Oil production averaged 678 tbd (+0.0% MoM, +29.6% YoY) in August according to OPEC Secondary Sources and 723 tbd (+14.9% MoM, +12.8% YoY) according to Direct Communication data.

Production has stagnated around 700 tbd as PDVSA faces frequent disruptions due to power outages and other operational difficulties.

Bloomberg reported exports volumes at 375 tbd (-26.0% MoM, -16.8% YoY) while Reuters reported 761 tbd (+35.8% MoM, +21.6% YoY), the largest gap between the sources since July 2021.

We estimate the value of oil exports at USD 12.0 bn YTD (+60.4% YoY) and around USD 17.5 bn (+50.0% YoY) for the full year.

Oil production has stagnated around 700 tbd but remains 35% up YoY and we expect it to end the year 27% up.

Oil export results are mixed: volumes are 12% down YoY but their value is still 52% up thanks to still-strong oil prices.

We revise our 2022 GDP growth forecast down to 9.1% due to significant oil sector underperformance.

Politically, Venezuela remains stuck with a weak opposition and a comfortable Maduro. We struggle to see significant progress in negotiations and remain skeptical about sanction relief.

As the 6-year Statute of Limitations draws near, we believe it is best to outright avoid bonds for which it...

We are seeing increasing market chatter over the possibility of a tolling agreement to suspend the effect of the Statute of Limitations on defaulted Venezuelan bonds.

The Guaidó administration has in the past stated a positive disposition to sign such agreements and we think interests are aligned for them to do so in the next year.

The Maduro government put a concrete proposal on the table in 2020, but a tolling agreement would lack any effect in NY courts without Guaidó’s participation.

Ultimately, the Statute of Limitations prevents court action after 6 years but doesn’t strictly invalidate bon...

Oil output was 706 tbd (+29.8% YoY) in June and 698 tbd (+36.3% YoY) in 1H22, according to OPEC Secondary Sources. Direct Communication data came at 727 tbd (+14.8% YoY) and 751 tbd (+38.0% YoY), respectively.

Bloomberg reported exports at 375 tbd (-0.8% MoM, -20.3% YoY) and Reuters at 631 tbd (+61.1% MoM, -1.6% YoY).

We estimate that the value of exports in 1H22 was USD 8.8 bn (+65.3% YoY) and expect them to end the year at USD 20.6 bn (+76.4% YoY).

Less than 2 months away from the fifth anniversary of the country’s default, the 6-year Statute of Limitations looms large over Venezuelan bonds.

The restriction on legal action applies to each payment separately (whether it is a coupon or principal amortization). For the first missed coupons, the limit goes into effect at some point between October 2023 and May 2024 (depending on the bond).

However, there is also a larger threat on principal payments, which applies to 6 sovereign bonds, 3 PDVSA bonds, and the ELECAR bond before 2027.

In our view, any bond with principal repayment before 2023 (minding sink schedules...

Late on Monday, Nicolás Maduro revealed that a US delegation is in Venezuela to resume March 5 talks.

The visit comes as a build-up of events points to a higher likelihood of an agreement, including the French Presidency’s support for the reintegration of Venezuela and Iran into the international oil market.

Earlier in the month, OFAC removed a nephew of Maduro’s wife from its SDN list and in May authorized Eni and Repsol to execute oil-for-debt swaps with PDVSA.

The likelihood of OFAC easing restrictions on Chevron is rising, but it is still premature to call it a done deal due to the US government&rsq...

Exported oil volumes plunged due to operational difficulties during the month, despite production still showing robust growth.

OPEC Secondary Sources data has production at 717 tbd (+41% YoY) in May and 693 tbd (+37% YoY) YTD. Direct Communication data came at 735 tbd (+26% YoY) in May and 756 tbd (+44% YoY) YTD.

The volume of oil exports fell 24% MoM to 378 tbd, according to Bloomberg, and 39% MoM to 391 tbd, according to Reuters.

Despite the setback, the value of oil exports remains 64% up YoY for Jan-May and we expect volumes to bounce back over the next two months as operational difficulties dissipate.

LEBAN Eurobonds are trading cheaper than VENZ for the first time since the March 2020 default.

Both countries are in seemingly intractable political crises, but the macro debacle has been much worse for Venezuela.

VENZ bonds are burdened by broad economic sanctions, a ban on trading by US persons, and the rapid approach of the statute of limitations. On the flip side, the country’s oil gives it more growth potential.

For LEBAN, a short-term IMF program and external debt restructuring look more feasible, which means the investment horizon is likely to be shorter.

We have BUY recommendations on both credits, but...

We expect oil production to rise 38% YoY to 767 tbd in 2022 and oil exports to come at USD 20.9 bn (+80% YoY).

We find strong growth in imports, which we forecast at USD 11.2 bn this year, 27% up against 2021.

Non-oil tax revenues show strong growth so far, and we expect them to end the year at USD 5.0 bn (6.5% of GDP), a 107% rise against the USD 2.4 bn (3.5% of GDP) of 2021.

Given developments in the oil, external and fiscal sectors, we revise our GDP growth forecast for 2022 to 11.2%, up from our previous 5.2%.

We expect inflation at 74%, below Sudan (244%), Lebanon (239%), Zimbabwe (86%), and Turkey (79%), which...

Oil production shows robust growth in YoY terms but remains below the peaks set in December, as quality issues and returned cargoes hinder exports.

OPEC’s Secondary Sources show production at 697 tbd (+33% YoY, +1% MoM) in March and 683 tbd (+33% YoY, +2% QoQ) in 1Q22.

The price of the Merey crude was USD 88.1/bbl (+90% YoY) in March and averaged USD 74.2/bbl (+76% YoY) in 1Q22.

In our view, sky-high prices and stable volumes put Venezuela well on track to generate USD 20 bn (+74% YoY) in oil exports this year.

A high-level US delegation visited Caracas over the weekend to discuss a potential deal to ease oil sanctions with the Maduro regime. The Venezuelan opposition was left out of the talks.

The country could add 500 tbd to its output with relative ease. The challenge will be to find terms that enable this without casting either side in a poor light.

A deal would decrease the probabilities of regime change but could also enhance recovery values if significant investment flows into the oil sector before a restructuring.

The cards are stacked against the opposition, who do not have much to offer in negotiations, while Maduro is focused on guaranteeing his reelection in 2024 by improving economic conditions.

We forecast GDP to grow 5.2% in 2022 (down from 6.2% last year) driven by a strong external sector, adaptation to sanctions, and a continuing rebound effect from the pandemic downturn.

We expect oil production to trend up towards 800-900 tbd and imports to grow to USD 11.4 bn in 2022 (53.2% up from USD 7.5 bn in 2021).

By the end of 2022, most bonds will turn 5 years in default. We expect increased litigation as the 6-year statute of l...

Partial results for the November 21 elections show the opposition won 3 of 22 governorships and either 40 or 117 of the 322 mayorships already called.

On aggregate, Chavismo received 3.6 mn votes (45.3%), the Democratic Unity Roundtable (MUD) 1.9 mn (24.5%), Fuerza Vecinal 456 thousand (5.8%) and Alianza Democrática 1.3 mn (15.7%).

The results will allow emerging moderate leaders, especially Manuel Rosales, to press for influence within the opposition, but we do not believe that will affect the timing or probability of a regime change.

Our base-case scenario remains that the Mexico talks will resume in 1Q22, but we...

Two key dates loom large over Venezuela’s interim government: the regional and local elections scheduled for November 21, and the expiration of Juan Guaidó’s legal mandate on January 5.

The regional and local elections look like a non-event to us we don’t expect them to change the current status quo in any way.

Voluntad Popular’s confrontation with one of its key partners in the G4 coalition, Primero Justicia, has made a renovation of Guaidó’s mandate unlikely.

Mexico talks could prove more relevant than the elections, but Maduro negotiates from a position of strength and doesn&...

The value of oil exports is 55.2% up YoY in the first 9 months of 2021 and would close 57.7% up for the full year if current trends hold.

Similarly, our data for imports shows a 20.3% YoY increase in the first 7 months of the year and would close the year 13.5% up if current levels hold stable.

Other indicators, including the Venezuelan Finance Observatory (OVF)’s Monthly Index of Economic Activity, various sectorial surveys, and Google Mobility data, also point at growth.

Our broad-based analysis of available economic data leads us to revise our GDP growth forecast for 2021 to 6.2%, from the previous 2.0%.

Gr...

There are 20 cases concerning Venezuelan defaulted debt in NY courts. Litigation for PDVSA debt has been limited: 3 cases involve the company’s promissory notes, 2 the PDVSA 20 collateral and only 3 involve other PDVSA bonds. There are 13 cases involving sovereign bonds.

The most litigated bonds so far are VENZ 25 (28.7% of the bond’s total outstanding), VENZ 20 (25.9%), and VENZ 18O (21.4%).

The 6 cases that have already concluded favorably to the bondholders have taken an average 16 months from initial complaint to final judgment.

The 11 ongoing cases have also taken 16 months on average, so far. In several,...

The Dominican government acquired PDVSA’s 49% share in joint-venture REFIDOMSA in a debt-for-equity swap valued at USD 88 mn.

If the bonds were received at market value by the Venezuelan government, it could have reduced its total debt by as much as USD 3.3 bn.

On the other hand, if the bonds were received at face value, it could have sold its stake in REFIDOMSA for as little as USD 7.5 mn.

Neither scenario looks reasonable, and we would expect the valuation to lie somewhere in between both cases.

We don’t think this operation can be scaled-up much more, as the stock of available external assets is limit...

Several developments in the last few weeks indicate that the race for Venezuelan assets abroad is heating up.

Banco San Juan Internacional (BSJI) recently received authorization from a Portuguese court and an OFAC license to seize funds from an account at Novo Banco, which holds around USD 1.8 bn.

ConocoPhillips is also trying to seize funds held by the Jamaican government in escrow accounts to the name of PDVSA, which could amount to USD 115 mn.

US courts are allowing FARC victims to seize Venezuelan government assets without requiring an OFAC license. The efforts have been very successful, and public documents have iden...

Over the past few days, we’ve seen two significant new concessions aimed at facilitating the participation of opposition parties in the upcoming November 21 elections.

On Monday, Maduro announced the elimination of “regional protectors,” which oversee the local and regional governments in opposition-controlled states and municipalities.

Then the recently designated CNE board lifted the ban on the MUD political coalition party used by the opposition to group their candidates under a single umbrella for elections.

These developments add to a June 25 joint statement by the US, EU, and Canada, which calls fo...

Today, Bloomberg released a rare interview with Venezuela’s de facto President Nicolás Maduro, alongside separate conversations with opposition leaders Juan Guaidó and Henrique Capriles. We provide a summary of each interviewee’s perspective and brief commentary.

Maduro paints his administration as a victim of US policy while reasserting his goodwill towards investors and creditors. Unsurprisingly, he seeks to rally lobbying efforts by creditors and oil companies to end the sanctions regime.

Juan Guaidó comes off as not being in control, both regarding US sanctions and the potential consequences...

Recent concessions by Maduro, including a new CNE, rekindled hope of a change in the stagnant status quo, especially given a moderate positive reaction from international players.

Nonetheless, Guaidó’s core demand is a clear schedule for short-term presidential and legislative elections, to which Maduro is extremely unlikely to agree.

The new CNE is regarded as a ploy to further divide the opposition. Guaidó rejected its designation and continues to antagonize alternative leaders who deem it a political victory.

In our view, the dynamics of the political stalemate haven’t changed since our last r...

There is a growing rift within the opposition coalition about the strategy going forward. An increasing number of politicians want to participate in regional elections, but Guaidó himself still refuses to do so.

Regardless of the participation, we see little chance of a regime change over the next 4 years.

We do think that there will be a relaxation of economic sanctions in the mid-term, but not without some concessions from Maduro.

In our view, any proposal to restructure Venezuelan debt in the short-term is fantasy, but we do think the US could lift the restriction on the trading of bonds in the secondary market....

Commodity prices have performed spectacularly after the chaos of March 2020: Precious metals (+ 25%), Gas (+ 66%), Oil (+ 254%), Copper (+ 93%) and Coal (+ 74%)

Some short-term conditions such as the stimulus packages of the main economies, inflationary risks and the weakness of the dollar promote a rise in real assets

Increased industrialization in India and the maintenance of government spending at high levels, support the boom in the long term

For now we know that there is a rise in prices, but there is no certainty that there will be a supercycle of several years because all the long-term factors are variable

Of...

In 2021, we expect the Maduro regime to continue moving in opposite directions in economics and politics.

What we see is an increasing likelihood that Venezuela will end-up a Cuba-like disaster: perpetual sanctions, no political opposition, economic stagnation and no resolution to the debt default.

PDVSA’s production hit bottom in 2020, and we expect Venezuelan oil output to stabilize in 2021, averaging 550 tbd over the year.

After seven years of contraction, we expect GDP to grow 2% in 2021, mainly driven by the non-oil sector (trade, construction and financial sectors).

BUY: Both Venezuela and PDVSA bonds ro...

Emerging markets faced massive capital flight as a result of the COVID-19 crisis.

However, there has been debate as to whether the severe initial shock was primarily the result of an interruption in liquidity flows and not the deterioration of macroeconomic variables.

Growth in emerging economies may have taken a permanent hit but, at the same time, emerging markets could become more attractive to those hunting for yield.

We believe that the deepness of the impact of the pandemic on EMs can be quantified.

Some observers of Venezuelan debt have proposed the idea of leveraging the Original Issue Discount (OID) on most of the country’s bonds to eliminate a portion of the principal claims in a future restructuring.

Most USD-denominated bonds were initially settled for local currency at an overvalued official exchange rate, thus generating arbitrage returns for locals.

While we don’t think applying an OID argument formally would be practical, we do think it will be a part of a broader discursive push for high haircuts.

After assessing the initial and amortized OID in each Venezuelan bond, we suggest that warry inves...

The PDVSA 22n bond has been highly controversial since its initial sale in a disputed 2017 transaction for the very unusual price of 31 cents on the dollar.

The bond’s issuance was heavily questioned by National Assembly representatives. This included strongly-worded statements by influential Congressman Julio Borges, who recommend its repudiation.

Nonetheless, we think the case against the bond is not so much about its legality, but rather its illiquidity and the potential reputational risk it entails.

On balance, holding this bond would be hard to justify, and a constructive investment thesis would have to rely on...

We take a comprehensive look at political risk indicators in a group of Emerging Market countries, trying to identify potential sources of conflict.

We analyze the electoral scenarios in the four Latin American nations that will have electoral processes during the end of 2020 and all of 2021.

We review the scenarios in the parliamentarians of Argentina and El Salvador, we comment on the electoral process that will take place in Venezuela, and we review the perspectives of the presidential elections in Ecuador.

We evaluated the World Bank’s governance indicators for our sample countries in 2019 and share our view of thes...

Late on Sunday, Bloomberg News reported that President-elect intends to name Antony Blinken as Secretary of State.

Blinken is deemed a strong defender of multilateralism and believes that the United States should reinforce its alliance with Europe. 

We expect that Blinken to start negotiations with stronger emphasis on gradual concessions and less emphasis on instant regime change, but not an outright lifting of the sanctions regime.

We expect any relaxation of the sanctions regime to come after Maduro’s regime show a prove of good faith.

Until August, the export index has declined 75.5% y-o-y. However, the exports index could be overestimating the decline after oil sanctions were imposed.

Unexpectedly, our import index shows a 22.3% increase until August.

We expect that this growth in imports will translate into a slight growth in GDP next year, under the assumption that oil production remains stable at an average of 400 kbd

With Biden’s victory we expect a de-escalation of the sanction regime in the medium term and a halt on the imposition of secondary sanctions in the short term

We think the change of administration in the US is likely to le...

Judge Katherine Polk Failla decided that the PDVSA 8.5 2020 bond is valid and enforceable, which brings bondholders one step closer to CITGO.

The applicable law governing the bonds is NY law, not Venezuelan law (as the Guaidó team had argued).

Furthermore, the several resolutions issued by the National Assembly rejecting the bond do not justify the application of the Act of State Doctrine.

It is worth remembering that OFAC’s General License 5E still blocks the attachment of the shares until January 2021, at the earliest.

Just shy of their 3rd year in default, there is USD 885 mn worth of sovereign bonds, USD 60 mn of PDVSA bonds, and USD 207 mn of PDVSA promissory notes under litigation.

A series of setbacks in the Casa Express/Pharo Gaia, Contrarian Capital, and Lovati et al. cases could have a very serious impact on a future restructuring of Venezuelan debt.

The legal representation of the Guaidó administration had been pursuing stays on litigation on the premise that judgements would hurt Venezuela’s capacity to renegotiate the debt in the future.

Several court decisions have found this argument lacking, indicating that in...

On September 15, the Maduro administration announced an offer to freeze the operation of the “prescription clause” in Venezuelan bonds.

According to some interpretations, this clause would cut down in half the NY law’s 6-year Statute of Limitations, putting missed coupons from late 2017 at risk of being lost.

Late on Monday, the Guaidó’s administration issued a statement clarifying that the prescription clause does not decrease the standard 6-year period to present legal actions on overdue payments.

The Maduro administration’s offer never made sense other than as a political ploy to ge...

The Maduro administration issued a statement offering a conditional agreement for the suspension of the statute of limitation on Venezuelan bonds.

Statute of Limitations on bonds extend to 6 years under New York law. It means that overdue payments that are not legally reclaimed within that timeframe become legally unenforceable.

U.S. persons are barred by sanctions from participating in any negotiation with the Maduro administration and any agreement would be legally invalid in U.S. courts.

It is very unlikely that the Maduro administration is ignorant of the fact that any agreement at this stage is impossible, which lead...

After January 5, 2021, the interim government goes into a grey area where its legitimacy is weakened.

Capriles intends to create a new space for negotiation, which unlocks the internal political struggle.

As we see it, although the recent political moves open up a political game that was stagnant, they do not increase the probabilities of regime change in the short term.

There hasn’t been much movement in Venezuela’s legal cases in U.S. courts and expectations of regime change have worsened somehow. We like PDVSA 8.5 2020 and cheap high-coupon Venezuelan bonds.

Since 2014, the economic debacle in general – and, particularly, the decline of oil production – has resulted in some large structural changes in the Venezuelan economy.

After the nationalization in 2011, revenues from gold smuggling sums on average USD 7.9 bn. In 2018 alone, Venezuela could have received USD 2.3 bn for gold smuggling.

According to our estimates, remittances went from 0.4% of GDP in 2017 to 4.2% of GDP in 2019.

We estimate that by the end of this year remittances would stand at 5.9% of GDP.

As we’ve noted before, we like the risk-return relation on the PDVSA 8.5 2020 and retain our...

Venezuela was already in a bad place before COVID-19, and the pandemic has only made it worse. The political and humanitarian crises look further from resolution than ever. Yet, there are still reasons to be hopeful of a sharp recovery once a transition materializes. In this report, we look at the facts to find a balance between the dual narratives of redemption and damnation.

Section 1 – The Bad: Venezuela Looks Like Post-War Debris, deals with the incredible plunge in the country’s economy, which is only comparable to some of the most destructive wars in recent history.

Section 2 – The Good: Venezuela is Sitting on a (B...

Taking a look at the history of the case of Kensington International Ltd. vs the Republic of Congo, we find some similarities that could be relevant to current Venezuela litigations.

In the event that creditors cannot (ultimately) put their hands over CITGO because of OFAC licenses or any other reasons, Venezuela/PDVSA cannot escape without paying one way or another.

Nevertheless, the core of Kensington vs Congo was the establishment of a fraudulent structure for the country to continue selling its oil without paying to creditors. This part of the dispute is hardly relatable for the most important Venezuela/PDVSA cases, which a...

The PDVSA 8.5 2020’s illegality trial is at the definitive stage and we review both sides' arguments to see who may be leading the race.

A hearing that could decide the case is scheduled for August 12.

The core of the dispute right now is the governing law for the authorization to pledge CITGO shares as collateral.

If the bondholders win the trial, the process of collecting the money could differ from the standard waterfall payment structure used in bankruptcy cases.

For now, the idea of a de-escalation of the conflict, a negotiation process and the possibility of mediation for the lifting of sanctions, seem far away.

PDVSA output plunged to 280 tbd in June, this places current Venezuelan output at its 1928 level, when the country was starting oil exploitation.

Households in a situation of income poverty went from 48.4% in 2014 to 96.2% in 2019 and extreme poverty went from 23.6% in 2014 to 79.3% in 2019.

We cut our growth estimate for 2020 from -21.2% last month to the current -30.2%.

For the past year, U.S. government executive orders have safeguarded Citgo from creditor attachment.

However, the defensive edifice is beginning to crack.

In the Crystallex trial, the upcoming fortnight will be key to decide the future of CITGO, according to the schedule set by Judge Leonard Stark.

The judge has moved to allow think the sale process through but has avoided giving the green light to the actual sale.

The Guaidó administration has just one last bullet in the chamber to protect Citgo.

We take a look at the parties’ proposals on how to sell the PDVH shares.

We estimate that less ...

36 of the 77 eligible countries have applied for the G20’s Debt Service Suspension Initiative (DSSI).

Chinese debt has grown significantly, but has remained highly opaque. The recently released World Bank dataset is a big step forward in this regard.

Countries that would benefit the most from DSSI owe on average 42% of their 2020-2021 and 41.1% of their 2022-2025 debt service to China.

So far, DSSI only extends for payments scheduled for 2020, but there are many voices calling for an extension to 2021.

To put it bluntly, a program of debt relief or a generalized standstill on official debt would go nowhere wit...

Emerging debt continues to be in trouble given current market conditions.

So far debt relief proposals by the G20, IMF and World Bank have only included private creditors on a voluntary basis.

It seems more costly to deal with relief or restructuring of Eurobonds than to advocate for this type of request in bilateral and commercial debt.

Multilateral organizations are also constrained from granting debt relief by its potential impact on their own credit profiles.

Low interest rates and the hunt for yields of the last decade has left broad swaths of EMs overindebted and vulnerable.

The first half of 2020 is not yet over and we already have 3 countries in default.

The recent record of most defaults on Eurobonds on a single year was 4 in 2017, so 2020 is not far from setting new records.

Eurobond restructuring processes are usually among the most complicated due to the variety of holders and the different interests they represent.

Suriname, Zambia, Belize, Sri Lanka and Angola are in the most risk to engross the default-statistic for the year.

Current gasoline production stands at around 35 kbd, representing a drop of 84.9% compared to the 2008 peak.

We expect that after the demand peak of the first week of the new price system, fuel demand will drop in the following weeks, so Iranian gas could last a month.

If the Maduro government fails to import more gasoline or reactivate the refining plants soon, we will once again see shortages like those of April and May.

Prospects for the economy remain grim, with a projected drop in GDP of 21.2% and inflation of 5,648% in 2020.

May was one of those months that feels like a year. We had a default in Argentina, a tense election in Suriname, a deadly pandemic still spreading around the world, and yet, it was a good month for emerging market debt

Our EMFI Core Index went up for the first time in 6 months. The biggest winners were Argentina, Angola and Ecuador, while Venezuela, Suriname and Sri Lanka were among the negative outliers that went against the general risk-on mood

The macro and fiscal situations deteriorated further for all countries covered, and we chronicled the dramatic economic crash in our Country Reports

We’ve been preparing fo...

As of May 22, 8 countries have at least one USD-denominated sovereign bond trading below 50 cents on the dollar.

The Covid-19 crisis could lead to a new wave of sovereign defaults from prolonged confinements.

We discuss the worst debt restructuring events so far this century.

Argentina 2005 remains at the forefront of these events if we exclude the exceptional cases of countries at war or leaving them.

The countries with the most compromised solvencies that could generate problems with their debt are Angola and somewhat behind, Sri Lanka, El Salvador, Egypt and Pakistan.

A pandemic year was on the cards, the dramatic magnitude of its effects was not.

The global economy is expected to shrink by 3% in 2020, but leading indicators are pointing to a deeper downturn.

Emerging countries with a history of volatile economic growth will show the worst results.

Some economies may experience a period of above-trend growth during the recovery, although the level of GDP will remain, in most cases, below the pre-virus level.

Today, the US Supreme Court rejected the request made by the Guaidó-appointed Special Prosecutor's office to overturn the Third Circuit Court decision that allows Crystallex to seize Citgo Holding shares.

The political arguments outlined in the appeal were based on the idea that the decision to allow Crystallex to seize the Citgo shares would go against US foreign policy interests

The move could be seen as a Hail Mary by the Guaidó-administration, which hoped that the SCOTUS and the US Executive would prioritize foreign relations. Nonetheless, the pass failed miserably. 

The Trump administration rem...

Pakistan is the weakest among the EMFI Countries, in terms of the spread of the virus. Lebanon, Sri Lanka and Barbados are the strongest, with a controlled increase rate and a persistent lockdown.

The countries that we evaluate with the worst economic performance year-to-date are Angola, Venezuela, Lebanon, Barbados, El Salvador, Ecuador, Sri Lanka, Argentina and Suriname.

Since the end of 2019, the local currency has depreciated -70.5% in Venezuela, -52.4% in Lebanon, -43.5% in Argentina and -40% in Suriname.

El Salvador and Argentina launched the most ambitious fiscal program among our sample, which will cost 6% and 5.6...

The safest rung of EM hard-currency sovereign bonds fell on March but has already retraced all their losses.

Mid-quality EMs plunged over March and have risen somehow since, but haven’t fully recovered.

This segment has seen a 320 bps rise in average yield in 2020, going from an average 6.1% yield to 9.3%.

We believe high-yield bonds in our mid-quality group have significant upside if they avert a credit event.

After a dry March, markets are again open for fresh bonds, but only from relatively high-quality issuers.

The press uncovered the involvement of the Juan Guaidó interim government in a poorly-planned maritime incursion to overthrow Maduro.

The failed incursion damages the interim government’s claim to constitutionality, on which international recognition is based.

Alejandro Grisanti, member of PDVSA ad hoc board, resigned from his position last week.

Grisanti's resignation represents the weakening of the fraction within the interim government that advocates for a negotiated solution with the bondholders.

US stocks rose 12.7% in April, while US investment grade bonds rose 4.6% and EM bonds 4.0%.

Our EMFI Core Index fell 0.9% over the month and is 27.1% down YTD.

The best performers of April were Egypt (+4.7%), Sri Lanka (+4.0%) and Turkey (+3.8%).

The worst performers were Suriname (-26.9%), Lebanon (-14.0%) and El Salvador (-11.3%).

The IMF has approved just over USD 16.0 bn for 61 countries.

Of the 16 countries we follow, 6 have already been granted financing for a combined USD 3.5 bn.

Lebanon and Argentina presented restructuring proposals asking for large debt relief but not offering much adjustment.<...

We identified 23 countries that have at least one bond yielding above 10%, a threshold usually associated with sovereign distress.

Among the most distressed credits, first-time defaulter Lebanon is trading between 16.3 and 18.3 cents on the dollar, on account of slow progress on a reform plan.

Argentina’s debt goes in a range of 23.2 to 34.6 cents on the dollar, days after the Fernández administration’s aggressive mid-April proposal to bondholders was publicly rejected by 3 creditor groups.

Ecuador trades between 28.8 and 33.6, after negotiating a coupon standstill that will give the country until Augus...

Citgo’s 2019 net income plunged 71.1%, from USD 851 mn in 2018 to USD 246 mn. EBITDA decline 42.3% from USD 1.85 bn to USD 1.06 bn, mainly driven by the decline in Lake Charles EBITDA that fell USD 301 mn.

Some PDVSA creditors expected Citgo to help pay off its parent’s debts. Citgo bond covenants restricts dividends payments while its net leverage (Dividend Threshold), or net debt divided by pre-tax earnings (EBITDA), remains above 2. The net leverage ratio jumped from 4.8 in 2018 to 16.8 at the end of last year.

We not expect the net leverage to fall below that level in the next year, since weaker refining margins...

Two weeks ago, we singled out some early calls for a generalized global debt moratorium in our Global Strategy Viewpoint: Force Majeure. The idea has gained significant traction and is becoming one of the main themes in economic and financial discussion.

While we don’t think a generalized moratorium on commercial bonded debt is likely to succeed, investors should be aware that it is a growing theme and bondholders will probably be under increased pressure to accept attempts at restructuring bond terms.

There are some indications that China is a significant roadblock for the IMF-World Bank initiative for a bilateral debt m...

Our index shows that in 2019 exports plunged 51.3% as US sanctions on PDVSA affected oil exports to the Venezuelan main trade partner.

We expect this decline to continue in 2020, recording a 67.8% contraction at the end of the year, as the price war between Russia and Saudi Arabia continues to flood oil market and the COVID-19 containment measures curtails global demand.

Imports halted in 2019, falling by 44.1%.  This reflects a strong 58.5% y-o-y decline imports in 2Q19 after the wind down period of the US sanctions came to an end.

We expect the imports decline to continue in 2020, registering a 27.6% contraction th...