/raid1/www/Hosts/bankrupt/TCRLA_Public/220602.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, June 2, 2022, Vol. 23, No. 104
Headlines
A R G E N T I N A
ARGENTINA: Inflation Bites, But High-End Consumption is Rising
CENTRO CULTURAL BORGES: Reopens in State Hands After 2Yr. Closure
B E L I Z E
BELIZE: Form Deal with Taiwan and IDB to Boost Jobs and Recovery
B R A Z I L
EMBRAER SA: To Resume Negotiations, Insists on Reducing its Order
J A M A I C A
STERLING INVESTMENT: Records Decline in Post-Tax Earnings
M E X I C O
PETROLEOS MEXICANOS: Moody's Rates New $2BB Notes Due 2029 'Ba3'
P E R U
PERU: IMF OKs New US$5.4B Flexible Credit Line Arrangement
P U E R T O R I C O
INNOVA INDUSTRIAL: Seeks to Hire Batista Law Group as Counsel
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A R G E N T I N A
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ARGENTINA: Inflation Bites, But High-End Consumption is Rising
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Buenos Aires Times reports that Argentina's economy is projected
this year to have an inflation floor of 70 percent. Some
economists are already projecting higher, given the price hikes
registered in the first four months of the year, the report notes.
In recent months, the disparities in consumption between low-income
and high-income sectors have widened, the report discloses. The
reason is inflation: prices reached 58 percent year-on-year in
April, and most are projected to clear 70 percent this year,
according to economists such as Martin Redrado and Marina dal
Poggetto, the report says.
According to data released by the Focus Market consultancy firm in
April, mass consumption in local shops witnessed the biggest
year-on-year percentage drop in the last 10 months, with a fall of
8.7 percent, producing a negative balance of 3.1 percent in the
first four months of the year, the report says.
The firm's chief, Damian Di Pace, also indicated that consumption
in the Buenos Aires Metropolitan Area (AMBA) "fell more than in the
interior of the country," the report relays.
In this regard, he explains that, on average, a typical family
requires about 42,500 pesos to afford a basic food basket, given
the Precios Cuidados price-control scheme. Outside of these
measures the value of that basket amounts to 45,000 pesos, but
costing an additional 7,000 or 8,000 pesos in Buenos Aires City or
in the first ring of the Conurbano, the report discloses.
"People's incomes are lagging behind the prices they receive on the
shelves," said Di Piace, adding that the slump in consumption is
occurring in all types of products. For example, that negative
balance of 3.1 percent in the first four months of the year was
made up of falls of 0.6 percent in beverages, one percent in
cleaning products, 6.3 percent in food and 7.4 percent in personal
care items, the report discloses.
Empty Refrigerators And Waiting List For Cars
With close to 40 percent of the population living below the poverty
line, and another 40 percent making up a diffuse "middle class,"
high earners are still spending, especially on automobiles, tourism
and leisure pursuits, the report says.
The delivery of a new car, after having put "all the money on the
table", can take between four and five months, and this also pushes
up the price of used cars, because they are available immediately,
the report notes.
The reason is simple. "People who can save do not want to do so
with a peso that is devaluing at a rate of 70 percent a year
compared to a fixed-term rate of less than 60% percent," explained
sociologist Alberto Cuenca, of the EconomÃa y Sociedad consultancy
firm, in an interview with Perfil, the report relays.
Such individuals "buy things that he or she can use and, what's
more, that he or she can get today and maybe tomorrow they won't be
on the market, the report discloses. This is not only seen in 'big
ticket items,' such as a car, but also in the purchase of computers
or notebooks that are in the shops today, but the sellers
themselves don't know if they will have them again," said Cuenca,
the report notes.
As for the boom in domestic tourism and packed theatres, they have
other origins, the report relays. According to theatre producer
Carlos Rottemberg: "After the quarantine brought about by Covid,
there was an explosion, a need to go out," the report notes.
On the business side, "there are promotions of two tickets for the
price of one, payment in three instalments . . . whatever is
necessary to put the wheel in motion again," he adds.
To this can be added "the arrival of foreign tourists, especially
Uruguayans, on weekends, beneficiaries of the exchange rate," the
report relays.
One example is the Van Gogh Experience, the exhibition on the Dutch
artist that was planned to run in December for two months, with
tickets ranging from 2,000 pesos for children and up to 3,000 pesos
for adults. Due to the success of the public, the show has been
extended until mid-June, the report says.
In the case of tourism, the government's Previaje plan that
reimburses 50 percent of expenses incurred in the country,
encouraged, together with the 'Ahora 12' instalment plan, trips to
destinations further away from the Federal Capital and Greater
Buenos Aires, such as Patagonia, Mendoza, Salta and Misiones, the
report discloses.
"The equation is the same. You buy something now that is expensive,
but in 12 months' time it will be cheaper," concludes Cuenca, the
report notes.
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.
CENTRO CULTURAL BORGES: Reopens in State Hands After 2Yr. Closure
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Hannah Gonzalez at Buenos Aires Times reports that the Centro
Cultural Borges ("Borges Cultural Centre," CCB), bearing the name
of Argentina's most famous writer, reopened its doors this March
after a two-year pandemic closure, this time in state hands.
The space is replete with 13 exhibition spaces, three performance
halls and a small open library, the report notes. The
Parisian-style building, constructed in 1891, has long been
recognised as a cultural meeting point - it was originally the
first home of the Museo Nacional de Bellas Artes, the report
discloses.
Under its new management, the four pavilions of the Centro Cultural
Borges currently feature the Bon Marche hall of the Museo Nacional
de Bellas Artes and a sprawling exhibit dedicated to legendary folk
singer Mercedes Sosa, as well as multiple rotating tango and jazz
concerts, the report relays.
It also proudly displays multiple inaugural exhibitions as well as
two exhibits that opened on May 11; one dedicated to the late
Mexican novelist Carlos Fuentes, and another by Diana Schufer, Las
palabras se las lleva el viento ("Words are carried by the wind"),
presented in dialogue with the works of the legendary writer for
whom the Centre is named: the incomparable Jorge Luis Borges, the
report notes.
Changing Hands
The report recalls that during former president Carlos Menem's
administration (1989-1999), the historic building passed from the
hands of Ferrocarriles Argentinos to hotel businessman Mario Falak
for the purposes of creating the Galerias Pacifico shopping centre.
Part of the building was allocated to the Borges Cultural Centre,
which, starting in 1995, was managed by the private Fundacion para
las Artes ("Foundation for the Arts").
The group remained in charge of the Centre until its closure due to
the pandemic, after which the National Culture Ministry recovered
the space in early 2021, following negotiations between the two
parties, the report says.
Ezequiel Grimson, former undersecretary of cultural policies for
Buenos Aires Province and ex-culture director of the National
Library, is the CCB's new director, the report notes.
"The Centro Cultural Borges had gone through some rather difficult
last few years in its private management, and the arrival of the
pandemic made it impossible for the project to continue," he told
the Times in an interview.
"The National Culture Ministry took charge [of the Centre] on the
basis of an agreement that was made between the Fundacion para las
Artes and the National Culture Ministry," he explained. After the
changing of hands, Grimson and his team worked "for practically an
entire year on its architectural transformation," the report
relays.
According to a sharply critical column published by Infobae in
August 2021, the process did not go quite so smoothly. Penned by
Blanca Maria Monzon, the CCB's director of the Audiovisual
Department before the change in management, the article voiced
complaints that not all employees were able to keep their jobs, the
report notes. "During the pandemic, the Fundacion para las Artes
informed the staff of the Borges Cultural Centre that they had to
transfer to the Culture Ministry, since the Fundacion could not
continue to absorb their salaries," writes Monzon.
"The situation of the monotributistas [self-employed staff] - some
with years, and decades, of sustained permanence in the institution
- was much more uncertain. They promised that the Fundacion would
remain an appendage within the CCB, and would therefore continue to
assume the commitment to pay their salaries: no-one would be left
without work," the report says.
"I found this argument dubious," the article continues. "Since its
inception - and for 26 uninterrupted years - the institution never
enjoyed sufficient funds to place all its workers on permanent
staff, particularly the hierarchical personnel. Unfortunately, time
proved me right. A few days later, they told us: we have no more
money, turn to the State," he added.
La Nacion reported in March that the Culture Ministry absorbed
about 20 employees from the Fundacion para las Artes, the report
notes.
Monzon could not be immediately reached to comment on this issue.
Despite the complaints, many experts are supportive of the changing
of hands, as well as the role of the state in this particular
project, the report relays.
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B E L I Z E
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BELIZE: Form Deal with Taiwan and IDB to Boost Jobs and Recovery
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President Mauricio Claver-Carone of the Inter-American Development
Bank (IDB) met with Vice Minister Alexander Tah-ray Yui to discuss
strategic expansion of the cooperation between the IDB and Taiwan
in Latin America and the Caribbean. During the meeting, the IDB
and Taiwan's International Cooperation and Development Fund (ICDF)
signed a Letter of Intent (LOI) with Mr. Joseph Waight, Financial
Secretary of the Ministry of Finance, Economic Development and
Investment of the Government of Belize (GOB), to establish
cooperation and coordination of IDB-approved financing that
includes an additional $5 million from the ICDF that will be
coordinated and supervised by the IDB program.
This agreement seeks to create employment and foster the economic
recovery of micro, small, and medium-sized enterprises (MSMEs) in
Belize. This collaboration builds on the IDB's existing work in
Belize that finances programs that support the protection of
productive sectors. This program is also expected to benefit
businesses that have been deeply affected by the COVID-19 crisis.
"At the IDB, we are thrilled to support Belize by empowering MSMEs,
which are critical sources of jobs, innovation, and growth,"
remarked President Claver-Carone. "Taiwan is a model of how to
empower and leverage the private sector as an engine for growth to
drive sustainable, transparent development and we look forward to
working together to uplift Belize's MSMES - in particular as we
seek to replicate the Bank's newly reached historic support for
women-led businesses - as a means of reigniting recovery and growth
across the region," said President Claver-Carone.
"The Inter-American Development Bank is the most prominent
development bank in the Western Hemisphere. Taiwan has been
proactively seeking opportunities of cooperation with the IDB.
Signing the Letter of Intent for the joint cooperation in Belize
today marks the beginning of deeper engagement between Taiwan and
the IDB. Through the partnership with the IDB, Taiwan looks
forward to enhancing cooperation with all the democratic countries
in the region," said Vice Minister Yui.
"The Government of Belize is grateful for the continued support of
the IDB and Taiwan toward the sustainable and balanced growth and
development of Belize. The GOB is particularly appreciative of this
program aimed at supporting women-led, small and medium enterprises
which is seen as a key element in the economic recovery of Belize.
The GOB commits to working closely with our development partners to
ensure a successful implementation of this program," stated
Financial Secretary Waight.
The funds will help MSMEs, with a focus on women-led business,
finance productive investments including purchases of plant
equipment and machinery, expansion and improvement of productive
infrastructure, plant and process retrofitting to adapt to new
public health requirements, and the implementation of new
technology, techniques, and processes.
The partnership's focus on empowering small enterprises and
promoting gender and diversity is closely aligned with "Vision
2025: Reinvest in the Americas," the IDB's blueprint for fostering
recovery and inclusive, sustainable growth in Latin America and the
Caribbean.
About the IDB
The Inter-American Development Bank is a leading source of
long-term financing for economic, social and institutional projects
in Latin America and the Caribbean. Besides loans, grants and
guarantees, the IDB conducts cutting-edge research to offer
innovative and sustainable solutions to our region's most pressing
challenges. Founded in 1959 to help accelerate progress in its
developing member countries, the IDB continues to work every day to
improve lives.
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B R A Z I L
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EMBRAER SA: To Resume Negotiations, Insists on Reducing its Order
-----------------------------------------------------------------
Rio Times Online reports that during the meeting of the head of the
Brazilian Air Force (FAB), Lieutenant Brigadier Carlos de Almeida
Baptista Jr., with different media, one of the main topics was the
Embraer KC-390 transport aircraft and the controversy over the
number of aircraft that will finally be acquired.
The Brazilian Air Force maintains that otherwise, it will
unilaterally cut its order for the Brazilian transport aircraft to
21 units, according to Rio Times Online.
Headquartered in Sao Jose dos Campos, State of Sao Paulo, Brazil,
Embraer SA manufactures and markets commercial, corporate, and
defense aircraft.
As reported in the Troubled Company Reporter-Latin America,
Egan-Jones Ratings Company maintained its 'B' foreign currency and
local currency senior unsecured ratings on debt issued by Embraer
SA on January 24, 2022.
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J A M A I C A
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STERLING INVESTMENT: Records Decline in Post-Tax Earnings
---------------------------------------------------------
RJR News reports that listed company Sterling Investments
registered a drop in post tax earnings during the January to March
quarter.
Sterling's net profit was $36.2 million down from $55.2 million
dollars during the same period in 2021, according to RJR News.
Gross income during the three months also declined to $36. 6
million compared to $80. 4 million last year, the report relays.
The investment company cited foreign exchange losses, the report
notes.
Meanwhile, QWI's Investments' profit declined to $38.7 million
during the January to March quarter, the report discloses.
It was at $79 million during the same period last year, the report
says.
Revenue was down $50 million dollars at $82.8 million, the report
relays.
QWI said the drop in earnings and profit was partly due to the
effects of the war in Ukraine and turbulence in the US market, the
report adds.
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M E X I C O
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PETROLEOS MEXICANOS: Moody's Rates New $2BB Notes Due 2029 'Ba3'
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Moody's Investors Service assigned a Ba3 senior unsecured rating to
Petroleos Mexicanos' ("PEMEX") 8.750% $2 billion new notes due
2029. The company will use the proceeds of the notes for general
corporate purposes, including the reduction of accounts payable to
large suppliers. The new notes will be jointly and severally
guaranteed by the company's operating subsidiaries, Pemex
Exploracion y Produccion, Pemex Transformacion Industrial and Pemex
Logistica. The new notes do not materially increase PEMEX's total
debt or debt leverage, and Moody's expects that the company's total
debt will remain stable or decrease somewhat by year-end 2022. The
rating outlook is negative.
Assignments:
Issuer: Petroleos Mexicanos
Senior Unsecured Regular Bond/Debenture (Foreign Currency),
Assigned Ba3
RATINGS RATIONALE
PEMEX's Ba3 corporate family rating and caa3 BCA reflect Moody's
view that the company's liquidity needs, and negative free cash
flow, will remain high in the next three years, despite currently
higher oil prices than expected, due to high debt maturities and
insufficient operating cash flow derived from the expansion of its
refining business, which has generated operating losses in the last
several years. Although oil and gas production growth has been
below management targets, Moody's acknowledges that PEMEX has been
successful in 2019-to date to post relatively stable production and
reserves levels and believes that this will continue to be the case
in 2022-23. However, Moody's expects that PEMEX's cash flow
generation and credit metrics will remain weak in the next three
years as the company increases fuel production, while grappling
with limited capital investment ability, high debt maturities, and
volatile oil and fuel prices.
PEMEX's Ba3 rating takes into consideration Moody's joint default
analysis, which includes assumptions of very high government
support in case of need and very high default correlation between
PEMEX and the government of Mexico (Baa1 negative), resulting in
six notches of uplift from the company's caa3 BCA. Since 2016, the
government has supported PEMEX in various ways, including capital
injections, tax reductions and early redemption of notes receivable
from the government. In 2021, the government supported PEMEX with
close to $20 billion between tax reductions and capital injections,
for capital investments and debt payments. The government has
stated its intention to continue to support PEMEX's debt payment
obligations in 2022 and 2023. Moody's expects that support from the
government will allow PEMEX to reduce its debt somewhat in
2022-23.
PEMEX has weak liquidity and is highly dependent on government
support. On March 31, 2022 PEMEX had $2.4 billion in cash but no
availability under its committed revolving credit facilities. The
company needs to address around $12.6 billion in debt maturities
from April 2022 to December 2023, besides substantial negative free
cash flow in the period, driven by insufficient operating cash
generation.
The negative rating outlook on PEMEX's Ba3 ratings is primarily
based on the negative outlook on Mexico's Baa1 rating given the
importance of the sovereign's credit strength and ongoing support
to PEMEX's ratings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
A downgrade of Mexico's Baa1 rating would likely result in a
downgrade of PEMEX's rating. For Moody's to consider an affirmation
of PEMEX's Ba3 rating following a sovereign downgrade, the
company's BCA would have to substantially improve. Factors that
could drive a higher BCA would be the ability of the company to (i)
strengthen its liquidity position (ii) internally fund enough
capital investment to fully replace reserves and deliver modest
production growth and (iii) generate free cash flow for debt
reduction. Because PEMEX's ratings are highly dependent on the
support from the government of Mexico, a change in assumptions
about government support and its timeliness could lead to a
downgrade of PEMEX's ratings.
Downgrades in the company's BCA could also lead to further
downgrades of PEMEX's ratings. Factors that could lead to a lower
BCA include material increase in net debt, an operating performance
worse than forecasted, reserves decline and decreases in reserves
life.
A rating upgrade is unlikely in the near term given the negative
outlook for Mexico's Baa1 rating and Moody's expectations for
continued negative free cash flow at PEMEX.
The methodologies used in this rating were Integrated Oil and Gas
Methodology published in September 2019.
Founded in 1938, PEMEX is Mexico's national oil company, with fully
integrated operations in oil and gas exploration and production,
refining, distribution and retail marketing, as well as
petrochemicals. PEMEX is also a leading crude oil exporter, around
60% of its crude is exported to various countries, mainly to the US
and Asia. In the three months ended March 31, 2022 the company
produced an average of 1,755 thousand barrels of crude oil per day
(excluding partners).
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P E R U
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PERU: IMF OKs New US$5.4B Flexible Credit Line Arrangement
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The Executive Board of the International Monetary Fund (IMF)
approved a successor two-year arrangement for Peru under the
Flexible Credit Line (FCL) in an amount equivalent to SDR 4.0035
billion (about US$ 5.4 billion) [1] and noted the cancellation by
Peru of the previous arrangement in the amount of SDR 8.07 billion.
The Peruvian authorities stated their intention to treat the new
arrangement as precautionary.
The FCL was established on March 24, 2009, as part of a major
reform of the Fund's lending framework (see Press Release No.
09/85). It allows its recipients to draw on the credit line at any
time and is designed to flexibly address both actual and potential
balance of payments needs to help boost market confidence. Drawings
under the FCL are not phased nor tied to ex-post conditionality as
in regular IMF-supported programs. This large, upfront access with
no ex-post conditionality is justified by the very strong policy
fundamentals and institutional policy frameworks and sustained
track records of countries that qualify for the FCL, which gives
confidence that their economic policies will remain strong, and
they will respond appropriately to the balance of payments
difficulties that they are encountering or could encounter.
Following the Executive Board's discussion on Peru, Mr. Kenji
Okamura, Deputy Managing Director, made the following statement:
"Peru's very strong economic fundamentals and policy
frameworks-anchored by a credible inflation targeting framework, a
flexible exchange rate, effective financial sector supervision and
regulation, and a solid medium-term fiscal framework-have allowed
the authorities to deliver a comprehensive and timely response to
the COVID-19 pandemic and promote growth. As a result, and spurred
by robust external demand, favorable terms of trade, and a surge in
construction, Peru's economy recovered strongly in 2021,
registering one of the highest growth rates in the region.
"Nevertheless, the Peruvian economy remains exposed to elevated
risks, including from renewed waves of the COVID-19 pandemic,
slowing economic activity in key trade partner countries, the war
in Ukraine, tighter global financial conditions, and political
uncertainty. The new arrangement under the Flexible Credit Line
will continue to play an important role in supporting the
authorities' macroeconomic strategy by providing insurance against
tail risks and bolstering market confidence.
"The authorities intend to treat the arrangement as precautionary
and exit the arrangement when external conditions allow. The lower
level of access requested-300 percent of quota, down from 600
percent in the FCL approved in 2020-as part of the authorities'
strategy of gradually phasing out the use of the facility is a
reflection of the country's very strong fundamentals, including the
additional buffers built with the accumulation of international
reserves, as well as the decline in external financing needs, since
the 2020 arrangement."
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P U E R T O R I C O
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INNOVA INDUSTRIAL: Seeks to Hire Batista Law Group as Counsel
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Innova Industrial Contractor Inc. seeks approval from the U.S.
Bankruptcy Court for the District of Puerto Rico to employ The
Batista Law Group, PSC as its bankruptcy counsel.
The Debtor requires a legal counsel to represent its interest in
this Chapter 11 case.
The hourly rates of the firm's counsel and staff are as follows:
Jesus E. Batista Sanchez, Esq. $275
Associates $225
Paralegals $100
Jesus Batista Sanchez, Esq., the principal of The Batista Law
Group, disclosed in a court filing that the firm is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code.
The firm can be reached through:
Jesus E. Batista Sanchez, Esq.
The Batista Law Group, PSC
P.O. Box 191059
San Juan, PR 00919
Telephone: (787) 620-2856
Facsimile: (787) 777-1589
Email: jeb@batistasanchez.com
About Innova Industrial Contractor
Innova Industrial Contractor Inc. filed for Chapter 11 protection
(Bankr. D.P.R. Case No. 22-01375) on May 16, 2022, listing under $1
million in both assets and liabilities. Gabriel Gonzalez,
president, signed the petition. Jesus E. Batista Sanchez, Esq., at
The Batista Law Group, PSC serves as the Debtor's counsel.
*********
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
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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.
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