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/raid1/www/Hosts/bankrupt/TCRLA_Public/230426.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, April 26, 2023, Vol. 24, No. 84 Headlines B O L I V I A BOLIVIA: Central Bank is Rebuilding Reserves, Finance Chief Says B R A Z I L BRAZIL: Backtracks Ending Tax Exemption for International Orders BRAZIL: Working on Extra Revenue Measures for Second Half COSAN SA: Moody's Affirms 'Ba2' CFR & Alters Outlook to Negative D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: IMF Projects Economy to Grow 4.2 % in 2023 P U E R T O R I C O AZURE DEVELOPMENT: Unsecureds Will Get 95% of Claims in 36 Months - - - - - ============= B O L I V I A ============= BOLIVIA: Central Bank is Rebuilding Reserves, Finance Chief Says ---------------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that Bolivia's central bank is rebuilding its international reserves as it deals with a "transitory" liquidity problem affecting the country, according to Finance Minister Marcelo Montenegro. The minister declined to elaborate on what the current level of reserves is, but said it had increased recently, according to Bloomberg. The central bank board can decide to withhold the data to avoid creating "more speculation," he said. "They're replenishing them," Montenegro said in an interview on the sidelines of the International Monetary Fund's spring meetings in Washington. "The central bank is the only institution that can publish those figures," he added, notes the report. Bolivia's foreign reserves have been on a long downward trend since 2014 as the once gas-rich nation gradually turned into a net energy importer, forcing the central bank to spend reserves to to defend its currency peg of close to 7 per dollar, the report notes. Bolivia had $3.5 billion in reserves as of Feb. 8, of which $372 million was in cash, according to the bank. The authorities stopped publishing the data two months ago as reserves dropped toward critical levels, the report adds. =========== B R A Z I L =========== BRAZIL: Backtracks Ending Tax Exemption for International Orders ---------------------------------------------------------------- Reuters reports that Brazil's government reversed a decision to end tax exemption on foreign shipments targeting Asian e-commerce giants, a measure aimed at improving public finances that faced backlash from lower-income Brazilians, a crucial part of the new government's electorate. Speaking to reporters, Finance Minister Fernando Haddad said that President Luiz Inacio Lula da Silva had asked him not to proceed with ending the tax exemption for international orders from individuals, according to Reuters. According to Haddad, Lula has directed the matter to be resolved through administrative means and heightened oversight, the report notes. The government had previously announced it would abolish the tax exemption on individual-to-individual shipments of up to $50, arguing it never applied to e-commerce but was being "widely and fraudulently" used for sales made by foreign companies. "It is generating confusion that this could harm people who, in good faith, receive orders from abroad up to that level," said the minister, the report notes. "It will be more difficult, but we are going to look into this topic to verify a more effective form of administrative supervision," 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). BRAZIL: Working on Extra Revenue Measures for Second Half --------------------------------------------------------- Reuters reports that Brazil's government is working on additional revenue measures to be announced in the second half of this year, said Revenue Chief Robinson Barreirinhas, highlighting confidence that this set of actions will improve public accounts. Speaking at a news conference on the 2024 budget bill, Barreirinhas stated that the measures would be additional to those already announced by Finance Minister Fernando Haddad and that "strategic issues" are involved in the timing of their disclosure, according to Reuters. Barreirinhas stated that there are "very solid and consistent" studies regarding the potential to boost annual revenue by 155 billion reais ($31.4 billion) as a result of these combined efforts, adding the revenue service is "comfortable" with meeting the revenue targets set by the minister, the report relays. Without elaborating, he said these new measures would align with the principle advocated by the administration of Brazil's new leftist President Luiz Inacio Lula da Silva, of not creating or increasing taxes but instead focusing on collecting from those who should be paying, the report discloses. 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). COSAN SA: Moody's Affirms 'Ba2' CFR & Alters Outlook to Negative ---------------------------------------------------------------- Moody's Investors Service has affirmed Cosan S.A. ("Cosan") Ba2 Corporate Family Rating and the senior unsecured Ba2 ratings of Cosan Luxembourg S.A. and Cosan Overseas Limited. Outlook changed to negative from stable. Affirmations: Issuer: Cosan S.A. Corporate Family Rating, Affirmed Ba2 Issuer: Cosan Luxembourg S.A. Backed Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 Issuer: Cosan Overseas Limited Backed Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 Outlook Actions: Issuer: Cosan Luxembourg S.A. Outlook, Changed To Negative From Stable Issuer: Cosan Overseas Limited Outlook, Changed To Negative From Stable Issuer: Cosan S.A. Outlook, Changed To Negative From Stable RATINGS RATIONALE The negative outlook reflects the execution risk of Cosan as it manages to continue reinforcing its liquidity and capital structure to service considerable debt and interests incurred from the collar loan financing structure over the next 4 years. Moody's believes there has been an increase execution risk since the acquisition of Vale shares was first announced stemming from increasing interest rates, tightening credit conditions and a weaker macro-economic outlook. Rating pressure would increase if Cosan is unable to maintain a comfortable liquidity ahead of such amortizations and possible derivatives settlements under the BRL8.5 billion collar loan financing used to fund the acquisition of Vale shares. Moody's viewed the transaction as credit negative because of the cash payments to service and amortize the collar loan financing and the carve out of dividends from Raizen S.A. (Baa3) and Compass Gas e Energia S.A. to cover redeemable preferred shares agreement also linked to the transaction. To avoid an increase in refinancing risk Moody's also expects Cosan to divest from certain assets and its participation in certain subsidiaries. Although Moody's believes Cosan's main subsidiaries Raizen S.A. and Compass Gas e Energia S.A. will generate consistent dividend upstream in the coming years, the expenses relating to the preferred shareholders and collar loan financing will maintain coverage of Net Dividends Received/Interest in a range of 0.7x to 1.3x between 2023 and 2027, compared to 2.0x in 2022. Once the loan used to finance the share acquisition is reduced in the coming years, the diversification offered by the dividend upstream from Vale will benefit Cosan's coverage metric and credit profile. On October 7, Cosan announced the acquisition of a 4.9% stake of Vale's voting rights. Vale is an investment-grade asset that offers exposure to foreign-currency revenue, and will benefit from decarbonization and carbon transition trends with sustained demand for high-quality iron ore, copper, nickel and other metals. Vale is one of the world's largest mining companies with substantive positions in iron ore and nickel, relevant operations in copper, and supplemental positions in energy and steel production. The company's principal mining operations are in Brazil, Canada and Indonesia. In 2022, ferrous minerals (primarily iron ore and pellets) accounted for around 80% of the company's net revenue. In 2022, Vale reported net operating revenue of $54.5 billion and Net Income of $16.8 billion. Cosan S.A.'s Ba2 corporate family rating (CFR) reflects its diversified portfolio of businesses, including the entire sugar-ethanol chain; fuel distribution, including convenience stores, natural gas, lubricants, logistics operations and metals & mining; and its adequate liquidity profile. The holding company's diversified sources of dividends, especially from stable businesses, such as the fuel and gas distribution, translates into a stable cash source over the long-term. Diversification mitigates volatility in the upstream business Cosan benefits from a diversification of cash flow streams from the agricultural sugar-ethanol activities, fuel distribution and piped natural gas distribution. The stake in Vale shares will improve diversification of dividends specially as the collar financing structures are amortized and the flow of dividends is up streamed to Cosan. Also, Rumo S.A. (Ba2 Negative) and other investments can improve diversification to Cosan as they grow more robust in their ability to provide consistent and reliable dividends. Cosan's ratings are constrained by the acquisitive growth history of the company and its subsidiaries, and the high gross leverage of the pro forma consolidated figures of the group. The negative outlook reflects the execution risk of Cosan as it manages to continue reinforcing its liquidity and capital structure to service considerable debt and interests incurred from the collar loan financing structure in the next 4 years. Rating pressure would increase if Cosan is unable to maintain a comfortable liquidity ahead of such debt amortizations and possible derivatives settlements. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade of Cosan's ratings could result from the upgrade of rated subsidiaries (Raízen S.A or Rumo S.A.). Upward pressure could develop if the parent company maintains a strong standalone financial position with adequate liquidity, increases cash flow and diversifies companies and segments. A downgrade of Cosan could result from a weakening of credit quality or operating performance of any of its key subsidiaries, such that Moody's expects dividends to be lower than the rating agency's current expectations. A weakening of liquidity, including broad declines in equity valuations or tightening credit conditions such that asset sales or capital market access becomes unattractive or inaccessible could also lead to a downgrade of the ratings. The principal methodology used in these ratings was Investment Holding Companies and Conglomerates published in April 2023. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: IMF Projects Economy to Grow 4.2 % in 2023 -------------------------------------------------------------- Dominican Today reports that the International Monetary Fund (IMF) projects that the economy of the Dominican Republic will grow 4.2% in 2023, a percentage slightly lower than the 4.4% reported by the World Bank. The IMF also projects that inter-annual inflation in the Dominican Republic will close the year at 4.9%, higher than the target range of 4% ± 1% that the country's Central Bank has set for itself, according to Dominican Today. By 2024, it will drop to 4%. The Dominican Republic's inter-annual inflation projection for 2023 is below that of the entire Latin American and Caribbean region, which the IMF indicates would be 11.8%, the report notes. It is also still below the regional 7.7% projected for 2024, the report relays. The International Monetary Fund believes that Latin American countries should implement tighter fiscal policies, raising, for example, taxes on the rich, to contain high inflation and thus take some weight off central banks in their monetary policy, the report discloses. "A more contractionary fiscal stance would help curb domestic demand, allowing interest rates to fall sooner," the institution said in a regional note issued on the occasion of the Fund's spring meetings with the World Bank, which are being held in Washington, the report says. The advice aligns with the IMF's message during the meetings, in which it has called for a tightening of fiscal policy to complement monetary policy at a time when high rates and global uncertainty are weighing down growth, the report relays. For the deputy director of the agency's Western Hemisphere Department, Nigel Chalk, the persistence of inflation probably means that "interest rates will have to remain high for longer than we initially thought," 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. ===================== P U E R T O R I C O ===================== AZURE DEVELOPMENT: Unsecureds Will Get 95% of Claims in 36 Months ----------------------------------------------------------------- Azure Development, Inc., filed with the U.S. Bankruptcy Court for the District of Puerto Rico a Disclosure Statement describing Plan of Reorganization dated April 20, 2023. The Debtor is a privately owned corporation existing under the Laws of the Commonwealth of Puerto Rico since June 10, 2002. Its offices are located at Condominio Esquire Calle Vela 2, San Juan, Puerto Rico. The Debtor's shareholder is Fideicomiso Valdes Acevedo. The Properties consist of two parcels of land at Mata de Platano Ward, Luquillo, Puerto Rico. Management maintains that upon the completion of the permitting process to develop the Properties they can be sold for not less than $4,500,000. The ongoing economic downturn and recession faced by Puerto Rico during the last years has adversely impacted numerous sectors and entities of Puerto Rico's economy, including Debtor's real estate development industry. As a result of the adverse effect on the real estate market, coupled with the delay in obtaining certain permits for the development of the Properties, Debtor was unable to meet the payments on its obligations, resulting in the filing by Oriental Bank of a collection of money and mortgage foreclosure action against Debtor in case No. SCI2015-00410 with the Court of First Instance of Puerto Rico, Superior Section of Fajardo, substituted by Triangle who purchased Debtor's loan from Oriental Bank. In an effort to protect the Properties, obtain a breathing spell and the benefits of 11 U.S.C. 362 (a), which stays all collection actions and judicial proceedings, on February 17, 2023, Debtor filed its Chapter 11 petition. Class 3 consists of Insiders' General Unsecured Claims. Insiders' claims due to Debtor's related parties will be subordinated, until the full payment of all other claims to be paid pursuant to the Plan. During the 36-month sale period of the Properties indicated under Class 1, these claims will not receive any dividends. However, upon the sale of the Properties, if after the payments to Class 1, 2 and 4 there are remaining funds, these claims will receive 95% thereof as payment in full. Class 3 is impaired. Class 4 consists of Non-Insiders' General Unsecured Claims. Non-insiders' claims for $20,000 or less, or those that are voluntarily reduced to $20,000, will be paid 95% thereof in 36 equal monthly installments commencing on the Effective Date to be advanced to Debtor by Cost Control. Claims in excess of $20,000 in this Class will not receive any dividends during this 36-month period. However, upon the sale of the Properties, if after the payments to Class 1 and 2 there are remaining funds, the claims in excess of $20,000 will receive 95% thereof, as payment in full satisfaction thereof. Class 4 is impaired. Class 5 consists of Interest in Debtor. Fideicomiso Valdes Acevedo will not receive any distribution under the Plan but will retain its shares in Debtor unaltered. Class 5 is unimpaired under the Plan and is not entitled to vote to accept or reject the Plan. Except as otherwise provided in the Plan, Debtor will effect payment of Administrative Expense Claims, Priority Tax Claims, Allowed Secured and Unsecured Claims as indicated above, from the cash advances to be provided by Cost Control, the funds in Debtor's in possession account, and those on deposit with the Court of First Instance of Puerto Rico, Superior Section of Fajardo in Case No. NSCI 2015cv00410and expected to be received by Cost Control. The remaining payments to the secured and unsecured claimants will be made from the proceeds of the sale of the Properties. A full-text copy of the Disclosure Statement dated April 20, 2023 is available at https://bit.ly/43V5vVZ from PacerMonitor.com at no charge. Debtor's Counsel: Charles A. Cuprill, Esq. Charles A. Cuprill, P.S.C., Law Offices 356 Fortaleza Street (2nd Floor) San Juan, PR 00901 Tel: 787-977-0515 Email: ccuprill@cuprill.com About Azure Development Azure Development, Inc. owns properties in Luquillo, P.R., valued at $3.14 million. The company is based in San Juan, P.R. Azure Development filed a petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 23-00462) on Feb. 18, 2023, with $3,142,794 in assets and $3,246,910 in liabilities. Jose Ricardo Martinez, vice-president of Azure Development, signed the petition. Judge Enrique S. Lamoutte Inclan oversees the case. The Debtor tapped Charles A. Cuprill, P.S.C., Law Offices as bankruptcy counsel and CPA Luis R. Carrasquillo & Co., P.S.C. as financial advisor. ********* 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. 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