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       T R O U B L E D   C O M P A N Y   R E P O R T E R

                 L A T I N   A M E R I C A

          Thursday, February 2, 2023, Vol. 24, No. 25

                           Headlines



B R A Z I L

BRAZIL: In Talks With Argentina on Whether to Combine Currencies
PETRO RIO: Moody's Hikes CFR to Ba3 Following Albacora Transaction


D O M I N I C A N   R E P U B L I C

[*] DOMINICAN REPUBLIC: 600MW in Renewable Energy by End of 2023


G R E N A D A

GRENADA: To Hike Taxes on Cigarettes, Alcohol


G U Y A N A

JAMAICA: Strengthens Trade Ties With Guyana


T R I N I D A D   A N D   T O B A G O

TRINIDAD & TOBAGO: CEOs Predict Global Growth Decline


X X X X X X X X

LATAM: IDB Provides Recommendations to Reduce Debt, Boost Growth

                           - - - - -


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B R A Z I L
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BRAZIL: In Talks With Argentina on Whether to Combine Currencies
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globalinsolvency.com, citing Bloomberg News, reports that Argentina
and Brazil are in the preliminary stages of renewing discussions on
forming a common currency for financial and commercial
transactions, reviving an often-discussed plan that would face
numerous political and economic hurdles.

South America's two largest economies have considered options to
coordinate their currencies for decades, often to counter the
influence of the dollar in the region, according to
globalinsolvency.com.

The persistent macroeconomic imbalances of both countries, together
with recurrent political obstacles to the idea, has resulted in
little practical progress, the report notes.

The latest negotiations were initiated by Buenos Aires, according
to a Brazilian government official, the report relays.

They're at a very early stage and there's no deadline for
completion, said the official, who asked not to be identified
because the discussions aren't public, the report notes.  Brazil's
agreement was no more than a nod for talks to take place, the
person said, the report adds.

                           About Brazil

Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.

As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that
jeopardize broad economic stability.

Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022).  The stable outlook
reflects S&P's base-case assumption that Brazil will maintain its
fiscal anchors over the next two years despite an increasing
interest burden, preventing significant fiscal slippage and
limiting the rise in its already high debt burden.

Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook.  Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.

DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).


PETRO RIO: Moody's Hikes CFR to Ba3 Following Albacora Transaction
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Moody's Investors Service has upgraded Petro Rio S.A.'s corporate
family rating to Ba3 from B1 following the completion of the
acquisition of Albacora Leste oil field. At the same time, Moody's
upgraded the rating on Petrorio Luxembourg Trading S.a.r.l.
("PetroLux") $600 million backed senior secured notes due 2026 to
Ba3 from B1. The outlook for all ratings was changed to stable from
positive.

Ratings upgraded:

Issuer: Petro Rio S.A.

Corporate Family Rating, Upgraded to Ba3 from B1

Issuer: Petrorio Luxembourg Trading S.a.r.l.

$600 million backed senior secured notes due 2026,
Upgraded to Ba3 from B1

Outlook actions

Issuer: Petro Rio S.A.

Outlook changed to stable from positive

Issuer: Petrorio Luxembourg Trading S.a.r.l.

Outlook changed to stable from positive

RATINGS RATIONALE

The upgrade of Petro Rio's ratings to Ba3 follows the conclusion of
the acquisition of Albacora Leste oil field on January 26, 2023 for
a total of $1.951 billion. The new field will materially increase
Petro Rio's production and reserves sizes, while not affecting the
company's conservative leverage ratios. Liquidity will also be
adequate after the payment for the acquisition given Petro Rio's
sound internal cash generation and manageable debt amortization
schedule.

Albacora Leste will add over 27,000 barrels of equivalent oil and
gas per day (boe/d) to Petro Rio's total production in 2023,
compared to a production of about 40,470 (boe/d) before the
acquisition, an increase of 40%. Petro Rio also estimates that
Albacora Leste will bring about 243 million barrels of net proved
reserves to the company. Petro Rio expects to increase the field's
production based on investments to enhance the asset's efficiency.
Moody's expects the new asset to bring about $500-550 million in
additional annual revenue for Petro Rio in 2023, based on a Brent
price estimate of $68 per barrel, with potential for upside from
2024 onwards depending on efficiency gains and oil prices.

Petro Rio's actual production at Albacora Leste is exposed to
execution risk related to required maintenance works aimed at
increasing the asset's efficiency. However, the company's credit
metrics are strong for its rating category and mitigate potential
lower production in case of prolonged stoppages or operational
disruptions, or if oil prices decline.

Petro Rio just disbursed $1.635 billion of cash to acquire the 90%
stake of Albacora Leste from Petroleo Brasileiro S.A. - PETROBRAS
(Ba1 stable) (Repsol Sinopec Brasil holds the remaining 10%). The
amount paid adds to the $292.7 million Petro Rio paid to Petrobras
at the signing of the sale contract in April 2022. In addition to
this amount, Petro Rio may have to disburse up to $250 million to
Petrobras during 2023-24 in contingent payments, depending on
future Brent prices.

Moody's estimates that Petro Rio's cash position is at about $200
million, proforma for the acquisition, but favorable oil prices and
higher production during 2023 will help restore the company's
available liquidity to about $400-500 million at year end. Petro
Rio has $70 million in debt coming due in 2023 and $336 million due
in 2024, and generates positive free cash flow after investments.
Moody's expects no cash distributions to shareholders at least in
the next three years.

Petro Rio's Ba3 ratings reflect its high operating efficiency and
cash generation, which supports low debt leverage and adequate
interest coverage ratios; high capital spending flexibility;
favorable regulatory environment; and the fact that the company's
capital is listed in the Brazilian stock exchange, which tends to
strengthen corporate governance. The Ba3 rating also reflects the
increase in the company's production and reserves size after the
acquisition of Albacora Leste field. Conversely, the rating is
constrained by Petro Rio's still small asset base and size of crude
oil production compared to peers; its high operating risk due to
geographic concentration and the mature nature of its oil and gas
assets; and the high risk related to the dependence on acquisitions
of oil and gas assets to sustain production or grow.

RATING OUTLOOK

The stable outlook on Petro Rio's Ba3 rating reflects Moody's
expectation that the company will be successful in incorporating
Albacora Leste to its portfolio, and that production will increase
to over 100,000 boe/d in 2024. The outlook also incorporates
Moody's expectations that Petro Rio will maintain adequate
liquidity even with potential volatility in oil prices.

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

Petro Rio's Ba3 ratings could be upgraded if the company (1)
increases production to levels approaching 150,000 boe/d; (2)
sustains leveraged full-cycle ratio, which measures an oil
company's ability to generate cash after operating, financial and
reserve replacement costs, consistently above 2.5x; (3) maintains
E&P debt/proved developed reserves below $7.0, and (4) maintains
retained cash flow (cash from operations before working capital
requirements less dividends) to total debt above 30%, all of which
while maintaining an adequate liquidity.

Petro Rio's Ba3 ratings could be downgraded if (1) retained cash
flow to total debt declines below 25%, with limited prospects of a
quick turnaround; (2) if E&P debt/proved developed reserves remains
above $10.0, with limited prospects of a quick turnaround and (3)
if there is a deterioration of the company's liquidity profile.

The principal methodology used in these ratings was Independent
Exploration and Production published in December 2022.

Petro Rio is an independent oil and gas production company focused
on assets located mainly in the Campos basin, in Rio de Janeiro,
Brazil. In the twelve months ended September 2022, its total assets
amounted to $3.7 billion.




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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: 600MW in Renewable Energy by End of 2023
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Dominican Today reports that Rafael Gomez, Vice Minister of Energy,
spoke about the Dominican Republic's energy and climate challenges
during his participation in the Caribbean Energy Conference, which
was held at the Jaragua hotel in this capital.

During his speech at the session, engineer Gómez emphasized the
importance of renewable energies in the Dominican Republic and
reported that the Ministry of Energy and Mines (MEM) and the
National Energy Commission (CNE) have promoted a plan to promote
them, to have 25% of the energy produced and consumed in the
Dominican Republic come from renewable sources by 2025, according
to Dominican Today.

He predicted that by 2030, 30% of energy production would come from
renewable sources, to meet the mandate of Law 57-07, which
encourages and regulates the development and investment in projects
that use any renewable energy source, the report notes.

Similarly, he mentioned the growth of renewable energies, noting
that there are currently 15 projects in development, 12 of which
are in the construction phase, and it is expected that they will
begin operations by the end of 2023, the report relays.  The
Dominican electrical system will receive approximately 600 MW of
clean energy with the inclusion of these projects. Participants
included Alfonso Rodriguez, Vice Minister of Savings and Energy
Efficiency, Walkiria Caamaño, Vice Minister of Hydrocarbons, and
representatives from Solar Turbines, InterEnergy, EGE Haina, AES,
S&P Global Commodity Insights, BMR Energy LLC, and GIZ, among
others, the report says.

The Caribbean Energy Conference is the region's first energy event,
bringing together a network of work, businesses, and colleagues
from more than 20 countries around the world to provide critical
information on the region's energy transformation, 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.

TCRLA reported in April 2019 that the Dominican To 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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G R E N A D A
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GRENADA: To Hike Taxes on Cigarettes, Alcohol
---------------------------------------------
Trinidad Express reports that Grenada Prime Minister Dickon
Mitchell has defended the decision to amend the Excise Act that
will result in an increase in alcoholic and tobacco products,
saying the measure is aimed at raising revenue for the Government
lost because of relief measures announced in the 2023 budget
statement.

Mitchell had told legislators the government could lose an
estimated EC$30 million (One EC dollar = US$0.37 cents) as a result
of the cost-of-living relief measures offered to citizens,
according to Trinidad Express.

"Given the significant potential loss of revenue by the fiscal
measures implemented by this Government, this is just one of the
many counteracting measures that the Government has taken from our
fiscal policy to address this," Prime Minister Mitchell told the
Lower House of Parliament as he tabled the amendment, the report
notes.

"The motion in relation to the Excise Tax Act is being moved to
support the Government's indication as per the budget presentation
and the passing of the Appropriation Act for 2023 as it relates to
alcohol and cigarettes and to assist the Government in paying for
the many fiscal measures that will be implemented in 2023 to
address the cost-of-living issues that are faced by our citizens,"
he added, the report relays.

Mitchell, who is also the Minister for Finance, made reference to
some of the areas where the Government will have reduced revenue,
the report discloses.

He said these include reducing the petrol tax from EC$5.50 to
EC$3.50 and removing certain items from the value added tax (VAT)
list such as cooking oil, kidney bean, condoms, sanitary pads,
spilt peas, adult diapers, baby diapers, toothpaste, toilet paper
and bathing soap, the report notes.

The government said the amendment to the Excise Act goes into
effect as of February 1, 2023, and will affect both alcoholic and
tobacco products, the report relays.

"Those measures will naturally lead to a reduction in Government
revenue and to offset that reduction, the Government's fiscal
policy is to tax goods which are to some extent, demerit goods,
such as cigarettes for example and alcohol and which themselves
often lead to, if abused, significant medical challenges for our
citizens," Mitchell said, the report notes.

He said that when citizens abuse these goods, the State in turn
then must find the necessary revenue to pay for citizens' care, the
report discloses.

"So the policy thinking behind these fiscal measures is, the
Government should raise revenue by increasing the tax on them to
help offset," he told legislators, the report relays.

"This will also assist the State with raising the much-needed
revenue to address the significant health challenges that we face
as a nation arising from the abuse of alcohol which in many cases
leads to significant renal failure and the abuse of cigarettes
which often times leads to significant respiratory illnesses," he
added.

The Prime Minister explained that the tax on alcohol will move from
EC$1.10 and EC$4.40 per litre to EC$1.50 and EC$5 per litre
respectively and increase the excise tax on cigarettes from 105 per
cent to 200 per cent, the report notes.

The amendment to the Excise Act will increase both the wholesale
and retail price of most alcohol products including beer, wine,
whisky, rum, brandy, vodka, gin and liqueur as well as all tobacco
and tobacco-substitute products such as cigars, cheroots and
cigarettes, the report relays.

However, Opposition Leader Dr Keith Mitchell did not support the
resolution, referring to his own experience of enforcing a similar
measure back in 1996, the report says.

"The fact is, I understand the objective of the government, it's an
attempt to raise revenue based on the perception that there will be
a drop in revenue from other areas," said Dr Mitchell, whose
government lost the June 2022 general election, the report
discloses.

"The problem is whether in fact that objective will be met," he
said, reminding legislators that his administration had enforced
such a measure in the past, but it failed to have serious financial
positive impacts, the report notes.

He called on the Government to clarify what goods will be directly
affected by the amendment to the Excise Act, the report relays.

"The motion speaks about alcohol and alcohol-related products so I
think the Government needs to make it very clear because there are
items that have serious alcohol content that may not necessarily be
part of this and it must be clarified," he said.

"For example, you have bay rum, methylated spirit that is used for
specific things even the question of sanitisers, some of them are
strong alcoholic content, ammonia for cleaning, I think the
government need to clarify exactly what products because when the
public servants are implementing something if they are not given
clear demarcation line . . . then they can act sometimes against
what the government's intention should be," Mitchell told
Parliament, the report adds.




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G U Y A N A
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JAMAICA: Strengthens Trade Ties With Guyana
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RJR News reports that Jamaica is strengthening trade ties with
Guyana.

Minister of Industry, Investment, and Commerce Senator Aubyn Hill
has led a second trade mission to the country with a delegation
from Jamaica, according to RJR News.

More than 70 business and trade interests were a part of the
mission, the report notes.

Mr. Hill says the move is to drive exports and investments between
Guyana and Jamaica, which he hopes will create strategic alliances
and help expand the economy, the report relays.

Vice President of Guyana, Dr. Bharrat Jagdeo, says the partnership
will lower unemployment while also enhancing infrastructure and the
housing stock, the report says.

Guyana is the fastest growing economy in the region, and one of the
only jurisdictions in the world projected to see double digit
growth, the report adds.

As reported in the Troubled Company Reporter-Latin America in March
2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.




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T R I N I D A D   A N D   T O B A G O
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TRINIDAD & TOBAGO: CEOs Predict Global Growth Decline
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Trinidad Express Newsday reports that nearly three quarters (73 per
cent) of CEOs believe global economic growth will decline over the
next 12 months, according to PwC's 26th Annual Global CEO Survey,
which polled 4,410 CEOs in 105 countries and territories in October
and November 2022.  The number is lower (62 per cent) for CEOs in
the Caribbean.

The bleak CEO outlook is the most pessimistic CEOs have been
regarding global economic growth since we began asking this
question 12 years ago, according to Trinidad Express Newsday.
Those expectations represented a stark reversal from the last
Caribbean participation in the survey (conducted in 2020) when a
similar proportion (69 per cent) thought economic growth would
improve, the report notes.

Caribbean CEOs: Organisations Will Not Be Economically Viable

In addition to a challenging environment, nearly one third of
Caribbean CEOs think their organizations will not be economically
viable in a decade if they continue on their current path, the
report notes.  The pattern is consistent with global (39 per cent)
and Latin America (29 per cent) though slightly higher than the US
(20 per cent), UK (22 per cent) and Canada (24 per cent), the
report relays.  Caribbean CEOs' confidence in their own company's
growth prospects also declined dramatically (by over 40 per cent)
with less than half being very or extremely confident compared to
the survey conducted in 2020 where almost 80 per cent were either
somewhat confident or very confident about their organization's
prospects for revenue growth over the next year, the report
discloses.

CEOs are also seeing multiple direct challenges to profitability
within their own industries over the next 10 years, the report
says.  Seventy-six per cent believe changing customer
demand/preferences will impact profitability, followed by changes
in regulation (64 per cent) and technology disruptions (60 per
cent), the report notes.

         Inflation, Volatility, Climate Change Top Concerns

While cyber and health risks were the top concerns for Caribbean
CEOs the last time they participated in the survey, the impact of
the economic downturn is top-of-mind for CEOs this year, with
inflation (50per cent) and macroeconomic volatility (36 per cent)
leading the risks weighing on CEOs in the short-term – the next
12 months – and over the next five years, the report discloses.
Close behind, 26 per cent also feel financially exposed to climate
change rising to be the top threat over the next 5 years, the
report relays.  Cyber risks have fallen dramatically to just 14per
cent and although they increase to 26 per cent in the medium term,
CEOs need to continue to show their commitment to stay ahead of
cyber challenges that are still very much on the rise, so they
safeguard their business against attacks, the report notes.

        Cutting Costs But Not Headcount or Compensation

In response to the current economic climate, Caribbean CEOs are
looking to cut costs and spur revenue growth. Sixty two per cent
report reducing operating costs, while 58 per cent report
diversifying product and service offerings and 44 per cent raising
prices, the report notes.  However, 66 per cent say they do not
plan to reduce the size of their workforce in the next 12 months. A
vast majority – 84 per cent – indicate they do not plan to
reduce staff remuneration in order to retain talent and mitigate
workforce attrition rates, the report relays.

Brian Hackett, territory leader, PwC Trinidad and Tobago, said:
"CEO's in the Caribbean express pessimism on the growth outlook
based on their views of various disrupting factors (inflation,
volatile economy, and imminent climate change) Both locally across
the Caribbean and globally, CEOs are re-evaluating their operating
models and cutting costs, yet despite these pressures, they are
continuing to put their people front and centre as they look to
retain talent in the wake of the ‘great resignation,' the report
relays.  The world continues to change at a relentless pace, and
the risks facing organisations, people - and the planet - will only
continue to rise. If organisations are not only to thrive -  but
survive the next few years – they must carefully balance the dual
imperative of mitigating short-term risks and operational demands
with long-term outcomes -  as businesses that don't transform,
won't be viable," the report notes.

   Managing Climate Risk a Growing Priority for Businesses

Climate risk featured more prominently - ranking third (26 per
cent) - as a short-term risk over the next 12-months for Caribbean
CEOs compared with Global CEOs, the report notes.  This is in-line
with how they see climate risk impacting their cost profiles (68
per cent), supply chains (58 per cent) and physical assets (38 per
cent) from a moderate to very large extent, the report relays.
Recognising how vulnerable the Caribbean is to climate change and
the impact it will have on business and society in the near and
over the long-term, a majority of CEOs have already implemented -
or are in the process of implementing - initiatives to reduce their
companies' emissions (52 per cent), in addition to innovating new,
climate-friendly products and processes (44 per cent), or
developing data-driven, enterprise-level strategy for reducing
emissions and mitigating climate risks (38 per cent), the report
discloses.

Despite an increasing number of countries now having some form of
carbon pricing, a majority of respondents (64 per cent) still do
not plan to apply an internal price on carbon in decision-making,
the report relays.  The good news is that roughly the same amount
(60 per cent) have already implemented - or are in the process of
implementing – initiatives to protect their company's physical
assets and/or workforce from the impact of climate risk, the report
notes.

Hackett concludes: "The risks facing organisations and society
today cannot be addressed alone and in isolation. CEOs must
therefore continue to collaborate with a wide range of public and
private sector stakeholders to effectively," the report adds.




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X X X X X X X X
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LATAM: IDB Provides Recommendations to Reduce Debt, Boost Growth
----------------------------------------------------------------
Countries in Latin America and the Caribbean should prioritize
bringing down debt to prudent levels to boost economic growth,
allow for productive investment and reduce the risk of a debt
crisis, according to a new flagship report by the Inter-American
Development Bank (IDB).

The study finds that total debt has risen in Latin America and the
Caribbean to some $5.8 trillion or 117% of GDP, from under $3
trillion in 2008. Public debt in the region grew from 58% in 2019
to 72% in 2020 due to COVID-related fiscal packages, lower
revenues, and a recession, according to "Dealing with Debt: Less
Risk for More Growth in Latin America and the Caribbean," part of
the IDB's Development in the Americas series.

High debt levels can hinder development because it prompts
investors to demand higher yields, crowding out private investments
and forcing governments to divert scarce resources to pay interest
instead of investing in infrastructure and public services. High
debt levels also reduce a country's ability to respond to future
economic shocks to support families and firms and increases the
risk of a crisis. The pandemic, the Russian invasion of Ukraine,
high inflation, rising interest rates and low world growth,
combined with high debt, increase the region's vulnerability.

In response, governments in the region should reduce public debt
ratios from an average of 70% to a range of 46%-55% of GDP, a level
that the study considers prudent, noting that the range will vary
for each country, depending on specific characteristics. Countries
dependent on volatile commodity revenues should bring debt levels
down further.

"Well-managed and sustainable debt can help unleash Latin America
and the Caribbean's abundant growth potential," said Eric Parrado,
Chief Economist of the Inter-American Development Bank. "Our new
flagship report outlines a pro-growth agenda, where debt becomes an
engine and not a drag on growth. It provides governments in the
region with comprehensive policy recommendations to strengthen
macro-fiscal institutions, reduce public debt and ensure a
supporting financing environment for firms."

             Strengthening Fiscal Institutions

The study analyzes several policies that can help governments bring
debt to prudent levels and promote debt sustainability.

Stronger fiscal institutions can encourage governments to stop
overspending in good times, build a cushion to deal with bad times,
and can help countries provide credible fiscal guidance to bring
public debt levels down. Fiscal rules help governments set
numerical goals for budget and macroeconomic aggregates in a
transparent way, so they become accountable for these results. The
study shows counties in Latin America and the Caribbean complied
with only 57% of the targets specified in the rules due to poor
design of the rules.

Ingredients of effective fiscal rules include solid legal
foundations, credible enforcement mechanisms, flexibility to deal
with shocks, and well-defined escape clauses. Independent fiscal
councils are also key for the effectiveness of fiscal rules and the
promotion of responsible policies because they oversee and monitor
the implementation of such rules.

                       Fiscal Consolidation

The study highlights that the best way to reduce debt is through
higher growth combined with efficient public spending and adequate
public revenues raised in a way that does not sacrifice growth.

In general, countries -especially those with high levels of
spending and taxes as a share of GDP- should focus on improving the
efficiency of both revenue collection and spending. The quality of
public investment can be enhanced at all stages of the project
cycle, transfer payments should be targeted to those who really
need them and monitoring of taxes improved. In countries where
revenues and spending are a lower percentage of national income,
enhancing the tax base and increasing public sector revenues could
allow for greater public investment with beneficial impacts on
growth.

Other opportunities include reforms to reduce labor informality,
such as reducing the tax incentives for firms to hire informal
labor and shifting the financing of benefits from labor taxes to
more general taxation.

                   Debt Management Strategies

The report also finds that countries should pay close attention to
debt management strategies. Efficient institutions, such
well-functioning Debt Management Offices and innovative debt
instruments, are vital for managing debt composition. Pre-pandemic
advances in improving debt composition have stalled and countries
need to actively manage amortization schedules. Over half of the
countries in the region face debt service of over 2.5% of GDP, and
a quarter more than 5% -a similar amount to the spending on
education.

Countries should take full advantage of multilateral development
banks and other official lenders providing competitive long-term
financing. Besides providing lending at lower rates and longer
tenors than private markets, development banks offer technical
knowledge and other instruments to help countries manage risks.

The report recommends creating a regional forum to improve debt
restructurings coordination. This would complement the current
international efforts that have largely focused on low-income
countries.

                         Private Debt

Private debt also rose before and during the pandemic. Overall,
domestic banking sectors in the region have grown, and a quarter of
countries have domestic credit of at least 100% of GDP. However,
for another quarter, credit is less than 50% of GDP. Access remains
sparse, especially for households and small and medium-sized
enterprises (SMEs) and female led firms.

Estimates point to a gap of $1.8 trillion between demand and supply
for funds available for SMEs in the region. Despite the
availability of programs to keep credit open to firms during the
pandemic, access remained a significant factor in allowing
companies to survive the health crisis.

Overall levels of indebtedness of households in the region remain
relatively low by international standards. Household debt in the
region is 22% of GDP on average, much lower than in other emerging
economies (35%) and developed countries (77%). The report provides
new comprehensive data on household credit in the region. The study
recommends that governments continue efforts to improve access to
credit to both households and SMEs.

The report recommends that governments design interventions that
are accurately targeted to those promising firms that need support
but offer a wider set of instruments including equity or quasi
equity so as not to add to debt burdens.



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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 2023.  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.
.


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