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/raid1/www/Hosts/bankrupt/TCRLA_Public/180323.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, March 23, 2018, Vol. 19, No. 59 Headlines A N T I G U A & B A R B U D A ANTIGUA & BARBUDA: Clears IMF Debt Ahead of Elections B A H A M A S BAHAMAS: Must Make Changes to Exit List of Uncooperative Countries B R A Z I L BANCO BTG: Moody's Hikes Long-Term LC Deposit Rating to Ba2 BR PROPERTIES: Fitch Affirms BB- IDR; Outlook Negative NOVA SECURITIZACAO: Moody's Assigns Ba2 Global Scale Rating to CRI D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Senate OKs US$50M IDB Loan to Improve Tax Mgmt DOMINICAN REPUBLIC: Banana Growers Scream as Haitian Workers Leave PAWA DOMINICANA: Charges Could Strike a Final Blow on Airline E C U A D O R GUATEMALA: Growth Falls Short to Achieve Lift of Living Standards J A M A I C A JAMAICA: BOJ Records Decline in Counterfeit Currency Notes JAMAICA: National Poverty Reduction Program Launched - - - - - =============================== A N T I G U A & B A R B U D A =============================== ANTIGUA & BARBUDA: Clears IMF Debt Ahead of Elections ----------------------------------------------------- Caribbean360.com reports that just hours before residents of Antigua and Barbuda went to the polls this morning, Prime Minister Gaston Browne disclosed that his administration had fully paid off the twin-island nation's debt to the International Monetary Fund (IMF). At a press conference, ahead of the general election, he said his government had given instructions to the Eastern Caribbean Central Bank to make the final payment of EC$12 million (US$4.4 million) to "retire that EC$320 million (US$118.5 million) loan in its entirety," according to Caribbean360.com. "It means therefore that from March 21 we will no longer be indebted to the IMF and that would have signaled to the international community and to investors that the Antiguan economy is strong," Mr. Browne told reporters, the report notes. The IMF loan was approved back in 2010, under a United Progressive Party (UPP) administration -- led by Baldwin Spencer and in which current UPP leader Harold Lovell was Finance Minister -- to support the government's plan to address rising debt, weak economic growth, and the effects of the economic crisis, the report relays. Questioned about the timing of the debt repayment, Prime Minister Browne was forthright about it potentially benefitting his Antigua and Barbuda Labor Party (ABLP) going into the poll, the report relays. "It so happens that we would have paid it down to $12 million on the eve of elections, so why not pay it off and get the credit going into elections? So I will accept that it is politically opportune to do it at this time; I'm not going to hide from that. But the reality is it was done and it will ultimately benefit the people of Antigua and Barbuda," he said, the report notes. "So I want to ask the people of Antigua and Barbuda a very simple question: I want to know if they're going to support the leader and the party who took them to the IMF or the leader and the party who took them out of the IMF?" he added, notes Caribbean360.com. The report relays that Mr. Browne also disclosed that Venezuela would be writing off a significant portion of Antigua and Barbuda's PetroCaribe debt, which stands at half a billion dollars. He said he had received confirmation that a letter would soon be sent confirming "the forgiveness of up to 50 per cent of the PetroCaribe debt," the report adds. ============= B A H A M A S ============= BAHAMAS: Must Make Changes to Exit List of Uncooperative Countries ------------------------------------------------------------------ RJR News reports that the Bahamas must undergo changes to its legal and regulatory framework, and implement additional accounting and reporting obligations in order to be removed from the European Union's (EU) list of uncooperative countries. Those comments came from Minister of Financial Services Brent Symonette in an address to that country's parliament, notes the report. Mr. Symonette added that the legislation to make those things happen will be debated by Parliament soon. Minister Symonette reminded the House members that the government had begun working on these measures to counter any kind of blacklisting by the EU, says the report. However, the government had not responded correctly to the EU's request for commitment to enact those changes by the end of the year and The Bahamas was thus blacklisted, it adds. =========== B R A Z I L =========== BANCO BTG: Moody's Hikes Long-Term LC Deposit Rating to Ba2 ----------------------------------------------------------- Moody's Investors Service has upgraded Banco BTG Pactual S.A.'s (BTG) long term local currency deposit to Ba2, from Ba3 and senior unsecured MTN to (P)Ba2 from (P)Ba3. Its standalone baseline credit assessment (BCA) was raised to ba2, from ba3. At the same time Moody's upgraded the bank's long-term national scale deposit rating to Aa2.br from A1.br. BTG's long term foreign currency deposit rating of Ba3 as well as short term local and foreign currency deposit rating of NP and the short term Brazilian national scale rating of BR-1 were affirmed. The outlook on its ratings is now negative(m), in line with the negative outlook on Brazil' sovereign ratings. Moody's also upgraded BTG's Grand Cayman Branch's foreign currency senior unsecured debt rating to Ba2, from Ba3, and the subordinate debt rating to Ba3, from B1; BTG's Luxembourg Branch's preferred stock non-cumulative debt rating was upgraded to B2(hyb), from B3(hyb). The rating action concludes the review of BTG's ratings which was initiated on November 29, 2017. Upgrades: Issuer: Banco BTG Pactual S.A. -- Adjusted Baseline Credit Assessment, Upgraded to ba2 from ba3 -- Baseline Credit Assessment, Upgraded to ba2 from ba3 -- Counterparty Risk Assessment, Upgraded to Ba1(cr) from Ba2(cr) -- Senior Unsecured MTN Program, Upgraded to (P)Ba2 from (P)Ba3 -- Long term local Deposit Rating, Upgraded to Ba2, negative, from Ba3 -- Long term NSR Deposit Rating, Upgraded to Aa2.br from A1.br Issuer: Banco BTG Pactual S.A., Grand Cayman Branch -- Counterparty Risk Assessment, Upgraded to Ba1(cr) from Ba2(cr) -- Subordinate Regular Bond/Debenture, Upgraded to Ba3 from B1 -- Senior Unsecured MTN Program, Upgraded to (P)Ba2 from (P)Ba3 -- Senior Unsecured Debt Rating, Upgraded to Ba2, negative, from Ba3 Issuer: Banco BTG Pactual S.A., Luxembourg Branch -- Counterparty Risk Assessment, Upgraded to Ba1(cr) from Ba2(cr) -- Pref. Stock Non-cumulative, Upgraded to B2(hyb) from B3(hyb) -- Senior Unsecured MTN Program, Upgraded to (P)Ba2 from (P)Ba3 -- Senior Unsecured Debt Rating, Upgraded to Ba2, negative, from Ba3 Affirmations: Issuer: Banco BTG Pactual S.A. -- Counterparty Risk Assessment, Affirmed NP(cr) -- Short term local Deposit Rating, Affirmed NP -- Short term foreign Deposit Rating, Affirmed NP -- Short term NSR Deposit Rating, Affirmed BR-1 -- Senior Unsecured MTN Program, Affirmed (P)NP -- Long term foreign Deposit Rating, Affirmed Ba3, stable Issuer: Banco BTG Pactual S.A., Grand Cayman Branch -- Counterparty Risk Assessment, Affirmed NP(cr) -- Senior Unsecured MTN Program, Affirmed (P)NP Issuer: Banco BTG Pactual S.A., Luxembourg Branch -- Counterparty Risk Assessment, Affirmed NP(cr) Outlook Actions: Issuer: Banco BTG Pactual S.A. -- Outlook, Changed To Negative(m) From Rating Under Review Issuer: Banco BTG Pactual S.A., Grand Cayman Branch -- Outlook, Changed To Negative From Rating Under Review RATINGS RATIONALE The upgrade of BTG's ratings reflects the bank's move to a less complex business profile and resulting stabilization of its balance sheet, particularly funding and liquidity, and revenue generation. The rating action also incorporates Moody's expectation that its revenue mix and future growth potential are centered on more balanced business segments with contained risk taking in terms of market, credit and liquidity risks. BTG's consistent income generation from steady fee and interest accruing businesses such as Asset & Wealth Management and corporate lending have helped to soften the more volatile stream coming from its Sales and Trading operation in 2017. The growing assets and wealth under management and good ranking in capital markets deals attest to the gradual recovery of BTG's franchise, and the volumes are on track to reach 3Q2015 levels. At the same time, BTG's cost cutting discipline has helped support profitability at sound levels, with net income to tangible assets reaching 1.9% in 2017, despite declining sharply from 3.1% in 2016. The bank's ample operational leverage should benefit from increased business volumes. While volatile earnings from sales and trading remain relevant to BTG's bottom line, Moody's expect revenues from steady sources to contribute a similar 50% share of total revenues as reported in 2017, supporting the sustainability of the bank's new business model. BTG's risk profile in 2017 was also supported by the sale of assets and investments in past years and cautious corporate lending. With the upcoming sale of its Petro Africa investment, expected to be finalized in 2018, BTG will conclude its deleveraging strategy of prior years. Moody's expect market risk to stabilize at lower levels, despite potential rapid swings at times, while credit risk -- a modest 1.8x of adjusted capital in December 2017 -- will gradually increase, as focus turn to corporate lending as a contributor to stable earnings. However, it is unlikely that leverage will return to the 6.7x peak observed in Q3 2015. In terms of capitalization, BTG has held a considerably improved position for the past 12 months, with Moody's tangible common equity to risk weighted assets (TCE / RWA) of 14.5% in December 2017. Its regulatory capital has been similarly strong, with CET1 ratio at 12.4%. The expectation of consistent internal earnings generation will reflect in increased capital, which will support the bank's asset growth. BTG's increasing ability to tap unsecured funding and extend maturities has positively reflected in improved liquidity, as reflected in the holdings of large volume of liquid assets, which also reduces its exposure to funding risk. Nevertheless, BTG remains reliant on its institutional client base for funding, an intrinsic dependence that management plans to address with investment in a new digital bank platform, now under development. The bank restored its access to capital markets following the USD500 million senior note placement in December 2017. The negative outlook on BTG's global scale long-term local deposit and senior unsecured debt ratings reflects the negative outlook on Brazil's Ba2 sovereign rating and considers the high credit interlinkages banks have with their sovereigns, directly via holdings of government bonds, and indirectly, via lending book exposure to the real economy. WHAT COULD CHANGE THE RATING UP/DOWN In line with the negative outlook, the rating does not face upward pressure at this time. However, the outlook could be stabilized if and when the sovereign outlook returns to stable. BTG's ratings could be downgraded if Brazil's sovereign rating is downgraded. Also, the bank's ratings could face downward pressure if 1) asset risk faces a sharp deterioration; 2) TCE/RWA records a meaningful decline; 3) profitability pressures arise from consistently lower revenue generation; and 4) access to unsecured funds and/or the volume of liquid resources is insufficient to counterbalance its intrinsic market funds reliance. The principal methodology used in these ratings was Banks published in September 2017. BR PROPERTIES: Fitch Affirms BB- IDR; Outlook Negative ------------------------------------------------------ Fitch Ratings has affirmed BR Properties S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB-' and National scale long-term rating at 'A(bra)'. The Rating Outlook for the corporate ratings remains Negative. BR Properties S.A.'s ratings are supported by the company's position as the largest Brazilian commercial properties company, with high-quality properties and tenant base. BR Properties' conservative liquidity strategy, with low refinancing risk from an extended debt amortization profile, is a key rating consideration. The ratings are also supported by the estimated BRL7.5 billion market value of properties in December 2017 (excluding projects under development), covering by 3.3x the company's net debt, and by the expectation that coverage ratio should strengthen due to a combination of significant lower interest rate in Brazil and a gradual improvement in EBITDA generation. The Negative Outlook continues to reflect the still challenged business environment and BR Properties' challenges to reduce its high vacancy rates (22%), in order to recover operational cash flow generation and report leverage, measured by net debt/EBITDA, at more conservative levels compared to current levels, to avoid continued pressure on its ratings. BR Properties' leverage is high and deleveraging has been slower than expected due to relevant asset acquisitions and weak economic scenario that negatively impacted vacancy rates and rental prices, despite the capital increase of BRL953 million in July 2017. In Fitch's opinion, BR Properties still has to demonstrate its commitment to maintain leverage at lower levels. KEY RATING DRIVERS Leverage Reduction Slower than Expected: Leverage reduction has been slower than previously projected due to relevant properties acquisition and weaker EBITDA generation negatively affected by adverse business environment and lower scale of operations. In 2017, net debt/EBITDA was 7x and Fitch's base case net leverage projection for 2018 has been revised to about 6x, falling to 5.3x during 2019. This compares with expected net leverage of 5.9x in 2017 and 4.6x in 2018 during the 2017 rating review. Relative to the value of the company's property portfolio, loan-to-value ratio was 43% and 29% on a net basis in December 2017. BR Properties' strategy for future acquisitions and the successful increase in EBITDA from lower vacancy rates will be key for leverage ratios and determine future rating actions. Ratings pressure could heighten if the company is not able to present a clear deleveraging trend in the medium term. During 2014 to 2017, the company sold more than BRL5 billion of assets and received a capital increase of BRL953 million, while debt reduction was about BRL2.2 billion and dividends totalled approximately BRL2.5 billion. As of Dec. 31, 2017, BR Properties had BRL3.3 billion of total debt. EBITDA to Gradually Recover: Fitch expects cash flow from lease agreements to gradually improve, in case a gradual recovery of business environment is confirmed, with positive affect on vacancy rates. The company's cash flow generation fell since 2014 due to the negative economic conditions and lower scale of operations, which resulted in an increase in leverage and lower interest coverage ratios. This was intensified by property acquisitions of about BRL1.2 billion during 2016 and 2017. If BR Properties is not successful in reducing vacancy rates and recovering cash flow generation in the short term, the ratings will be pressured. Fitch projects EBITDA around BRL375 million in 2018, improving to about BRL427 million in 2019. BR Properties generated BRL320 million of EBITDA and cash flow from operations was negative BRL17 million in 2017, as per Fitch's calculation, pressured by high financial expenses. Investments of BRL564 million and dividend distributions of BRL7 million resulted in negative FCF of BRL589 million during 2017. BR Properties received BRL953 million of capital increase and about BRL324 million from sale of assets in 2017. Interest coverage, measured as EBITDA/interest, remained low and was 0.9x in 2017, compared with 0.8x in 2016 and 1.5x in 2015, and Fitch projects to improve to 1.3x in 2018. Vacancy Rates Remain a Concern: Fitch expects a slow recovery in Sao Paulo commercial properties market during 2018 and 2019. Lower delivery cycle, higher net absorption, growing demand and flight to quality should support a reduction in vacancy rates and rental prices recovery. However, Fitch still has a cautious view on the recovery speed. BR Properties' activities are concentrated in Sao Paulo (51% of total gross leasable area) and Rio de Janeiro (44%). In Fitch's view, the important presence in Rio de Janeiro market adds higher challenges to BR Properties, due to the strong economic and security crisis in the state, which could result in higher challenges for the recovery of this market. BR Properties continued to report high vacancy rates due to Brazil's difficult business environment and the company's recent properties acquisition. In December 2017, financial vacancy was 22% and physical vacancy was 30.2%. Excluding recent acquisitions (Passeio Corporate, Galpao Imbuia and Centenario Plaza Complex), financial vacancy would reduce to 12.3%. Fitch estimates that the early termination of Petrobras' lease contract of West Tower and part of East Tower of Ventura office building should have a negative impact of approximately 4.4 p.p. in the company's physical vacancy. However, Petrobras' decision to return part of Ventura building will have no impact on BR Properties' revenues during 2018, due to penalty fees. DERIVATION SUMMARY BR Properties' historically strong liquidity, with low refinancing risk from an extended debt amortization profile, is a key rating consideration. BR Properties leverage is still high and the expected reduction is taking longer than anticipated. The company's interest coverage ratios and leverage are weaker than players in the mall segment. The company's aggressive growth strategy in the short to medium term also adds uncertainty about the company's commitment to reduce leverage to more conservative levels, and is incorporated in the Negative Outlook. BR Properties is the largest commercial properties company in the fragmented Brazilian market, with high-quality properties and tenant base. The company had an estimated market value of properties of BRL7.5 billion in December 2017 (excluding projects under development), with a gross leasable area of 595,897 square meters. The company's assets are located in Brazil, mainly in Sao Paulo and Rio de Janeiro, and are concentrated in office buildings following the sale of several properties between 2014 and 2016. BR Properties is rated below BR Malls Participacoes (FC IDR BB/Stable, LC IDR BB+/Positive, National Scale rating AA+(bra)/Positive), Iguatemi Empresa de Shopping Centers S.A. (AAA(bra)/Stable), Multiplan Empreendimentos Imobiliarios S.A. (AAA(bra)/Stable), and Sonae Sierra Brasil S.A. (AA(bra)/Stable) due to more volatile cash flow generation capacity from office buildings compared to a more resilience EBITDA generation of the malls operators. BR Properties' vacancy rates are higher than malls operators, as demand for commercial properties is directly related to Brazil's macroeconomic conditions and was very affected by recent recession. KEY ASSUMPTIONS Fitch's Key Assumptions Within Fitch Rating Case for the Issuer -- Vacancy rate gradually declining during 2018 and 2019; -- No sale of assets; -- Property acquisition of BRL71 million in 2018; -- Minimum dividends distribution; -- Maintenance of adequate liquidity. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action A rating upgrade for BR Properties is not likely in the near future. A sustainable recovery of cash flow generation and maintenance of leverage at more conservative levels for a longer period could result in a stabilization of the Rating Outlook. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- Expectation that net leverage will not reduce to below 6.0x in the following years; -- EBITDA to gross interest expense coverage ratio consistently below 1.0x; -- Liquidity falling to levels that considerably weaken short- term debt coverage; -- Vacancy rates consistently above 20% and higher delinquency rates, which could result in a reduction in operational cash generation; -- Sale of assets that results in a weaker portfolio of properties, with a significant reduction of the company's cash flow generation capacity, absent a strong leverage reduction. LIQUIDITY Strong Liquidity: BR Properties' has preserved healthy liquidity in the last few years and a manageable debt amortization profile. As of Dec. 31, 2017, total cash and marketable securities was BRL1.1 billion and total debt was BRL3.3 billion. High cash cushion benefited from the capital increase of BRL953 million in July 2017 and sale of assets. Cash covered short-term debt of BRL599 million by 1.8x and was used to finance the company's negative FCF. About 66% of BR Properties' debt is secured and the company has demonstrated satisfactory ability to access local and international debt markets. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: BR Properties S.A. -- Long-Term Foreign Currency IDR at 'BB-'; -- Long-Term Local Currency IDR at 'BB-'; -- USD285 million senior unsecured perpetual notes at 'BB-'; -- Long-term national scale rating at 'A(bra)'. The Rating Outlook for the corporate ratings is Negative. NOVA SECURITIZACAO: Moody's Assigns Ba2 Global Scale Rating to CRI ------------------------------------------------------------------ Moody's America Latina Ltda. has assigned definitive ratings of Ba2 (Global Scale, Local Currency) and Aa2.br (National Scale) to the 26th Series of the first issuance of real estate certificates ("certificados de recebiveis imobiliarios" or CRI) issued by Nova Securitizacao S.A. (Nova Securitizacao, the Issuer or the Securitizadora) and backed by one series of debentures issued by BR Properties S.A. (BR Properties). Issuer: Nova Securitizacao S.A. - 26 Serie da Primeira Emissao 26 Serie - Primeira emissao, Assigned Ba2 / Aa2.br RATINGS RATIONALE The Ba2 (Global Scale, Local Currency) and Aa2.br (National Scale) ratings assigned to the CRI are primarily based on the willingness and ability of BR Properties (as debtor) to honor the payments defined in transaction documents, as reflected in the Ba2/Aa2.br senior secured ratings of the underlying debenture backing the CRI issuance. Any change in the ratings of the debentures will lead to a change in the ratings of the CRI. The certificates are backed by a real estate credit note ("cedula de credito imobiliario" or CCI), which in turn is backed by the debentures issued by BR Properties. The underlying debentures are rated Ba2 (Global Scale, Local Currency) Aa2.br (National Scale). BR Properties is responsible to maintain an expense reserve above or at the minimum level established in the transaction documents. BR Properties is also responsible for covering any extraordinary expenses. The CRI are floating rate notes, indexed to the DI (interbank deposit rate) rate plus a spread of 70 basis points. Interest will be paid on a quarterly basis, followed by two principal payments in March 2022 and March 2023. The definitive ratings on the CRI are based on a number of factors, among them the following: - The willingness and ability of BR Properties (as debtor) to make payments on the underlying debentures, rated Ba2/Aa2.br. BR Properties is therefore ultimately responsible for making timely principal and interest payments on the debentures backing the CRI. - Pass through structure; interest risk mitigated: The payment schedule of the CRI replicates the scheduled cash flow of the underlying debentures, with a one-day lag, which allows adequate timing to make payments under the CRI. The CRI payments will match any payments on the underlying debentures. The floating rate of DI to be paid under the CRI will be determined using the same DI period under the underlying debenture. To mitigate the risk of the additional one day of interest for the first interest payment, the debentures will incorporate one extra day of interest accrual. - BR Properties is ultimately responsible for the transaction expenses: BR Properties is responsible, under the transaction documents, for all the CRI expenses. In addition, the CRI will benefit from an expenses reserve, sized to cover any shortfall of cash to pay down transaction expenses. BR Properties is responsible to maintain a minimum of BRL 12,000 in the expenses reserve throughout the life of the transaction. - BR Properties' payment obligations under the debentures, assignment agreement and the trust expenses related to the CRI issuance will benefit from: (i) a fiduciary lien ("alienacao fiduciaria") of Galpao Tucano, an industrial warehouse/distribution center with 31,716 square meters of gross leasable area (GLA), located in the city of Jarinu, in Sao Paulo state, and (ii) a pledge of receivables ("cessao fiduciaria") of the current and future tenant rent flows related to the exploration of the building. The property is conveniently located near multiple modes of transportation, including toll roads, airports and seaport. - No commingling risk: BR Properties will make the payments due on the debentures directly to the transaction trust account held at Banco Bradesco S.A. (Ba2 negative). - Segregated assets: The CRI benefit from a fiduciary regime ("regime fiduciario") whereby the assets backing each series of CRI are segregated. These segregated assets are destined exclusively for payments on the CRI as well as certain fees and expenses, and will be segregated from all of the other assets on the issuer's balance sheet. However, the transaction is subject to residual legal risk because Nova Securtizacao's real estate credits can be affected by the securitization company's tax, labor and pension creditors. (For more information, see the "Fiduciary Regime and Segregation of Assets" section in the Pre-sale Report.) BR Properties S.A. [BOVESPA: BRPR3], headquartered in Sao Paulo, Brazil, is an owner, acquirer, manager, and developer of office, industrial and retail properties in the main economic regions of Brazil. As of December 31, 2017, the company held interests in 46 properties, totaling 685 thousand square meters of GLA, of which five land parcels are for future development. The Ba2 /Aa2.br senior secured ratings of the debentures that backs the CRI reflects BR Properties' dominant size and scale as one of the largest owners of high-quality, office and industrial properties in Brazil, its strengthening balance sheet, improved liquidity, as well as the collateral package of the offering The global scale senior secured rating is one notch above the company's senior unsecured (foreign currency) rating of Ba3. Nova Securitizacao was incorporated in 2007 as a securitization company (companhia securitizadora de creditos imobiliarios) authorized to issue real estate certificates (CRI) and agribusiness certificates (CRA) as per Brazilian law nß 9,514/97. To date, Nova Securitizacao has issued circa 25 transactions of CRI, totaling approximately BRL1.5 billion, with an outstanding amount of CRI of BRL 1.2 billion. Nova Securitizacao financial auditor is BLB Auditores Independentes. Factors that would lead to an upgrade or downgrade of the ratings: Any changes in the senior secured ratings of the underlying debentures will lead to a change in the ratings on the CRI. The principal methodology used in these ratings was "Moody's Approach to Rating Repackaged Securities" published in June 2015. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Senate OKs US$50M IDB Loan to Improve Tax Mgmt ------------------------------------------------------------------ Dominican Today reports that the Senate approved a US$50 million loan from the Inter-American Development Bank (IDB), aimed at improving Dominican Republic's tax administration efficiency and public spending. The initiative submitted by the Executive Branch on Nov. 21, 2017 aims to improve the tax collection efficiency and better educate the taxpayer population, according to Dominican Today. The Senate also approved a bill to amend Article 91 of Law 479-08 on Businesses and Individual Limited Liability Companies, the report notes. As reported in the Troubled Company Reporter-Latin America on Nov. 20, 2017, Fitch Ratings has affirmed Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. DOMINICAN REPUBLIC: Banana Growers Scream as Haitian Workers Leave ------------------------------------------------------------------ Dominican Today reports that the lack of day laborers poses a threat to banana harvests and exports to Europe, since most workers, of Haitian origin, when they get documents leave the farms and emigrate to tourist areas such as the East, the North and major cities, such as Greater Santo Domingo and Santiago, according to agro producers, military and govt. officials. Monte Asamsi Northwest Agricultural Association director Rafael Sosa warned that the Dominican Republic is on the verge of losing Europe's export market due to the lack of workers, according to Dominican Today reports that. The agro leader said the 15,787 Haitians working in the Northwest's banana plantations, all have headed to tourism regions such as Bavaro, the East, North Coast and others, the report notes. The head of the entity which groups banana producers said the foreigners have to have legal papers and access to public services, otherwise the product doesn't enter the European market, the report relays. "But ever since we gave them the regularization card, they leave our farms," Mr. Sosa told Listin Diario, the report notes. He noted that, like him, many banana workers complain that, of the eight cleaners who normally work in disinfecting the fruit, only two were operating, the report discloses. "With so much effort we regularized them, but they leave our farms," Mr. Sosa said, adding that other Haitians who have entered the country irregularly have been returned to their country, and now have no laborers to weed, cut, harvest and re-plant, the report adds. As reported in the Troubled Company Reporter-Latin America on Nov. 20, 2017, Fitch Ratings has affirmed Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. PAWA DOMINICANA: Charges Could Strike a Final Blow on Airline ------------------------------------------------------------- Dominican Today reports that the Dominican Civil Aviation Institute (IDAC) and the Civil Aviation Board (JAC) filed a complaint at the Justice Ministry against the suspended airline Pawa Dominicana for distraction of funds and defaults in payments and airport fees. A team of IDAC and JAC lawyers filed the lawsuit against the airline, on behalf of both agencies, whose measures will likely herald the end the carrier, according to Dominican Today. The airline which started flight operations just a few years ago was suspended from flying last Jan. 26, on financial violations with the aeronautics and civil aviation agencies, the report notes. Following the suspension, the airline left over 6,000 passengers stranded at Las Americas International airports and the terminals in Miami, Aruba, Curacao, San Martin, Havana and San Juan, the report relays. ============= E C U A D O R ============= GUATEMALA: Growth Falls Short to Achieve Lift of Living Standards ----------------------------------------------------------------- According to a Concluding Statement issued by IMF staff at the end of its official staff visit (or 'mission'), underpinned by solid, hard-earned macroeconomic stability, Guatemala's near-term growth has been good but falls short of the rates needed to achieve Guatemala's aspirations to meaningfully lift the living standards of its citizens. The mission recommends greater policy support for the economy over the near-term as well as supply side reforms -- including an integral fiscal reform -- that would sustain higher per capita growth rates and lift more Guatemalans out of poverty into the medium-term. The legacy of the Peace Accords and the Fiscal Pact are good basis to articulate the national dialogue in the pursuit of the Sustainable Development Goals. 1. Raising living standards continues to be the main challenge facing Guatemala. Income per capita over the past decade has grown at an average rate of 1 percent, a rate that is insufficient to meaningfully reduce Guatemala's high levels of poverty (currently at 60 percent of the population). Over the last two years, even though strong remittance inflows have helped sustain private consumption, growth has decelerated as a result of weak confidence, insufficient contribution of budget spending to growth, court-mandated suspensions of mining activities, and unfavorable external conditions. This slowdown has been broad- based, evident in employment, private consumption, and credit growth. 2. The mission forecasts a subdued recovery in the near term. Better U.S. growth, accommodative monetary conditions, and some support from pent-up government spending should allow growth to rise gradually to 3.6 percent by 2019. Achieving better growth outturns will require efforts to boost both public and private investment (which, at 14 percent of GDP overall, is low relative to Guatemala's peers). However, inadequate budgetary revenue constrains the government's ability to spend on physical and human capital and political fragmentation have diminished the prospects for those future reforms that would help attract private investment. 3. Inflation is expected to remain within the central bank's target range, with risks skewed toward the lower part of the band. Despite political uncertainties over the last couple of years, a sound monetary policy management helped keep inflation expectations firmly anchored. Also, slowing activity, low oil prices, and a strong currency kept headline inflation comfortably within the 4Ò1 percent target range last year, leaving aside a couple of short-lived bouts of food inflation. Core inflation has been mostly below the 3 percent lower bound of the target range in 2017 and, as of February 2018, is falling. Even as oil prices return to higher levels, staff's projected economic slack into 2019 is expected to result in a headline inflation rate that is below the mid-point of the target range over the near term. 4. The external position is stronger than implied by Guatemala's medium-term fundamentals and desirable policies. The combination of low oil prices and an upsurge in remittance inflows have resulted in a sizable improvement in the current account coupled with a modest appreciation of the exchange rate. By the same token, a partial normalization of these forces is expected to bring the current account to a modest deficit by 2021. Staff analysis suggests that the current account in 2017 was around 2¨ percent of GDP above what would be expected given Guatemala's young population and low per capita income. Spending more on public infrastructure, expanding social protection, and removing structural impediments to investment would facilitate an adjustment to a small current account deficit over the medium- term. Such an adjustment should be expected to be accompanied by a further, modest appreciation in the exchange rate. 5. The mission assesses the risks to the outlook to be tilted downwards. Domestic risks that are worth highlighting include both binding budget limits and insufficient progress in addressing spending under-execution, both of which limit the ability of the public sector to support growth. The delayed resolution of judiciary decisions that will allow for the normalization of the operations of a large mining company is also a risk. While global financial conditions are currently very accommodative, they could tighten abruptly, raising the future cost of external financing and weighing on growth. Guatemala also faces serious, albeit low probability, tail risks from future restrictions on financial transfers from the U.S. that disrupts remittances, an increase in the deportations of Guatemalan nationals from the U.S, or from a broader global retreat from trade openness and cross-border integration. Recalibrating the Policy Mix The macroeconomic policy mix should be geared towards supporting demand. Ideally, such support should come from a loosening of spending limits and an improvement in the government's ability to execute growth-enhancing social and infrastructure programs. However, the contribution of fiscal policy to economic growth may fall short of expectations. If true, and growth and inflation outturns are weaker than the central bank's forecasts, further monetary policy support should be considered. 6. A supplementary budget is necessary to support near-term growth and address longstanding infrastructure gaps and social needs. After Congress rejected the government's 2018 budget (which proposed a debt-financed increase in spending of around 10 percent in real terms), the government's ability to meaningfully expand spending is constrained. The government's supplementary budget -- that would aim to raise spending by up to 1/2 percent of GDP in 2018 -- merits support. During this budget year, a particular focus should be placed on raising capital spending. Spending should be increased by around 1 percent of GDP starting in 2019, centered on a few large-scale, high-impact programs designed to address essential social and infrastructure needs (below). Over the medium-term, this higher spending should be financed through a comprehensive tax reform. 7. In parallel, best efforts should be deployed to improve the execution of spending. Reforms of the Procurement Law, adopted over the past two years, have facilitated greater oversight over public spending and contributed to tackling corruption. However, as a side-effect, these new controls have led to slower execution of spending, given continued reluctance by public officials to execute projects because they could be personally liable and, at times, the lack of unified criteria in the assessment of bidding process by auditors. The mission welcomes efforts towards the identification of outstanding obligations for projects carried over from the previous year, and improved clarification in the application by Comptroller auditors of administrative versus criminal procedures. Additional measures to speed up execution, without diluting the appropriate focus on governance, could include a reform of the General Comptroller towards the development of preventive capacities and concurrent auditing, consensual interpretation of the norms applied to procurement, and the application of unified criteria to protect public employees from potential arbitrary decisions by auditors. The creation of the Vice Ministry for Transparency, aimed at coordinating and supervising the myriad decentralized entities involved in procurement, also shows promise coupled, in the medium term, with a new procurement law. The revised framework would favor the design of a national investment strategy to be input into a multi- year investment budget. 8. Monetary policy is rightly accommodative and further reductions in the policy rate should be considered if growth and inflation disappoint relative to the central bank's forecasts. Reflecting monetary policy accommodation, policy rates, adjusted for expected inflation are negative and are below estimates of the neutral policy rate. Nonetheless, there are important uncertainties to the outlook, including inadequate budget execution preventing fiscal policy from sufficiently supporting domestic demand. If activity indicators have not strengthened by mid-year and inflation risks appear to remain to the downside, the central bank should remain open to further lowering policy rates to support the economy. The recently-adopted microcredit, collateral, and factoring laws should facilitate monetary policy transmission. Putting in place a comprehensive securities market and public debt law, continued efforts towards discouraging financial dollarization, and encouraging competition in the banking sector would help deepen financial intermediation, support growth, and improve monetary policy transmission over the medium term. 9. The central bank's inflation targeting framework would benefit from allowing for greater exchange rate flexibility. Over the past 2-3 years, amidst strong remittance inflows and soft nominal imports from terms of trade gains, the central bank's foreign currency intervention rule has led to a sustained accumulation of foreign currency reserves. Going forward, the authorities should continue to allow greater currency flexibility to facilitate a smoother external adjustment to changing global and domestic conditions. Further widening of the margin under which FX intervention is triggered and reducing the amount of intervention undertaken once the rule has been triggered warrant consideration. If remittance flows were to abruptly decline, the authorities should respond with both sales of foreign exchange and a depreciation on the exchange rate. Higher Potential Growth, Better Living Standards and A More Resilient Financial System Reversing the downward trend in investment is key to raising living standards and capitalizing on the demographic dividend expected to occur over the next two decades. This will require actions on multiple fronts. First, improving business environment conditions. Second, an integral fiscal reform encompassing continued tax administration efforts, tax policy changes, and spending flexibility, all geared at high- impact projects in pursuit of the Sustainable Development Goals. Third, expanding social protection by creating more formal jobs in the economy. Last, but not least, sustained efforts to improve governance. 10. A better business climate is vital to spur private investment. The government is introducing an online system for businesses tax reporting and registration as well as a system of arbitration to resolve business disputes. Further efforts could be made to coordinate all entities involved in the awarding of construction licenses and reduce judicial backlogs in contract disputes. Simplifying customs procedures will be important to maximize the gains from the recently adopted customs unions with Honduras, with no detriment to ongoing revenue mobilization efforts or the warranted control of illicit flows. The authorities should strive for a swift incorporation of ILO Convention 169 into Guatemala's domestic legal system in a way that balances the need to attract investment and jobs in extractive industries with the rights and protections for indigenous people. Strengthening competition policies, including through the adoption of the pending competition law will be important to spur domestic investment and improve Guatemala's attractiveness to foreign investors. 11. Revenue mobilization efforts need to continue, within the context of an integral fiscal reform. A comprehensive tax reform is needed to raise revenues to at least 15 percent of GDP. A variety of tax policy changes will be needed including an increase in the PIT rates (which could be frontloaded), a simplification of the corporate income tax, higher indirect taxes, and redirecting some existing tax deductions to improve health and pension coverage. The resulting taxation system should be progressive, and any regressive effects compensated via well-targeted social spending (below). Tax reform efforts should be reinforced with continued tax and custom administration efforts to fight tax evasion, with a focus on reinforcing controls of the VAT with an emphasis on risk-based auditing, strengthening the large-taxpayer office management, improving the use of tax information to detect and correct non-compliance, enhancing SAT's tax collection executive faculties, including through better operationalization of bank secrecy provisions, and tightening controls of ports and the customs clearance process. 12. The additional revenues mobilized should be geared towards high-impact projects in pursuit of the Sustainable Development Goals. Such emblematic programs include increased coverage and quality of pre-primary and secondary education; enhanced preventive and primary health care; higher coverage of pensions, particularly for the self-employed, to alleviate poverty of the elderly; and improved coverage and targeting of the main cash transfer program. Such social investments are expected to more- than-offset any potential regressive effects arising from the proposed tax reform. Clearly, given the amounts involved, any such disbursements should hinge upon an improved coordination amongst the line Ministries involved and be subject to systematic evaluation as part of the annual budgetary exercise. The size of the existing infrastructure gap could require some private sector participation, for which it would be desirable to provide legal certainty to private investors by consolidating the numerous regulations currently existing in the sector. 13. As a complement to revenue mobilization, s pending needs to be made more productive. Achieving this goal would ideally be helped by scaling back the current earmarking of revenues and mandatory spending floors. Couching spending objectives within a medium-term budget framework, and greater accountability for outturns though an ex-post evaluation of performance would be important objectives in this respect. Labor-intensive health and education spending needs to be made more effective, including by shifting the input mix away from personnel costs and toward greater capital outlays. Better aligning pay with performance in the provision of such services and reforming current regulations of the Laws on the Civil Service and Salaries in Public Administration will be important milestones. Completing the public-sector personnel census is a wise decision to make the hiring public officials more transparent and to assess the cost of their salaries. 14. Tackling labor market informality will promote a fairer tax and social protection system. High informality in Guatemala results in low coverage for basic social protections, high poverty, and low productivity. Addressing informality would be facilitated by making the determination of the minimum wage more predictable, and as with part-time pay, less binding; raising the productivity of informal workers (by e.g., investment in rural roads and irrigation in the poorest areas); fostering apprenticeship schemes such as Mi Primer Empleo and other vocational training programs, and making the self-employed eligible for health and pension systems. 15. The financial system is well regulated and the time is ripe for it further modernization. Banks are well capitalized, appear to have sufficient liquidity, and nonperforming loans are low. Sharp increases in interest rates or severe liquidity shocks in U.S. dollar funding markets could challenge banks' resilience, although such shocks would be absorbed within available capital and liquidity buffers. Moreover, efforts are ongoing to buttress banks' ability to withstand such shocks, including through a requirement of supplemental capital for market risk and a liquidity coverage requirement for foreign currency holdings. The mission recommends further tightening of prudential requirements on FX loans to unhedged borrowers if existing measures fall short. More generally, circumstances seem appropriate for a gradual move towards Basel III standards. Finally, the new banking law currently with Congress, if passed, would strengthen the bank resolution framework and reinforce depositor protection. The initiative would introduce greater clarity regarding the triggers of an effective resolution, as well as safeguards for the use of public funds in the open-bank intervention scheme. 16. Improved governance is critical to durably raising investment. A reference for the region, collaboration between the General Prosecutor's office and the International Commission Against Impunity in Guatemala has been effective in enhancing independent investigation of acts of corruption. There is scope to strengthen the integrity of the judiciary by enhancing the appointment procedures for judges and magistrates (via reform of the Law and Regulation for the Nominations Committee), effectively implementing the merit-based system for the advancement of judges' careers, and fully applying the sanctions system--as per the new law on the judicial career. Online publication of judicial decisions is another important step towards reinforcing legal certainty. There is also room to strengthen the regime of asset disclosures for public officials through a more coordinated application, and stricter supervision, by the Comptroller's Office within the framework of the Public Probity Law. An additional step, to avoid conflict of interest and tackle illicit flows, is to ensure transparency on the ultimate beneficial ownership of corporate vehicles. 17. A stronger AML/CFT framework is paramount to support efforts against corruption and organized crime. Adoption of a revised AML/CFT bill, already endorsed in 2014 by the bank supervisor, the private sector, and international organizations, would make it more difficult to conceal proceeds of corruption and would deter illicit flows. The bill and implementing regulations, when established, would (i) expand the list of reporting entities to include notaries and other non-financial businesses and professionals, (ii) enhance preventive measures for reporting entities, (iii) establish an obligation for financial institutions to adopt a risk-based approach to managing and supervising risks and a sound sanctioning regime for noncompliance, (iv) improved protection for supervisors, and (v) enhance interaction between the supervisor and law enforcement authorities. In addition, risk- based AML/CFT supervision should be strengthened, both for offsite and onsite activities. Lastly, additional consideration should be given to reinforcing the supervisory framework of cooperatives. ============= J A M A I C A ============= JAMAICA: BOJ Records Decline in Counterfeit Currency Notes ---------------------------------------------------------- RJR News reports that there has been a decline in the number of counterfeit currency notes detected in circulation in Jamaica. According to the Bank of Jamaica's annual report, the total number of counterfeit notes detected during 2017 was 4,014, representing a value of J$4.7 million, according to RJR News. This was down from 4,517 pieces, valued at $4.9 million, in 2016, the report notes. The Bank of Jamaica says this was equivalent to 26 counterfeit notes per one million genuine notes in active circulation in 2017, relative to 32 pieces per million in 2016, the report relays. Meanwhile, during last year 425.9 million notes, valued at $343.8 billion, were processed by the central bank, compared to 430.7 million notes, valued at $319.3 billion, in 2016, the report says. Of the total number of notes processed, 84.7 per cent were deemed fit for re-circulation, an increase of 0.5 percentage points relative to 2016, the report notes. Banknotes considered unfit to re-enter circulation and counterfeit notes were destroyed, the report adds. As reported in the Troubled Company Reporter-Latin America on Feb. 5, 2018, Fitch Ratings has affirmed Jamaica's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'B' and has revised the Rating Outlook to Positive from Stable. JAMAICA: National Poverty Reduction Program Launched ---------------------------------------------------- RJR News reports that the Planning Institute of Jamaica (PIOJ) and the Ministry of Economic Growth and Job Creation morning launched the National Poverty Reduction Program. The program seeks to provide an accountability framework for national efforts to reduce poverty in Jamaica, according to RJR News. It will seek to empower persons through the strengthening of economic livelihoods, human capital development, and addressing psychosocial, cultural and normative factors that influence poverty, the report notes. The national program will also seek to strengthen basic rural and urban community infrastructure and accelerate coordination and capacity building among service providers, the report adds. As reported in the Troubled Company Reporter-Latin America on Feb. 5, 2018, Fitch Ratings has affirmed Jamaica's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'B' and has revised the Rating Outlook to Positive from Stable. *********** 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, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2018. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *