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/raid1/www/Hosts/bankrupt/TCRLA_Public/240823.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 Friday, August 23, 2024, Vol. 25, No. 170 Headlines A R G E N T I N A ARGENTINA: Milei's Support Survives His Economic Experiment B E R M U D A BERMUDA: Retail Sales Edge up in February B R A Z I L BRAZIL: Troubled Airlines Hit With Losses on Currency, Climate Woes COMPANHIA SIDERURGICA: Incurs BRL222.6M Net Loss in 2Q 2024 RIO DE JANEIRO CITY: Fitch Ups LongTerm IDR to 'BB', Outlook Stable SLC AGRICOLA: Increasing Debt Levels Raise Concerns for Stability STATE OF RIO DE JANEIRO: Fitch Affirms 'BB' LT IDR, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Markets Register Shortages, High Chicken Prices J A M A I C A BERGER PAINTS: Realizes $5.4 Million Loss in Q2 JAMAICA: Annual Inflation at 5.1% in July JAMAICA: Jamaican Dollar Slides to New Record Low v. US Greenback JMMB GROUP: Incurs $1.5 Billion for June Quarter M E X I C O NEW FORTRESS: Restarts Fast LNG Production at Mexican Site X X X X X X X X LATAM: IDB Proposes Regional Alliance to Strengthen Security - - - - - ================= A R G E N T I N A ================= ARGENTINA: Milei's Support Survives His Economic Experiment ----------------------------------------------------------- Manuela Tobias & Patrick Gillespie at Bloomberg News report that in the eight months since Javier Milei took office, prices have soared more than 100 percent, consumer spending tanked and unemployment climbed as Argentines have been subjected to the most brutal austerity shock in recent history. Yet something unexpected has happened on Milei's watch: for all the ongoing misery, he remains just as popular as when he stormed to power pledging to take a chainsaw to the state, according to Bloomberg News. Even the hardest hit continue to swear by his bitter economic medicine, Bloomberg News notes. Argentina is in the early stages of an economic and monetary experiment that will determine whether it can escape decades of decline and recapture some of its earlier swagger as a commodities superpower, Bloomberg News relays. Everywhere you look there are signs of decay, and the accompanying strains on its people, Bloomberg News says. More than half of Argentines now live below the poverty line as Milei's "shock therapy" exacerbates the already staggering levels of destitution that he inherited, the report discloses. Milei's popularity stands at a healthy 52 percent, a one percentage point bump from February, according to polling firm Management & Fit, notes the report. His immediate predecessor, Alberto Fernandez, racked up a disapproval rating of 79 percent by the end of his term, and is now fighting allegations of domestic abuse that risk compounding the now-opposition's woes, the report relays. Cooling inflation -- Milei's central rallying cry -- is one leg propping up his support, Bloomberg News notes. Monthly price increases fell from a three-decade high of 25.5 percent in December to four percent in July, adds the report. Residual anger at Peronism, the statist movement that's governed Argentina for 16 of the last 20 years, most recently under Fernandez, helps explain the rest, Bloomberg News says. 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 Aug. 8, 2024, affirmed its 'CCC/C' foreign and local currency sovereign credit ratings on Argentina. S&P also affirmed its 'raB+' national scale rating on the country. The outlook on the long-term ratings remains stable. S&P's 'CCC' transfer and convertibility assessment for Argentina remains unchanged. S&P said the stable outlook on the long-term ratings balances the risks posed by pronounced economic imbalances and other uncertainties with recent progress in making fiscal adjustments, reducing inflation, and undertaking structural reforms to address long-standing microeconomic weaknesses that have contributed to poor economic performance for many years.s that it would likely consider to be distressed. Fitch Ratings 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. ============= B E R M U D A ============= BERMUDA: Retail Sales Edge up in February ----------------------------------------- Duncan Hall at Royal Gazette reports that retail sales volume in Bermuda increased by 0.6 per cent year-over-year in February, according to figures released August 16 by the Ministry of Economy and Labor. That figure was determined after adjusting for the retail sales rate of inflation, which was measured at 3.4 per cent in February, according to Royal Gazette. In value terms, retail sales were an estimated $92.2 million, the report notes. Three of the seven sectors recorded year-over-year volume index increases in February, the report relays. Service stations' sales volume increased 5 per cent, the report discloses. The sales volume for food stores rose 2.8 per cent, the report says. In the all-other-store-types sector -- comprising stores selling household items, furniture, appliances, electronics, pharmaceuticals and tourist-related goods -- there was a 2.6 per cent increase in sales volume, the report relays. According to the report, the sales volume for building material stores decreased by 0.1 per cent. The sales volume for liquor stores fell 4.8 per cent. The sales volume at apparel stores decreased 5.1 per cent. The sales volume at motor vehicle stores decreased 17.5 per cent. Selected overseas declarations increased by 14.3 per cent compared with February 2023. Imports via courier increased $1.5 million to $13.1 million, the report notes. This increase was partially attributed to the higher importations of pharmaceutical products and electrical machinery and mechanical appliances, the report relays. Imports by households via sea increased $1.2 million to $7.1 million, the report notes. Declarations at the airport by returning residents increased $0.3 million to $3.4 million, the report discloses. Imports via the Bermuda Post Office remained the same at $0.4 million, says the report. Excluding Sundays, there were 25 shopping days, one fewer than in February 2023, the report adds. =========== B R A Z I L =========== BRAZIL: Troubled Airlines Hit With Losses on Currency, Climate Woes ------------------------------------------------------------------- Bloomberg News reports that Brazilian airlines, already struggling with high interest rates and volatile fuel costs, are being hit with more losses as currency woes and climate challenges test the sector's operational resilience. Azul SA and Gol Linhas Aereas Inteligentes SA, two of the nation's largest carriers, reported setbacks in the second quarter as a weakening Brazilian real and the closing of a key airport following torrential rains in country's south dragged their earnings, quarterly reports showed, according to the report. Gol estimated that the closing of Porto Alegre's Salgado Filho airport was responsible for revenue losses amounting to approximately 120 million reais, the report relates. 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. As reported in the TCR-LA on May 6, 2024, Moody's Ratings affirmed the Government of Brazil's long-term issuer and senior unsecured bond ratings at Ba2, senior unsecured shelf rating at (P)Ba2 and changed the outlook to positive from stable. Moody's assesses thatBrazil's real GDP growth prospects are more robust than in the pre-pandemic years, supported by the implementation of structural reforms over multiple administrations, as well as the presence of institutional guardrails that reduce uncertainty around future policy direction. The outlook change to positive is underpinned by Moody's assessment that more robust growth combined with continued, albeit gradual, progress towards fiscal consolidation, may allow Brazil's debt burden to stabilize. However, there are risks to the government's execution of continued fiscal consolidation. 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-TermForeign-Currency Issuer Default Rating (IDR) at 'BB' with a StableOutlook. 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. DBRS Inc., on August 15, 2023, upgraded Brazil's Long-TermForeign and Local Currency - Issuer Ratings to BB from BB (low).At the same time, DBRS Morningstar confirmed Brazil'sShort-term Foreign and Local Currency - Issuer Ratings at R-4.The trend on all ratings is Stable (March 2018). COMPANHIA SIDERURGICA: Incurs BRL222.6M Net Loss in 2Q 2024 ----------------------------------------------------------- simplywall.st reports that Companhia Siderurgica Nacional (CSN) has announced its Second Quarter 2024 Results. Key financial results show that: -- Revenue was BRL10.9 billion (down 1.0% from 2Q 2023) -- Net loss was BRL222.6 million (down by 221% from BRL183.6 million profit in 2Q 2023). -- There is BRL0.17 loss per share (down from BRL0.14 profit in 2Q 2023). Revenue exceeded analyst estimates by 2.5%, notes the report. Earnings per share (EPS) missed analyst estimates, it adds. Looking ahead, revenue is forecast to grow 2.4% p.a. on average during the next 3 years, compared to a 2.9% growth forecast for the Metals and Mining industry in Brazil, notes the report. The company's shares are up 2.6% from a week ago, according to the report dated Aug. 15. As reported in the Troubled Company Reporter-Latin America on Aug. 21, 2024, S&P Global Ratings revised the outlook on its global and national scale ratings on Brazil-based integrated steel, mining, and cement producer Companhia Siderurgica Nacional (CSN) to negative from stable. S&P also affirmed its 'BB' global scale and 'brAAA' national scale ratings on the company. At the same time, S&P revised the outlook on CSN Mineracao S.A. (CMIN) to negative from stable and affirmed the 'brAAA' rating, mirroring its action on its parent. RIO DE JANEIRO CITY: Fitch Ups LongTerm IDR to 'BB', Outlook Stable ------------------------------------------------------------------- Fitch Ratings has upgraded the City of Rio de Janeiro's (Rio) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'BB' from 'B+'. A Stable Rating Outlook has been assigned following the upgrade. Fitch has also affirmed Rio's Short-Term Foreign and Local Currency IDRs at 'B'. Rio's National Long-Term Rating has been upgraded to 'AA+(bra)/Stable from 'A(bra)'/Positive, while the National Short-Term Rating was upgraded to 'F1+(bra)' from 'F1(bra)'. Rio's Standalone Credit Profile (SCP) has been raised to 'bb' from 'b+' and no other factors affect the municipality's ratings. The upgrade of City of Rio de Janeiro ratings reflects the municipality's improved fiscal management and liquidity metrics in the last three years, with unrestricted cash larger than short-term liabilities, as per the Capacidade de Pagamento (CAPAG) liquidity indicator. CAPAG is the National Treasury's classification system to measure financial health of subnational governments. Rio reported substantial improvements in payables, with no delays in its payroll bill, aligned with timely payment of suppliers and service providers. Fitch raised the entity's risk profile to 'Low Midrange' from 'Weaker' due to the strengthening of Rio's 'liabilities and liquidity flexibility'. KEY RATING DRIVERS Risk Profile: 'Low Midrange' The assessment reflects Fitch's view that there is a moderately high risk of the issuer's ability to cover debt service with the operating balance weakening unexpectedly over the scenario horizon (2024-2028) due to lower revenue, higher expenditure, or an unexpected rise in liabilities or debt-service requirements. Revenue Robustness: 'Midrange' The Brazilian tax collection framework transfers to states and municipalities a large share of tax collection responsibilities. Constitutional transfers exist as a mechanism to compensate poorer entities. For this reason, high dependence on transfers is considered a weak feature for Brazilian local and regional governments (LRGs). The primary metric for revenue robustness is the transfers ratio, which measures transfers to operating revenue. A relatively high dependence on transfers is considered a weaker feature due to the fact that the sovereign, the main counterpart for Brazilian LRGs, is rated below investment grade. Fitch classifies LRGs that report a transfer ratio above or equal to 40% as 'Weaker', while those with a ratio below 40% are classified as 'Midrange' due to higher fiscal autonomy. The City of Rio reports relative fiscal autonomy, driving this factor to 'Midrange'. Transfers represented 33.7% of operating revenues, on averages in 2019-2023. The municipality receives transfers from both the federal government (BB/Stable) and the State of Rio de Janeiro (BB/Stable). The City of Rio main operating revenue sources are based on tax revenues, which represent 43.4% of operating revenues in 2023. The most important taxes are the Imposto Sobre Servicos (ISS, tax on services) and the IPTU (real estate property tax). While the ISS is strongly correlated with the performance of economic activity, the IPTU is more stable source of revenues, considering that is leaved on the ownership of urban real estate properties and is paid annually. Rio has a low exposure to volatile revenue sources, such as oil royalties. Revenue Adjustability: 'Weaker' Fitch considers Brazilian states and municipalities to have a low capacity level for revenue increase in response to a downturn. There is low affordability of additional taxation given that tax tariffs are close to the constitutional national ceiling, driving this factor to weaker. When faced with a negative shock over revenue collection, Brazilian LRGs are less likely to raise tax rates. Instead, they usually apply measures to lower tax evasion and introduce tax refinancing programs. The most important municipal tax is the ISS, a tax on services, which represented 48% of tax collection in 2023. Another important tax for municipalities is the Imposto Predial e Territorial Urbano, a tax on urban properties, which corresponded to 29% of the City of Rio's tax collection in 2023. Expenditure Sustainability: 'Midrange' Municipalities provide health care and elementary education services. They are also responsible for urban infrastructure and social housing, but those mandates consume less of the municipal budget compared with health and education. Expenditure tends to grow with revenue as a result of earmarked revenue. States and municipalities are required to allocate a share of revenue to health and education. This results in procyclical behavior in good times, as periods of high revenue growth result in similar trends for expenditure. However, due to the weight of personal expenditure and salary rigidity, downturns that result in lower revenue are not followed by similar drops in expenditure. The City of Rio de Janeiro reports moderate control over expenditure growth, with sound margins. Operating margins averaged 10.7% in the 2019-2023 period. Operating expenditure increased 0.8% annually in real terms on average between 2019 and 2023, below operating revenues growth of 1.2%. Expenditure Adjustability: 'Weaker' Brazilian local governments suffer from a fairly rigid cost structure, driving this factor to 'Weaker'. As per the Brazilian Constitution, there is low affordability of expenditure reduction, especially for the payroll bill and pensions. As a result, whenever there is an unpredictable reduction in revenues, operating expenditure does not follow automatically. For the City of Rio, personal expenditures corresponded to 54.5% of total expenditure in 2023. This item has very limited flexibility for adjustments given salary rigidity and limited ability to manage human resources. Other operating expenditures amounted to close to 33.5% of total expenditures in 2023 and has some flexibility for adjustments, but still limited by constitutional mandates on health and education. Lastly, Capex represented 9.9% of total expenditures in 2023 and 4.7%, on average, between 2019 and 2023. Historically, Brazilian LRGs have often relied on investments cuts when facing a more challenging economic scenario. Liabilities & Liquidity Robustness: 'Midrange' The Brazilian credit market for subnational governments is limited and highly controlled by the federal government. Often, LRGs opt for new loans with federal guarantees, which are only granted to subnationals rated 'A' or 'B' under the National Treasury CAPAG, a criteria that assesses indebtedness, current savings and liquidity. The City of Rio has an agreement with the federal government that allows it to get new loans with federal guarantees amounting to up to 3% of net current revenue. Rio currently has a score of 'B' under the CAPAG criteria. Brazil has a moderate national framework for debt and liquidity management, featuring prudential borrowing limits and restrictions on loan types. Under the Fiscal Responsibility Law of 2000, Brazilian LRGs must comply with indebtedness limits. Consolidated net debt for municipalities cannot exceed 120% of net current revenue. The City of Rio complies with the Fiscal Responsibility Law, reporting a debt ratio of 43.63% as of YE 2023. The Fiscal Responsibility Law also sets limits for guarantees, at 22% of net current revenue. The City of Rio reported no guarantees as of YE 2023. As of YE 2023, external debt totaled BRL5.1 billion, corresponding to 30% of direct debt. Foreign debt amortization is expected to average BRL334 million annually until 2028, and there is no significant maturity concentration throughout the amortization period. External debt is largely owed to multilateral organizations and counts with federal government guarantee. Debt directly owed to the federal government represented only 3.2% of total debt at YE 2023. The City of Rio restructured its debt with the federal government years ago in exchange for an external loan with a multilateral organization. There is some off-balance sheet risk stemming from the pension system for the City of Rio, which is low when compared to Brazilian States, given that municipalities do not carry the burden of pensions related to public security. The municipality transfers additional resources annually to cover for the pension deficit. Rio does not have an accumulated stock of 'precatorios', which are claims on governments originated from judicial liabilities. Liabilities & Liquidity Flexibility: 'Midrange' Liabilities and Liquidity Flexibility was reassessed to 'Midrange' from 'Weaker' due to the entity's reported improvement in liquidity metrics in the last three-years. Aframework exists for providing emergency liquidity support from the federal government via the granting of extended maturity over the prevalent federal debt portion. Fitch assesses the entity's available liquidity to differentiate between 'Weaker' and 'Midrange' for liabilities and liquidity flexibility. The Brazilian National Treasury analyzes the liquidity rate for LRGs to assess which entities qualify for federal government guarantees (Capacidade de Pagamento or CAPAG), which is measured by the LRGs' short-term financial obligation to net cash. The federal government's threshold to rate this ratio 'A' is 100%. Fitch has set a threshold of 100% for the average of the last three years (2021-2023 YE) and for the last YE results available (December 2023), which would result in a 'Midrange' assessment for this factor. Rio reported a three-year average liquidity ratio of 72.9%. As of December 2023, the metric reached 80.5%, corroborating with the 'Midrange' assessment. Debt Sustainability: 'a category' Fitch's forward looking rating scenario indicates the payback ratio, measured as net direct debt/operating balance, the primary metric of the debt sustainability assessment, will reach an average of 6.0x for 2026-2028, which is aligned with the 'aa' category. Fitch applies an override due to the actual debt service coverage ratio, the secondary metric, at 1.1x for the average of 2026-2028, which is aligned with the 'bb' category. Fiscal debt burden is projected at 32% for the period. For its rating case, Fitch considers the municipality's historical performance and projections for main macro variables, such as GDP growth and inflation. The rating case is inherently a stressed scenario. Operating revenue is expected to grow 4.7% on average between 2024 and 2028, largely driven by tax collection. Operating expenditure growth reflects government projections for 2024. Going forward, Fitch applies a growth rate related to inflation plus spread. Fitch projects new loans disbursement following the schedule provided by the government, as well as the maximum amount of new loans that the municipality is allowed to access annually. Debt amortization and interest payments reflect government projections. Derivation Summary The City of Rio's ratings reflect the combination of a 'low midrange' risk profile and 'a' debt sustainability assessment under Fitch's rating case. The SCP is assessed at 'bb' and factors in a comparison with national and international peers. The City of Rio's 'BB' IDRs are not affected by any other rating factors. Its national scale rating of 'AA+(bra)' is based on a national peer comparison. Key Assumptions Risk Profile: 'Low Midrange' Revenue Robustness: 'Midrange' Revenue Adjustability: 'Weaker' Expenditure Sustainability: 'Midrange' Expenditure Adjustability: 'Weaker' Liabilities and Liquidity Robustness: 'Midrange' Liabilities and Liquidity Flexibility: 'Midrange' Debt sustainability: 'a' Support (Budget Loans): 'N/A' Support (Ad Hoc): 'N/A' Asymmetric Risk: 'N/A' Rating Cap (LT IDR): 'N/A' Rating Cap (LT LC IDR) 'N/A' Rating Floor: 'N/A' Quantitative assumptions - Issuer Specific Fitch's rating case is a "through-the-cycle" scenario, which incorporates a combination of revenue, cost and financial risk stresses. It is based on 2019-2023 figures and 2024-2028 projected ratios. The key assumptions for the scenario include: - Yoy 4.7% increase in operating revenue on average in 2024-2028; - Yoy 5.0% increase in tax revenue on average in 2024-2028; - Yoy 5.4% increase in operating expenditure on average in 2024-2028; - Net capital balance of - BRL2,210 million on average in 2024-2028; - Cost of debt: 5.7% on average 2024-2028. Quantitative assumptions - Sovereign Related Figures as per Fitch's sovereign actual for [2023] and forecast for [2024-2025], respectively (no weights and changes since the last review are included as none of these assumptions was material to the rating action). Liquidity and Debt Structure Net adjusted debt considers BRL17.2 billion of direct debt and unrestricted cash of BRL2.1 billion as of YE 2023. Fitch estimates that close to 30% of debt is external and guaranteed by the federal government, while 3.2% is debt owed directly to the federal government. The City of Rio's largest creditors are the World Bank, Banco Nacional de Desenvolvimento Economico e Social and Caixa Economica Federal. Issuer Profile The City of Rio de Janeiro has the second-highest municipal GDP in Brazil, accounting for 4% of national GDP. The city is headquarters to various Brazilian oil, mining and telecommunications companies and is one of the most visited cities in the Southern Hemisphere. The City of Rio's economy correlates highly with the performance of the oil and tourism sectors. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - A negative rating action on Brazil IDRs would negatively affect Rio's IDRs; - Rio's ratings could be downgraded if its payback ratio increases to above 7.5x, indicating a deterioration against peers within the 'BB' category; - Rio's ratings could also be downgraded due to an erosion of the municipality's liquidity metrics towards 'Weaker' as per Fitch assessment. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Rio's IDRs are at the sovereign level and could only be upgraded if the sovereign is upgraded in combination with an upgrade of the municipality's SCP; - Rio's SCP could be raised if its actual debt service coverage ratio consistently improves to approximately 1.5x and its payback ratio is projected below 6x; - Rio's long-term national scale rating could be upgraded if its debt sustainability improves to the 'aa' category. 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 ----------- ------ ----- Rio de Janeiro, City of LT IDR BB Upgrade B+ ST IDR B Affirmed B LC LT IDR BB Upgrade B+ LC ST IDR B Affirmed B Natl LT AA+(bra)Upgrade A(bra) Natl ST F1+(bra)Upgrade F1(bra) SLC AGRICOLA: Increasing Debt Levels Raise Concerns for Stability ----------------------------------------------------------------- Richard Mann at Rio Times Online reports that SLC Agricola (SLCE3) faced a challenging second quarter in 2024, with declines in key financial metrics primarily due to adverse conditions in the soybean market. SLC Agricola is a leading Brazilian agricultural producer specializing in soybeans, cotton, corn, and other crops, according to Rio Times Online. Established in 1977, it has significantly grown in the agribusiness sector by leveraging advanced agricultural technologies and sustainable practices, the report notes. The company aims to enhance productivity and efficiency while committing to sustainable growth and value creation for shareholders, the report relays. Financial Performance Overview Net Income: Net income decreased by 7.8% to R$321.142 million ($58.93 million), down from R$348.719 million ($63.99 million) in Q2 2023. Challenges in the soybean segment significantly impacted profitability. EBITDA: Adjusted EBITDA fell sharply by 53.4% to R$258.1 million ($47.36 million). Operational pressures exacerbated this drop, with reduced soybean productivity and pricing contributing to the decline. Free Cash Flow: Free cash flow deteriorated by 40.6%, resulting in a negative R$543.006 million ($99.63 million). This negative cash flow was driven by decreased soybean revenue and expenditures on inputs for the 2023–24 crop, alongside investments in machinery and soil amendments for the 2024–25 crop. Revenue and Sales Analysis Net Revenue: Net revenue fell by 6.4% to R$1.351 billion ($247.89 million), primarily driven by the soybean segment. Reduced productivity in the 2023–24 harvest affected overall revenue. Sales by crop: -- Cotton: Sales volume increased by 58.9%. -- Cotton Seed: Sales surged by 84.3%. -- Corn sales saw a modest increase of 2.7%. -- Cattle: Sales rose by 51.5%. -- Other Crops: Sales increased by 179%. -- Soybeans (commercial + seeds): sales volume decreased by 27.4%, highlighting the significant impact on overall performance. Operational and financial challenges Soybean Market Impact: Declines in soybean sales, both in volume and price, affected financial health. The downturn in the soybean market was attributed to lower productivity, directly impacting revenue and cash flow. Debt and Leverage: Negative cash generation led to a net debt/adjusted EBITDA ratio of 1.99x, indicating increased leverage. The company may face challenges managing debt if conditions persist. Strategic Considerations Diversification: Increased sales of other crops suggest a strategic shift, with the company diversifying revenue streams to mitigate risks associated with soybean dependency. Investment in Future Crops: Despite challenges, SLC Agricola continues to invest in future crop cycles, with expenditures on machinery and soil amendments reflecting a forward-looking approach that may position the company for growth. Market Challenges The company faced several key challenges: Reduced soybean productivity and pricing pressures Negative cash flow due to decreased soybean revenue and investments in future crops Increased leverage, with a net debt/adjusted EBITDA ratio rising to 1.99x. Competitive Positioning While facing headwinds, SLC Agricola demonstrated strengths: Diversification: Significant sales increases in cotton (58.9%), cotton seed (84.3%), cattle (51.5%), and other crops (179%). Forward-looking investments: continued investments in machinery and soil amendments for future crop cycles. Industry Trends The agricultural sector is experiencing trends that impact SLC Agricola and its competitors: Sustainability focus: growing emphasis on environmentally friendly practices and energy efficiency. Digitalization: Increasing adoption of digital technologies and automation in agricultural processes. Alternative proteins: rising investments in cultivated meat and other alternative protein sources are creating new market opportunities. Competitive Landscape SLC Agricola remains a leading player in Brazilian agribusiness, focusing on technology and sustainable practices. Its diversification strategy may help it weather challenges better than competitors who are overly reliant on soybeans. Investments in future crop cycles could position it for stronger performance relative to peers. Outlook SLC Agricola faces near-term challenges but has the potential for recovery. The company needs to manage its increased debt levels carefully. Continued diversification of the crop portfolio may help mitigate risks. Improving operational efficiencies will be crucial for enhancing competitiveness. External market conditions, particularly in the soybean sector, will significantly influence future performance. Conclusion SLC Agricola's Q2 2024 results reflect significant challenges primarily caused by adverse conditions in the soybean market, the report relays. While growth in other segments has occurred, overall performance has suffered, the report notes. The company's ability to manage debt and diversify its crop portfolio will be crucial for its future success, the report discloses. Investors must monitor these factors closely, as external market conditions will also influence prospects, the report relates. To strengthen its position, SLC Agricola should focus on leveraging its diversification strategy, optimizing operational efficiency, and capitalizing on emerging trends in sustainable and technology-driven agriculture, the report adds. STATE OF RIO DE JANEIRO: Fitch Affirms 'BB' LT IDR, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has affirmed the Brazilian State of Rio de Janeiro's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB' with a Stable Rating Outlook and its Short-Term Foreign and Local Currency IDRs at 'B'. Fitch has also affirmed Rio de Janeiro's National Long-Term Rating at 'AAA(bra)' with a Stable Outlook and its National Short-Term Rating at 'F1+(bra)'. Rio de Janeiro Standalone Credit Profile (SCP) was lowered to 'ccc-' from 'ccc'. The state's IDRs benefit from a seven-notch uplift from its SCP considering the support derived from the New Fiscal Recovery Regime and its impact over the state's enhanced debt sustainability. The New Fiscal Recovery Regime (NFRR) is a national framework to ease the debt burden of distressed subnational governments. Throughout the duration of the program, Rio de Janeiro benefits from debt service relief through a step-up debt service schedule and the federal government will service all contracts included under the program. Fitch expects the Federal Government (BB/Stable) will continue to honor the State of Rio de Janeiro's debt service under the NFRR. Rio de Janeiro's SCP was lowered to 'ccc-' from 'ccc', reflecting deteriorating debt service coverage metrics under the NFRR. The state's debt continues to grow due to intergovernmental debt indexation and the accumulation of unpaid debt service, which is added to the debt stock as negotiated under the NFFR. At the same time, Rio de Janeiro was penalized for not reaching agreed targets under the NFRR, what translates into an acceleration of capital payments under the NFRR. The matter was judicialized, with the Supreme Court limiting Rio's debt service to the same level registered in 2023 going forward. Fitch will continue monitoring the situation. KEY RATING DRIVERS Risk Profile: 'Weaker' The assessment reflects Fitch's view that there is a high risk of the issuer's ability to cover debt service with the operating balance weakening unexpectedly over the scenario horizon (2024-2028) due to lower revenue, higher expenditure, or an unexpected rise in liabilities or debt-service requirement. Revenue Robustness: 'Weaker' The State of Rio de Janeiro is dependent on volatile revenue sources related to oil royalties. Dependency on volatile revenue sources, such as commodity sales, is considered weakness for revenue robustness. Unanticipated shocks to oil prices could have a potentially large negative impact over the state's budget, especially due to the state's annual pension deficit, which is financed through royalties per state law. The share of oil royalties to operating revenues decreased to 25.9% in 2023 from 31.8% in 2022 with decreasing oil prices. Fitch expects Brent oil prices per barrel to average USD80 in 2024, practically stable from 2023 average prices of USD82.5. Going forward, Fitch projects the Brent oil at USD70 in 2025 and USD65 in 2026-2027, leading to a real drop in projected operating revenues. Overall, dependence on volatile revenue sources related to oil drives this factor to weaker. The Brazilian tax collection framework transfers to states and municipalities a large share of the responsibility to collect taxes. Constitutional transfers exist as a mechanism to compensate poorer entities. For this reason, a high dependence on transfers is considered a weak feature for Brazilian local and regional governments (LRGs). The State of Rio de Janeiro reports significant fiscal autonomy, with a low reliance on transfers, which represented 11% of operating revenues between 2019 and 2023. Nonetheless, the state's fiscal autonomy does not compensate for its high dependency on volatile revenue sources. Revenue Adjustability: 'Weaker' The State of Rio de Janeiro made substantial efforts to recover tax collection in 2024 by increasing the ICMS basic tariff to 20% from 18%. The measure was an attempt to recover part of the tax losses incurred following the National Congress movement of June 2022, which limited the ICMS tariff over fuels and electricity. Rio de Janeiro was among the states that incurred larger losses considering the state's tariffs over fuels were at 34% before the federal intervention. In spite of the state's efforts, revenue adjustability is very limited for Brazilian states and municipalities. Overall, affordability of additional taxation is low given that tax tariffs are close to the constitutional national ceiling. A small number of taxpayers also represent a large share of tax collection, with the ten largest representing approximately a third of ICMS tax collection in Rio de Janeiro. Lastly, the track record of federal intervention creates further challenges for revenue adjustability. Expenditure Sustainability: 'Midrange' Responsibilities for states are moderately countercyclical since they are engaged in healthcare, education and law enforcement. Expenditure tends to grow with revenues as a result of earmarked revenues. States and municipalities are required to allocate a share of revenues in health and education. This results in a pro-cyclical behavior in good times, as periods of high revenue growth result in a similar behavior for expenditures. However, due to the large weight of personal expenditures and rigid salaries, downturns that result in lower revenues are not followed by similar drops in expenditures. Rio de Janeiro reported consistent improvement in expenditure trends in the last five years (2019-2023). Operating margins have averaged at 10.4% in 2019-2023 and are projected to average 4.7% under Fitch's rating case scenario horizon. The state has recovered from a period of significant fiscal distress, when it accumulated delays on its payroll and on suppliers in 2015-2019. The payroll bill was settled by 2018. The state is currently under the New Fiscal Recovery Regime, which creates a number of conditions on expenditure growth that should contribute to sustain a more favorable trend going forward. Between 2019 and 2023, operating expenditures increased 0.3% annually in real terms, compared to 1.3% growth of operating revenues. Fitch will continue monitoring the sustainability of the state's expenditures going forward. Expenditure Adjustability: 'Weaker' Brazilian local governments suffer from a fairly rigid cost structure, driving this factor to 'Weaker'. As per the Brazilian Constitution, there is low affordability of expenditure reduction especially in salaries. As a result, whenever there is an unpredictable reduction in revenues, operating expenditure does not follow automatically. For the State of Rio de Janeiro, staff costs corresponded to 67.5% of total expenditure in 2023. This item has very limited flexibility for adjustments given salary and pensions rigidity, with limited capacity to manage human resources. Other operating expenditures amounted to 32.5% of total expenditures in 2023 and has some flexibility for adjustments, but still limited by constitutional mandates. Lastly, CAPEX represented 5.4% of total expenditures in 2023 and 3.5% on average between 2019-2023. Historically, Brazilian LRGs have often relied on investment cuts when facing a more challenging economic scenario. Liabilities & Liquidity Robustness: 'Weaker' There is a moderate national framework for debt and liquidity management, since there are prudent borrowing limits and restrictions on loan types. Under the Fiscal Responsibility Law, or Lei de Responsabilidade Fiscal (LRF), of 2000, Brazilian LRGs must comply with indebtedness limits. Consolidated net debt for states cannot exceed 2.0x, or 200%, of net current revenue. The State of Rio de Janeiro reported a debt ratio of 188.41%, as of December 2023. The LRF also sets limits for guarantees at 22% of net current revenues. The state reported a 0.09% ratio as of December 2023. The State of Rio de Janeiro has not serviced most of its debt between 2017 and 2022. It joined the Fiscal Recovery Regime, as of September 2017, sponsored by the federal government. The program was valid for three years and its main objective was to provide the State of Rio de Janeiro with debt service relief, while pushing for fiscal austerity. As of June 21, 2022, the state formalized entry to the New Fiscal Recovery Regime. The negotiated conditions apply from Aug. 1, 2022. Under this new program, the state has a nine-year transition period with a step-up debt service profile. In the meantime, the federal government will continue to honor all debt contracts included under the program. Through the duration of the program, the state's capacity to take on new loans will be limited and only allowed for specific circumstances and with federal approval. Rio de Janeiro's total debt was around BRL187.3 billion by the end of 2023, of which only BRL731 million are not included under the New Fiscal Recovery Regime. The debt under the NFRR consists of intergovernmental debt (BRL156.8 billion) and guaranteed commercial debt (BRL29.7 billion). Therefore, in practice, 99% of the state's debt service is towards the federal government. The state was expected to pay debt service of BRL6.1 billion in 2024. However, because the State of Rio did not comply with fiscal target under the NFRR, it was penalized by the National Treasury and should pay close to BRL9 billion in 2024. The state appealed to the Supreme Court and managed to get a favorable decision, which limits its debt service payments to the same amount paid in 2023 (BRL4.9 billion) for the coming years (2024 onwards). Rio claims that it does not have the capacity to increase debt service payments going forward. Fitch will continue monitoring the discussion over the state's NFRR, as well as the broader discussion on intergovernmental debt. There is moderate off-balance sheet risk stemming from the pension system, which is a burden for most Brazilian LRGs, especially for states given their mandate over education and public security. Another relevant contingent liability refers to the payment of judicial claims, the so-called "precatorios". The national congress has determined that subnational governments must fully amortize such liabilities until 2029. Liabilities & Liquidity Flexibility: 'Weaker' A framework exists for providing emergency liquidity support from the federal government via the granting of extended maturity over the prevalent federal debt portion. Fitch assesses the entity's available liquidity to differentiate between 'Weaker' and 'Midrange' for liabilities and liquidity flexibility. The Brazilian National Treasury analyzes the liquidity rate for LRGs to assess which entities qualify for federal government guarantees (Capacidade de Pagamento or CAPAG), which is measured by the LRGs' short-term financial obligation to net cash. For the State of Rio de Janeiro, the National Treasury is currently not publishing data on CAPAG metrics, what reflects the fact that the state is under the NFRR and, therefore, its metrics benefit from federal support. Overall, the state's liquidity metric has improved in the last three-years. Fitch estimates that Rio de Janeiro reported a three-year average liquidity ratio of 62.3%. As of December 2023, the metric reached 17.6%. For Brazilian LRGs, Fitch usually rates LRGs with a ratio below 100% as 'Midrange'. Still, considering the accumulation of unpaid debt service to the debt stock, especially now that Rio de Janeiro is not complying with the NFRR debt service schedule, Fitch continues to assess Liabilities and Liquidity Flexibility at Weaker. Debt Sustainability: 'b category' Fitch forward-looking scenario indicates that the payback ratio (net direct debt to operating balance) - the primary metric of the debt sustainability assessment - will reach an average of 43.3x for the 2026-2028 period. This is aligned with a 'b' assessment. The actual debt service coverage ratio (ADSCR), the secondary metric, is projected at 0.3x, on average, for 2026-2028, also aligned with a 'b' assessment. Fiscal debt burden is projected at 183.7% for the same period. Debt sustainability deteriorated somewhat from the previous annual review on the back of increasing debt accumulation related to the indexation of intergovernmental debt, and increased debt service payments throughout the scenario horizon. The state's sculpted debt service profile under the New Fiscal Recovery Regime is designed to increased gradually over 9 years, what leads to a growing debt service bill in the medium-term, with a larger debt service relief in the short-term. The penalization of the state for not complying with targets agreed under the NFFR leads to the acceleration of capital payments, with higher debt service payments than originally negotiated throughout the scenario horizon. ESG Governance -- Creditor Rights: State of Rio de Janeiro's track record in the breach of legal documentation stating full debt service payments, reflects the very low willingness to pay. The SCP will be reassessed once State of Rio recovers and it is able to honor its committed financial obligations in due time with no federal government aid. Derivation Summary Fitch relies on its rating definitions to position the State of Rio de Janeiro SCP at 'ccc-'. Rio de Janeiro has a 'Weaker Risk' Profile and 'b' debt sustainability assessment. Debt sustainability deteriorated, with pressured coverage metrics, as the state was penalized for not reaching targets agreed under the NFFR. Overall, Rio de Janeiro continues to be pressured by its high debt burden and can only manage its debt service profile with federal support. The state's IDR's benefit from a seven-notch uplift from its SCP considering the support derived from the NFRR and its impact over the state's enhanced debt sustainability. Key Assumptions Risk Profile: 'Weaker' Revenue Robustness: 'Weaker' Revenue Adjustability: 'Weaker' Expenditure Sustainability: 'Midrange' Expenditure Adjustability: 'Weaker' Liabilities and Liquidity Robustness: 'Weaker' Liabilities and Liquidity Flexibility: 'Weaker' Debt sustainability: 'b' Support (Budget Loans): Support (Ad Hoc): 'N/A' Asymmetric Risk: 'N/A' Rating Cap (LT IDR): 'N/A' Rating Cap (LT LC IDR) 'N/A' Rating Floor: 'N/A' Quantitative assumptions - Issuer Specific Fitch's rating case is a "through-the-cycle" scenario, which incorporates a combination of revenue, cost and financial risk stresses. It is based on 2018-2022 figures and 2024-2028 projected ratios. The key assumptions for the scenario include: - Yoy 3.2% increase in operating revenues on average in 2024-2028; - Yoy 6.8% increase in tax revenue on average in 2024-2028; - Yoy 3.9% increase in operating expenditures on average in 2024-2028; - Net capital balance of - BRL1,327 million on average in 2024-2028; - Cost of debt - 3.6% average for 2024-2028, considering the step-up approach by the NFRR. Quantitative assumptions - Sovereign Related Figures as per Fitch's sovereign actual for 2023 and forecast for 2024-2025, respectively (no weights and changes since the last review are included as none of these assumptions was material to the rating action). Liquidity and Debt Structure Direct debt amounts to BRL187.3 billion. Fitch estimates that close to 99% of debt is included under the New Fiscal Recovery Regime. Rio de Janeiro has accumulated large cash availabilities following the concession of its water company, CEDAE. Resources have been used to finance its CAPEX program. Issuer Profile The State of Rio de Janeiro is classified by Fitch as a Type B LRG, which is required to cover debt service from cash flows on an annual basis. Rio de Janeiro is the second largest regional economy in Brazil, at 10.5% of national GDP. GDP per capita of BRL54,359.6 is 1.29x the national average. Revenue sources are mainly based on taxation and royalties from oil-related activities, with a low dependence on federal transfers. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - A negative rating action on the sovereign rating would lead to a corresponding rating action on the State of Rio de Janeiro given that its ratings are uplifted to the sovereign level through of intergovernmental finance support; - The State of Rio de Janeiro's IDRs would be downgraded under the perception of weakened federal support to the state's debt service through the New Fiscal Recovery Regime and deteriorating enhanced metrics. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - A positive rating action on Brazil's IDR could lead to a corresponding rating action on the State of Rio de Janeiro given that its ratings are uplifted to the sovereign level through of intergovernmental finance support. ESG Considerations Rio de Janeiro, State of has an ESG Relevance Score of '5' for Creditor Rights due to its track record in the breach of legal documentation stating the full debt service payments, reflecting the very low willingness to pay, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in implicitly lower rating. Rio de Janeiro, State of has an ESG Relevance Score of '4' for Rule of Law, Institutional & Regulatory Quality, Control of Corruption due to the fact that government effectiveness and institutional and regulatory quality was not sufficient to prevent the state from resorting to external financial support, namely the federal government, to pursue fiscal balance, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. Rio de Janeiro, State of has an ESG Relevance Score of '4' for Biodiversity and Natural Resource Management in recognition of its economic and financial dependency on the hydrocarbon sector, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. 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. Public Ratings with Credit Linkage to other ratings The ratings of the State of Rio de Janeiro are equalized to the Brazilian sovereign through intergovernmental finance support. Entity/Debt Rating Prior ----------- ------ ----- Rio de Janeiro. State of LT IDR BB Affirmed BB ST IDR B Affirmed B LC LT IDR BB Affirmed BB LC ST IDR B Affirmed B Natl LT AAA(bra)Affirmed AAA(bra) Natl ST F1+(bra)Affirmed F1+(bra) =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Markets Register Shortages, High Chicken Prices ------------------------------------------------------------------- Dominican Today reports that for some time now, the merchants of the Villa Consuelo and Duarte markets have decreased the amount of chicken they buy to sell. They said the reason is that the dealers cannot supply them with the pounds they used to buy. For some months, this situation has led to comments on the shortage of chicken, whose pound is marketed between RD$80 and RD$85, both in markets and supermarkets, the report relays. Some attribute the shortage to inflation, which, according to information from the Central Bank, registered a slight increase of 0.48% in June, the report says. In addition, regarding speculation about the chicken situation, the Minister of Agriculture, Limber Cruz, said last month that high temperatures and low quality in the raw materials the bird consumes for its growth are added to the elements that can directly affect its development and quality, the report discloses. In Supermarkets Two supermarket chains visited by journalists from Listin Diario found that a pound of chicken is sold at 80 and 81 pesos depending on the distributor, the report discloses. Government Subsidy To deal with the increase in the prices of basic foodstuffs and other basic necessities among Dominicans, the Government has allocated at least RD$12,829.4 million, the newspaper El Dia reported in a publication, the report says. "This investment has been used to subsidize fuels, maintain the cost of basic foodstuffs and other essential products, as well as to implement social programs that support the most vulnerable sectors of the population," he explained, 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 December 4, 2023, the TCR-LA reported that Fitch Ratings has affirmed Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' and revised the Outlook to Positive from Stable. Fitch says the Positive Outlook reflects a trend improvement in governance, and robust growth prospects that should lead to continued gains in per capita income. According to Fitch, growth has decelerated in 2023, but it expects Dominican Republic to recover to high levels during 2024-2025. External liquidity metrics have improved in recent years, and foreign currency share of government debt is on a downward path. In August 2023, Moody's Investors Service 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. ============= J A M A I C A ============= BERGER PAINTS: Realizes $5.4 Million Loss in Q2 ----------------------------------------------- RJR News reports that local paint manufacturer, Berger Paints Jamaica, is reporting a loss of $5.4 million for its second quarter ended June 2024. This reflects an improvement compared to the $87.48 million loss registered at the end of June 2023, according to RJR News. Berger faced higher manufacturing expenses for the period, the report notes. Despite the quarter's performance, the company made a profit of $42.89 million at the mid-year point, compared with the $122.88 million loss for the period, the report relays. As for revenue, Berger says that amounted to $791 million, up from $743.77 million for the similar quarter last year, the report discloses. Berger Paints says it will be launching new and innovative products to help boost its performance for the second half of the year, the report adds. JAMAICA: Annual Inflation at 5.1% in July ----------------------------------------- RJR News reports that annual inflation was 5.1 per cent for the 12 months ended July 2024. The Statistical Institute of Jamaica says this was influenced by an 11.5 per cent increase in 'Transport' costs over the 12 months, according to RJR News. There was also a 3.5 per cent rise in 'Food and Non-Alcoholic Beverages,' the report relays. Goods and services associated with the 'Housing, Water, Electricity, Gas and Other Fuels' increased by 5 per cent, the report discloses. The annual inflation rate represents the fifth consecutive month where point to point inflation returned to the Bank of Jamaica's 4 to 6 per cent target range, the report relays. For the month of July alone, the cost of goods and services rose by 0.8 per cent, the report notes. This increase was mainly influenced by a 1.9 per cent advance in the 'Food and Non-Alcoholic Beverages' division, the report says. This was attributed to the continued rise in the price of some agricultural produce, especially after Hurricane Beryl devastated St. Elizabeth, which provides a number of agricultural goods, the report discloses. The class 'Ready-made food and other food products' also rose by 2.8 per cent, due to higher escallion prices, the report relates. The group 'Non-Alcoholic Beverages' increased by 0.3 per cent in July, the report relays. STATIN says all classes in this group increased, as a result of higher prices for fruit juices, teas and carbonated beverages, the report notes. 'Transport' also rose by 0.4 per cent, due to higher petrol prices and increased toll rates for the East-West leg of Highway 2000, 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. JAMAICA: Jamaican Dollar Slides to New Record Low v. US Greenback ----------------------------------------------------------------- RJR News reports that foreign exchange trading resumed Wednesday, August 21, with banks and cambios selling the American dollar for an average $158.44. This is the highest average seeking rate for the greenback compared to the local currency on record, according to RJR News. The Canadian dollar is being sold for $116.24, the report notes. The average value of the Pound is $203.58, while the Euro is going for $178.81, 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. JMMB GROUP: Incurs $1.5 Billion for June Quarter ------------------------------------------------ RJR News reports that financial conglomerate JMMB Group Limited reported a net loss of $1.5 billion for the June quarter, primarily due to a one-off share of losses from its associate. In its first-quarter financial report, the company said the positive core operations was achieved from the net loss that its associated company, Sagicor Financial Company Limited suffered, according to RJR News. The group owns 23.6 percent of Sagicor Financial, an insurance conglomerate with reach across the Caribbean, the United States, and Canada, the report relays. JMMB said the associate loss was mainly on account of market-to-market and actuarial adjustments, the report notes. Net operating revenue for the group declined by 19 percent to $5.66 billion, the report relays. The group now has total assets of $680 billion, inclusive of shrinking capital of $50.8 billion, down from $56 billion when compared with the corresponding period last year, the report adds. The JMMB Group is one of the brokerage houses in the Caribbean, offering a wide range of investment solutions, banking and insurance services in Jamaica, Trinidad & Tobago and the Dominican Republic. =========== M E X I C O =========== NEW FORTRESS: Restarts Fast LNG Production at Mexican Site ---------------------------------------------------------- Emilia Jackson at chemanalyst.com reports that New Fortress Energy Inc. ("NFE") has announced the successful completion of the scheduled maintenance outage for its 1.4 MTPA Fast LNG 1 asset, located offshore Altamira, Mexico ("FLNG"). The maintenance activities were executed as planned, ensuring that the unit underwent necessary inspections and repairs to optimize its performance, according to chemanalyst.com. With these essential tasks now completed, the FLNG unit has resumed its production operations, adhering to the scheduled timeline, the report notes. "This milestone reinforces our commitment to maintaining high operational standards and ensuring the continuous delivery of reliable Liquefied Natural Gas (LNG) supply. This scheduled maintenance outage followed the significant achievement of our first LNG cargo, which was successfully delivered on August 9. This milestone underscores the progress and operational readiness of our 1.4 MTPA Fast LNG 1 unit. With the maintenance now completed, the FLNG 1 unit is poised to continue its production ramp-up, the report notes. We anticipate that the unit will reach its full production capacity later this month, marking a key phase in its operational ramp-up and reinforcing our commitment to meeting the growing demand for liquefied natural gas with enhanced efficiency and reliability," the report quotes NFE as saying. New Fortress Energy is a leading player in the global energy infrastructure sector, the report relays. The company is committed to providing innovative energy solutions that are both sustainable and accessible. By focusing on clean, reliable, and affordable energy sources, New Fortress Energy is driving the transition to a more sustainable future. The company's integrated network of natural gas and liquefied natural gas infrastructure, coupled with its fleet of specialized ships, enables it to rapidly deliver turnkey energy solutions to markets worldwide, the report says. By providing essential energy infrastructure and services, New Fortress Energy is driving economic growth, enhancing energy security, and promoting environmental stewardship, the report relays. The company's innovative approach to energy development empowers local communities and industries by providing access to reliable and affordable energy resources. Through its commitment to sustainability and responsible business practices, New Fortress Energy is playing a pivotal role in shaping the future of the global energy landscape. The company's focus on delivering sustainable energy solutions aligns with the growing demand for clean and reliable energy sources, positioning it as a key player in the transition to a more sustainable energy future, the report notes. According to the report, as a trusted LNG energy partner, the company is committed to driving business success through their comprehensive energy solutions. They focus on delivering safe, reliable, and cost-effective energy while prioritizing environmental sustainability. By offering tailored implementation strategies, they work to optimize energy infrastructure, effectively reduce operational costs, and enhance overall efficiency, the report relays. Their expertise provides clients with the confidence to transition to liquefied natural gas (LNG), enabling businesses to harness the advantages of a cleaner and more sustainable fuel, the report discloses. With the company's support, clients can achieve operational excellence and align with contemporary environmental goals while meeting their energy needs efficiently, the report adds. As reported in the Troubled Company Reporter-Latin America on Aug. 7, 2024, S&P Global Ratings lowered its issuer credit rating on New Fortress Energy Inc. (NFE) to 'B+' from 'BB-'. The outlook is stable. =============== X X X X X X X X =============== LATAM: IDB Proposes Regional Alliance to Strengthen Security ------------------------------------------------------------ The Inter-American Development Bank (IDB) proposes the creation of the Alliance for Security, Justice, and Development with the security and justice ministers of the region, aiming to coordinate the implementation of public policies and resource mobilization to address, with a new approach, the challenges to economic and social development posed by organized crime. The following countries have already indicated that they will join the Alliance proposed by the IDB: Argentina, Brazil, Chile, Colombia, Costa Rica, Guatemala, Honduras, Panama, Paraguay, Peru, and Uruguay. Ecuador has committed to assuming the first presidency of the Alliance, and the IDB announced that it will serve as the technical secretariat. Through the alliance, the IDB would provide financing, assistance, and technical advice to governments to expand successful, evidence-based interventions; launch innovative pilot initiatives to prevent and address crime and violence; and build institutional capacities. As a result, it would magnify regional experiences, ensure the sustainability of policies, and mobilize resources for countries' security and justice systems. The alliance would also complement existing networks and platforms by giving countries opportunities to dialogue, cooperate, and exchange knowledge with each other. Crime and violence stand in the way of development and economic growth in Latin America and the Caribbean. The IDB estimates that they lop an average of 3.5% off countries' GDP, taking into account loss of human capital and public and private funds spent to address crime. The alliance aims to allay widespread violence and, in turn, promote sustainable economic development and social cohesion. The alliance was proposed at the Regional Security Summit held in Guayaquil, Ecuador on August 19 and 20. A second summit will be convened along with the Caribbean ministers in December 2025 in Barbados. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2024. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *