EMFI | Home

Sri lanka

November 15, 2019

SRILAN 6 3/4 04/18/28 Spread

The frontrunner candidates for Saturday's Presidential Elections, Rajapaksa and Premadasa

On November 14, Elections Commission (EC) Chairman Mahinda Deshapriya said presidential campaign ended on Wednesday, urging the candidates to remove all posters from the country. The EC asked social media sites to remove all paid or sponsored political advertisements. The Commissioner estimated the total cost of the Saturday Presidential Election to reach nearly LKR 7.5 bn (USD 4.6 mn).

On Saturday November 16^th, 16 million people will be voting for a new president. The former Defense Secretary Gotabaya Rajapaksa and the current Housing Minister Sajith Premadasa are the leading candidates.

Elections in Sri Lanka allow voters to choose up to three candidates according to their order of preference. The candidate who obtains 50% plus one vote as the first preference will be declared the winner.

Zambia

November 15, 2019

ZAMBIN 8.97 07/30/27 Spread

There is no light at the end of the tunnel for the kwacha

Since the beginning of the week, the kwacha exchange rate has exhibited strong variations reaching a maximum ZMK/USD 14.07, a six-month hike that implies a devaluation of 1.7%. Similarly, the price of their bonds has fallen significantly after importers bought dollars to protect themselves from future depreciation while developing an energy crisis in the country.

Everything indicates that the situation of the kwacha will continue to get worse. Currently, homes and businesses suffer power outages of up to 18 hours a day as a consequence of the severe drought the country is suffering, so the government is looking to import electricity from South Africa.

On the other hand, on November 14 the visit of an IMF delegation began to exchange information with the authorities about the policies that the government was undertaking in relation to the economy, said a spokesman for the ministry of finance. "The government is aware of its responsibility to create adequate conditions for a closer cooperation relationship with the IMF in the near future," said the representative.

Venezuela

November 15, 2019

VENZ 9 1/4 09/15/27 Price

VENZ 7 03/31/38 Price

Lawsuit over bond does not imply a repudiation, according to Guaidó

On November 14, the interim presidency of Venezuela issued a statement arguing that the PDVSA 8.5 2020 lawsuit in the New York Federal Court does not imply a repudiation of the total public debt. The statement says that the demand addresses a small fraction of Venezuela’s external debt, since the PDVSA 8.5 2020 share is only 1%.

The interim presidency said bondholders knew that the PDVSA 8.5 2020 was unconstitutional before it was issued, since its illegality was declared by the National Assembly in a public session. Risks associated with these bonds were acknowledge by important consultancy firms such as “Nomura Securities, Deutsche Bank Markets Research, Torino Capital and the Dow Jones Industrial News,” argued the statement.

Interim president Juan Guaidó called for mass protest next Saturday, November 16. "I will assume my responsibility, I ask you to also assume your role in this fight", said the opposition leader. The opposition leader suggested that the difference with previous calls is that now it is expected to be the beginning of a permanent protest in Venezuela.

Kenya

November 15, 2019

KENINT 7 1/4 02/28/28 Spread

KENINT 8 1/4 02/28/48 Spread

Government asks to raise spending

On November 13, the interim Treasury secretary, Ukur Yatani, expressed to the Senate budget committee his intention to extend spending for the fiscal year (from July 2019 to June 2020) to KES 3.13 tn (USD 30.6 bn). Which means an increase of KES 86 bn or 2.8%. This is the third time in the fiscal year that the government increases spending.

With the increase in spending, the fiscal deficit at the end of the period would increase to 6.3% of GDP from 6.2% estimated in October’s second review. The fiscal deficit has increased because revenues have been lower than expected. The accumulated income until September was KES 410.5 bn, below a target of KES 495 bn.

Angola

November 14, 2019

ANGOL 8 1/4 05/09/28 Spread

ANGOL 9 3/8 05/08/48 Spread

Oil sector attracts new investments

On November 13, the Angolan government signed several agreements with the Italian oil company ENI, in the framework of President João Lourenço's official visit to the Vatican.

Angolan Minister of Petroleum, Diamantino Azevedo, said that five documents were signed, two of them related to the exploitation of two of offshore blocks in the northern province of Cabinda. Other commitments are related to a partnership between the Angolan oil company Sonangol and ENI for renewable energy projects.

This investment scheme is part of Angola's strategy to increase its oil production to 1,436 tbd (in October the production stood at 1,391 tbd according to OPEC direct communication).

Oil sector attracts new investments

On November 13, the Angolan government signed several agreements with the Italian oil company ENI, in the framework of President João Lourenço's official visit to the Vatican.

Angolan Minister of Petroleum, Diamantino Azevedo, said that five documents were signed, two of them related to the exploitation of two of offshore blocks in the northern province of Cabinda. Other commitments are related to a partnership between the Angolan oil company Sonangol and ENI for renewable energy projects.

On the other hand, on November 7, the Sheikh of the United Arab Emirates (UAE) Ahmed Dalmoor Al Maktoum expressed his country's interest in investing in Angola's oil logistics to multiply fuel storage capacity.

Speaking to the national and foreign press, Dalmoor Al Maktoum highlighted the great opportunities for foreign investment in Angola and the potential of the Barra do Dande base to ensure the internal supply of fuels and future exports to other markets in the region.

In that sense, a memorandum of understanding was signed with the oil company Sonangol, with paving the way to a future Emirati participation in the construction of the oceanic terminal of Barra do Dande, in the northern province of Bengo. The work is currently in 20% execution, after its stoppage in 2016, hence the importance of resuming the investing process in this key terminal, said the project director, Mauro Graça.

According to Sonangol, Angola only processes 20% of the fuel it consumes, while the rest depends on imports. Graça explained that to resume execution, they must first evaluate the state of the infrastructure and equipment that have been in operation for several years, with the idea of putting into operation the first phase of the project during the first half of 2022.

The initial calculation conceived an infrastructure to collect more than 1.2 mn cubic meters, but that figure will also be subject to revision since the scope must match the potential demand of the domestic and regional market, the director said.

This investment scheme is part of Angola's strategy to increase its oil production to 1,436 tbd (in October the production stood at 1,391 tbd according to OPEC direct communication). On October 15, President Lourenço said that oil and gas production had declined in recent years due to operational problems and lack of timely investments. Therefore, Lourenco has made a number of oil policy changes to attract foreign investment, like the restructuring of the state-owned Sonangol.

The government is struggling with declining fiscal revenues, given low crude prices, slumping output and years of mismanagement that left Sonangol bloated and inefficient. However, the second largest oil producer in Africa must be patient, as these represent the first steps on the road to recovery.

Meanwhile, the figures keep showing a deteriotion trend. According to a report presented in Luanda, Angola exported 116.4 mn barrels of oil in the third quarter of 2019, 5.3 mn barrels less than in the second quarter; oil exports account for 95% of the overall. Similarly, the bulletin published by OPEC reflects a decrease of 43 tbd in October compared to September according to secondary sources; while direct communication indicates that production is increasing.

Suriname

November 14, 2019

SURINM 9 1/4 10/26/26 Spread

Suriname issue USD 150 mn in secured notes

On November 14, the Suriname government announced an upcoming issuance of 18-month notes worth USD 150 million, with semiannual coupons. This financing will be used mainly to make a payment to the American company Alcoa to complete the process of transferring the Afobaka hydroelectric plant to the state-owned Staatsolie Power Company Suriname N.V (SPCS).

Suriname is recovering from a two-year recession that took place between 2015 and 2016 caused by the end of alumina exports. Suriname has offset the losses due to the depletion of alumina, increasing gold and oil exports. GDP growth went from -3.4% in 2015 to -5.9% in 2016, after which it recovered to 1.7% and 2.6% in 2017 and 2018, respectively. However, the fiscal deficit has proved more difficult to contain. The central bank figures show that the fiscal deficit reached 10.6% of GDP in 2016. The fiscal deficit fell to 9.2% of GDP in 2017 and 7.9% in 2018. According to prospectus, in 2019 GDP increase 1.4% and the fiscal deficit reaches 7.3% of GDP.

Nigeria

November 13, 2019

NGERIA 6 1/2 11/28/27 Spread

NGERIA 7 5/8 11/28/47 Spread

Nigeria amends law to capture higher oil revenues

After years of unsuccessful efforts to change oil production regulation, the Nigerian government has reformed the 1993 deep offshore and inland law. The reform includes an escalating royalty as oil prices rise. The government has estimated that the reform will generate at least USD 1.5 bn in additional revenue by 2021.

The reform that inject uncertainty into the sector is the new right of the Minister of Petroleum to conduct reviews of production-sharing contracts every eight years.

Although in the short term, the change will deliver the intended increase in fiscal revenues, in the long-term the new taxes could discourage oil investment in Nigeria and some African countries are taking advantage of the situation.

Belize

November 13, 2019

BELIZE 4.9375 02/20/34 Spread

EU removes Belize from the black list

As we indicated in our previous report, the European Union dropped Belize from its tax haven “black list” on Friday, November 8. This list includes all countries that have unfair or less transparent tax regimes.

According to the council, Belize was moved from the blacklist to a gray list, and to be white-listed, the country's authorities should address the issue of its foreign source income exemption regime. The country should address the issue of its foreign source income exemption regime by end 2019.

The Belizean government asserts that it will continue its commitment to EU representatives as well as foreign financial services to ensure improvements in “technical problems.”

Ghana

November 13, 2019

GHANA 7 5/8 05/16/29 Spread

GHANA 8.627 06/16/49 Spread

The government submitted the 2020 draft budget to the congress

On November 13, the Minister of Finance, Ken Ofori-Atta, submitted the 2020 Draft Budget and the Government's Economic Policies to Parliament. This is the first budget of the current administration in which it will not be subject to the restrictions of an agreement with the International Monetary Fund (IMF). In April 2019, a four-years financing program with the IMF ended. The program aimed to reduce the fiscal gap and restore debt sustainability. On its last visit, at the beginning of October, an IMF mission recommended maintaining fiscal discipline in the period prior to the December 2020 general elections.

Grenada

November 13, 2019

GRENAD 7 05/12/30 Spread

IMF forecast a 3.1% GDP growth in 2019

In the World Economic Outlook report, the IMF forecasts that Grenada will grow 3.1% in 2019 and its GDP per capita will rise 4% to USD 30,730. In addition, the economy would continue expanding, but at a slower pace to reach 2.7% in 2020.

The Fund also expects inflation to close the year at a moderate 0.99%, while expects a slight rebound for next year, to reach 1.9% year-on-year. Exports of goods and services would expand by 4.2% in 2019 and 4% next year. Imports would grow by 5.7% and 3.8% during the same period.

The IMF figures shows that the government's gross debt to GDP ratio will fall from 63.5% in 2018 to 59.1% in 2019. This reduction will be possible through fiscal consolidation under the Fiscal Responsibility Law (FRL) and an improvement in the economic growth.

Turkey

November 12, 2019

TURKEY 6 1/8 10/24/28 Spread

TURKEY 5 3/4 05/11/47 Spread

Sanctions are coming

On November 11, the European Union foreign ministers unveiled a system for imposing sanctions on Turkey over its unauthorized gas drilling in Mediterranean waters off the coast of Cyprus. The sanctions are directed at individuals or entities involved in these unauthorized activities, but no Turkish companies or officials have yet been targeted.

European officials did not set a timeline for implementation, giving Turkey an opportunity to back down from drilling in the vicinity before sanctions could be enforced. The decision reflects the deterioration in relation between EU and Turkey, being the latter a formal candidate to join the EU.

On the other hand, Turkey would potentially face sanctions from the United States. On this occasion, this position is not related to the Turkish-Syrian conflict, but to the purchase of a Russian missile defense system made by the Erdogan administration. On Sunday, the White House security adviser, Robert O'Brien, stated that if the Turks do not "get rid" of these missiles, the country "will feel the impact of the sanctions."

Argentina

November 12, 2019

ARGENT 5 7/8 01/11/28 Spread

ARGENT 6 7/8 01/11/48 Spread

Three more funds sue Argentina over GDP warrants

Three investment funds Palladian Partners LP, HBK Master Fund LP and Hirsh Group LLC sued Argentina on August 12 for USD 427 mn claiming that the country modified the baseline used to assess payments on the GDP-linked warrant in 2014. The case was presented in the Commercial Court, Queen's Bench Division of the High Court of Justice of England and Wales, by the number FL-2019-000010. Together, the three funds own 29% (or USD 6 bn) of the Euro-denominated securities issued in 2005 and 2010, issued as part of debt exchanges.

The claimants argued that the country changed the GDP base year from 1993 prices to 2004 and refused to publish the 1993 GDP. In February 2014, the former Minister of Economy Axel Kilcillof announced that GDP grew 4.9% in 2013. But in March 2014, the Office for National Statistics (INDEC) changed the GDP’s baseline year, reducing growth in 2013 to 2.9%, below the 3.25% that triggered the coupons payments that year.

Currently, there are seven lawsuits regarding the Argentine GDP warrants. In January 2019, Aurelius Capital Master Ltd presented a similar demand in the New York federal court (case number 1:2019cv00351) for USD 83.7 mn, alleging that Argentina defaulted payments in 2013 on its GDP-linked securities. On October 31^th, the distress debt fund filed another suit seeking another USD 75.3 mn (totaling USD 159 mn) for overdue interest on this debt.

Cameroon

November 11, 2019

REPCAM 9 1/2 11/19/25 Spread

Legislative and municipal elections will be held in February

In a decree signed by President Paul Biya on Sunday November 10, it is established that municipal and legislative elections will be held on February 9, 2020. In these elections, National Assembly’s representatives and municipal councilors will be elected.

As soon as the decree was published, it was criticized by several political parties, mostly by the Social Democratic Front (SDF), the main opposition party. Jean Robert Wafo, member of the Front, informed on his party’s intentions of boycotting the upcoming elections. The SDF argues that the agreements reached last September during the “Great Dialogue” have not been met and that their decision of not taking part in the elections will not change unless the government keeps its word.

Lebanon

November 11, 2019

LEBAN 7 03/20/28 Spread

LEBAN 7 1/4 03/23/37 Spread

Salameh pledged to safeguard the stability of the national currency

On November 11, during a press conference, the governor of the Central Bank of Lebanon, Riad Salameh, assured that measures had been taken to safeguard the deposits and the central bank has the ability to preserve the stability of the Lebanese pound.

The governor denied the possibility of capital controls being established "because Lebanon depends on the free movement of money."

Salameh also informed that international reserves including Eurobonds amount to USD 38 bn. The reserves have decreased significantly to defend the exchange rate. In July, international reserves stood at USD 50.7 bn.

Gabon

November 11, 2019

GABON 6.95 06/16/25 Spread

Cabinet director, Brice Laccruche is removed from his position

Brice Laccruche Alihanga was dismissed by presidential decree of his position as Director of the Cabinet of the President of the Republic on November 7. The appointment was made public by Prime Minister Julien Nkoghe Bekale. In October 2018, President Ali Bongo suffered a stroke that leave him out of the office until March 2019. Laccruche Alihanga has gradually established itself as a key player in Gabon’s politics.

Brice Laccruche Alihanga toured on behalf of President Bongo in October, the first time that someone other than the president of Gabon makes a traditional tour. The tour raised strong criticism among government’s opponents, who interpreted the tour as Laccruche strategy to position himself as the president's successor.

The new cabinet director is Théophile Ogandaga, currently deputy general manager of Olam Gabon.

Barbados

November 08, 2019

BARBAD 6 5/8 12/05/35 Price

Finance Minister highlights debt swap conditions

On November 5, Finance Minister Ryan Straughn explained the terms and conditions of the debt swap accepted by external creditors on October18. Straughn explained to the Lower House that two instruments will be issued. The first with 6.5% coupons in US dollars expiring on February 1, 2021, and the second with semi-annual coupons of 6.5% in US dollars with expiration on October 1, 2029.

The finance minister explained that the economy has stabilized but was not yet out of danger. Straughn said: “We have taken this country from the edge (…) When trying to get out of a hole, we must first stop digging and then make sure that we can get everyone out as quickly as possible (…) There is a lot of work to do."

Ukraine

November 08, 2019

UKRAIN 9 3/4 11/01/28 Spread

IMF and Ukraine make progress in negotiations

Ukraine and IMF are making in negotiations of a new three-year financial arrangement that could be supported by an Extended Fund Facility (EFF), said Director of the IMF Communications Department Gerry Rice on November 7^th. The potential deal will replace the USD 3.9 bn Stand-By Agreement (SBA) that expires at the start of January 2020.

Deputy National Bank of Ukraine (NBU) Governor Kateryna Rozhkova said in April that the total IMF bailout could be between USD 5 bn and USD 8 bn. But the IMF is expecting that the dispute with Ihor Kolomoisky to be resolved.

NBU Governor warned that a ruling against the nationalization could hurt investor sentiment and the potential deal with the IMF. Although the Gerry Rice did not mention the PrivatBank issue in the IMF press briefing on November 7^th, he stressed the need to tackle corruption and reduce the influence of oligarchs over the economy.

Ecuador

November 08, 2019

ECUA 7 7/8 01/23/28 Spread

Economic Growth Law: Moving slowly, but surely

After three sessions and 71 interventions of the lawmakers, the first debate of the Economic Growth Law officially ended on November 7. The draft includes tax reforms that would allow the government to raise USD 700 mn in additional resources, according to finance ministry estimates, and reforms to increase After the Central Bank’s autonomy.

The second debate will take place in a single session. The voting process could be for the full text of the law or by sections. Likewise, by decision of the Parliament, the draft may be dismissed. The Assembly has until Sunday November 17 to make a final decision.

We consider unlikely that the National Assembly decides to dismiss the draft, taking into account the draft includes several requests that the business sector has been doing for a long time, such as the elimination of the income tax advance payment. The correísta bench has been the main promoter of dismissing the proposal since the beginning of the discussions on October 29, although they do not have the majority in their favor.

Brazil

November 07, 2018

PETBRA 5.999 01/27/28 Spread

Bolsonaro's victory and Guedes' statements strengthen market confidence

On Sunday 28, Jair Bolsonaro was elected as president of Brazil in the second round of these elections with just over 55% of the vote.

Paulo Guedes will be in charge of directing the economy of the Carioca country. After the victory of Bolsonaro, he offered some statements in which he says that the Mercosur block is not a priority, on the contrary, it is committed to a lower commercial opening with countries in the region while betting on increasing trade with other nations of the world, this together with attractive measures for companies: privatizations, concessions and sale of state properties.

At this time there are no reasons not to be optimistic with Brazil. Brazil's economic situation continues to improve. The growth of consumption, greater bank placements, reduction of the primary deficit and positive trend of PMI are some of the signs that can be observed.

Sovereign bonds have reacted positively. Their prices have increased while the differentials have tightened. On the other hand, the country risk has decreased 10% in the last month.