Dominican Republic Bi-Weekly Report

Slowing Down but Still Remarkable

August 25, 2017BancTrust & Co. Research Team

• The economic activity expanded 4.0% y-o-y in 1H17 due to a lower than expected GDP result in the second quarter of the year
• The government has executed 46.7% of the 2017 Budget plan while incomes rose 1% above estimations on account of a higher tax collection
• We expect the loosened monetary policy to add dynamism to economy in the short-term, though fulfilling the inflation target could be uphill

Economic performance continues to show signs of decelerating in the second quarter of 2017, as the Central Bank of the Dominican Republic (BCRD in Spanish) reported that the Monthly Indicator of Economic Activity (IMAE in Spanish) recorded an increase of 2.7% in April-June of this year. This result put the accumulated figure at 4% y-o-y in 1H17, significantly lower than the 7.4% y-o-y growth reached in June 2016. The economic activities with the greatest impact in the period January-June 2017 were: Hotels, Bars and Restaurants, Agriculture, Transportation and Storage, Financial Intermediation, Insurance and Related Activities and Commerce.

Dominican Republic Bi-Weekly Report

Adding Fuel to Economy’s Running-Empty Tank

August 11, 2017BancTrust & Co. Research Team

• The Central Bank lowered the Monetary Policy Rate and the legal reserve requirement looking to stimulate the economy that seems to be unexpectedly running out of fuel
• The Monthly Manufacture Activity Index dropped 10.5% in June, which we believe signals towards a significant slowdown in general economic activity
• Economy Minister Isidoro Santana assessed the impact of previous fiscal reforms in the Dominican economy, looking towards making the Fiscal Pact more efficient

The Central Bank of the Dominican Republic (BCRD in Spanish) finally decided to take action regarding the slowdown in economic activity, as in spite of growing at rates above most of Latin American countries, such rates are approaching below-potential levels. In this respect, the BCRD decided to lower its Monetary Policy Rate (MPR) and the legal reserve requirements to start a cycle of expansionary monetary policy, looking to return to growth rates according to or above the country’s potential.

Dominican Republic Bi-Weekly Report

An Expected, But Very Welcome, Upgrade

July 28, 2017BancTrust & Co. Research Team
  • Moody’s upgraded DR’s credit rating one notch to “Ba3” with a “stable” outlook, citing robust growth outlook and lower fiscal deficit
  • Tourism continues as the top economic sector in the country, growing 6.5% y-o-y in 1H17. President Danilo Medina bets on further strengthening of this economic activity
  • Inflation in June was 0.06% m-o-m while the y-o-y figure stands at 2.55%

Moody’s upgraded DR’s credit rating to “Ba3” from “B1” with stable outlook. The credit rating agency issued a report on Thursday 20 July where they considered as drivers the “robust” growth outlook – when compared to its rating peers – and the improvement in the fiscal balance. These drivers are no surprise for us as we have consistently seen signals of general macroeconomic improvement when assessing the country’s economic performance, but Moody’s decision definitely brings good news as it could prop up investments in strategic sectors in order to cement the current positive trend and turn it into one showing long-term stability.

Dominican Republic Bi-Weekly Report

The Political Parties Law is Back on the Stage

July 14, 2017BancTrust & Co. Research Team
  • The Central Electoral Board is planning to put a ceiling on private contributions to electoral campaigns as part of the new Political Parties and Electoral laws
  • The Monthly Economic Activity Index grew 5% y-o-y in May and accumulates a 4.2% y-o-y growth in YTD terms
  • The Monetary Policy Rate was kept at 5.75% on account of a controlled inflationary dynamic and generalized positive results in the domestic economy

The Central Electoral Board (JCE in Spanish) finally stepped up to revive the debate regarding the new Political Parties Law. The President of the JCE, Julio Castaños, participated in a forum organized by the National Council of Private Business (CONEP, in Spanish) addressing the issue of the financing of the electoral campaign, remarked as one of the most important problems given the accusations of corruption and use of dirty money. We continue to believe that this law, as well as the reform to the Electoral Law, represent the issues with the highest priorities to be debated in the political context, as the issues with transparency, corruption and political inequality surrounding the electoral events taint these and add a damaging uncertainty in both political and economic context.

Dominican Republic Bi-Weekly Report

A “Historic” Issuance

June 30, 2017BancTrust & Co. Research Team
  • Dominican Republic issued last week a USD500mn reopening of the 5.95% 2027 bonds
  • Exports through Free Trade Zones increased 4.8% y-o-y in 1Q17 and their contribution in the GDP grew 1.4% y-o-y, but their structure is way different than 20 years ago
  • Deflation is back again, with a -0.14% m-o-m result in the CPI in May after in March a -0.2% result was obtained

The Dominican Republic headed again to international markets, only that this time it was not for budgetary reasons but rather for finding financing for finishing the construction of the Punta Catalina thermoelectric plant. The sovereign opted for reopening the issuance of January 2017 where bonds worth USD1.2bn were sold with a 5.95% coupon rate and maturity in 2027. The retap was for USD500mn but the bonds priced at 106.382 in order to yield 5.1%, which the Finance Ministry deemed as a “historic” rate as it is the lowest in history for the country’s 10-year securities.

  • 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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