/raid1/www/Hosts/bankrupt/TCRLA_Public/240521.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
Tuesday, May 21, 2024, Vol. 25, No. 102
Headlines
A R G E N T I N A
ARGENTINA: 'Very Close' to Lifting FX Controls, Milei Says
ARGENTINA: Central Bank Cuts Interest Rate for 6th Time to 40%
ARGENTINA: Milei Attacks Critics as He Denies Peso-Dollar Lag
ARGENTINA: Poverty Rate was 48.9% in April, Study Shows
B R A Z I L
BRAZIL: IBC-Br Economic Activity Down 0.34% in March
C O L O M B I A
PORTUARIO DE BARRANQUILLA: Fitch Alters Outlook on 'BB' IDRs to Neg
J A M A I C A
JAMAICA: Housing and Utilities Costs Rise 5%
JAMAICA: Targeting Firms with Outstanding Corporate Taxes
P A N A M A
BICSA: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable
T R I N I D A D A N D T O B A G O
NIQUAN ENERGY: CariCRIS Downgrades Rating to Default
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: 'Very Close' to Lifting FX Controls, Milei Says
----------------------------------------------------------
Buenos Aires Times reports that President Javier Milei sees his
government lifting currency controls very soon as his economic team
works to clean up the Central Bank's balance sheet.
"The truth is that we're very close to lifting" controls, Milei
said at a conference in Buenos Aires, without providing more
specifics on timing. "It's in our plans to lift them as soon as
possible," according to Buenos Aires Times.
Milei added that he expects his Central Bank to move toward a
"flexible" exchange rate at some undefined point, the report notes.
The monetary authority right now holds a tight grip on the peso,
only allowing it to devalue two percent a month despite monthly
inflation four times that level, the report relays.
Milei said further unwinding of the Central Bank's debt liabilities
and accumulating more foreign reserves would be essential steps,
the report discloses.
The libertarian president vowed to march forward eventually with
his campaign promise to close Argentina's Central Bank and create a
"competition of currencies" where people can choose the money with
which they want to conduct legal transactions, the report relays.
He insisted the peso would be fixed at that point, the report
notes.
"The peso will be like a rock, it won't move," Milei said, again
declining to provide more specific details. "You can all choose
what currency you do transactions in," he added.
Argentina is locked out of international capital markets in part
because of a cobweb of currency controls and capital restrictions
mostly imposed since 2019 when a left-leaning Peronist government
came to power, the report relays. That government defaulted on
Argentina's dollar bonds in 2020, and investors see lifting the
currency controls as a crucial step in returning to markets, the
report discloses.
Milei also went on a tirade against local economists who claim the
peso is overvalued because of the mismatch between inflation and
the pace of controlled devaluation, known as a "crawling peg," the
report notes. Prices are up by more than 100 percent since Milei's
government took office December 10 while the peso has been devalued
by about 59 percent over that same period, making goods more
expensive in dollar terms, the report relays.
The president commented on his currency strategy after inflation
data showed price increases cooled for the fourth straight month in
April, allowing the Central Bank to cut interest rates for the
sixth time under his watch, the report relays. Benchmark borrowing
costs are now at 40 percent, down from 133 percent in December, the
report discloses.
Officials from the International Monetary Fund also anticipated a
looming change of currency strategy in the staff-level agreement
both sides reached regarding Argentina's US$44-billion program, the
report 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 March 15, 2024, raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating. The
outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and policy
uncertainties with the favorable change in near-term debt service
obligations. S&P also expect no further debt exchanges that it
would likely consider to be distressed.
Fitch Ratings 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.
ARGENTINA: Central Bank Cuts Interest Rate for 6th Time to 40%
--------------------------------------------------------------
Kevin Simauchi & Ignacio Olivera Doll at Bloomberg News report that
Argentina cut its benchmark interest rate for a sixth time under
President Javier Milei as his government sees inflation edging
lower while it shrinks the Central Bank's balance sheet.
The monetary authority lowered its key rate to 40 percent from 50
percent, according to a statement published on its website,
according to Bloomberg News. Borrowing costs have now fallen from
a high of 133 percent last December, Bloomberg News relays.
Argentina's monthly inflation has slowed since Milei took office
December 10, easing to 8.8 percent in April from 26 percent in
December, Bloomberg News discloses. His economic team sees the
trend continuing as it forecasts consumer price increases waning to
3.8 percent by September, according to a presentation seen by
Bloomberg News. That's much lower than the 5.8 percent rate
expected by analysts in a Central Bank survey, Bloomberg News
relays.
However, annual inflation continued to run hot at 289.4 percent in
April, its highest level in about three decades, according to
official statistics, Bloomberg News notes.
The rate decision comes after the International Monetary Fund's
staff signed off on the eighth review of Argentina's US$44-billion
program, Bloomberg News notes. If approved by the IMF's executive
board, that move would give the country some US$800 million in
breathing room to honor debt repayments to the Washington-based
lender, Bloomberg News discloses.
While Milei's monetary policy goes against the IMF's orthodox
recommendation for real positive rates, officials expect lower
borrowing costs will allow the Central Bank to clean up its
debt-laden balance sheet and absorb excess liquidity as key steps
before lifting capital controls, 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 March 15, 2024, raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating. The
outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and policy
uncertainties with the favorable change in near-term debt service
obligations. S&P also expect no further debt exchanges that it
would likely consider to be distressed.
Fitch Ratings 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.
ARGENTINA: Milei Attacks Critics as He Denies Peso-Dollar Lag
-------------------------------------------------------------
Buenos Aires Times reports that resident Javier Milei hailed his
government in a keynote speech, insisting he is winning the fight
against inflation and defending its severe public spending
cutbacks.
Milei, 53, said at an event hosted by the Inter-American Council
for Trade and Production (CICyP) that Argentina is "very close to
lifting" foreign exchange controls and that dollarisation of the
economy remains a target, according to Buenos Aires Times.
In his typically combative style, the La Libertad Avanza leader
slammed fellow economists who questioned his stabilisation plan,
dismissing them as inaccurate, the report notes.
"If there is no stabilisation plan, do you think inflation will go
down by chance? It's really insulting," the President told business
leaders, the report relays.
The remark came a day after Argentina's government announced that
inflation reached 8.8 percent in April, the first single-digit
inflation figure since October 2023, Buenos Aires Times discloses.
Consumer prices have risen almost 290 percent year-on-year, the
report discloses.
Since taking office last December, Milei has slashed public
spending, downsizing the Cabinet, eliminating government agencies,
halting public works projects and laying off thousands of public
employees, the report notes.
"We have made the biggest fiscal adjustment in the history of
humanity," Milei said, Buenos Aires Times relays.
Buenos Aires Times notes that moves to eliminate subsidies for
utilities, remove price controls and a sharp devaluation of the
peso have hit the pockets of Argentine hard. Around half of the
population is not considered poor, according to several studies,
the report relays.
Many economists in Argentina have argued that the nation's currency
should be further devalued, noting alleged "exchange rate
backwardness" - i.e. an appreciation of the peso against the
dollar. Among them is Domingo Cavallo, whom Milei once called "the
best economist in Argentine history," Buenos Aires Times
discloses.
However, the President assured that "there is no exchange rate lag"
and said that "the dollar is fine." Economists who dispute this
assertion are making the wrong analysis, he argued., accusing them
of "fatal arrogance," the report notes.
"Even though I'm here in my capacity as President, given the
intensity of the debate over a foreign exchange lag, I'm still an
economist. So I find it relevant to have this debate because from
my point of view, except for rare exceptions, what most analysts
are saying is wrong," said the head of state, the report relays.
"Trying to correct the exchange rate by devaluing the dollar only
increases the number of poor and destitute people and does not
solve the problem," he argued, the report relays.
"They are claiming to know things they don't have the faintest idea
about," the President complained at the event staged at the Alvear
Hotel, branding his critics "loudmouths" who make "cheap analyses,"
the report discloses.
Buenos Aires Times says that the far-right leader accused critical
economists of "intellectual dishonesty" and denounced them for
"wanting things to go wrong."
Milei, who admitted he was "a bit more aggressive than usual," also
referred to the so-called 'cepo,' strict restrictions on the
purchase of foreign currency that have been in place since 2019,
the report notes.
"We are going to open the cepo, it is in our plans to do so as
quickly as possible," said the President, Buenos Aires Times
discloses.
"One of the things that the IMF [International Monetary Fund]
praised the most is how every day we lift restrictions on the
foreign exchange market," declared Milei, the report notes.
Argentina has a US$44-billion loan with the multilateral lender and
its debt restructuring plan involves regular reviews of public
accounts, the report relays.
In his speech, President Milei also mentioned two of his election
campaign mantras: dollarisation and the elimination of the Central
Bank, the report relays.
The La Libertad Avanza leader assured that "as the economy expands,
the amount of pesos will be relatively smaller and then the economy
can be dollarised and the Central Bank eliminated," the report
discloses.
Much of Milei's Cabinet were in attendance at the event in Buenos
Aires, including presidential chief-of-staff Karina Milei, Interior
Minister Guillermo Francos, Security Minister Patricia Bullrich,
Foreign Minister Diana Mondino; Economy Minister Luis Caputo and
Central Bank Governor Santiago Bausili, the report 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 March 15, 2024, raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating. The
outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and policy
uncertainties with the favorable change in near-term debt service
obligations. S&P also expect no further debt exchanges that it
would likely consider to be distressed.
Fitch Ratings 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.
ARGENTINA: Poverty Rate was 48.9% in April, Study Shows
-------------------------------------------------------
Buenos Aires Times reports that poverty affected 48.9 percent of
the population in Argentina in April, equating to around 29.4
million people, a study from the Universidad Torcuato Di Tella has
found.
The number of poor rose 0.6 percent in the six-month period between
November 2023 and April 2024, compared to October-March 2023,
according to Buenos Aires Times. The poverty level rose a
remarkable 7.2 points from the data reported last December, the
report notes.
According to Di Tella, the average Basic Food Basket for Greater
Buenos Aires during the six-month period was calculated at 203,642
pesos per adult - a year-on-year increase of 265.3 percent, the
report relays. Average family income rose 196.1-percent over the
same time period, the report discloses.
The study, based on data from the INDEC national statistics
bureau's Encuesta Permanente de Hogares (EPH) survey, estimated
that 48.9 percent of the population was poor, the report notes.
With 95 percent confidence, it foresees an official rate of between
47.4 percent and 50.4 percent, the report 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 March 15, 2024, raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating. The
outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and policy
uncertainties with the favorable change in near-term debt service
obligations. S&P also expect no further debt exchanges that it
would likely consider to be distressed.
Fitch Ratings 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.
===========
B R A Z I L
===========
BRAZIL: IBC-Br Economic Activity Down 0.34% in March
----------------------------------------------------
Marcela Ayres at Reuters reports that economic activity in Brazil
in March fell by a seasonally adjusted 0.34% from the month before,
a central bank index showed, while economists polled by Reuters
were expecting a milder 0.25% contraction.
In the first quarter, the IBC-Br index, a key predictor of gross
domestic product (GDP), grew by 1.08%.
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.
S&P Global Ratings raised on Dec. 19, 2023, its long-term global
scale ratings on Brazil to 'BB' from 'BB-'. The outlook on the
long-term ratings is stable. S&P affirmed Brazil's global scale
short-term ratings at 'B' and its national scale long-term rating
at 'brAAA'. S&P also raised the transfer and convertibility
assessment on the country to 'BBB-' from 'BB+'. S&P said, "The
stable outlook reflects our expectation that Brazil will maintain
A strong external position, thanks to strong commodity output and
limited external financing needs. We also believe Brazil's
institutional framework can sustain stable and pragmatic
policymaking based on extensive checks and balances across the
executive, legislative, and judicial branches of government. We
expect a very gradual fiscal correction but anticipate fiscal
deficits will remain large."
Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable
Outlook. Fitch said Brazil's ratings are supported by its large and
diverse economy, high per-capita income, and deep domestic markets
and a large cash cushion that support the sovereign's financing
flexibility and its high local-currency debt share. Strong external
finances support resilience to shocks, underpinned by a flexible
exchange rate, robust international reserves and a sovereign net
external creditor position. The ratings are constrained by weak
economic growth potential, relatively low governance scores, high
and rising government debt/GDP, and budgetary rigidities. A new
fiscal framework introduced this year aims to anchor a gradual
consolidation process and address these fiscal weaknesses, but its
effectiveness is increasingly unclear.
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 Inc., on August 15, 2023, upgraded Brazil's Long-Term
Foreign and Local Currency - Issuer Ratings to BB from BB (low).
At the same time, DBRS Morningstar confirmed Brazil's
Short-term Foreign and Local Currency - Issuer Ratings at R-4.
The trend on all ratings is Stable (March 2018).
===============
C O L O M B I A
===============
PORTUARIO DE BARRANQUILLA: Fitch Alters Outlook on 'BB' IDRs to Neg
-------------------------------------------------------------------
Fitch Ratings has affirmed Distrito Especial Industrial y Portuario
de Barranquilla's (the District) Long-Term Foreign and Local
Currency Issuer Default Ratings (IDRs) at 'BB'. The Rating Outlook
has been revised to Negative from Stable. Fitch has also affirmed
Barranquilla's National Long-Term Rating at 'AA(col)'. The Outlook
has been revised to Negative from Stable.
Fitch has additionally affirmed Barranquilla's National Short-Term
Rating at 'F1+(col)'. Barranquilla's Standalone Credit Profile
(SCP) is assessed at 'bb'. Barranquilla's local bond notes of up to
COP650,000 million, of which COP394,366 million were actually
placed, are affirmed at 'AA(col)'.
Fitch's Outlook revision to Negative reflects potential pressures
on funding cost and term conditions that the District might face,
which the agency believes could arise from continued noncompliance
with local debt limits. Fitch acknowledges that Barranquilla has
been increasing outstanding debt to finance an important investment
plan, and such debt has been risen from a variety of sources and
currencies.
However, from a credit perspective, the uncompliant situation can
be seen as structurally weaker as they are exposed to greater
uncertainty for both market access and the future cost of debt,
showing a weakening of the Districts' specific regulatory framework
relative to its peers. Such a situation might lead to a
reassessment to 'Weaker' from 'Midrange' of 'Liabilities and
Liquidity Robustness' key rating driver and, therefore, would have
implications over the Risk Profile Assessment.
The affirmation of the 'BB' IDR reflects the combination of a 'Low
Midrange' risk profile and a debt sustainability score at the 'a'
level in Fitch's rating scenario. The affirmation also reflects the
district's better-than expected results of 2023, consolidating a
structural improvement in the District's tax revenue collection.
Fitch´s operating balance projections have improved from the
previous annual review, which resulted on an average payback ratio
of 5.2x from 7x in the previous annual review, which is still
aligned with a 'aa' assessment. Whereas, the actual debt service
coverage ratio (ADSCR) estimated is around 1.2x from 1.6x in 2023
revision. Nonetheless, Fitch notes the ADSCR performance would be
pressured at the end of the five-year forecast period due to
estimated higher debt levels and their respective amortization
profile. Debt Sustainability is assessed at 'a' as it considers an
override from the secondary metric, which is one level below the
primary metric.
KEY RATING DRIVERS
Risk Profile: 'Low Midrange'
Risk Profile - 'Low Midrange': The assessment reflects Fitch´s
view that there is a moderately high risk of the issuer´s ability
to cover debt service with the operating balance weakening
unexpectedly over the scenario horizon (2024-2028) due to lower
revenue, higher expenditure, or an unexpected rise in liabilities
or debt-service requirements.
Revenue Robustness: 'Weaker'
Fitch considers the institutional framework for transfer allocation
and its evolution to be stable and predictable. However, the
sustainability of transfer growth is uncertain, due to the fiscal
pressures faced by the central government and the adverse economic
environment. Transfers represent about 52.4% of Barranquilla's
operating revenues between 2019 and 2023, which comes from a
counterparty rated at 'BB+'.
Nonetheless, Fitch favorably highlights the local economic dynamics
together with fiscal strategies to increase overall collection.
Both property and industry and commerce tax (Impuesto de Industria
y Comercio [ICA]) taxes, which represent around 60% out of taxes
revenues, have shown a growing trend, specially ICA collection that
has shown two-digit growth in the past two years. Fitch will
monitor District's own revenues dynamism and their proportion to
operating revenues in the midterm.
Revenue Adjustability: 'Midrange'
Barranquilla has discretion to adjust its tax rates, considering
the limits established by the national government. However, the
capacity of taxpayers to absorb tax increases is moderate, which
could counteract these adjustments. The analysis incorporates
Barranquilla's strong socioeconomic profile, per capita value added
and its fiscal autonomy. However, the assessment is limited by the
sovereign rating, as per the relevant criteria, as well as Fitch's
view of taxpayers' ability to afford potential rate hikes, which is
somewhat limited compared with international peers.
Fitch observes that the district showed a positive trend in its tax
collection and is evidenced by an increase of around 17% over 2022
and 2023. Administrative efforts keeping cadastral values updated,
increasing the taxpayer base, progressive increasing of the ICA
rate for financial entities and payment facilities provided to
taxpayers have favored this result.
Expenditure Sustainability: 'Midrange'
The Colombian institutional framework establishes that
responsibilities of territorial entities are mainly focused on the
provision of the social services of education, healthcare and
potable water. These responsibilities, are mainly funded with
national transfers (Sistema general de Participaciones, in
Spanish). Fitch views them as moderately countercyclical and
expects stable growth in the midterm. During 2019-2023, operating
expenditure growth has been below operating revenue growth (CAGR
8,6% and 9.5%, respectively). Also, operating margins have been
stable and around 19% on average during the same period.
Expenditure Adjustability: 'Midrange'
Balanced budget rules are in place. Particularly expenditure
control rules, are defined under Law 617, which have a strong track
record of enforcement and effectiveness. The historical capex
financed with the current balance has been around 12.5%, so Fitch
believes that the margin to reduce or postpone it is moderate.
Liabilities & Liquidity Robustness: 'Midrange'
Fitch views that the Colombian regulatory framework mandates local
and regional governments to generate positive operating results and
maintain prudential limits for indebtedness, although concerns
remain regarding the treatment of off-balance sheet obligations and
unrestricted liquidity management.
Fitch considers that Barranquilla has intensified the use of debt
as a financing mechanism for its investment plan, and moreover the
debt/current revenues ratio has exceeded the legal limit allowed
since 2019. In addition, according to District's own projections,
this is not expected to normalize until after 2030. In Fitch's
view, such a situation could pressure on the District's funding
cost and term conditions, and weakening the issuer-specific
regulatory framework compared to its peers.
The agency will monitor local and international market access and
debt composition, as well as its exposure to variable interest
rates or exchange rates. At YE 2023, outstanding debt was
denominated in local currency (53%) and foreign currency (47%),
with fixed and indexed interest rates plus a credit spread. The
agency identified obligations that may be assimilated to the
District´s debt related to government related entities, which are
backed by the district revenues.
Liabilities & Liquidity Flexibility: 'Weaker'
The Colombian regulatory framework does not provide emergency
liquidity support from the Central Government for local and
regional governments (LRGs). On the other hand, the entities have
access to short and long-term credit lines with local banks, rated
below investment grade.
Fitch notes that the District has presented unrestricted cash
deficits. In 2023, it totaled COP137,8 billion, lower than in the
last two years, equivalent to about 9% of tax revenues. Fitch
considers that the tendency to generate a deficit constitutes a
credit risk, as it reflects the District's limitations to maintain
available liquidity.
Debt Sustainability: 'a category'
Barranquilla's Debt Sustainability is assessed at 'a' and considers
an override from the secondary metric, which is two levels below
the primary metric. Fitch's forward-looking rating case scenario
indicates that the payback ratio of net direct risk/operating
balance — the primary metric of the debt sustainability
assessment — will reach an average of 5.2x for 2027-2028, which
is aligned with a 'aa' assessment. The ADSCR, the secondary metric,
is projected at an average of 1.2x for 2027-2028, aligned with a
'bbb' assessment.
Fitch observed an improvement particularly on the payback ratio in
the forecasted period. Nonetheless observes DSCR results would be
pressured at the end of the five-year forecast period due to higher
debt levels and their respective amortization profile.
DERIVATION SUMMARY
The District's Standalone Credit Profile (SCP) is assessed at 'bb',
reflecting a combination of a 'Low Midrange' risk profile and debt
sustainability assessed in the 'a' category under Fitch's
rating-case scenario, and by peer comparison with other national
peers such as Departamento Antioquia, Medellin, Municipio de
Rionegro and other international peers. Fitch does not apply any
asymmetric risk. Therefore, Barranquilla's Fitch-rated IDRs are
'BB'/Negative.
Short-Term Ratings
For the national scale, the correspondence table indicates a
Fitch-rated 'F1+(col)' Short-Term rating.
National Ratings
Barranquilla's Fitch-rated national scale rating is 'AA(col)'
Negative Outlook, and is derived from the 'BB' IDR with a Negative
Outlook, according to national correspondence table and peer
analysis.
Debt Ratings
The local bond notes up to COP650,000 billion rating is at the same
level as Barranquilla's National Long-Term Rating of 'AA(col)'.
KEY ASSUMPTIONS
Risk Profile: 'Low Midrange'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Midrange'
Expenditure Sustainability: 'Midrange'
Expenditure Adjustability: 'Midrange'
Liabilities and Liquidity Robustness: 'Midrange'
Liabilities and Liquidity Flexibility: 'Weaker'
Debt sustainability: 'a'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Asymmetric Risk: 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2019-2023 figures and 2024-2028 projected
ratios. The key assumptions for the scenario include:
- tax growth rate close to 6.8% annual average;
- transfers grow according to the moving average of the growth of
the Nation's current revenues over the last four years;
- an annual increase in GOs aligned with operating revenues, with a
floor equal to the inflation rate of the immediately prior year
plus a spread, considering a conservative growth rate for salary
expenses. This results in an average annual growth of approximately
10%;
- average net capital expenditure of around COP1 trillion per
year;
- average cost of debt of 10.4%, in line with Fitch's estimations
for interest rates.
- debt levels consider the highest value between the District's
borrowing plan and potential borrowing according to a factor close
to regulatory limits.
Quantitative assumptions - Sovereign Related
Figures as per Fitch's sovereign actual for 2023 and forecast for
2024, respectively (no weights and changes since the last review
are included as none of these assumptions was material to the
rating action):
Liquidity and Debt Structure
At the end of 2023, Barranquilla had approximately COP3 trillion of
direct long-term debt comprised of several loans with commercial
and development banks, and issues in the local market. In addition,
they have variable interest rates and moderate exposure to exchange
rate risk (47% of its long-term direct debt is in euros and U.S.
dollars), although it has hedges to protect itself against exchange
rate variations.
According to the new administration, for the four-year period from
2024 to 2027, the indebtedness plan incorporates COP3 trillion in
new debt. Therefore, the debt disbursements included in Fitch
scenarios are: 2024 of COP650 billion; 2025 of COP750 billion; 2026
of COP750 billion; 2027 of COP750 billion; and 2028 of COP250
billion.
The rating scenario contemplates the aforementioned disbursements,
as well as specific loans that are backed by district revenues and
which are registered by decentralized entities such as Empresa de
Desarrollo Urbano de Barranquilla y Región Caribe S.A. (Edubar)
and Agencia Distrital de Infraestructura (ADI), which totaled
approximately COP1 trillion at the end of 2023, Fitch considers
other Fitch-classified debt.
Fitch observed limitations in maintaining available liquidity, as
Barranquilla has registered unrestricted cash financing deficits
over 2019-2023. At YE 2023, the unrestricted cash deficit was
equivalent to around 9% of tax revenue, lower from its highest
level registered in 2020 when it reached 26.8%. The deterioration
was mainly due to the delay between the debt disbursement and
project's execution
Summary of Financial Adjustments
- Cash surplus of previous years are subtracted from capital
revenues.
• Previous years deficits are subtracted from expenditure.
• Also, some withdrawals from the pension funds are reclassified
to pass through transfers from capital revenue.
• General adjustments when inconsistencies are identified between
in financial statements provided by the issuer and those published
through the Consolidator of Treasury and Public Information
(Consolidador de Hacienda e Información Pública [CHIP]) both as
Single Territorial Form (Formulario Único Territorial [FUT]) and
Single Category of Ordinary Public Information (Categoría Única
deInformación Pública Ordinaria [CUIPO]), the latter used from YE
2022 and YE2023.
Capital expenditure considers such associated with gross capital
formation (formacion bruta de capital), according to Fitch's
perspective.
In addition, operating expenditures include items with a recurring
nature
Issuer Profile
The Special Industrial and Port District of Barranquilla has a
population of 1.2 million, which represents 48.4% of the Atlantic
Department's population and contributes with 66.4% to the
Department's GDP. Like all Colombian local and regional
governments, Fitch classifies Barranquilla as type B as the issuer
covers debt service from its cash flow on an annual basis.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Reassessment to Weaker' from 'Midrange' of 'Liabilities and
Liquidity Robustness' key rating driver coupled with Debt
Sustainability assessment at 'a' due to material negative
developments on funding cost and term conditions that the District
might face.
- Payback ratios consistently close to 9.0x with coverage ratios
consistently below 1.2x under Fitch's rating case.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- The Outlook could be revised to Stable if there is a perception
of improvement in the key rating drivers mix, which could include a
reassessment on Revenue Robustness factor based on lower transfer
reliance.
- Payback ratios consistently close to 5.0x on the scenario horizon
with a DSCR close to 2.0x; a favorable position with peers.
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.
DISCUSSION NOTE
There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members. The
rating decision as discussed in this rating action commentary
reflects the committee discussion.
Entity/Debt Rating Prior
----------- ------ -----
Distrito Especial
Industrial y
Portuario de
Barranquilla LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT AA(col) Affirmed AA(col)
Natl ST F1+(col) Affirmed F1+(col)
senior
unsecured Natl LT AA(col) Affirmed AA(col)
=============
J A M A I C A
=============
JAMAICA: Housing and Utilities Costs Rise 5%
--------------------------------------------
RJR News reports that consumers in Jamaica paid an average 5 per
cent more for goods and services in the 'Housing, Water,
Electricity, Gas and Other Fuels' division.
This implies mixed movements in gas prices, along with electricity
and water rates, according to RJR News.
The Statistical Institute of Jamaica (STATIN) says, however, that
for the month of April 2024, the index fell by 2.3 per cent on
average, the report notes.
This was influenced by lower electricity rates in April compared to
March, the report relays.
That out-turn caused a 6.1 per cent decline in the 'Electricity,
Gas and Other Fuels' group, the report discloses.
There was also a 1.3 per cent drop in prices linked to the group
'Water Supply and Miscellaneous Services Relating to the Dwelling,'
the report relays.
This decrease was heavily influenced by lower water and sewage
rates, 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: Targeting Firms with Outstanding Corporate Taxes
---------------------------------------------------------
RJR News reports that Finance Minister Dr. Nigel Clarke says the
Tax Administration of Jamaica (TAJ) is working to bring in the
outstanding corporate income taxes, owed by firms for last fiscal
year.
The category was short $14 billion based on the tax projections for
the 2023/2024 fiscal year, affecting the country's fiscal surplus
target, according to RJR News.
Speaking with Radio Jamaica News, Dr. Clarke said an analysis will
be done on the factors leading to the outstanding payments, the
report notes.
"These entities are identified. We know what they have declared and
TAJ will be following up with them pretty assuredly to ensure that
they pay over, but also to inquire why they did not pay in March.
All of that information and data is useful. And I have to see what
the results of that exercise is before making any definitive
steps," he added.
Based on Jamaica's Income Tax Act, unpaid sums owed to the
government will also accumulate interest from the day after it is
due, the report relays.
Dr. Clarke said he will now be updated regularly on this process.
"I can't impose an artificial deadline but I'll be meeting with
them at least weekly until we sort of resolve this overhang and,
you know, really get to handle as to what the causes are and we're
able to estimate what the yield from that overhang will be in this
fiscal year," 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.
===========
P A N A M A
===========
BICSA: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable
-------------------------------------------------------
Fitch Ratings has affirmed Banco Internacional de Costa Rica,
S.A.'s (BICSA) Long- and Short-Term Issuer Default Ratings (IDRs)
at 'BB' and 'B', respectively. Fitch has also affirmed BICSA's
Shareholder Support Rating (SSR) at 'bb' and its Viability Rating
(VR) at 'bb-'. Fitch has affirmed the bank's Long- and Short-Term
National Ratings at 'AA-(pan)' and 'F1+(pan)', respectively. The
Rating Outlook for the Long-Term IDR and National Rating is
Stable.
KEY RATING DRIVERS
Ratings Driven by Parent Support: BICSA's IDRs and National Ratings
are driven by its SSR of 'bb'. BICSA is domiciled in Panama, and
its shareholders are Banco de Costa Rica (BCR) and Banco Nacional
de Costa Rica (BNCR). BICSA's SSR reflects the ability and
propensity of the shareholders to provide timely support to the
bank if required.
Strong Support Ability: Fitch's assessment regarding BICSA's
ability to use support from its shareholders is highly influenced
by the 'BB'/Stable IDRs of BCR and BNCR. BICSA's shares are owned
51% by BCR and 49% by BNCR, and its SSR and IDR are equalized with
its shareholders' IDRs. In turn, BICSA's national scale ratings
reflect BCR and BNCR's relative creditworthiness compared to other
rated issuers in Panama.
Significant Reputational Risk: Fitch's support propensity
assessment is highly influenced by the significant reputational
risks for BCR and BNCR in case a of a default of BICSA. The
Panamanian bank's credit profile is strongly linked to those of its
shareholders and their strategy.
Blended Operating Environment Approach: BICSA's VR incorporates its
operating environment (OE) of 'bb', which factors in its
international operations. The entity has exposures in close to 30
jurisdictions. Panama and Costa Rica represent around 60% of total
earning assets. The bank's international operations yield an OE
lower than Panama's OE assessment of 'bb+'.
Specialized Business Profile: BICSA acts as the international
lending arm of its Costa Rican's state-owned shareholders. The
bank's business profile mirrors its consistent business model as a
niche bank, focused in the corporate segment along with geographic
diversifications, although with a lower scale of operations in
respect to the banks in the Panamanian market that participate in
all the credit segments. BICSA's total operating income (TOI) for
the last four years (2020-2023) averaged USD47.7 million and is
aligned with its 'b+' business profile score.
Moderate Risk Profile: Fitch revised BICSA's 'bb-' risk profile
trend to 'negative' from 'stable'. This reflects the bank's high
debtor concentration risk. BICSA also has relatively low collateral
in its largest debtors, comparing below some peers and could mildly
affect its asset quality, profitability and capitalization in case
of deterioration.
The top 20 debtors represented 3.1x its CET1 capital, a sizable
exposure in case of an unforeseen impairment on them. Among these
debtors, the largest segments are financial and infrastructure
construction, although the latter are served mostly via factoring
discounts in which the Panamanian state guarantees the payment,
which mildly mitigates the exposure. BICSA's risk profile also
incorporates its reasonable risk controls, which have allowed it to
reduce impairment levels, and its moderate credit growth appetite.
Gradual Improvement in Asset Quality: BICSA's asset quality is
adequate and gradually improving, which mirrors improvements in its
clients' credit profiles along with loan recoveries and repayments.
As of YE2023, its stage-3 loans to total loans metric represented
2.2% (2022: 4.1%). Fitch anticipates BICSA will keep delinquency
levels under control and remain well in line with its 'bb-' asset
quality score due to the bank's conservative profile and its
adequate risk controls.
Progressive Operating Profitability Increase: As of YE23, BICSA's
operating profit to risk weighted assets (RWA) metric of 0.9%
(2020-2023 average: 0.5%), which is aligned with its 'b' earnings
and profitability score. The 2023 improvement mirrors the gradual
increase of its credit operations along with controlled loan
impairment charges. However, its profitability remains modest
compared to similarly rated peers.
Reasonable Capitalization: As of end-2023, BICSA's common equity
tier 1 (CET1) to RWAs metric was 11.0%. However, the regulatory
capital metric was 13.3%, which considers dynamic provisions that
provide an additional countercyclical buffer for absorbing losses
in stress scenarios. This additional buffer improves the bank's
capitalization levels and mirrors its current 'bb-' capitalization
and leverage score, which is relatively similar to some local
peers.
Stable Funding Sources: BICSA's funding and liquidity score of
'bb-' mirrors its stable albeit concentrated deposit base, with the
top 20 depositors representing 48% of total deposits at YE23.
The bank's funding profile is also underpinned by its relatively
diversified complementary funding sources, comprised by wholesale
credit lines, interbank loans and senior debt issuances, which
helps sustain its financial flexibility and access to liquidity.
The score also takes into consideration potential support from BCR
and BNCR. As of YE23, BICSA's loan to deposits metric was 203.6%
(2020-2023 average: 197.7%), which compares unfavorably to its
banking system peers.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- BICSA's IDR and SSR could be downgraded if its parents' ratings
are downgraded. A significant reduction in BCR and BNCR's
propensity to provide timely support to their subsidiary could also
trigger a downgrade of BICSA's ratings.
- BICSA's national scale ratings would also be downgraded in case
of a multi-notch downgrade of BCR and BNCR's IDRS.
- The VR could be downgraded by a material deterioration of the OEs
in Panama and Costa Rica, where BICSA has its main exposures,
and/or a relevant deterioration of the bank's financial profile,
reflected in a significant and sustained increase in its impaired
loans and by a further reduction of its operating profit to RWA
ratio that reduces its CET1 ratio sustainably below 10%.
- The VR could also be downgraded by a materialization of
unforeseen credit deterioration from its high concentration risk in
its portfolio, mirroring less effective risk controls and affecting
its asset quality, profitability and capitalization metrics.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Although unlikely, Fitch could upgrade BICSA's IDRs, SSR and
National-Scale ratings if its parent companies' ratings are
upgraded. A material improvement of BCR and BNCR's propensity to
provide support would also be positive for BICSA's ratings.
- The VR could be upgraded following a significant and sustained
improvement in BICSA's business operations and financial
performance that results in a higher operating profits to RWA
metric consistently above 1.25% and increases its CET1 metric
continuously above 13%, and an improved funding structure reflected
in a loan-to-deposit ratio sustainably of 140% or below, while
maintaining good asset quality.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Debt Issuance Ratings Aligned to Issuer's: The Long-Term and
Short-Term National Rating of BICSA's senior unsecured issuances in
Panama are rated 'AA-(pan)' and 'F1+(pan)', respectively, at the
same level of the issuer. The ratings reflect the creditworthiness
of BICSA's parents, BCR and BNCR, relative to other rated issuers
in Panama.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Panamanian debt ratings would reflect any possible movement in the
bank's national ratings.
VR ADJUSTMENTS
Fitch has assigned the OE Score below the implied score for the
following adjustment reason: International operations (negative).
Fitch has assigned the Funding and Liquidity Score has been above
the implied score for the following adjustment reason: Liquidity
access and ordinary support (positive).
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch reclassified re-paid expenses and other deferred assets as
intangible in order to calculate a consistent tangible common
equity/tangible assets ratio in relation to previous periods.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
BICSA's ratings are linked to the ratings of its parents, BCR and
BNCR.
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
----------- ------ -----
Banco
Internacional
de Costa Rica,
S.A. LT IDR BB Affirmed BB
ST IDR B Affirmed B
Natl LT AA-(pan)Affirmed AA-(pan)
Natl ST F1+(pan)Affirmed F1+(pan)
Viability bb- Affirmed bb-
Shareholder Support bb Affirmed bb
senior
unsecured Natl LT AA-(pan)Affirmed AA-(pan)
senior
unsecured Natl ST F1+(pan)Affirmed F1+(pan)
=====================================
T R I N I D A D A N D T O B A G O
=====================================
NIQUAN ENERGY: CariCRIS Downgrades Rating to Default
----------------------------------------------------
RJR News reports that regional rating agency Caribbean Information
and Credit Rating Services (CariCRIS) has lowered Niquan Energy
Trinidad Limited's credit rating to default.
In a news release, CariCRIS said it lowered NiQuan's assigned
issuer/corporate credit ratings by three notches to CariD on the
regional rating scale and ttD on the Trinidad & Tobago National
Scale, as well as jmD on the Jamaica National Scale, according to
RJR News.
CariCRIS says the ratings reflect NiQuan's significantly
deteriorated business and financial risk profile due to the absence
of a reliable gas supply, which has led to impaired debt servicing
ability, the report notes.
*********
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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