/raid1/www/Hosts/bankrupt/TCRLA_Public/240912.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, September 12, 2024, Vol. 25, No. 184
Headlines
A R G E N T I N A
AEROLINEAS ARGENTINAS: 1,500 Jobs Cut in Last Six Months
ARGENTINA: 55% of Population Below Poverty Line, Says UCA Body
GAUCHO GROUP: Director David Reinecke Reports Securities Ownership
GENERACION MEDITERRANEA: Moody's Affirms Caa3 CFR, Outlook Stable
B R A Z I L
NUBANK: Bad Loans Pile Up at Bank
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Haiti Crisis Straining Government Systems
DOMINICAN REPUBLIC: Housing Costs Soar in Country
E C U A D O R
GUAYAQUIL DPR: Fitch Rates USD125M Series 2024-1 Notes 'BB-'
J A M A I C A
JAMAICA: May Not Meet Vision Timeline 2030 for Developed Status
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A R G E N T I N A
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AEROLINEAS ARGENTINAS: 1,500 Jobs Cut in Last Six Months
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Buenos Aires Times reports President Javier Milei's government says
it has reduced the workforce at state-owned airline Aerolineas
Argentinas by 13 percent over the last six months.
A total of 1,500 fewer workers are now on the payroll, said
Presidential Spokesperson Manuel Adorni at his daily press
conference, according to Buenos Aires Times.
He praised the state carrier's new boss, Fabian Lombardo, for
trimming staffing levels, which have taken place amid a persistent
conflict with aeronautical unions over wage increases, the report
relays.
"Aerolineas Argentinas has announced that it has managed to
downsize its employees by 1,500, most of them by voluntary
retirement [schemes], which means a cutback of 13 percent of its
staff," highlighted Adorni, the report notes.
"This puts it at levels like other companies such as [commercial
airline] Latam, which has a similar number of employees," he said,
the report discloses.
President Milei's chief spokesperson, who did not mention the
ongoing conflict with unions, said the flagship state airline had
reduced its working deficit by 70 percent, the report relays.
"This winter it was the first in the last seven seasons to generate
genuine income," said Adorni, who thanked Lombardo and his
executive team for "putting the company in order," he added.
The report relays that Aviation unions are at odds with the Milei
administration and the airline's top brass over "unacceptable" wage
proposals and have launched strike action in demand of better pay,
the report relays.
Workplace assemblies have also led to the cancellation of dozens of
flights, affecting thousands of passengers, the report notes. More
suspensions are expected, with union leaders vowing further action,
the report discloses.
Aerolineas' top management has denounced the assemblies as "covert
strikes" and announced wage deductions, the report relays.
Adorni praised Lombardo for imposing sanctions on "those launching
surprise strikes that complicate the lives of those who intend to
travel," the report notes.
Milei's top spokesperson said that as long as the flagship carrier
continues under state administration, officials will work to make
it "as efficient as possible . . . as a true private company," the
report relays.
Lombardo penned a letter to Aerolineas workers, in which he
confirmed that the company would close out the year with 10,400
employees, a 13 percent drop from December 2023, the report
recalls.
"That is not the only milestone we achieved during this time,"
wrote the CEO, the report says.
"In the first semester, we reduced our operating deficit by over 70
percent, from US$272 million to US$79 million. In July alone we
turned a genuine profit of over US$20 million," he added. "The
last winter season in which the operating result was positive was
in 2017," he pointed out," notes the report.
Aerolineas Argentinas lost around US$390 million last year,
according to data published by Infobae, notes the report. The
firm's new bosses are looking to trim that by at least half, the
report discloses.
"Our work is paying off," continued Lombardo, notes Buenos Aires
Times. "We will show the industry and Argentine society that we are
on the right path to correct the direction of the company," he
added.
Lombardo said that the Aerolíneas Argentinas had cancelled
"deficit-ridden flights" - a reference to the cutting of
loss-making international routes to New York and Havana, as well as
the domestic Atlantic coast locations - and was "relaunching
red-eye flights" as it looks to exploit "new opportunities," the
report relays.
The 'red-eye' flights, which will be pitched a low-cost "super
promo" rate, according to the firm, will go to five locations
(Bariloche, Iguazu, Salta, Comodoro Rivadavia and Trelew) from
Aeroparque Jorge Newbury, offering affordable rates at late hours,
the report adds.
About Aerolineas Argentinas
Headquartered in the Torre Bouchard, located in San Nicolas,
Buenos Aires, Aerolineas Argentinas, formerly Aerolineas
Argentinas S.A., is Argentina's largest domestic and international
airline. It is the national airline and carries around 70% of
Argentina's domestic traffic and 40% of international flights from
Ministro Pistarini International Airport, which is located in
Ezeiza, Buenos Aires. Aerolineas Argentinas is currently owned in
its majority by the Argentine government, which seized the airline
from Spanish tourism company Grupo Marsans in 2009.
In June 2001, the airline filed for protection from creditors and
went into administration. In 2002, a Buenos Aires judge accepted
its debt restructuring agreement with creditors.
ARGENTINA: 55% of Population Below Poverty Line, Says UCA Body
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Buenos Aires Times reports more than 55 percent of Argentina's
population were living below the poverty line at the end of the
first half of the year, according to the latest report from an
influential socio-economic watchdog.
According to an estimate from the Observatorio de la Deuda Social
of the Universidad Catolica Argentina (Social Debt Observatory of
the Catholic University of Argentina, ODSA-UCA), 55.5 percent were
considered poor at the halfway point of the year, with 17.5 percent
of Argentines living in extreme poverty, the report notes.
The figures indicate the impact of Argentina's ongoing recession
and runaway inflation, which exceeds 260 percent over the last 12
months, according to Buenos Aires Times.
ODSA-UCA's figures show that 49.5 percent of the nation was living
in poverty when President Javier Milei was sworn into office, the
report relays.
The private estimate is higher than Argentina's most recent
official rate, tracked by the INDEC national statistics bureau, the
report relays.
According to government data, 41.7 percent of inhabitants were
living in poverty at the end of 2023, with 11.9 percent classified
as destitute - i.e. their income does not suffice to purchase the
minimum quantity of food for subsistence, the report discloses.
Rising poverty and destitution levels can be attributed in large
measure to the impact of inflation in the early months, mostly in
the item of food which affected the lowest classes of society, the
report says.
The report notes that Consumer prices have increased by 79.8
percent in the first half of the year, according to government
data.
According to the UCA survey, 24.9 million urban residents were in a
situation of poverty at the midpoint of the year. Those all failed
to afford the total basic shopping basket, which last June cost
873,168 pesos for a couple with two children aged six and eight,
according to INDEC data, the report relays.
The basket has risen 76.1 percent in the first half of the year,
the report discloses.
UCA's study assures that some 7.8 million people are in a state of
extreme poverty, the report relays.
"Total food insecurity for urban areas covered by the ODSA-UCA
survey reaches 24.7 percent of people, 20.8 percent of households
and 32.2 percent of children and adolescents," highlighted the
report, Buenos Aires notes.
Furthermore, "in an even graver situation with severe food
insecurity are 10.9 percent of people, 8.8 percent of households
and 13.9 percent of children and adolescents," the report relays.
The report discloses that noting government efforts to assist those
living in poverty, the UCA body indicated: "There are attempts to
compensate for the elevated food deprivations suffered by the
population with actions carried out from different levels of the
state."
"Considering children and adolescents, 42.6 percent reside in
households receiving AUH+Tarjeta Alimentaria child benefits and
food stamps, half attend school canteens, 36.7 receives food boxes
or packages from these canteens and 11.1 percent receive food boxes
or packages elsewhere with many households accumulating more than
one benefit," it concluded, the report discloses.
INDEC will publish its official poverty calculation for the first
half of the year on September 26.
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.
GAUCHO GROUP: Director David Reinecke Reports Securities Ownership
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David Reinecke, a director in Gaucho Group Holdings, Inc., filed a
Form 3 Report with the U.S. Securities and Exchange Commission,
disclosing ownership of 67 shares of common stock directly.
Additionally, he holds 3 options to purchase common stock at
$10,896 per share, exercisable on September 28, 2025, and 34
Restricted Stock Units vesting on December 31, 2024, with an
exercise price of $116 per share.
A full-text copy of the SEC Report is available at:
https://tinyurl.com/4pkumc27
About Gaucho Group Holdings
Through its wholly-owned subsidiaries, Gaucho Group Holdings, Inc.
invests in, develops, and operates real estate projects in
Argentina. GGH operates a hotel, golf and tennis resort, vineyard,
and producing winery in addition to developing residential lots
located near the resort. In 2016, GGH formed a new subsidiary,
Gaucho Group, Inc., and in 2018, established an e-commerce platform
for the manufacture and sale of high-end fashion and accessories.
In February 2022, the Company acquired 100% of Hollywood Burger
Argentina, S.R.L., now Gaucho Development S.R.L., through
InvestProperty Group, LLC and Algodon Wine Estates S.R.L., which is
an Argentine real estate holding company. In addition to GD, the
activities in Argentina are conducted through its operating
entities: InvestProperty Group, LLC, Algodon Global Properties,
LLC, The Algodon - Recoleta S.R.L., Algodon Properties II S.R.L.,
and Algodon Wine Estates S.R.L. Algodon distributes its wines in
Europe under the name Algodon Wines (Europe). On June 14, 2021, the
Company formed a wholly-owned Delaware limited liability company
subsidiary, Gaucho Ventures I - Las Vegas, LLC, for purposes of
holding the Company's interest in LVH Holdings LLC.
New York, NY-based Marcum LLP, the Company's auditor since 2013,
issued a "going concern" qualification in its report dated April
29, 2024, citing that the Company has a significant working capital
deficiency, has incurred significant losses, and needs to raise
additional funds to meet its obligations and sustain its
operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
GENERACION MEDITERRANEA: Moody's Affirms Caa3 CFR, Outlook Stable
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Moody's Ratings affirmed Generacion Mediterranea S.A's (Gemsa) Caa3
corporate family rating, following the company's debt exchange
transaction. The outlook is stable.
The affirmation considers that the company has completed an
exchange for its local issued notes, extending their maturities to
2027 and 2028, partially alleviating its liquidity pressures.
Nevertheless, its debt maturity profile continues to be
challenging, given that Gemsa still faces significant debt
maturities on its outstanding cross border debt, of over $100
million each year in 2025 and 2026. Although the exchange will not
entail nominal losses to investors, Moody's consider Gemsa's
current debt restructuring as a distressed exchange under Moody's
definition, given the extension of maturities to 2027-28.
RATINGS RATIONALE
On August 9, the company announced an exchange offer over most of
its outstanding local market notes, amounting to over $400 million
of principal with maturities between 2024 and 2026. The exchange
closed on August 28 and it was accepted by 81%, representing $325.8
million of the total eligible capital of $403.4 million
outstanding.
While the company has been able to extend the profile of its local
issued notes through the exchange, its liquidity position remains
tight because of weak cash generation until all its projects under
construction become operative. To this point, the company still
faces significant short term debt maturities on its cross border
debt, for which the management already announced it will seek to
perform an additional debt exchange in the following months. The
rating's affirmation is based in the high probability of another or
persistent default event as per Moody's definitions, while the
company needs to roll over short-term debt maturities, and Moody's
expectation that eventual losses to investors will remain in line
with the current Caa3 rating level.
The ratings affirmation factors the expectation of higher cash
generation in 2025, following the full-year incorporation of Peru's
operations and the completion of the company's expansion plan,
toward converting its Ezeiza (COD in April 24) and Maranzana power
plants into combined cycles and the co-generation project Arroyo
Seco. These projects will allow the company to almost double its
current EBITDA and improve cash generation accordingly. The credit
profile further incorporates the improved asset positioning and
extended contractual life, resulting from these investments. Gemsa
has already secured the financing to complete these projects and,
while it entailed a higher leverage and interest costs, the higher
cash flows from these expansions will allow for a gradual debt
reduction over the upcoming years as the ongoing expansion of its
installed capacity matures. As such, Gemsa's credit metrics are
currently weaker than those of its power generation peers in
Argentina. The ratings base case incorporates Moody's expectation
that Gemsa's leverage will start declining to around 6 times (debt
to EBITDA) once the projects under construction are completed in
2025.
Gemsa will continue to benefit from fixed-capacity payments from
its portfolio of assets that are mostly contracted under long-term
power purchase agreements (PPAs). Nevertheless, Gemsa's exposure to
CAMMESA, the agency that manages the wholesale electricity market
in Argentina, as its main off-taker will continue to constrain its
credit profile. Given that power prices remain subsidized, CAMMESA
continues depending on Government of Argentina (Ca stable)
transfers to make payments to power generators under its PPA's.
While in recent months subsidies have been reduced and CAMMESA's
contractual payments to power generators have normalized, is not
infrequent that payments are well delayed, which could add more
pressures to the Gemsa's weak liquidity position.
The stable rating outlook reflects Moody's expectation that Gemsa
will be able to complete its expansion without significant delays
or cost overruns while maintaining high availability of its
operational fleet. The stable outlook also incorporates the
company's continued ability to roll-over its debt maturities.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Given the company's exposure to CAMMESA, coupled with weak
liquidity and high leverage, a rating upgrade is unlikely. An
upgrade would require an upgrade of the sovereign rating, along
with improved liquidity and lower leverage, such that debt/EBITDA
remains lower than 4x and cash flow from operations pre-working
capital/debt is consistently above 15%.
Moody's could downgrade the rating if the company's expansion
suffers a significant delay or cost overruns, leading to higher
leverage for longer than expected, specifically, debt/EBITDA
remaining above 6x on a sustained basis.
Generacion Mediterranea S.A (Gemsa) is an operating-holding company
that owns and operates 1,604 megawatts (MW) +254 MW under
construction of power capacity, on its own and through its several
subsidiaries. It is expected that in January 2025 Gemsa will also
absorb and merge Albanesi Energia S.A.
The principal methodology used in this rating was Unregulated
Utilities and Unregulated Power Companies published in December
2023.
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B R A Z I L
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NUBANK: Bad Loans Pile Up at Bank
---------------------------------
Bloomberg News reports that in just a little over a decade, Nu
Holdings Ltd. has gone from an obscure fintech startup in Sao Paulo
to the most valuable bank in all of Latin America. It's been a
dizzying ascent, powered by a business model that Brazil's
uber-conservative banking titans never had much of a stomach for:
lending to low-income families, according to Bloomberg News.
Growth keeps coming at a breakneck pace - some 60% of all Brazilian
adults now have Nubank's app on their phone - and investors keep
frantically bidding the stock higher, Bloomberg News relays. It's
up 36% over the past month, 109% over the past year and 214% in the
past two years, Bloomberg News notes.
To a growing band of skeptics in Sao Paulo and New York, this makes
little sense, Bloomberg News says. As they see it, Nubank's go-go
approach is troubling and its stock overvalued, Bloomberg News
discloses. The bank's executives have pledged, they note, to keep
cranking up the pace of loan growth - it grew around 28%
year-on-year - even as its portfolio of troubled loans swells to
levels above industry norms, Bloomberg News says.
"The discussion on credit quality made us decide to follow this
from a little further away," said Fernando Fontoura, a portfolio
manager at Persevera Asset Management in Sao Paulo, Bloomberg News
relays. In June, Persevera sold all of the Nubank shares it held
as the position became "crowded," he added.
JPMorgan Chase & Co and UBS both cut their recommendations on the
bank to neutral in July, citing worsening asset quality, Bloomberg
News relays. That brings the number of neutral ratings on the
stock to eight, according to data compiled by Bloomberg. Twelve
analysts rate the stock a buy and two have sell recommendations,
Bloomberg News notes. Nubank's trading at $14.25, slightly above
the 12-month consensus target price from analysts of $14.14,
Bloomberg News discloses.
Yuri Fernandes at JPMorgan said on July 21 that the trend in
Nubank's late payments had started to rise "meaningfully" faster
than the industry as a whole in November of last year, Bloomberg
News says.
"We see asset quality becoming increasingly harder to understand,"
XP Inc. analysts including Bernardo Guttman, wrote in a report last
month. "We anticipate investors becoming more uncertain" on the
issue, they added.
Bad Loans
Nubank, which operates through a phone app and has no physical
branch offices, reported on Aug. 13 that non-performing loans of 90
days or more hit a record 7% in the second quarter, at the same
time that it cut provisions for bad debts to $760 million from $831
million three months before, Bloomberg News relays. Analysts had
forecast an increase to $898 million, Bloomberg News notes.
Late payments for 90 days or more are now significantly above the
5.5% average for the banking industry in July calculated by
Brazil's central bank, Bloomberg News relays. While the bank
doesn't disclose non-performing loan or credit data by country -
Nubank has expanded to Mexico and Colombia in recent years, where
it's best known as Nu - some 90% of its clients are in Brazil,
Bloomberg News discloses.
In a written response to questions, Nubank said its strategy has
resulted in increased revenue and greater resilience, "more than
offsetting the higher delinquency rates that come with it,"
Bloomberg News relays.
"When we identify an asset class or customer segment with
compelling risk-adjusted returns that also encourages responsible
customer behavior, we actively pursue growth in these areas," the
bank added, Bloomberg News notes.
Fast Growth
For now, the rising default rate is just a cloud on the horizon -
the bank's shorter time provisions, between 15 and 90 days, which
Nubank says are more correlated to credit provisioning under IFRS
rules, improved in the quarter, Bloomberg News relays.
Plus, the interest rates of up to 100% that banks are entitled to
charge on consumer loans easily compensates for the late payments,
Bloomberg News notes.
Nubank's loan portfolio leaped 28% year-on-year to end the second
quarter at almost $19 billion, while net income more than doubled
to $487 million from the year earlier, surpassing analyst
expectations of $418 million, Bloomberg News discloses.
Persevera's Fontoura said that Nubank has been nimble in adapting
its credit underwriting, while processes in more established banks
had become "ossified," Bloomberg News says.
Long-Term View
The company's executives have defended the breakneck rate of
lending growth, with Chief Operating Officer Youssef Lahrech
telling analysts in an earnings call that the bank prioritizes
long-term strategies over "short-term non-performing loan metrics,"
Bloomberg News notes.
While worry over the sustainability of Nubank's growth has
increased, its funding and lower expenses enable it to outperform
competitors in the low-income credit sector, said Pedro Leduc, an
analyst at Itau BBA, Bloomberg News relays. Itau reiterated its
outperform recommendation on the stock on Aug. 29.
Concerns around the bank's numbers are not a consensus in Wall
Street, the bank's press office said, pointing to comments from
banks including Morgan Stanley and Goldman Sachs, which said higher
NPLs were a result of a "riskier loan mix, more than actual
deterioration," Bloomberg News discloses.
But market nerves over default levels had surfaced even before the
second-quarter earnings report, with central bank data released on
Aug. 1 showing the credit quality of the bank's loan portfolio had
worsened in May, Bloomberg News relays. Four days later, Nubank
announced that it had replaced its global head of credit risk, Ravi
Prakash, Bloomberg News notes.
All that meant credit quality was the focus of the Q&A on the call
with analysts after the earnings release, FT Partners analysts
including Craig Maurer wrote in a note, Bloomberg News relays.
Markets were "seeking security in the idea that risk-adjusted
returns and the current level of provisioning could withstand a
meaningful downturn," they said, Bloomberg News notes.
Analysts expect the central bank to start raising rates again as
early as Sept. 18 amid concern over the fiscal deficit, damping
growth, Bloomberg News discloses. Higher borrowing costs could
spur more defaults, as customers tend to prioritize paying back
institutions with which they have long-lasting banking
relationships with, Bloomberg News says.
Financial Savvy
The recent surge in fintechs means that 29% of Brazilians now have
five credit cards or more, according to credit data provider
Serasa, Bloomberg News relays. Thiago Ramos, a coordinator at
Serasa, said most people are seeking ever more lines of credit,
illustrating a lack of financial savvy, Bloomberg News notes.
If financial education was better, "consumers would know that the
path they should be taking is the opposite," Ramos said, Bloomberg
News discloses.
For now, Nubank is cashing in on that surging demand for credit,
Bloomberg News notes.
And while the company may be aware of the risks, "that doesn't mean
these concerns can't get worse," Fontoura said, Bloomberg News
adds.
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D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: Haiti Crisis Straining Government Systems
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Dominican Today reports that President Luis Abinader addressed the
Haitian crisis' impact on the Dominican Republic during a recent
meeting with U.S. Secretary of State Antony Blinken.
Abinader highlighted the strain the situation places on the
Dominican Republic's migration, health, and education systems,
according to Dominican Today.
At a press conference, Abinader noted that approximately 6.5% of
the Dominican Republic's students, around 147,000, are of Haitian
nationality, the report notes. He also revealed that Haitian
migrants account for 14% of hospitalizations and 34% of births in
public hospitals, a situation he claimed is unprecedented in global
health systems, the report relays.
Abinader expressed concern over the increased migratory pressure
resulting from the crisis, which affects public services and poses
security risks, the report discloses. He emphasized the need for
additional support from the multinational security support mission
(MCS) and resources to strengthen the UN trust fund, the report
notes. The President also highlighted the importance of renewing
the MCS mandate in October, the report relays.
He reiterated the Dominican Republic's commitment to working with
the United States on regional security and stability, while
acknowledging differences in perspectives on certain issues, 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.
DOMINICAN REPUBLIC: Housing Costs Soar in Country
-------------------------------------------------
Dominican Today reports that the cost of building a home in the
Dominican Republic is on the rise. According to the National
Office of Statistics (ONE), the direct construction cost index for
housing increased by 7.82% year-on-year in July, the report notes.
The Direct Housing Construction Index (ICDV), a benchmark that
tracks monthly cost variations for building homes, stood at 233.84
in July, representing a 0.31% increase from June, according to
Dominican Today.
Single-level homes saw the most significant cost increase, rising
0.45% compared to June, followed by four-level multi-family homes,
which experienced a 0.34% increase, the report relays.
These figures do not include indirect costs such as land, design,
construction permits, financing costs, and contractor profits, the
report discloses.
A breakdown of costs by category shows that construction materials
experienced the most significant increase, rising 0.51% between
June and July, the report notes. While materials and labor costs
climbed, machinery and subcontracting costs saw slight decreases,
the report relays.
Specific products that saw the largest price increases during this
period include electrical wires (8.87%), cement and adhesives
(2.53%), plumbing equipment and appliances (0.65%), and floors and
ceramics (0.44%), the report says.
In addition to rising construction costs, both builders and buyers
are facing higher interest rates, which further impact the final
price of homes on the market, the report discloses. Mortgage
interest rates averaged 12.65% in July, an increase of 0.45
percentage points compared to June, the report relays.
The Dominican Republic has a total of 3,694,060 private dwellings,
with single-family homes accounting for 66.1% of the total, the
report notes. While the demand for housing remains strong, rising
costs and interest rates are likely to dampen market activity in
the coming months, the report relays.
The Central Bank recently announced a reduction in its monetary
policy rate, which could lead to lower interest rates for both
consumers and businesses, the report says. However, the full
impact of this decision on housing costs remains to be seen, 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.
=============
E C U A D O R
=============
GUAYAQUIL DPR: Fitch Rates USD125M Series 2024-1 Notes 'BB-'
------------------------------------------------------------
Fitch Ratings has assigned a 'BB-' rating to the $125 million
series 2024-1 issued by Guayaquil DPR Limited. Fitch has also
affirmed the outstanding series of notes at 'BB-'. The Rating
Outlook is Stable.
Entity/Debt Rating Prior
----------- ------ -----
Guayaquil DPR Limited
2023-1 401536AA5 LT BB- Affirmed BB-
2023-2 401536AC1 LT BB- Affirmed BB-
2024-1 401536AE7 LT BB- New Rating
Transaction Summary
Guayaquil DPR Limited is backed by existing and future USD
diversified payment rights (DPRs) originated by Banco Guayaquil,
S.A. (BG) in Ecuador. The majority of DPRs are processed by
designated depository banks (DDBs) that have executed account
agreements (AAs), irrevocably obligating them to make payments to
an account controlled by the program agent.
KEY RATING DRIVERS
Future Flow (FF) Ratings Driven by Originator's Credit Quality: The
ratings of this FF transaction are driven by the Long-Term (LT)
Issuer Default Rating (IDR) of the originator, BG. On Nov. 10,
2023, Fitch affirmed BG's LT IDR at 'CCC+' and Viability Rating
(VR) at 'ccc+'. BG's IDR is underpinned by its VR, which is highly
influenced by Ecuador's sovereign rating and broader OE
considerations. The bank's ratings are capped by Fitch's assessment
of the operating environment (OE) score of 'ccc+'.
GCA Supports Notching Differential: Fitch uses a going concern
assessment (GCA) score to gauge the likelihood that the originator
of an FF transaction will stay in operation throughout the
transaction's life. Fitch assigned a GCA score of 'GC2' to BG based
on the bank's systemic importance. The score allows for a maximum
of four notches above the Long-Term IDR of the originator.
Notching Uplift from IDR: The 'GC2' allows for a maximum four
notch-rating uplift from the bank's LT IDR pursuant to Fitch's FF
methodology. Considering the bank's current LT IDR, the assigned
ratings are at the maximum notching differential of four notches
allowed by Fitch's FF methodology for an originator with a score of
'GC2'. Fitch reserves the maximum notching uplift for transactions
with originators rated on the lower end of the rating scale, such
as BG.
Moderately High Future Flow Debt: Fitch estimates future flow debt
will represent approximately 4.8% of BG's total funding and 29.1%
of BG's non-deposit funding when utilizing nonconsolidated
financials as of June 2024 and considering the new DPR issuance of
$125 million together with the outstanding balances on the Series
2023-1 and 2023-2 notes, and BG's merchant voucher program. Fitch
views the ratio of FF debt to overall liabilities as small enough
to allow the financial FF ratings the maximum uplift indicated by
the GCA score.
Coverage Levels Commensurate with Rating: Fitch views the
transaction's debt service coverage ratio (DSCR) as more than
sufficient for the assigned rating. The minimum projected DSCR is
approximately 52.9x when considering the maximum periodic debt
service over the life of the program, including the new $125
million issuance, and DDB flows over the past five years, while
excluding what could be considered non-recurring DPR flows.
Sovereign/Diversion Risks Reduced: The structure mitigates certain
sovereign risks by collecting cash flows offshore until investors
are paid. Fitch believes diversion risk is partially mitigated by
the AAs that have been executed by the DDBs.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The transaction ratings are sensitive to changes in BG's credit
quality. Currently, the transaction ratings are receiving the
maximum notching uplift from BG's LT IDR. Therefore, a
deterioration in BG's credit quality by one notch would trigger a
downgrade of the ratings of the transaction from their current
level.
- The transaction ratings are sensitive to increases in the FF debt
relative to the bank's funding ratios. If either of the ratios
increase beyond the thresholds outlined in Fitch's Future Flow
Securitization Rating Criteria, it could result in a downgrade of
the ratings of the transaction from their current level.
- The transaction ratings are sensitive to the DPR business line's
performance and its ability to continue operating, as reflected by
the bank's GCA score. Changes in Fitch's view of the bank's GCA
score could lead to a change in the transaction ratings. Any
changes in these variables will be analyzed in a rating committee
to assess the possible impact on the transaction's ratings.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- The main constraint to the transaction ratings is the
originator's rating and BG's operating environment. If the bank's
LT IDR is upgraded by more than one notch from its current rating,
Fitch would also consider upgrading the transaction's ratings.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The future flow ratings are driven by the credit risk of Banco
Guayaquil, S.A. as measured by its Long-Term IDR.
=============
J A M A I C A
=============
JAMAICA: May Not Meet Vision Timeline 2030 for Developed Status
---------------------------------------------------------------
RJR News reports that Jamaica could miss the timeline set to
achieve developed country status, through the Vision 2030 National
Development Plan.
Program Manager for Vision 2030, Peisha Bryan Lee, made the
admission while responding to questions at the Planning Institute
of Jamaica's quarterly press briefing, according to RJR News.
"Our data does suggest that the goals and outcomes, and
particularly I would say the targets that were benchmarked against
developed country status standards, most likely will not be
achieved by 2030," she said, the report relays.
"I put in this proviso though, when we started the process of
long-term national development planning, we thought of getting to
developed country status. We at the time made an assessment in
2007 that this could be done within 21 years, so 2030. But the
intention was not to be stuck on a timeline, but to be stuck on a
pathway and a vision for the Jamaica that we all want," she
conceded, the report notes.
But PIOJ Director General Dr. Wayne Henry said there has been
improvement across all four national goals, with 62.2 per cent of
the 75 national outcome indicators being little, somewhat, mostly
or fully achieved when measured against the 2021 tag, the report
discloses.
"[Some] 25.7 per cent of targets were fully achieved or exceeded;
6.8 per cent were mostly achieved as between 80-99 per cent; and
20.3 per cent were somewhat achieved as between 40-79 per cent;
9.5% were a little achieved as 1-39 per cent; and 37.8 per cent
were same as or worse than the baseline year 2007 value, at between
0 per cent or negative," he outlined, the report relays.
The areas of advancement include human capital development and
strengthened social protection, along with improved fiscal
outcomes, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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