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/raid1/www/Hosts/bankrupt/TCRLA_Public/210330.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 Tuesday, March 30, 2021, Vol. 22, No. 58 Headlines A R G E N T I N A ARGENTINA: Bondholders Sue Buenos Aires Over $7BB Debt Logjam B E R M U D A SIRIUSPOINT LTD: S&P Rates $200MM Series B Preferred Shares 'BB+' B R A Z I L BRAZIL: Economists Call for Tougher Measures as Cases Ramp Up BRAZIL: Inserts Itself in International Context of Reinsurance C H I L E EMPRESA NACIONAL DEL PETROLEO: S&P Lowers ICR to to 'BB+' GEOPARK LTD: S&P Alters Outlook to Stable, Affirms 'B+' ICR C O S T A R I C A COSTA RICA: S&P Affirms 'B' LT Sov. Credit Rating, Outlook Neg. D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Low Dollar Rate Expected to Continue DOMINICAN REPUBLIC: Moody's Affirms Ba3 Long Term Issuer Rating M E X I C O FINANCIERA INDEPENDENCIA: S&P Affirms B+ LT Rating, Outlook Neg. GRUPO GICSA: S&P Downgrades ICR to 'B+', Outlook Negative MEXICO: Down One Place in the World Ranking of Car Producers P E R U CORPORACION AZUCARERA: S&P Alters Outlook to Pos, Affirms 'B-' ICR P U E R T O R I C O FARMACIA NUEVA: Asks for 90-Day Extension to File Plan STONEMOR INC: Lowers Net Loss to $8.4 Million in 2020 V E N E Z U E L A VENEZUELA: Basic Food Basket Jumps Nearly $30 in a Single Month - - - - - ================= A R G E N T I N A ================= ARGENTINA: Bondholders Sue Buenos Aires Over $7BB Debt Logjam ------------------------------------------------------------- Andrew Scurria and Ryan Dube at The Wall Street Journal reports that bondholders filed suit in New York against Argentina's Buenos Aires province after talks broke down over restructuring $7.1 billion in provincial debt as the country's leftist government seeks a larger accommodation with the International Monetary Fund to regain market access. GoldenTree Asset Management LP and other investment firms sought a judgment in the U.S. District Court in New York over the province's failure to make debt payments stretching back to April of last year, according to The Wall Street Journal. Since then, the investors said, Buenos Aires "has chosen to follow a course of confrontation and default with its international bondholders rather than one of negotiation and compromise," the report notes. Buenos Aires stands apart from other Argentine provinces such as Cordoba, Salta and Entre Rios that have come to terms with creditors this year, the report discloses. Before the Covid-19 pandemic, Argentina signaled it would seek to restructure its sovereign and municipal debt obligations and reached an agreement in August to restructure $65 billion in sovereign bonds, the report relays. The Buenos Aires Finance Ministry said it had been holding talks with creditors in good faith, but their lawsuit now will make it more difficult to reach a resolution, the report discloses. "It doesn't surprise us because these are tactics that they tend to use to add pressure," the ministry said, the report relays. "They've taken an uncompromising position, seeking coupon rates that deny the financial relief the province needs and that were provided to the nation," the ministry added. Successive governments have repeatedly driven Argentina into economic crises by overspending, which has led to chronic inflation, devaluation and default, the report relays. Now, three years into a grinding recession, the economy is in its worst shape in decades, with scant cash and gold reserves to make debt payments, the report discloses. Despite last year's sovereign-debt restructuring, Argentina must still reach a separate deal with the IMF before regaining access to international capital markets, the report notes. Argentina's economy was in recession before the pandemic, and last year shrank 10%, one of the deepest contractions in the world, the report says. The IMF, owed $44 billion, expects the country's economy to grow 4.5% this year, the report notes. Argentina is unlikely to reach consensus with the multilateral lender before midterm elections in October on thorny issues such as how the country plans to rein in runaway public spending, The Wall Street Journal has reported. Buenos Aires has been in sporadic talks with bondholders and said it wouldn't continue private discussions with GoldenTree, which had signed a nondisclosure agreement, the report relays. GoldenTree said the proposed terms put forth by Buenos Aires "do not come close to reflecting the current payment capacity and economic prospects of the province," the report notes. Other investors that sued include Greylock Capital Management LLC, Pinehurst Partners LP, San Bernardino County Employees' Retirement Association and Louisiana State Employees' Retirement System, the report relays. "In the long run, the true cost of the province's unconstructive approach will be borne by its population and businesses," a steering committee of bondholders said. "With less access to capital and a hostile investment environment, job creation, business activity and economic growth will continue to suffer." Buenos Aires is Argentina's most populous province. Gov. Axel Kicillof, a leftist member of the country's ruling Peronist party and close ally of Vice President Cristina Kirchner, has in past administrations helped lead expropriations of foreign companies, the report discloses. Although a hub for industry and agriculture, Buenos Aires is also home to myriad social problems, including deep-rooted poverty in neighborhoods that suffer from high crime and lack basic services such as running water, the report relays. The Finance Ministry said half of the people who live in the province are poor, the report discloses. "Committing ourselves to unsustainable payments has a real impact and will result in a worse situation, which is already extremely fragile," the ministry said about its debt payments, the report adds. About Argentina Argentina is a country located mostly in the southern half of South America. It's capital is Buenos Aires. Alberto Angel Fernandez is the current president of Argentina after winning the October 2019 general election. He succeeded Mauricio Macri in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019, according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. Standard & Poor's credit rating for Argentina stands at CCC+ with stable outlook, which was a rating upgrade issued on Sept. 8, 2020. Moody's credit rating for Argentina was last set at Ca on Sept. 28, 2020. Fitch's credit rating for Argentina was last reported on Sept. 11, 2020 at CCC, which was a rating upgrade from CC. DBRS' credit rating for Argentina is CCC, given on Sept. 11, 2020. As reported by The Troubled Company Reporter - Latin American, DBRS noted that the recent upgrade in Argentina's ratings (September 2020) follows the closing of two debt restructuring agreements between the Argentine government and private creditors. The first restructuring involved $65 billion in foreign-law bonds. The deal achieved the requisite participation necessary to trigger the collective action clauses and finalize the restructuring on 99% on the aggregate principal outstanding of eligible bonds. DBRS added that the debt restructurings conclude a prolonged default and provide the government with substantial principal and interest payment relief over the next four years. DBRS further relayed that Argentina is also seeking a new agreement with the International Monetary Fund (IMF) to replace the canceled 2018 Stand-by Agreement. Formal negotiations on the new financing began in November 2020. Obligations to the IMF amount to $44 billion, with major repayments coming due in 2022 and 2023. ============= B E R M U D A ============= SIRIUSPOINT LTD: S&P Rates $200MM Series B Preferred Shares 'BB+' ----------------------------------------------------------------- S&P Global Ratings assigned its 'BB+' issue-level rating to SiriusPoint Ltd.'s (BBB/Negative/--) 8% $200 million series B, resettable fixed-rate cumulative preferred shares. S&P's issue-level rating is two notches below our long-term issuer credit rating on SiriusPoint, reflecting subordination and deferability features. S&P said, "We consider these securities as being eligible for intermediate equity content under our hybrid capital criteria. We include securities of this nature, up to a maximum of 15%, in our calculation of total adjusted capital, which forms the basis of our consolidated risk-based capital analysis of insurance companies." Such inclusion is subject to the notes being considered eligible for regulatory solvency treatment under the Bermuda Monetary Authority's capital requirement rules, and the aggregate amount of included hybrid capital not exceeding the total eligible for regulatory solvency treatment. SiriusPoint issued these shares on the closing date of the merger of Third Point Reinsurance Ltd. and Sirius International Insurance Group Ltd. in exchange for the existing preferred B shares issued by Sirius International Group. On a pro forma basis, SiriusPoint's financial leverage was about 32% at year-end 2020 and the fixed-charge coverage was negative due to underwriting losses. By 2022, S&P expects the financial leverage ratio to improve to around 30% and the fixed-charge coverage ratio to be greater than 4x. =========== B R A Z I L =========== BRAZIL: Economists Call for Tougher Measures as Cases Ramp Up ------------------------------------------------------------- AP News reports that hundreds of Brazilian economists, including former finance ministers and central bank presidents, urged the Brazilian government in an open letter to speed up vaccination and adopt tougher restrictions to stop the rampant spread of COVID-19. The signatories of the letter decried the "devastating" economic and social situation in Latin America's largest nation, according to AP News. They also attempted to debunk President Jair Bolsonaro's assertion that lockdowns and restrictions would inflict greater hardship on the population than the disease, the report relays. "This recession, as well as its harmful social consequences, was caused by the pandemic and will not be overcome until the pandemic is controlled through competent action from the federal government," the letter read, the report discloses. "It is urgent that the different levels of government prepare to implement an emergency lockdown," the letter said. Brazil Economy Minister Paulo Guedes said that mass vaccination had to be accelerated "to ensure a safe return to work", especially for the most vulnerable, the report relays. Brazil's gross domestic product contracted 4.1% in 2020, the biggest annual recession in decades, the report notes. The economists said the fall in activity alone cost Brazil a loss in tax collection of 6.9%, approximately 58 billion reais ($10.5 billion), the report relays. The nation had an average of 2,235 deaths a day during the third week of March -- the highest since the beginning of the pandemic. So far, nearly 295,000 people have died, the second largest tally in the world after the United States, according to data from Johns Hopkins University, the report notes. Since the beginning of the pandemic, Bolsonaro has fought against restrictions on the economy adopted by state governors and mayors. The president sought to lift restrictions imposed in the Federal District, Bahia and Rio Grande do Sul via the Supreme Court, online news site G1 reported, the report relays. About Brazil 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. S&P Global Ratings affirmed on December 14, 2020, its 'BB-/B' long-and short-term foreign and local currency sovereign credit ratings on Brazil. The outlook on the long-term ratings remains stable. Fitch Ratings' credit rating for Brazil stands at 'BB-' with a negative outlook (November 2020). Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). As reported in the Troubled Company Reporter-Latin America, S&P Global Ratings' stable outlook assumes that timely implementation of fiscal adjustment and modest economic recovery will help preserve market confidence and adequate funding conditions for the government in local markets in the next two years, despite a sustained increase in the debt burden. BRAZIL: Inserts Itself in International Context of Reinsurance -------------------------------------------------------------- Richard Mann at Rio Times Online reports that the pandemic brought significant losses for reinsurers, responsible for paying the excess losses of insurers. And this results in higher rates, deductibles, and tougher conditions, with exclusions. In Brazil, besides the impacts of the international scenario, the regulatory framework is under revision by the Superintendency of Private Insurance (SUSEP), according to Rio Times Online. The two major reinsurers, Swiss Re and Munich Re, have each reported losses of nearly US$4 billion from the pandemic in 2020, the report relays. "In almost all of the reinsurance contracts that we are renewing, there is a request for the inclusion of a clause that excludes transmissible diseases, increases in rates, and in deductibles," says Juliana Kazumi Chen, responsible for reinsurance at Fator Seguradora, the report adds. About Brazil 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. S&P Global Ratings affirmed on December 14, 2020, its 'BB-/B' long-and short-term foreign and local currency sovereign credit ratings on Brazil. The outlook on the long-term ratings remains stable. Fitch Ratings' credit rating for Brazil stands at 'BB-' with a negative outlook (November 2020). Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). As reported in the Troubled Company Reporter-Latin America, S&P Global Ratings' stable outlook assumes that timely implementation of fiscal adjustment and modest economic recovery will help preserve market confidence and adequate funding conditions for the government in local markets in the next two years, despite a sustained increase in the debt burden. ========= C H I L E ========= EMPRESA NACIONAL DEL PETROLEO: S&P Lowers ICR to to 'BB+' --------------------------------------------------------- S&P Global Ratings lowered its issuer credit and debt ratings on Empresa de los Ferrocarriles del Estado (EFE) and Empresa de Transporte de Pasajeros Metro S.A. (Metro) to 'A' from 'A+', and on Empresa Nacional del Petroleo (ENAP) to 'BB+' from 'BBB-'. At the same time, S&P affirmed the ratings on Corporacion Nacional del Cobre de Chile (Codelco) at 'A', given that we revised upward its stand-alone credit profile (SACP) to 'bb-' from 'b+' due to stronger copper prices. On March 24, 2021, S&P Global Ratings downgraded Chile to 'A' from 'A+'. The outlook on the sovereign is now stable. The downgrade of ENAP, EFE, and Metro follows the downgrade of Chile. The sovereign's downgrade mainly incorporates that the country's public finances are likely to stabilize at a structurally weaker level after the impact of the pandemic recedes and the economy grows at its trend level, with fiscal deficits moderately higher than S&P had expected, persisting for the next two to three years due to spending pressures. This is despite Chile's comparatively low debt burden, high monetary flexibility, and institutional strengths that have facilitated countercyclical policies to cushion the harsh economic and social impact of the global pandemic and recession. S&P said, "Our 'A+' local currency rating on Chile largely determines our ratings on ENAP and Metro, because we believe they would enjoy government support in a hypothetical financial stress scenario. Their underlying SACPs are much lower than their final ratings because of these support assumptions. Chile's weaker credit quality causes overall credit quality of ENAP and Metro to slip, even assuming no changes to our view of government support and of their strategic value to Chile. "We equalize the rating on EFE to that on Chile, given its monopoly status as the only provider of passenger rail transportation in Chile, along with one of the country's largest commuter and short-haul rail service providers. The company's integral link to the government is underpinned by the latter's total control, high degree of involvement in the commercial strategy and supervision, and the guarantee that it provides for 95% of EFE's outstanding debt. "We revised upward Codelco's SACP to 'bb-' from 'b+' because we expect the company to benefit from strong copper prices that would allow it to internally finance its $3.5 billion annual investment program and generate excess cash for the next two to three years, and probably beyond." In addition, the company launched a cost-reduction initiative in 2020 that's aimed at lowering operating costs by as much as $1 billion and to increase investment efficiencies. Therefore, Codelco's contributions to the Chilean treasury are likely to grow meaningfully --probably by more than $4 billion annually compared with the 2020 level--in the form of higher payments according to the Law 13,196, corporate income taxes, and dividends. These factors underscore Codelco's importance to the Chilean government in times of rising fiscal needs and supports S&P's views of an extremely high likelihood of government support to Codelco. GEOPARK LTD: S&P Alters Outlook to Stable, Affirms 'B+' ICR ----------------------------------------------------------- On March 25, 2021, S&P Global Ratings revised its outlook on Latin American oil and gas company GeoPark Ltd. (GPRK) to stable from negative. S&P also affirmed its global scale 'B+' issuer credit and issue-level ratings on the company. S&P said, "The stable outlook incorporates our expectation that GPRK will maintain solid operating performance and profitability while expanding its reserve base in the Llanos basin. We expect the company to maintain its debt to EBITDA at 1.5x-2.5x and funds from operations (FFO) to debt above 30% for the next two years. "The Brent price more than doubled--from about $30 per bbl to about $64--since our April 8, 2020, assignment of the negative outlook on GPRK. Given that the company's oil business represents about 90% of its total oil and gas production and similar contribution in terms of revenues and EBITDA, GPRK is highly exposed to oil prices. As a result, we now expect gross leverage to improve from 3.7x in 2020 to around 2.2x in 2021, given the Brent prices of $60 per bbl under our recently published price deck, "S&P Global Ratings Revises Oil And AECO Natural Gas Price Assumptions And Introduces Dutch Title Transfer Facility Assumption", dated March 8, 2021. However, we expect high price volatility to remain and demand dynamics to depend on global economic recovery and the pandemic's trajectory." GPRK held relatively well in downturn during 2020, reducing operating costs by 26% and general and administrative expenses about 50% (considering Amerisur pro forma) and maintaining adjusted EBITDA margins at 60%, almost in line with the 2019 level. In addition, the company reduced capital expenditures by 40%, allowing for an 82% increase in its cash position to $202 million in December 2020, compared with 2019. This demonstrated the company's prudent risk management and strategy to preserve cash during the cycle downturn. In terms of capital structure, GPRK has no debt amortization until September 2024, and we now expect the company to resume deleveraging after increasing debt in 2020 to finance Amerisur's acquisition through the issuance of the 2027 notes of $350 million. GPRK abandoned in 2020 its project to develop operations in Peru's Morona block due to extended force majeure that allowed for the termination of the license contract. Also, at the end of 2020, the company announced the sale of its 10% working interest in Brazil's Manati gas field for about $27 million (still subject to certain conditions and regulatory approvals) due to its mature profile and low reserve life. The company's output in Argentina is small and decreasing, mainly as a result of limited maintenance activities and the natural decline of the fields. As a result, S&P now expects slower improvements in scale and diversification. On the other hand, GPRK is focusing on expanding production and reserve base in Colombia, in Llanos 34 and CPO-5 blocks. These blocks are very efficient and low cost, with Llanos 34 achieving operating expenditures at about $4 per bbl in the first nine months of 2020, and drilling and put-on-production costs of $3.6 million per well. This underscores the company's commitment to prioritize most profitable fields and projects. =================== C O S T A R I C A =================== COSTA RICA: S&P Affirms 'B' LT Sov. Credit Rating, Outlook Neg. --------------------------------------------------------------- S&P Global Ratings affirmed its 'B' long-term foreign and local currency sovereign credit ratings on Costa Rica. The outlook remains negative. At the same time, S&P affirmed its 'B' short-term sovereign credit ratings. The transfer and convertibility assessment remains 'BB-'. Outlook The negative outlook indicates the possibility of a downgrade over the coming six to 12 months should Costa Rica fail to advance its strategy for corrective fiscal actions, such as those under the proposed EFF or public employment law, that would strengthen its financial metrics after the pandemic, or should setbacks to the improved local market financing conditions seen thus far in 2021 arise. Downside scenario Stressed local market conditions would likely imply additional risk for debt management, given the sovereign's record of challenges in securing congressional approval for external financing, be it from capital markets or official creditors. In this scenario, covering the government's large funding needs may require recourse to the central bank or other unconventional financing. This in turn could result in S&P Global Ratings viewing the country's institutional framework and ability to support public finances less favorably--despite widespread checks and balances and a solid democratic tradition--and lead us to lower the ratings. Upside scenario Conversely, S&P could revise the outlook to stable over the same period if the government and congress advance concrete measures to anchor fiscal policy after the pandemic. At the moment, the government has articulated this strategy under the EFF proposal and the public employment law under debate. Such steps, along with the post-pandemic economic recovery, could support investor confidence, sustain fluid access to local market and official borrowing as well as foreign direct investment (FDI), and reduce the country's external vulnerability. Rationale The ratings on Costa Rica reflect its long-established democracy, which has brought political stability amid solid checks and balances, and a generally prosperous economy and standards of living compared with regional peers. However, they also reflect persistent fiscal slippage over the past decade--which led to a doubling of government debt as a share of GDP even before the pandemic--for which the political leadership's policy response has not been as proactive and timely as for higher-rated sovereigns. Costa Rica's fiscal and external profiles are complicated by rigidities and long-standing vulnerabilities in the government's debt management procedures. The congress has often held back approval for the government to borrow externally, forcing it to rely on a small domestic market. Such political obstacles have weakened the predictability of debt management and reduced the government's financial flexibility. Despite solid FDI inflows that have generally covered the current account deficit (CAD), vulnerabilities associated with external debt and financing are key rating weaknesses. Monetary policy credibility and execution, in contrast, have benefited from an inflation-targeting regime, more exchange rate flexibility, and some decline and stabilization in the level of dollarization in the financial system. Institutional and economic profile: A strong democratic tradition has supported a prosperous economy, but the country's record of addressing fiscal weakness is not timely -- Costa Rica's stable political system and social indicators compare positively with those of peers. -- However, political challenges have slowed progress in redressing long-standing fiscal weaknesses, and the government hopes to bolster policy credibility under the auspices of engaging with the IMF. -- After contraction in 2020, S&P expects GDP growth to average about 3% in 2021-2024. S&P's assessment of Costa Rica's institutional effectiveness reflects its strong democratic tradition of stable political institutions, high social indicators, and overall predictable, albeit slow, policymaking. The country's low poverty and low crime compare positively with its Central American peers. The passage of a 2018 fiscal reform by President Carlos Alvarado's administration's multiparty coalition (which introduced a value-added tax in mid-2019 and other taxes, along with measures to control expenditure on salary configuration in the public sector) was an encouraging development. But it also highlighted the slow pace and political challenges associated with advancing and implementing fiscal correction in Costa Rica. The country's fragmented decision-making process gives even small numbers of opponents in the congress the ability to stall approval of legislation. This dynamic impeded progress on fiscal measures under two prior administrations. Subsequent objections raised by political constituencies to coverage of salary reforms under the 2018 reform required the country's comptroller and attorney general to rule on its application to the broad public sector. S&P said, "While we expected that reform would help the sovereign slowly reduce its general government deficit, we did not expect it to stabilize a rising debt burden. Further fiscal pressures amid the pandemic led the Alvarado Administration to prioritize bolstering its policy credibility and securing financing under the auspices of an EFF." The government and IMF negotiated a three-year $1.78 billion program in early 2021. Widespread social protests and political pushback to the government's initial adjustment plan led to a national dialogue among key stakeholders last November. The program considers those deliberations and aims to strengthen fiscal performance over time by containing spending in the public sector (per the 2018 reform) and via a new public employment law, along with various revenue measures to bolster the competitiveness of the Costa Rican economy. Both the EFF and new public employment law are currently pending cross-party approval in the Costa Rican congress. In S&P's view, the Alvarado Administration has already used substantial political capital to advance this EFF. And given the political calendar, there is limited scope to articulate and advance alternative plans. Campaigning for the February 2022 presidential and legislative elections kicks off with primaries in June. Also, setbacks in passage of the EFF, which needs a two-thirds congressional majority, would likely undermine sentiment in local capital markets. Sentiment improved following the announcement of the program, and it has facilitated local financing of the government's large funding needs in 2021. In the past, the Costa Rican congress has withheld approval for external financing, forcing the government to rely on the country's small domestic market. While there is a captive local market--with state-owned banks, institutional investors (with ties to the public sector), and state-owned enterprises as key creditors for the government--a weakening in sentiment would raise the cost of borrowing. And reliance on less conventional financing could negatively affect our ratings. Passage of the EFF by President Alvarado's Partido Accion Ciudadana, which holds only 10 out of 57 seats in a fragmented congress, and its coalition partners seems most likely. That said, there were delays in approving official loans in 2020. Such political obstacles weigh on S&P's view of debt management and the government's financial flexibility. S&P said, "In 2021, we expect a 2.6% recovery in real GDP, following an estimated decline of 4.5% in 2020. The contraction reflected a strong hit to domestic demand amid measures to combat COVID-19 internally, as well as a drop in tourism and goods exports due to the economic contraction in the U.S. and global trading partners. We expect the rebound to strengthen in 2022 to 3.6%, followed by growth of about 3% in 2023 and 2024. Persistently large budget deficits will limit the government's ability to make investments, especially in much-needed physical infrastructure, limiting the ability of the economy to expand at a faster pace over the coming years. We believe the country's overall good business climate will continue to support steady FDI flows of about 3.5% of GDP, especially in life sciences, digital technology, and services." Flexibility and performance profile: Deteriorating fiscal indicators and high external vulnerability remain prominent rating weaknesses -- Costa Rica's fiscal profile remains under pressure after deficits and debt rose further in 2020 and pending implementation of correction measures. -- High external indebtedness presents a rating weakness despite the steady FDI inflows that mostly finance the CAD. -- The country's monetary policy credibility reflects inflation targeting, more flexibility in the colon exchange-rate regime, and some decline in dollarization. Costa Rica's fiscal profile remains challenged, leading the authorities to bolster policy credibility and secure financing by engaging with the IMF for an EFF. A history of difficult discussions in the country's congress in authorizing external borrowing--especially from global capital markets but also from multilateral lenders--highlights Costa Rica's vulnerabilities in securing deficit financing. Despite the passage of fiscal reform in 2018 that included a tax reform effective July 2019, Costa Rica's fiscal profile continued to deteriorate in the run-up to the pandemic. The general government deficit increased toward 6% of GDP in 2019 and 8% in 2020. S&P forecasts the general government deficit will decline toward 6.7% of GDP in 2021 and 6% in 2022 (our definition of general government includes the central bank, decentralized government agencies, and social security). Accordingly, S&P projects that the change in net general government debt will average 5.5% of GDP in 2021-2024. Consistently high fiscal deficits have significantly increased the country's debt burden and interest payments over the past decade. Debt was trending higher before the pandemic and jumped last year. Net general government debt rose to 64% in 2020 from 54% in 2019, compared with 27% in 2010. S&P said, "At the same time, we expect interest payments will average 18% of general government revenue during 2021-2024, up from 8% in 2010. We project net general government debt will reach close to 74% of GDP in 2024." The constitution requires the congress to approve all individual borrowings and external debt with a two-thirds majority. The approval process has often been slow, and political resistance has stymied multiyear borrowing authorization that the finance ministry sought to facilitate greater flexibility. This heightens the challenges to effective debt management, given the higher funding needs associated with the government's weaker fiscal profile. Locally issued debt accounts for about 75% of the government's debt, which is a strength. The fact that over 40% is denominated in foreign currency, however, is a vulnerability. An abrupt change in the exchange rate could boost the sovereign's interest payments and debt burden. Dollar debt is issued in both local and external markets, and the government relied on increased locally issued dollar-denominated debt in moments of stress in 2018. S&P said, "We expect the CAD to widen in 2021 as the economy recovers, and we expect it to average above 3% of GDP in 2021-2024. This incorporates income deficits following higher interest payments on external debt. We expect Costa Rica's trade deficit to average 5.4% of GDP during 2020-2023 and rise toward 6% of GDP by the end of the period as the economy recovers. The services balance is likely to remain in surplus, at about 8% of GDP on average, thanks to a vibrant tourism sector (which we expect will recover after the pandemic recedes). Accordingly, we expect the sovereign's gross external financing needs to hover around 104% of current account receipts and usable reserves over the next three years, and for its narrow net external debt to average about 64% of CAR during 2021-2024." Monetary policy credibility and execution have benefited from an inflation-targeting regime, more exchange rate flexibility under a managed float, and some decline and stabilization in the level of dollarization in the financial system. Dollar-denominated loans from Costa Rica's financial institutions are just below 40% of total loans to the private sector, and some of that lending has gone to borrowers that do not have dollar earnings or other forms of hedging currency risk. Dollarization of assets and liabilities in the financial system has declined on balance over the past five to 10 years and poses less of a constraint on the conduct of monetary policy than before. That said, an unexpectedly sharp change in the exchange rate could create asset quality problems in the financial system. Dollarization also limits the central bank's ability to act as a lender of last resort. Amid the COVID-19 shock, the central bank cut its rate to a historical low of 0.75% as of June 2020, where it still stands. The bank has signaled an ongoing accommodative monetary policy stance. S&P said, "Given that the bank's assets-to-GDP ratio is about 95% and that our Banking Industry Country Risk Assessment (BICRA) is '8', we consider Costa Rica's contingent liabilities to be limited. (BICRAs are grouped on a scale from '1' to '10', ranging from what we view as the lowest-risk banking systems [group '1'] to the highest-risk [group '10'].)" In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. Ratings List Ratings Affirmed Costa Rica Sovereign Credit Rating B/Negative/B Transfer & Convertibility Assessment Local Currency BB- Costa Rica Senior Unsecured B =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Low Dollar Rate Expected to Continue -------------------------------------------------------- Dominican Today reports that the president of the Confederation of Commerce of Provisions and SMEs (Confecomercio) was confident that the dollar rate would continue its downward trend because, according to statistics from the Central Bank of the Dominican Republic (BCRD), the arrival of tourists and international reserves have increased, which should translate into a drop in the prices of food goods and services demanded by the population. Gilberto Luna said that "a decrease in the commercialization of the dollar exchange rate will necessarily decree a systematic decrease in the products of the family basket," according to Dominican Today. Luna emphasized that the dollar rate should go down to the levels it was in March 2020, between RD$53.50 and 54.00 for one dollar, the report notes. In the same vein, the business leader expressed that an excess of dollars in the economy should immediately bring about a policy towards lowering the exchange rate for the benefit of the population, the report relays. Likewise, he said that if the economic activities have decreased in the last year and more dollars have arrived in the country, there must be a disposition of all the sectors so that the prices of food, hardware, and other goods go down, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. 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. Fitch Ratings on Jan. 18, assigned a 'BB-' rating to Dominican Republic's USD1.5 billion 5.3% notes due Jan. 21, 2041. Concurrently, the Dominican Republic reopened its 2030 4.5% notes for an additional USD1.0 billion, which Fitch rates 'BB-', raising the total outstanding amount of the 2030 notes to USD2.0 billion. Standard & Poor's, on December 4, 2020, affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on the Dominican Republic. The outlook remains negative. S&P also affirmed its 'B' short-term sovereign credit ratings. The negative outlook reflects S&P's view that it could lower the ratings on the Dominican Republic over the next six to 18 months, given the severe impact of the COVID-19 pandemic on the sovereign's already vulnerable fiscal and external profiles, as well as the potential for a weaker-than-expected economic recovery. 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: Moody's Affirms Ba3 Long Term Issuer Rating --------------------------------------------------------------- Moody's Investors Service has affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook. The key drivers of the decision were: (1) The country's low susceptibility to event risk, with external vulnerability and government liquidity risks contained, given fully financed current account deficits, higher foreign exchange reserves to cover upcoming debt maturities and a proven track record of market access in times of market turmoil. (2) Relative economic resilience to the coronavirus shock despite the country's relative dependence on tourism, supported by solid medium-term growth prospects and income per capita levels above Ba peers. (3) Weak fiscal strength, which reflects long-standing credit challenges, given a high exposure to foreign exchange risks and a very high interest-to-government revenues ratio compared to peers. Moody's expectation that fiscal restraint and revenue-enhancing reforms will improve debt metrics partly balances the recent deterioration in metrics. The stable outlook reflects Moody's view that the Ba3 rating captures the balance of risks to the Dominican Republic's credit profile. Moody's expects that the government's debt levels will rise only moderately after a significant increase in 2020 and anticipates that the government will pursue revenue-enhancing reforms that will alleviate fiscal constraints stemming from a limited tax base. The rating agency expects balance-of-payments and government liquidity risks to remain contained and projects economic growth will return to its pre-pandemic rate of around 5% in the medium term. The stable outlook is also supported by a banking sector that remains resilient despite an anticipated deterioration in asset quality. The local-currency (LC) country ceiling remains unchanged at Baa3, maintaining the existing gap between the sovereign rating and the foreign-currency (FC) ceiling. The three-notch gap with the sovereign rating reflects relatively weak, albeit improving, government institutions that are increasingly more predictable and reliable, a small government footprint in the economy and financial system, low political risk and moderate external imbalances. The FC country ceiling remains unchanged at Ba1. The one-notch gap with the LC country ceiling reflects moderate external indebtedness and improved foreign exchange reserve accumulation. RATINGS RATIONALE RATIONALE FOR THE AFFIRMATION OF THE Ba3 RATING FIRST DRIVER: LOW SUSCEPTIBILITY TO EVENT RISK, WITH EXTERNAL VULNERABILITY AND GOVERNMENT LIQUIDITY RISKS CONTAINED The Dominican Republic has seen a reduction in external risks over the past decade, with a current account deficit of 1.2% of GDP on average over 2016-20 compared to 4.6% over 2011-15. While the country continues to be dependent on fuel imports, the current account deficit has declined significantly owing to lower oil prices, efforts to diversify the energy mix, as well as the accumulation of foreign exchange reserves. Reserves have risen steadily since 2014 and reached $10.7 billion at the end of 2020. Looking ahead, ongoing efforts to further diversify the energy mix and structurally reduce the Dominican Republic's dependence on oil imports will continue to lower the current account's exposure to oil price movements. In 2020, the severe global economic contraction negatively affected the Dominican Republic's external accounts via a fall in tourism receipts as well as depressed external demand. However, strong growth in remittances combined with a stronger import compression than the decline in exports limited the widening of the current account deficit. As in previous years, the current account deficit is fully financed by foreign direct investment, which reached $2.5 billion in 2020 despite the pandemic, driven primarily by the communication, mining and real estate sectors. Moody's anticipates that government liquidity risks will be contained. During the pandemic, the Dominican Republic demonstrated funding flexibility through its uninterrupted capital market access at favorable rates as well as financial support from multilaterals to cover the large financing gap last year. The Dominican Republic's exposure to cross-border financing will remain high as well as its reliance on foreign-currency funding since the government will likely continue to prioritize lower funding costs over currency risk. As a result, its balance sheet will maintain a relatively high exposure to exchange rate risk -- about two-thirds of the government's debt is foreign-currency-denominated. Moody's expects gross financing needs to decline in 2021-23 to around 9%-10% of GDP, similar to 2018-19 and down from 14% of GDP in 2020. SECOND DRIVER: DOMINICAN REPUBLIC'S ROBUST MEDIUM-TERM GROWTH PROSPECTS Since 2002, economic growth in the Dominican Republic has averaged more than 5% annually and GDP per capita (PPP basis) has more than doubled, surpassing the Ba median. The pandemic had a severe negative impact on growth in 2020, with an estimated 6.7% contraction driven by the combination of a sharp decline in tourist arrivals and lower domestic consumption amid the pandemic-induced social distancing and quarantine measures. That said, the economic contraction was not as large as in regional peers and other tourism-dependent countries. This partly reflects a more modest exposure to tourism compared to peers, with tourism's total contribution at 16% of GDP compared to 25% or more in Caribbean peers. Even though the industry took a significant hit in the second quarter of 2020, activity resumed partially by the summer and given strong collaboration between the government and the private sector to minimize contagion and assist tourists, the sector saw a rise in bookings for the end of the year -- total arrivals in 2020 were shy of 40% of the level registered in 2019, peaked at 58% in the last months of 2020 and preliminary government numbers for early 2021 show a sustained recovery trend. Moody's has raised its growth projection for 2021 to 6% from 4.8% mainly due to a higher positive carryover effect than previously expected, and due to the country's fast vaccine rollout, which is currently ahead of several Latin American and Caribbean countries in terms of total doses administered per 100 people. The fast pace of the vaccine rollout will support a faster reopening of domestic activity, including construction, commerce and other services, and will support a faster recovery in the tourism sector. The latter is also related to the tourism sector's favorable structure, since it is not as exposed to cruise ships as other destinations in the Caribbean and around 30% of the tourists come from the US, where Moody's expects growth to rebound strongly this year. Looking further ahead, the government's relatively strong and prolonged policy response will likely limit the pandemic's scarring effects on the economy in the medium-term, albeit at a fiscal cost, supporting Moody's assumption of a return to pre-pandemic growth of 5% rate per year over 2022-24. THIRD DRIVER: WEAK FISCAL STRENGTH MITIGATED BY EXPECTATION OF REVENUE-ENHANCING MEASURES AND PROSPECTS OF FISCAL RESTRAINT In 2020, the government provided prolonged fiscal support on the revenue and the spending side to households and companies amid the pandemic shock, amounting to more than 2% of GDP. Given the estimated economic contraction of 6.7% last year, the fiscal deficit reached 7.5% of GDP, a significant increase compared to 2.3% of GDP in 2019 but lower than our previous estimates of 10.2% of GDP for year-end. The debt-to-GDP ratio increased by 15 percentage points this year to 57.1%, which is slightly below the Ba-rated median. Moody's expects a gradual fiscal consolidation path beginning this year, with the fiscal deficit declining to around 4% of GDP this year and remaining around 3% of GDP in 2022 and beyond. This implies that the debt ratio will continue to deteriorate, albeit at a slower pace. Despite a debt-to-GDP ratio below that of peers, the Dominican Republic has two key credit weaknesses that stand out relative to peers: government debt is vulnerable to exchange rate risk given that two-thirds of the total is denominated in foreign currency and weak debt affordability due largely to a very low revenue base, which is related to tax exemptions and loopholes that the most dynamic sectors of the economy, including the tourism sector, are benefiting from. This is the reason why despite debt-to-GDP ratios are below those of peers, interest payments-to-revenue at around 24% in 2021 are the highest in the Ba category. The new administration is contemplating revenue-enhancing reforms this year, with implementation starting in 2022. Even though details have not yet been made public, Moody's expects reforms will seek to increase government revenue by simplifying the tax system and potentially expanding the tax base. While implementation risks are considerable, Moody's believes the government will prioritize increasing government revenue and maintaining fiscal restraint, cognizant of its importance to maintain debt sustainability in the medium term and favorable market access. In addition, Moody's notes the government's efforts to streamline expenditures though various measures such as consolidating government entities, better budget planning and improved treasury management. Pro-active debt pre-funding strategies and a more active debt management office has been put in place, which Moody's expects will establish a more rules-based approach to fiscal and debt management policy, leading to fiscal savings. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's view that the Ba3 rating captures the balance of risks to the Dominican Republic's credit profile. Moody's expects government debt levels to rise only moderately and assumes the government will pursue revenue-enhancing reforms this year to be implemented beginning next year, which would address the country's fiscal constraints due to its limited tax base. The rating agency also expects balance-of-payments and government liquidity to will remain contained, and projects economic growth of around 5% on average in the medium-term. The stable outlook also takes into account an institutional framework that is improving, in tax administration and collection, budget and treasury management and in efforts to strengthen the judicial system. An overhaul of the electricity sector, already underway, will contribute to lower losses and reduce its impact on fiscal accounts. Moody's also expects the banking sector to remain resilient to the foreseen deterioration in asset quality. Financial depth is among the lowest in Latin America, with total loans equal to one-quarter of nominal GDP. Stable deposits and adequate liquidity buffers support financial flexibility. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS Moody's takes account of the impact of environmental (E), social (S) and governance (G) factors when assessing sovereign issuers' economic, institutional and fiscal strength and their susceptibility to event risk. Dominican Republic's ESG Credit Impact Score is highly negative (CIS-4), reflecting a weak governance issuer profile score with limited financial resilience and relatively high exposure to environmental risk. Dominican Republic's exposure to environmental risks is moderately negative (E-3 issuer profile score), related to physical climate change and water issues. Lower crop yields because of climate events can harm the agricultural export sector and tourism revenues may be affected by rising sea levels and increased storm severity. However, the geography and extension of the island mitigate the impact as a climate event may affect a region but not all the country. Exposure to social risks is also moderately negative (S-3 issuer profile score). Social considerations historically have not materially impacted Dominican Republic's credit profile, supported by a sustained period of high economic growth rates and the reduction of poverty levels, but challenges related to education, health, safety and access to basic services will pressure government finances, more so in the context of a very narrow revenue base. The influence of governance on Dominican Republic's credit profile is highly negative (G-4 issuer profile score) reflecting its weak, albeit improving, government effectiveness, rule of law and control of corruption. Long-standing challenges related to the electricity sector, which has persistent losses, and relatively large revisions in the budget throughout the year affect fiscal predictability. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The credit profile could face upward pressure if there were a significant improvement in debt metrics in general, and in debt affordability indicators in particular. A significant decrease in the government's balance sheet exposure to foreign-currency-denominated debt or the implementation of fiscal reforms that underpin and improve debt sustainability prospects could also lead to an upgrade. A fiscal response from the authorities that proves insufficient to effectively address the marked deterioration in fiscal and debt metrics observed last year and that falls short in leading the way to a material increase in the government's low revenue base could lead to a negative rating action. Higher funding costs than those Moody's currently anticipate could also lead to a negative rating action given the country's exposure to cross-border financing. A weakening of external accounts that results in a structural deterioration in the current account deficit and leads to a decrease in foreign exchange reserves would exert downward pressure on the Dominican Republic's credit profile. GDP per capita (PPP basis, US$): 19,898 (2019 Actual) (also known as Per Capita Income) Real GDP growth (% change): 5% (2019 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 3.7% (2019 Actual) Gen. Gov. Financial Balance/GDP: -2.3% (2019 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: -1.4% (2019 Actual) (also known as External Balance) External debt/GDP: 42% (2019 Actual) Economic resiliency: ba1 Default history: At least one default event (on bonds and/or loans) has been recorded since 1983. On March 23, 2021, a rating committee was called to discuss the rating of the Dominican Republic, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have not materially changed. The issuer's fiscal or financial strength, including its debt profile, has materially decreased. The issuer's susceptibility to event risks has not materially changed. Other views raised included: The issuer's governance and/or management, have materially increased. The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019. =========== M E X I C O =========== FINANCIERA INDEPENDENCIA: S&P Affirms B+ LT Rating, Outlook Neg. ---------------------------------------------------------------- S&P Global Ratings affirmed its 'B+' long-term global scale and 'mxBBB-/mxA-3' national scale ratings on Financiera Independencia, S.A.B. de C.V. (SOFOM) (Findep). S&P also affirmed its 'B+' issue-level rating on Findep's senior unsecured notes. At the same time, we removed the ratings from CreditWatch negative, where we placed them on Dec. 30, 2020. The outlook is negative. Relatively low profitability and wide credit losses are taking a toll on Findep's business position. With the selling of its group loan and payroll discount businesses, Findep now generates revenue from its individual loan segment. The subsidiaries that Findep sold contributed about 18% of total revenue but generated incremental costs given their low levels of operating synergies with the lender's core business lines. In this sense, the sale is part of Findep's strategy to increase its efficiencies and develop additional products that share operating resources, aiming to reduce operating expenses. S&P believes Findep will find it tough to implement this strategy amid Mexico's weak economy. Despite a shrunken portfolio, Findep aims to improve asset quality and profitability metrics. Findep's loan portfolio contracted sharply in 2020 following the sale of Finsol (group loans). Additionally, during the first quarter of 2021, the portfolio contraction continued following Fisofo's sale (payroll discount). S&P said, "In this sense, we expect the loan portfolio to shrink almost 30% as of March 2021 year on year. We expect the lender's operations to grow, particularly those in the U.S. (AFI) that have better asset quality metrics." This could result in lower loan-loss reserves. Finally, the plan to reduce operating costs and improve the portfolio quality could lift Findep's profitability. S&P said, "We expect economic uncertainties will continue weighing on asset quality and operating profile in 2021. Findep's nonperforming loans and charge-offs have remained high in the past four years, and they reached 5.1% and 21.6%, respectively, in 2020. This was a result of the pandemic-induced economic shock and the borrower relief programs. However, Findep took the full effect of those programs in 2020 and there are no outstanding credits on its balance sheet. We believe AFI's expanding portfolio could help the lender's asset quality to reach the pre-pandemic metrics."s Finally, given the pandemic-related uncertainty and its harsh effect on the Mexican economy, we believe 2021 could also be a tough year for Findep because its Mexican operations continue to dominate its portfolio. Liquidity has held up, but could decline if collections decrease even further. During 2020, Findep maintained all of its funding lines, which propped its liquidity. However, we will continue to monitor the lender's collections because we believe that higher levels of troubled loans could crimp liquidity. GRUPO GICSA: S&P Downgrades ICR to 'B+', Outlook Negative --------------------------------------------------------- On March 25, 2021, S&P Global Ratings lowered its long-term global scale issuer credit ratings on Mexico-based real estate developer and operator Grupo GICSA S.A.B. de C.V. (GICSA) to 'B+' from 'BB-' and its national scale ratings to 'mxBBB-' from 'mxBBB+'. S&P also lowered issue-level ratings on the company's senior notes GICSA 15, GICSA 17, and GICSA 19 to 'mxBBB-' from 'mxBBB+'. The negative outlook on both scale ratings reflects a potential downgrade in the next six months if GICSA's liquidity position continues to tighten due to weak cash flows and low cash reserves, in comparison with short-term debt maturities or a more aggressive capex deployment. Even though the vaccination campaign started in Mexico three months ago, an immunization of a significant proportion of the population remains improbable in the next six months, which will likely lead to continued closure of public spaces, shopping malls, entertainment venues, and others. S&P said, "Consequently, we expect that real estate players--exposed to retail and office spaces, such as GICSA--will continue to underperform. We believe that GICSA's occupancy rates could be under pressure in 2021 and could decline 1%-2%, given the company's renewal rate near 90% and that close to 16% of its occupied gross leasable area (GLA) matures this year. In our view, GICSA's assets remain attractive across the Mexican market. However, the pandemic-fueled recession will continue to take a toll on several of its tenants, which may continue to seek rent relief or renegotiation. On the other hand, it's currently uncertain at what pace demand for office spaces will decline in Mexico due to the surge in work-from-home policies. Still, we expect this trend to increase over the medium term, affecting GICSA and the real estate industry." These factors have and could continue to, put pressure on GICSA's rent collection, liquidity position, and overall credit quality in the next six months if no countermeasures are implemented to meet upcoming debt maturities. S&P said, "We expect GICSA's consolidated revenue to increase in 2021 by double digits thanks to a modest rise in rental income, due to the stabilization of Explanada Pachuca and Explanada Culiacan, and the company's goal to accelerate the sale of its residential project, Cero5Cien. However, economic woes may spook potential buyers. Therefore, there's a risk that the costs to accelerate this project's works will significantly surpass potential income, causing GICSA's EBITDA to erode during 2021. As a result, we expect GICSA's adjusted gross debt to EBITDA to remain above 9.5x and EBITDA interest coverage just above 1.0x in 2021, considering commissions and financing expenses. On the other hand, rent collections and cash generation will remain volatile and vulnerable to lockdowns. During the fourth quarter of 2020, the company reported cash collections near 84% for the whole portfolio, with levels near 98% on office properties and 77% on shopping malls. However, authorities reimposed lockdowns in some of GICSA's geographic footprint for about half of the first quarter of 2021. In our view, these restrictions will continue to pressure GICSA's collections, generating volatility in its liquidity throughout 2021. "We consider that a proactive liability management of the remaining 2022 debt maturities could alleviate GICSA's liquidity needs in the short term. However, if management fails to improve liquidity in the near term through asset sales and refinance bank debt and local notes due 2022, we could revise our liquidity assessment to a weaker category in the next six months." On March 25, 2021, GICSA reached an agreement with holders of GICSA 17 notes to extend the debt maturity to December 2023, from April 2021, in exchange for an interest rate step-up, of which 25 bps for 12 months will be paid in advance on April 2021 and a change in the notes amortization schedule, changing from a bullet structure to an initial amortization on April 2021 and monthly payments in the last year of the tenor. S&P said, "In our view, this agreement isn't tantamount to default, because we consider that GICSA wouldn't default on this obligation absent this agreement, given its current liquidity sources that include unrestricted cash of about MXN800 million and marketable securities valued near MXN1.4 billion. Additionally, we consider the company has well-established relationship with banks, given that GICSA recently refinanced about MXN2.1 billion on a bank loan at property level originally due January 2022 and is progressing on refinancing another bank loan in the next few months. Finally, we consider that the proposed conditions provide enough compensation to holders of GICSA 17, given the interest rate step-up, change in amortization, and that the notes are currently trading near par." Environmental, social and governance (ESG) credit factors for this credit rating change: -- Consumer-related factors MEXICO: Down One Place in the World Ranking of Car Producers ------------------------------------------------------------ Juan Martinez at Rio Times Online reports that Mexico dropped one position as world producer of light vehicles during 2020, moving to seventh place. South Korea overtook both Mexico and India, due to the impact of the Covid-19 pandemic that forced plants to close for about three months, revealed the International Organization of Motor Vehicle Manufacturers (OICA), according to Rio Times Online. The international body reported that global light vehicle production fell 16% during 2020, with the assembly of 78 million units, led by China with 25,225,242 vehicles manufactured, the report notes. In recent years, Mexico maintained the sixth position as a vehicle manufacturer in the world; but in 2020 it fell to the seventh position while South Korea jumped into the top ten at sixth, the report adds. ======= P E R U ======= CORPORACION AZUCARERA: S&P Alters Outlook to Pos, Affirms 'B-' ICR ------------------------------------------------------------------ On March 25, 2021, S&P Global Ratings revised the outlook on Peru-based sugar producer Corporacion Azucarera del Peru, S.A. (Coazucar) to positive from negative and affirmed its 'B-' issuer and issue-level credit ratings on the company. S&P said, "The positive outlook reflects our expectation that Coazucar will extend its debt maturity profile over the upcoming months and maintain the liquidity headroom it has built recently, which would lead us to revise our liquidity assessment. We also expect Coazucar will continue to improve its credit metrics, with debt to EBITDA in the 3.0x area and an EBITDA margin of about 25%. "Better financial results than we expected in 2020 have helped Coazucar's credit metrics recover and improved the company's liquidity headroom. However, Coazucar faces a $212.8 million debt maturity in 2022 related to its senior unsecured notes. In our view, the company has the capacity to manage and refinance these obligations based on its solid and long-standing relationships with the banking system in Peru and access to the local capital markets. Only after the company extends its debt maturity profile and comfortably mitigates short-term risks, we would revise our existing liquidity assessment." In the past few years, Coazucar's liquidity has been pressured in part due depressed global sugar prices that undermined the company's profitability and exacerbated the volatility of its cash flows. Some factors that expose sugar prices to risk are global warming and unfavorable weather conditions such as the El Niño climate pattern. However, at this time S&P sees the positive momentum from the price cycle will support Coazucar's financial risk profile and should help protect its current liquidity headroom. Despite lower sugar volume sales in 2020 mainly due to lower demand from the food and beverage industry affected by the pandemic, Coazucar had better-than-expected top-line growth of 9% due to the higher average sugar prices. S&P sid, "For 2021, we expect sugar demand to remain subdued, with volume sales increasing in the low-single digit area. However, we don't expect any dip in sugar prices for 2021 and Coazucar's consolidated revenues should increase in the mid-single digit area. Considering that the company's cost structure would remain broadly stable, we estimate that cash flow will be similar to 2020. With no major capital investment requirements in Coazucar's pipeline, we believe the company will be able to fund its operating and investing activities without incurring additional debt in the next 12-months. We forecast Coazucar's debt to EBITDA will trend towards the 3.0x area and its interest coverage to be about 4.0x, which would compare favorably to peers." ===================== P U E R T O R I C O ===================== FARMACIA NUEVA: Asks for 90-Day Extension to File Plan ------------------------------------------------------ Farmacia Nueva Borinquen, Inc., is asking the Court to extend by 90 days its March 22, 2021 deadline to file a plan and a disclosure statement. Nilda M. Gonzales-Cordero explains that she has begun working with the analysis of the case and the drafting of the disclosure statement and Chapter 11 plan, however, concluded that at this moment the case is not ready for its filing. She narrated that the extension of the pandemic has hurt sales and the tax season has delayed meetings for plans to increase sales and identify business opportunities. "We are positive that the sales could increase with the appropriate modifications made in the business together with the opening of the schools and other business in the pharmacy's neighborhood. Nevertheless, the Debtor will need additional time to investigate the schedule of the schools to be opened and to finish the planning with the accountants," Ms. Gonzales-Cordero explains. Legal counsel for Farmacia Nueva Borinquen: NILDA M. GONZALEZ-CORDERO Guaynabo, Puerto Rico 00970 Tel: (787) 721-3437 Fax:(787) 724-2480 E-mail: ngonzalezc@ngclawpr.com About Farmacia Nueva Borinquen Farmacia Nueva Borinquen, Inc. sought protection for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 20-03715) on Sept. 21, 2020, listing under $1 million in both assets and liabilities. Nilda Gonzalez Cordero, Esq. represents the Debtor as counsel. STONEMOR INC: Lowers Net Loss to $8.4 Million in 2020 ----------------------------------------------------- StoneMor Inc. filed with the Securities and Exchange Commission its Annual Report on Form 10-K disclosing a net loss of $8.36 million on $279.54 million of total revenues for the year ended Dec. 31, 2020, compared to a net loss of $151.94 million on $257.24 million of total revenues for the year ended Dec. 31, 2019. As of Dec. 31, 2020, the Company had $1.63 billion in total assets, $1.72 billion in total liabilities, and a total owners' equity of($92.41 million). StoneMor said, "Our primary sources of liquidity are cash generated from operations and proceeds from asset sales. Our primary cash requirements, in addition to normal operating expenses, are for capital expenditures, net contributions to the merchandise and perpetual care trust funds and debt service. Amounts contributed to the merchandise trust funds will be withdrawn at the time of the delivery of the product or service sold to which the contribution related, which will reduce the amount of additional borrowings or asset sales needed." "While we rely heavily on our available cash and cash flows from operating activities to execute our operational strategy and meet our financial commitments and other short-term financial needs, we cannot be certain that sufficient capital will be generated through operations or be available to us to the extent required and on acceptable terms. We have experienced negative financial trends, including net losses and use of cash in operating activities, which, when considered in the aggregate, raise substantial doubt about our ability to continue as a going concern." A full-text copy of the Form 10-K is available for free at: https://www.sec.gov/Archives/edgar/data/1753886/000156459021015568/ston-10k_20201231.htm About StoneMor Inc. StoneMor Inc. (http://www.stonemor.com),headquartered in Bensalem, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 313 cemeteries and 80 funeral homes in 26 states and Puerto Rico. StoneMor's cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise. ================= V E N E Z U E L A ================= VENEZUELA: Basic Food Basket Jumps Nearly $30 in a Single Month --------------------------------------------------------------- The Latin American Herald reports that monthly wages earned by a small part of the Venezuelan population in foreign currency seem worthless now that food prices and other essential products continue on the rise every single month. The South American nation's basic food basket shot almost $30 higher between January and February to $281.97 from $254.25, an increase of $27.72 or 10.9% according to figures released by the Center for Documentation and Social Analysis of the Venezuelan Federation of Teachers (Cendas-FVM), the report notes. The hike, triggered by an uncontrollable rise in the prices of the local bolivar currency, clearly evidences how wages paid in foreign currency are not free from Venezuela's harsh hyperinflationary crisis since 2017 and without any hopes to come to an end this year, according to The Latin American Herald. According to Cendas-FVM, the food basket was located at Bs.536 million in February, an increase of Bs.78.1 million or 17% from the previous month, when it was located at Bs.458 million, and 1,914% year-on-year, the report relays. On the other hand, monthly inflation was 50.9% and 4,311% year-on-year which represents an important spike in inflation from January (3,478%) in interannual terms, the report discloses. The Cendas-FVM showed that it took a five-person household 446.46 minimum wages to obtain the food basket in February of this year, that is to say, 14.88 wages on a daily basis (Bs.18 million or $9.39 a day), the report relays. All items that make up the food basket experienced a jump in prices: sugar and salt (38.2%); cereals and cereal products (37.1%); fish and seafood (27.8%); roots, tubers, and others (25.6%); fats and oils (20.6%); meat and meat products (16.2%); milk, cheeses, and eggs (15.5%); sauces and mayonnaise (12.9%); coffee (10.2%); grains (10.1%); and fruits and vegetables (2.4%), the report discloses. Minimum monthly wages in Venezuela are currently located at Bs.1.2 million, excluding food vouchers of the same value, which take them slightly above a dollar taking into consideration the official foreign exchange rate set by the Central Bank of Venezuela (BCV) of Bs.1.8 million per dollar on March 22, the report adds. Venezuela Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and a large number of small islands and islets in the Caribbean sea. The capital is the city of Caracas. Hugo Chavez was president to Venezuela from 1999 to 2013. The Chavez presidency was plagued with challenges, which included a 2002 coup d'etat, a 2002 national strike and a 2004 recall referendum. Nicolas Maduro was elected president in 2013 after the death of Chavez. Maduro won a second term at the May 2018 Venezuela elections, but this result has been challenged by countries including Argentina, Chile, Colombia, Brazil, Canada, Germany, France and the United States who deemed it fraudulent and moved to recognize Juan Guaido as president. The presidencies of Chavez and Maduro have challenged Venezuela with a socioeconomic and political crisis. It is marked by hyperinflation, climbing hunger, poverty, disease, crime and death rates, social unrest, corruption and emigration from the country. S&P Global Ratings, in May 2019, removed its long- and short-term local currency sovereign credit ratings on Venezuela from CreditWatch with negative implications and affirmed them at 'CCC-/C'. The outlook on the long-term local currency rating is negative. At the same time, S&P affirmed its 'SD/D' long- and short-term foreign currency sovereign credit ratings on Venezuela. Moody's credit rating (long term foreign and domestic issuer ratings) for Venezuela was last set at C with stable outlook in March 2018. Meanwhile, Fitch's long term issuer default rating for Venezuela was last in 2017 at RD and country ceiling was CC. Fitch, on June 27, 2019, affirmed then withdrew the ratings due to the imposition of U.S. sanctions on Venezuela. ********* 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 2021. 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 * * *