Venezuela Weekly Report

An Ideal Deal

July 14, 2017BancTrust & Co. Research Team

• Gold Reserve announced a third amendment to the Settlement Agreement with Venezuela, including monthly payments adding to USD1bn by June 2019 and the placement of USD350mn in sovereign financial instruments as collateral
• PDVSA bonds hit a month-high this week despite falling oil prices and international reserves nearing the USD10bn mark
• The clash between public authorities continued this week with the Attorney General rejecting a ruling of the Supreme Court for considering it illegitimate while the Congress moves forward to a plebiscite regarding the Constituent Assembly on 16 July

The Canadian gold mining company Gold Reserve posted on its website yesterday a new amendment to the Settlement Agreement that maintains with Venezuela regarding a payment of USD1.04bn by the latter. The new debt distribution includes 20 monthly payments of USD29.5mn, three monthly payments of USD40mn and a final payment of USD285mn, adding to USD1bn by June 2019, as well as the placement of USD350mn in sovereign financial instruments as collateral. In our view, this new schedule of monthly small quotas makes feasible the payment of Venezuela even despite the distressed liquidity levels that the South American country is undergoing. The sovereign is facing USD5bn in principal and interests next year.

Argentina Weekly Report

A Hint of Recovery

July 7, 2017BancTrust & Co. Research Team
  • Argentina’s economy seems to be heading to recovery thanks to the recent results of Construction and Industrial Activity, which increased 2.7% m-o-m and 10.3% y-o-y, respectively
  • Century bond details were released and one of the more important features is that it is callable at any time that the government considers
  • Oil Company Pampa Energia suspended the issuance of a USD500mn bond due to uncertainty in the FX market after the MSCI decision and the recent pre electoral moves

This week, mix signs were released over the economic performance of the country, however we see the trend for upcoming months to show favorable results. In this regard, the first data released was the Monthly Economic Activity Estimator for April which resulted in disappointing news as the index showed no variation in the economic activity when compared to March results –march results, instead, were really good news as it presented a 1.5% advance-, meanwhile the y-o-y variation was 0.6%, while market expectations were above the 1% y-o-y. In the other hand, construction and industrial activity saved the week.

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.

Andean, Central America, & Caribbean Weekly Report

Honduras: Reaching for Their Goals

July 7, 2017BancTrust & Co. Research Team

• We believe Honduras’ 1Q17 results show that the country will be able to accomplish its year-end goals, showing a 4.4% y-o-y improvement for this period
• The trade deficit decreased by 5.5% y-o-y last April on account of higher exports and despite a stark increase in oil and derivatives purchase
• The customs union, expected to increase trade in USD1bn, finally entered into force this week

Honduras’s economy is showing significant improvements this year, demonstrating that it is capable to reach its 2017 growth target of 3.6% – in our view –, although some private companies estimate that the country could even reach a 4% y-o-y- growth at the end of 2017. In detail, the Central Bank released its report for the performance of the economy in 1Q17 in which is evident the good news with a 1.7% q-o-q growth rate and a 4.9% y-o-y advance as a result of leading sectors like: Manufacture (3.3%) and Agriculture (5.2%), while principal services were: Communications, Real Estate Activities, and Construction, which grew 1.4%, 1.6% and 1.4%, respectively. The boost came from the demand side, as there was an improvement in household consumption influenced by the increasing dynamism of remittances coming from the US. At the same time, government spending was reduced by 2.2% due to spending measures reflected in the Fiscal Responsibility Law.

Ecuador Bi-Weekly Report

“Encouraging” GDP Results

July 21, 2017BancTrust & Co. Research Team

• GDP expanded 2.6% y-o-y in 1Q17. We believe results for the 2Q17 will be fundamental to determine the economy’s path as particular domestic risks persist
• Inflation reached 0.16% y-o-y in June, the lowest figure since 2007, signaling worries about the anticipated economic recovery
• The government is considering scaling down the Manta Refinery project, while oil exports fell 2.6% m-o-m in May due to lower shipments to the US and Peru

The economy expanded 2.2% q-o-q in 1Q17, according to the Central Bank of Ecuador (BCE in Spanish), and an accumulated figure of 2.6% y-o-y. The economic sectors with the highest growth rates were: Oil Refining, 28.4% – due to the repowering of the Esmeraldas refinery; Electricity and water supply, 22.4%; Fishing (except shrimp), 11.0%; Financial services activities, 5.7%; Trade, 5.7%; Domestic service, 5.6% and Transportation, 5.3%. In this regard, the BCE manager Veronica Artola stated the institution sees the economy in an expansion phase and that next month figures are encouraging.

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, July 19 2017

    -The National Assembly (AN in Spanish) approved the final reports on the popular consultation of 16 July and the candidates for magistrates of the Supreme Court (TSJ in Spanish). The latter is part of the process of one of the main items of the current agenda of “zero hour” established by the opposition party Democratic Unity Roundtable (MUD in Spanish), as the legislators expect to exercise their constitutional ability to name – on Friday 21 July – new magistrates and thus actively repudiate the current Supreme Court and i

  • Tuesday, July 18 2017

    - Following the results of the public consultation election on Sunday, the Democratic Unity Roundtable (MUD in Spanish) called for a 24-hour national strike on Thursday in protest against the National Constituent Assembly (ANC in Spanish) proposed by the administration of Nicolas Maduro. Furthermore, Freddy Guevara, deputy President of the Congress, said they expect to name the new magistrates of the Supreme Court on Friday. We can anticipate this move will not be acknowledge by both the government and the Supreme Court, but will u

  • Thursday, July 13 2017

    - S&P Global Ratings, following its Tuesday action of downgrading Venezuela’s rating, yesterday decided also to downgrade the corporate credit of Corporacion Electrica Nacional, better known as CORPOELEC (former ELECAR). The action resulted in a downgrade from “CCC” to “CCC -“while also maintaining the negative outlook. In detail, the rating agency argued that they are taking this action against the corporate as a result of the sovereign’s downgrade, as it reflects that this is a “government-related entity” (GRE

  • Wednesday, July 12 2017

    - A US appeals court blocked Exxon Mobil Corp from enforcing a USD1.6bn award against Venezuela for an asset seizure back in 2007. The court ruled that the judge made a mistake in excusing Exxon from complying with procedural requirements to enforce the October 2014 ruling. In this way, the court supported Venezuela’s point that Exxon should have tried to enforce the award under the federal Foreign Sovereign Immunities Act (FSIA), instead of streamlined procedures. All-in, Exxon's petition was dismissed without prejudice, meaning


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