/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/131226.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, December 26, 2013, Vol. 14, No. 254 Headlines A R G E N T I N A * PETROBRAS ARGENTINA: S&P Cuts Foreign Currency Rating to 'CCC+' B R A Z I L JBS SA: CVM Grants Registration of Tender Offer of Vigor Shares RODOPA INDUSTRIA: S&P Withdraws 'CCC' Corporate Credit Rating C A Y M A N I S L A N D S ANDESCORP INVESTMENTS: Members Receive Wind-Up Report ARSENAL INVESTMENTS: Members Receive Wind-Up Report CF FUND: Sole Member Receives Wind-Up Report FONDELEC E.E.E.G.P.: Members Receive Wind-Up Report GALENA INSURANCE: Shareholder Receives Wind-Up Report JUNTOS BALANCE: Shareholders Receive Wind-Up Report LADY LUCK: Members Receive Wind-Up Report LDEP-NT: Shareholders Receive Wind-Up Report LHFP-NT: Shareholders Receive Wind-Up Report LIEP-NT: Shareholders Receive Wind-Up Report ON WINGS: Members Receive Wind-Up Report TV RECOVERY: Shareholders Receive Wind-Up Report WM INVESTMENTS: Members Receive Wind-Up Report E L S A L V A D O R EL SALVADOR: S&P Affirms 'BB-/B' Sovereign Credit Ratings H O N D U R A S * HONDURAS: To Join Electricity Market With $22.9MM IDB Financing J A M A I C A JAMAICA: Bad Debts in Commercial Banks Rise to Over J$20 Billion M E X I C O CORPORACION INTERAMERICANA: S&P Withdraws 'B+' CCR P A R A G U A Y PARAGUAY: IMF Article IV Staff Mission Gives Concluding Statement T R I N I D A D & T O B A G O CL FIN'L: St Lucia Seeks to Comfort CLICO Policy Holders - - - - - ================= A R G E N T I N A ================= * PETROBRAS ARGENTINA: S&P Cuts Foreign Currency Rating to 'CCC+' ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered the local currency ratings to 'CCC+' from 'B-' and affirmed its 'CCC+' foreign currency ratings on the following Argentine entities: -- CLISA-Compania Latinoamericana de Infraestructura y Servicios S.A.; -- Raghsa S.A.; -- Aeropuertos Argentina 2000 S.A. (AA2000); -- Hidroelectrica Piedra del Aguila S.A. (HPDA); and -- Transportadora de Gas del Sur S.A. (TGS). In addition, S&P affirmed its 'B-' local currency and 'CCC+' foreign currency ratings on the following entities: -- Alto Palermo S.A.; -- IRSA Inversiones y Representaciones S.A.; and -- Capex S.A. S&P removed the local currency ratings on all these entities from CreditWatch negative, where it placed them on Sept. 13, 2013. The outlook is now negative. In addition, S&P lowered both its local and foreign currency ratings on Industrias Metalurgicas Pescarmona S.A. (IMPSA) to 'CCC+' from 'B-'. At the same time, S&P lowered its foreign currency rating on its wholly-owned subsidiary, WPE International Cooperatief U.A. (WPEIC), to 'CCC+' from 'B-' and assigned a 'CCC+' local currency rating. S&P also removed these ratings from CreditWatch negative, where it placed them on Sept. 13, 2013. The outlook is now negative. S&P also lowered its local currency rating to 'B-' from 'B' and foreign currency rating to 'CCC+' from 'B-' on Alto Parana S.A. At the same time, S&P removed these ratings from CreditWatch negative, where it placed them on Sept. 13, 2013. The outlook is now negative. In addition, S&P lowered its foreign currency rating on Petrobras Argentina S.A. to 'CCC+' from 'B-' and removed it from CreditWatch negative, where S&P placed it on Sept. 13, 2013. The outlook is now negative. Finally, S&P affirmed its senior unsecured 'BBB-' rating on Alto Parana and 'BBB' rating on Petrobras Argentina's guaranteed notes, reflecting the rating of the guarantors (their respective parents). The downgrade of CLISA, Raghsa, AA2000, HDP, and TGS reflects S&P's belief that these entities won't be able to generate enough local currency resources to honor all of their financial obligations under a sovereign default scenario. Therefore, S&P is now aligning its local currency ratings on these entities to their respective foreign currency ratings and to the sovereign rating and Transfer & Convertibility Assessment (T&C) on Argentina. The local ratings affirmation on Alto Palermo, IRSA, and Capex reflects S&P's opinion that these entities have certain mitigating factors (in particular, existing liquidity sources including cash in hand and liquid assets in foreign currency) that would allow them to meet their financial obligations, at least for some additional time, while withstanding the above mentioned macroeconomic conditions under a sovereign default scenario. As a result, the local currency ratings on these three entities remain one notch above their foreign currency ratings, which are still capped by S&P's T&C assessment on Argentina. The downgrade of IMPSA and WPEIC reflects the group's ongoing financial performance deterioration including weaker credit metrics, weak liquidity, and increased refinancing risk. The foreign currency downgrade of Alto Parana and Petrobras Argentina reflects S&P's opinion that these entities won't be able to continue honoring their existing or potential foreign currency nonguaranteed obligations under a scenario of restrictions to access foreign currency and/or restrictions on transferring money abroad. As a result, S&P's foreign currency ratings on these entities are now the same as its T&C risk assessment for zrgentina. S&P views Alto Parana as a "moderately strategic" subsidiary for Celulosa Arauco y Constituci▋ and Petrobras Argentina as a "nonstrategic" subsidiary for Petroleos Brasileiros S.A. According to S&P's criteria, its assessment of their group status doesn't merit a higher rating than the sovereign rating and T&C assessment. The ratings on both companies' guaranteed notes remain unchanged, reflecting the rating of their guarantors (parent companies). The local currency downgrade of Alto Parana reflects S&P's opinion that the company's very low debt level, which the parent doesn't guarantee, would allow it to withstand, at least for some additional time, a sovereign default scenario by generating enough local currency to cover its financial obligations. The outlook on all the entities is now negative, reflecting that of the sovereign. It also reflects S&P's views that credit quality for the Argentine corporate sector may continue to deteriorate based on a weaker operating environment (including high inflation and gradual devaluation of Argentine peso), a challenging refinancing scenario, and increased regulatory risk. =========== B R A Z I L =========== JBS SA: CVM Grants Registration of Tender Offer of Vigor Shares --------------------------------------------------------------- The Brazilian Securities and Exchange Commission (CVM) granted the registration of the public tender offer for the acquisition by FB Participacoes S.A., controlling shareholder of Vigor Alimentos S.A. and JBS S.A., of common shares issued by Vigor in exchange for common shares issued by JBS, in accordance with CVM Ruling No. 361, dated as of March 5, 2002, as amended as a result of the approval of the applicable registration exemptions related to the Tender Offer by the CVM's Board of Commissioners at the meeting held on December 17, 2013. In view of the above, the Tender Offer notice ("Offer Notice") will be published within the term established by CVM Ruling 361, and will set forth all of the terms and conditions of the Tender Offer. Vigor recommends its shareholders to read the Offer Notice and JBS' Reference Form for the analysis of the Tender Offer. Such documents are available at CVM's and the Sao Paulo Stock Exchange - BM&FBOVESPA's websites. Vigor and JBS will keep their shareholders and the market informed on the results of the Tender Offer. Headquartered in Sao Paulo, Brazil, JBS S.A. is the world's largest protein producer in terms of revenues, slaughter capacity and production. It is the leader beef, chicken and leather player and a leading lamb producer on a global basis, besides being the third largest pork producer in the USA. The company has large scale and diversification, with presence in more than 100 countries. * * * As reported in the Troubled Company Reporter-Latin America on Oct. 24, 2013, Fitch Ratings affirmed the foreign and local currency Issuer Default Ratings (IDRs) of JBS S.A. (JBS) at 'BB-' as well as its 'A-(bra)' national scale rating. Fitch has also affirmed at 'BB-' rating on the notes due in 2016 issued by JBS and the 'A-(bra)' rating of its debentures due in 2015. RODOPA INDUSTRIA: S&P Withdraws 'CCC' Corporate Credit Rating ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its global scale corporate credit and debt ratings on Rodopa Industria e Comercio de Alimentos Ltda to 'CCC' from 'B'. In addition, S&P lowered its national scale corporate credit rating on the company to 'brCCC' from 'brBB+'. The outlook on the corporate credit ratings is negative. S&P then withdrew all the ratings at the issuer's request. The downgrade reflects the company's decision to cease operations and lease all of its operating units to JBS (BB/Stable/--). This transaction is still subject to Brazilian antitrust approval. S&P expects Rodopa to pay down its short- to medium-term obligations with its current cash position of about R$86 million as of June 30, 2013, and with the release of its working capital, including its inventories, accrued taxes, and accounts receivable. S&P believes the company's current assets are enough to cover all of its short- to medium-term liabilities, such as short-term debt and accounts payable. However, the negative outlook reflected the uncertainties regarding Rodopa's ability to meet the interest and principal under its $100 million privately placed unsecured notes (which correspond to almost all its noncurrent liabilities), given the operating challenges to convert its other noncurrent assets (such as plants, fields, and buildings) into liquid cash. According to the latest information, S&P can't envision a clear default scenario in the short term. Rodopa's initial plan was to almost double its slaughtering capacity within three years to strengthen its competitive position in a commodity market and enhance its efficiency. However, according to management, the company found it difficult to compete, expand, and issue new debt at attractive rates, and decided to exit the business and lease its plants. S&P now sees the company's liquidity as "weak" given that Rodopa will discontinue its operations. S&P expects Rodopa to use its cash position, positive working capital, and low funds from operations generation to liquidate its short- to medium-term liabilities. Rodopa could liquidate its long-term liabilities-- which total about R$260 million and mainly consist of the privately placed unsecured notes--with the remaining cash and its noncurrent assets, which are evaluated in more than R$280 million. The negative outlook reflected S&P's expectations of operating challenges until 2017, when Rodopa is expected to liquidate its $100 million privately placed notes, considering the risks to convert its assets into liquid cash to pay down its liabilities. It also have reflected S&P's concerns regarding company's ability to renegotiate covenants to prevent a debt acceleration trigger on the bond during the period of the asset transfer. ========================== C A Y M A N I S L A N D S ========================== ANDESCORP INVESTMENTS: Members Receive Wind-Up Report ----------------------------------------------------- The members of Andescorp Investments Limited received on Dec. 10, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Buchanan Limited P.O. Box 1170, George Town Grand Cayman Cayman Islands ARSENAL INVESTMENTS: Members Receive Wind-Up Report --------------------------------------------------- The members of Arsenal Investments Limited received on Dec. 16, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: CDL Company Ltd. P.O. Box 31106 Grand Cayman KY1-1205 Cayman Islands CF FUND: Sole Member Receives Wind-Up Report -------------------------------------------- The sole member of CF Fund Holdings Ltd. received on Dec. 19, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Lee Shick 20 Cecil Street #21-02 Equity Place 049705 Singapore FONDELEC E.E.E.G.P.: Members Receive Wind-Up Report --------------------------------------------------- The members of Fondelec E.E.E.G.P. Corp. received on Dec. 17, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Csaba Soos c/o Colin Berryman Telephone: +1 (345) 949 8599 Facsimile: +1 (345) 949 4451 Harbour Place, 4th Floor 103 South Church Street P.O. Box 10240 Grand Cayman KY1-1002 Cayman Islands GALENA INSURANCE: Shareholder Receives Wind-Up Report ----------------------------------------------------- The shareholder of Galena Insurance Corporation SPC received on Dec. 20, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Bruce Putterill 607 West Bay Road #15 P.O. Box 30867 Grand Cayman KY1-1104 Cayman Islands Telephone: (345) 525-2069 Facsimile: (345) 949-4772 JUNTOS BALANCE: Shareholders Receive Wind-Up Report --------------------------------------------------- The shareholders of Juntos Balance Fund Limited received on Dec. 10, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Gene Dacosta Telephone: (345) 814 7765 Facsimile: (345) 945 3902 P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands LADY LUCK: Members Receive Wind-Up Report ----------------------------------------- The members of Lady Luck Holdings Limited received on Dec. 10, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Buchanan Limited P.O. Box 1170, George Town Grand Cayman KY1-1102 Cayman Islands LDEP-NT: Shareholders Receive Wind-Up Report -------------------------------------------- The shareholders of LDEP-NT received on Dec. 11, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Jonathan Bernstein Telephone: (345) 949 4900 Facsimile: (345) 949 4901 c/o Appleby (Cayman) Ltd. P.O. Box 190 Clifton House 75 Fort Street Grand Cayman, KY1-1104 Cayman Islands LHFP-NT: Shareholders Receive Wind-Up Report -------------------------------------------- The shareholders of LHFP-NT received on Dec. 11, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Jonathan Bernstein Telephone: (345) 949 4900 Facsimile: (345) 949 4901 c/o Appleby (Cayman) Ltd. P.O. Box 190 Clifton House 75 Fort Street Grand Cayman, KY1-1104 Cayman Islands LIEP-NT: Shareholders Receive Wind-Up Report -------------------------------------------- The shareholders of LIEP-NT received on Dec. 11, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Jonathan Bernstein Telephone: (345) 949 4900 Facsimile: (345) 949 4901 c/o Appleby (Cayman) Ltd. P.O. Box 190 Clifton House 75 Fort Street Grand Cayman, KY1-1104 Cayman Islands ON WINGS: Members Receive Wind-Up Report ---------------------------------------- The members of On Wings of Destiny Limited received on Dec. 10, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Buchanan Limited P.O. Box 1170, George Town Grand Cayman KY1-1102 Cayman Islands TV RECOVERY: Shareholders Receive Wind-Up Report ------------------------------------------------ The shareholders of TV Recovery Ltd. received on Dec. 13, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Ian Patrick Pilgrim Mayflower Management Services (Bermuda) Limited 102 St. James Court Flatts Smiths FL04 Bermuda Telephone: +1 (441) 542 6330 e-mail: ipilgrim@mayflower.bm WM INVESTMENTS: Members Receive Wind-Up Report ---------------------------------------------- The members of WM Investments received on Dec. 16, 2013, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: CDL Company Ltd. P.O. Box 31106 Grand Cayman KY1-1205 Cayman Islands ==================== E L S A L V A D O R ==================== EL SALVADOR: S&P Affirms 'BB-/B' Sovereign Credit Ratings --------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB-/B' long- and short-term sovereign credit ratings on the Republic of El Salvador. The outlook on the long-term rating remains negative. S&P's 'AAA' transfer and convertibility (T&C) assessment for El Salvador is unchanged. RATIONALE Many years of low GDP growth in El Salvador have contributed to a steady increase in the government's debt burden, raising its vulnerability to potential adverse external shocks. S&P expects that per capita real GDP growth will be modest in 2013, about 1.3%, and rise toward 2% in the coming two years. Low economic growth and political pressure for social spending have contributed to fiscal slippage in recent years, despite rising tax revenues. As a result, S&P projects that net general government debt could rise to 47% of GDP in 2013. Failure to reduce fiscal deficits, which have averaged 4% of GDP since 2010, would result in a continued rise in the government's debt burden. Moreover, the resulting large borrowing requirements would expose the sovereign to growing vulnerability to potentially adverse shifts in market sentiment. Relatively low foreign direct investment is leading to higher reliance on external debt to fund the country's persistent current account deficit, likely exceeding 6% of GDP in 2013 and declining only moderately toward 4% of GDP next year. El Salvador's limited monetary and fiscal flexibility and its high general government and external debt burdens constrain the ratings. Total investment has remained below 15% of GDP for many years, thereby limiting GDP growth and contributing to fiscal strains. The country formally adopted the U.S. dollar as its currency in 2001. Dollarization has lowered inflation and helped stabilize the market, though it has also imposed monetary inflexibility. El Salvador's well-regulated banking system, as well as its political commitment to addressing fiscal and external imbalances, supports the ratings. The local currency rating on El Salvador is 'BB-', and the T&C assessment is 'AAA'. These reflect the country's adoption of full dollarization in 2001. S&P thinks El Salvador is unlikely to de- dollarize because most policymakers consider the costs of doing so much greater than the disadvantages of limited monetary flexibility. OUTLOOK The negative outlook reflects the at least one-in-three likelihood of a downgrade in the next 12 months if political polarization continues to constrain investment and GDP growth, resulting in a higher burden of fiscal and external debt. S&P expects that El Salvador will see an orderly political transition to the next presidential administration in early 2014. However, continued political polarization could sustain risk aversion and stall economic reforms, leading to continued low private investment and sluggish economic performance. Conversely, an improvement in political dialogue and a more cohesive decision-making process after the elections could improve conditions for economic growth. Effective implementation of laws to promote public-private partnerships would facilitate higher fiscal revenues, making it easier to stabilize the budget deficit and the burden of government and external debt. Similarly, efforts to strengthen El Salvador's legal and regulatory environment could increase the country's long-term growth prospects. S&P could revise the outlook to stable as a result. 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 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. RATINGS LIST Ratings Affirmed El Salvador (Republic of) Sovereign Credit Rating BB-/Negative/B Transfer & Convertibility Assessment AAA Senior Unsecured BB- =============== H O N D U R A S =============== * HONDURAS: To Join Electricity Market With $22.9MM IDB Financing ----------------------------------------------------------------- With Honduran President Porfirio Lobo Sosa as a witness of honor, Finance Minister Wilfredo Cerrato and Inter-American Development Bank President Luis Alberto Moreno signed an agreement for US$22.9 million in financing for a project to upgrade Honduras' power infrastructure and support its participation in Central America's regional electricity market. The regional electricity market, known by its Spanish acronym MER, was established under a framework agreement among six Central American countries in order to optimize the use of their energy resources and reduce electricity costs by taking advantage of economies of scale. All six countries are also partners in SIEPAC, the Central American electric interconnection system. The IDB contributed US$271.5 million in loans to finance the construction of the system's 1,793-kilometer power transmission line. The new financing provided by the IDB to Honduras will support a project to strengthen the regional network by building a permanent link to a line connecting the Honduran and the Guatemalan grids. The project will also finance institutional capacity building to enable the Honduran power utility, ENEEE, to participate effectively in the MER. Under the project, a new substation will be built for the power line between San Buenaventura in Honduras and Panaluya in Guatemala. This will technically close the loop between the Honduran, Guatemalan and Salvadoran grids, making the regional network more robust. In addition, ENEE will strengthen its management, as well as establish an electricity transactions unit in order to better participate in the MER. Once the new infrastructure is completed and operational, regional electricity transactions are expected to triple by 2017. The IDB financing consists of a 30-year, US$16 million loan with a fixed interest rate plus a 40-year, US$6.9 million loan with a fixed annual interest rate of 0.25 percent. ============= J A M A I C A ============= JAMAICA: Bad Debts in Commercial Banks Rise to Over J$20 Billion ---------------------------------------------------------------- RJR News reports that the Bank of Jamaica has released information showing that bad debts in commercial banks rose to more than J$20 billion at the end of September. That was a nine per cent expansion in the bad debt portfolio of commercial banks, according to RJR News. The report relates that the Bank of Jamaica said the overall bad debt portfolio at the institutions it supervises, was J$26.7 billion, down 5 per cent from September last year. =========== M E X I C O =========== CORPORACION INTERAMERICANA: S&P Withdraws 'B+' CCR -------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'B+' corporate credit and issue ratings on Corporacion Interamericana de Entretenimiento S.A.B. de C.V at the company's request, as its outstanding $13.7 million senior unsecured bonds were prepaid on Dec. 16, 2013. =============== P A R A G U A Y =============== PARAGUAY: IMF Article IV Staff Mission Gives Concluding Statement ---------------------------------------------------------------- An International Monetary Fund (IMF) mission visited Paraguay during December 2-12 for discussions with government officials, the private sector, the donor community and other stakeholders, as part of the IMF's annual Article IV consultations with its member countries. At the conclusion of the visit, mission Chief Ugo Fasano issued the statement: "Paraguay has strong economic fundamentals-low debt, sizeable official reserves, and a manageable fiscal deficit. The main challenge ahead is to improve social and economic development, which has lagged behind the region amid widespread structural weaknesses. The authorities have crafted a good economic plan and have made a solid start by enacting important pieces of legislation. Implementation of the legislative and economic reform agenda, particularly in the context of a less favorable external environment and longstanding institutional weaknesses, will be critical. "The government's economic plan would help buttress Paraguay's growth potential and reduce poverty over the medium term. This plan rightfully focuses on fostering investment in infrastructure, improving the business climate, modernizing the public sector, and maintaining fiscal prudence. In support, the central bank will remain focused on maintaining stable, low inflation within an inflation-targeting (IT) regime, while further strengthening financial supervision in line with international best practices. If fully implemented, these reforms together with sustained macroeconomic stability could lead to higher investment though, at this stage, it is debatable by how much and how fast it can be executed, given a softer external environment and weaknesses in institutional capacity. So far, indications of interest by local and foreign investors have been encouraging. "A brisk economic expansion is expected to continue over the medium term, amid low inflation and fiscal and external deficits (Tables 1 and 2): * Growth. After contracting by 1.2 percent in 2012, activity grew by 14.9 percent (y/y) in the first three quarters of 2013, as agricultural output recovered from last year's drought. While economic activity might have slowed somewhat recently (in part a reflection of rising smuggling from Argentina), the mission still expects overall 2013 growth to remain robust at 12.7 percent, with non-agricultural output growing by 5.2 percent, slightly above potential. Real GDP is projected to expand on average by about 4.5 percent in the period 2014-18 given robust agriculture and livestock sectors and expected higher investment in export- oriented industries and infrastructure (overall investment would increase by about 4.0 percentage points of GDP over the period). * Inflation. Higher food prices, notably meat, have been pushing inflation up during much of 2013, with accumulated headline inflation reaching 3.7 percent in the period January-November. End-2013 inflation should be slightly above 4.0 percent, and hover at about the central bank's target rate of 5.0 percent next year and over the medium term. * The central government deficit. The mission expects the fiscal deficit to stay low over the medium term in line with the ceilings imposed by the fiscal responsibility law, keeping the current low debt, broadly stable in percent of GDP. Given past under- execution of capital spending, we estimate a deficit of 1.8 percent of GDP in 2014-just 0.1 percentage points above the 2013 estimated outcome. The deficit will likely decline over the medium-term to about 1.0 percent of GDP, as a result of rising tax collection-though less rapidly than envisaged by the government given tax and customs administration resource constraints-and restrained growth in current primary spending, in particular the wage bill. This would imply a broadly neutral fiscal stance in the coming years. Deficit financing will be provided by foreign sources (multilaterals) and in a lesser extent through domestic debt issuances. * The external current account balance. Despite continued real effective appreciation of the guarani, buoyant agricultural and meat exports would cause the current account surplus to widen to close to 1.0 percent of GDP by the end of 2013. However in 2014, the current accounts will likely swing to a deficit of about 0.8 percent of GDP, owing to some softening in soybean and beef prices even as volumes expand further. Over the medium term, private sector net savings would contribute to maintaining the current account deficit low at about 1.0 percent of GDP, despite negative public sector net savings and some projected deterioration in Paraguay's terms of trade. The expected increase in foreign direct investment (FDI) in response to the development strategy would keep official reserves at a relatively high level through 2018 (equivalent to over four months of imports). Overall, the risks to the outlook are balanced. The main downside risks stem from possible lower regional growth, negative price shocks to Paraguay's main commodity exports, tighter global financial conditions, and/or internal disruptions related to weather and labor and other supply bottlenecks. Upside risks include faster than expected progress on the implementation of the government's reform agenda. Supply constraints, coupled with possible increases in food and administrated prices, pose an upside risk to inflation. "Against this background, the mission discussed with the authorities policies to: (a) manage shocks and maintain macroeconomic stability; (b) cement stability via strengthened fiscal, monetary and financial policy frameworks; and (c) promote strong, sustainable and inclusive growth. A. Managing shocks and maintaining stability. While macroeconomic policies have been broadly appropriate in 2013, it would be prudent to move to a neutral monetary stance in the short-term. In light of inflationary pressures, brisk credit growth, and expected robust economic activity, the mission welcomed the recent policy rate increase bringing it closer to the estimated neutral real interest rate of about 2 percent. As this may increase the central bank's quasi-fiscal deficit, which has already reached about 0.6 percent of GDP in 2012 from 0.3 percent in 2010, we would recommend increasing the remuneration rate on the recapitalization bonds, which currently pay only 0.25 percent per year. Fiscal policy is expected to remain broadly neutral anchored on the rules established in the fiscal responsibility law. Exchange rate flexibility and monetary policy remain the first line of defense against potential external shocks. Despite low public debt, active fiscal policy should be a last resort in the face of potential shocks and designed such that it does not reduce future budget flexibility (as was the case in 2012 with the large increase in the wage bill). Strong fundamentals and greater exchange rate flexibility provide the government with better buffers to cope with these temporary external shocks than in the past. Although the banking sector remains sound, closer monitoring is warranted if credit growth increases further. The banking sector has continued to show adequate profitability, liquidity and capitalization in 2013. After increasing since 2008, non- performing loans (NPLs) have remained relatively stable over the past year at about 2.3 percent as of September, which is below regional levels. However, in a relatively short period of time, credit to the private sector, including consumer loans, has doubled in percent of GDP since 2007-08, reaching 34 percent in 2013, rising faster than in other countries in the region. B. Cementing sound fundamentals. Fiscal framework The mission welcomed recent significant improvements in the fiscal framework. The fiscal responsibility law should reduce fiscal policy uncertainty. In addition, efforts to broaden the tax base- through a revised tax on agricultural profits and generalized VAT along with a new personal income tax-will add much needed revenues to maintain fiscal sustainability over the medium-term in light of rising social expenditures. The laws on public-private partnerships (PPPs) and joint ventures may improve the quality of investment, ease financial constraints, and foster private sector participation in infrastructure projects. Nonetheless, the mission encourages the authorities to continue their efforts in further strengthening: * The fiscal rule: As the government gains experience with the fiscal responsibility law, it would seem appropriate to expand the coverage of the deficit rule beyond the central government; making the triggers to invoke escape clauses more specific; and improving the reporting requirements to encourage public accountability and transparency. The mission expects that the issuance of the regulations of the law will clarify some of these issues. * Public financial management: Strong budget institutions are needed to further enhance the credibility of fiscal policy and improve the quality of spending. To this end, strengthening budget design, control and monitoring, with a stronger emphasis on results, and adopting a medium-term expenditure framework should be a priority, as much as mobilizing additional resources. It is also important to efficiently use limited public resources, with the Treasury moving from the present system of cash rationing to a modern cash management system. The mission welcomed the recently enacted state financial administration modernization law that establishes a Treasury Single Account and opens the possibility to issue short-term government debt. * Public investment management, planning and regulatory capacity needs to be strengthened to increase the execution rate of projects and ensure that PPPs provide high-quality infrastructure services efficiently. PPP projects should be included in the national public investment system (SNIP), and the regulation of the law must provide clear guidelines for the specification, renegotiation and termination of contracts in line with international best practices. The mission conquers with the authorities that initial emphasis of PPPs should be on sound projects that address clear bottlenecks in transportation and power infrastructure, as they are likely to have high economic rates of return. In addition, it would be important to aim at transparent fiscal accounting and comprehensive disclosure of all fiscal contingencies related to the ongoing initiatives to encourage private sector participation in infrastructure and other public projects. * Tax policy and revenue administration: Despite some progress over the past decade, tax collection efforts remain relatively low (estimated at about 51 percent of its potential vis-�-vis a regional average of 71 percent). Thus, implementation of new information systems, improved taxpayer controls via database crosschecks and the use of risk management systems are urgently required to improve revenue administration. The mission encourages the authorities to raise the VAT on financial services from its current 5 percent to the 10 percent general rate, and complete as soon as possible the assessment of property values to further increase revenue. Fund technical assistance (TA) recommendations in these areas provide an adequate reform guide. * Pension reform could reduce potentially large fiscal liabilities, improve national savings, and foster the development of domestic capital markets. The mission welcomed efforts underway to draft new framework legislation and establish a pension regulator. Monetary Framework The mission congratulated the authorities on the significant advances made in implementing an inflation-targeting (IT) regime. The BCP has taken several important steps, including the publishing a bi-annual inflation report, implementing a new Real Time Gross Settlements (RTGS) payments system, as well as refining its liquidity management and forecasting framework, and monetary policy instruments. Additional advances would help achieve the BCP's goal of moving to a full-fledged IT regime, including developing an active money market by increasing the predictability of its operations and available instruments. Continuing with a market based process of financial de-dollarization would further enhance Paraguay's monetary policy framework. In particular, well designed macro-prudential rules could be used to reduce foreign exchange risk and further entrench a de-dollarization process. The mission welcomed recent steps taken by the central bank to establish a foreign exchange (FX) intervention policy that is more transparent, better communicated and more consistent with a full- fledged IT regime. The BCP has intervened in the market since last July only through its pre-announced "sales program" and indicated that it would only adjust this program to offset excessive FX volatility. As a result, the central bank has only accumulated US$16 million in international reserves since July 2013. However, to avoid affecting market expectations on the exchange rate, the mission recommends that the central bank disclose, well in advance, the size of its sale program (in addition to the nature and frequency as it currently does). This will require improved coordination and communication between the Ministry of Finance and the BCP on government's financial transactions. Financial sector framework The supervisory-regulatory framework of the banking system has undergone major improvements in recent years. The mission welcomes ongoing efforts to align bank and BCP legislation with international best practices in risk-based supervision and prudential norms. Moreover, efforts are also needed to improve the availability of credit information on borrowers, and to strengthen the bank supervisor's loan classification system. The mission welcomed efforts underway with Fund TA to migrate to international accounting standards (i.e. IFRS) for banks and in supervisory reporting. The supervisory approach and soundness of cooperatives are expected to strengthen as a result of new legal requirements (e.g., increased capital adequacy and provisioning) to be enacted early next year. This, in turn, would make possible setting up a liquidity assistance facility and a deposit insurance scheme for cooperatives, in line with the 2010 FSAP update recommendations. The authorities' anti-money laundering plan (AML/CFT) launched in June 2013 needs to be activated as soon as possible. There are legal and operational shortcomings in controlling the cross border physical transportation of cash and bearer negotiable instruments while corruption continues to be a serious obstacle for effective actions. In this context, the authorities' agreement with the Central Bank of Brazil on measures to control cross-border cash flows is a welcomed advancement. Additional Fund TA is available to support the authorities as they continue to implement the plan. C. Achieving development goals. Paraguay faces widespread structural weaknesses that have hindered productivity and growth potential. These include poor quality of infrastructure, education and the legal system. In fact, the country ranks relatively low in the World Economic Forum's Global Competitiveness Index (119/148) and the World Bank's Doing Business Indicators (109/185). The authorities' reform agenda rightly targets key areas to lift productivity, a key driver of long-term growth prospects and sustainable improvements in living standards. Growth prospects could improve further if structural reforms deepen and/or expand to other areas. Labor market inefficiencies, in particular, will have to be addressed to support the development strategy. The large informal sector in Paraguay has hindered productivity and overall economic growth. To some extent, this informality has flourished given labor market institutions that are weak by international standards, with structural rigidities linked to hiring and firing practices and redundancy costs. Efforts to increase female labor force participation-a large part of the informal sector -- and to improve the quality of training would also help raise productivity and lower poverty. Civil service and public enterprise (PE) reforms are needed to improve efficiency and cost effectiveness. The civil service should seek to attract and maintain qualified personnel at a competitive salary while at the same time opening the fiscal space to increase essential social and infrastructure spending. PEs play an important role in key sectors, and increasing their efficiency can help ease constraints their capacity to invest. Thus, the government should continue improving public enterprise monitoring and performance and consider increasing water and electricity rates and eliminating the general diesel fuel subsidy- while including targeted safety net measures to ensure that the most vulnerable are protected. In addition, it would be crucial to establish a long-term development plan to make sure that PEs can accompany the robust growth outlook, particularly in the energy sector, to avoid bottlenecks. "The mission commended the government's focus on reducing poverty. While sustained strong economic growth is no doubt an essential condition for reducing poverty, the mission welcomed the holistic approach that the government is implementing to tackle several key dimensions of poverty: vulnerability (social safety nets through conditional cash transfer programs and targeted subsidies), social exclusion (increase access to basic services such as schooling, health, safe water and sewerage, and electricity) and economic exclusion (expand opportunities to increase earnings, such as by improving rural roads and enhancing small-scale farmers' earnings). To succeed, assuring the long-term sustainability of all these initiative will be crucial." =============================== T R I N I D A D & T O B A G O =============================== CL FIN'L: St Lucia Seeks to Comfort CLICO Policy Holders -------------------------------------------------------- Caribbean360.com reports that the St. Lucia government in November said it would continue to work with other Caribbean countries affected by the collapse of the Trinidad-based insurance conglomerate, Colonial Life Insurance Company (CLICO) in seeking to ease the problems of policy holders. Prime Minister Dr. Kenny Anthony, who is also the finance minister, said that since the collapse of the Trinidad-based CL Financial, the parent company of CLICO in 2009, "CLICO International Life Insurance Limited has experienced serious liquidity problems," according to Caribbean360.com. Dr. Anthony said in May 2010, the Registrar of Insurance intervened in the operations of the St. Lucia branch operations and imposed a prohibition to writing any new contract of insurance and to refrain from any action that was adverse to the policyholders, the report recalls. The report discloses that Dr. Anthony said that in April 2011, the Eastern Caribbean Supreme Court appointed Richard Surage of PKF Professional Services as judicial manager for the branch and that over the past months, the Eastern Caribbean governments and the court appointed judicial managers "have considered several restructuring options and their financing implications. "We continue to work assiduously with the objective of deriving a regional solution which is optimal for policyholders in all practical circumstances," Dr. Anthony said, adding the St. Lucia government "continues to work closely with the government of Barbados and other OECS governments in an effort to secure the most advantageous and beneficial interest of our policyholders," the report notes. "Government recognizes the burden which policyholders have had to endure and the tolerance and patience exhibited thus far," the report quoted Dr. Anthony as saying. "Government therefore remains committed to arriving at a practical solution at the earliest. However, the reality of the situation is that the issues surrounding the collapse of CLICO cannot be fully resolved without our regional partners," Dr. Anthony added, the report relays. Last year, the report notes, St. Vincent and the Grenadines Prime Minister Dr. Ralph Gonsalves said that CLICO's total exposure amounted to 16 per cent of the gross domestic product (GDP) for member countries of the Eastern Caribbean Currency Union (ECCU). Dr. Gonsalves, the report relays, said this would translate in the region of US$800 million in liabilities in CLICO Trinidad, CLICO Barbados and also British American Insurance Company (BAICO). The report notes that CLICO operations are being sold off or placed in government custody across its regional markets; a move taken by different countries to protect policyholders after the Trinidad-owned insurance group ran into liquidity troubles at the close of 2008. CLICO and its parent CL Financial were rescued by the Trinidad government, which is now selling off businesses owned by the conglomerate, the report adds. About CL Financial CL Financial Limited is a privately held conglomerate in Trinidad and Tobago. Founded as an insurance company by Cyril Duprey, Colonial Life Insurance Company was expanded into a diversified company by his nephew, Lawrence Duprey. CL Financial is now one of the largest local conglomerates in the region, encompassing over 65 companies in 32 countries worldwide with total assets standing at roughly US$100 billion. * * * As reported in the Troubled Company Reporter-Latin America on Aug. 6, 2013, Caribbean360.com said that over TT$8 billion worth of Colonial Life Insurance Company Limited's (CLICO) profitable business will be transferred to Atruis, a new company that will be owned by the state. CLICO is a subsidiary of CL Financial Limited. The Trinidad Express said that the Cabinet approved the transfer as the Finance and General Purposes Committee continues to discuss a letter of intent hammered out by the Ministry of Finance and CL Financial's 400 shareholders, which envisions taxpayers will recover the more than TT$20 billion Government has injected since 2009 to keep CL subsidiary CLICO and other companies afloat, according to Caribbean360.com. Caribbean360.com noted that CLICO financially caved in on itself at the end of 2008 after the investment instruments of major policyholders matured and they wanted hundreds of millions of dollars they were owed. Caribbean360.com related that at its annual general meeting in Sept. 2013, CL Financial shareholders voted to extend the agreement with Government until August 25, 2014, while Cabinet decides on a new framework accord to recover the debt owed to Government through divestment of CL subsidiaries, including Methanol Holdings, Republic Bank, Angostura Holdings, CL World Brands and Home Construction Ltd. Proceeds from the divestment of these assets will go toward Government's recovery of the billions it pumped into CLICO, Caribbean360.com said. *********** Monday's edition of the TCR-LA delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR-LA editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR-LA constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR-LA editor holds some position in the issuers' public debt and equity securities about which we report. Tuesday's edition of the TCR-LA features a list of companies with insolvent balance sheets obtained by our editors based on the latest balance sheets publicly available a day prior to publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Submissions about insolvency-related conferences are encouraged. Send announcements to conferences@bankrupt.com *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Valerie U. Pascual, Julie Anne L. Toledo, Frauline S. Abangan, and Peter A. Chapman, Editors. Copyright 2013. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000 or Nina Novak at 202-241-8200. * * * End of Transmission * * *