Andean, Central America, & Caribbean Weekly Report

Bolivia & Jamaica

December 22, 2017BancTrust & Co. Research Team

Bolivia: Struggling to achieve a fourth presidential term

  • President Evo Morales announced his candidacy for 2019, after the Constitutional Court allowed indefinite re-election
  • Government sent to the Legislature the 2018 Budget proposal, with an estimate of 8.3% of fiscal deficit and a projected economic growth of 4.7%

The political tensions increased after the last week of November, when the country’s Constitutional Court decided to authorize indefinite re-election for public office, which would allow current President Evo Morales to run for presidential elections scheduled for 2019 – if won, it would mean his fourth consecutive presidential term. Moreover, the verdict would also allow other candidates for public office such as state governors, senators, parliamentarians and mayors to run indefinitely.

Andean, Central America, & Caribbean Weekly Report

Honduras & Nicaragua

December 15, 2017BancTrust & Co. Research Team

Honduras: Vote Recount: Solution or the Eye of the Storm?

  • The situation in Honduras complicated seriously after doubts were casted on the results of some polling stations, which the Supreme Electoral Court will try to dissipate with a one-by-one recount of the disputed votes
  • S&P and Moody’s have warned that, should the controversy continue unsettled and thus affect the reforms path, Honduras’s credit rating could be in line for a downgrade

The situation is this: It has been almost two weeks after the general elections in Honduras took place and alleged irregularities in the vote counting provoked the eruption of protests and claims against the victory of current President Juan Orlando Hernandez (JOH). Finding out whether there were or not irregularities – the leftist coalition that had Salvador Nasralla as their candidate and himself said they had the evidence – will be the job of the Supreme Electoral Court (TSE in Spanish) now, but we are of the opinion that all this could have been prevented by the TSE by having a more fluent communication with the political parties, observers and the people.

Andean, Central America, & Caribbean Weekly Report

Honduras: Our Guide for the Electoral Sunday

December 1, 2017BancTrust & Co. Research Team
  • This Sunday will be celebrated general elections where the focus will be placed, without a doubt, in the presidential race. President Juan Orlando Hernandez seems poised to defeat the opposition’s main candidate Salvador Nasralla
  • The economic activity is growing well above official estimations, with exports growing at a record pace. Also, inflation remains in the target range
  • Public debt stands at USD10.6bn, with IDB and other multilaterals as the main external creditors

This Sunday the country will turn to polling stations to vote for the President, the deputies to Central American Parliament, deputies for the National Congress and mayors; but the focus will be, without a doubt, on the race for the country’s mandatary. We see President Juan Orlando Hernandez (JOH) likely getting reelected – the most important pollsters place him with a large advantage over the rest of contenders, even though we believe that the vote difference will not be that big – in spite of the steady pick up of popularity of Salvador Nasralla, the most important opposition candidate.

Andean, Central America, & Caribbean Weekly Report

Paraguay & Costa Rica

November 17, 2017BancTrust & Co. Research Team
Paraguay: Setting the Stage for Early 2018
  • Paraguay looks to issue a 10-yr global bond between January and February. Whether it is issued in foreign or domestic currency remains to be seen, but the latter has become an attractive option recently
  • The Paraguayan curve of dollar bonds is quite expensive in our opinion when compared to other EM countries like the Dominican Republic. Taking this into consideration, the domestic market could become the most attractive offer

Paraguay is looking to issue USD500mn in 10-yr global bonds by January or February of 2018, according to what was stated by Finance Minister Lea Gimenez. There’s not much detail available on the issuance so far, but Gimenez did point out an interesting diatribe: whether issuing global bonds in foreign or domestic currency. She advised some banks have expressed interest in a global bond denominated in Paraguayan Guarani (from now on, PYG), but a final decision would be taken after assessing the results of the roadshow.

We believe that the option of opting for issuing in local currency – and not in USD – might not be that contrived because of two specific factors: the positive reaction of investors’ demand to recent issuances in PYG; and the political obstacles that could face a new issuance in USD. These factors, along with the strong economic performance of the country – we will provide details on this later –, would lead (in the case of favoring the PYG option) to a successful issuance for the government as they would manage to acquire the funds required for closing the budget gap while reducing the magnitude of the external debt-to-GDP ratio.

Regarding the first of the factors abovementioned, a recent retap for a total of PYG90bn in 3-yr and 5-yr bonds was oversubscribed by 177% – order books totaled PYG249.8bn. In detail, the bids for the retap of the 3-yr, 7.3% securities totaled 253.6% of the total issued amount (PYG50bn); while the PYG40bn retap of the 5-yr, 8% securities received bids for a total of PYG123bn. In the political ground, the Deputies’ Chamber – amidst the discussions on the Budget for 2018 – intended to cut in half the size of the issuance to avoid “excessively” increasing the amount of the country’s indebtedness in foreign currency.

The hurdle set by Deputies’ decision came even after the President Horacio Cartes made a call to “not worry” on public indebtedness as the country has the capacity to honor all its outstanding obligations; and also after an exercise of debt sustainability conducted by the Finance Ministry that showed that even in the worst-case scenario the public debt is sustainable. Therefore, we see that for the government would be a lot more convenient to issue the bonds in local currency; while the investors – even foreign – would also be favored by the positive outlooks on the Paraguayan economy, which once realized would likely push upwards the price of securities issued by the country. Also, the interest rate of the security is likely to be very attractive considering that the PYG has appreciated 1.48% y-o-y against the dollar while inflation is expected to close 2017 at 3.8%.


Andean, Central America, & Caribbean Weekly Report

Panama: Moderate Growth with Solid Supports

November 3, 2017BancTrust & Co. Research Team
  • Ministry of Economy and Finance reduced growth projections by 0.3 percentage points. However, the economic outlook remains positive based on infrastructure projects
  • We highlight the outstanding performance the Panama Canal is having since the expansion, reaching a cargo record of 403.8mn tons
  • Public investment projects have found support in China financing

At the beginning of this month, the Ministry of Economy and Finance (MEF in Spanish) reduced economic growth projections for the end of 2017 to 5.5%, which is 0.3 percentage points lower than those projected at the beginning of the year. According to the press release, the downward revision is attributed to moderate growth and, in some cases, to a smaller increase in certain activities of importance to the economy; such as financial intermediation, real estate, business & rental activities, retail and electricity supply. In fact, the Monthly Economic Activity Index (MEAI) reflects a similar performance for the January-August period with an increase of 5.7% y-o-y, and a 4.9% y-o-y growth in August, significantly lower results when compared with the first five months of the year that showed an average growth around 6.6%.

The IMF also reduced its growth projections for the country in 2017 from 5.8% to 5.3%, while its projections for 2018 suffered a reduction to 5.6% from 6.1%; while the average growth until 2022 remains unchanged at 5.5%. In our view, despite the fact that several sectors are growing at more moderated rates, we believe that the public investment in infrastructure and the positive performance of the Canal – further details are provided later – would support the actual growth rate and will keep it in line with the long-term projections of 5.5%.

In this regard, last month Moody’s changed its outlook on Panama to positive from stable, while they also reaffirmed its rating at Baa2 based on two main issues according to the report. In the first place, they expected that the debt trend will improve in the upcoming years due to compliance of the fiscal rule in the last few years and a strengthening of the institutional framework. They hope this to continue over time as they believe that the government has been doing a significant effort increasing transparency and management on fiscal matters. The second factor is the GDP growth rate that continues to outperform peers and keeps supporting the country’s economic strength.


  • Tuesday, January 16 2018


    - Yesterday the President Nicolas Maduro gave its yearly speech which should be something close to the state of the union and that according to the constitution should be presented in front of the National Assembly. However, this year and arguing the illegality of the National Assembly, the decision was to give his speech in front of the National Constituent Assembly. In detail, more than a state of the union this was one of the usual speech of the President with not much data to collect. Among

  • Monday, January 15 2018


    - The dialogue meeting held in the Dominican Republic between members of the opposition and the government last weekend culminated again without any results. International mediators indicated that although some agreements were reached, several points remain pending and both parties will meet again this Thursday, January 18. In our opinion, it was expected that results would not be achieved,as we have been saying we believe that the most likely to happen is that the negotiation rounds will culmin

  • Friday, January 12 2018


    - The National Electoral Council (CNE in Spanish) announced that it has approved the schedule for the validation of political parties that did not participate in the last municipal elections which it will take place on 27 and 28 of January. The process will be carried out to comply with the order of the National Constituent Assembly (ANC), which has as its sole purpose to be another obstacle for the opposition. We believe that at the moment the attention is focused on the negotiations in the Dom

  • Thursday, January 11 2018


    - The situation regarding Venezuela’s debt with Brazil received yesterday two mixed updates, as the Brazilian Ministry of Finance reported that the first paid an old debt but that it is still in arrears with another payment. In detail, the ministry informed that Venezuela paid USD262.5mn – corresponding to the May-August period of 2017 – on 5 January as part of their commitments under the Reciprocal Credit and Payments Agreement (CCR), which is part of the benefits of the Latin American In


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