/raid1/www/Hosts/bankrupt/TCRLA_Public/240716.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, July 16, 2024, Vol. 25, No. 142
Headlines
A R G E N T I N A
ARGENTINA: Frees up Oil Markets, Vista Reaps More From Crude Sales
ARGENTINA: IMF Denies There is 'Specific Timetable' for New Deal
ARGENTINA: Inflation Rose Slightly to 4.6% in June, INDEC Says
ARGENTINA: Milei Dials Back Therapy to Keep Inflation in Check
COMPANIA GEN DE COMBUSTIBLES: S&P Affirms CCC ICR on Liability Mgmt
B E R M U D A
RLGH FINANCE: Fitch Assigns 'BB+' Rating on Subordinated Notes
B R A Z I L
BRAZIL: Central Banker Signals High Bar for Currency Intervention
BRAZIL: Inflation Rose Less Than Expected in June
GOL LINHAS: Can Make Incentive Payments, Court Rules
C H I L E
TOESCA SA: Chile Sees Flood of Commercial Buildings to hit Market
G U A T E M A L A
GUATEMALA: Moody's Affirms 'Ba1' Issuer Ratings, Outlook Stable
V I R G I N I S L A N D S
EDEN ROCK: Teneo to Lead BVI Liquidation Proceedings
TREKSTAR LIMITED: Vistra Leads BVI Liquidation Proceedings
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A R G E N T I N A
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ARGENTINA: Frees up Oil Markets, Vista Reaps More From Crude Sales
-------------------------------------------------------------------
Buenos Aires Times reports that Argentine shale driller Vista
Energy charged export prices for more than 40 percent of crude that
it sold to domestic refiners in the second quarter -- the clearest
sign yet that the South American country's moves to free up oil
markets under President Javier Milei are gaining momentum.
The libertarian leader has vowed to end the meddling in crude
prices of previous governments, a tactic that kept gasoline cheap
but turned off international investors eyeing the heralded Vaca
Muerta shale patch, according to Buenos Aires Times. Since Milei
took power seven months ago, drillers and refiners have been
negotiating a pathway to so-called export parity for crude, which
means that oil producers like Vista can charge the same prices
locally as overseas, the report notes.
Taking into account all of its sales -- both local and global --
Vista charged export parity, or about US$77 a barrel, for 64
percent of its production, Chief Executive Officer Miguel Galuccio
said on an earnings call, up from 47 percent a year ago, the report
relays.
Buenos Aires Times discloses that efforts to reach international
pricing have slowed in recent weeks as Milei tries to keep
inflation in check. But late last month, lawmakers gave the idea
the green light for the long term when they approved Milei's
sweeping reform package.
The measures include legal provisions that would ban the government
from intervening in crude prices and severely limit its scope for
blocking export cargoes, the report relays.
"These are two very important principles. The spirit of them is
good," Galuccio said, notes the report. "Of course, it's going to
be a matter of execution — how fast the principles can be
transmitted into reality. The fine-printing of the regulation is
key."
Other call highlights:
-- Galuccio said Vista's production forecast for 2025 is "shy,"
and that it will update investors as it targets the upper end
of its guidance for 2024
-- He said the company will "compete hard" against rival bids to
acquire Exxon Mobil Corp.'s Argentine shale assets
-- An extra fracking set will arrive some time in the fourth
quarter. Vista will also swap one of its existing three drill rigs
for a "state-of-the-art" rig from Houston in October
-- The volume of crude that the company trucks to ports could more
than double to 20,000 barrels a day in the fourth quarter,
representing more than one quarter of output, as it waits for new
pipeline capacity
-- The new capacity would allow Vista to next year reduce — and
eventually eliminate — the need for costly trucking services
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: IMF Denies There is 'Specific Timetable' for New Deal
----------------------------------------------------------------
Buenos Aires Times reports that the International Monetary Fund
does not have a "specific timetable" for negotiating a new funding
agreement with Argentina, says the multilateral lender's top
spokesperson.
The clarification was issued by Julie Kozack, the Fund's
communications director, in response to remarks by Argentina's
Economy Minister Luis Caputo, who said that a new programme could
be secured "this year," according to Buenos Aires Times.
Argentina wants the International Monetary Fund, with which it
already has a US$44-billion loan program, to lend it more money,
primarily to assist the nation in removing its strict currency
controls, the report notes.
The so-called 'cepo,' which limits access to dollars in a country
where the US currency serves as a safe haven for savings, has been
in place since 2019, the report relays. President Javier Milei has
said in recent months that he wants an additional US$15 billion in
order to smooth their removal, the report discloses.
Caputo, speaking in a radio interview, did not provide figures, but
said he was optimistic that a new deal providing fresh IMF funds
could be sealed by the year's end, Buenos Aires Times relays.
"We are starting to talk about the new agreement, to think [about
reaching an agreement] in September is a lot, but for sure this
year," Caputo added.
He specified that "it could mean fresh funds."
However, Kozack denied those reports at a press conference in
Washington, the report relays.
The IMF "will engage in discussions on a possible new arrangement .
. . . once the authorities formally request it" but "at this stage
there is no specific timetable for such discussions," she said,
notes the report. "Our exchanges remain frequent and constructive,"
the official added.
Nevertheless, she reiterated that the Fund is satisfied with the
recent economic measures taken by Argentina, which is facing a
severe recession, the report discloses. Gross domestic product
slumped 5.1 percent year-on-year in the first quarter of 2024,
inflation is running at an annual 280 percent and more then half
the population is living in poverty, the report says.
Kozack acknowledged the challenges but highlighted the "quite
positive" developments seen in recent weeks, such as the approval
in Congress of "crucial fiscal and structural measures," the report
relays.
Buenos Aires Times notes that the IMF spokesperson highlighted,
above all, income tax reform because it "brings more formal sector
workers with higher incomes into the tax net, thus supporting
incomes in Argentina and also improving the burden sharing of
fiscal consolidation."
Approval of Milei's package of reforms to liberalise the economy
demonstrates, according to the IMF spokeswoman, "the
administration's willingness and ability to find a political
compromise," the report relays.
Preliminary data, she added, "suggest that fiscal and reserve
targets continue to be met . . . . [with] further reductions in
inflation and some stabilization of economic activity and demand,"
the report discloses.
"All this says, and as we have said many times before, that
continued efforts are necessary to continue stability and ensure
economic recovery and our team is actively engaged with the
authorities to this point," she added.
The relationship between the IMF and Argentina's government has
taken a good turn since Milei's arrival in office last December,
but it has not been without disagreements, the report relays.
Milei himself has implicitly criticized Rodrigo Valdés, the Fund's
director for Latin America and the Caribbean, who negotiates with
Caputo on behalf of the IMF, the report notes.
Without naming him, Argentina's President accused Valdés in a
social media post of being a member of the "São Paulo Forum" -- a
reference to a leftist political group in the region, the report
discloses.
Kozack came out in defence of the official in the presser.
IMF Managing director Kristalina Georgieva has "full confidence in
Rodrigo Valdes and his entire management team," said the
spokesperson, the report relays.
Kozack added, however, that the relationship with the Argentine
authorities is "active and constructive," the report notes.
Finally, the IMF spokesperson played down tensions on foreign
exchange markets, stating it is "inevitable that countries that
apply these types of stabilisation programmes will have periods of
volatility," the report discloses.
"The key here, for policymakers, as they look at this volatility,
is to stay nimble with policies and evolve to continue to address
the macroeconomic imbalances that exist. And this is exactly what
the Argentine authorities are doing," she stressed.
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: Inflation Rose Slightly to 4.6% in June, INDEC Says
--------------------------------------------------------------
Buenos Aires Times reports that inflation accelerated slightly in
June from May but remained below five percent for a second
consecutive month, according to official data.
Consumer prices rose 4.6 percent in June, a rise of 0.4 points from
the previous month, according to Buenos Aires Times.
It's the first time in five months that inflation has risen --
while in December price hikes hit 25.5 percent, they slowed to 20.6
percent in January, 13.2 percent in February, 11 percent in March,
8.8 percent in April and 4.2 percent in May, the report notes.
Inflation over the last 12 months now totals 271.5 percent,
according to the INDEC national statistics bureau, which revealed
prices to the punter have risen by 79.8 percent since the turn of
the year, the report relays.
The highest increase last month was a rise of 14.3 percent for
housing, water, electricity, gas and other fuels, mainly due to
hikes in rent and electricity and gas tariffs, the report
discloses.
It was followed by restaurants and hotels (6.3 percent) and
education (5.7 percent), with surges seen across all levels of
education, the report discloses.
The two divisions with the smallest changes in June were alcoholic
beverages and tobacco (2.1 percent) and household equipment and
maintenance (2.3 percent), the report says.
At the category level, regulated prices (8.1 percent) led the
increase, followed by seasonal (4.4 percent) and core inflation
(3.7 percent), the report adds.
Earlier, Economy Minister Luis Caputo had forecast a rate of "below
five percent," the report relays.
"That is the expectation and core inflation should start with three
percent," said the official.
"We are in the recovery stage, we are out of intensive care,"
Caputo told Radio Mitre, the report notes.
According to the Central Bank's regular survey of market
expectations, consumer prices are expected to rise 138 percent this
year, the report discloses.
Consumption and economic activity have plummeted since December
following a massive devaluation of the peso and strict budget cuts,
the report relays.
GDP fell by 5.3 percent in the first quarter of the year, the
second consecutive quarterly decline, the report notes.
"The significant drop in consumption explains the reduction in the
inflation rate since December, to a large extent," economist Hernan
Letcher, director of the Centro de Economia Politica Argentina
(CEPA), the report says.
Argentina's economy will contract by 2.8 percent this year,
according to the International Monetary Fund (IMF), after declining
1.6 percent in 2023, 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: Milei Dials Back Therapy to Keep Inflation in Check
--------------------------------------------------------------
Manuela Tobias & Kevin Simauchi at Bloomberg News report that
President Javier Milei is tapping the brakes on his shock therapy
programme in a bid to hold on to popular support amid Argentina's
bleak economic reality, even if it means unsettling markets.
This month, the libertarian leader postponed increases to fuel
taxes and utility prices that together would have added 1.2
percentage points to monthly inflation, according to JPMorgan Chase
& Co. Heavily subsidized train fares have been frozen since May,
and the price of bus tickets hasn't budged since April, according
to Bloomberg News.
Those delays lay bare the narrowing road ahead as Milei tries to
fix a broken economy without fanning already sky-high inflation. A
fresh reading is expected to show the monthly rate of consumer
price gains rose after five straight declines, the report notes.
"The government started to focus so much on achieving a sustained
slowdown of inflation that it began to leave aside its other
objectives," said Nicolas Gadano, chief economist of Buenos Aires
consultancy firm Empiria. "Postponing more price adjustments means
those inflation wins are a bit of bread for today, but hunger for
tomorrow," the report relays.
Argentina's currency also exemplifies that tension. Since a 54
percent devaluation in December, the government has rejected calls
to speed up its two-percent monthly depreciation of the official
peso rate, known as the 'crawling peg' -- or strip capital controls
altogether -- because they fear a faster clip would only juice
prices more, the report says. As a result, exporters are
withholding their soybeans and the Central Bank's accumulation of
reserves has ground to a halt, the report notes.
"Energy tariffs are a fine harmony between reducing subsidies and
inflation," Economy Minister Luis Caputo said in a radio interview,
reiterating that Argentina would not devalue the peso again, the
report relays. "The priority is to lower inflation," he added.
Bloomberg News discloses that Caputo fiercely defends the crawling
peg behind closed doors too, despite mounting pressures to devalue
the currency. Any foreign exchange moves would dent Milei's
popularity among the middle class, the backbone of his programme,
according to multiple people who met with the economic team in
recent weeks.
While investors and economists laud Milei's work thus far --
monthly inflation slowed to 4.2 percent in May from 25.5 percent in
December, and the government is running a budget surplus for the
first time since 2008 -- they warn the crawl has an Achilles heel
of sorts, Bloomberg News notes.
"Argentina's macro situation is not on a stable trajectory so if we
continue this way without any changes, something will explode,"
said Ernesto Revilla, chief Latin American economist at Citigroup
Inc, Bloomberg News relays. "You can't let the exchange rate
depreciate at a rate so significantly lower than inflation for more
than some time, because that starts to generate pressures that need
to be resolved," the report notes.
Exultant after passing his landmark reform bill in Congress, Milei
declared in a morning television interview that Argentina was
entering the next phase of his monetary plan, the report relays.
Hours later, after markets closed, Caputo and Central Bank Governor
Santiago Bausili sat before reporters at a press conference
outlining a technical balance-sheet exercise, dodging questions on
the peso, the report discloses. Benchmark sovereign bonds due in
2035 fell roughly 1.1 cents on the dollar, Bloomberg News relays.
"The markets had a different question, and they didn't answer it,"
said Juan Manuel Truffa, director of economic consultancy Outlier,
Bloomberg News notes.
With a slow crawl and a weakening parallel exchange rate, the FX
gap is only widening, Bloomberg News discloses. An artificially
strong peso has consequently slowed the government's efforts to
build its foreign reserves, pushing some on Wall Street to lament
Milei's unwillingness, for now, to adjust his currency policy,
Bloomberg News relays.
So far, Argentina's sovereign bonds are among the worst performers
among their emerging-market peers, according to a Bloomberg index.
They've still delivered investors returns of 39 percent since Milei
took office late last year.
Monthly dollar purchases, a key metric for fixed-income investors,
topped US$2 billion through May, but the central bank went into
reverse and sold US$84 million through June 28, the report relays.
This month, however, has seen a pickup, with authorities buying
some US$120 million, according to government data, Bloomberg News
notes.
"There's really only one reason we care about Argentina rebuilding
reserves and that is for them to be able to service their foreign
debt. There is a lot of it outstanding too," said David Austerweil,
deputy emerging markets portfolio manager at Van Eck Associates
Corp, Bloomberg News discloses.
Meanwhile, the chances of fresh funds from a potential new
International Monetary Fund program look just as slim as when the
idea was first floated earlier this year as a way to help lift
currency controls, the report relays. And in 2025, Milei will face
midterm elections in which he'll need to gain legislative support,
Bloomberg News notes.
Caputo, at the June 28 press conference, signalled the government
would freeze electricity and gas tariffs — contradicting a senior
energy official who outlined monthly price hikes just three weeks
earlier. Energy bills for the middle class nonetheless more than
doubled in June, 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.
COMPANIA GEN DE COMBUSTIBLES: S&P Affirms CCC ICR on Liability Mgmt
-------------------------------------------------------------------
On July 10, 2024, S&P Global Ratings affirmed its 'CCC' issuer and
issue ratings on Argentine oil and gas company Companía General de
Combustibles S.A. (CGC) with a stable outlook. At the same time,
S&P revised downward CGC's stand-alone credit profile (SACP) to
'ccc+' from 'b-'.
S&P said, "We could lower the ratings in the next six to 12 months
if restrictions on accessing the foreign exchange market are
tightened or extended, and if we revise downward our transfer and
convertibility (T&C) assessment of Argentina. We could also revise
our assessment of CGC's SACP downward if we observe increasing
refinancing risk and weakening liquidity amid constrained access to
debt markets."
CGC has recently completed a liability management process. The
company refinanced its syndicated loan agreement, pushing the
amortizations through 2026 and increasing the loan by $88 million
to a total of $184 million. CGC also placed series 35 notes for
$150 million in the domestic market by exchanging $52 million of
the series 30 notes maturing in March 2025 and raising $98 million
in new money. In addition, CGC recently announced the prepayment of
100% of outstanding local bonds series 30 in parallel with the
reopening of local bonds series 35 for up to $30 million, to be
subscribed by exchanging the series 30 notes.
Nevertheless, CGC continues to face considerable debt maturities in
the next two years, and refinancing of these will depend on
favorable international and/or domestic bond markets. International
debt markets have remained largely closed for Argentine corporates,
and this situation is unlikely to change materially if exchange
controls remain in place. CGC has historically been able to tap
domestic markets, but the depth and appetite of this market can be
volatile depending on macroeconomic variables.
CGC has about $75 million of debt maturing in the second half of
2024, and around $230 million maturing in 2025 (considering the
completed refinancing). S&P estimates its cash position at around
$285 million (including securities) after placing local bonds, but
it also expects negative free operating cash flow (FOCF) of about
$100 million in 2024 and $80 million in 2025, mainly due to high
capital expenditures (capex) of around $350 million per year.
S&P said, "We expect CGC to maintain a solid operating performance
in the next two years, increasing production by 15% to 62,000
barrels of oil equivalent (boe) per day in 2024 and 66,000 boe per
day in 2025, from 54,000 boe per day in 2023. In this scenario, we
forecast EBITDA of $330 million-$350 million in 2024 and 2025.
However, we expect the company to continue raising debt to finance
its ample capex plan and cash flow deficits for the next two years.
As a result, we forecast leverage, measured as debt to EBITDA, of
3.5x-4.0x through 2025.
"Even though the company's SACP is 'ccc+', we cap the ratings on
CGC at 'CCC' because the bulk of CGC's revenue and cash flow are
generated in Argentina, since only 10% of sales come from exports.
The new Argentine administration has gradually eased restrictions
on accessing or transferring funds abroad, particularly for debt
repayments and imports. However, Argentina's macroeconomic
situation remains delicate. Restrictions could tighten again,
including additional central bank regulations, forcing Argentine
entities to unilaterally push forward payments in foreign-currency
debt -- a situation that we typically view as being tantamount to
default."
=============
B E R M U D A
=============
RLGH FINANCE: Fitch Assigns 'BB+' Rating on Subordinated Notes
--------------------------------------------------------------
Fitch Ratings has assigned a rating of 'BB+' to RLGH Finance
Bermuda Ltd's (RLGH) issuance of fixed rate subordinated notes. The
issuance will constitute Tier 2 Capital under the Bermuda Monetary
Authority's regulatory framework.
KEY RATING DRIVERS
The notes are rated two notches below RLGH's long-term IDR of 'BBB'
reflecting two notches for Fitch's baseline assumption of 'Poor'
recovery expectations and zero additional notches for 'Minimal'
non-performance risk.
The 'Minimal' non-performance risk assessment considers that while
the notes contain an interest deferral feature, this only triggers
in the event of the company's Enhanced Capital Ratio (ECR)
declining below 100%. This trigger level is low, as a 100% ECR
breach implies an insurer is already in severe financial
difficulties, and Fitch does not expect pressure by the regulator
to exercise this feature absent an ECR breach.
The notes are treated as 100% debt in Fitch's calculation of
financial leverage. Fitch expects to give 100% capital treatment to
the notes in its Prism Capital Model, consistent with the
regulatory capital credit.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to a
Negative Rating Action/Downgrade
- RLGH's hybrid securities ratings could be lowered by one notch to
reflect higher non-performance risk if Bermuda's regulatory
environment becomes more controlling in its supervision of
(re)insurers, in Fitch's view;
- Deterioration in business profile stemming from increased risk
through acquisitions or adverse experience with the existing
run-off liabilities;
- Deterioration in Fitch's assessment of the operating companies'
capitalization, including a consolidated Prism score below 'Very
Strong', capital declining below target levels or financial
leverage maintained over the long term above 30%;
- Material increase in investment risk or investment losses that
affect Fitch's view of capital.
Factors That Could, Individually or Collectively, Lead to a
Positive Rating Action/Upgrade:
- An improved view of business profile driven by continued success
in managing existing run-off liabilities while successfully
executing future run-off transactions;
- Maintaining or improving capitalization at operating companies,
along with financial leverage below 25%;
- Fixed-charge coverage ratio maintained above 7x;
- Return on equity above 10%.
Entity/Debt Rating
----------- ------
RLGH Finance
Bermuda Ltd
Subordinated LT BB+ New Rating
===========
B R A Z I L
===========
BRAZIL: Central Banker Signals High Bar for Currency Intervention
-----------------------------------------------------------------
Bloomberg News reports that Brazil's top decision-maker on currency
intervention signaled he wouldn't pull the trigger on any move to
stem this year's rout in the real without obtaining full support
from the central bank board.
Gabriel Galipolo told investors in private meetings this month he
would seek consensus from fellow bank directors before taking
action in the foreign exchange market, according to four
participants of those gatherings, the report relays.
The cautious stance seemed part of the monetary policy director's
strategy to avoid any appearance of being susceptible to political
pressure at a delicate time for the institution, the people said,
requesting anonymity to discuss the meetings, notes Bloomberg
News.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
As reported in the TCR-LA on May 6, 2024, Moody's Ratings affirmed
the Government of Brazil's long-term issuer and senior
unsecured bond ratings at Ba2, senior unsecured shelf rating at
(P)Ba2 and changed the outlook to positive from stable. Moody's
assesses thatBrazil's real GDP growth prospects are more robust
than in the pre-pandemic years, supported by the implementation of
structural reforms over multiple administrations, as well as the
presence of institutional guardrails that reduce uncertainty
around future policy direction. The outlook change to positive is
underpinned by Moody's assessment that more robust growth combined
with continued, albeit gradual, progress towards fiscal
consolidation, may allow Brazil's debt burden to stabilize.
However, there are risks to the government's execution of
continued fiscal consolidation.
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-TermForeign-Currency Issuer Default Rating (IDR) at 'BB' with
a StableOutlook. 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.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-TermForeign
and Local Currency - Issuer Ratings to BB from BB (low).At the same
time, DBRS Morningstar confirmed Brazil'sShort-term Foreign and
Local Currency - Issuer Ratings at R-4.The trend on all ratings is
Stable (March 2018).
BRAZIL: Inflation Rose Less Than Expected in June
-------------------------------------------------
Bloomberg News reports that Brazil's annual inflation rate rose
less than expected in June, bolstering the central bank after it
came under fire from critics for pausing its interest rate cuts to
combat simmering price pressures.
Official data released July 10 showed prices increased 4.23% from a
year earlier, below the 4.32% median estimate from analysts in a
Bloomberg survey, the report notes.
In June, inflation stood at 0.21%, under all forecasts, the report
adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
As reported in the TCR-LA on May 6, 2024, Moody's Ratings affirmed
the Government of Brazil's long-term issuer and senior
unsecured bond ratings at Ba2, senior unsecured shelf rating at
(P)Ba2 and changed the outlook to positive from stable. Moody's
assesses thatBrazil's real GDP growth prospects are more robust
than in the pre-pandemic years, supported by the implementation of
structural reforms over multiple administrations, as well as the
presence of institutional guardrails that reduce uncertainty
around future policy direction. The outlook change to positive is
underpinned by Moody's assessment that more robust growth combined
with continued, albeit gradual, progress towards fiscal
consolidation, may allow Brazil's debt burden to stabilize.
However, there are risks to the government's execution of
continued fiscal consolidation.
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-TermForeign-Currency Issuer Default Rating (IDR) at 'BB' with
a StableOutlook. 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.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-TermForeign
and Local Currency - Issuer Ratings to BB from BB (low).At the same
time, DBRS Morningstar confirmed Brazil'sShort-term Foreign and
Local Currency - Issuer Ratings at R-4.The trend on all ratings is
Stable (March 2018).
GOL LINHAS: Can Make Incentive Payments, Court Rules
----------------------------------------------------
Judge Martin Glenn of the United States Bankruptcy Court for the
Southern District of New York granted GOL Linhas Aereas
Inteligentes S.A., et al.'s motion seeking entry of an order
confirming the authority of the Debtors to make payments under
their incentive plans in accordance with the Final Wages Order
without further Court order.
The Motion is supported by the declarations of Joseph W. Bliley,
Zachary P. Georgeson and Aloizio Ribeiro Lima.
The U.S. Trustee filed a Response and Reservation of Rights. The
Response does not object to the present payments, but argues that
going forward, requests of this type should be made by a Section
503(c) motion. The Debtor filed a reply in further support of the
Motion.
The Court held a hearing on the Motion on July 1, 2024.
One of the Debtors' first-day motions was the Motion for Entry of
Interim and Final Orders (i) Authorizing Them to (a) Maintain
Employee Programs in the Ordinary Course and (b) Pay Prepetition
Employee Obligations Related Thereto and (ii) Granting Related
Relief.
Part of the relief requested in the Wages Motion was to maintain
and continue paying Employee Obligations (which includes
obligations related to the "Employee Programs" defined to include
the Incentive Plans) in the ordinary course of business. On
February 27, 2024, the Court entered an order granting the
requested relief on a final basis.
In accordance with the Final Wages Order, on April 16, 2024, the
Debtors provided the UST with notice of their intent to make
certain payments under the Revenue Sharing Program and the
Incentive Bonus Program in April 2024.
On May 15, 2024, the UST requested that the Debtors seek Court
authority to make Incentive Payments under section 503(c) of the
Bankruptcy Code through a new motion and that failure to do so
could result in an objection to the Debtors' Incentive Payments.
The Motion seeks entry of an order confirming the Debtors'
authority to make payments under their Incentive Plans during the
pendency of these cases in accordance with the Final Wages Order
without further order of the Court. The Debtors argue that the
Incentive Payments are also authorized by section 363(c)(1) of the
Bankruptcy Code as payments in the ordinary course of business, or
in the alternative, under section 363(b)(1) as an exercise of their
business judgment. They also argue that nothing in section 503(c)
prohibits the payments.
The Debtors argue that the Incentive Payments are consistent with
their past practice and with industry standards, and should be
approved under section 363(c).
In the alternative, the Debtors argue if the Court finds Incentive
Payments to be outside the ordinary course of business, they should
nevertheless be approved under section 363(b)(1) of the Bankruptcy
Code as a sound exercise of the Debtors' business judgment.
The Debtors do not believe that section 503(c) is the applicable
provision under which to seek approval of the Incentive Payments,
as the Incentive Plans are preexisting plans for non-insider
Employees that the Debtors maintain in the ordinary course of
business. Nevertheless, they argue, the Incentive Payments satisfy
section 503(c) of the Bankruptcy Code.
The UST contests the proposition that the Final Wages Motion and
section 363 grant the Debtors the authority to make future payments
under the Incentive Plans.
Rather, the UST argues, approval for such payments must be sought
under section 503(c). The UST Response also highlights "several
misleading data points" in the Motion.
The UST argues the Incentive Payments should not be "considered
payments in the ordinary course of business, unless it is the
Debtors' ordinary course of business to be operating in U.S.
bankruptcy proceedings."
The Court finds that under both the "vertical" and "horizontal"
tests, the Incentive Payments are clearly made in the ordinary
course of business.
Accordingly, the Final Wages Order authorizes the Incentive
Payments, and the Court could grant the Motion on that basis
alone.
Though the Final Wages Order is grounds to grant the Motion, the
Incentive Payments are also authorized under section 363(b), the
Court states. Section 503(c) is inapplicable, the Court notes.
The Court finds that the Debtors have demonstrated that that the
Incentive Plans and the payments thereunder are paid in the
ordinary course of business, are consistent with industry
standards, and have been maintained continuously since 2001 (much
longer than seven years). The Debtors could thus have made the
Incentive Payments pursuant to section 363.
The UST cites no cases where comparable incentive plans or payments
thereunder were found to violate section 503(c).
According to the Court, the Debtor also satisfactorily addressed
the "misleading data points" flagged by the UST.
First, the UST notes the disparity between the Debtors' alleged
average payout per Employee, which is approximately $19,000, and
the information provided to the UST by the Debtors, indicating that
top recipients received "amounts well in excess of $19,000, while
most received much less.". The Debtors had stated that their
average payout per Employee is approximately $19,000, not the
maximum payout, and confirmed in their Reply that "the mathematical
average was accurately reported." Averages can include figures
"well in excess of" the average. Thus, the UST's first point boils
down to the fact that the average is not the same as the median or
mode.
The UST's second point is that the Debtors "admit" that the
payments under the Incentive Bonus Program are not mandated by any
CBA. However, these payments are still required for Brazilian
Employees under Brazilian labor law, and still clearly made in the
ordinary course of business, the Court notes.
Last, the UST raised a question about "inconsistency" in the
Debtors' description of the timing of payments under the Incentive
Bonus Program. There was nothing nefarious about this; as the
Debtors clarified, their statements in the Wages Motion were based
on the assumption that they would continue encountering liquidity
issues, but have reverted to their typical payment schedule in
light of certain tax benefits, the Court states.
A copy of the Court's decision dated July 2, 2024, is available at
https://urlcurt.com/u?l=zFlYam
Attorneys to the Debtors:
Evan R. Fleck, Esq.
Bryan V. Uelk, Esq.
Lauren C. Doyle, Esq.
MILBANK LLP
55 Hudson Yards
New York, NY 10001
E-mail: efleck@milbank.com
buelk@milbank.com
ldoyle@milbank.com
- and -
Andrew M. Leblanc, Esq.
Erin E. Dexter, Esq.
MILBANK LLP
1850 K St. NW, Suite 1100
Washington, DC 20006
E-mail: aleblanc@milbank.com
edexter@milbank.com
- and -
Gregory A. Bray, Esq.
MILBANK LLP
2029 Century Park East, 33rd Floor
Los Angeles, CA 90067
E-mail: gbray@milbank.com
Attorney for the United States Trustee:
Annie Wells, Esq.
OFFICE OF THE UNITED STATES TRUSTEE
William K. Harrington, United States Trustee, Region 2
1 Bowling Green, Room 534
New York, NY 10004
About Gol GOLL4.SA
GOL Linhas Aereas Inteligentes S.A. provides scheduled and
non-scheduled air transportation services for passengers and cargo;
and maintenance services for aircraft and components in Brazil and
internationally. The company offers Smiles, a frequent-flyer
program to approximately 20.5 million members, allowing clients to
accumulate and redeem miles. It operates a fleet of 146 Boeing 737
aircraft with 674 daily flights. The company was founded in 2000
and is headquartered in Sao Paulo, Brazil.
GOL Linhas Aereas Inteligentes S.A. and its affiliates and its
subsidiaries voluntarily filed for Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 24-10118) on Jan. 25, 2024.
GOL Linhas estimated $1 billion to $10 billion in assets as of the
bankruptcy filing.
The Debtors tapped Milbank Llp as counsel, Seabury Securities Llc
as restructuring advisor, financial advisor and investment banker,
Alixpartners, LLP, as financial advisor, and HUGHES Hubbard & Reed
LLP as aviation related counsel. Kroll Restructuring
Administration LLC is the claims agent.
=========
C H I L E
=========
TOESCA SA: Chile Sees Flood of Commercial Buildings to hit Market
-----------------------------------------------------------------
Bloomberg News reports that investors in Chile are bracing for a
rare flood of commercial buildings to hit the market as two of the
nation's largest real estate investment funds near liquidation.
Real estate portfolios worth $552 million held in funds managed by
heavyweights Toesca SA and Banchile Inversiones could soon go on
sale due to recent shareholder votes, according to the report.
To recall, Bloomberg News reported in May that Toesca is set to
liquidate its holdings in coming months, the latest signal of the
ripple effects of high interest rates around the world.
Specifically, Toesca announced the liquidation of its "Rentas
Inmobiliarias" investment fund, which has $215 million in assets
including shopping centers, warehouses, office buildings and senior
residences located in various cities in Chile.
Alongside Toesca, Banchile could also face liquidation in December
after a group of shareholders voted to withdraw from a real estate
fund with assets worth $337 million, rejecting the company's
proposed extension, notes Bloomberg News.
This is raising fears of a looming vicious cycle in Chile, the
report notes.
Low prices prompted investors to give up and liquidate real estate
investments, but the upcoming sudden supply of buildings could push
prices down even further, the report adds.
=================
G U A T E M A L A
=================
GUATEMALA: Moody's Affirms 'Ba1' Issuer Ratings, Outlook Stable
---------------------------------------------------------------
Moody's Ratings has affirmed the Government of Guatemala's
long-term foreign and local currency issuer ratings at Ba1 and
maintained the stable outlook. Moody's has also affirmed
Guatemala's foreign currency senior unsecured debt ratings at Ba1.
The Ba1 rating affirmation reflects Guatemala's track record of
stable economic growth notwithstanding low per-capita income and
comparatively weak infrastructure and social development
indicators, a track record of prudent fiscal management associated
with low and stable government debt metrics, and limited external
vulnerabilities supported by significant remittance inflows. The
rating affirmation also reflects long-standing institutional
challenges and political risk as the main event risk driver. The
stable outlook captures the government's anti-corruption,
transparency and social reform efforts and the focus on public
investment to address the economy's infrastructure deficit,
balanced against a challenging reform negotiation process in
parliament that underpins continued political event risk.
Guatemala's local currency (LC) and foreign currency (FC) ceilings
remain unchanged. Namely, the local currency ceiling at Baa1, three
notches higher than the sovereign rating, reflects limited
government intervention in the economy and limited external
imbalances. The foreign currency ceiling at Baa3, two notches below
the LC ceiling, reflects the comparatively high, although
improving, FC loan-to-deposit ratio at over 100% in Guatemala's
banking system compared to regional peers.
RATINGS RATIONALE
RATIONALE FOR THE Ba1 RATINGS AFFIRMATION
Guatemala's economy has reported steady growth at annual rates of
some 3.5% over the past 20 years, a trend Moody's expect to
persist. Large remittance inflows at 20% of GDP in 2023 underpin
steady private consumption and have allowed the economy to absorb
external and domestic shocks over the past decade. Still,
Guatemala's infrastructure deficit, low income per capita and the
country's weak social and development indicators in the regional
comparison remain key credit constraints. The high inequality and
poverty incidence is exacerbated by a narrow public sector
footprint that constrains the provision of public services and
infrastructure investment, thereby perpetuating existing
challenges.
Moody's expect the new government's efforts to improve and expand
the supply of housing, water and sanitation, and education and
health services to help mitigate the country's comparatively weak
social indicators. Similarly, increased public investment in roads,
highways and ports will likely help address Guatemala's
infrastructure deficit, enhancing the country's attractiveness as
FDI destination and its export competitiveness, if sustained over
time.
Increased public investment, which the government aims to gradually
increase to 4.5% of GDP in 2027 from 2.5% in 2023 and a projected
3% in 2024, will likely lead to higher fiscal deficits in the order
of 2.9% of GDP in 2025-27 compared 1.3% in 2023 and an expected
2.7% in 2024. Still, the projected increase in debt to GDP will be
limited, taking the ratio to just 30% of GDP in 2027 from a
projected 26.7% in 2024, without jeopardizing Guatemala's track
record of low debt levels.
Low central government revenue intake at a projected 12.5% of GDP
in 2024 from similar levels in 2023, a long-standing feature of
Guatemala's fiscal profile, weakens debt affordability as measured
by the interest-to-revenue ratio. At 13.1% in 2023, Guatemala's
interest-to-revenue ratio is above the Ba-rated median of 10.3%.
Looking forward, the government aims to improve tax compliance as a
way to enhance revenue performance and does not envision higher tax
rates. As a result, Moody's do not expect a structural increase in
the government's revenue intake or the overall public sector
footprint.
Guatemala's Ba1 rating is supported by limited external
vulnerability risks owing to foreign exchange reserves equivalent
to 7.4 months of goods and services imports as of May 2024, and
consecutive current account surpluses since 2016. Government
liquidity risks are modest given very low gross financing needs
that Moody's anticipate will come at less than 5% of GDP annually
over the next three years and the presence of a debt service
amortization fund that is administered by the central bank.
Meanwhile, political risk is the main event risk driver
constraining Guatemala's credit profile, increasing the risk of
obstruction in Congress and making reform implementation more
challenging.
RATIONALE FOR THE STABLE OUTLOOK
Moody's expect Guatemala's track record of macro-economic and
fiscal stability to persist in the future, underpinned by steady
remittance inflows as shock absorption mechanism.
The stable outlook also reflects the government's enhanced
anti-corruption program as well as efforts to increase transparency
in the government's decision-making process, developments that are
captured in Moody's institutions and governance strength
assessment. If these efforts prove fruitful and effective, they
will help strengthen Guatemala's business environment and set the
stage for higher foreign direct investments and medium-term growth
prospects. However, the outlook also incorporates implementation
risks with respect to the government's reform agenda as a result of
potential obstruction in Congress considering the government
party's minority position, as well as continued opposition from
elements of the judicial apparatus.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Guatemala's ESG Credit Impact Score (CIS-4) reflects its weak
governance profile and limited resilience due to low economic
development, its highly negative exposure to social risks, and a
moderately negative exposure to environmental risks.
Guatemala's exposure to environmental risks (E-4 issuer profile
score) is based on the country's exposure to climate change risks
from recurring droughts and hurricanes, which can deplete
agricultural production and harm Guatemalan exports. Exposure to
physical climate risk is the major concern for the country while
Moody's project risks to access to water, the depletion of natural
capital, and waste and pollution will become more acute over time
for Guatemala.
Exposure to social risks (S-4 issuer profile score) stems from
long-standing levels of poverty, economic inequality, and social
exclusion. Guatemala is characterized by high levels of poverty,
limited educational outcomes, and lack of sufficient access to
basic services and housing, while previously high crime levels are
declining. Like many other emerging economies Guatemala benefits
from a comparatively benign demographic structure.
The influence of governance on Guatemala's credit profile is
moderately negative (G-3 issuer profile score) and includes issues
such as rule of law and control of corruption, which limit policy
effectiveness and reduce investment and growth. In recent years
accusations of political corruption have led thousands to protest,
raising the risk of domestic political turmoil.
GDP per capita (PPP basis, US$): 10,587 (2023) (also known as Per
Capita Income)
Real GDP growth (% change): 3.5% (2023) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 4.2% (2023)
Gen. Gov. Financial Balance/GDP: -1.3% (2023) (also known as Fiscal
Balance)
Current Account Balance/GDP: 3.1% (2023) (also known as External
Balance)
External debt/GDP: 18.3% (2023)
Economic resiliency: ba1
Default history: No default events (on bonds or loans) have been
recorded since 1983.
On 08 July 2024, a rating committee was called to discuss the
rating of the Guatemala, Government of. Other views raised
included: The issuer's economic fundamentals, including its
economic strength, have not materially changed. The issuer's
institutions and governance strength has increased. The issuer's
fiscal or financial strength, including its debt profile, has not
materially changed. The issuer's susceptibility to event risks has
not materially changed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward pressure on the credit profile would emerge if policy
measures translated into improved economic conditions, leading to
higher GDP growth on a sustained basis. Significant improvement in
the country's institutional framework in general, and its
governance indicators in particular, including over election
cycles, would also support a higher rating.
The rating could experience downward pressure if there is an
erosion in the country's long-standing commitment to prudent fiscal
management. Worse-than-expected economic performance that leads to
persistently higher debt ratios, a weakening of social development
indicators or increased political instability would weaken
Guatemala's credit profile.
The principal methodology used in these ratings was Sovereigns
published in November 2022.
===========================
V I R G I N I S L A N D S
===========================
EDEN ROCK: Teneo to Lead BVI Liquidation Proceedings
----------------------------------------------------
Eden Rock Asset Based Lending Fund Ltd and Eden Rock Asset Based
Lending Master Ltd were placed in voluntary liquidation proceedings
pursuant to Section 204(1)(b) of the BVI Business Companies Act,
2004 on July 3, 2024.
The Joint Voluntary Liquidators are:
Russell Crumpler
Christopher Farmer
Teneo (BVI) Limited
PO Box 2438, 3rd Floor
Banco Popular Building, Road Town
Tortola, British Virgin Islands
TREKSTAR LIMITED: Vistra Leads BVI Liquidation Proceedings
----------------------------------------------------------
A voluntary dissolution of Trekstar Limited commenced on June 17,
2024.
The liquidator may be reached at:
Maurice Janssen
Vistra Corporate Services Centre
Wickhams Cay II, Road Town
Tortola, VG 1110
British Virgin Islands
*********
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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Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2024. All rights reserved. ISSN 1529-2746.
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