/raid1/www/Hosts/bankrupt/TCRLA_Public/241024.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, October 24, 2024, Vol. 25, No. 214
Headlines
A R G E N T I N A
ARGENTINA: Soup Kitchens Struggle With Queues as Poverty Rises
GAUCHO GROUP: Sees Strong Growth in Buenos Aires Real Estate Market
B R A Z I L
AZUL SA: To Raise Cash to Seal Aircraft Lessor Deal and Slash Debt
BRAZIL: Industrial Production Slows in Sept. Amid Cautious Optimism
CONSTELLATION OIL: S&P Assigns 'B' ICR, Outlook Stable
C O S T A R I C A
COSTA RICA: S&P Affirms 'BB-/B' ICR s & Alters Outlook to Positive
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Tax Reform Threatens Rise in Housing Prices
J A M A I C A
JAMAICA: BOJ Pumps Another US$30 Million Into Forex Market
JAMAICA: MSME Alliance Renews Call for Micro Stock Exchange
M E X I C O
GRUPO AEROMEXICO: S&P Upgrades ICR to 'B+', Outlook Stable
P U E R T O R I C O
D'PASTRY INC: Seeks to Hire Tamarez CPA as Accountant
DP ENTERPRISE: Seeks to Hire Tamarez CPA as Accountant
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A R G E N T I N A
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ARGENTINA: Soup Kitchens Struggle With Queues as Poverty Rises
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Agustina Bordigoni at Buenos Aires Times reports that soup kitchens
have greatly been affected as the Argentinian government has
decided to reduce spending by cutting back on assistance to soup
kitchens and community food bank areas.
Argentines have formed a 'fila del hambre' protest or hunger row in
Argentina's Human Capital Ministry to seek out social aid,
according to Buenos Aires Times. The line stretches for 20 blocks,
the report cites.
The report notes that among others, Graciela Achaval's soup kitchen
in Presidencia Roque Saenz Pena, Chaco Province, can hardly keep up
with the demand, and she's been told by authorities to wait for
further aid in 2025. Achaval is making food for 80 families.
Queues are getting longer at soup kitchens, but resources remain
finite, Buenos Aires Times relays. Even donations from the private
sector are dwindling.
Buenos Aires Times notes that poverty in Argentina in the first
half of the year rose 16 points from the same period in 2023. In
Greater Resistencia, the area surrounding the capital of Chaco
Province, more than 76 percent of the population is poor, the
report says.
Moreover, sales of basic products at small and medium sized shops
are slumping, the report notes. The Confederacion Argentina de la
Mediana Empresa (CAME) reported an 18.6-percent cumulative fall in
the consumption of basic food products in the first nine months of
the year, the report cites. Pharmacy sales also fell in September,
the report notes. They are down 25.5 percent this year overall and
fell by three percent as against the same month in 2023, the report
recalls.
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.
In March 2022, the International Monetary Fund (IMF) approved a new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authories an immediate disbursement of an equivalent of
US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
S&P, in March 2024, raised its local currency sovereign credit
ratings on Argentina to 'CCC/C' from 'SD/SD' and its national scale
rating to 'raB+' from 'SD'. S&P also raised its long-term foreign
currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed
its 'C' short-term foreign currency rating. The S&P ratings have
been affirmed as of August 2024. 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 that it would likely consider to be distressed.
In June 2023, Fitch ratings also upgraded 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-'.
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 2023. The new 'CC' rating signals a
default event of some sort appears probable in the coming years.
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: Sees Strong Growth in Buenos Aires Real Estate Market
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Gaucho Group Holdings, Inc. reported substantial growth and
favorable trends in the Buenos Aires real estate market,
underscoring the market's recovery and the Company's strategic
positioning in Argentina's burgeoning luxury real estate sector.
Drawing on internal expertise and recent market data, Gaucho
Holdings underscores a pivotal shift in the market dynamics of
Argentina's capital.
The Buenos Aires real estate sector is witnessing a significant
revival after several years of downturn, marked by an all-time high
in property sales and an increase in mortgage issuances. This
resurgence is largely fueled by the successful implementation of
President Javier Milei's tax amnesty program, which has not only
infused considerable capital back into the economy but also
substantially reduced the inflation rate, with a sizable portion of
this capital redirected towards real estate investment.
Buenos Aires Market Highlights:
* Record Sales: August reported the highest property sales
since May 2018, with 5,297 transactions closed, mirroring levels
seen during the peak of UVA, "Unidad de Valor Acquisitivo" mortgage
issuances under the previous administration.
* Rising Prices: The average sales price for properties in
popular neighborhoods such as Palermo, Colegiales, and Recoleta
ranges between $106,000 to $115,000 for studio apartments,
demonstrating a robust year-over-year increase.
* Mortgage Trends: Despite historical challenges with currency
restrictions, mortgage issuances are steadily climbing, signifying
growing buyer confidence and an expanding credit market.
Senior real estate analysts from Gaucho Holdings' network of global
experts, agree that the Buenos Aires real estate market is
experiencing a significant resurgence, fueled by policy changes and
economic influxes that are catalyzing property investments. This
view aligns with the September 2024 Buenos Aires Real Estate Update
from BowTiesMara, noting a significant increase in mortgage
issuance and real estate sales despite ongoing currency
restrictions.
Scott Mathis, CEO and Founder of Gaucho Group Holdings, Inc.,
commented on the developments, "The Buenos Aires real estate market
is experiencing a dynamic transformation, driven by favorable
government policies and a strong influx of investment capital. As a
company deeply embedded in the luxury real estate segment, we are
optimally positioned to leverage these emerging opportunities for
growth and expansion."
Doug Casey, Gaucho Holdings' lead business advisor and a respected
figure in economic speculation, recently highlighted the
transformative potential of these reforms: "If Milei's reforms
stick, within a decade, Argentina could become the most prosperous
country in the world... It's the perfect country whose only real
problem is its insane government. But that's about to change."
Gaucho Holdings concurs with Mr. Casey, believing that Argentina's
potential to undergo a radical economic transformation
significantly enhances the investment landscape.
This market momentum is indicative of a broader economic recovery
in Argentina, with implications for both domestic and international
investors. Gaucho Group Holdings continues to monitor these
developments closely, ensuring strategic alignment with the most
promising market trends.
About Gaucho Group Holdings, Inc.
For more than ten years, Gaucho Group Holdings, Inc.
(gauchoholdings.com) has focused on sourcing and developing
opportunities in Argentina's undervalued luxury real estate and
consumer marketplace. The Company aims to capitalize on the rapid
growth of global e-commerce across multiple market sectors,
aspiring to become a leader in diversified luxury goods and
experiences in lifestyle industries and retail landscapes. Their
concentration spans fine wines (algodonfinewines.com &
algodonwines.com.ar), hospitality (algodonhotels.com), and luxury
real estate (algodonwineestates.com) under the Algodon brand, as
well as leather goods, ready-to-wear, and accessories from the
fashion brand Gaucho - Buenos Aires (gaucho.com).
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.
Gaucho reported a net loss of $16.20 million for the year ended
Dec. 31, 2023, compared to a net loss of $21.83 million for the
year ended Dec. 31, 2022. As of June 30, 2024, Gaucho had $15.94
million in total assets, $13.52 million in total liabilities, and
$2.42 million in total stockholders' equity.
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B R A Z I L
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AZUL SA: To Raise Cash to Seal Aircraft Lessor Deal and Slash Debt
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globalinsolvency.com, citing Bloomberg News, reports that Azul SA
is rushing to raise cash as part of a deal it reached with its
aircraft lessors, a key step in the Brazilian carrier's attempt to
again rework its debt.
The company was able to strike an agreement with lessors and parts
suppliers that reduces its debt by 3 billion reais (US$540 million)
in exchange for 100 million new preferred shares, according to
globalinsolvency.com.
The announcement sent shares rallying as much as 22%, the report
notes. But the boost proved short-lived, the report relays.
As recently reported in the Troubled Company Reporter-Latin
America, Moody's Ratings downgraded Azul S.A. (Azul)'s corporate
family rating to Caa2 from Caa1. At the same time, Moody's
downgraded to Caa1 from B3 the rating of the senior secured first
lien debt and to Caa2 from Caa1 rating of the senior secured debts
of Azul Secured Finance LLP (Delaware), and to Caa3 from Caa2 the
senior unsecured debt ratings of Azul Investments LLP. The outlook
for the issuers was changed to negative from positive.
BRAZIL: Industrial Production Slows in Sept. Amid Cautious Optimism
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Richard Mann at Rio Times Online reports that the Brazilian
industrial sector experienced a slight downturn in September 2024,
following two months of growth. The production index dropped to
48.8 points, down from 54.3 in July and 52.2 in August, according
to Rio Times Online.
The production decline impacted companies of all sizes, according
to data from Brazil's National Confederation of Industry (CNI), the
report notes. However, employment in the sector demonstrated
resilience despite the slowdown in output, the report discloses.
The employment index reached 51.1 points in September, marking the
third consecutive month of positive growth, the report relays.
Medium and large industries drove this increase, while small
businesses saw a decrease in industrial employment, the report
notes.
Capacity utilization remained steady at 72%, which is 1 percentage
point above the historical September average of 71%, the report
discloses. This marks the sixth consecutive month that capacity
utilization has exceeded the monthly historical average, the report
relays.
The stock level evolution indicator slightly decreased to 49.2
points in September from 49.6 in August, the report notes.
Meanwhile, the credit access ease index rose to 42.9 points in the
third quarter of 2024, a 1.6-point increase from the previous
quarter, the report discloses.
Raw material prices continued to rise, with the indicator reaching
62.9 points in the third quarter of 2024, a 1.6-point increase from
the previous quarter, the report says. This ongoing trend of
rising costs presents a challenge for manufacturers, the report
notes.
The industrial sector faced several key challenges in the third
quarter of 2024, the report relays. High tax burden remained the
most cited problem, mentioned by 33.6% of surveyed industrial
entrepreneurs, the report says. The scarcity or high cost of raw
materials was the second most common issue, affecting 24.9% of
respondents, the report notes.
Looking ahead, the demand expectation index for October fell to
56.3 points, a 1.4-point decrease from September, the report
discloses. The raw material purchase expectation indicator also
declined, reaching 54.3 points after a 1.3-point drop from the
previous month, the report notes.
Despite these declines, both indices remain above the 50-point
threshold, indicating a cautiously optimistic outlook among
industrial entrepreneurs for the next six months, the report
relays. The investment intention indicator rose slightly to 58.3
points in October 2024, 6.2 points above the historical average,
the report says.
This data suggests that while the Brazilian industrial sector faces
some headwinds, it maintains a cautiously positive outlook for the
near future, the report notes. The sector continues to navigate
challenges such as high taxes, raw material costs, and skilled
labor shortages, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
Moody's credit rating for Brazil was last set at Ba2 with positive
outlook as of May 2024. S&P Global Ratings raised on Dec. 19,
2023, its long-term global scale ratings on Brazil to 'BB' from
'BB-'. Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable
Outlook. DBRS' credit rating for Brazil was last reported at BB
with stable outlook at July 2023.
CONSTELLATION OIL: S&P Assigns 'B' ICR, Outlook Stable
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S&P Global Ratings assigned its 'B' issuer credit rating to
Brazilian offshore drilling company Constellation Oil Services
Holding S.A. and its preliminary 'B+' issue-level rating to the
proposed $650 million senior secured notes.
The stable outlook indicates S&P's expectation that Constellation
will have a stronger capital structure and enhanced liquidity to
support capital expenditure (capex) requirements after the
recapitalization process, while some of its assets transition to
new contracts next year.
The company operates a fleet of seven offshore drilling rigs (three
drillships and four semisubmersibles) exclusively in Brazil, and
with a significant customer concentration in Petrobras
(BB/Stable/--).
Although Constellation has a long-standing relationship with
Petrobras and a solid track record of contract renewal, in S&P's
view, this customer concentration compares negatively with
international peers such as Noble, Seadrill, and Valaris. These
peers, which also operate in Brazil, have larger geographic
footprints, with presences in the Gulf of Mexico, Africa, the U.S.,
and Europe, in some cases. Moreover, these peers have more
diversified fleets of over 20 assets.
On the other hand, Constellation's smaller asset portfolio results
in high utilization rates. Constellation delivered an average
uptime rate of 96% in the first half of 2024, and we expect it to
remain high at above 92% in subsequent years.
Furthermore, Constellation has one seventh-generation drillship,
Brava Star, which usually grants higher day rates versus peers with
asset fleets of sixth generation and below. Brava Star's current
contract with Petrobras is priced at approximately $370,000 per
day, supporting Constellation's healthy profitability.
Currently, 100% of Constellation's fleet is contracted, with a firm
backlog of $1.6 billion as of September 2024, considering potential
extensions of the existing contracts.
Moreover, Constellation announced on Sept. 23, 2024, the signing of
two new contracts with Petrobras. They have an average term of 2.5
years and will add a total backlog of $1 billion, and they're for
Laguna Star and the operation of a third-party rig at the Roncador
field in the Campos Basin.
The new contracts are expected to start in the third quarter of
2025, and Laguna Star's existing contract will be due in June
2025.
Still, because five of Constellation's current seven contracts will
come due in 2025, the company's backlog compares negatively with
some of its main peers (such as Noble, which had a backlog of $4.2
billion as of July 2024).
Constellation has several planned stoppages for maintenance and
upgrades in 2025, which we think will weigh on its EBITDA margin.
S&P forecasts a margin of about 30% in 2025 (versus 35% in 2024)
and gross debt to EBITDA of 4.0x-4.5x (versus about 3.5x by the end
of this year).
S&P forecasts that the fleet in 2026 will be fully contracted, with
higher day rates in line with industry tailwinds. S&P forecasts
that margins then will be near 50% and that gross leverage will be
about 1.5x.
Constellation seeks to revamp its debt profile by raising up to
$650 million in five-year senior secured notes, and it announced
the firm commitment of approximately $75 million of new equity from
private investors.
As part of the recapitalization plan, existing debt with
shareholders will be capitalized through convertible notes, which
we see as tantamount to equity. The convertible notes will be
issued at the holding company level, above Constellation ("New
HoldCo").
Consequently, the company's capital structure will only include the
proposed $650 million senior secured notes (versus total debt of
$950 million as of June 2024), with a smoother debt maturity
profile. The new senior secured notes will have amortizations of
$75 million annually, starting in 2026.
Accordingly, the preliminary rating should not be construed as
evidence of final ratings. If the company does not complete all of
the steps of its recapitalization, or if the final amounts and
capital structure depart from our current assumptions, we reserve
the right to withdraw or revise our ratings.
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C O S T A R I C A
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COSTA RICA: S&P Affirms 'BB-/B' ICR s & Alters Outlook to Positive
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S&P Global Ratings, on Oct. 22, 2024, revised its outlook on the
long-term ratings on Costa Rica to positive from stable. At the
same time, S&P affirmed its 'BB-' long-term and 'B' short-term
foreign and local currency sovereign credit ratings. The transfer
and convertibility assessment remains at 'BB+'.
Outlook
The positive outlook reflects the possible further improvements in
Costa Rica's external profile over the next 12 to 24 months and/or
potential upside from stronger long-term economic growth.
Upside scenario
S&P said, "The positive outlook indicates a greater than
one-in-three chance that we could raise the rating on Costa Rica
over the next 12-24 months if its external position improves beyond
our expectations or if long-standing political obstacles to issue
cross-border debt are not an impediment for timely access to
external financing. We could also raise the rating if nearshoring
or friendshoring (focusing on supply chains with geographically
closer countries or with geopolitical allies, respectively)
materializes into sustained economic growth consistently above
peers'."
Downside scenario
S&P could revise the outlook to stable over the next 12-24 months
if an economic slowdown in Costa Rica's key trading partners,
external shocks, or insecurity weigh on its balance-of-payments
position and economic performance.
Rationale
S&P's ratings on Costa Rica are supported by the country's stable
democracy and political institutions, solid checks and balances,
and generally prosperous standards of living compared with those of
regional peers. Although the special regimes (incentives the
government gives to companies to make investments in Costa Rica)
continue to spur economic growth, structural constraints around the
regime still weigh on long-term economic growth prospects.
The 'BB-' ratings also incorporate a trend of political
fragmentation that has, at times, complicated timely legislative
action. Although external buffers have improved, Costa Rica's
fiscal and external profiles include rigidities and vulnerabilities
related to slow policymaking and limited access to external
financing. Such obstacles reduce the predictability of debt
management and the government's financial flexibility.
Institutional and economic profile: Costa Rica is consolidating as
a regional hub for services and high-end manufacturing with
relatively stable institutions albeit slow policymaking
-- S&P expects real GDP growth to average 3.4% in 2024-2027,
driven by free-trade zones, though structural challenges remain.
-- The stability of Costa Rica's political institutions and higher
social standards compare well with those of peers and provide a
solid base to keep attracting investment.
-- Political fragmentation results in slow progress in redressing
long-standing fiscal weaknesses, including lack of coordination for
timely access to external financing.
S&P said, "We expect Costa Rica's GDP per capita to increase to
$17,517 in 2024 and continue to climb. Costa Rica's economic
performance in 2023 was better than expected, with an annual real
growth rate of 5.1%. We estimate 2024 real growth to remain
relatively strong at 4%." The country's business climate, active
tourism industry, growing high-end export-oriented manufacturing
(such as medical devices), nearshoring opportunities, and a
continued rise in exports--though at slower rates--will sustain
growth.
Foreign direct investment (FDI) inflows showed remarkable growth in
2023, increasing to US$4.7 billion in 2023 from $3.7 billion in
2022. FDI in the economy has been mostly in the free-trade zone,
which is mainly the metropolitan area.
Also, the decarbonization model of Costa Rica increases the
appetite for investment. Currently, 98% of Costa Rica's energy
generation is from clean, renewable sources, well above the 59% of
other Latin American countries. Costa Rica's special trade zones in
life sciences, digital technology, and services could benefit
further from global nearshoring or friendshoring.
The rating on Costa Rica benefits from a strong track record of
stable political institutions and overall predictable, albeit slow,
policymaking. Social and environmental standards are also generally
higher than those of peers in the region and in similar rating
categories.
Costa Rica compares favorably with regional peers in terms of
security indicators. However, a surge in violence -- driven by
expansion of drug cartel activity -- poses a significant challenge
to remain among the safest countries in Central America and has
eroded President Rodrigo Chaves' approval to 54% from over 60% in
2022. Likewise, efforts to effectively address insecurity can
increase fiscal pressure.
President Chaves' administration has focused on boosting
post-pandemic growth and strengthening Costa Rica's fiscal
position, reaping the benefits of the 2018 fiscal reform. However,
the president's party--which holds only nine seats in the 57-seat
unicameral Legislative Assembly--has struggled throughout its term
to build alliances. The country's fragmented decision-making has
slowed and, at times, impeded progress on fiscal measures that have
been debated under multiple administrations.
As a result, initiatives proposed by the executive--such as
strengthening the tax base and the recently announced referendum to
give the administration greater powers over planning and
procurement for major infrastructure projects--are unlikely to be
implemented, in S&P's view.
S&P believes constraints on timely access to external financing
still weigh on the rating. At the end of 2022, the legislature
approved a $5 billion multiyear global bond borrowing authority for
2023-2025, subject to some conditionality. As a result, in March
and November 2023, the government tapped global markets for a $1.5
billion bond each.
However, 2024 and 2025 global issuances are conditional upon
completion of specific fiscal targets and the implementation of
customs scanners set by law, which impeded 2024 issuance. The
government recently proposed modifying the conditions and delaying
issuances to 2025 and 2026. This modification of the law still
needs to be approved by the Assembly, and its approval is expected
to be discussed in the fourth quarter of 2024.
Flexibility and performance profile: External financing risks are
likely to ease, but lack of timely access to external financing,
lingering spending pressure, and high interest burden remain
constraints
-- Stronger external buffers, alongside narrower current account
deficits and solid FDI, should reduce possible balance-of-payments
risks.
-- Fiscal consolidation is on track, but spending pressure and a
high interest burden are both likely to strain fiscal performance.
-- The country's monetary policy credibility reflects inflation
targeting, but dollarization remains important and limits the scope
of transmission mechanisms.
S&P said, "We expect the sovereign's gross external financing needs
to hover around 100% of current account receipts (CAR) and usable
reserves over the next three years, and we expect its narrow net
external debt to average 25% of CAR in 2024-2026."
As of December 2023, the current account deficit (CAD) narrowed to
1.45% from 3.2% GDP the previous year. Stronger exports and more
favorable terms of trade were the main reasons for the improvement.
Meanwhile, strong FDI inflows were 4x the CAD, and the Central Bank
of Costa Rica has taken advantage of a better balance-of-payments
position to strengthen reserves, which remain high at US$14.15
billion as of October 2024 (or slightly above 15% of GDP).
S&P said, "In our view, there is potential upside for Costa Rica's
external performance as it consolidates as a high-tech
manufacturing and services hub and as it keeps attracting high-end
tourism. We expect CADs to remain around 2.4% GDP in 2024-2027 as
the trade deficit worsens, driven by import growth. We expect CARs
to remain solid, backed by services and high-tech manufacturing
exports for electronic and medical devices and services." This,
along with sound reserves and positive FDI prospects, contributes
to the country's external profile improvement. Nonetheless,
downside risk from limited access to external financing remains.
In S&P's view, fiscal consolidation remains on track, with 2023
annual fiscal results posting a second consecutive primary surplus.
However, structural limitations may slow the decline in debt to
GDP. Midyear 2024 results reveal sluggish revenue growth, in part
because of the negative impact from the appreciated colon, among
others, and increased spending pressure from one-off spending on
salaries adjustment and transfers, leading to tighter margins.
S&P expects the deficit in fiscal year 2025 to stand around 3% and
improve to 2.8% by fiscal year 2027, and net general government
debt to remain slightly below 63% in fiscal year 2027. The
government is expecting to cross the debt threshold (below 60%) by
2025 and loosen some restrictions on spending, in line with the
fiscal rule.
In S&P's view, the fiscal rule, which limits spending as debt
remains above 60% GDP, has supported the fiscal improvement.
Nevertheless, interest spending as a share of budget and GDP
remains high, above the 15% threshold, and Costa Rica has a
relatively low tax base, also affected by the sluggish growth of
the local economy.
S&P said, "Likewise, we expect political fragmentation to keep
constraining timely access to external financing, which hampers
fiscal flexibility. Although, the central government tapped global
markets in March and November 2023 for the first time since 2019,
issuing US$1.5 billion each. The remaining US$2 billion is delayed,
given conditions imposed by the Assembly have not yet been met. We
expect further US$1 billion issuances initially scheduled for
2024-2025 to be postponed to 2025-2026, contingent upon the
Assembly's approval."
In S&P's view, fiscal performance remains subject to political risk
and spending coverage of the fiscal rule, which could be diminished
through legislative action as elections approach in 2026. Moreover,
fiscal performance is subject to downside risk from the
materialization of off-budget claims related to health services
from previous years by the Costa Rican Social Security Fund of
around 6% of GDP.
The central bank continues its easing cycle that started in 2023
and has brought the rate down to 4% in October. On the other hand,
inflation has started to rise into positive territory since July
2024 and stood at 0.3% as of August 2024. S&P expects inflation to
gradually correct to the lower end of the central bank's target
range and average 1.3% in 2024-2027.
The sovereign rating benefits from the central bank's monetary
policy credibility and execution of its inflation-targeting regime
and exchange-rate flexibility under a managed float. Nonetheless,
in our view, dollarization is still important in the system and
poses some limits to transmission mechanism as savings would likely
migrate from colon deposits to dollar deposits in time of stress.
Although dollarization has declined over the past years, an
unexpectedly sharp change in the exchange rate could create asset
quality problems in the financial system. Dollarization also limits
the central bank's ability to act as a lender of last resort.
S&P said, "Given that the banking system's assets-to-GDP ratio is
about 93% and that our Banking Industry Country Risk Assessment
(BICRA) for Costa Rica is '8', we consider Costa Rica's contingent
liabilities to be limited. (BICRAs are grouped on a scale from '1'
to '10', ranging from what we view as the lowest-risk banking
systems [group '1'] to the highest-risk [group '10'].)"
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
Ratings Affirmed
Costa Rica
Transfer & Convertibility Assessment
Local Currency BB+
Costa Rica
Senior Unsecured BB-
Ratings Affirmed; CreditWatch/Outlook Action
To From
Costa Rica
Sovereign Credit Rating BB-/Positive/B BB-/Stable/B
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Tax Reform Threatens Rise in Housing Prices
---------------------------------------------------------------
Dominican Today reports that the United Construction Sector of the
Dominican Republic, including APROCOVICI, ADECLA, AEI, and the
Dominican Association of Housing Builders and Promoters (ACOPROVI),
has raised concerns about the impact of the proposed tax reform on
the housing sector. They warn that the reforms could significantly
increase housing costs, affecting access to affordable homes for
many Dominicans, according to Dominican Today.
The construction sector estimates that housing prices could rise by
over 30% due to changes such as the elimination of the
differentiated income tax rate for housing trusts and the
imposition of VAT on housing sales and related services, the report
notes. This would cause a 12.5% increase in housing costs and an
additional 18% hike due to VAT on non-industrial goods and
transportation, the report relates. They caution that 59% of
Low-Cost Housing (LCH) projects would no longer qualify for
government subsidies, disqualifying 6 out of 10 Dominican families
from obtaining affordable housing, the report notes.
Additionally, the sector fears that rental prices will surge due to
reduced housing supply and increased costs for property owners, the
report discloses. This, combined with taxes on short-term rentals,
could result in a 56% decline in housing demand, a decrease in
investment by 77,000 million pesos, and the loss of over 115,000
jobs in the sector, the report says. The construction sector is
calling for a review of the fiscal measures to mitigate these
negative effects and ensure continued access to affordable housing
in the country, the report relays. They are committed to working
with the government to find solutions through dialogue, the report
discloses.
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.
Standard & Poor's credit rating for Dominican Republic was raised
to 'BB' in December 2022 with stable outlook. Moody's credit
rating for Dominican Republic was last set at Ba3 in August 2023
with the outlook changed to positive. Fitch, in December 2023,
affirmed the Dominican Republic's Long-Term Foreign-Currency Issuer
Default Rating (IDR) at 'BB-' and revised the outlook to positive.
=============
J A M A I C A
=============
JAMAICA: BOJ Pumps Another US$30 Million Into Forex Market
----------------------------------------------------------
RJR News reports that the Bank of Jamaica again intervened in the
foreign exchange market with another US$30 million in an effort to
halt the slide in the value of the Jamaican dollar against the US
dollar and other international counterparts.
The National Commercial Bank Jamaica purchased US$5.77 million,
JMMB Bank Limited was allocated US$4.38 million, followed by the
Bank of Nova Scotia with US$3.85 million at $158.82, according to
RJR News.
The BOJ stressed that these intervention funds must be sold to end
users or to businesses who are paying bills for capital goods,
spare parts and raw materials, the report notes.
This marks the second intervention following Oct. 17's intervention
with another US$30 million, the report notes.
Foreign exchange trading ended Oct. 17, with banks and cambios
selling the American dollar for an average $159.20, the report
relays.
The Canadian dollar is being sold for $117.17, the report
discloses.
The average value of the pound is $207.37, while the euro is going
for $174.65, 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. In September 2023, S&P
Global Ratings raised 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', with a stable outlook. In September 2024, S&P
affirmed 'BB-/B' sovereign ratings on Jamaica and revised outlook
to positive. In March 2022, Fitch Ratings affirmed Jamaica's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'.
The Rating Outlook is Stable.
JAMAICA: MSME Alliance Renews Call for Micro Stock Exchange
-----------------------------------------------------------
RJR News reports that outgoing president of the MSME Alliance
Donovan Wignal is renewing his call for the creation of a nano or
micro stock exchange.
This, he says, will help the smaller members of the Alliance to
raise affordable, long term capital to expand their businesses,
create employment as well as to generate more foreign exchange
earnings, according to RJR News.
His comments are against the background of the findings of the
third quarter Business and Consumer Confidence Survey, conducted by
Don Anderson and his team at Market Research Services Limited, the
report notes.
The survey indicated that only 4 per cent of the 125 businesses
interviewed stressed that they would seek badly needed capital from
the JSE main or junior market, while 49 per cent say they would
borrow from the banking system, although 51 per cent stressed that
bank financing is too expensive, the report relays.
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. In September 2023, S&P
Global Ratings raised 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', with a stable outlook. In September 2024, S&P
affirmed 'BB-/B' sovereign ratings on Jamaica and revised outlook
to positive. In March 2022, Fitch Ratings affirmed Jamaica's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'.
The Rating Outlook is Stable.
===========
M E X I C O
===========
GRUPO AEROMEXICO: S&P Upgrades ICR to 'B+', Outlook Stable
----------------------------------------------------------
S&P Global Ratings raised its issuer credit rating on Mexico's
leading airline, Grupo Aeromexico S.A.B. de C.V. to 'B+' from 'B'.
At the same time, S&P raised its issue rating on its outstanding
$663 million senior secured notes due 2027 to 'BB-' from 'B+'. The
recovery rating remains '2', reflecting its expectation for
substantial recovery (70%-90%) in the event of a payment default.
The stable outlook reflects S&P's view that Aeromexico's operating
and financial performance should continue to improve through higher
revenue and EBITDA in the next 12 months.
For the 12 months ended June 2024, the company increased revenue
nearly 25% and posted EBITDA margin of 29% (up from 17% in 2023),
funds from operations (FFO) to gross debt of 38%, and S&P Global
Ratings-adjusted gross debt to EBITDA of 2.1x (down from nearly
5.0x). The improvement mainly derived from strong demand in
domestic and international markets and an increase in routes,
frequencies, and capacity. S&P expects the company to maintain FFO
to gross debt above 30%, gross debt to EBITDA in the 2.0x area, and
free operating cash flow (FOCF) to gross debt near 15%.
Inflationary pressure peaked in 2023 (affecting prices for several
commodities and raw materials, including jet fuel) and has
continuously eased so far in 2024. Meanwhile, Aeromexico has
increased its profitability, posting EBITDA margins near 30% by the
end of 2023 and in the first half of 2024. S&P expects the company
to continue prudently managing its cost structure through
operational efficiencies that leverage its industry expertise,
which should result in EBITDA margins consistently near 30% or
above.
The company remains a premium airline because of its competitive
advantages, including its variety of international routes and its
quality products, as well as its strong position in Mexico. The
company's revenue continues to stem mainly from its international
routes, accounting for around 60%, while domestic flights account
for 40%. By June 30, 2024, Aeromexico had increased its passenger
volume around 23% from 2019, while its loyalty program membership
rose to around 10.5 million users from around 8 million. At the end
of 2023, the company posted about 53 million available seats per
kilometer (ASK), and S&P expects this figure to rise to about 58
million by the end of 2024, assuming a fleet of about 147 aircraft.
However, for the time being, the Boeing strike has delayed the
delivery of these new airplanes, and there is no specific date
envisioned for the strike to resolve. S&P said, "We expect it will
end in the next 12 months, allowing Aeromexico to increase its
productive asset base as expected and boosting its revenue. In
2024, the company has opened 15 new international destinations, and
we expect this number to increase next year, subject to expanding
the fleet. As a result, our base-case scenario now assumes revenue
growth near 10% by the end of 2024 and around 5.5% by the end of
2025."
S&P said, "In our view, the capex plans are key mainly because of
the increase in the aircraft fleet. We will continue to monitor the
company's capex deployment and the timely delivery of the new
airplanes in the next 12 months. We will also evaluate whether this
potential asset base increase leads to substantial revenue and
EBITDA growth and improved credit metrics.
"Aeromexico has no significant debt commitments in the next 12
months that could compromise its liquidity position. Its $663
million 8.5% senior secured notes due 2027 are its most material
maturity, and we expect the company to implement prudent liability
management and refinance this debt well ahead of its maturity.
Besides this material financial obligation, we don't envision
extraordinary cash outflows that could threaten liquidity in the
next 12 months. We expect dividend distributions would be
contingent on the company's cash flow generation, as long as its
credit metrics are not affected."
=====================
P U E R T O R I C O
=====================
D'PASTRY INC: Seeks to Hire Tamarez CPA as Accountant
-----------------------------------------------------
D'Pastry Inc. seeks approval from the U.S. Bankruptcy Court for the
District of Puerto Rico to hire Tamarez CPA, LLC as its
accountant.
The firm will render these services:
a) reconcile financial information to assist Debtors in the
preparation of monthly operating reports;
b) assist in the reconciliation and clarification of proof of
claims filed and amount due to creditors;
c) provide general accounting and tax services to prepare
quarterly, year-end reports and income tax preparation;
and
d) assist the Debtors and Debtors' counsel in the preparation
of the supporting documents for the Chapter 11
Reorganization Plan, including negotiation with creditors.
The firm will will provide assistance in the preparation of the
monthly operating reports, as well as business consulting services
in the development of reorganization strategies and tax preparation
services.
The firm will be paid at these rates:
Albert Tamarez-Vasquez, CPA CIRA $165 per hour
CPA Supervisor $110 per hour
Senior Accountant $90 per hour
Staff Accountant $70 per hour
The firm will receive a post-petition retainer in the total amount
of $5,000.
Albert Tamarez Vasquez, CPA, owner of Tamarez CPA, disclosed in a
court filing that his firm is a "disinterested person" as that term
is defined in Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Albert Tamarez Vasquez, CPA
Tamarez CPA, LLC
1519 Ave. Ponce De Leon, Suite 412
San Juan, PR 00909
Telephone: (787) 795-2855
Facsimile: (787) 200-7912
Email: atamarez@tamarezcpa.com
About D'Pastry Inc.
D'Pastry Inc. filed a petition under Chapter 11, Subchapter V of
the Bankruptcy Code (Bankr. D.P.R. Case No. 24-03678) on Aug. 30,
2024, listing under $1 million in both assets and liabilities.
Licenciado Carlos Alberto Ruiz, LLC represents the Debtor as legal
counsel.
DP ENTERPRISE: Seeks to Hire Tamarez CPA as Accountant
------------------------------------------------------
DP Enterprise Corp seeks approval from the U.S. Bankruptcy Court
for the District of Puerto Rico to hire Tamarez CPA, LLC as its
accountant.
The firm will render these services:
a) reconcile financial information to assist Debtors in the
preparation of monthly operating reports;
b) assist in the reconciliation and clarification of proof of
claims filed and amount due to creditors;
c) provide general accounting and tax services to prepare
quarterly, year-end reports and income tax preparation;
and
d) assist the Debtors and Debtors' counsel in the preparation
of the supporting documents for the Chapter 11
Reorganization Plan, including negotiation with creditors.
The firm will will provide assistance in the preparation of the
monthly operating reports, as well as business consulting services
in the development of reorganization strategies and tax preparation
services.
The firm will be paid at these rates:
Albert Tamarez-Vasquez, CPA CIRA $165 per hour
CPA Supervisor $110 per hour
Senior Accountant $90 per hour
Staff Accountant $70 per hour
The firm will receive a post-petition retainer in the total amount
of $5,000.
Albert Tamarez Vasquez, CPA, owner of Tamarez CPA, disclosed in a
court filing that his firm is a "disinterested person" as that term
is defined in Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Albert Tamarez Vasquez, CPA
Tamarez CPA, LLC
1519 Ave. Ponce De Leon, Suite 412
San Juan, PR 00909
Telephone: (787) 795-2855
Facsimile: (787) 200-7912
Email: atamarez@tamarezcpa.com
About DP Enterprise Corp
DP Enterprise Corp sought protection for relief under Chapter 11 of
the Bankruptcy Code (Bankr. D.P.R. Case No. 24-03087) on July 25,
2024, listing $100,001 to $500,000 in assets and $500,001 to $1
million in liabilities. Carlos Alberto Ruiz, Esq. at Licenciado
Carlos Alberto Ruiz, LLC represents the Debtor as counsel.
*********
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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