Venezuela Weekly Report
- 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
- 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
- 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.
Ecuador Bi-Weekly Report
- 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
- 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
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.