Research & Strategy

Our Research & Strategy department focuses on innovative, market oriented views and analysis for institutional clients in the fixed income market.

We emphasize our local presence in the region to provide value added in markets like Venezuela and Argentina, where information is not ready accessible. Our main goal is to give investors decision-making tools based on fundamental and quantitative research.

Venezuela Weekly Report

PDVSA: Keeping the Promise Despite the Rumors

November 3, 2017BancTrust & Co. Research Team
  • Once more, PDVSA proved its willingness and, more importantly, its capacity to pay as they honored today the scheduled amortization of the PDV’20 for an amount of USD841.88mn
  • Uncertainty before the payment generated mixed results on both PDVSA and VENZ curves. We note the influence of the PDV’20 payment on the performance of the soon-to-mature PDV’17.
  • On the local front, former MinFin Ramon Lobo was designated as the new President of the Central Bank, while his successor at the MOF will be PDVSA CFO, Simon Zerpa

This week has not been an easy one for either PDVSA or VENZ curves amid the uncertainty of whether PDVSA was to make payment corresponding to the first amortization of the PDV’20 for USD842mn. After the nervousness that hit the market just the day before, and doubts on how the state oil company was going to proceed earlier this morning, the state-owned oil company reported before midday that they had made the payment. In the official communiqué, they remarked the achievement of making payment despite the difficulties imposed by the international financial blockade, a direct consequence of US sanctions driven by US President Donald Trump.

Additionally, they informed that the money had been transferred to the accounts of US-based bank J.P. Morgan; however, they did not mention anything on the interest payment that it was also due for today (USD143.1mn). In that last matter, we previously anticipated that the company would prioritize principal payments and that it was going to use the 30-day grace period that rules over the coupons, especially when a bigger payment is yet to come next week with the PDV’17N.

Venezuelan fixed income performance this week, in general, can be defined as reactive as the market changed its appreciation from positive to negative, and backwards, within hours responding to rumors; and for us, that is the key on what we saw this week: rumors.

As we take a look on the PDV’17N, maturing next Thursday for a total of USD1,170mn between principal and interest, we notice a high influence from this week’s expectations. In this regard, today’s payment served to prove that the state-owned oil company effectively has the resources to pay and maintained its willingness intact; the reason why recent statements made by former PDVSA CEO Rafael Ramirez, and even by President Maduro himself, should not be disregarded.

Argentina Weekly Report

Inflation is Finally Giving Up

September 22, 2017BancTrust & Co. Research Team
  • The national CPI result for August 2017 stood at 1.4% m-o-m, confirming a deceleration trend for the end of the year. By then, it is expected to reach a monthly inflation of 1% in order to achieve 2018 inflationary goal
  • On the Fixed Income arena, the government of Jujuy issued a “green bond” for USD210mn with a 5-year maturity and a coupon rate of 8.625%
  • Likewise, Finance Ministry Luis Caputo announced that, given the current scenario, they do not discard a new bond issuance before the mid-term elections. This issuance could be denominated in EUR, CHF, JPY or a mix of currencies

This week, the long-awaited news arrived to confirm that the government’s policies have resulted in routing inflation to the desired target and that the FX movements did not cause the so fear “pass-through” effect. However, this is still not enough reason for the Central Bank of Argentina to ease its actions with the key monetary policy rate.

Dominican Republic Bi-Weekly Report

“Let’s Pick Up the Pace Again”

November 10, 2017BancTrust & Co. Research Team
  • Central Bank Governor recently reported preliminary economic figures as of 3Q17. Economic activity is picking up again, as well as most macroeconomic indicators
  • In our view, risk-reward plus macroeconomic overview make DR an attractive – even though pricy – bet among its Central America and Caribbean peers
  • We forecast better economic performance in economic activity by the end of 2017 and for 2018, based on stimulus measures for the construction and tourism sector

Hector Valdez Albizu, Governor of the Central Bank of the Dominican Republic (BCRD by its Spanish acronym), recently revealed the available economic figures as of 3Q17 that bring back the optimism to the short and mid-term outlook. While we will provide details on several variables, we believe that the spotlight should be placed on the Monthly Economic Activity Index (IMAE in Spanish). IMAE figures are available only as of August due to the report complications derived of the impact of the hurricanes, but that result was 5.1% y-o-y, enough to take back the YTD accumulate to the level of increase exhibited as of June: 4% y-o-y.

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%.


Ecuador Bi-Weekly Report

Putting fiscal accounts in order

November 17, 2017BancTrust & Co. Research Team
  • The 2018 budget was sent to the National Assembly with a reduction of 5.3% in expenditure and with new financing needs of USD8.25bn
  • Government is proposing a tax reform to support better results in fiscal sustainability for 2018
  • After the resignation of petroleum manager, Byron Ojeda, negotiations on crude oil contracts are delayed

On November 01 President Lenin Moreno forwarded to the National Assembly the budget for fiscal year 2018. It amounts to USD34,853mn, representing a decrease of 5.3% or minus USD2bn in relation to the budget approved by congress for the current year. In detail, this draft estimates that the fiscal deficit would represent 3.9% of GDP for the mentioned year. We believe that the fact that the government has submitted a more austere budget is the first step to achieve better fiscal results for 2018, an issue we know has been one of the biggest inconveniences in the recent economic crisis.

Corporate Weeky Report

Corporate Report: Pampa Energia

October 7, 2016BancTrust & Co. Research Team
  • Last July, Pampa Energia finished the acquisition process for Petrobras Argentina S.A, turning it into the largest private energy company in Argentina
  • Currently away from top positions, Pampa is likely to improve in its market share position for both oil and gas by next year, once the merge with Petrobras is totally complete
  • An upcoming issuance, which is set to repay a bridge loan which permitted the acquisition of Petrobras, is expected to be of USD600mn, which would be the largest issuance of the company

Company Background

Pampa Energia S.A. is one of the principal energy companies in Argentina and through its subsidiaries manages to participate in all stages of the electricity activity, from exploration and production to distribution. Its activities are separated over three different segments: generation, transmission and distribution. Moreover, the company has participation in production and distribution of general gas. Just to set an example, through Edenor in the distribution segment, Pampa has an important participation in the Argentine market with an estimate 21% of participation in the whole supply of electricity.

  • Wednesday, November 15 2017


    - Amid uncertainty after the investors meeting, the attention continues to be on the interest payments which grace period expired this week (PDV’27, VENZ’19 and VENZ’24) and the call for default for both Venezuela and PdVSA. In this sense, the ISDA which is in charge since last week of assessing a credit default decision over the PDV’17 payment (which also arrived later than the day expected) said that they will meet again on Thursday with a deadline until Friday to make any decision on

  • Tuesday, November 7 2017


    - The selloff in sovereign and quasi-sovereign curves continued yesterday, with the first leading with an average 11.47% drop – thanks mostly to the whopping correction of both VENZ’18, as the old fell 51.73% and the new decreasing 48.64%. Meanwhile, the PDVSA curve closed the day with a -4% average result. This situation is likely to continue, in our view, for as long as payments of coupons in grace period are not being made, situation aggravated by the closeness of the deadlines of each gr

  • Thursday, November 2 2017


    - After yesterday’s comments of the Depository Trust Company of Venezuela’s bond payments, confirming the transaction and extra official information about some holders that already received payment on 2020 bond, the Venezuelan bonds showed positive movements. In this sense, we can use the PDV’20 experience to expect a similar process for the funds of the PDVSA 2017N to matured today for a total amount of USD1.170mn between principal and interest, with an announcement of the payment during

  • Wednesday, November 1 2017


    - Until today 01 January 2017, will be held the process to postulate for the municipal elections, which are expected for around 10 December. However, there is no clear information on the ongoing process and the opposition response has not been clear either. In detail, seven opposition parties has decided to not participate in the next electoral process, however we do not discard that some of its member could –at the very last minute- decide that they will participate as an independent candidat


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