/raid1/www/Hosts/bankrupt/TCRLA_Public/240320.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
Wednesday, March 20, 2024, Vol. 25, No. 58
Headlines
A R G E N T I N A
ARGENTINA: Gets Sued in U.S. Over Unpaid Fuel for President's Plane
ARGENTINA: S&P Raises Sovereign Credit Ratings to 'CCC/C'
BANCO GALICIA: S&P Raises Long-Term ICR to 'CCC', Outlook Stable
BUENOS AIRES: S&P Upgrades ICR to 'CCC', Outlook Stable
B O L I V I A
BOLIVIA: Bond Rally in Crisis-Ridden Country Baffling Wall Street
B R A Z I L
BRAZIL: Lula's Debt Relief Program Struggles to Boost Consumption
J A M A I C A
JAMAICA: Import Bill From EU Rises to US$478 Million
N I C A R A G U A
NICARAGUA: Moody's Upgrades Issuer Ratings to B2, Outlook Stable
P E R U
RUTAS DE LIMA: S&P Lowers Debt Rating to 'CCC+', Outlook Negative
P U E R T O R I C O
VHB FOODS: Seeks to Tap Juan C. Bigas Law Office as Legal Counsel
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A R G E N T I N A
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ARGENTINA: Gets Sued in U.S. Over Unpaid Fuel for President's Plane
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Buenos Aires Times reports that a firm in the United States is
suing Argentina after it defaulted on payments related to fuel for
the nation's presidential plane.
Associated Energy Group, with offices in Miami and subsidiaries in
cities like Houston, Texas, pointed out that Argentina "has
substantially and repeatedly breached its payment obligations for
the fuel and services rendered and invoiced between September 18,
2023 and January 4, 2024," according to a lawsuit filed before a
federal court in the southern district of Florida, according to
Buenos Aires Times.
The period mostly overs fuel expenses for use of the presidential
aircraft during former president Alberto Fernandez's (2019-2023)
term in office, though it also covers a brief part of President
Javier Milei's administration, the report notes.
According to court document, the firm is suing the President of
Argentina in order to collect unpaid invoices amounting to over US$
351,000, in addition to procedural expenses, interest and fees, the
report relays.
Associated Energy Group (AEG Fuels) said that the amount is for
services rendered to Argentina's presidential plane ARG01 and jet
ARG03 within the United States (in the states of New York, Texas,
Massachusetts, Colorado and Kansas) and in India, South Africa,
Panama and Peru, the report discloses.
"AEG has demanded on several occasions the payment of the debt from
Argentina, but it hasn't received full payment for the amount owed.
Despite repeated demands by AEG to Argentina, including a demand
letter dated February 12, 2024, the defendant has refused to comply
with all its payment obligations," the firm explained in its
complaint, Buenos Aires Times says.
The majority of the debt is obligations contracted during the last
year of Alberto Fernandez's government, the report relays. Yet
there are also three bills that were issued in the first few weeks
of President Milei's government - one issued on December 26, 2023
for services to ARG01 amounting to US$68,820, another one dated
January 4 for ARG03 for US$1,245 and US$60 for a cancellation or
delay fee for services to the presidential plane, also dated
January 4, the report notes.
Milei took office on December 10 last year.
The new president, who is determined to tackle Argentina's runaway
inflation of 276 percent per annum, has introduced draconian
spending cuts to address the economic crisis, the report says.
One of Milei's headline moves has been to ground the presidential
fleet, only travelling abroad on commercial airlines, the report
discloses. In the first three months of his administration, he has
visited Switzerland (for the World Economic Forum in Davos),
Israel, Italy and the United States, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
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.
ARGENTINA: S&P Raises Sovereign Credit Ratings to 'CCC/C'
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On March 15, 2024, S&P Global Ratings raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating. The
outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
Outlook
The stable outlook on the long-term ratings balances the risks
posed by pronounced economic imbalances and policy uncertainties
with the favorable change in near-term debt service obligations.
S&P also expect no further debt exchanges that it would likely
consider to be distressed.
Downside scenario
S&P said, "We could lower the ratings over the coming 12 months if
negative policy or political developments undermine Argentina's
limited access to financing. Failure to advance difficult fiscal,
monetary, and other reforms could hurt access to funding, including
from the Extended Fund Facility provided by the IMF, from other
multilateral lending institutions, and from local investors. As a
result, we could lower the ratings. In addition, at such low rating
levels, we generally consider debt exchanges as distressed and
tantamount to a default."
Upside scenario
S&P could raise the ratings during the coming 12 months if it sees
successful execution of economic policies that continue to address
Argentina's major structural macroeconomic imbalances, setting the
stage for better fiscal outcomes, containment of high inflation,
and a sustainable economic recovery. Under such a scenario, the
government would enjoy better access to voluntary market funding.
Rationale
S&P said, "We raised our local currency ratings because we consider
the selective default to be cured following the delivery of new
securities to bondholders. We viewed the March debt exchange as
distressed, rather than opportunistic, owing to the government's
weak market access." This week's swap was the sixth such operation
since August 2022. A 'CCC' rating indicates that the obligor might
not meet its financial commitments in the event of adverse
business, financial, or economic conditions.
The government offered to exchange peso-denominated debt coming due
in the remainder of 2024 for four new debt instruments that mature
from late 2025 until mid-2028. The exchange offer was open to both
public-sector creditors (mostly the central bank and the social
security institute) and private-sector creditors. (The
public-sector creditors held most of the exchanged debt.) The
government announced that creditors agreed to exchange 77% of the
eligible debt instruments, equivalent to $42.6 billion. The private
sector's participation in the exchange was low--it exchanged just
over 17% of its holdings.
S&P expects that all non-tendered bonds will be paid in full, just
as they have been following the five prior swaps.
S&P's 'CCC' long-term foreign and local currency ratings reflect
the government's modestly better liquidity position due to the
impact of the debt exchange on its debt servicing needs and due to
recent positive economic developments.
Despite the challenges of gaining support for a difficult
adjustment program from Congress and provincial governors, the
government has made initial progress in reducing its fiscal
deficit, narrowing the gap between the official and blue-chip
exchange rate, and accumulating foreign exchange reserves. The
inflation rate has declined for the second consecutive month but
remains high.
S&P expects the government's ability to sustain its economic
policies will depend on strengthening political support for the
reform agenda. Global capital markets remain closed to Argentina.
BANCO GALICIA: S&P Raises Long-Term ICR to 'CCC', Outlook Stable
----------------------------------------------------------------
S&P Global Ratings raised its long-term issuer credit ratings on
Banco Galicia to 'CCC' from 'CCC-' and the rating on its
subordinated debt to 'CC' from 'C'. S&P also raised its long-term
issuer credit ratings on Banco Patagonia to 'CCC' from 'CCC-' and
affirmed the 'C' short-term ratings. The outlook on both entities
is stable.
The rating actions on all financial entities S&P rates on the
global scale in Argentina follows the actions on the sovereign and
modest improvement in the foreign exchange market. However, its
ratings on the financial institutions continue incorporating high
short-term vulnerabilities coming from high inflation, subdued
economic activity, foreign exchange rate volatility, and limited
access to markets.
These factors continue to restrict credit conditions in Argentina
and pose vulnerabilities for banks operating in the country. Banks
in the system have good liquidity and capitalization metrics and
manageable credit losses, but most of the liquidity is allocated in
repurchase agreements (repos) with the central bank and,
increasingly, in government bond holdings.
S&P said, "On March 13, 2024, we lowered our local currency ratings
on Argentina to 'SD' following the announcement of an Argentine
peso-denominated debt exchange that we view as distressed, rather
than opportunistic. The government offered to exchange $55.3
billion equivalent in peso-denominated debt coming due in the
remainder of 2024 for four new debt instruments that mature from
late 2025 until mid-2028. Creditors agreed to exchange 77% of the
eligible debt instruments, equivalent to $42.6 billion.
"After the completion of the debt exchange--and issuance of the new
securities--we consider the selective default to be cured and
raised the sovereign long-term local and foreign currency ratings
to 'CCC' on March 15. We also raised our transfer and
convertibility (T&C) assessment to 'CCC' from 'CCC-', reflecting a
modest improvement in the foreign exchange markets. A country T&C
assessment reflects our view of the likelihood of a sovereign
restricting non-sovereign access to foreign exchange needed to
satisfy the non-sovereign's debt service obligations."
Despite the still challenging political debate with Congress and
the provincial governors, the government has made initial progress
in reducing its fiscal deficit, narrowing the gap between the
official and blue chip exchange rate, and accumulating foreign
exchange reserves. The inflation rate has declined for the second
consecutive month but remains high. Going forward, we expect the
government's ability to sustain the direction of these policies
will depend on broadening the level of political support for its
reform agenda. Global capital markets still remain closed to
Argentina.
Environmental, social, and governance factors have no material
influence on S&P's credit rating analysis of Banco Galicia and
Banco Patagonia.
Outlook
The stable outlook on the entities reflects the one on Argentina,
along with lower risks in foreign exchange markets amid modest
recovery in Argentina's external liquidity.
Downside scenario
S&P said, "We could lower the ratings in the next six to 12 months
if the sovereign has further difficulties managing its debt or if
exchange rate restrictions worsen. We also consider the continued
existence of multiple distortions in the economy that could erode
the solvency and liquidity of Argentine banks and their capacity to
service debt."
Upside scenario
S&P could raise the ratings on the banks if it was to raise the
rating on the sovereign, because the credit quality of the latter
limits the ratings on the banks.
Ratings List
UPGRADED; CREDITWATCH/OUTLOOK ACTION; RATINGS AFFIRMED
TO FROM
BANCO DE GALICIA Y BUENOS AIRES S.A.U.
Issuer Credit Rating CCC/Stable CCC-/Negative
Subordinated CC C
UPGRADED; CREDITWATCH/OUTLOOK ACTION; RATINGS AFFIRMED
TO FROM
BANCO PATAGONIA S.A.
Issuer Credit Rating CCC/Stable/C CCC-/Negative/C
BUENOS AIRES: S&P Upgrades ICR to 'CCC', Outlook Stable
-------------------------------------------------------
S&P Global Ratings raised its foreign and local currency issuer
credit ratings on the City of Buenos Aires and the following
provinces to 'CCC' from 'CCC-':
-- Buenos Aires,
-- Entre Rios,
-- Jujuy,
-- Mendoza,
-- Neuquen,
-- Rio Negro, and
-- Salta.
The outlooks on the eight issuers are stable. S&P also raised its
issue-level ratings on the same group of LRGs to 'CCC' from
'CCC-'.
Outlook
The stable outlooks on the eight Argentine LRGs balance S&P's
assessment of lower risk in accessing foreign currency to make debt
service payments and a modest recovery in Argentina's external
liquidity with very high fiscal pressure from the national fiscal
adjustment and volatile macroeconomic conditions.
Downside scenario
S&P could lower the long-term ratings on the LRGs if the central
government tightens access to FX, impairing the Argentine LRGs'
ability to service foreign currency debt in the next six to 12
months. In addition, we would likely consider a debt exchange or
restructuring as distressed and tantamount to a default at such low
rating levels.
Upside scenario
S&P could raise the ratings in the next 12 months if it sees
additional improvement in external liquidity and conditions for
nonsovereign access to foreign currency to service debt. S&P's
long-term ratings trajectory for Argentina will depend on the
ability of the new administration to advance its stabilization
plan. Further progress with economic adjustments, along with better
access to liquidity, would augur well for the sovereign rating over
the long term and would also be positive for Argentine LRGs.
Rationale
S&P said, "Our upward revision of the T&C assessment and the
upgrade of Argentine LRGs to 'CCC' reflects modest improvement in
Argentina's international reserves because of the central
government's initial success in reducing its fiscal deficit,
marginally recovering market confidence, and narrowing the gap
between the official and blue-chip exchange rates.
"Net international reserves remain negative, which we believe
underscores Argentina's significant external vulnerabilities. That
said, the central bank has initiated a gradual lifting on myriad
restrictions for nonsovereign borrowers in accessing FX at the
official exchange rate.
"In our opinion, the LRGs don't meet the criteria to be rated above
Argentina's T&C assessment. Moreover, LRGs are highly sensitive to
sovereign risk: The country's high inflation, economic recession,
and high uncertainty on exchange-rate movements limit space for
effective financial planning and weigh on budgetary execution.
"Moreover, we believe Argentine LRGs operate in a weak
institutional framework, and stressed sovereign conditions often
lead to swings in policies. For example, the central government has
historically passed fiscal stress to LRGs, mostly in the form of
cuts to nonautomatic transfers or increased spending
responsibilities. Nonautomatic transfers averaged roughly 1.2% of
GDP in the recent past, and we expect them to fall to 0.2% of GDP
under the current sovereign fiscal adjustment. The share of
nonautomatic transfers across provinces ranges from 2.5%-20% of
total transfers.
"Despite recent pressure on their revenue structure, we believe
most Argentine LRGs are generally willing to avoid default. While
the situation is fragile, LRGs accumulated liquidity in the past
few years, albeit mostly in pesos, while foreign currency debt
service is relatively smooth in 2024 owing to LRG debt
restructurings in 2020-2021. Local currency obligations are
generally less burdensome compared to the budget, while not all are
indexed to inflation.
"That said, all provinces we rate defaulted or held distressed debt
exchanges in 2020-2021. When under stress in that period, the
provinces tended to prioritize salaries and social spending over
debt service.
"The City of Buenos Aires hasn't defaulted in the recent past. We
believe the city benefits from a stronger economic profile and has
hard currency liquidity that could very comfortably cover its debt
service payments for the next couple of years. We incorporate this
strength in its 'bb-' stand-alone credit profile."
On the other end is the Province of La Rioja (currently at 'SD'),
which defaulted on Feb. 29 and pursued a debt restructuring despite
the very low debt service in 2024.
Ratings List
BUENOS AIRES (CITY OF)
UPGRADED
TO FROM
BUENOS AIRES (CITY OF)
Senior Unsecured CCC CCC-
UPGRADED; CREDITWATCH/OUTLOOK ACTION
TO FROM
BUENOS AIRES (CITY OF)
Issuer Credit Rating CCC/Stable/-- CCC-/Negative/--
BUENOS AIRES (PROVINCE OF)
UPGRADED
TO FROM
BUENOS AIRES (PROVINCE OF)
Senior Unsecured CCC CCC-
UPGRADED; CREDITWATCH/OUTLOOK ACTION; RATINGS AFFIRMED
TO FROM
BUENOS AIRES (PROVINCE OF)
Issuer Credit Rating CCC/Stable/NR CCC-/Negative/NR
ENTRE RIOS (PROVINCE OF)
UPGRADED
TO FROM
ENTRE RIOS (PROVINCE OF)
Senior Unsecured CCC CCC-
UPGRADED; CREDITWATCH/OUTLOOK ACTION
TO FROM
ENTRE RIOS (PROVINCE OF)
Issuer Credit Rating CCC/Stable/-- CCC-/Negative/--
JUJUY (PROVINCE OF)
UPGRADED
TO FROM
JUJUY (PROVINCE OF)
Senior Unsecured CCC CCC-
UPGRADED; CREDITWATCH/OUTLOOK ACTION
TO FROM
JUJUY (PROVINCE OF)
Issuer Credit Rating CCC/Stable/-- CCC-/Negative/--
MENDOZA (PROVINCE OF)
UPGRADED
TO FROM
MENDOZA (PROVINCE OF)
Senior Unsecured CCC CCC-
UPGRADED; CREDITWATCH/OUTLOOK ACTION
TO FROM
MENDOZA (PROVINCE OF)
Issuer Credit Rating CCC/Stable/-- CCC-/Negative/--
NEUQUEN (PROVINCE OF)
UPGRADED
TO FROM
NEUQUEN (PROVINCE OF)
Senior Unsecured CCC CCC-
UPGRADED; CREDITWATCH/OUTLOOK ACTION
TO FROM
NEUQUEN (PROVINCE OF)
Issuer Credit Rating C CC/Stable/-- CCC-/Negative/--
PROVINCE OF RIO NEGRO
UPGRADED
TO FROM
PROVINCE OF RIO NEGRO
Senior Unsecured CCC CCC-
UPGRADED; CREDITWATCH/OUTLOOK ACTION
TO FROM
PROVINCE OF RIO NEGRO
Issuer Credit Rating CCC/Stable/-- CCC-/Negative/--
SALTA (PROVINCE OFUPGRADED
TO FROM
SALTA (PROVINCE OF)
Senior Unsecured CCC CCC-
UPGRADED; CREDITWATCH/OUTLOOK ACTION
TO FROM
SALTA (PROVINCE OF)
Issuer Credit Rating CCC/Stable/-- CCC-/Negative/--
=============
B O L I V I A
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BOLIVIA: Bond Rally in Crisis-Ridden Country Baffling Wall Street
-----------------------------------------------------------------
Bloomberg News reports that the Latin American high-yield bond
rally that started in El Salvador and expanded to Venezuela,
Argentina and Ecuador has now swept up Bolivia in its wake.
That's a step too far for some investors, according to Bloomberg
News.
The report says that El Salvador gained after unexpectedly meeting
all its debt payments, while Venezuela rallied after the US lifted
sanctions. Ecuador and Argentina jumped as they imposed radical
free-market reforms following years of mismanagement, the report
relays. But Bolivia hasn't seen any of the measures that bolstered
its peers, sticking instead to a fixed exchange-rate policy,
state-led development of mineral resources and deficit-fueled
growth, the report notes.
Argentina is planning to stop importing gas from Bolivia in
October, which threatens to accentuate a dollar shortage that has
left central bank reserves almost empty, the report says. Despite
all that, the bonds have returned 19% this year, making it one of
the best bets in emerging-market sovereign debt this year,
according to a Bloomberg index, the report adds.
The $1 billion of bonds due in 2028 have soared 12 cents to 59
cents on the dollar this year, while the $850 million of 2030 bonds
jumped 5 cents to 61 cents, according to pricing data collected by
Bloomberg.
The report says the bonds got a boost in December when socialist
former President Evo Morales was barred from running in the 2025
election by the constitutional court. They got another lift last
month after the government agreed a 10-point plan with local
industry leaders to tackle the dollar shortage and ease the path
for new exports.
Bolivia only faces interest payments to bondholders over the next
two years, according to data compiled by Bloomberg. Larger bond
bills don’t come due until 2026.
According to Bloomberg News, the Andean nation has "very serious
fiscal and external problems, but the debt service remains
manageable and they have political incentives not to default before
the 2025 elections," said Pilar Navarro, an economist at EMFI Group
Ltd. "Some of the rebound is associated with the market
reconsidering these factors."
Barclays Capital Inc. strategist Sebastian Vargas wrote in January
that he expects the country to muddle through with its bond
payments, even as officials delay any sort of significant reforms
until after the presidential election, notes the report.
The government also remains confident and is even considering the
sale of as much as $1 billion in green bonds this year to kickstart
its lithium industry, Economy Minister Marcelo Montenegro told
Bloomberg last week. The landlocked nation holds the world's
largest deposits of the white metal used in electric vehicle
batteries.
But for all that optimism, Bolivia's notes still trade at 1,756
basis points over similar US Treasuries, according to JPMorgan
Chase & Co. data, relates the Bloomberg News report.
The central bank had just $166 million left in cash as of December,
the last date for which figures are available. That leaves it
almost empty handed as it defends a 16-year-old currency peg that
has made it nearly impossible to find dollars outside of the black
market, the report notes.
And the root cause of the problem remains, the report says. The
government posted a fiscal deficit of about 7.5% of gross domestic
product last year, which is expected to widen to about 7.8% in
2024. That needs to be financed either with domestic or external
borrowing.
So, as the peril of government defaults in emerging markets this
year cools, many money managers like Lazard Asset Management's Arif
Joshi worry that Bolivia may, or should, buck that trend.
"If the market keeps going higher, Bolivia might keep rallying,
even though the fundamentals don’t support it," said Carlos de
Sousa, an investor at Vontobel Asset Management in Zurich, notes
Bloomberg News. "It’s the 'tide that raises all boats' kind of
dynamic."
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B R A Z I L
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BRAZIL: Lula's Debt Relief Program Struggles to Boost Consumption
-----------------------------------------------------------------
Bloomberg News reports that President Luiz Inacio Lula da Silva's
plan to help Brazilians escape the record amounts of debt they
amassed during the pandemic remains well short of its targets as it
approaches its March 31 expiration, denting his efforts to unleash
consumer spending and boost growth in Latin America's largest
economy.
Desenrola, as the program is known, was expected to help as many as
70 million people, including 30 million with lower incomes and
smaller debts, according to Bloomberg News.
The Finance Ministry estimated it would renegotiate 50 billion
reais ($10.1 billion) in bank-held debts by the end of last year,
the report notes.
By the start of March, however, 12 million people had negotiated
36.5 billion reais in debt, according to government figures, even
after the program received a three-month extension in December, the
report relays.
"The numbers still fall short of the program's potential," said
Rubens Sardenberg, the head of Brazilian banking federation
Febraban, adding however that its results have been "significant,"
the report relays.
Desenrola's shortcomings, partly explained by technological hurdles
to access the program, compound a challenging scenario for the
Brazilian economy, which isn't expanding as fast as needed for Lula
to deliver on his campaign pledges, the report discloses.
The government launched Desenrola in July, as massive amounts of
household debt and sky-high interest rates threatened to choke
Brazil's economy, the report says.
As the pandemic waned, outstanding debt surged to average roughly
half of family income, while interest rates on credit cards
skyrocketed to nearly 450%, the report notes. By last May, four of
every 10 Brazilian adults faced default, one survey showed, 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.
S&P Global Ratings raised on Dec. 19, 2023, its long-term global
scale ratings on Brazil to 'BB' from 'BB-'. The outlook on the
long-term ratings is stable. S&P affirmed Brazil's global scale
short-term ratings at 'B' and its national scale long-term rating
at 'brAAA'. S&P also raised the transfer and convertibility
assessment on the country to 'BBB-' from 'BB+'. S&P said, "The
stable outlook reflects our expectation that Brazil will maintain a
strong external position, thanks to strong commodity output and
limited external financing needs. We also believe Brazil's
institutional framework can sustain stable and pragmatic
policymaking based on extensive checks and balances across the
executive, legislative, and judicial branches of government. We
expect a very gradual fiscal correction but anticipate fiscal
deficits will remain large."
Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable
Outlook. Fitch said Brazil's ratings are supported by its large and
diverse economy, high per-capita income, and deep domestic markets
and a large cash cushion that support the sovereign's financing
flexibility and its high local-currency debt share. Strong external
finances support resilience to shocks, underpinned by a flexible
exchange rate, robust international reserves and a sovereign net
external creditor position. The ratings are constrained by weak
economic growth potential, relatively low governance scores, high
and rising government debt/GDP, and budgetary rigidities. A new
fiscal framework introduced this year aims to anchor a gradual
consolidation process and address these fiscal weaknesses, but its
effectiveness is increasingly unclear.
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).
=============
J A M A I C A
=============
JAMAICA: Import Bill From EU Rises to US$478 Million
----------------------------------------------------
RJR News reports that the cost of goods coming to Jamaica from the
European Union jumped by almost 30 per cent for January to October
2023.
The Statistical Institute of Jamaica says the value of imported
goods from the trade bloc amounted to US$478.2 million for the
period, according to RJR News.
This was 29.6 per cent higher than the US$369 million spent during
the comparable period in 2022, the report notes.
The increased comparative spend was linked mainly to growth in the
imports of "Machinery and Transport Equipment" and "Food," the
report relays.
The importation of "Machinery and Transport Equipment" was valued
at US$165.2 million, 72 per cent above the US$96.1 million in the
similar 2022 period, the report notes.
Spending on "Food" amounted to US$98.1 million, an increase of 8.2
per cent when compared with the US$90.6 million spent in 2022, the
report discloses.
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.
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N I C A R A G U A
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NICARAGUA: Moody's Upgrades Issuer Ratings to B2, Outlook Stable
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Moody's Ratings has upgraded the Government of Nicaragua's
long-term local and foreign currency issuer ratings to B2 from B3.
The outlook remains stable.
The upgrade of Nicaragua's ratings to B2 from B3 reflects Moody's
view that the sovereign's credit profile has structurally
strengthened due to the accumulation of substantial fiscal and
external buffers above Moody's prior expectations, as a result of
the authorities' concerted policy efforts to mitigate challenges
from international sanctions. Although the sanctions constrain the
sovereign's external financing options and pose downside risks for
economic activity should they disrupt investment flows, twin fiscal
and current account surpluses alongside efforts to attract Chinese
financing and investment, enhance the economy's resilience to
potential shocks compared to Moody's previous assessment. The
authorities' track record of navigating prior shocks while
maintaining a prudent policy mix that safeguarded macroeconomic
stability supports this view. The B2 rating also takes into account
weak institutions, and high susceptibility to event risk,
particularly political risk.
The stable outlook balances the positive trends above against
continued challenges that could weigh on Nicaragua's credit profile
more than Moody's currently assumes, as a result of domestic and
external political risks that could include stricter sanctions, and
a decline in the share of highly concessional borrowing in overall
government debt that is likely to raise debt servicing costs on a
durable basis.
Nicaragua's local-currency country ceiling has been raised to Ba3
from B1, while the foreign-currency country ceiling was raised to
B1 from B2. The two-notch gap between the local-currency ceiling
and the sovereign rating reflects a relatively limited government
footprint in the economy, weak predictability and reliability of
institutions, moderate external imbalances, and elevated domestic
political risks. The one-notch gap between the foreign-currency
ceiling and the local-currency ceiling reflects the economy's
moderate level of external indebtedness, a relatively open capital
account a moderate level of policy effectiveness.
RATINGS RATIONALE
RATIONALE FOR THE UPGRADE OF THE RATINGS TO B2
SUBSTANTIAL INCREASE IN FISCAL BUFFERS STRENGTHENS THE CREDIT
PROFILE
A shift to fiscal surpluses since 2022 has led to a substantial
accumulation of liquid assets deposited at the central bank. The
general government financial balance shifted from a deficit of 1.6%
of GDP in 2021 to a 0.8% surplus in 2022 due to an increase in tax
revenues reflecting the ongoing effects of the 2019 tax reform and
a moderation in public wages and social spending, despite a
temporary increase in subsidies due to the inflationary shock.
Moody's estimates that the surplus widened to 1.5% of GDP in 2023
allowing the sovereign to accumulate 10.2% of GDP in central bank
deposits as of October 2023. Moody's forecasts a small fiscal
surplus of around 0.1% of GDP at the general government level in
2024, with a possibility of stronger outcomes given that the
authorities are once again enacting measures to reduce
expenditures.
General government debt stood at 45% of GDP in 2022 and Moody's
estimates that it declined to 42.4% of GDP in 2023. Nicaragua's
debt remains lower than most 'B'-rated peers, despite facing
multiple consecutive shocks including widespread protests in
2018-19 that paralyzed economic activity and the 2020 pandemic.
Moody's forecasts that Nicaragua's general government debt will
continue to decline gradually, reaching 41.2% of GDP at the end of
2024 and easing to 40.7% in 2025. A further accumulation of
government deposits at the central bank is likely, based on the
broadly balanced budget expectations mentioned above allowing an
accumulation of liquidity as amortizations come due and debt is
rolled over (external and domestic debt amortization will be on
average 3% of GDP per year in the next few years).
The accumulation of fiscal buffers and strong fiscal performance
limits the sovereign's reliance on borrowing from multilateral
development banks to cover its financing needs. This is
particularly relevant for the sovereign's creditworthiness in the
context of existing sanctions that could disrupt financing and
trade flows. Through 2023 the net flow of funds from key
multilateral institutions has remained positive such that the stock
of outstanding debt to all multilateral development banks has
continued to increase, albeit at a slowing pace. Although access to
official external credit so far has not been materially constrained
under the Nicaraguan Investment Conditionality Act (NICA) and the
Renacer Act, the US has increased the number of sanctioned
individuals in Nicaragua and tightened enforcement of existing
sanctions. However, Moody's estimates that in a downside scenario
where financing flows to Nicaragua are completely halted, current
fiscal buffers would cover the sovereign's gross financing needs
through 2026.
ACCUMULATION OF FOREIGN EXCHANGE RESERVES AND EFFORTS TO DIVERSIFY
INTERNATIONAL TRADE LINKAGES ALSO HELP MITIGATE POTENTIAL RISKS
Following the post pandemic recovery in 2021 when real GDP
rebounded 10.3%, the economy has continued to grow in the 3.5%-4%
range, higher than Moody's initial estimates of 2%-3%, supported by
a substantial increase in remittances which have more than doubled
since 2021. Remittance growth slowed to a still-high 45% at the end
of 2023 from a peak of 62%, and the level of remittances reached
27% of GDP from less than 13% in 2018. The large inflows from
remittances have led to a structural shift in the current account.
The foreign exchange inflows from the remittances have pushed the
current account back to surplus, while sustained foreign direct
investment (FDI) inflows have contributed to a rapid accumulation
of gross international reserves above Moody's earlier projections
such that the external reserve buffer is likely to reach 30% of GDP
by the end of 2024. The international reserve buffer, combined with
the fiscal reserve buffer, helps to mitigate risks from potential
shocks while granting the authorities a high level of policy
flexibility.
Additionally, the authorities have continued efforts to diversify
international trade linkages through the signing and implementation
of multiple free trade agreements (FTAs), including a recent FTA
with China that came into effect in January 2024. This latest
agreement has the potential to boost investment flows and favorably
alter the structure of Nicaragua's export markets toward another
large economy with ample demand for its export products, making it
more likely that the economy will remain resilient to possible
disruptions in trade and financial flows from western countries.
Approximately half of Nicaragua's exports are currently sent to the
US and around 25% to Central America, Panama and the Dominican
Republic, all covered under FTAs signed in 2004.
CREDIT CHALLENGES CONTINUE TO CONSTRAIN THE RATING
The B2 rating also takes into account weak institutions, and high
susceptibility to event risk, in particular political risk.
Nicaragua scores below the median for B-rated sovereigns in all
categories of the Worldwide Governance Indicators except for
political stability that is recovering following the 2018-19
protests. A particular weakness of Nicaragua's institutional
profile involves rule of law and control of corruption, where it
ranks among the lowest of sovereigns rated by Moody's. The lack of
a credible system of political checks and balances that fosters
policy debate and hinders voice and accountability, and a
diminished perception that the country's institutions uphold the
respect for contracts and private property and grant investment
security, weigh on Nicaragua's institutions and governance
strength.
The sovereign's high susceptibility to event risk is a reflection
of lingering domestic political risks and the continued threat of
stricter sanctions that could halt the flow of capital in and out
of Nicaragua. Although the accumulation of large buffers partially
mitigates this risk, it does not fully offset it, constraining
Nicaragua's credit profile. Low income levels and the small scale
of the economy also limit the sovereign's economic strength,
despite improved growth prospects.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook reflects Moody's view that upside and downside
risks to Nicaragua's credit profile remain balanced. The
sovereign's strong adjustment capacity will continue to guide
prudent fiscal policymaking that has led to the accumulation of the
sizable buffers and the structural shift toward stronger external
and public finances. These improvements will help mitigate the
effects of potential future shocks. Nevertheless, domestic and
external political tensions heighten the risk of harsher sanctions
being imposed on the country that could jeopardize trade and
financial flows and lead to economic shocks that would reduce
existing buffers. Although the country is likely to begin
diversifying its international trade linkages, the process will be
gradual.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Nicaragua's CIS-4 ESG Credit Impact Score reflects social and
governance risks as a result of persistent social tensions within
the country and weak political institutions despite the
authorities' capacity to respond to shocks. Environmental risks
also weigh on Nicaragua's rating.
Nicaragua's exposure to environmental risks (E-4) stems from
physical climate, water management and natural capital risks.
Nicaragua's geography is dominated by a region known as the Dry
Corridor, characterized by recurrent drought and heavy
precipitation events that lead to flooding and landslides, or in
dry periods, wildfires. The steady rise in the frequency and
severity of drought and other climate-related shocks poses a
moderate threat to Nicaragua's agricultural sector, which employs
nearly 30% of the country's population and accounts for about 15%
of GDP.
Nicaragua's S-4 social issuer profile score reflects its exposure
to various social risks, including labor and income, education,
housing, health and safety and access to basic services. Social
considerations have played a role in increasing political risk in
the country. While Nicaragua does not experience gang-related
violence as other neighbors in the region, the country's domestic
politics were embroiled in a national political conflagration in
2018-19 following the government's attempt to reform the pension
system in April 2018, with violent protests disrupting economic
activity. Although the protests have ceased, sociopolitical
tensions persist.
Nicaragua's G-4 governance issuer profile score reflects of the
sovereign's ongoing challenges with respect to the weak rule of law
and control of corruption, issues that Moody's expect to persist
over the medium term. These challenges more than offset the
benefits from more than a decade-long record of prudent monetary
and fiscal policy, which was partly cultivated through strong
relationships with the IMF and multilateral creditors.
GDP per capita (PPP basis, US$): 7,229 (2022) (also known as Per
Capita Income)
Real GDP growth (% change): 3.8% (2022) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 11.6% (2022)
Gen. Gov. Financial Balance/GDP: 0.8% (2022) (also known as Fiscal
Balance)
Current Account Balance/GDP: -1.6% (2022) (also known as External
Balance)
External debt/GDP: 90% (2022)
Economic resiliency: b1
Default history: At least one default event (on bonds and/or loans)
has been recorded since 1983.
On March 12, 2024, a rating committee was called to discuss the
rating of the Nicaragua, Government of. The main points raised
during the discussion were: The issuer's economic fundamentals,
including its economic strength, have materially increased. The
issuer's institutions and governance strength, have materially
increased. The issuer's fiscal or financial strength, including its
debt profile, has materially increased. The issuer's susceptibility
to event risks has not materially changed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
A lifting of international sanctions that ensures sustained access
to financing and trade flows, or a continued increase in fiscal and
external buffers and reduction in public debt that further
mitigates the impact of potentially stricter sanctions, could lead
to an upgrade. Progress on structural reforms that support economic
strength through an improvement in the business climate and a
softening of domestic political tensions would enhance the
sovereign's creditworthiness.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
Downward pressure on the sovereign's credit profile would emerge if
fiscal metrics were to deteriorate significantly, reversing the
progress achieved on the accumulation of liquidity buffers. A
prolonged period of weak economic activity as a result of social or
political tensions would substantially weaken Nicaragua's credit
profile and could lead to a rating downgrade.
The principal methodology used in these ratings was Sovereigns
published in November 2022.
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P E R U
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RUTAS DE LIMA: S&P Lowers Debt Rating to 'CCC+', Outlook Negative
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S&P Global Ratings lowered its issue-level rating on Rutas de Lima
S.A.C. (RdL or the project) to 'CCC+' from 'B-' and removed it from
CreditWatch with negative implications.
The negative outlook reflects a one-in-three chance of a further
downgrade in the next 12 months if S&P perceives higher risks of
bond payment acceleration, or if it envisions a pronounced
deterioration of the project's cash flow and liquidity.
On March 8, 2024, the Constitutional Court of Peru unanimously
declared the collective habeas corpus claim filed against RdL as
partially funded and ordered the project to suspend collections at
the Chillon toll plaza. The decision is unappealable and will
remain in place until measures are adopted to stop the violation of
the right to freedom of movement (such as the construction of a
free alternative road to PN), or until the Peruvian criminal court
issues a final judgement on the legality of the concession
agreement between the Metropolitan Municipality of Lima (MML) and
RdL.
S&P said, "Since we don't expect any of these measures to occur in
the short to medium term, we updated our base-case scenario and
excluded permanently toll collections from PN (which represents
about 30% of the project's revenue). In our previous scenario, we
only excluded these revenues for a 90-day period, waiting on a
final decision on this matter.
"In our updated base case, and assuming that the project's margin
to reduce costs is limited, we anticipate cash flows available for
debt service (CFADS) from Panamericana Sur (PS) won't be sufficient
to cover the debt service in the next 12 months, reflected by our
forecast DSCR of around 0.9x for December 2024. However, we believe
the project has sufficient liquidity in the form of accessible cash
and reserve accounts to cover the debt shortfalls for the next
seven years, which is consistent with a 'CCC+' rating."
As of Feb. 29, 2024, RdL's liquidity includes a debt service
reserve account of PEN58 million, accessible cash and accounts of
PEN131 million, an additional project reserve account of PEN151
million, a major maintenance reserve account of PEN62 million (of
which only 25% can be used to fulfill any shortfall), and an
operation and maintenance reserve account of PEN59 million.
All the arbitration processes that RdL has had with the MML in the
past (regarding the suspension of toll collections and the
opposition to tariff increases) have resolved in favor of the
project, which sets a good precedent for RdL. However, S&P does not
anticipate a resolution in the short term because we expect the
final judgement on Arbitration III to be issued during the first
half of 2025.
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P U E R T O R I C O
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VHB FOODS: Seeks to Tap Juan C. Bigas Law Office as Legal Counsel
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VHB Foods Corp. seeks approval from the U.S. Bankruptcy Court for
the District of Puerto Rico to hire Juan C. Bigas Law Office to
handle its Chapter 11 case.
Juan C. Bigas Law Office received a retainer in the amount of
$3,000, against which the firm will bill on the basis of $300 per
hour.
In addition, the firm will seek reimbursement for work-related
expenses.
As disclosed in court filings, Juan C. Bigas Law Office is a
"disinterested person" pursuant to Section 101(14) of the
Bankruptcy Code.
The firm can be reached through:
Juan Carlos Bigas Valedon, Esq.
Juan C. Bigas Law Office
515 Ferrocarril
Urb. Santa Maria
Ponce, PR 00717
Phone: (787) 259-1000
Email: cortequiebra@yahoo.com
citas@preguntalegalpr.com
About VHB Foods Corp.
VHB Foods Corp. filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No.
24-00875)
on March 5, 2024, listing $100,001 to $500,000 in assets and
$1,000,001 to $10 million in liabilities.
Juan Carlos Bigas Valedon, Esq., at Juan C Bigas Law Office
represents the Debtor as counsel.
*********
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