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       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

          Tuesday, October 20, 2020, Vol. 21, No. 210

                           Headlines



B R A Z I L

BRAZIL: Suspends Tariffs on Corn and Soy Until 2021
OI SA: S&P Hikes ICR to 'CCC+' on Reorganizational Plan Amendment
PETRO RIO: S&P Withdraws Prelim. 'B' LongTerm Issuer Credit Rating


C A Y M A N   I S L A N D S

CFG INVESTMENTS 2019-1: S&P Affirms 'BB' rating on Class B Notes


C O L O M B I A

GRAN COLOMBIA: Fitch Hikes LT IDR to B+, Outlook Stable


D O M I N I C A N   R E P U B L I C

DOMINICAN REPUBLIC: All Fuels Will Register New Rises
DOMINICAN REPUBLIC: Poised to Get US$373MM From Banks, Gold Miner


J A M A I C A

JAMAICA: BOJ Intervenes in Foreign Exchange Market With Flash Sale


M E X I C O

MEXICO: Chief Charged in US With Drug, Money Laundering Conspiracy
STATE OF SONORA: Moody's Cuts Issuer Ratings to B1/Baa2.mx

                           - - - - -


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B R A Z I L
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BRAZIL: Suspends Tariffs on Corn and Soy Until 2021
---------------------------------------------------
Rio Times Online reports that Brazil will suspend tariffs on corn
and soy imports from countries outside the Mercosur trade bloc
until early next year to help reduce food prices that are pushing
up inflation.

Brazil is the fifth largest country in the world and third largest
in the Americas.  Jair Bolsonaro is the current president, having
been sworn in on Jan. 1, 2019.

Standard & Poor's credit rating for Brazil stands at BB- with
stable outlook (April 2020).  Moody's credit rating for Brazil was
last set at Ba2 with stable outlook (April 2018).  Fitch's credit
rating for Brazil was last reported at BB- with negative outlook
(May 2020). DBRS's credit rating for Brazil is BB (low) with stable
outlook (March 2018).

As reported in the Troubled Company Reporter-Latin America, Fitch
Ratings' outlook revision in May 2020 for Brazil to negative
reflects the deterioration of Brazil's economic and fiscal outlook,
and downside risks to both given renewed political uncertainty,
including tensions between the executive and congress, and
uncertainty over the duration and intensity of the coronavirus
pandemic.


OI SA: S&P Hikes ICR to 'CCC+' on Reorganizational Plan Amendment
-----------------------------------------------------------------
S&P Global Ratings raised its global and national scale issuer
credit ratings on Brazil-based telecom operator Oi S.A. to 'CCC+'
and 'brBB', respectively, from 'SD' to reflect the completion of
the JRP amendment and the ongoing risk of a conventional default.

In addition, S&P raised its issue-level rating on Oi's unsecured
debt to 'CCC+' from 'CCC-' based on its unchanged recovery rating
of '4'.

S&P said, "The ratings incorporate our view of the tough economic
and competitive conditions, the challenging operational
transformation project, and our expectation that leverage will
remain high at least during the next two years, with adjusted gross
debt to EBITDA significantly above 6x and free operating cash flow
(FOCF) to debt close to 0%.

"The stable outlook reflects our view that Oi doesn't face
short-term liquidity pressures and our assumption that it will be
able to repay or refinance its debenture due January 2022. We also
assume Oi will successfully complete its JRP, including selling
assets and prepaying debt."

The upgrade follows the completion of Oi's JRP amendment, which
credit holders approved on Sept. 8, 2020, was ratified by the
judicial court on Oct. 5, 2020, and was published in Brazil's
federal official gazette on Oct. 8, 2020.

The JRP's amended terms now allow Oi to create isolated production
units (UPIs) to carve out assets and sell them in the next few
quarters, including its mobile assets and part of its
infrastructure assets. S&P assumes that the company will be able to
complete the asset sales (towers, data center, mobile,
infrastructure, and TV assets), raising about R$24 billion-R$27
billion in the next years.

In addition, if Oi reaches "liquidity events," it will prepay debt
owed to banks and export credit agencies (ECAs) with a 55%
discount. Those "liquidity events" are triggered if, after paying
down BNDES and Oi Movel's debentures, the net proceeds from the
sales of the mobile assets and part of the infrastructure assets
exceeds R$6.5 billion. S&P includes these prepayments in its
base-case scenario starting in 2022.

S&P said, "The ratings reflect our assumption that the company will
be able to refinance or repay its debenture due January 2022, and
therefore won't face short-term liquidity pressures, because its
next significant maturity wouldn't be until 2025. However, we
forecast cash flow leverage metrics to remain high in the next few
years, with adjusted gross debt to EBITDA significantly over 6x and
FOCF to debt close to 0% in the next two years. We expect the
credit metrics to start improving by 2022 with the prepayment of
debt.

With the asset sales, Oi will become a different company mainly
focused on its customers (residential and business) and offering
fixed broadband, fiber-to-the-home (FTTH), fixed telephony, and
infrastructure services. It will have forecast annual revenue of
about R$10.7 billion and EBITDA generation close to R$2.3 billion
in 2021, compared to R$18.5 billion and R$6.0 billion in 2020. Oi
also intends to remain a minority shareholder in the InfraCo, the
UPI that will hold the infrastructure assets, which we incorporate
into our forecasts through the equity method, since Oi won't
control the InfraCo, it won't be consolidated on Oi's balance
sheet, and Oi won't guarantee its debt. S&P also assumes that
InfraCo will start paying dividends by 2023, which we incorporate
into Oi's EBITDA.

S&P said, "Although we expect Oi to successfully create and
administrate the new company, we believe there are execution risks
and operational challenges given such a transformational event on
top of a tough economic environment. Moreover, Oi will face
significant competition in the fixed broadband segment because FTTH
has become a focus for most of its competitors due to expected high
returns, although we believe it has a significant competitive
advantage due to its geographic reach. Moreover, it will still
carry its legacy assets such as its copper lines, which face a
cyclical downturn with continuous disconnections in the next few
years. Therefore, we forecast revenues to decline in 2021 and 2022
and to start recovering only by 2023.

"We expect Oi to focus on its FTTH segment through the InfraCo,
significantly increasing the number of houses passed (HP) over the
next years. By the end of second quarter 2020, Oi had 6.7 million
HP and 1.3 million connected homes. It expects to increase the
number of HP by a 47% compound annual growth rate (CAGR) between
2019-2024, of which it expects to connect about 23% after three
years of implementation. Oi also estimates it has 388 thousand
kilometers of fiber cables across all Brazilian states.

"Furthermore, we forecast adjusted EBITDA margins of 21% in 2021
compared to 33% in 2020 based on the remaining assets profile,
which have lower margins than the assets that Oi will sell.

"We forecast significant cash consumption in 2020 due to high
capital expenditures (capex) of about R$7 billion. For 2021 and
2022, we forecast a significant drop in capex needs to R$1.7
billion and R$1.5 billion, respectively, but FOCF should remain
negative or close to zero in these years because the investments in
fiber will take some years to bring returns."


PETRO RIO: S&P Withdraws Prelim. 'B' LongTerm Issuer Credit Rating
------------------------------------------------------------------
S&P Global Ratings said that it has withdrawn its preliminary 'B'
long-term issuer credit rating on Petro Rio S.A. at its request.
The outlook at the time of withdrawal was stable. S&P also withdrew
its preliminary 'B+' issue-level rating on the company's proposed
senior secured debt, which did not proceed.

  Ratings List

  Not Rated Action; CreditWatch/Outlook Action
                         To          From
  Petro Rio S.A.
   Issuer Credit Rating  NR/--   B(prelim)/Stable/--
                         To     From

  Petrorio Luxembourg S.A.R.L
   Senior Secured       NR     B+(prelim)
    Recovery Rating     NR     2(85%)




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C A Y M A N   I S L A N D S
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CFG INVESTMENTS 2019-1: S&P Affirms 'BB' rating on Class B Notes
----------------------------------------------------------------
S&P Global Ratings downgraded the rating on CFG Investments Ltd.'s
series 2019-1's class A to 'BBB- (sf)' from 'BBB (sf)' and affirmed
the 'BB (sf)' rating on class B from the same level. The rating
action derives from the recent downgrade of Curacao to 'BBB- (sf)'
from 'BBB (sf)', as S&P believes that the currency risk is
mitigated at the sovereign rating of all jurisdictions.

The note issuance is an ABS transaction backed by unsecured
personal loan receivables originated in four jurisdictions: Aruba
(BBB+/Negative/A-2), Curacao (BBB-/Negative/A-3), Bonaire (not
rated), and Panama (BBB+/Negative/A-2).

S&P said, "For any scenario where the economy is pegged to the
dollar (Aruba, Curacao, and Panama), the approach is to assume a
100% loss for the maximum limit concentration allowed, since we do
not believe the currency peg would hold beyond the rating level. As
such, we considered the worst-case pool allowed by the
transaction's concentration limits." Doing so, when applying 100%
losses for this country, plus the original loss assumptions for the
other jurisdictions, the credit enhancement available for class A
is not sufficient to withstand the 'BBB' stress level."

As the rating action is strictly related to currency risk
associated to Curacao, it's important to highlight that the
transaction maintains strong levels of overcollateralization and
liquidity reserves, which were enhanced in August 2020. Key
considerations are that:

-- As of September 2020, CFG presents an overcollateralization
(O/C) level of $53,744,283 and optional enhanced O/C of
$55,595,495. The current O/C level considers $14,185,986 in cash
deposited in the borrower collection account.

-- Total hard credit enhancement represents 29.4% for class A and
20.2% for class B.

-- The reserve account remains fully funded ($2,580,000) and
represents almost twice the interest service and expenses
($1,215,262) paid on a monthly basis. CFG also maintains a
liquidity reserve of $2,000,000 funded from collections.

S&P will continue monitoring the development of sovereign ratings
for Aruba, Curacao, and Panama as well as the key performance
indicators for the transactions. As the sovereign rating on Curacao
currently has a negative outlook, a new downgrade would likely have
a negative impact on the ratings assigned to the transaction.

S&P Global Ratings acknowledges a high degree of uncertainty about
the evolution of the coronavirus pandemic. The current consensus
among health experts is that COVID-19 will remain a threat until a
vaccine or effective treatment becomes widely available, which
could be around mid-2021. S&P said, "We are using this assumption
in assessing the economic and credit implications associated with
the pandemic. As the situation evolves, we will update our
assumptions and estimates accordingly."

Environmental, social, and governance (ESG) credit factors for this
credit rating change:

-- Health and safety risk.




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C O L O M B I A
===============

GRAN COLOMBIA: Fitch Hikes LT IDR to B+, Outlook Stable
-------------------------------------------------------
Fitch Ratings has upgraded Gran Colombia Gold Corp.'s Long-Term
Foreign and Local Currency Issuer Default Ratings (IDRs) to 'B+'
from 'B'. In addition, Fitch has upgraded Gran Colombia's secured
gold notes to 'B+'/'RR4' from 'B'/'RR4'. The Rating Outlook is
Stable.

The upgrades reflect the improvement in the company's capital
structure due to strong free cash flow and capital raising, which
has led to substantial debt repayment. The rating upgrades reflect
an expectation that Gran Colombia will continue to maintain a
strong capital structure, and that its free cash flow will remain
robust following the transfer of its Marmato Lower Zone mine and
assets to Caldas Gold Corp.

Gran Colombia's 'B+' ratings continue to be constrained by the
company's small scale of operations compared to Fitch's gold mining
rated peers. The company's reliance on the Segovia mine for its
operating cash flow, the short mine life of its reserves, and the
sustainability of its low cash costs in the face of expected lower
grades over the coming years, are additional constraints on its
ratings.

KEY RATING DRIVERS

Positive Strategic Decisions: Gran Colombia has made a number of
strategic moves in the past 12 months that have given it a stronger
balance sheet and lowered risk. These moves include the spinoff of
the Marmato Low Zone project to Caldas Gold Corp, a company in
which Gran Colombia has a 53.5% interest, and spinning out Zancudo
to ESV Resources. Additionally, Gran Colombia has been able to
create value for underdeveloped assets while moving the USD269
million construction risk of the Marmato project off of its balance
sheet.

Net Cash Position: Gran Colombia had USD88 million of cash and
marketable securities as of June 30, 2020 and USD56 million of
total debt. The debt consists of USD41 million of amortizing gold
notes and USD15 million of optionally convertible subordinated
debentures. Gran Colombia's USD32 million net cash position
compares with a net debt position of USD38 million at the end of
2018, when the company had USD36 million of cash and USD74 million
of debt. The USD70 million turnaround in the company's net debt
position was driven by strong operating results and USD29 million
of net proceeds from an equity private placement.

Solid Free Cash Flow: Gran Colombia generated USD166 million of
consolidated EBITDA during the LTM ended June 30, 2020, which is an
increase from USD146 million in 2019 and USD102 million in 2018.
FCF was USD13 million during the first six months of 2020 and USD54
million in 2019. Fitch projects the company will generate about
USD200 million of EBITDA and USD75 million of FCF during 2020. The
impact of the coronavirus pandemic on the company's 1H20 output has
been more than offset by elevated gold prices.

Single-Asset Risk: More than 90% of Gran Colombia's mining
production and EBITDA during 1H20 came from mines at its Segovia
operation. Proven and probable reserves are extremely low at this
site, being equivalent to a three-year mine life. Short-term to
medium term risk is viewed as manageable, given exploration
activity on 24 veins at this site, which have increased measured
and indicated resources at Segovia. The company's dependence on
cash flow from one key operating site, however, makes it vulnerable
to production stoppages due to labor unrest or weather events. The
Segovia operations consist of three mines, one processing plant and
additional artisanal miners that operate on Gran Colombia's
approximately 9,000-hectare concessions.

Competitive Cost Structure: Gran Colombia had an all-in sustaining
cost (AISC) of production of USD916 per ounce in 2019 and a cash
cost per ounce of production of USD661. These figures place the
company firmly in the second quartile of the gold production cost
curve and are due to the high ore grade at Segovia. The company's
AISC is expected to increase over the next few years as head grades
at Segovia decline and the company increases capex on drilling.
During 1H20, Gran Colombia's Segovia operations had an average head
grade of 14.4 grams/ton (g/t). This compares with average reserve
grades of 10.5 g/t at Segovia. During 1H2020, the AISC increased
due to pandemic-related production disruptions.

Marmato Spin-off: Gran Colombia spun off of the Marmato Low Zone
operations to Caldas Gold Corp through a reverse takeover
transaction with Bluenose Gold during February 2020. These assets
consist of the existing underground gold mine at Marmato, the right
to mine the high-grade lower portion of the Echandia license area,
and the processing plant. Gran Colombia now owns 53.5% of Caldas
Gold following its amalgamation with SARC, the holder of mining
rights in Ontario. Caldas Gold is about to embark on a USD269
million deep mineralization project at Marmato. This project is
being funded through a CAD50 million private placement of warrants
and the issuance of USD83 million of subscription receipts that
convert into gold linked notes. The company is also expected to
enter into a streaming transaction. Neither the gold notes nor the
streaming transaction will have recourse to Gran Colombia.

DERIVATION SUMMARY

Gran Colombia's 'B+' rating results from its small scale of
operations, relatively low reserve mine life and lack of commodity
diversification, partially offset by the company's low leverage and
manageable debt on balance sheet, its high-grade Segovia asset, and
competitive all-in sustaining cost position relative to peers.

During 2019, Gran Colombia produced 239,991 ounces of gold. This is
considerably less than the sales of gold by Kinross Gold Corp
(BBB-/Positive) of 2.5 mm oz, AngloGold Ashanti Limited
(BBB-/Stable) at 3.3 mm oz, PJSC Polyus (BB/Stable) at 2.8 mm oz
and Agnico Eagle Mines Limited (BBB/Stable) at 1.8 mm oz. Gran
Colombia's mine life of 3 years pales in comparison to Kinross at
nine years, Agnico Eagle at about 11 years, AngloGold Ashanti at 12
years, and Polyus at 20 years.

Gran Colombia's AISC of USD916/oz place it firmly in the second
quartile of the production cost curve. The company also has a
stronger balance sheet versus these larger peers. These factors are
largely offset by the high risk of operating at one dominant mining
site.

KEY ASSUMPTIONS

Gold prices of USD1,750/oz in 2020, USD1,400/oz in 2021 and
USD1,200/oz in 2022;

Gold sales drop 10% in 2020 to 216,000 ounces before recovering to
237,000 ounces in 2021; and then declining to 227,000 ounces in
2021

Capex is USD45 million in 2020 before escalating to USD159 million
in 2021 and USD162 million in 2022. The latter figures include the
Caldas Gold expansion capex to be funded by non-recourse financing

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

  -- The company's small size and lack of diversification limit its
upward rating mobility;

  -- An upgrade to 'BB-' is not likely until the company lowers its
single mine site risk;

  -- An increase in the reserve life of Segovia would also be a
necessary consideration for a positive rating action

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

  -- Deterioration in liquidity position resulting in cash and
equivalents below USD35 million on a prolonged basis;

  -- Prolonged strikes or mine closures that would halt or
significantly lower gold production;

  -- Large debt-funded acquisitions.

LIQUIDITY AND DEBT STRUCTURE

Strong Liquidity Position: Gran Colombia reported Fitch-adjusted
cash and equivalents of USD88 million as of June 30, 2020. The
company also had USD4 million of cash in its gold-linked notes
trust account. This amount of liquidity comfortably covers USD12
million of short-term debt related to the gold-linked notes.

Gran Colombia's debt consists of USD41 mm of gold notes outstanding
and USD15 million of convertible unsecured subordinated 2024
debentures. The company's amortization schedule is manageable with
about USD10 million per year of gold-linked notes amortizing in
2021, 2022 and 2023

Caldas Gold Corp, a 53.5% owned subsidiary of Gran Colombia, has
raised USD83 million of gold linked notes and will raise about
USD110 million through a streaming transaction. This debt, along
with funds from an equity issuance, will be used to fund a USD269
million expansion project. Caldas Gold Corp's debt will is being
structured so that it is non-recourse to Gran Colombia

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING

The principal sources of information used in the analysis are
described in the Applicable Criteria.

ESG CONSIDERATIONS

Gran Colombia has an ESG relevance score of '4' related to
Community Relations, as the company is exposed to local unrest in
the communities surrounding its Marmato and Segovia mining
operations, which has a negative impact on the credit profile, and
is relevant to the ratings in conjunction with other factors.

Gran Colombia has an ESG relevance score of '4' for Labor Relation
risks, as Gran Colombia partially relies on third-party artisanal
miners for its gold production, which has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.

Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.




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D O M I N I C A N   R E P U B L I C
===================================

DOMINICAN REPUBLIC: All Fuels Will Register New Rises
-----------------------------------------------------
Dominican Today reports that for the week of Oct. 17-23, all fuels
will register slight increases compared to last week, according to
the Ministry of Industry, Trade, and Mipymes (MICM).

Regular gasoline will be sold at RD$198.30, and the premium at
RD$208.30 for an increase of 60 and 50 cents per gallon,
respectively; a gallon of regular diesel will rise to RD$1.80, will
sell at RD$148.50, and premium will be sold at RD$159.70 increasing
by RD$2.60, as detailed in a press release from the institution,
according to Dominican Today.

Liquefied petroleum gas (LPG) will sell for RD$113.30, for an
increase of 1.50 pesos per gallon, the report notes.

Likewise, avtur will increase by RD$1.70 per gallon, will sell at
RD$108.10; kerosene will cost RD$131.80, up RD$1.90; fuel oil #6
will be sold at RD$ 97.20 per gallon, up RD$1.80; and fuel oil #1
will register a rise of RD$1.80, will sell for RD$109.50, the
report relays.

Natural gas will remain at RD$28.97 per cubic meter, the report
adds.

                    About Dominican Republic

The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district, the report
relays.  Luis Rodolfo Abinader Corona is the current president of
the nation, the report saysa.

The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."

An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.

Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).


DOMINICAN REPUBLIC: Poised to Get US$373MM From Banks, Gold Miner
-----------------------------------------------------------------
Dominican Today reports that the renegotiation of the agreement
with Barrick Gold includes an advance tax payment corresponding to
next year of 95 million dollars and 47 million dollars for this
year, Finance Minister Jochi Vicente said.

"The financial intermediation entities will make an advance of
around 20 billion pesos, and in the case of Barrick Gold it will be
an agreement that contemplates an advance for this year of 47
million dollars and for next year 95 million dollars," said the
official, according to Dominican Today.

According to the minister, what Barrick Gold will advance totals
142 million dollars, the report relays.

The agreement announced by President Luis Abinader last week will
allow the government to finance the deficit in the 2021 budget,
without the need to resort to the taxes that were proposed, the
report adds.

                 About Dominican Republic

The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district, the report
relays.  Luis Rodolfo Abinader Corona is the current president of
the nation, the report saysa.

The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."

An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.

Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).




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J A M A I C A
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JAMAICA: BOJ Intervenes in Foreign Exchange Market With Flash Sale
------------------------------------------------------------------
RJR News reports that the Bank of Jamaica intervened in the foreign
exchange market with a flash sale.

The BOJ offered US$20 million to authorized dealers and cambios,
according to RJR News.

The central bank restricted the price at which B-FXITT participants
resell the funds to a maximum spread of 20-cents on the buy price,
the report relays.

It also restricted re-sale to end-users, te report notes.

End-users as defined by the central bank are non-financial
commercial entities that are funding obligations for essential
goods and services, the report adds.

                         About Jamaica

Jamaica is an island country situated in the Caribbean Sea. Jamaica
is an upper-middle income country with an economy heavily dependent
on tourism.  Other major sectors of the Jamaican economy include
agriculture, mining, manufacturing, petroleum refining, financial
and insurance services.

Standard & Poor's credit rating for Jamaica stands at B+ with
negative outlook (April 2020).  Moody's credit rating for Jamaica
was last set at B2 with stable outlook (December 2019).  Fitch's
credit rating for Jamaica was last reported at B+ with stable
outlook (April 2020).

As reported in the Troubled Company Reporter-Latin America, Fitch's
revision of Jamaica's outlook in April 2020 to Stable from Positive
reflects the shock to Jamaica from the coronavirus pandemic, which
is expected to lead to a sharp contraction in its main sources of
foreign currency revenues: tourism, remittances and alumina
exports.




===========
M E X I C O
===========

MEXICO: Chief Charged in US With Drug, Money Laundering Conspiracy
------------------------------------------------------------------
Alex Segura Lozano at EFE News reports that Mexico's former defense
secretary has been arrested on a United States Drug Enforcement
Administration warrant and indicted on charges that he accepted
bribes in exchange for allowing the H-2 Cartel, a drug-trafficking
organization, to operate with impunity.

Gen. Salvador Cienfuegos Zepeda, who served as defense secretary
under Mexican former President Enrique Peña Nieto, was arrested at
Los Angeles International Airport and charged with four counts
relating to drug trafficking and money laundering, according to EFE
News.

The indictment filed in August 2019 in the Brooklyn-based US
District Court for the Eastern District of New York and unsealed
alleges that Cienfuegos committed the crimes over a period of just
over a year between December 2015 and January 2017 while he was at
the helm of the Defense Secretariat, the report notes.

In the indictment, a federal grand jury charges Cienfuegos with
three counts related to the manufacture, importation and
distribution of narcotics and one count of conspiring to launder
the proceeds from their sale, the report relays.

The arrest is regarded by analysts as a blow to the
already-tarnished legacy of Pena Nieto and to the reputation of
Mexico's armed forces, the report discloses.

"The defendant Salvador Cienfuegos Zepeda, also known as 'El
Padrino' and 'Zepeda,' together with others, did knowingly and
intentionally conspire to manufacture and distribute one or more
controlled substances, intending, knowing and having reasonable
cause to believe that such substances would be unlawfully imported
into the United States from a place outside thereof," the
indictment reads, the report relates.

According to court documents, the DEA's multi-year sting known as
"Operation Padrino" is linked to an earlier investigation into the
criminal activities of the former attorney general of the western
Mexican state of Nayarit, Edgar Veytia, who pleaded guilty and was
sentenced to 20 years behind bars in September 2019 for his role in
an international drug-trafficking conspiracy, the report relays.

Prosecutors had accused Veytia, a dual US and Mexican citizen, of
receiving regular bribes and providing official sanction for the
H-2 Cartel to import illegal drugs from Mexico to the US, the
report says.

They also alleged that he used his position as top law enforcement
officer in his state to obstruct investigations and prosecutions of
drug traffickers in Mexico and secure the release from prison of
members and associates of the H-2 Cartel, the report notes.

The US government now accuses Cienfuegos of having had ties to Juan
Francisco Patron Sanchez, alias H-2, a top leader of the Beltran
Leyva drug cartel who was killed by Mexican marines in February
2017, the report recalls.

"Due in part to the defendant's corrupt assistance, the H-2 Cartel
conducted its criminal activity in Mexico without significant
interference from the Mexican military and imported thousands of
kilograms of cocaine, heroin, methamphetamine and marijuana into
the United States," prosecutors said in a letter to Eastern
District Judge Carol B. Amon, the report discloses.

Before learning about the charges, leftist Mexican President Andres
Manuel Lopez Obrador, who was elected in July 2018 on an
anti-corruption platform, said the arrest of Cienfuegos was an
"unequivocal sign of the breakdown" of the previous neo-liberal
regime, the report relates.

Speaking at his regular daily news conference, Lopez Obrador said
the news of Cienfuegos' arrest was "regrettable" and compared it to
last year's detention - also in the US - of Genaro Garcia Luna, who
served as public safety secretary in former President Felipe
Calderon's 2006-2012 administration and oversaw the country's
now-defunct civilian Federal Police force, the report notes.

The police has long been maligned in Mexico but Cienfuegos' arrest
calls into question the integrity of the military, a key pillar for
years in Mexico's strategy against organized crime, the report
adds.


STATE OF SONORA: Moody's Cuts Issuer Ratings to B1/Baa2.mx
----------------------------------------------------------
Moody's de Mexico S.A. de C.V. downgraded the issuer ratings for
the State of Sonora to B1/Baa2.mx (Global Scale, local
currency/Mexico National Scale) from Ba3/A3.mx, downgraded its
baseline credit assessment (BCA) to b1 from ba3, and changed the
outlook to stable from negative.

At the same time, Moody's affirmed the debt ratings of Baa1/Aa1.mx
of the following seven enhanced loans of the State of Sonora:

  - MXN 5 billion enhanced loan (original face value) from Banobras
with a maturity of 30 years and a pledge of 14.33% of the state's
general participations fund revenues

  - MXN 4.4 billion enhanced loan (original face value) from
Banobras with a maturity of 20 years and a pledge of 13.87% of the
state's general participations fund revenues

  - MXN 3.1 billion enhanced loan (original face value) from
Banobras with a maturity of 30 years and a pledge of 8.78% of the
state's general participations fund revenues

  - MXN 3.5 billion enhanced loan (original face value) from
Bancomer with a maturity of 20 years and a pledge of 10.93% of the
state's general participations fund revenues

  - Two enhanced loans for MXN 2.0 billion each (original face
value) from Santander, each with a maturity of 20 years and each
with a pledge of 6.31% of the state's general participations fund
revenues

  - MXN 1 billion enhanced loan (original face value) from BanBajio
with a maturity of 20 years and a pledge of 3.15% of the state's
general participations fund revenues

RATINGS RATIONALE

The downgrade of the issuer ratings primarily reflects recurring
deficits that will continue to drive rising debt levels and will
keep the state's already weak liquidity position under pressure.
Sonora's diminished liquidity weakens its capacity to absorb
ongoing revenue pressures while also facing significant short-term
debt maturities.

Following a drop in own-source revenue in 2020, Sonora will
continue to face negative pressure through 2021 as it faces
declining federal transfers stemming from the economic recession
caused by the pandemic. In Moody's opinion, the state will unlikely
be able to further reduce operating expenses in 2021 to offset the
anticipated revenue decline following modest reductions in
operating spending in 2020. As a result, Moody's expects Sonora's
operating balance will deteriorate from a 3.4% surplus in 2019 to
0.6% in 2020 and a 1.5% deficit in 2021. Sonora also faces
continued declines in earmarked federal transfers, which declined
4.4% in 2019 and will decline further in 2020 and 2021. The state
has contracted new long-term debt to maintain its capital spending
budget in 2020, but will likely need to cut infrastructure spending
next year. Moody's expects the state's cash financing deficit will
likely widen to between 4-4.3% in 2020 and 2021.

The state's ratio of cash/current liabilities was 0.12x in December
2019, leaving it with a limited capacity to absorb unexpected
shocks, and leading to a continued use of short-term loans to
bridge liquidity needs. Short-term debt averaged 11.1% of direct
debt between 2015-2019, and this dependence on short-term debt will
become an additional source of pressure in 2021 given that Mexican
law requires states and municipalities to liquidate all short-term
loans three months before the end of an administration (Sonora will
need to pay off short-term loans in June ahead of a September
change in administration).

The state has identified assets that can be sold in the coming
months in order to pay down short-term loans, though the economic
recession could adversely affect market conditions. The state also
plans to take on additional short-term financing before the end of
the year to meet year-end expenses. Given its low cash balances,
Moody's considers it likely the state will allow other current
liabilities (suppliers) to grow in 2021 in order to pay down its
short-term financing.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook reflects Moody's expectation that even as the
state will continue to face financial pressure through 2021, key
credit metrics including debt levels and liquidity are not expected
to decline materially beyond Moody's forecasts. In addition,
looking beyond the current downturn, Moody's expects the strength
of Sonora's state economy will support an eventual recovery in
revenue that will support an eventual stabilization of credit
metrics.

RATINGS RATIONALE FOR THE ENHANCED LOAN RATINGS

The affirmation the Baa1/Aa1.mx debt ratings despite the downgrade
of the issuer's ratings primarily reflects the additional legal
enhancement in the trust structure under which these loans were
issued. The structure includes an irrevocable mandate, signed by
the state of Sonora and the Federal Government as well as the
trustee, and ensures that the Ministry of Finance will transfer
Sonora's pledged General Participations Fund revenue directly to
the paying trust, separating the loans from the state's liquidity
pressures. In cases where the issuer has a low speculative grade
rating, the mandate trust structure provides a strong level of
insulation between the loan and the issuer's idiosyncratic risks.

In addition, the affirmation reflects the following factors:

1. Estimated cash flows that generate adequate debt service
coverage (DSC) ratios:

i. MXN 5 billion (original face value) from Banobras: under its
base case scenario, cash flows are projected to provide 3.0x debt
service coverage at the lowest point over the life of the loan.
Under a stress case scenario, estimated cash flows are projected to
provide 2.3x debt service coverage at the lowest point.

ii. MXN 4.4 billion (original face value) from Banobras: under its
base case scenario, cash flows are projected to provide 2.9x debt
service coverage at the lowest point over the life of the loan.
Under a stress case scenario, estimated cash flows are projected to
provide 2.2x debt service coverage at the lowest point.

iii. MXN 3.1 billion (original face value) from Banobras: under its
base case scenario, cash flows are projected to provide 3.0x debt
service coverage at the lowest point over the life of the loan.
Under a stress case scenario, estimated cash flows are projected to
provide 2.3x debt service coverage at the lowest point.

iv. MXN 3.5 billion (original face value) from Bancomer: under its
base case scenario, cash flows are projected to provide 2.9x debt
service coverage at the lowest point over the life of the loan.
Under a stress case scenario, estimated cash flows are projected to
provide 2.2x debt service coverage at the lowest point.

v. Two loans for MXN 2.0 billion each (original face value) from
Santander: under its base case scenario, cash flows are projected
to provide 2.8x debt service coverage at the lowest point over the
life of both loans. Under a stress case scenario, estimated cash
flows are projected to provide 2.2x debt service coverage at the
lowest point for both loans.

vi. MXN 1 billion (original face value) from BanBajio: under its
base case scenario, cash flows are projected to provide 2.8x debt
service coverage at the lowest point over the life of the loan.
Under a stress case scenario, estimated cash flows are projected to
provide 2.1x debt service coverage at the lowest point.

2. Solid level of reserves for all the enhanced loans of 3.0x debt
service coverage, which provides an adequate cushion against
payment delays.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

If the state achieves balanced operating and cash financing
results, resulting in sustained improvements in its liquidity
position, a decline in its dependence on short-term loans and a
stabilization of its overall debt metrics, this could put positive
pressure on its ratings. Conversely, if operating and cash
financing deficits exceed projections, resulting in a larger than
expected drop in already tight liquidity, this would put negative
pressure on the ratings.

Given that the enhanced loans are rated at the same level as
Mexico's Baa1 sovereign rating, an upgrade of the Global Scale
rating of the loans would only be possible if the sovereign rating
is upgraded and if Sonora's issuer rating and/or the credit
enhancements of the loans are strengthened. Conversely, given that
the loans are rated at the same level as the sovereign, a downgrade
of the sovereign rating would also result in a downgrade of the
enhanced loan ratings. Given the links between the loans and the
credit quality of the obligor, a further downgrade of the state's
issuer rating, or a material decline in debt service coverage to
levels below its expectations, could exert downward pressure on the
ratings of the loans.

The methodologies used in these ratings were Enhanced Municipal and
State Loans in Mexico Methodology published in May 2019, and
Regional and Local Governments published in January 2018.

The period covered in the financial information used to determine
State of Sonora's rating is between January 01, 2015 and December
31, 2019 (source: State of Sonora).



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