Andean, Central America, & Caribbean Weekly Report

Peru: Great News Came, But Could be Better

September 22, 2017BancTrust & Co. Research Team
  • Moody’s affirmed Peru’s “A3” rating and a “stable” outlook, but we believe that the economic prospects could continue improving and thus signal towards better ratings in the short and mid-term
  • GDP grew 3.64% y-o-y in June while the YTD figure rose 2.3% y-o-y. In our view, considering the reconstruction works after El Niño and those for the Panamerican Games of 2019, economic activity could pick up even further to grow 3% by year-end
  • Y-o-y inflation stood at 3.37%, above the 1%-3% official goal. Nonetheless, we recommend being watchful of possible stimulus measures that could further prop up inflation

Credit rating agency Moody’s decided to affirm Peru’s credit rating at “A3” as well as the “stable” outlook, taking into account that the economy has been able to recover importantly after suffering the impact of negative shocks as the spillover of the Odebrecht scandal and even the worse-than-expected climatic phenomenon of “Coastal El Niño”. An additional positive factor considered by Moody’s refers to the enhancement of the fiscal accounts, which now count with a renewed credibility that does nothing but add to the outlook of a resilient macroeconomic stability.

Andean, Central America, & Caribbean Weekly Report

Guatemala:The Political Crisis Threatens the Economy

September 15, 2017BancTrust & Co. Research Team
  • A severe political crisis is currently undergoing, and not only puts President Jimmy Morales on shaky grounds but could also hamper the economic performance of Guatemala
  • The Customs Union between Guatemala and Honduras could see the entrance of El Salvador earlier than expected. Also, Nicaragua joining as an observer has been very welcomed
  • The Public Finance Minister presented at the Congress the Budget Law for the next year, focusing on human development; security and justice; and the recovery of the road infrastructure

Political tension in Guatemala spiked severely after President Jimmy Morales declared persona non grata and tried to remove the head of the anti-corruption organism backed by the United Nations Ivan Velasquez. Morales took the decision Velasquez and the Attorney General Thelma Aldana presented evidence regarding an alleged illegal electoral financing felony committed by the President in 2015’s campaign. The untimely decision of Morales while he is facing the possibility of preliminary hearings against him has raised concerns overseas, as it casts serious doubts regarding the government’s commitment in the fight against corruption.

Andean, Central America, & Caribbean Weekly Report

Bolivia: Re-Launching the Economic Approach

September 1, 2017BancTrust & Co. Research Team
  • Bolivia is expected to growth north of 4%, but it is probably missing the target of 4.7% on account of the need for a policy refreshment. However, Moody’s decided to upgrade its outlook from negative to stable
  • Among the key sectors to foster economic growth, lithium exploitation and the energy export capacity seems to be taking the leadership
  • A new hike in gas tariff –after 20 years unchanged- has made the industries to fear on cost increases and loss of competitiveness 

Evo Morales’ government has among their achievements a country that has been the growth leader in the region for several years. Nonetheless, this year may be the exception with still positive results but probably under the government’s target. However, the country is still on a very good path and that perception has been ratified for the three major rating agencies this year – recently Moody’s ratified Bolivia’s rating at “Ba3” with an improvement on its outlook from negative to stable. In detail, the reason for this improvement is that economic growth still looks robust with strong fiscal indicators and low debt levels. Additionally, they argued that the country has low vulnerability to external shocks –this is a matter that was proved when the country was less affected with the decreasing oil prices than its peers.

What is clear is that the President itself and its cabinet are recognizing that the economic policy needs to be re-launched in order to avoid any future deceleration. In this regard, Economy Minister Luis Arce –who is currently on a leave as he is receiving medical treatment in Brazil- made statements where he said his perspective is for the economy to continue growing above the 4% at the end of the year, but possibly not reaching the 4.7% target. In this respect, this goes in the line of the Economic Commission for Latin America and the Caribbean (CELAC in Spanish) recent outlook of 4% for the end of 2017, and in our view is the most realistic expectation.

As for Evo Morales’ perception, he said that the idea for future performance is based on four branches of the economy: Hydrocarbons, Mining, Energy and Agricultural, while at the same time being complemented with other sectors like tourism. To achieve the success in these four strategic fields, it is necessary to install a program to accelerate investments and the associations with the private sector, in our view.
Lithium and Energy Projects

One of the key developments to come seems to be the projects related with the lithium industrialization, in which it is expected that participation with other countries and private companies will help to it to be a more effective development with greater economic results. Until now, the government guarantees that more than USD1bn are available for the industrialization that is expected to make the economy to growth different, by enhancing its capabilities.

Andean, Central America, & Caribbean Weekly Report

Jamaica: A New Tap… and New Bond?

August 25, 2017BancTrust & Co. Research Team

• Jamaica tapped this week its 2028 and 2045 bonds to pay for a debt buy back of the four bonds with shorter maturities. Meanwhile, the government set its eyes in a Diaspora bonds issuance
• The Jamaica 55 Diaspora Conference was held in Kingston and the government took advantage of it to promote new investments in the Caribbean island
• Current account deficit reached a 20-year low in 4Q16, being a direct result of the structural reforms made by the country

Jamaica has been very active in the international financial markets recently, considering that they tapped 2 bond issuances and are currently on the look for an alternative financing instrument: a Diaspora bond. We believe that the latter, in particular, presents a positive stance on how to continue financing growth in the country in the long-term, as it could turn out to be even better for the country than options like foreign direct investment or betting for an indefinite growth in the tourism sector. We will give additional details on it later.

Andean, Central America, & Caribbean Weekly Report

Trinidad & Tobago: Economic Growth Ahead

August 18, 2017BancTrust & Co. Research Team
  • CEPAL: T&T economy is poised to grow this year after three years in decline, thanks to the surge in energy prices and a new investment projects
  • Foreign reserves will likely continue to decrease in the short-term as export gains due to higher oil prices would not be able to fully counterweight the current account deficit
  • The Central bank decided to leave the repo rate unchanged at July’s meeting. Nonetheless, the weakness in the performance of key variables could, in our view, lead to changes in upcoming months

Trinidad & Tobago (T&T) is poised to grow 0.3% y-o-y in 2017, according to the latest report by the United Nations’ Economic Commission for Latin America and the Caribbean (better known as CEPAL in Spanish). This figure might seem small at first sight, all the more when compared to the Caribbean region estimate (1.2%), but it represents the first positive economic growth for T&T economy after registering three consecutive years in decline due to fall oil and gas prices, its main key export products – in contrast to its smaller Caribbean peers which rely heavily on tourism. In particular, the surge in energy prices has brought a new wave of investments in the sector as well as a much welcome enhancement of the terms of trade.

  • Monday, September 25 2017

    - Last Friday, the government of Canada announced economic sanctions on key Venezuela’s officials which affects 40 individuals who have played a key role in Maduro´s regime. In detail, these sanctions prohibit any person in Canada or any Canadian outside the country to have any type of economic relation with these members of the Venezuelan government. We see that the consequences of this sanctions are very similar to those applied by the United States government, affecting only individuals, reason why we do not expect the conse

  • Thursday, September 21 2017


    - Yesterday rumors started of the country being late on the payment of an USD185mn coupon of the VENZ27, which had to be canceled on September 15. Nevertheless, near the end of the day the national public credit office said that it sent the money on time to the corresponding financial institutions and the delay is due to "operational changes" in order to make future financial transactions effective. Furthermore, the credit institution reiterated Venezuela’s commitment in paying its debt and ca

  • Tuesday, September 19 2017

    - According to some new information, it seems that PetroChina Americas is revising its oil for cash agreements with PDVSA after the US sanctions were imposed, which would made them unable to act as an agent to commercialize Venezuelan crude. In detail, there is no change –as the sanctions detailed- in the ongoing contracts; the effect comes for the intention to renew or to extent the terms of the existence contracts. Read More >>

  • Friday, August 25 2017

    -Yesterday, it was known that some representatives of the Venezuelan government has been trying to reach a general agreement in China that comprises the creation of a sub-fund for the repurchase of Venezuelan debt –sovereign and PDVSA’s- which will allow the government to take advantage of the savings made when buying at discount the bonds with maturities in 2017 and 2018, savings are calculated around USD700mn. The final strategy will be to swap at maturity the bonds that are repurchase for new PDVSA’s debt with maturities


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