/raid1/www/Hosts/bankrupt/TCRLA_Public/230301.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, March 1, 2023, Vol. 24, No. 44
Headlines
A R G E N T I N A
ARGENTINA: Climate Change Link Uncertain in Severe Drought
ARGENTINA: Eight Million of Working Age Are Jobless, Says Report
[*] ARGENTINA: Prelim. Data Shows Economy Grew 5.2% in 2022
B R A Z I L
BRAZIL: Suspends Beef Exports to China After Mad Cow Case
C H I L E
INVERSIONES LATIN: Moody's Cuts Rating on $404MM Sec. Notes to B3
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Peso Appreciation Trend Returns
E C U A D O R
ECUADOR: Moody's Affirms 'Caa3' Foreign Currency Issuer Rating
J A M A I C A
JAMAICA: Removed From EU Non-Cooperative Tax List
[*] JAMAICA: Back to Pre-Pandemic Growth Levels
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Climate Change Link Uncertain in Severe Drought
----------------------------------------------------------
Carly Wanna at Bloomberg News reports that Argentina is
experiencing its worst drought in 60 years. A new study finds that
although climate change likely exacerbated the dry spell, it has
not necessarily caused a decrease in rainfall, according to
Bloomberg News.
Scientists with World Weather Attribution (WWA) studied the drought
in central South America during the final three months of 2022,
Bloomberg News notes. They found that rainfall over that period
was lower than average but within expected natural variations in
precipitation, Bloomberg News relays. As a result, it could not be
directly linked to human-caused climate change, Bloomberg News
discloses.
Even so, the team did conclude that global warming likely
contributed to dryness, Bloomberg News relays. Higher temperatures
decrease the amount of available water, in part through a higher
rate of evaporation, and probably worsened the effects of the
drought, Bloomberg News says.
As severe weather events become more common, scientists have sought
to determine how exactly human actions are reshaping the planet,
Bloomberg News relays. The WWA finding shows just how complicated
that relationship can be, Bloomberg News notes.
"That's one of the reasons why we do these attribution studies —
to show what the realistic impacts of climate change are," said
Friederike Otto, a climate scientist at Imperial College London and
co-leader of World Weather Attribution, a research collaboration
that specialises in near real-time analysis of weather events,
Bloomberg News discloses.
"Not every bad thing that is happening now is because of climate
change. It is really important to find out where climate change is
a real game changer," Otto said, Bloomberg News says.
Researchers with WWA observed rainfall over a region including much
of Argentina, Uruguay and a small portion of Brazil, Bloomberg News
notes. The group found that the low levels of precipitation at the
end of 2022 have a five-percent chance of occurring in any given
year, Bloomberg News relays.
As a result, the authors write, they "cannot be confident" that the
lack of rain falls outside of natural variability in the region.
The report acknowledges that La Nina, an atmospheric phenomenon
that disrupts normal wind patterns, at least partially reduced the
amount of rain, Bloomberg News notes.
Meanwhile, extreme heat stunted agricultural production in the
region. Altogether, those high temperatures and dry conditions
depleted crop yields and inflated global food prices, Bloomberg
News says.
Past studies from WWA have drawn more direct connections between
observed weather events and human activities, Bloomberg News
relays. A September analysis found that climate change intensified
rainfall in Pakistan, contributing to deadly floods, Bloomberg News
discloses. Another report found that high temperatures on the
North American Pacific coast in 2021 would have been "virtually
impossible" without climate change, Bloomberg News relays.
The most recent study found a more complex relationship. According
to Otto, that work is crucial, Bloomberg News notes.
"People weaponise the weather. If there's a cold day, people say
it's not climate change, but of course that has nothing to do with
physics or with how weather is," Otto said. "What we are doing and
why we are doing it is to show what are the realistic consequences
of climate change, and how do they affect people now," he added.
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.
Last March 25, 2022, Argentina finalized agreement with the IMF for
a new USD44 billion Extended Funding Facility (EFF) intended to
fund USD40 billion in looming repayments of the defunct Stand-By
Arrangement (SBA), with an extra USD4 billion in up-front net
financing. This has averted the risk of a default to the IMF
and is facilitating a parallel rescheduling of Paris Club debt.
S&P Global Ratings, on Jan. 20, 2023, affirmed its 'CCC+/C' foreign
currency and 'CCC-/C' local currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings remains negative.
S&P's 'CCC+' transfer and convertibility assessment is unchanged.
The negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Global capital
markets are closed to Argentina. Moreover, disagreement within the
government coalition and infighting among the opposition constrains
the sovereign's ability to implement timely changes in economic
policy.
Fitch Ratings, on the other hand, downgraded in October 2022
Argentina's Long-Term Foreign-Currency (FC) and Local-Currency (LC)
Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC'. The downgrade
reflects deep macroeconomic imbalances and a highly constrained
external liquidity position, which Fitch expects to increasingly
undermine repayment capacity as foreign-currency debt service ramps
up in the coming years.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS confirmed Argentina's Long-Term Foreign Currency Issuer Rating
at CCC and Long-Term Local Currency Issuer Rating at CCC (high) on
July 21, 2022.
ARGENTINA: Eight Million of Working Age Are Jobless, Says Report
----------------------------------------------------------------
Joaquin Morosi, citing a new report, at Buenos Aires Times reports
that the effects of the Covid-19 pandemic still persist on the
Argentine job market with a significant percentage of the
population inactive despite the pickup registered in employment
levels in recent months.
The number of people who neither have nor seek employment, despite
being of working age, reaches eight million, according to a study
from the Fundacion Eforo think-tank, the report notes.
The International Labour Organisation (ILO) considers that "the
increasing inactivity is one of the main consequences of the
current job crisis" while stressing that reinserting people in
working life is more complex on the basis of inactivity than of
unemployment, according to Buenos Aires Times.
The report, Caracterización de la población inactiva en edad de
trabajar (2021), prepared by the Fundación Éforo, reveals over
half the Argentine population to be inactive or approximately 24
million people (around 53 percent), the report relays.
Of that total, some 16 million people are outside the legal working
age while eight million do not work despite having the right age to
do so, 65 percent of them female and 35 percent of them male, the
report notes.
As for age-groups, 4.3 million of the inactive are above the age of
24 while the remaining 3.7 million are aged between 15 and 24, of
whom 2.9 million are studying and 800,000 neither work nor study,
the report relays. The study further details that within the
inactive population, 5.4 million people, most of them women, have
no source of income, the report discloses.
Out of the total population (around 46 million people according to
the provisional Census 2022 data), 6.3 percent are inactive people
who have not finished their secondary education while a further 7.3
percent are inactive despite complete secondary studies or
incomplete university studies with one percent of the total
population unemployed professionals who are not actively seeking
work (approximately 460,000 people), the report discloses.
As for type of household, the report reveals a differential
distribution of inactivity, the report says. In homes of two
parents it is more frequent to find at least one person of working
age inactive, the report relays. Of the three million households
with one member inactive, 2.1 million (70 percent) have two parents
while 1.8 million of such homes have the other member working in
the labour market, the report notes.
Of this type of household, 54 percent (or approximately 1.1
million) are in a situation of social vulnerability (43 percent
impoverished and 11 percent destitute) while 90 percent or 1.6
million women who neither seek nor have employment are female, the
report discloses.
The report analysed that "both informal employment and labour
inactivity mostly affect women and youth," expressing that "among
the factors explaining inactivity we must take into account the
role of domestic tasks, the distribution of care (of children and
the elderly), the educational level and the structure of the
household," the report relays.
In that sense, it added that "the inactivity of persons of working
age must be understood as a situation which exceeds individual
decision-making and responds to broader and more complex social
scenarios," the report notes.
Employment on The Rise?
The data of the SIPA (Sistema Integrado Previsional Argentino)
pension system, which takes into consideration the employer
contributions of registered company employees, show the number of
registered jobs last November to reach 13.018 million, the report
relays. This implies that 47,825 people joined the job market,
which meant a monthly improvement of 0.4 percent or 5.1 percent
when measured year-on-year, i.e. 630,759 more jobs than the
previous November, the report notes.
The increase is partly due to the increase in the number of
independent workers (as opposed to wage-earners), especially those
persons registered as paying the taxation for the self-employed
(monotributo), the report relays. These grew a monthly 1.6 percent
last November or 7.7 percent year-on-year (135,900 more people)
while those in the social categories of the taxation of the
self-employed rose 39.7 percent year-on-year, implying 156,600 more
people, the report notes. There were almost 5,000 more
self-employed professionals (autónomos) registered by the SIPA
during the last year, the report discloses. Thus 297,500 of the
630,800 people registered in the last year of the social security
system were not wage-earners (48 percent), thus implying the
creation of over 330,000 jobs paying salaries, 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.
Last March 25, 2022, Argentina finalized agreement with the IMF for
a new USD44 billion Extended Funding Facility (EFF) intended to
fund USD40 billion in looming repayments of the defunct Stand-By
Arrangement (SBA), with an extra USD4 billion in up-front net
financing. This has averted the risk of a default to the IMF
and is facilitating a parallel rescheduling of Paris Club debt.
S&P Global Ratings, on Jan. 20, 2023, affirmed its 'CCC+/C' foreign
currency and 'CCC-/C' local currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings remains negative.
S&P's 'CCC+' transfer and convertibility assessment is unchanged.
The negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Global capital
markets are closed to Argentina. Moreover, disagreement within the
government coalition and infighting among the opposition constrains
the sovereign's ability to implement timely changes in economic
policy.
Fitch Ratings, on the other hand, downgraded in October 2022
Argentina's Long-Term Foreign-Currency (FC) and Local-Currency (LC)
Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC'. The downgrade
reflects deep macroeconomic imbalances and a highly constrained
external liquidity position, which Fitch expects to increasingly
undermine repayment capacity as foreign-currency debt service ramps
up in the coming years.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS confirmed Argentina's Long-Term Foreign Currency Issuer Rating
at CCC and Long-Term Local Currency Issuer Rating at CCC (high) on
July 21, 2022.
[*] ARGENTINA: Prelim. Data Shows Economy Grew 5.2% in 2022
-----------------------------------------------------------
Buenos Aires Times reports that Argentina recorded growth of 5.2
percent in 2022 year-on-year, according to preliminary data
published by the government.
If verified, the figures would mean that Latin America's
third-largest economy grew slower than the 10.3 percent registered
in 2021, but the first time in more than a decade recorded two
consecutive years of expansion, according to Buenos Aires Times.
The new data comes from the INDEC national statistics bureau's
monthly estimate of economic activity (EMAE), the report notes.
According to the body, gross domestic product declined 1.2 percent
in December compared to the same month the previous year, the
report relays.
Fishing was the sector banking the highest year-on-year expansion
in December, with 15.5 percent growth, according to INDEC, whose
data anticipates GDP, the report discloses. The hotels and
restaurants sector rose 10.8 percent over the same period.
The activity that fell the most in the last month was agriculture
and livestock, falling 18 percent, exacerbated by a year of a
severe drought, the report relays. Manufacturing (down 2.1
percent) and construction (down 1.7 percent) also fell, the report
notes.
Chronic inflation which reached 94.8 percent in 2022 prevented the
country from reaping some of the fruits of its economic growth, the
report relays.
Argentina also has to remain fiscally disciplined as part of a loan
refinancing agreement with the International Monetary Fund, the
report says.
According to the International Monetary Fund, the economy will grow
by two percent in 2023, above the projected regional average, 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.
Last March 25, 2022, Argentina finalized agreement with the IMF for
a new USD44 billion Extended Funding Facility (EFF) intended to
fund USD40 billion in looming repayments of the defunct Stand-By
Arrangement (SBA), with an extra USD4 billion in up-front net
financing. This has averted the risk of a default to the IMF
and is facilitating a parallel rescheduling of Paris Club debt.
S&P Global Ratings, on Jan. 20, 2023, affirmed its 'CCC+/C' foreign
currency and 'CCC-/C' local currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings remains negative.
S&P's 'CCC+' transfer and convertibility assessment is unchanged.
The negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Global capital
markets are closed to Argentina. Moreover, disagreement within the
government coalition and infighting among the opposition constrains
the sovereign's ability to implement timely changes in economic
policy.
Fitch Ratings, on the other hand, downgraded in October 2022
Argentina's Long-Term Foreign-Currency (FC) and Local-Currency (LC)
Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC'. The downgrade
reflects deep macroeconomic imbalances and a highly constrained
external liquidity position, which Fitch expects to increasingly
undermine repayment capacity as foreign-currency debt service ramps
up in the coming years.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS confirmed Argentina's Long-Term Foreign Currency Issuer Rating
at CCC and Long-Term Local Currency Issuer Rating at CCC (high) on
July 21, 2022.
===========
B R A Z I L
===========
BRAZIL: Suspends Beef Exports to China After Mad Cow Case
---------------------------------------------------------
Tatiana Freitas & Hallie Gu at Bloomberg News report that Brazil,
the world's biggest beef exporter, is halting exports of the red
meat to China starting after confirming a case of the animal
illness known as mad cow disease.
The case of bovine spongiform encephalopathy was confirmed by
Brazil's Agriculture Ministry, and shipments to China were halted
as part of a trade protocol between the two nations, according to
Bloomberg News. Brazilian authorities will be holding
conversations with Chinese counterparts in a bid for a "prompt
re-establishment" of trade flows, the ministry said in a statement
obtained by the news agency.
The export suspension is a blow to some of the world's major
meatpackers, including JBS SA, Marfrig Global Foods and Minerva SA,
the report notes. China, the main destination for Brazilian beef,
accounted for almost 60% of the nation's exports in Jan, the report
relays. Brazil was also the top beef supplier to China last year,
ahead of Argentina and Uruguay, the report relays. Meat company
shares plunged in Brazil, the report discloses.
Top Beef Suppliers to China in 2022, Brazil cargoes accounted for
almost half of China's beef imports in 2022, the report discloses.
Samples of the infected animal were sent to a lab in Alberta,
Canada, to determine if the case is "atypical," the report relays.
The atypical variety differs from "classical" BSE linked to
Creutzfeldt-Jakob disease in people, the report notes. An atypical
case also generally means the animal contracted the disease
spontaneously, not through contaminated meat-and-bone meal, the
report relays.
The ban on shipments to China is only expected to last a short time
if the case is atypical, said Pan Chenjun, a senior analyst at
Rabobank, the report relays. Still, there'll be a significant
impact in the meantime because Brazil is such a large supplier, the
report notes. Other South American exporters may benefit as they
have similar products, the report relays.
China Customs, the Ministry of Commerce and the Ministry of
Agriculture and Rural Affairs didn't immediately respond to faxes
seeking comment.
The mad cow case was detected in a nine-year old cow in Maraba,
Pará state, the report relays. The animal, which was fed on grass
only, was culled and its carcass incinerated on the farm, the
report notes. The last atypical mad cow case in Brazil happened in
2021, when China took three months to lift an export ban, the
report says.
Based on the outlook for tight global beef supplies and the Chinese
economy growing more than in 2022, it is possible that the ban will
be shorter compared with 2021, according to Hyberville Neto,
director at HN Agro consultancy, 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).
=========
C H I L E
=========
INVERSIONES LATIN: Moody's Cuts Rating on $404MM Sec. Notes to B3
-----------------------------------------------------------------
Moody's Investors Service has downgraded to B3 from B2 the rating
assigned to the $404 million Senior Secured Notes issued by
Inversiones Latin America Power Limitada ("ILAP" or the "Project")
with final maturity in 2033 ("Notes"). The rating action was driven
by governance factors. Moody's initiated ILAP's rating under review
on December 5, 2022 and the rating continues under review for
further downgrade.
Downgrades:
Issuer: Inversiones Latin America Power Limitada
Senior Secured Regular Bond/Debenture, Downgraded to
B3 from B2; Under Review for further Downgrade
RATINGS RATIONALE
The downgrade of Inversiones Latin America Power Limitada's (ILAP)
secured notes to B3 considers the deterioration of the issuer's
liquidity profile following the draws on the project cash reserves,
leading to a higher reliance on external funding sources to meet
upcoming debt payments amid volatile operating and market
conditions in Chile. In the last quarter of 2022, ILAP drew on the
LC Facilities it holds with Citibank N.A. to pay its suppliers and
to service its January 2023 debt payment. In total, $4.5 million
was drawn from the operations and maintenance reserve account
(OMRA) and $13.0 million was drawn from the debt service reserve
account (DSRA), leaving just $3.5 million available for future debt
service needs.
The rating remains under review for further downgrade given the
uncertainty on ILAP's ability to manage a liquidity improvement
ahead of its next debt payments amounting $14.1 million in July
2023, as well as the need to refund the drawings under the Letter
of Credit Facility Agreement (LC Facility) within eighteen months
to avoid an event of default.
In 2022, ILAP relied on a $5 million subordinated loan provided by
the sponsors to meet July 2022 debt installment. At this time, ILAP
is planning to improve liquidity through the sale of receivables
accumulated under the new mechanism for stabilization of regulated
prices (PEC II), under the framework approved by the Chilean
congress in May 2022 with the purpose to alleviate working capital
pressures of power companies in Chile. Between April and December
2022, ILAP had accumulated $10.2 million in accounts receivables
under the PEC II. However, this monetization strategy still depends
on certain regulatory approvals and the establishment of a PEC II
emergency fund by the ministry of energy, which has been under
discussion since the second half of 2022.
As an alternative funding source, the project company has $18
million in receivables accumulated under the first price
stabilization mechanism (PEC I) for collection starting in 2025.
Some power companies in Chile have already monetized their PEC I
receivables through securitization. However, Moody's considers the
monetization of the PEC I receivables more difficult for ILAP to
execute, because those receivables are pledged as collateral for
the bondholders and were considered in the design of the
amortization schedule to meet the target debt payments.
Operating conditions in Chile remains volatile. In the last quarter
of 2022, spot prices decreased driven by a higher share of hydro
generation during night hours. Amid these improved conditions, ILAP
reported its best quarter since the bond was issued, including
decoupling gains of $3.8 per megawatt hour that resulted in $9.1
million earnings before interests, taxes, depreciation and
amortization (EBITDA). On the other hand, wind conditions remains
subdue and curtailment risk remains elevated. Moody's current
baseline rating scenario incorporates operating conditions to
gradually improve leading to an EBITDA of $23.5 in 2023, up from
$18.6 in 2022. Despite this improvement, it is very unlikely that
ILAP will be able to service its debt payments due in July and
January without the timely implementation of the PEC II fund or new
cash injections from the sponsor.
ILAP's B3 rating remains supported by the high share of contracted
revenue from creditworthy counterparties with highly priced power
purchase agreements (PPAs) during the life of the notes, except for
the last year ahead of the final amortization payment, when the
share of contracted revenues will drop to about 25%. The agency
recognizes the Project's cash flow protections to the current high
inflation environment, as its PPA prices are indexed to the US
consumer price index (CPI) and adjusted every six months, resulting
in higher margins. Over the last twelve months to December 2022,
the CPI registered a 6.5% increase. Nonetheless, the recent
deterioration of ILAP's credit profile is a risk to their regulated
PPAs, given contractual provisions that require ILAP to maintain
minimum credit quality standards. Moody's acknowledges that the
early termination of the PPAs is not automatic and there are some
incentives in place for the parties to maintain those agreements.
Hence, an early termination of the project's regulated PPAs is not
incorporated in the B3 ratings.
Governance factors were highly relevant for this rating action.
Moody's now assess financial strategy and risk management as highly
negative, reflecting the deterioration on the liquidity profile.
Moody's also assess management track record to be highly negative
because of their limited ability to respond to changes in market
conditions in order to sustain target credit metrics. While the
current liquidity shortfall derives from regional operating and
market conditions that have also impacted other renewable projects,
ILAP's higher risk factor considers that the notes payment
structure entails high leverage and contractual limitations that
allow for little deviations from the initial projections. As a
result, Moody's assessment of ILAP's governance issuer profile
score (G-IPS), was revised to G-4 (highly negative) from G-3
(moderately negative).
During the review process, Moody's will focus on the project's
ability to improve its liquidity position ahead of the upcoming
interest and legal debt amortizations and reinstate the cash
reserves.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
There is little prospect for ratings upgrade. The outlook could
return to stable if ILAP is able to monetize the receivables it
accumulated under the price stabilization mechanism or obtain a
cash injection from sponsors that demonstrates a recovery of its
liquidity profile, evidenced by a DSCR consistently above 1.0x and
the refunding of its operation and maintenance and debt reserve
accounts.
The rating could be downgraded if Moody's perceives further
deterioration of ILAP's liquidity profile encompassing higher
likelihood of losses to creditors, such that there are prolonged
delays on the approval of PEC II regulatory relief, failure to
refund the LC facility before the second quarter of 2024, or the
DSCR remaining constantly below 1.0x. Early termination of the PPAs
by the distribution companies would also increase pressure for a
rating's downgrade.
ILAP is a subsidiary of Latin America Power S.A., owned by BTG
Pactual Brazil Infrastructure Fund II (45.85%), Patria
Infrastructure FIP (45.85%), and GMR Holding B.V. (8.30%). ILAP
owns 100% of the ownership interest in two wind power generation
assets in Chile, "San Juan" and "Totoral", which have achieved full
commercial operating date on March 2017 and January 2010,
respectively, and have a combined installed capacity of 239.2
megawatt ("MW") North of Santiago.
The principal methodology used in this rating was Power Generation
Projects Methodology published in January 2022.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Peso Appreciation Trend Returns
---------------------------------------------------
Dominican Today reports that the exchange market resumed the path
of appreciation of the Dominican peso, a trend that during 2022
represented a revaluation of the national currency against the US
dollar.
According to information from the exchange market, there were
wholesale operations with rates below RD$56.00 per dollar, both for
purchase and sale, the report notes. During 11 months last year,
there was a marked trend towards the base of the exchange rate in
the foreign exchange market, which was not greater because the
Central Bank intervened by buying dollars to avoid further falls
that could affect the profitability of the generating sectors,
according to Dominican Today.
Until the end of November, the dollar was trading in a range of
RD$55.00 to RD$56.00 per dollar, the report relays. After the
first fortnight of December, there was a slight slide in the rate
and it was placed over RD$56.00, the report notes. This increase
was attributed to demands by importers to cover debts with their
foreign suppliers of raw materials and final goods purchased for
Christmas and before Black Friday, the report says.
In general, the revaluation of the Dominican currency against the
United States was 2.0% during the past year 2022, according to
calculations made by the Central Bank of the Dominican Republic,
the report notes.
Already in the first month and a half of this year, the
appreciation is around 1.13%, the report relays. After the slide
of the last five weeks of 2022, the exchange market has once again
reflected falls in the dollar exchange rate, the report notes. The
inflow of foreign currency continues to boom, the report relays.
Last January, the inflow of remittances was US$802 million, a
figure slightly higher than that registered in the same month of
the previous year, the report discloses. According to official
calculations, so far this year, the Dominican peso has appreciated
1.69% against the US dollar, the report relays. This behavior is
due to the greater availability of foreign currency in the local
market as a result of the increase in the flows of remittances
received during the month of January, equivalent to a 5.6% (US$42.7
million) increase compared to 2022, the report says.
The increase in the flow of foreign currencies is also associated
with more favorable financial conditions that have generated
incentives for local and international institutional investors to
allocate their capital in instruments denominated in local
currency, the report relays.
An expert in the matter commented that in particular, this behavior
is evident in the wholesale market segment, whose prices have
experienced a decrease in the currency of up to 63 cents of
Dominican pesos since the beginning of the current year, generating
an accumulated appreciation of 1.13% in 2023, the report notes.
In its most recent monetary policy report, the BCRD, when referring
to aspects of the external sector of the economy, said that
"activities that generate foreign currency (tourism, national
exports, and free zones, remittances and foreign direct investment)
have maintained a performance positive, contributing to an
appreciation of the Dominican peso of around 2.0% in 2022," 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.
=============
E C U A D O R
=============
ECUADOR: Moody's Affirms 'Caa3' Foreign Currency Issuer Rating
--------------------------------------------------------------
Moody's Investors Service has affirmed the Government of Ecuador's
long-term foreign-currency issuer rating at Caa3. The outlook
remains stable.
The affirmation of Ecuador's Caa3 rating reflects Moody's
assessment that the sovereign's credit profile remains constrained
by limited financing options, weak institutions and a challenging
sociopolitical environment, factors that heighten redefault risk.
Despite progress achieved under the recently completed $6.5 billion
(5.7% of GDP) International Monetary Fund (IMF) Extended Fund
Facility (EFF) program, Ecuador continues to face material credit
risks on account of limited access to external funding, low
liquidity buffers, and very weak governance.
The stable outlook on the rating reflects Moody's view that upside
and downside risks to Ecuador's credit profile remain balanced.
Fiscal performance will benefit from favorable hydrocarbon prices
and debt ratios will continue trending downward. Near-term
liquidity risks are moderate given small government deficits and
limited debt refinancing needs after the 2020 restructuring.
Nevertheless, political gridlock will limit the government's
ability to adopt reforms to improve market confidence and regain
access to international capital markets ahead of a challenging debt
repayment schedule.
Ecuador's foreign-currency country ceiling remains at Caa2,
maintaining the existing one-notch gap between the sovereign rating
and the foreign-currency country ceiling to reflect a track record
of multiple sovereign defaults, weak policy effectiveness and the
government's relatively large share in the country's total external
debt. Moody's does not assign a local currency country ceiling for
Ecuador because the country is fully dollarized.
RATINGS RATIONALE
RATIONALE FOR AFFIRMING THE Caa3 RATING
THE SOVEREIGN'S CREDIT PROFILE REMAINS CONSTRAINED BY LIMITED
FINANCING OPTIONS AND A CHALLENGING SOCIOPOLITICAL ENVIRONMENT THAT
HEIGHTENS REDEFAULT RISK
Ecuador's credit profile incorporates a history of debt repayment
that spans multiple defaults, very weak governance, lack of access
to international capital markets, and absence of a credible
medium-term financing framework. Although the current government
has made progress on different fronts under the IMF program, very
low institutional and governance strength raises concerns about how
durable these improvements will be under successive governments.
Despite the relief on interest payments from the 2020 restructuring
and financing from the recently completed IMF program, the
sovereign is likely to face future liquidity challenges as a result
of its limited financing options that heighten the risk of
redefault.
Moody's estimates that the central government deficit narrowed to
1.8% of GDP in 2022 from 4% in 2021 and 8.1% in 2020, due to high
oil prices and expenditure restraint. The adoption of permanent
measures to contain (and in some cases, reduce) public wages, along
with a progressive income tax reform adopted in November 2021,
supported an improvement in the non-oil balance that will help
maintain fiscal sustainability through the current government's
term in office. The rapid decline in the central government deficit
substantially reduced financing needs to 6.6% of GDP in 2022 from
over 14% in 2020. The central government fiscal deficit is likely
to remain around 2% of GDP, under current policies, through the
next general election in 2025. Oil prices are likely to remain
supportive and the tax reform will continue to anchor structural
revenues near current levels. The authorities have committed to
continued IMF technical assistance on tax administration to address
evasion and reduce compliance gaps, even though the EFF program has
successfully concluded. As a result, Moody's estimates that central
government financing needs will remain manageable in 2023 at 6.5%
of GDP.
For the first time in over two decades, the sovereign successfully
completed an IMF program in December 2022. Moody's believes that
reforms adopted under the EFF will help support fiscal
sustainability in the near term. A more robust budgeting and fiscal
framework has been institutionalized and technical capacity at the
Ministry of Finance has been strengthened. However, enhancing
fiscal transparency remains a work-in-progress. Improvements in
data quality and fiscal management practices are still at an early
stage and revisions to fiscal accounts going back to 2012 have been
significant, helping to explain the accumulation of arrears with
domestic suppliers under previous governments.
Despite the progress achieved under the IMF program, access to
capital markets is likely to remain constrained, limiting the
sovereign's financing alternatives ahead of increased financing
needs in the coming years. Moody's forecasts that central
government financing needs will increase to 7.2% of GDP in 2024 and
8.4% in 2025 as domestic and external repayments increase. This
coincides with the general election and precedes the five yearly
amortizations in 2026-30 for the sovereign's 2030 bonds. There have
not been any concrete announcements about another IMF program that
would help the sovereign meet its repayments as of yet.
Social unrest that erupted in violent protests in June 2022 has
weakened the government's political capital for implementing
policies to attract investment and reinvigorate economic growth.
Tensions between the executive and the legislature have resulted in
political gridlock that has halted the government's reform agenda,
undermining investment sentiment and market confidence. On February
6, voters rejected an eight-question referendum proposed by the
government on issues ranging from security and the environment to
the political structure of the country that was intended to provide
a boost to the Lasso administration. The results amounted to a vote
of No Confidence and signaled increasing barriers to governability
that will hinder the authorities' ability to execute their policy
agenda. In line with these developments, spreads and yields on
Ecuador's debt remain high as a challenging political environment
has increased the perception of country risk.
RATIONALE FOR THE STABLE OUTLOOK:
The stable outlook on the rating reflects Moody's view that upside
and downside risks to Ecuador's credit profile remain balanced.
Moody's believes it is likely that the government will remain
committed to maintaining fiscal discipline through the end of its
term in office.
Near-term liquidity pressures remain manageable as financing needs
have been alleviated by narrower fiscal deficits and lower external
repayments. Ecuador's past liquidity struggles were caused by large
government financing needs and a burdensome interest bill on
external bonds. The 2020 restructuring resulted in substantial
liquidity relief by cutting the average interest rate on external
bonds to 5.3% from over 9.2% under a step-up coupon structure, and
by pushing back maturities.
Supported by favorable oil prices, tax administration measures and
expenditure restraint, fiscal deficits are likely to remain around
2% of GDP, such that debt ratios will continue trending downward
and liquidity pressures will remain in check. Nevertheless, the
government's ability to adopt reforms to improve market confidence
and regain access to international capital markets ahead of a
challenging debt repayment schedule will remain limited by
political gridlock and a persistent risk of social unrest.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Ecuador's ESG Credit Impact Score is highly negative (CIS-4),
reflecting a very highly negative governance issuer profile score
that has resulted in multiple defaults, and high exposure to
environmental and social risks.
Ecuador's exposure to environmental risks is highly negative (E-4
issuer profile score), related to physical climate and carbon
transition risks. Ecuador's economy (particularly primary sector
activity) has been subject to droughts and floods from the El Niño
weather shock that happens at irregular intervals. Natural
disasters like volcanic eruptions and earthquakes over the past
decade have led to unexpected fiscal costs and localized economic
disruption. Exposure to carbon transition risks, albeit over the
long term, stems from hydrocarbon dependence on exports and
government revenues.
Exposure to social risks is also highly negative (S-4 issuer
profile score). Social considerations have played a role in
increasing political risk in the country. As illustrated in October
2019, violent protests broke out against government measures to
eliminate fuel subsidies, forcing the government to backtrack on
the subsidy removal and to devise complimentary measures in support
of fiscal consolidation under an IMF program. The risk of social
unrest constrains the sovereign's ability to adopt policies that
address long-standing distortions that inhibit economic growth in
the country.
The influence of governance on Ecuador's credit profile is very
highly negative (G-5 issuer profile), reflecting weak rule of law,
high levels of corruption, and the sovereign's default track
record. Long-standing concerns about public financial and fiscal
management, willingness to repay (which in the past had a hand in
defaults), and the overall clarity and predictability of
policymaking constrain Ecuador's credit profile.
GDP per capita (PPP basis, US$): 11,748 (2021) (also known as Per
Capita Income)
Real GDP growth (% change): 4.2% (2021) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 1.9% (2021)
Gen. Gov. Financial Balance/GDP: -4% (2021) (also known as Fiscal
Balance)
Current Account Balance/GDP: 2.8% (2021) (also known as External
Balance)
External debt/GDP: 54.1% (2021)
Economic resiliency: b2
Default history: At least one default event (on bonds and/or loans)
has been recorded since 1983.
On February 22, 2023, a rating committee was called to discuss the
rating of the Ecuador, Government of. Other views raised included:
The issuer's economic fundamentals, including its economic
strength, have materially increased. The issuer's institutions and
governance strength, have not materially changed. The issuer's
fiscal or financial strength, including its debt profile, has not
materially changed. The issuer's susceptibility to event risks has
not materially changed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
FACTORS THAT COULD LEAD TO AN UPGRADE
A credible medium-term financing plan that fully covers funding
needs, such that the sovereign is able to avoid payment stress,
would decrease the likelihood of a credit event associated with
elevated losses to bondholders, supporting a higher rating.
Additionally, a more harmonious political environment that supports
policy continuity, stronger investment and increased economic
dynamism could lead to a higher rating.
FACTORS THAT COULD LEAD TO A DOWNGRADE
The re-emergence of liquidity pressures, whether due to a material
widening of the fiscal deficit or insufficient financing flows
amidst a challenging debt maturity schedule, that increase the
likelihood of a credit event or losses consistent with a Caa3
rating, would lead to a downgrade.
The principal methodology used in this rating was Sovereigns
published in November 2022.
=============
J A M A I C A
=============
JAMAICA: Removed From EU Non-Cooperative Tax List
-------------------------------------------------
David Rose at Jamaica Observer reports that Jamaica has been
removed from the European Union's (EU) list of non-cooperative
jurisdictions for tax purposes following amendments to the Special
Economic Zones Act (SEZA).
This was confirmed, with Barbados, North Macedonia and Uruguay also
being removed from the Annex II state of play document, according
to Jamaica Observer. The amendment to the SEZA ensured Jamaica
conformed with international standards of tax transparency which
were related to preferential tax regimes as per the EU's October
publication, the report notes. Jamaica was mentioned in February
2021 as being one jurisdiction aiming to cooperate with the EU in
implementing commitments, the report relays.
"At the same time, I warmly congratulate North Macedonia, Barbados,
Jamaica and Uruguay as they successfully fulfilled their
commitments and could be removed from the state of play document,"
stated Sweden's Minister of Finance Elisabeth Svantesson in the
release, Jamaica Observer discloses.
Four more countries were added to the Annex I list, with the
current list now having 16 jurisdictions including The Bahamas,
Trinidad and Tobago, the British Virgin Islands, and the US Virgin
Islands, the report notes. The Annex I list, which is also dubbed
the black list, is reserved for jurisdictions that don't cooperate
with the EU or have failed to deliver on commitments on
implementing necessary reforms, the report relays. The Annex II
list, typically referred to as the grey list, is for jurisdictions
that have committed to making reforms in cooperation with the EU,
the report discloses.
This decision comes as a victory for the local insurance sector,
which would have faced possible repercussions in its reinsurance
arrangements if it had been added to the black list in the recent
update, the report relays. The general insurance sector is already
facing the fallout from reduced reinsurance capacity that has lead
to insurance premiums rising by more than 50 per cent for renewals
with existing clients, the report says.
The Financial Action Task Force (FATF) is set to give an update
regarding Jamaica's status on the multilateral body's grey list.
The FATF had set February 2023 as the new follow-up evaluation
deadline, after missing its original January 2022 timeline, the
report notes. Barbados, the Cayman Islands, and Haiti are other
Caribbean territories on the grey list, the report relays. The
FATF is an intergovernmental organisation aimed at combating money
laundering and terrorism financing, the report discloses.
Jamaica was put under increased monitoring in February 2020, with
the country having 40 action items based on FATF recommendations,
the report relays. Jamaica was compliant/largely compliant with 27
of these items up to October when Finance Minister Dr Nigel Clarke
provided an update on the matter, the report notes. The last major
hurdles at the time were amending the Companies Act to improve the
beneficial ownership regime; finalisation of charities regulations;
bringing all designated non-financial businesses and professions
(DNFBP's) into the Anti-Money Laundering/Combating the Financing of
Terrorism (AML/CFT) regime; and ensuring adequate, risk-based
supervision in all sectors, the report relays.
Dr Clarke had indicated a March 2023 deadline to have the
amendments brought to Parliament, the report discloses.
The Privy Council ruled on February 9 in favor of the General Legal
Council and attorney general of Jamaica against the Jamaica Bar
Association on Jamaican statutory regime to combat money
laundering, the report relays. This means that Jamaica would have
satisfied international standards in bringing all DNFBP's under its
anti-money laundering and Combating of Terrorism Financing
framework, the report says.
"For the reasons set out above, the board concludes that the regime
does not breach attorneys' or their clients' constitutional rights.
It follows that the board will humbly advise His Majesty that the
appeals should be allowed and that the order of the Full Court
should be restored," the Privy Council judgment stated, the report
discloses.
As a result, Jamaica will now move ahead with putting
attorneys-at-law under the Proceeds of Crime Act for them to fulfil
their reporting obligations, as part of the DNFBP's framework, the
report relays. Thus, they would have a duty to report suspicious
activities/transactions in relation to their clients with the
General Legal Council, which will resume its role as the designated
body for monitoring compliance, 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.
[*] JAMAICA: Back to Pre-Pandemic Growth Levels
-----------------------------------------------
RJR News reports that Jamaica could return to pre-pandemic economic
growth levels in the current fiscal year, fast-tracking initial
projections.
The Planning Institute of Jamaica (PIOJ) says while it was expected
that pre-pandemic economic growth levels would be realised in the
2023/2024 fiscal year, which starts in April, the projections for
the January to March quarter suggest recovery, according to RJR
News.
PIOJ Director General Dr. Wayne Henry said for fiscal year 2022/23,
the economy is projected to grow within the range of four to six
per cent, the report notes.
The four to six per cent projected growth for this fiscal year,
which ends March 31, is an upward revision from the projection of
3.5 to 4.5 per cent growth set last year, the report discloses.
At the same time, the local economy is projected to grow between
one and three per cent for the 2023/24 fiscal year, the report
notes.
According to Dr. Henry, this reflects the faster than expected pace
of recovery in the previous fiscal year, leading to an earlier than
anticipated normalization of output and a return to the long-term
trend of growth, the report discloses.
But it also reflects a deterioration in the economic outlook for
some of Jamaica's main trading partners, which has implications for
local external demand, the report says.
GDP performance in fiscal year 2023/24 is anticipated to be driven
by continued robust performance in stopover arrivals facilitated by
increased room capacity as well as intensified marketing efforts,
the report discloses.
Last month, the World Bank projected growth of two per cent for the
2023/24 fiscal year, the report notes.
The PIOJ said growth in the fiscal year should also be supported by
increased capacity utilization in the mining and quarrying
industry, 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.
*********
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
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re-mailing and photocopying) is strictly prohibited without prior
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Information contained herein is obtained from sources believed to
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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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* * * End of Transmission * * *