/raid1/www/Hosts/bankrupt/TCRLA_Public/240104.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, January 4, 2024, Vol. 25, No. 4
Headlines
A R G E N T I N A
ARGENTINA: Reform Architect Says He Isn't Even Halfway Done
C O S T A R I C A
COSTA RICA: Inflation Expected to Rise Back by Mid-2024
E C U A D O R
ECUADOR DPR: Fitch Affirms 'BB-' Ratings on Three Loans
J A M A I C A
[*] JAMAICA: Economy Grew 2.1% in Third Quarter
[*] JAMAICA: PIOJ Predicts Positive Economic Performance for Q4
M E X I C O
SERVICIOS CORPORATIVOS: Fitch Alters Outlook on 'BB-' IDRs to Pos
T R I N I D A D A N D T O B A G O
NATIONAL ENTERPRISES: Reports $455.1M Loss for FY Ended Sept. 30
TRINIDAD & TOBAGO: Central Bank Maintains 3.5% Repo Rate
X X X X X X X X
LATAM: Aviation Industry Calls for Changes
- - - - -
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A R G E N T I N A
=================
ARGENTINA: Reform Architect Says He Isn't Even Halfway Done
-----------------------------------------------------------
Ignacio Olivera Doll at Bloomberg News reports that the architect
behind President Javier Milei's ambitious, pro-business reform
blitz says he's only getting started and that new policy changes
will be unveiled soon regardless of the social unrest and worker
protests triggered by the government's overhaul zeal.
Federico Sturzenegger, one of Argentina's most cited economists and
Milei's key adviser to deregulate the ailing economy, said the
government will send another bill to Congress to eliminate 160
"absurd" regulations that hinder activity, according to Bloomberg
News . Together with a sprawling decree and another wide-ranging
bill that Milei's administration presented in his first three weeks
in power, they seek to radically transform the South American
nation, he said, Bloomberg News notes.
"The reforms have a dimension that goes deeper than the reforms
themselves - it's like an overhaul of the economic power structure
in Argentina," Sturzenegger said in an interview at the
presidential palace in Buenos Aires, adding that the measures
account for only 40 percent of the changes Milei wants to achieve,
Bloomberg News relays. "I don't remember anyone with so much
forcefulness," he added.
Bloomberg News discloses that the libertarian economist Milei has
wasted no time since taking office on December 10 with a popular
mandate to tame inflation running above 160 percent and restart a
stagnant economy. The 300-measure decree issued, which seeks to
greatly reduce the hand of the state in Argentina's economy, was
followed on by an omnibus bill heading to Congress with other 664
articles, Bloomberg News relays.
The new legislation comply with Milei's shock therapy strategy,
which also included a 54 percent currency devaluation and major
spending cuts to achieve a balanced budget in 2024, with the goal
of reversing the country's economic crisis, Bloomberg News notes.
The decree was met with resistance by the opposition, with some
legislators arguing that it goes beyond the president's powers,
Bloomberg News notes. Sturzenegger, 57, says such criticism is a
smokescreen not to discuss the content of reforms while adding the
decree is an "all or nothing" bet because Congress can vote it down
but can't modify it, Bloomberg News says.
Milei counts on the fact that none of his immediate predecessors
had a decree turned down by Congress but that political fight will
take place early next year, Bloomberg News discloses.
Protests, Strike
While the government's ambitious changes have already triggered
some scattered protests in Buenos Aires and other cities, Milei's
big test will come on January 24 when Argentina's largest union
group, CGT, holds a nationwide strike to protest against the
measures, Bloomberg News relays. The general strike will be the
earliest in an Argentine president's term in the past 40 years of
democracy, a sign of the hostility Milei can expect from CGT, a
group traditionally linked to the Peronist opposition, Bloomberg
News discloses.
In addition, several requests were filed in courts to legally stop
the decree once it's active, Bloomberg News says.
Sturzenegger remains unfazed, saying he expects lawmakers to pass
the bill "in some form" before March and the legislation is crucial
to reach a fiscal balance next year, Bloomberg News notes. He's
confident in the end the "pro-jobs" reforms will make it easier to
do business and spur activity in diverse sectors from rental
contracts to satellites, Bloomberg News says.
"Is anyone going to present a case in the justice system that there
can't be satellite Internet, that there can't be competition? It's
somewhat ridiculous," Sturzenegger says, referring to recently
lifted restrictions for Elon Musk's Starlink to operate in
Argentina, Bloomberg News discloses.
Deregulation Czar
For Sturzenegger, who holds a doctorate in economics from the
Massachusetts Institute of Technology, this is the second
high-profile attempt to fix Argentina's perennial crisis, after he
led the Central Bank from 2015 to 2018 under the government of
President Mauricio Macri, Bloomberg News relays.
Before joining Milei's ranks, the economist spent the past 18
months designing deregulation reforms for Patricia Bullrich, who
lost to the president in an October first round but subsequently
joined his government as security minister, Bloomberg News notes.
Sturzenegger then fused his reform plans with those of Energy
Secretary Eduardo Chirillo, who worked on Milei's campaign,
Bloomberg News relays.
At a deeper level, Sturzenegger says the fast paced, sweeping
reforms go beyond just changing the fine print, but aim to
challenge the political establishment, echoing Milei's campaign
pledges, Bloomberg News notes.
"The only way to achieve change is to disarm that structure and to
disarm it, in some sense, you have to drain it of its resources,
because that's what they use to sustain the status quo,"
Sturzenegger said, Bloomberg News adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez 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.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on June 13, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
0its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC-/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is negative. S&P's
'CCC-' transfer and convertibility assessment is unchanged. None of
its rated bond issues are affected.
S&P said the negative outlook on the long-term ratings is based on
the risks surrounding pronounced economic imbalances and policy
uncertainties before and after the 2023 national elections.
Divisions within the government coalition, and infighting among the
opposition, constrain the sovereign's ability to implement timely
changes in economic policy.
Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
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, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
===================
C O S T A R I C A
===================
COSTA RICA: Inflation Expected to Rise Back by Mid-2024
-------------------------------------------------------
The Executive Board of the International Monetary Fund (IMF)
completed the fifth review of Costa Rica's economic reform program
supported by the IMF's extended arrangement under the Extended Fund
Facility (EFF). Completion of this review makes available SDR
206.23 million (about US$ 276 million), bringing total
disbursements under the arrangement to SDR 1.03115 billion (about
US$ 1.4 billion). The Executive Board also completed the second
review under Costa Rica's Resilience and Sustainability Facility
(RSF) arrangement. The completion of this assessment makes
available SDR 184.7 (about US$ 247 million) associated with this
review and again makes available another SDR 184.7 million, which
the authorities did not request be disbursed within the required
30-day window following the first review. The Executive Board also
concluded the 2023 Article IV consultation with Costa Rica.[1]
Costa Rica's three-year extended arrangement under the EFF was
approved on March 1, 2021, in the amount of SDR 1.23749 billion
(335 percent of quota in the IMF or about US$1.8 billion at the
time of approval of the arrangement, see Press Release No. 21/53)
and was extended by five months on March 25, 2022.
Costa Rica's RSF arrangement was approved on November 14, 2022, in
the amount of SDR 554.1 million (150 percent of quota in the IMF or
about US$ 725 million at the time of approval of the arrangement).
Its duration coincides with the period remaining under the EFF -
disbursements under the RSF being contingent on the conclusion of
relevant reviews under the EFF and implementation of scheduled
reform measures. The Costa Rican Legislative Assembly's
Ratification of the RSF, which occurred on October 17, 2023, will
enable the authorities to request disbursements made available by
completion of assessments.
Real GDP growth is expected to reach around 5 percent this year,
supported by buoyant exports and recovering domestic demand. Growth
is expected to moderate to 3½ percent in 2024, which is broadly in
line with the medium-term potential growth rate. Headline inflation
has been negative as global commodity prices fell and a stronger
currency helped to reduce goods prices. Inflation is expected to
rise back within the Central Bank of Costa Rica (BCCR)'s tolerance
band by mid-2024. The value of the colon has stabilized near its
historical average in real effective terms and international
reserves buffers are strong. Banking sector capital and liquidity
metrics are comfortable and provisioning is adequate, although
dollarization remains high. The ratio of gross debt-to-GDP has
continued to decline despite the government's efforts to build up
liquidity buffers. Staff projects a primary surplus of 1.5 percent
of GDP this year and of around 2 percent of GDP over the medium
term.
Following the Executive Board's discussion on Costa Rica, Mr. Bo
Li, Deputy Managing Director and Acting Chair of the Board, issued
the following statement:
"Costa Rica is reaping the benefits from its home-grown reform
program. Strong implementation of the Fund-supported programs has
enabled the country to restore confidence in the strength of its
policy frameworks, withstand multiple external shocks, push forward
key reforms, and achieve robust growth. Fiscal outturns have
exceeded expectations, and the institutional framework for fiscal
policy has been particularly valuable in achieving these results.
Monetary policy has demonstrated its ability to react to inflation
shocks and anchor expectations and reserves are adequate.
"The central bank should return to a neutral stance by mid-2024 and
the exchange rate allowed to respond flexibly to market conditions.
The BCCR has appropriately lowered the policy rate and should
continue to do so to ensure that inflation converges decisively to
the target. A more flexible exchange rate and greater transparency
in central bank FX operations would allow monetary policy to have
its full effect on activity and inflation and would incentivize the
deepening of the FX market. Further institutional and technical
reforms should be targeted at improving the functioning of the FX
market and strengthening market participants' ability to manage
currency risks.
"The authorities should continue pursuing improvements to the
central bank's governance and autonomy. While the central bank is
conducting monetary policy in an independent manner, these
practices should be institutionalized through legislation. It is
critical that the central bank's autonomy and other areas of
improvements recommended in the 2020 Safeguards Assessment that
remain unaddressed be followed up in a steadfast manner.
"Ongoing spending restraint is expected to continue to reduce the
debt and interest burden and should be continued. Passage of the
income and value added tax bills would improve the equity and
efficiency of the tax system and raise revenues that have been
eroded in recent reforms. Broadening the CIT base and abolishing
income tax exemptions would further these objectives, reduce debt
faster, and create more space for spending to improve public
services. The implementation of the public employment bill by the
executive branch marks an important milestone.
"There are ongoing efforts to make productivity gains more
broad-based and to green the economy. The authorities should deepen
their efforts to boost female labor force participation and
integrate migrants into the formal labor market as part of their
package of reforms to make growth more equitable. Efforts to
increase digital connectivity, reduce electricity costs, and
improve educational outcomes will boost productivity throughout the
economy. Building on progress on both climate adaptation and
mitigation, reform measures to publish guidelines to assess the
climate impact of public projects, introduce a vehicle feebate
scheme, expand climate transition fiscal risk analysis, and better
evaluate climate change-related credit risks are all important
steps to make the Costa Rican economy greener and more resilient."
Executive Board Assessment
Executive Directors commended the authorities for their strong
implementation of the Fund-supported programs, which has enabled
the country to restore confidence in the strength of its policy
frameworks, withstand multiple external shocks, and achieve robust
growth. To build on this progress, Directors encouraged continued
fiscal prudence while supporting social assistance, carefully
calibrated monetary policy, and structural reforms to broaden
employment and support the green transition.
Directors agreed that monetary policy has demonstrated its ability
to react to inflation shocks and anchor expectations. They agreed
that the central bank should return to a neutral stance by mid-2024
and that the exchange rate should be allowed to respond flexibly to
market conditions. Further institutional and technical reforms
targeted at improving the functioning, deepening, and transparency
of the FX market and strengthening market participants' ability to
manage currency risks were encouraged.
Directors encouraged the authorities to continue pursuing
improvements to the central bank's governance and autonomy,
including through legislation. They stressed that the central
bank's autonomy and other recommendations in the 2020 Safeguards
Assessment should be addressed in a steadfast manner.
Directors commended the authorities for the impressive fiscal
performance. They supported the ongoing spending restraint, which
will help reduce the debt and interest burden. Directors encouraged
passage of the government's income and value added tax bills to
improve the equity and efficiency of the tax system and restore
revenues. Broadening the CIT base and abolishing tax exemptions
would reduce debt faster and create space for enhanced social and
infrastructure spending. They welcomed reforms to improve fiscal
transparency and spending, including implementation of the public
employment bill.
Directors were encouraged by ongoing efforts to make productivity
gains more broad-based and to build a greener and more resilient
economy. They supported the authorities' efforts to boost female
labor force participation and integrate migrants into the formal
labor market, increase digital connectivity, reduce electricity
costs, and improve educational outcomes to boost productivity
throughout the economy. Directors welcomed progress on both climate
adaptation and mitigation and the reform measures in the context of
the RSF, which should help catalyze much needed climate financing.
=============
E C U A D O R
=============
ECUADOR DPR: Fitch Affirms 'BB-' Ratings on Three Loans
-------------------------------------------------------
Fitch Ratings has affirmed Ecuador DPR Funding Limited's series
2020-1 loan, 2022-1 notes, and 2023-1 loan at 'BB-'. The Rating
Outlook is Stable.
Entity/Debt Rating Prior
----------- ------ -----
Ecuador DPR Funding
2020-1 LT BB- Affirmed BB-
2022-1 27928YAA5 LT BB- Affirmed BB-
2023-1 LT BB- Affirmed BB-
TRANSACTION SUMMARY
The future flow (FF) program is backed by existing and future U.S.
dollar-denominated diversified payment rights (DPRs) originated by
Banco Pichincha C.A. (BP) in Ecuador. The majority of DPRs are
processed by designated depository banks (DDBs) that have signed
acknowledgement agreements (AAs), irrevocably obligating them to
make payments to an account controlled by the transaction trustee.
Fitch's ratings address timely payment of interest and principal on
a quarterly basis.
KEY RATING DRIVERS
Future Flow Rating Driven by Originator's Credit Quality: The
rating of this FF transaction is driven by the Long-Term Issuer
Default Rating (IDR) of the originator, BP. On Nov. 10, 2023, Fitch
affirmed BP's Long-Term IDR at 'CCC+' and Viability Rating (VR) at
'ccc+'. BP's IDR is underpinned by its VR, or standalone
creditworthiness. However, the bank's ratings are capped by Fitch's
assessment of the operating environment (OE) score of 'ccc+'.
Ecuador's sovereign rating and broader OE considerations highly
influence the bank's VR.
Going Concern Assessment (GCA) Score Supports Notching
Differential: Fitch uses a Going Concern Assessment (GCA) score to
gauge the likelihood that the originator of a future flow
transaction will stay in operation through the transaction's life.
Fitch assigns a GCA score of 'GC1' to BP based on the bank's
systemic importance and standing as the largest bank in the
Ecuadorian banking system in terms of assets and deposits. The
score allows for a maximum of six notches above the Long-Term IDR
of the originator; however, additional factors limit the maximum
uplift.
Factors Limit Notching Differential: The 'GC1' score allows for a
maximum six-notch rating uplift from the bank's IDR, pursuant to
Fitch's future flow methodology. However, uplift is tempered to
four notches from BP's Long-Term IDR, given certain factors, such
as high future flow debt relative to BP's non-deposit funding and
Fitch reserving the maximum notching uplift for originator's rated
at the lower end of the rating scale.
Relatively High Future Flow Debt Relative to BP's Balance Sheet
Limits Notching Differential: Future flow debt represents
approximately 3.2% of BP's total funding and 31.6% of non-deposit
funding when considering the current outstanding balance of the
program ($443.8 million) as of Oct. 31, 2023 and utilizing
September 2023 non-consolidated financials.
Fitch does not allow the maximum uplift for originators that have
future flow debt greater than 30% of the overall non-deposit
funding. Nevertheless, given the benefits of the structure and
quality of flows, the agency allows for differentiation (four
notches) from BP's Long-Term IDR. Fitch is comfortable with these
ratios at the assigned rating and expects these levels to remain
high given the program continues to be a main source of funding for
the bank.
Coverage Levels Commensurate with Assigned Rating: The series
2023-1 loan has an interest-only period of two years with the first
principal payment not expected to be due until March 2025.
Considering average rolling quarterly DDB flows over the past five
years (November 2018 - October 2023) and the maximum periodic debt
service over the life of the program, including Fitch's 'BB-'
interest rate stress for the series 2023-1 floating-rate loan,
Fitch's minimum projected quarterly debt service coverage ratio
(DSCR) is 50.6x. The program can withstand a reduction in flows of
approximately 98% and still cover the maximum quarterly debt
service obligation. Nevertheless, Fitch will continue to actively
monitor the performance of the flows.
Reduced Redirection/Diversion Risk: The structure mitigates certain
sovereign risks by collecting cash flows offshore until collection
of the periodic debt service amount, allowing the transaction to be
rated over the sovereign country ceiling. Fitch believes payment
diversion risk is partially mitigated by the Account Agreements
signed by the five correspondent banks processing the vast majority
of U.S. dollar DPR flows originating in the U.S.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The transaction's ratings are sensitive to changes in BP's credit
quality, which in turn is sensitive to changes in Ecuador's credit
quality and operating environment. A deterioration of BP's credit
quality by more than one notch could trigger a negative rating
action on the transaction's rating.
- The transaction's ratings are sensitive to the DPR business
line's performance and its ability to continue operating, as
reflected by the GCA score. A change in Fitch's view on the bank's
GCA score can lead to a change in the transaction's ratings. The
minimum expected quarterly DSCR is approximately 50.6x, and should
therefore withstand a significant decline in cash flows in the
absence of other issues. However, significant declines in flows
could lead to a negative rating action. Any changes in these
variables will be analyzed in a rating committee to assess the
possible impact on the transaction's ratings.
- No company is immune to the economic and political conditions of
its home country. Political risks and the potential for sovereign
interference may increase as a sovereign's rating is downgraded.
However, the underlying structure and transaction enhancements
mitigate these risks to a level consistent with the assigned
rating.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- The main constraint to the transaction's ratings is the
originator's rating and BP's operating environment. If upgraded,
Fitch will consider whether the same uplift could be maintained or
if it should be further tempered in accordance with criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The future flow ratings are driven by the credit risk of Banco
Pichincha C.A. as measured by its Long-Term IDR.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
=============
J A M A I C A
=============
[*] JAMAICA: Economy Grew 2.1% in Third Quarter
-----------------------------------------------
RJR News reports that Jamaica's economy grew by 2.1 per cent for
the third quarter ended September.
The Statistical Institute of Jamaica (STATIN) says this was mainly
influenced by growth in both the services and goods producing
industries, according to RJR News.
The data reflect an improvement, compared with the 1.9 per cent
estimate for real value added which came from the Planning
Institute of Jamaica a few weeks ago, the report notes.
For the three months, STATIN says all services industries recorded
growth, with the exception of 'Producers of Government Services'
which declined by 0.9 per cent, the report relays.
There was a 6 per cent growth in the 'Transport, Storage &
Communication' industry, 'Hotels & Restaurants' gross domestic
product improved by 6.7 per cent, while other 'Other Services'
improved by 4.5 per cent, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
[*] JAMAICA: PIOJ Predicts Positive Economic Performance for Q4
---------------------------------------------------------------
RJR News reports that the Planning Institute of Jamaica says the
performance of the local economy is expected to be generally
positive for the current October to December quarter.
PIOJ Director General Dr. Wayne Henry says some key sectors,
including tourism, will lead the out-turn for the short to medium
term, according to RJR News.
The hotels and restaurants industry and related industries such as
other services and transport, storage and communication are
expected to lead the growth momentum in the services industry, the
report notes.
"Generally, the prospects are positive for the Jamaican economy and
is predicated on the continued expansion of economic activities in
most industries. Increased employment level is also expected to
result in greater domestic demand in the short to medium term," Dr.
Henry noted, the report relays.
He said the continued ramping up of production capacity at the
Jamalco alumina refinery is expected to result in relatively strong
growth in mining and quarrying, the report says.
For October, alumina production increased by 4.6 per cent, the
report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
===========
M E X I C O
===========
SERVICIOS CORPORATIVOS: Fitch Alters Outlook on 'BB-' IDRs to Pos
-----------------------------------------------------------------
Fitch Ratings has affirmed Servicios Corporativos Javer, S.A.B. de
C.V.'s (Javer) Long-Term Local- and Foreign-Currency Issuer Default
Ratings (IDRs) at 'BB-' and the Long-Term National Rating at
'A(mex)'. The Rating Outlook for all ratings has been revised to
Positive from Stable.
Javer's ratings are supported by its strong business position as
one of the largest homebuilding companies in Mexico, ability to
adjust its sales mix to market dynamics, above average operating
margins and solid liquidity position.
The Positive Outlook reflects the company's positive trend in its
operating performance and solid FCF generation; consistency in
these factors that allow it to strengthen its leverage metrics,
while maintaining a disciplined capital allocation strategy and
visibility on the government housing policies after 2024 federal
elections may support a positive rating action.
KEY RATING DRIVERS
Strong Operating Results: EBITDA generation has been strong in the
last couple of years, mainly due to the change in the company's
sales mix; for the LTM as of September 2023, EBITDA margin was
14.8%, similar to 14.1% in December 2022 and higher than 13.9% in
December 2021. Javer has continued to diversify its portfolio of
projects and locations, driving the sales mix toward higher-margin
and higher average price products following market dynamics.
Increased revenue generation has allowed Javer to strengthen its
credit metrics and liquidity. Fitch expects margins to continue at
similar levels over the next 24 months.
Solid Leverage Metrics: Fitch expects EBITDA gross and net leverage
to remain around or below 2.0x and 1.0x, respectively, over the
rating horizon. This leverage level is expected to be driven by a
stabilization on debt levels and a strong operating performance.
Since December 2022, Javer's net leverage ratio (net debt/EBITDA
pre IFRS16) has been below 1.0x; for the LTM as of September 2023
was 0.8x, the lowest in a decade, down from 2.5x in December 2020.
The improvement in the company's leverage metrics reflects higher
margins and positive FCF as result of the strategy to focus in the
middle income and residential segments.
Sales Mix Flexibility: Javer's business model has shown flexibility
to adapt the sales mix to market conditions and benefit from it.
The change in sales mix toward middle-income and residential
segments came with an increase in average sales price and a decline
in sales volume. LTM September 2023 average sale price for Javer
was around MXN706 thousand, up 8.1% from MXN653 thousand during the
same period of 2022, driven primarily by the change in sales mix.
In terms of units, the company sold 12,490 in the LTM as of 3Q23,
down from levels above 18,000 units in 2018.
Positive FCF Generation: Efficiencies and controls in working
capital have benefited FCF generation. In addition, land investment
has been low since 2020 due to delays in the acquisitions pipeline
process, from the seller side and a strategy to only replenish
inventory as it's sold. Javer's working capital management will
continue to be key for business and financial strengthening in the
coming years. Fitch projects that land investment will continue to
be around 8% of revenues over the rating horizon; moreover, Fitch
expects that Javer will generate positive FCF in the rating
horizon, allowing it to cover scheduled debt amortizations.
Industry Still Linked to INFONAVIT: Javer continues to maintain its
market share as the leading national provider of new homes sold
through the INFONAVIT mortgage system. The share of units sold by
Javer through INFONAVIT and COFINAVIT loans has historically been
high. For the LTM as of September 2023, it was around 87.3% of
total homes, compared to 85.4% in 2022 and 87.4% in 2021.
In August 2021, a set of new rules and policies to qualify for an
INFONAVIT individual home loan were approved, which apply to all
housing intended to be acquired and granted as collateral through
an INFONAVIT loan. Housing developments must adhere to the new
criteria regarding location, mobility, and environment that could
make more difficult finding reserves that meet the conditions of
the new regulation or that the cost of these reserves does not
correspond to the company's strategy.
DERIVATION SUMMARY
Javer's rating is supported by its market leadership and product
diversification in Mexico. The company continues to be a leader of
new homes sold through the INFONAVIT system in Mexico. Javer's
operations are concentrated in eight states where the company holds
one of the largest market shares.
Homebuilding companies in the U.S., such as Meritage Homes
Corporation (BBB-/Stable) and Lennar Corporation (BBB/Positive),
are larger in scale in terms of revenues and market
diversification. Compared with Javer, U.S. peers have stronger
EBITDA margins, net leverage and interest coverage metrics. Also,
U.S. peers have access to a broader range of sources of financing.
Compared with Mexican peers as Inmobiliaria Ruba, S.A. de C.V.
(Ruba; AA-[mex]/Stable) and Consorcio Ara, S.A.B. de C.V. (Ara;
A+[mex]/Stable) Javer has lower average price per unit and higher
net leverage; in terms of volume, for the LTM as of September 2023
Javer sold 12,490 units, Ruba 9,899 and Ara 5,960. Javer is present
in eight Mexican states, Ruba in 12 and Ara in 16 (although it
concentrates operations in Estado de Mexico and Quintana Roo).
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for Javer include:
- Increase of 2% in units sold in 2023; average increase of 3%
going forward;
- Average prices rise 7% in 2023 due to better sales mix; increase
stabilizes going forward at around 4% per year on average, in line
with expected inflation;
- Revenues increase by an average of 8% in 2023-2025;
- Average EBITDA margin of around 14%;
- Land investment equivalent to 8% of revenues in forecasted
period;
- Debt remains at MXN2.450 billion in rating horizon.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade
- Maintain sustained gross leverage below 2.0x;
- Strong operational results reflected in EBITDA margin above 14%,
even with a change in sales mix
- Continued positive FCF generation across the cycle and a
strengthened financial flexibility;
- Strong liquidity position;
- Clarity in government housing policies after 2024 federal
elections.
Factors that could, individually or collectively, lead to negative
rating action/downgrade
- Sustained EBITDA margin reductions below 12%;
- Land investment levels substantially above current expectations
of investing to replace land reserves used;
- Negative FCF for consecutive years driven by increasing working
capital needs;
- Weakening of cash position;
- Gross leverage above 3.0x
LIQUIDITY AND DEBT STRUCTURE
Very Strong Liquidity: As of Sept. 30, 2023, the company's
liquidity is strong with an available cash balance of MXN1.5
billion compared to short-term debt of MXN422 million. The change
in product mix to higher average-priced housing, coupled with lower
land inventory investments, freed up working capital resources
which resulted in a positive FCF generation.
The company does not have a dividend payout policy, providing a
flexible approach to liquidity during volatile periods and in times
of large investments. Fitch expects the company to manage its
EBITDA leverage trend to around 2.0x with excess cash flow to be
deployed for capex and dividends.
ISSUER PROFILE
Javer is one of the largest homebuilding companies in Mexico. The
company's growth is based on its participation in the homebuilding
market in Mexican states that have above average economic
development and population growth.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Servicios Corporativos
Javer, S.A.B. de C.V. LT IDR BB- Affirmed BB-
LC LT IDR BB- Affirmed BB-
Natl LT A(mex) Affirmed A(mex)
=====================================
T R I N I D A D A N D T O B A G O
=====================================
NATIONAL ENTERPRISES: Reports $455.1M Loss for FY Ended Sept. 30
----------------------------------------------------------------
Trinidad Express reports that National Enterprises Ltd (NEL)
recorded a total comprehensive loss of $455.1 million for the
financial year ended September 30.
This marked a significant contrast to the gain of $1.98 billion in
the preceding 18-month financial period, according to Trinidad
Express.
"This position is due mainly to the significant swing in fair value
of Trinidad and Tobago Nitrogen Co Ltd (Tringen) from $2.43 billion
in the previous financial period to $1.46 billion at the close of
this financial year," NEL's chairman Ingrid Lashley stated, the
report notes.
"Just as elevated ammonia prices drove the valuation in the
financial period 2022, a decline and volatility in ammonia prices
combined with gas curtailment issues, were responsible for the 40%
decline in this year's valuation," she stated, the report relays.
Lashley stated that despite this decline in Tringen's fair value,
NEL continues to demonstrate resilience through sustained cash flow
growth, the report discloses.
"Notably, dividends from Tringen totalling $371.2 million were
recorded in the current financial year, marking a significant
increase from $239.3 million in the 18-month period of 2022,"
Lashley stated, the report says.
NEL changed its financial year-end to September annually from
March, resulting in an 18-month reporting period, the report
notes.
"Furthermore, our diversified portfolio showcases robust
performance, with almost all investee companies, apart from
National Flour Mills Ltd, NGC Trinidad and Tobago LNG Ltd and
Tringen, exhibiting substantial gains in fair value over the past
fiscal year," Lashley stated, the report relays.
"This is exemplified by the impressive 43% surge in the fair value
of the Telecommunications Services of Trinidad and Tobago from
$161.9 million in September 2022 to $184.9 million by September 30,
2023," she stated, the report discloses.
Lashley emphasised that maintaining a healthy cash position is
pivotal, and NEL boasted $242.6 million in cash and cash
equivalents at the close of this financial year, the report says.
"This solid financial foundation not only ensures consistent
dividend payments to our esteemed shareholders, aligning with our
established dividend policy, but also empowers us to consider
strategic investments, bolstering our planned diversification
strategy," Lashley stated, the report notes.
"In spite of the challenges, our commitment to growth, resilience,
and strategic foresight remains unwavering, positioning us strongly
for a prosperous future," she stated, the report relays.
Lashley said that NEL earned an operating profit of $391.3 million,
marking a 32% increase from the previous 18-month period, the
report discloses.
"This profit is principally driven by dividend income of $382.7
million, which represents an increase of 29% above the $296.4
million recorded in the prior period," she added.
TRINIDAD & TOBAGO: Central Bank Maintains 3.5% Repo Rate
--------------------------------------------------------
Trinidad Express reports that ongoing and emerging geopolitical
factors are clouding the external economic policy outlook for 2024,
the Central Bank of Trinidad and Tobago stated in its Monetary
Policy announcement for December.
"Domestically, macroeconomic conditions appear favourable based on
the retreat of inflation, sustained private sector credit growth
and robust non-energy sector activity. Short-term TT/US interest
rate differentials remain a concern as regards external balance,
but could narrow further based on the projected downward path of
foreign rates," the Central Bank stated, according to Trinidad
Express.
The Central Bank said that in reviewing external developments, the
Monetary Policy Committee (MPC) took particular note of the rapid
slowdown in global inflation and the less aggressive monetary
stance adopted by major central banks, the report relays.
"Taking all these factors into account, the MPC agreed to maintain
the repo rate at 3.50%. At the same time, the MPC considered that
the dynamic nature of external economic developments in 2023, their
repercussions on Trinidad and Tobago's open economy, and the
expected continuation of that situation in 2024 warranted continued
vigilance and agility on the part of the Central Bank to
potentially rapidly changing circumstances. The Central Bank will
continue to carefully monitor and analyse international and
domestic developments and prospects," it stated, the report notes.
The Central Bank stated that with inflation easing faster than
anticipated and prospects for a "soft landing" gaining momentum
across several advanced and emerging market economies,
international macroeconomic conditions appear relatively less
constrained towards the end of 2023, the report discloses.
"This has prompted several Central Banks to pause further interest
rates hikes or reduce rates. For example, the United States
Federal Reserve (Fed) maintained its federal funds target range of
5.25% to 5.5% during the fourth quarter of 2023, with financial
markets anticipating interest rate cuts in 2024 from as early as
the first few months of the year. Notwithstanding recent positive
developments, major downside risks prevail. In particular, the
unsettled geopolitical landscape, accentuated by the conflict in
the Middle East and a slew of national elections scheduled for
2024, has heightened economic uncertainty. According to the
International Monetary Fund's October 2023 World Economic Outlook,
global growth is forecast to slow to 2.9% in 2024 compared to 3% in
2023," it added, the report relays.
T&T Economy Grew by 3% in First Quarter
"On the domestic front, the latest data from the Central
Statistical Office (CSO) indicated that real GDP expanded by 3%
(year-on-year) during the first quarter of 2023. Indicators
monitored by the Central Bank suggest steady economic recovery
during the first nine months of 2023, led by the non-energy sector.
Activity in the transportation and storage, wholesale and retail
trade (excluding energy), electricity and water (excluding gas) and
construction sectors continued to underpin the non-energy sector's
positive performance. Labour market statistics show that the
unemployment rate declined to 3.7% in the second quarter of 2023
compared with 4.9% one quarter earlier," it stated, the report
discloses.
The Central Bank stated that in the meanwhile, inflation continued
to be moderate, the report relays.
"According to the CSO, headline inflation measured 1.1%
(year-on-year) in November 2023 compared with 4.1% three months
earlier. The deceleration was driven by lower food inflation which
slowed to 0.8% from 5.6% over the same period. Core inflation
(which excludes food items) slowed to 1.2% from 3.7%, as the full
pass-through of higher fuel prices implemented in late 2022 was
complete. However, there was an uptick in producer prices (2.6%)
in the 12 months to June 2023 from 2% in March, while price
increases for building materials (3.1%) continued to decelerate
over this quarter," it noted, the report relates.
Ample Liquidity
"With respect to financial indicators, liquidity remains ample.
Commercial banks' excess reserves at the Central Bank stood at a
daily average of $4.9 billion in November 2023 and hovered around
this level up until December 22, 2023. However, a recent uptick in
government domestic financing operations has added to the
variability of excess liquidity. In this context, there was a
significant pick-up in interbank activity during the fourth quarter
of 2023. The repo window was also accessed on one occasion at the
end of November 2023—the first time since January 2022," it
stated, the report relays.
The Central Bank said that the momentum in private sector credit
was sustained, the report notes.
"In the 12 months to October 2023, financial system credit grew by
7.7%. Spurred in part by a resurgence in motor vehicle loans,
consumer lending growth reached 8.9% in October 2023—surpassing
the rate of business credit expansion in August 2023. Business
lending increased by 7.6% during the same period, while real estate
mortgage credit growth slowed somewhat (5.8% in October 2023
compared with 6.8% in August 2023). There is evidence that
short-term interest rate differentials are narrowing. Heightened
government activity on the domestic capital market contributed to a
slight upward shift in shorter term domestic rates. The
differential between interest rates on three-month treasuries in
Trinidad and Tobago and the United States moved to -440 basis
points in November 2023 from -464 basis points in August 2023," it
stated, the report notes.
The Central Bank said that the next Monetary Policy announcement is
scheduled for March 28, the report adds.
===============
X X X X X X X X
===============
LATAM: Aviation Industry Calls for Changes
------------------------------------------
Juan Martinez at Rio Times Online reports that in Latin America,
the aviation industry, led by the Panama-based ALTA, faces multiple
policy challenges that require urgent attention.
Key concerns include over-regulation, higher taxes, supply-chain
issues, and soaring fuel costs, according to Rio Times Online.
Specific challenges exemplify these obstacles, like Mexico City's
aircraft movement limitations and Brazil's increased ticket taxes,
the report notes.
While acknowledging the industry's post-COVID-19 recovery, ALTA
points out these issues' detrimental impacts on economic growth,
the report adds.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Chapman, Editors.
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