over a thousand warrants were issued against politicians
and businessmen in relation to the scandal. In 2016, Marcelo
Odebrecht, CEO of Odebrecht, was sentenced to 19 years in prison
after being convicted of paying more than $30 million in bribes to
Petrobras executives.
In January 2018, Petrobras agreed to pay $2.95 billion to settle a
U.S. class action corruption lawsuit. In September 2018,
Petrobras agreed to pay $853.2 million to settle with Brazilian and
U.S. authorities.
In July 2022, Fitch Ratings affirmed Petrobras' BB- Long-Term
Issuer Default Rating. In addition, Fitch has revised the Rating
Outlook to Stable from Negative following a similar revision to
Brazil's Sovereign Rating Outlook. Also in July 2022, Egan-Jones
Ratings Company upgraded the foreign currency and local currency
senior unsecured ratings on debt issued by Petrobras to BB+ from
BB.
===============
C O L O M B I A
===============
FEDEICOMISO PA PACIFICO: Fitch Affirms 'BB+' Rating on $260.4M Bond
-------------------------------------------------------------------
Fitch Ratings has affirmed the following ratings of Fideicomiso
P.A. Pacifico Tres (Pacifico):
- USD260.4 million USD bonds at 'BB+'; Outlook Stable;
- COP397,000 million UVR bonds at 'BB+'/Outlook Stable and
'AA+(col)/Outlook Positive;
- COP300,000 million UVR loan at 'BB+'/Outlook Stable and
'AA+(col)/Outlook Positive;
- COP450,000 million COP loan A at 'AA+(col)'/Outlook Positive;
- COP150,000 million COP loan B at 'AA+(col)'/Outlook Positive.
RATING RATIONALE
The Positive Outlook on the national ratings continues to reflect
the satisfactory progress on construction works, with the
completion of four out of five Functional Units (UFs), with the
remaining UF at 94.8% of advance and expected to be completed in
January 2024. Once the project is fully operational after the
completion of UF5, the national scale ratings would be consistent
with the highest rating category, assuming project fundamentals and
financial profile remain stable.
The ratings are based on the low revenue risk due to the existence
of traffic top-ups and grantor payments, a strong debt structure,
characterized by several prefunded reserve accounts, distribution
tests, a cash sweep mechanism and robust liquidity mechanisms.
Under Fitch's rating case, Pacifico presents a loan life coverage
ratio (LLCR) of 1.4x, which is strong for the rating category
according to applicable criteria and revenue profile but is limited
by the credit quality of grantor Agencia Nacional de
Infraestructura (ANI). Fitch views the latter as a credit-linked
entity to the Government of Colombia (BB+/Stable).
Construction is expected to continue during early 2024, with the
most complex works already completed. Remaining works were extended
due to delays in expropriation processes but are expected to
continue to advance at an adequate pace.
KEY RATING DRIVERS
Low Exposure to Volume Risk [Revenue Risk - Volume: Midrange]: The
project's revenues mainly consist of the ANI's contributions and
toll revenues streaming from toll collection and top-up traffic
payments. Traffic revenues are not subject to the demand of price
risk, even if traffic volumes are severely below expectations or
expected price increases are not implemented. The ANI will
periodically compensate the concessionaire if toll collections are
below the amounts established in the concession contract. The ANI
payment obligations under the concession agreement are consistent
with the credit quality of the grantor, the ANI.
Sources of revenue are subject to infrastructure availability,
service levels and quality standards, based on the fulfillment of
indicators provided in the concession agreement. There are clearly
defined, unambiguous, back-to-back penalty deduction mechanisms in
the concession agreement with robust cure periods. Deductions are
legally capped at 10%. Additionally, fines imposed on the
concessionaire, as well as penalty clauses in case of early
termination of the agreement, are limited by contract.
Inflation Adjusted Tolls [Revenue Risk - Price: Midrange]: Tariffs
are annually adjusted by the inflation rate at the beginning of the
year. If net present value of toll collections received by year
eight, 13, 18, and the last year of the concession is below
guaranteed values, the ANI has the obligation to cover any
shortfalls, after deductions.
Adequate Maintenance Plan [Infrastructure Development and Renewal:
Midrange]: The project depends on a moderately developed capital
and maintenance plan to be implemented directly by the
concessionaire. The plan will be largely funded from project cash
flows. The concession agreement does not contemplate hand-back
requirements; however, the concessionaire is to operate and
maintain the road according to the pre-established standards at all
times. The structure includes a dynamic 12-months forward-looking
O&M reserve account for routine and periodic maintenance
expenditures.
The independent engineer believes the concessionaire has the
experience and the ability to operate the project successfully. The
O&M plan, organizational structure and budget, appear reasonable
and in line with similar Colombian projects. The concessionaire has
a liquid support instrument equivalent to the maximum amount of O&M
expenses forecast for six months. This instrument must be issued by
a financial entity with a minimum credit rating of 'BBB-' or
'AA+(col)'.
Robust Debt Structure [Debt Structure: Stronger]: The debt is fully
amortizing, senior secured, comprising USD-, UVR- and
COP-denominated financings. USD-denominated debt, which is matched
with USD-linked currency revenues settled in COP (49% of future
budget allocations [Vigencias Futuras] are USD-linked), has also
been issued at a fixed rate. Furthermore, the transaction
contemplates a short-term hedging mechanism provided by eligible
counterparties to cover foreign exchange risk exposure fully. UVR-
and COP-denominated debt is indexed to inflation and is not exposed
to basis risk.
Structural features include multiple reserve accounts and a cash
sweep mechanism. Robust liquidity mechanisms are in place to
mitigate liquidity/budgetary risk, construction delays, and reduced
cash flow generation due to low traffic performance. The
transaction has a fully-committed revolving subordinated SMF, equal
to 15% of outstanding senior debt, in which eligible lenders have
committed to disburse funds to the project company when necessary.
Additional liquidity includes 12-months principal and interest
prefunded onshore and offshore debt service reserve accounts
(DSRA).
Financial Profile
Fitch's rating case LLCR is 1.4x, which is robust for the rating
category according to Fitch's applicable criteria and when compared
with other similarly rated transactions, particularly in light of
the project's low exposure to volume risk, but limited to the
counterparty risk rating of ANI's obligations.
Also, the projected debt service coverage ratio (DSCR) profile
presents levels below 1.0x in several years. However, the cash flow
available for debt service shortfall in those years are expected to
be covered with funds of the debt service reserve account and, if
needed, making use of additional liquidity sources available.
PEER GROUP
Pacifico is comparable to Fideicomiso P.A. Costera (Costera), rated
'BB+'/Outlook Stable and 'AAA(col)'/Outlook Stable. Costera is
Pacifico's closest peer, as both concessions are part of the 4G
toll road program and share volume, price, infrastructure and
development/renewal, and debt structure risk attributes. Pacifico
has a slightly lower minimum LLCR at 1.4x, compared to Costera at
1.5x; in addition, Costera's successful completion of its
construction phase supports its higher ratings on the national
scale. The international ratings of both projects are constrained
by the credit quality of ANI's obligations.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Deterioration in Fitch's view regarding the ANI's credit
quality's contributions.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- For the national scale ratings, successful completion of UF5;
- Improvement in Fitch's view regarding the ANI's credit quality's
contributions.
CREDIT UPDATE
As of September 2023, the overall construction progress is 98.7%
complete, 0.3% ahead of programmed progress. Four UFs are 100%
completed, with only one UF (UF5) pending completion. UF5 has a
construction progress of 94.8% and the concessionaire expects it to
achieve completion by January 2024. The IE notes that multiple
issues have delayed the construction progress of UF5, related to
the relocation of an oil pipeline, difficult rights of way (ROW)
management, and difficulties to undertake road closures as
planned.
The concessionaire did not meet the original UF5 deadline of May
2023, so it requested the 20% cure period established in the
concession agreement. The request was approved by ANI, so 360 days
were added. The new contractual deadline is May 2024.
In November 2022, the concessionaire received the partial
completion certificate of 19.15 km of UF5 and in July 2023, the
partial completion of 5.4 km of UF5. Such advance corresponded to
an investment of 85.47%, which entitled the project to receive a
special compensation of 80%.
As of September 2023, average annual daily traffic (AADT) reached
17,101 vehicles, which represented a growth of 2.8% compared to the
same period in 2022, in line with Fitch's base case expectations of
2.7%.
In January 2023, the Colombian government announced, through Decree
050, that toll rates for 2023 would be frozen, as part of the
government's anti-inflationary policies. The decree also states
that the government will design and apply a mechanism to
re-establish the tariff scheme by December, 2024.
As of September 2023, reported toll revenues were COP86.5 billion,
below Fitch's base case expectations of COP97 million. The
difference mainly comes from the tariff freeze of January.
Additionally, the concessionaire is currently only entitled to
receive approximately 85% of the collection due to the lack of
completion in UF5.
Between January and August 2023, the project also received the
top-up payment corresponding to year eight of the concession (DR8)
for COP203.3 billion, with a remaining amount of COP12.6 billion to
be received upon UF5 completion.
As of July 2023, operational, maintenance and administrative
expenditures were COP43 billion, above Fitch's expectations of
COP39 billion under its base case for the same period. According to
the concessionaire, the higher expenditures were due to higher
insurance costs due to construction delay.
The debt service was paid only with the project's generated cash
flows without the use of liquidity sources. The debt service was
higher than expected due to an actual inflation in average of 11%
in 2023 versus 4.0% projected by Fitch.
FINANCIAL ANALYSIS
Fitch's base case departed from the actual traffic observed as of
September 2023, for all toll booths. For 2023-2035, this case
assumed traffic would grow at a CAGR of 2.0% for Supia and Irra
toll booths, 2.3% for Guaico, and 1.9% for Acapulco.
Toll rates of 2022 are assumed to remain the same in 2024. In 2025,
Fitch assumes an increase on toll rates by inflation of 2023 and
2024, projected at 9.0% and 5.0%, respectively. Then, annual
increases at projected inflation of 3.5% in the long term. Fitch
also assumed an additional gradual catch up with 2022 inflation of
13.1% distributed between 2025 and 2027. O&M and major maintenance
expenses were increased by inflation plus 5.0% and 3.0%,
respectively, for every year from the concessionaire's budget,
while the performance ratio was assumed at 99.0%.
Fitch assumed FBAs payment would present a three-month delay, while
the top-up payment delay would be equivalent to 18 months. The
assumptions represent the maximum days of delay permitted before a
termination event is triggered according to the concession
agreement.
Under this scenario, minimum LLCR is 1.5x, while minimum DSCR is
0.6x. Although a DSCR profile with coverages below 1.0x may reflect
short-term liquidity issues, this is not a concern for Pacifico, it
benefits from a 12-month DSRA and a subordinated multipurpose loan
facility (SMF).
Fitch's rating case assumed the same traffic for 2023 for all toll
booths than the base case. From 2023-2035, Fitch assumed traffic
would grow at a CAGR of 1.3% for Guaico and Irra toll booths, 1.2%
for Acapulco and 1.1% for Supia. Fitch also assumed the same
construction delays in UF5, inflation projections, and FBAs
payments and top-up payment delays than the base case. The gradual
catch up with 2022 inflation is not included. O&M and major
maintenance expenses were increased by inflation plus 7.5% and
5.0%, respectively, for every year from the concessionaire's
budget, while the performance ratio was assumed at 95.0%.
Under this scenario, minimum LLCR is 1.4x, while minimum DSCR is
0.5x. Pacifico's liquidity would also be enough to address the
projected DSCRs below 1.0x.
SECURITY
The secured parties benefit from a first-priority security interest
in, control over, and lien on all of the issuer rights in the
indenture trustee accounts and the funds, financial assets and
other properties deposited and to be deposited in such accounts.
Senior lenders share common collateral on a pari passu basis in
relation to all current and future debt of the project company. All
proceeds from the collateral will be paid to the intercreditor
agent, who, in turn, will distribute the monies to the secured
parties. None of the parties will have the right to take
independent enforcement in respect to the common collateral.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Fideicomiso P.A.
Pacifico Tres
Fideicomiso P.A.
Pacifico Tres/
Project Revenues –
First Lien/1 LT LT BB+ Affirmed BB+
Fideicomiso P.A.
Pacifico Tres/
Project Revenues –
First Lien/1 Natl LT Natl LT AA+(col) Affirmed AA+(col)
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D O M I N I C A N R E P U B L I C
===================================
[*] DOMINICAN REPUBLIC: Predicts Foreign Investment to Reach $4.4BB
-------------------------------------------------------------------
Dominican Today reports that President Luis Abinader presided over
the inauguration of a new luxury hotel on Cayo Levantado, a
development representing a EUR50 million investment in the Samana
province. This upscale hotel is set to create over 500 direct job
opportunities in the region.
During the inauguration event, President Abinader highlighted the
positive trends in foreign investments in the Dominican Republic,
according to Dominican Today.
He noted that foreign investments are anticipated to reach $4.4
billion this year, up from $4.1 billion in the previous year, the
report notes. This upward trajectory in foreign investments
signifies economic growth and increased investor confidence in the
country, the report discloses.
Abinader expressed his gratitude to the Pinero Group for their
commitment to promoting tourism and providing employment
opportunities to around 7,000 Dominicans, the report says. He also
mentioned that the tourism sector is expected to receive over $30
billion in investment next year, the report notes.
David Collado, the Minister of Tourism, revealed that investments
totaling 1.7 billion pesos are currently underway in Samana, with
completion expected in January and February 2024, the report
discloses. He also predicted that 2023 would be a record-breaking
year for tourism, with over 10 million tourists expected to visit
the country, the report says.
Collado commended the government's responsible approach to
reopening the country to tourism during the pandemic, which played
a pivotal role in the sector's recovery, the report notes. He
highlighted the international recognition that the Dominican
Republic has received for its remarkable rebound in the tourism
industry, the report relays.
The newly inaugurated Cayo Levantado Resort boasts 218 rooms and
represents a significant investment of over EUR50 million, the
report relays. It focuses on sustainability, wellness, promoting
local culture, and preserving the natural environment, the report
notes. The resort offers unique amenities, including "Yubarta," a
space for personal development inspired by the local humpback
whales of Samana, the report says.
This resort has also become a source of employment for the province
and surrounding areas, creating approximately 500 direct jobs, with
a majority being Dominican citizens, contributing to the region's
economic and social growth, the report discloses.
Cayo Levantado Resort's emphasis on sustainability extends to
environmental conservation efforts, including landscaping and
revegetation work on the island, the implementation of paperless
check-in, the elimination of single-use plastics, and the use of
clean energy sources like photovoltaic panels and waste
biodigestion system, the report says.
The resort aims to raise environmental awareness among its guests
through programs and activities organized by the Eco Bahia
Foundation, encouraging a deeper connection with the natural
environment, the report discloses.
The opening ceremony was attended by various government officials,
including the Minister of the Environment, the governor, the
senator, the mayor of Samana, the commander of the Navy, the
directors of Apordom and Politur, the Spanish ambassador to the
Dominican Republic, and representatives from the tourism sector,
the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
On August 14, 2023, the TCR-LA reported that Moody's Investors
Service has changed the outlook on the Government of Dominican
Republic's ratings to positive from stable and affirmed the local
and foreign-currency long-term issuer and senior unsecured ratings
at Ba3. Moody's said the key drivers for the outlook change to
positive are: (i) sustained high growth rates have enhanced the
scale and wealth levels of the economy; and (ii) a material decline
in the government debt burden coupled with improved fiscal policy
effectiveness will support medium-term debt sustainability.
The affirmation of the Ba3 ratings balances the Dominican
Republic's strong economic growth dynamics and relatively contained
susceptibility to event risks, with a comparatively weaker fiscal
position, reflecting long-standing credit challenges which include:
(i) a shallow revenue base compared to peers, (ii) weak debt
affordability metrics, and (iii) high exposure to foreign currency
borrowing.
S&P Global Ratings, in December 2022, raised its long-term foreign
and local currency sovereign credit ratings on the Dominican
Republic to 'BB' from 'BB-'. The outlook on the long-term ratings
is stable. S&P affirmed its 'B' short-term sovereign credit
ratings. S&P also revised its transfer and convertibility (T&C)
assessment to 'BBB-' from 'BB+'. The stable outlook reflects S&P's
expectation of continued favorable GDP growth and policy continuity
over the next 12-18 months that will likely stabilize the
government's debt burden.
In February 2023, S&P said its BB ratings reflect the country's
fast-growing and resilient economy. It also incorporates the
country's historical political and social challenges in passing
structural reforms to contain fiscal deficits, despite recent
improvements in the electricity sector. The ratings are constrained
by relatively high debt, a hefty interest burden, and limited
monetary policy flexibility.
Fitch Ratings, in December 2022, affirmed the Dominican Republic's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Rating Outlook.
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J A M A I C A
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JAMAICA: Climate Change Robs Agriculture Sector of Growth
---------------------------------------------------------
Kellaray Miles at Jamaica Observer reports that unpredictable
weather patterns precipitated by longer droughts and more frequent
rainfall are being cited among some of the major climate change
challenges which have been impairing growth for the local
agriculture sector.
Climate change, which global food experts believe will contribute
substantially to future food insecurity, is likely to also result
in higher prices for products and reduced food production,
according to Jamaica Observer.
An International Monetary Fund (IMF) article done in 2008 had
indicated that among the long list of potential problems expected
to come from global warming, the risks to agriculture stand out as
one of those most impacting, the report notes.
"It has been widely recognized that developing countries in general
stand to lose more from the effects of global warming on
agriculture than do industrial countries. This, as most developing
countries have less capacity to adapt than do their wealthier
neighbors. Most are also in warmer parts of the globe, where
temperatures are already close to or beyond thresholds at which
further warming will reduce rather than increase agricultural
output," the report said.
Agricultural stakeholders in pointing to the various level of
impacts on the sector have all agreed that climate change realities
in recent years have truly started to materialize in more
aggressive ways, incurring higher costs for farmers and other key
stakeholders, Jamaica Observer says.
For the Jamaica Coffee Growers Association (JCGA), their President
Donald Salmon said that coffee farmers, which have been feeling the
pinch from persistent rainfall in the last three weeks, are now
suffering from further losses as blocked roadways and damaged
infrastructure presents new structural challenges wherein farmers
are prevented from accessing their fields to harvest ripe berries,
Jamaica Observer discloses.
"I did a tour of most of our farms and a significant quantity, or
millions of dollars, have been reported lost as the recent heavy
rains -- worsened by blocked roads due to landslides -- now
prevents farmers from getting to the coffee. As a result, these
farmers are hurting and they are now contemplating how they will be
able to recover from all the losses, which they have estimated
between $800,000-$1,000,000 per individual, Jamaica Observer
discloses.
"During this tour we visited St Thomas, Portland and St Andrew --
the three main areas to look at some of the sections most affected
and in some parts of west Portland alone, losses were estimated
within the range of 15,000 boxes or about $120 million in revenues.
If we should, however, look at all the areas, this further
translates to losses of approximately 20,000-30,000 boxes or $160
million-$240 million in earnings. First, it was the drought but as
it is now we are seeing where heavy rains in the last few weeks
have further exacerbated existing challenges," Salmon told the
Jamaica Observer in an interview.
Pleading for greater assistance from government through the
relevant personnel and agencies, the JCGA head said that coffee
farmers, in light of the continued losses, are also now in dire
need of all available technical assistance to have the road
networks cleared along with the requisite financial assistance to
counter losses and to secure proper insurance coverage in the wake
of future events, Jamaica Observer says.
Lenworth Fulton, president of the Jamaica Agricultural Society
(JAS), in recounting similar challenges which he said have been
affecting both crop and livestock farmers, agreed that the
sustainability of the sector was indeed under threat, especially if
the estimated 15-20 per cent of its usual output or billions in
earnings continue to be eroded by the impacts of climate change,
Jamaica Observer notes.
He explained to the Business Observer that aside from the direct
impacts on flora and fauna, climate change has also blighted a
number of other social and economic prospects for the sector
resulting in scaled employment opportunities in mainly the rural
areas, higher crime and violence in some parts of these same areas
and increased operational costs for farmers, Jamaica Observer
relays.
"More rainfall leads to reduced production and the demand for
labour while warmer climate breeds more pests and higher
infestation for certain crops. With more pest, farmers are often
faced with the need to buy more pesticide in order to undertake
intensive spraying activities," he said, noting all occurring as a
result of the multiplied effects of the change in weather patterns
which in the process also adds higher costs while raising new
health concerns for farmers, who may have to increase their usage
of certain chemicals to eradicate pest, Jamaica Observer notes.
The Statistical Institute of Jamaica (Statin) in its last report on
gross domestic product (GDP) out-turns said that the agriculture
sector which was one in the goods-producing industry to have
returned a negative output, contracted by 8.1 per cent during the
April-June quarter, Jamaica Observer discloses. According to the
preliminary findings, this was largely attributed to adverse
drought conditions over the period which resulted in a decline in
the area of crops reaped and a reduction in crop yields across most
groups, the report says.
Fulton, in also calling on government to undertake increased
research and development studies and to fund more public education
campaigns, believes that these could help to bring some amount of
relief to the ailing sector, Jamaica Observer notes.
"Going forward, I believe that some of the challenges that continue
to plague the sector as it relates to climate change issues will
continue to persist until, as a country, we can move to have
sensible, well-designed public education programs, carefully put
together with the proper messaging," he stated, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
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