/raid1/www/Hosts/bankrupt/TCRLA_Public/220420.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
Wednesday, April 20, 2022, Vol. 23, No. 73
Headlines
A R G E N T I N A
ARCOS DORADOS: Fitch Gives 'BB' Rating to Proposed Unsec. Notes
ARCOS DORADOS: Moody's Rates New Sustainability-Linked Notes 'Ba2'
ARGENTINA: 'Inflation is Paralyzing Economy,' Says IMF official
EDENOR SA: Commences Exchange Offer of 2022 Senior Notes
B O L I V I A
BOLIVIA: Could Face Shortages of Eggs And Other Food Products
B R A Z I L
SAMARCO MINERACAO: Creditors Reject Debt Restructuring Proposal
D O M I N I C A N R E P U B L I C
[*] DOMINICAN REPUBLIC: Farmers Call for Self-Sufficiency
X X X X X X X X
LATIN AMERICA: Hit By One Inflationary Shock on Top of Another
- - - - -
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A R G E N T I N A
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ARCOS DORADOS: Fitch Gives 'BB' Rating to Proposed Unsec. Notes
---------------------------------------------------------------
Fitch Ratings has assigned a 'BB' to the proposed new
sustainability-linked unsecured notes issued by Arcos Dorados B.V.
The notes will be fully and unconditionally guaranteed by Arcos
Dorados Holdings Inc. Proceeds of the notes are for debt
refinancing.
KEY RATING DRIVERS
EBITDA Recovery: Fitch expects Arcos Dorados' performance to
improve in 2022 due to the economic recovery in most regions where
the company operates, a gradual opening of dine-in services as
mandated restrictions are gradually relaxed, and strong sales from
drive-thru, delivery and digital. Drive-thru and delivery generated
49% of systemwide sales in the third quarter of 2021 and digital
sales, which include delivery, mobile app and self-order kiosks,
contributed 36%.
Fitch forecasts EBITDA to reach USD303 million in 2022 compared to
about USD270 million in 2021 (USD68 million in 2020) based on the
company's capacity to manage costs inflation (food and headcounts)
through price management initiatives and stores openings.
Deleveraging Expected: Fitch expects lease-adjusted net leverage to
trend toward 3.0x in 2022, reflecting higher EBITDA. The company
also benefited from debt derivatives gains which had a positive
impact on net debt, in line with the company's policy to hedge 50%
of its USD denominated debt.
Neutral FCF: Fitch expects FCF to be neutral due to higher capex in
2022. Capex, mainly related to openings and store modernization, is
expected to reach USD180 million to USD200 million in 2022,
compared to about USD110 million to USD130 million estimated in
2021. The company expects to open at least 55 new restaurants in
2022 and 200 or more locations from 2022 to 2024. The number of
free-standing restaurant openings will be about twice the number
opened during the most recent, pre-pandemic growth cycle
(2017-2019).
Country Ceiling: Arcos Dorados is headquartered in Argentina (CCC),
but its cash flow generation is heavily concentrated in Brazil
(BB-/Negative), which is estimated to account for 38% of revenues
and 52% of adjusted EBITDA in 2021. The Long-Term Foreign Currency
Issuer Default Rating (IDR) is not constrained by Brazil's Country
Ceiling (BB), given the company's ability to cover hard currency
debt service with cumulative cash flow from higher-rated countries,
such as Chile, Mexico, Colombia, Uruguay and Panama.
Solid Business Profile: Arcos Dorados' ratings reflect a solid
business position as the sole franchisee of McDonald's restaurants
across Latin America, benefitting from the McDonald's brand.
However, the company faces various regional economic challenges.
The company operates or franchises 2,261 McDonald's restaurants and
268 McCafes in 20 countries as of Dec. 30, 2021. About 70% of these
restaurants are operated by Arcos Dorados, while the remainder are
franchised restaurants.
McDonald's Franchise Strength: The ratings incorporate the strength
of McDonald's as a franchisor and the longstanding relationship
with Arcos Dorados' owners and management. The master franchise
agreement sets strict strategic, commercial and financial
guidelines for Arcos Dorados' operations, which support the
operating and financial stability of the business and the
underlying value of the McDonald's brand in the region.
DERIVATION SUMMARY
Arcos Dorados' ratings reflect its solid business position as the
sole franchisee of McDonald's restaurants across Latin America,
benefiting from the iconic McDonald's brand. The company is
confronted by several economic challenges facing the region, as
most of Arcos Dorados' EBITDA is generated in Brazil. The company's
geographical diversification and presence in several countries in
Latin America outside of Brazil and Argentina support the Foreign
Currency IDR.
Arcos Dorados' credit profile compares favorably to Alsea, S.A.B.
de C.V.'s (BB-) financial profile due to higher leverage and lesser
financial flexibility. Alsea's ratings incorporate its history of
debt-financed acquisitions that have resulted in higher than
expected leverage levels. The business profile is constrained by
the company's smaller size relative to its international peers such
as McDonald's, Starbucks Corporation (BBB/Stable) and Darden
Restaurants, Inc. (BBB/Stable). The company also reported lower
profitability than its peers due to its presence in less mature
countries.
KEY ASSUMPTIONS
Fitch's key assumptions within the agency's rating case for the
issuer include:
-- EBITDA of about USD303 million in 2022;
-- Capex of USD200 million in 2022;
-- Lease-adjusted net leverage moving toward 3.0x by 2022.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Net lease-adjusted debt levels below 3.5x on a sustained
basis;
-- Strong liquidity, positive FCF and refinancing of the 2023.
-- Factors that could, individually or collectively, lead to
negative rating action/downgrade:
-- Adjusted net leverage exceeding 4.5x on a sustained basis
beyond 2021;
-- Weak liquidity position.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fitch views Arcos Dorados' liquidity as strong
due to its solid cash position of USD279 million as of Dec. 30,
2021, committed bank lines, including a USD25 million of undrawn
committed revolving credit facility with JP Morgan, and manageable
long-term debt maturity profile. Arcos Dorados' debt consists of
two U.S. notes maturing in 2023 (USD202 million outstanding as of
4Q21) and 2027. The company has little debt in the short-term.
ISSUER PROFILE
Arcos Dorados is the world's largest McDonald's franchisee in terms
of system-wide sales. It has the exclusive right to own, operate
and grant franchises of McDonald's restaurants in 20 countries and
territories in Latin America and the Caribbean.
ESG CONSIDERATIONS
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.
DEBT RATING
---- ------
Arcos Dorados B.V.
senior unsecured LT BB New Rating
ARCOS DORADOS: Moody's Rates New Sustainability-Linked Notes 'Ba2'
------------------------------------------------------------------
Moody's Investors Service assigned a Ba2 rating to the proposed
seven to 10-year senior unsecured sustainability-linked notes to be
issued by Arcos Dorados B.V., fully and unconditionally guaranteed
by its parent company, Arcos Dorados Holdings Inc. ("Arcos
Dorados"). The Ba2 ratings on Arcos Dorados existing notes remain
unchanged. The outlook is stable.
This will be a sustainability-linked issuance, and coupon will be
linked to the performance of established sustainability performance
targets; more specifically, absolute greenhouse gas emissions
(scope 1 and 2) and greenhouse gas emissions intensity (scope 3).
Net proceeds from the proposed notes issuance will be used
primarily for a tender offer for Arcos Dorado's outstanding 6.625%
senior notes due 2023 and 5.875% senior notes due 2027. The purpose
of the tender offer is to extend the maturity of Arcos Dorados
outstanding financial debt; therefore, its indebtedness will not
increase. The rating of the notes assumes that the final
transaction documents will not be materially different from draft
legal documentation reviewed by Moody's to date and assumes that
these agreements are legally valid, binding and enforceable.
Rating assigned:
Issuer: Arcos Dorados B.V.
Proposed $350 million Gtd Senior Global Notes, Assigned Ba2
(Guaranteed by Arcos Dorados Holdings Inc.)
Outlook Actions:
Issuer: Arcos Dorados B.V.
Outlook, Stable
RATINGS RATIONALE
Arcos Dorados credit profile continues to reflect the company's
solid market position in Latin America as McDonald's Corporation's
(McDonald's, Baa1 stable) master franchisee in the region, and its
size and scale as the largest independent McDonald's franchisee
worldwide by sales and number of restaurants (2,261 at the end of
fourth-quarter 2021). Furthermore, Arcos Dorados operates the
region's largest free standing restaurant portfolio with over 1,100
locations, representing 49% of Arcos Dorados' total restaurants as
of December 2021, which offer a combination of take-out, drive-thru
or delivery services, and provide key competitive advantages.
Arcos Dorados' currency exposure and the concentration of its cash
flow in a limited number of markets with a high dependency on the
Brazilian market (38% of revenues and 52% of EBITDA as of
fiscal-year 2021) continue to constrain the ratings.
Another constraint is Arcos Dorados' large capital spending
requirements under its Master Franchise Agreement (MFA) with
McDonald's; however, Moody's understands that McDonald's has some
flexibility under this requirement. In this regard, Arcos Dorados,
in agreement with McDonald's, withdrew the 2020-2022 capital
spending plan announced in March 2020 to preserve Arcos Dorados'
financial soundness during the heigh of the Coronavirus pandemic.
One of Arcos Dorados' key competitive advantages in the region is
its restaurant portfolio, of which nearly half are free-standing
units, which cannot be easily replicated by competitors and proved
a key advantage to adapt to changing guest preferences during the
pandemic. Furthermore, Arcos Dorados announced a $650 million
capital spending plan for 2022-2024, where around 90% of new
restaurant openings in the period will be free standing locations.
The performance of Arcos Dorados showed significant improvements in
2021 and by the third-quarter of 2021 it had already surpassed
pre-pandemic sales levels in local currency. Arcos Dorados has
several key strategies to be able to drive top-line growth, market
share gains and profitability. In this regard, the company
implemented its Three D's strategy of Drive-thru, Delivery and
Digital and was able to leverage on the flexibility of the
restaurant portfolio to offset the temporary decline in mall stores
and the on-premise sales channels as a result of mobility
restrictions. As of the second half of 2021 higher economic
activity and lower mobility restrictions in the region had improved
client traffic on-premise, but not at the expense of off-premise
sales, however. In fact, Drive-thru, Delivery and Digital sales
segments have continued to grow and as of the fourth quarter of
2021 the company had achieved the highest ever drive-thru guest
volume, the highest ever delivery order volume and the highest ever
digital sales total for a single quarter.
Arcos Dorados' liquidity continues to be supported by its cash
balance, at $279 million as of December 31, 2021, and $25 million
available under its committed credit facility (undrawn), with no
significant maturities in the short term ($16 million as of
December 2021). The liquidity position of the company will be
further improved by the proposed tender offer because Arcos
Dorados' $755 million in financial debt as of December 2021 was
mainly composed of the notes maturing in 2023 ($203 million) and
2027 ($536 million); also, including hedges, financial debt was
$658 million as of December 2021. Additionally, as of December 2021
operating leases liabilities amounted to $786 million, taking total
debt as adjusted by Moody's to $1,542 million.
Improved performance and profitability has allowed Arcos Dorados to
deleverage significantly during 2021, and Moody's expects that the
company's good operating performance will allow them to continue
this deleveraging process in coming years. In this regard, Moody's
expects debt to EBIDTA ratio to remain at around 3.6x-3.7x in
2022-2023, down from 3.9x as of fiscal-year 2021.
The stable outlook incorporates Moody's expectation that Arcos
Dorados will maintain an adequate liquidity and good operating
performance in the next 12-18 months, which will allow the company
to improve overall credit metrics and deleverage towards levels
more in line with its Ba2 rating.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Moody's takes into account the impact of environmental, social and
governance (ESG) factors when assessing companies' credit quality.
Arcos Dorados ESG Credit Impact Score is moderately negative
(CIS-3). This reflects Moody's assessment that ESG attributes are
considered to have a limited impact on the current rating, with
greater potential for future negative impact. Arcos Dorado's focus
on sustainability, strong brand name, broad geographic
diversification in Latin America and readily available workforce of
young people is somewhat balanced by its reliance on natural
capital (given its high reliance on the sustainability of
agriculture related natural resources), and exposure to customer
relations, responsible production and long-term demographic trends
towards healthier diets.
The company is committed to improve energy efficiency use and
reduce greenhouse gas emissions, which are in line with industry
trends; also, 100% of packaging for consumer products will come
from renewable, recycled, or certified sources by 2025 and the
company is committed to recycle customer packaging in 100% of its
restaurants by 2025.
Arcos Dorados is publicly traded and operates with a moderate
financial policy. The company must comply with the Master Franchise
Agreement (MFA) with McDonald's, with strict financial
requirements.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The ratings could be downgraded if there is a deterioration in
liquidity and operations as a consequence of potential new
coronavirus variants that would require the resumption of lockdowns
or isolation measures in the region. Specifically, ratings could be
downgraded if Moody's-adjusted debt to EBITDA ratio is expected to
remain above 4.5x or retained cash flow (RCF) to debt below 15% on
a sustained basis. In addition, given the high concentration of
operations in Brazil, a downgrade of Brazil's sovereign rating
(Government of Brazil, Ba2 stable) could strain Arcos Dorados'
ratings.
Similarly, given Arcos Dorados' strong dependence on the Brazilian
market, an upward rating movement would also be subject to its
relative position to Brazil's sovereign ratings. An upgrade would
require Arcos Dorados to show a more resilient performance
regardless of the underlying macroeconomic environment and
consumption patterns in key markets, in particular in Brazil; and
to sustain lease-adjusted debt to EBITDA below 3.5x and adjusted
RCF to debt above 20% on a sustainable basis.
The principal methodology used in this rating was Restaurants
published in August 2021.
Headquartered in Buenos Aires, Argentina, Arcos Dorados Holdings
Inc. (Arcos Dorados) is the leading quick-service restaurant
operator in Latin America and the Caribbean. It is also McDonald's
largest independent franchisee globally in terms of systemwide
sales and restaurant count. The company has the exclusive rights to
own, operate and grant franchises of McDonald's restaurants in 20
Latin American and Caribbean countries. In fiscal-year 2021, Arcos
Dorados generated $2.7 billion in revenues.
ARGENTINA: 'Inflation is Paralyzing Economy,' Says IMF official
---------------------------------------------------------------
Buenos Aires Times reports that Argentina's runaway inflation has
not only prompted criticisms from the opposition and even some
government sectors at home - there's also been harsh commentary
from the International Monetary Fund.
"Inflation is paralyzing the economy in Argentina," concluded Ceyla
Pazarbasioglu, the IMF's strategic director and a Turkish economist
entrusted with evaluating the consistency of the local data in the
light of the IMF agreement, according to Buenos Aires Times.
"Inflation is toughest on the most vulnerable" and it is imperative
"to tame it," Pazarbasioglu said in a television interview,
explaining that the decision to raise interest rates to 47% "is
part of the agreement which Argentina concluded with the IMF," the
report relays.
In that context, she added: "We are seeing shock aftershock in the
world economy including financial crisis, coronavirus and war. Many
countries have an unsustainable debt" requiring careful work on the
part of the IMF, governments and the private sector, the report
discloses.
Via Twitter, the economist called on "the international community
to urgently support vulnerable countries via coordinated actions
ranging from emergency food supplies to financial support,
increased agricultural production and opening up trade," the report
says.
Opposition Critics
The comments came as opposition leaders lined up to hammer the
government in the wake of INDEC's revelation that inflation reached
6.7% in March, the report relays.
Describing inflation as "a hidden tax that eats the income of those
who work," Buenos Aires City Mayor Horacio Rodriguez Larreta called
for "a comprehensive economic plan" to tackle price hikes, the
report notes.
"The national government has an obligation to resolve this issue
urgently, but the solution will never come from boasting about not
having an economic plan, but exactly the opposite. There are no
magic solutions, it is a lie that there is a secret formula to
unlock this problem. The only thing that solves inflation is a
consistent and serious comprehensive economic plan. The government
has not yet presented it, we Argentines are waiting for it," said
the Juntos por el Cambio leader, the report relays.
PRO deputy Maria Eugenia Vidal complained that the government was
repeating unsuccessful policies, while Radical deputy Martin Tetaz
blamed the government's money-printing for the rate, the report
discloses.
Fellow opposition lawmaker Waldo Wolff said the ruling coalition
was "breaking social contracts," while calling on them to "take
charge," the report notes.
New IMF Fund
Meanwhile, the IMF has approved the creation of a new Resilience
and Sustainability Trust (RST), destined to boost the economies of
poor and middle-income countries as from next month in the
framework of "climate change and pandemics," from which Argentina
stands to pick up US$1.3 billion in special drawing rights (SDRs),
the report relays.
"The RST will broaden the impact of the US$650 billion assigned
last year to channel funds from our economically stronger members
towards countries where the needs are greater, the report relays.
The aspiration is to build up a trust of at least US$45 billion as
an aid to vulnerable countries facing longer-term challenges posing
risks to their economies and peoples," commented IMF Managing
Director Kristalina Georgieva, the report notes.
Last August, Argentina received US$4.334 billion in special drawing
rights which were deposited as reserves in the Central Bank and
used to pay part of the debt to the IMF, the report says.
Sums from the new trust can be returned over a period of 20 years,
"thus helping to generate resilience from the long-term risks for
the stability of the balance of payments," indicated Georgieva in
an official communique, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its 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.
Argentina obtained on March 25, 2022, approval from the Executive
Board of the International Monetary Fund (IMF) of a 30-month
extended arrangement under the Extended Fund Facility (EFF)
amounting to SDR 31.914 billion (equivalent to US$44 billion).
Under the new terms, Argentina secured a much-needed grace period
that postpones repayment of its debt. However, IMF warned of
exceptionally high risks to the program.
EDENOR SA: Commences Exchange Offer of 2022 Senior Notes
--------------------------------------------------------
Empresa Distribuidora y Comercializadora Norte S.A. ("Edenor" or
the "Company") announces the commencement of its offer to exchange
(the "Offer" or the "Exchange Offer") any and all of its
outstanding 9.75% Senior Notes due 2022 (the "Existing Notes") for
the applicable amount of newly issued 9.75% Senior Notes due 2025
(the "New Notes") and cash, as applicable, upon the terms and
subject to the conditions set forth in the exchange offer
memorandum, dated April 12, 2022 (the "Exchange Offer Memorandum").
Capitalized terms not defined herein shall have the meaning
ascribed to them in the Exchange Offer Memorandum.
The Offer is only available to holders of Existing Notes who are
(1) "Qualified Institutional Buyers" ("QIBs") as defined in Rule
144A under the Securities Act of 1933, as amended (the "Securities
Act"), in a private transaction in reliance upon the exemption from
the registration requirements of the Securities Act provided by
Section 4(a)(2) thereof, or (2) persons other than "U.S. persons"
(as defined in Rule 902 under Regulation S under the Securities
Act, "U.S. Persons") outside the United States who are not
acquiring New Notes for the account or benefit of a U.S. Person, in
offshore transactions in reliance on Regulation S under the
Securities Act, and who are non-U.S. Qualified Offerees (as defined
in the Exchange Offer Memorandum), in each case, whose receipt and
review of the Exchange Offer Memorandum, and participation in the
Offer, is otherwise permitted under the laws and regulations of any
jurisdiction applicable to them.
Eligible Holders in Argentina are urged to read, must follow the
procedures set forth in, and must rely exclusively on, the
Argentine Exchange Offer Memorandum. Holders who desire to obtain
and complete an electronic Eligibility Letter should visit the
following website:
https://bonds.morrowsodali.com/EdenorEligibility.
A full text copy of the company's press release is available at:
https://prn.to/3JN7lwW
About Edenor SA
Headquartered in Buenos Aires, Argentina, Edenor S.A. (NYSE: EDN;
Buenos Aires Stock Exchange: EDN) is the largest electricity
distribution company in Argentina in terms of number of customers
and electricity sold (both in GWh and Pesos). Through a
concession, Edenor distributes electricity exclusively to the
northwestern zone of the greater Buenos Aires metropolitan area
and the northern part of the city of Buenos Aires.
* * *
As reported by the Troubled Company Reporter-Latin America on
April 15, S&P Global Ratings placed its 'CCC-' issuer credit and
issue-level ratings on Argentine energy distribution company,
Empresa Distribuidora Y Comercializadora Norte S.A. (Edenor) on
CreditWatch with positive implications.
On April 12, 2022, Edenor announced an above-par exchange offer on
its $98 million outstanding senior unsecured Class 9 notes due
October 2022. The company expects to issue new 9.75% senior secured
notes due 2025 for up to $120 million.
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B O L I V I A
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BOLIVIA: Could Face Shortages of Eggs And Other Food Products
-------------------------------------------------------------
Rio Times Online reports that in Bolivia, three subsectors of the
Santa Cruz production apparatus - poultry farmers, pig farmers and
dairy farmers - are warning of a short-term disruption in the
supply of chicken and pork, as well as eggs and milk, due to a
shortage of corn in the local market.
The yellow grain is fundamental and overarching in the animal
nutrition of the aforementioned branches of production, according
to Rio Times Online.
The top leader of Santa Cruz's poultry sector called on the Food
Production Support Company (Emapa) to be transparent about
information on stockpiling corn in its silos, the report relays.
As reported in the Troubled Company Reporter-Latin America on March
4, 2022, S&P Global Ratings assigned its 'B+' issue rating to
Bolivia's US$850 million senior unsecured notes. The 7.5% notes
will mature in 2030.
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B R A Z I L
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SAMARCO MINERACAO: Creditors Reject Debt Restructuring Proposal
---------------------------------------------------------------
Reuters reports that creditors of Brazilian miner Samarco Mineracao
SA, a joint venture of Vale SA and BHP Billiton Ltd, rejected the
debt restructuring plan presented by the company in an online
creditors assembly.
Creditors are expected to present an alternative plan for the debt
restructuring within 30 days, according to the report.
Representatives of 99.3% of unsecured credits rejected the plan,
while smaller creditors in different classes voted favorable to the
company's plan, the report notes.
An alternative plan designed by creditors is now allowed under
Brazilian law, which previously mandated liquidation if creditors
rejected a restructuring plan proposed by the company, the report
relays.
In a statement, the group of creditors said they will propose
mining executive Tito Martins to lead Samarco and take the company
"back to growth," the report discloses.
Creditors also said the company's restructuring plan
"underestimated" Samarco's production capacity, the report says.
In a statement, Samarco said financial creditors need to consider
interests of all stakeholders and "should not look only for
financial return that cannot be supported by the company," the
report relates.
Shareholders Vale and BHP have already requested to be allowed to
vote on the plan proposed by the creditors, but the bankruptcy
court has not yet decided on the matter, the report adds.
About Samarco Mineracao SA
Samarco Mineracao SA is a Brazilian mining joint venture between
BHP Group and Vale SA. It serves as an iron ore processing
company.
The company provides blast furnace, direct reduction, sinter feed,
as well as low and normal silica content pellets.
On April 9, 2021, the Debtor filed a voluntary petition for
judicial reorganization in the 2nd Business State Court for the
Belo Horizonte District of Minas Gerais in Brazil pursuant to
Brazilian Federal Law No. 11,101 of Feb. 9, 2005.
Samarco Mineracao filed for Chapter 15 bankruptcy recognition
(Bankr. S.D.N.Y. Case No. 21-10754) on April 19, 2021, in New York,
to seek U.S. recognition of its Brazilian proceedings.
The Debtor's U.S. counsel is Thomas S. Kessler of Cleary Gottlieb
Steen & Hamilton LLP.
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D O M I N I C A N R E P U B L I C
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[*] DOMINICAN REPUBLIC: Farmers Call for Self-Sufficiency
---------------------------------------------------------
The Federation of Farmers for Progress called for the
implementation of an integrated food self-sufficiency program in
the country and an improvement in the quality of agricultural
products, toward becoming more and more organic, free of pesticides
and chemical products harmful to health.
"We have to go back to basics. The country needs to produce enough
to be able to supply and sustain itself; it should not need to
import anything, because everything can be grown here. We must
remember that we are a nation with an agricultural heritage, and we
have forgotten that," said Esteban Polanco, president of the
Federation of Farmers for Progress (Federación de Campesinos hacia
el Progreso).
He also stressed the importance of creating a farmers' movement to
unify the sector, with the aim of defending agricultural resources,
land, and national production.
The organization celebrated its 30th anniversary on April 5,
highlighting its achievements in the mountainous and remote
communities of Alto Yuna, which had been isolated, neglected by the
state, and impoverished for decades, without basic electricity and
education services. Now, their progress is tangible.
Polanco stated that they were working on the implementation of an
economic development plan, which would guarantee an income for the
community members, while also providing an incentive for
sustainable agricultural production.
"More than 60% of the country's fresh surface water comes from this
area. Developing economic projects in this area is sensitive. That
is why we have organized and educated the communities," he said.
The Federation of Farmers for Progress in the upper Yuna River
basin is made up of about 300 families. Their main crops are
coffee, bananas, and, on a smaller scale, cocoa.
"We want to revive family farms and set up family farming units,
modules that guarantee self-consumption. We also have a cooperative
for farmers to sell their crops at more competitive prices," he
added.
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.
TCRLA 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, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'. The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative. S&P also affirmed
its 'BB-' long-term foreign and local currency sovereign credit
ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said. A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
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LATIN AMERICA: Hit By One Inflationary Shock on Top of Another
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According to the International Monetary Fund, after years of
fluctuating around targets, inflation in Latin America's largest
economies is the highest it's been in 15 years, having suffered two
major shocks: the impact of the pandemic, and of the Russia-Ukraine
war.
As in other emerging markets and advanced economies, inflation
accelerated in Brazil, Chile, Colombia, Mexico, and Peru-the LA5-in
2021. The increase in inflation was initially driven by surging
food and energy prices but became broader, reflecting monetary
policy inertia and wage indexation practices (contracts that adjust
their terms automatically with inflation), as well as a strong
recovery in demand, initially for goods but later for services too.
The war in Ukraine is yet another inflationary shock to the region.
IMF's estimates suggest that a 10 percentage points increase in
global oil prices would lead to a 0.2 percentage point increase in
inflation in LA5, while a 10 percentage points increase in global
food prices would result in a 0.9 percentage point increase in
inflation. A combined 10 percentage points shock to both oil and
food prices would push up inflation by 1.1 percentage points.
Inflationary pressures exacerbated by the war may persist due to
existing indexation and early indications of labor market tightness
in some countries.
Inflation in Latin America
In addition to the macroeconomic impact, current higher inflation
is regressive, with low-income households suffering a steeper
cost-of-living increase. For a region with historically high levels
of inequality, the erosion of real incomes due to the soaring cost
of food and energy will only add to the economic strains faced by
vulnerable households in the region. And as IMF showed in its
October 2021 Outlook, low-income households were already the most
affected by the economic consequences of the pandemic.
Inflation Drivers
Global factors, specifically commodity and import prices, were key
drivers of inflation in 2021. IMF's analysis suggests that these
play a larger role in the region than in advanced economies.
Domestic factors also contributed. Although they're often
country-specific, there are some associated with the pandemic that
are common to countries in the region. As in some advanced
economies like the United States, in LA5 they appear to be related
to the recovery in private consumption in 2021.
Fiscal stimulus and other support measures boosted demand for goods
in most LA5 countries in the early months of the pandemic and core
goods inflation moved in tandem. Growing demand for services,
supported by the lifting of mobility restrictions, made inflation
broader based as reflected in the recent rise in core services
inflation. For instance, private demand for goods recovered rapidly
and strongly in Chile on the back of fiscal support and pension
withdrawals, and a sustained but milder recovery in private demand
for services followed, which contributed to the rise in core
inflation of 6.6 percent year-over-year in February 2022.
Inflation in Latin America
Following unprecedented monetary policy easing to support the
economy during the early months of the pandemic, central banks in
LA5 swiftly reversed their stance when inflation began rising,
often tightening rates by more than anticipated by market
participants.
The Central Bank of Brazil was the first one to change course in
March 2021, and others followed suit, leading to cumulative rate
hikes that ranged from 1.75 to 9.75 percentage points from their
end-2020 levels.
These actions, together with LA5 central banks' hard-won
credibility in fighting inflation, have kept long-term inflation
expectations anchored despite the increase in inflation. As shown
in the October 2021 Outlook, LA5 central banks seem to have
achieved higher credibility than the average emerging market
central bank.
Central banks need to be vigilant and continue to take decisive
actions if needed.
*********
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 2022. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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