The Executive proposes a 2026 budget with expenditures totaling GTQ 161.8 bn (15.8% of GDP), the highest in the country's history. 

The projected fiscal deficit amounts to 3.2% of GDP, extending the expansionary trend started with the 2025 budget. We maintain our projection of a fiscal deficit of 2.8% of GDP and a primary deficit of 1.0% for 2025. 

Despite large fiscal space, challenges persist in the low execution and transparency of public spending, especially in infrastructure. 

The sustainability of this strategy will depend on channeling resources towards activities that increase productive capacity and long-term growth potential.

The name remains one of the strongest relative value names in our coverage, with yields still above its credit tranche — we continue to see an appealing risk/reward and maintain our BUY. 

Our EMFI Core Index had a strong June, climbing 3.8% as nearly all its components advanced. Argentina was the sole exception, holding steady. 

The index concluded 1H25 with a strong 8.1% gain, marking its second-best first half on record, trailing only 2024's 12.6%. 

ECUA (+15.4%), LEBAN (+8.7%), and ANGOL (+6.1%) were June’s top performers, while ARGENT (+0.3%) was the weakest performer. 

During the month, we closely monitored the impact of the Israel-Iran conflict on global markets while covering 1Q and 1H results for several countries. 

During the month, we saw two issuances from the countries we cover: BARBAD 8% 2035 and BAHAMA 8.25% 2036. We made no changes to our credit strategy recommendations in June.  

The YoY inflation declined from 37.9% in April to 35.4% in May, although market participants expect the central bank to miss its target for the year.

GDP growth slowed from 5.4% YoY in 4Q24 to 2% YoY in 1Q25, driven by weaker domestic demand.

Profit margins fell to 4.6% in 1Q25, the lowest level since 4Q20, despite easing monetary policy since late 2024.

We revised our inflation forecast upward from 26.4% to 28.1% and our GDP growth forecast from 3.4% to 3.0% in 2025.

BUY: We like the credit due to healthy fundamentals and attractive valuations from a relative value perspective.

The arrest of Ekrem Imamoglu affected market confidence in the administration and put pressure on the currency, precipitating a sharp decline in FX reserves, but the crisis appears to be under control.

With geopolitical risks dissipating, the name enjoys healthy solvency and liquidity fundamentals.

On a relative value basis, we see the name as attractive and believe its spread can tighten. Good current income is also a positive factor.

We evaluate the risk/reward asymmetrically skewed to the upside and modify our recommendation from HOLD to BUY.

Despite progress under the IMF program, Sri Lanka’s fourth review remains pending due to unresolved structural benchmarks and financing assurances.

Although the external sector registered a current account surplus in early 2025, rising import levels coupled with volatile oil prices present increasing risks to the external sector.

The US tariffs, currently on hold, pose a significant risk to Sri Lankan exports, particularly in key sectors such as garments and textiles.

While remittances and tourism have shown strong performance, Sri Lanka remains highly exposed to external shocks, and any disruption could increase fiscal and monetary pressures.

HOLD: Strong macroeconomic momentum has pushed valuations to their highest levels since March, but external risks persist. 

The IMF approved the third review of the EFF and ECF programs with Honduras and authorized a new disbursement of USD 160 mn, highlighting the commitment to fiscal stability and partial progress in structural reforms. 

Almost all performance criteria were met as of March 2025, with ENEE cutting distribution losses to 34.7%, reinforcing fiscal and operational progress, though priority social spending remains lagging. 

Despite progress, challenges remain on the institutional agenda: only 3 out of 6 structural targets have been met, several reforms are still pending, and new benchmarks were added in a sensitive political context.

BUY: Strong macro and fiscal stability, supported by the IMF anchor, has helped to contain idiosyncratic risk. With yields surpassing those of regional peers, Honduras consolidates its position as an appealing risk-reward story. 

Progress on external buffers, ESG indicators (where Honduras ranks in the bottom global quintile), and remittances independency are needed to unlock further upside in yields. 

Despite ongoing vulnerability to oil price volatility (with average prices currently below budget projections), the government is implementing significant tax reforms to boost non-oil revenues.

President Bola Tinubu approved four key tax bills aimed at increasing tax collection through systemic efficiency.

We don’t expect this tax reform to generate substantial social discontent as it incorporates specific mitigating measures, but the new VAT distribution may pose political risk due to regional equity concerns.

The tax reform poses significant upside risks over the medium term, even if the government falls short of its 18% tax-to-GDP target by 2026, as the country will have a more efficient tax system and diversified revenues. 

In the first quarter of 2025, GDP rose by 3.5% YoY, despite a contraction of 4.3% in the oil sector.

Oil output continues on a declining path, hitting 1002 tbd in April (-6.7% YoY) and 1015.5 tbd in May (-10.2% YoY).

Domestic credit for the non-oil sector remains limited, particularly due to higher financing for the public sector.

The government is promoting new privatizations and tax reform to encourage economic diversification, although the oil sector's importance is unlikely to fade in the medium term.

HOLD: Improved oil prices would benefit the credit through the next year, but the high external debt burden can only be solved with sustained growth and overall surpluses.

We project Ukraine’s GDP growth at 2.6% in 2025, with downside risks if the war of attrition persists.

Inflation accelerated to 15.9% YoY in May 2025, while the NBU maintained its policy rate at 15.5%, and we maintain our inflation forecast of 10.6% by the end of 2025.

We forecast Ukraine’s fiscal deficit at 18.3% of GDP in 2025, with currently 57.8% of spending allocated to defense and revenues up 149.8% YoY.

International reserves stood at USD 44.5 bn in May 2025, covering 5.8 months of imports, supported by USD 4.6 bn in aid received between January and April.

With Eurobonds trading at deeply depressed levels, we see the risk-reward tilted to the upside. We maintain our BUY recommendation.  

El Salvador posted primary and overall surpluses in 1Q25 thanks to spending restraint and higher non-tax revenues.  

We revised our fiscal projections, forecasting a primary surplus of 3.4% of GDP and an overall fiscal deficit of 0.3% of GDP in 2025. 

Congress approved the long-awaited Fiscal Sustainability Law on June 10, fulfilling one of the IMF’s structural measures and setting legally binding debt targets for the Non-Financial Public Sector. 

El Salvador continues to meet most of its commitments under the IMF’s Extended Fund Facility (EFF), but the exclusion of pension liabilities from the central government balance remains a transparency concern.

HOLD: Despite progress in fiscal consolidation and compliance with EFF targets, the name has a high debt-to-GDP ratio and low growth, while trading with yields below credit rating peers.

Jamaica's current account surplus rose to 3.4% of GDP in 2024, an increase from 2.9% in 2023.

In 1Q25, stopover tourism arrivals fell 5.6% YoY, partly due to adverse travel advisories from the US. Total visitors came in at 1.2 mn, 94% of the Ministry of Tourism’s target of 1.3 mn.

Remittances during the first two months of the year were higher than last year (+3.9% YoY in January and +2.3% YoY in February), but they could be affected by Donald Trump's proposed 3.5% tax on remittances

For 2025, we project a moderate fiscal surplus of 0.5% of GDP, primarily driven by the new US trade and immigration policies, a slowdown in the tourism sector, and concerns over slowing economic growth in the US, which could affect remittance inflows.

Yields fail to compensate for the latent external risks embedded in the credit, particularly with hurricane season just underway. We reaffirm our SELL rating. 

The IMF increased its growth forecast from 3.6% to 3.8% for the current fiscal year that ends on June 30 after a surprise of 4.3% in the last quarter of 2024.

Private investment rose from 39.5% to 63.5% of the total investment in the first quarter of FY 2024–25, reaching its highest level in at least 5 years.

Real credit to the private sector rose by an average of 8.8% during the first quarter of 2025.

The government announced the sale of stakes in 10 public companies for FY 2025-26, but the military sector is deepening its control over the food sector.

HOLD: While liquidity fundamentals remain worrying, the name still enjoys access to external markets for rollover purposes and high coupons partially mitigating potential price declines.

Following the IMF’s May visit, Pakistan’s authorities committed to energy, monetary, and fiscal reforms under the EFF and RSF programs, presenting the FY 2025-26 budget around those programs’ objectives.

In the first three quarters, revenues surged by 36.7% YoY, yet interest payments consumed nearly 48.2% of revenues.

Pakistan’s Finance Ministry projects the fiscal year 2024-25 to close with a deficit of about 5.6% of GDP and a primary surplus of 2.2%.

The new budget considers revenue‑enhancing measures, targeting a primary surplus of 2.4% of GDP and an overall deficit of 3.9%.

We forecast the deficit to narrow to 4.6 % of GDP in FY 2025‑26 and 3.6 % in FY 2026‑27, but slower growth, inflation spikes, and potential defense-spending shocks could derail consolidation, especially given volatile non‑tax revenues from state‑owned enterprises.

BUY: The increase in revenues is encouraging, as it reduces liquidity pressures. With official creditors mostly assured to cover the financing gap, bonds look attractive in our opinion.

Greater sectarian polarization and low voter turnout consolidated the presence of traditional parties and marginalized civil society forces.

While municipal elections do not represent a proper test for political parties, they confirmed that Hezbollah is far from disappearing in the Lebanese political landscape.

Hezbollah and the Amal Movement succeeded in unifying the Shia vote, avoiding a defeat in what was expected to be a plebiscite and maintaining their territorial base in southern Lebanon despite Israel's attacks.

On the side of catholic parties, Lebanese Forces took away seats from the Free Patriotic Movement, likely related to FPM’s relationship with Hezbollah and Michael Aoun’s legacy.

BUY: Despite the rally in the last months, the PDI-adjusted price is low, at 12.7c, which tilts the risk/reward balance to the upside.

The FY2024/25 budget projected growth in revenues and expenditures of 6.7% and 4.7%, respectively, with an estimated primary surplus of 3.9% of GDP and an overall deficit of 0.5% of GDP.

The cumulative fiscal deficit for the first ten months stands at USD 38.3 mn (0.3% of our estimated GDP), with revenues amounting to USD 2.5 bn (15.6% of GDP and 69.4% of the annual target).

The FY2025/26 budget aims to consolidate the fiscal commitment and discipline that the government has sought to maintain, projecting for the first time a fiscal surplus of 0.5% of GDP and a primary surplus of 4.5% of GDP.

We forecast a primary surplus of 3.7% and an overall deficit of 0.7% for fiscal year 2024/25. For fiscal year 2025/26, we forecast a primary surplus of 4.5% and an overall surplus of 0.2%.

HOLD: Neutral credit indicators and a 7.4% current yield for the 8-year bond balance the risk/reward proposition. 

Inflation slowed down to 2.8% MoM in April and both the asset-based break-even inflation and the central bank’s market expectations survey signal further declines ahead. 

Milei gained political momentum with a key electoral victory in the City of Buenos Aires, which is set to influence alliances for the October mid-term legislative elections. 

Argentina's leading GDP indicator registered a 1.8% MoM seasonally-adjusted decline in March; however, we maintain our 2025 GDP growth forecast at 5.2%. 

The government issued a peso-denominated bond subscribed in USD to boost international reserves and secure funds to meet Eurobond maturities, but meeting IMF program targets will require additional policy and financing efforts. 

BUY: With the upcoming election as a likely catalyst for further spread tightening, we think that the name will provide strong returns and the government will be able to roll over its 2026 Eurobond maturities. 

Costa Rica requested a USD 1.5 bn Flexible Credit Line (FCL) from the IMF on a precautionary basis, following the successful completion of the previous Extended Fund Facility (EFF). 

The IMF praised the country's macroeconomic stability, highlighting 4.3% growth in 2024, low inflation, and prudent fiscal management, although it warned of the need to make progress on pending structural reforms. 

Costa Rica’s fiscal position strengthened in January–April 2025, with revenues up 2.5% YoY and expenditures down 1.7% YoY, driven by improved tax collection and a 5.7% drop in interest payments. 

The political landscape adds uncertainty with a president who could lose his immunity, a ruling party without a clear successor, and speculation about Chaves possibly tendering an early resignation to seek a seat in 2026. 

SELL: While fundamentals seem strong, Z-spreads are as low as 170 bps, which seems expensive in relative value terms. 

Our EMFI Core Index gained 2.4% in May, with 20 names rising, 2 holding steady, and only 1 losing ground. 

GHANA (+7.1%), VENZ (+7.0%), and PKSTAN (+5.3%) were May’s top performers, while only UKRAIN (-3.9%) lost ground.  

During the month, we closely evaluated the impact of sanctions on the Venezuelan oil industry and its exports in light of the recent developments.  

We also revised the outlook for our African Countries with fresh macroeconomic data from the latest WEO and our own updated projections, upgrading our recommendation on GHANA to BUY based on relative value considerations. 

We continued to monitor the ceasefire agreement in Pakistan. After geopolitical risks for the credit dissipated, we upgraded the name to HOLD. 

We are closely tracking Ecuador’s fiscal outlook, and given our bearish expectations on the fiscal front we downgraded the credit from BUY to HOLD. 

Arrests of CHP members and other government opponents continue, while the lira has already overcome the USD/TRY 39 threshold, increasing inflationary pressures.

Authorities remain focused on bringing inflation to single digits, with the Monetary Policy Committee (MPC) restarting the tightening cycle with a 350 bps rise and stressing the importance of fiscal prudence.

During the first four months of 2025, once adjusted by inflation, fiscal accounts showed a 7.9% improvement in revenues and a 4% decrease in expenditures compared to the same period in 2024.

Even so, lower-than-expected revenues led us to adjust our estimations for the fiscal deficit, from 3.5% of the GDP to 4.0%, still representing an improvement compared to the 4.9% 2024 budget deficit.

The country still has considerable external liquidity and is also able to tap international markets, but we believe that spreads are already tight, especially in relation to credit peers. Therefore, we switch from BUY to HOLD.

President Noboa began his full term with strong legislative backing after his ADN party, in alliance with Pachakutik, PSC, and independents, secured control of key commissions in the National Assembly.

The administration's first urgent bill, the “National Solidarity Law,” includes fiscal incentives to support public security and recovery in violence-affected areas.

A second reform aims to modernize Ecuador’s procurement system, targeting corruption and waste equivalent to 0.7% of GDP, through international standards, digital oversight, and whistleblower protections.

Following the consolidation required under the IMF program, the administration has announced policies on strategic sectors including fuel subsidy cuts.

HOLD: Despite the finance minister's statements regarding the multilateral guarantee for future debt issuances, we continue to see a lack of progress in the fiscal arena.

Following the election, PM Kamla declared her intention to reduce the inherited fiscal deficit by cutting existing public spending.

There is an ongoing negotiation with the United States to ensure access and exploitation of natural gas in the Dragon and Manakin-Cocuina fields on the border with Venezuela.

The fiscal deficit in FY 2023/2024 amounted to TTD 9.1 billion (5.2% of GDP), far exceeding the initially budgeted TTD 5.2 billion (3% of GDP).

Everything indicates that a significant recovery in natural gas production will not occur in the short term, but medium-term prospects are better.

SELL: We believe the risk/reward profile is unfavorable and likely to deteriorate further in the short term given the weak fiscal position. 

Following our update to macro-fiscal forecasts and the release of the April IMF WEO update, we look at relative valuations by comparing CCC-rated countries plus Egypt and El Salvador.

We remain positive on Argentina given its strong economic policy, plus the multilateral support. We also turned positive on Pakistan after tensions with India dissipated.

Political risk reigns supreme in Bolivia, as presidential elections in 2025 will be critical for implementing much-needed reform.

Egypt and El Salvador, on the other hand, seem expensive relative to peers, but high coupons compensate for possible spread widening.

Investors are getting nervous about Noboa’s lack of progress in the fiscal sphere; if measures are not taken, we estimate an overall deficit of 2.4% of GDP.

Ukraine still has support from the IMF and the EU, mitigating downside risks. It has demonstrated a strong willingness to pay, and near-term Eurobond debt service is minimal.

 Three of the nine presidential candidates are aligned with the leftist movement that has governed the country for the past two decades. The other six candidates are from center-right opposition parties.

Andrónico, the most popular leftist candidate according to recent polls, can still register as a candidate if he receives the endorsement of another party before June 6.

If Andrónico's candidacy materializes, both the left and the right will be highly divided for the upcoming elections. Therefore, a runoff will likely determine the outcome of the presidential election.

Waves of protests are likely to break out if Andronico is left out of the election.

SELL: Fragile reserve strategy, political uncertainty, and stretched valuations undermine expected returns; risks to the FX peg and debt servicing capacity remain elevated ahead of August elections.  

In 2024, the fiscal deficit narrowed to 6.8% of GDP and 2.1% of GDP primary surplus, supported by IMF reforms.

Last year, tax revenues rose by USD 2.6 bn due to a VAT hike, the removal of exemptions, and broader tax base measures; further revenue-raising reforms continue in 2025 to support IMF targets.

The 2025 Budget introduces new tax measures, aiming to raise tax revenues to 13.9% of GDP, slightly above our forecast of 13.7% of GDP.

High interest payments constrain spending, but considering ongoing reform efforts, we estimate that the fiscal deficit will fall to 6.1% of GDP in 2025 and 5.5% of GDP in 2026, with 2.8% and 2.5% of GDP as primary surplus, respectively.

HOLD: External risks persist, but manageable debt service and fiscal consolidation support stability; domestic challenges remain, yet IMF support helps contain downside.  

Inflation fell to 16.5% YoY in March from 16.8% in February, driven by food and electricity generation, which has improved scarcity. 

So far, the central bank has been cautious regarding its monetary policy tightening, increasing 50 bps on November 12, 2024, and February 11, 2025, explained by their fears of further contributing to a contraction in the economy, paired with the drought effects. 

The kwacha posted a MoM 5.0% appreciation, trading at USD/ZMW 26.7 on May 8, but returned to the USD/ZMW 28 threshold in the last two weeks of May. 

Nonetheless, we are not expecting major volatility from the currency, considering that copper production has been on the rise and reserves remain strong. 

We maintain our estimation for inflation at 13.7% by the end of 2025, but there are significant downside risks. 

HOLD: ZAMBIN 33 continues to yield slightly below the CCC-rated average, and we believe it is warranted based on liquidity relief provided by the restructuring. 

With 96% of votes counted, the NDP secured 18 out of 51 seats, two more than in the past elections, while the VHP secured 17.

Voter turnout was 65.8%, well below the 2020 and 2015 elections, in which participation was 71% and 72.5%, respectively.

Although there is still high uncertainty about the Surinamese political outlook, it seems that odds have change in favor of the opposition candidate, Jennifer Geerling-Simons.

A government led by Simons would likely conduct to a deterioration of Suriname fiscal position in the coming years, nonetheless, the expected oil boom by 2028 would be enough to put the public finances back on track.

Guatemala’s economy grew 3.7% in 2024, up from 3.5% in 2023, driven by higher public spending and investment. 

However, the start of 2025 shows signs of deceleration, with an increase in the trade balance deficit. 

The IMF raised its growth projection for 2025 to 4.1% from 3.6%, while the Bank of Guatemala lowered it to 3.8% (from 4%) due to external risks; we maintain our forecast at 3.6%.  

Remittances rebounded strongly in the first quarter of 2025 (+20.5% YoY), boosting consumption and easing pressure on the external balance, but slowed down to 7.4% YoY in April. 

Guatemala’s removal from the IACHR human rights blacklist, along with other international law-facing reforms, are positive signals of renewed international engagement and efforts to strengthen legal certainty.

The name has been recently upgraded to "BB+" by S&P. To become a BBB-, we evaluate that greater progress is necessary in Governance. Given attractive current yields, and solid fundamentals, we maintain our BUY rating. 

Barbados’ real GDP grew by an estimated 2.6% YoY in Q1 2025, driven primarily by tourism (+9.5% YoY), construction (+6.4% YoY), and business services (+3.4% YoY).

The current account posted a moderate deficit equivalent to 0.36% of GDP, primarily due to a decline in net exports of goods. However, this was partially offset by an increase in net service exports, driven largely by growth in the tourism sector.

In FY 2024/2025, the government recorded a primary fiscal surplus of 4.6% of GDP (+1.1 p.p.), supported by corporate tax reform and stronger economic growth.

The risk of natural disasters cannot be ruled out in Caribbean countries, as demonstrated by the impact of Hurricane Beryl in July 2024.

Despite the improved economic outlook and stable solvency Indicators, we continue to recommend to HOLD the credit due to its inherent vulnerability to natural disasters. 

The US–Ukraine Minerals Agreement established a joint reconstruction fund funded by Ukraine’s mineral revenues, restoring US military aid but with strings attached.

Ukraine retains ownership of its natural resources under the deal, which excludes existing projects and hinges on attracting private capital for new ventures.

Despite the agreement, peace talks have stalled, with Russia demanding territorial concessions and continuing military operations amid coordinated Western pressure.

Without a significant shift in Russia’s strategic calculus or a consistent US diplomatic posture, the likelihood of a persistent ceasefire remains low in the near term.

Ukraine held unsuccessful negotiations with an ad hoc creditor committee representing the outstanding restructuring warrants worth USD 3.2 bn. 

Despite the uncertain trajectory of the conflict, current depressed bond prices limit downside risk. We maintain our BUY for the name. 

One of the two polls available places the ruling VHP party in third place with 7 seats and includes a large share of undecided voters, equivalent to 10 out of 51 seats.

The other poll shows the VHP leading with 17 seats but excludes undecided voters from its results.

Considering the polls’ results, we believe the final stance of the NPS will be crucial for the formation of a new government, though everything will depend on the final composition of the national assembly.

We see the election as highly competitive, but we are slightly more inclined to a VHP victory.

BUY: Despite weak performance in the last month, the GranMorgu oil project remains on track and we see good prospects for the credit.

SSA countries are showing moderate growth prospects, with Zambia and Ghana outperforming the regional average, while Nigeria and Angola lag slightly behind.

Nigeria stands out in terms of solvency, with lower debt ratios and stronger current account surpluses; Zambia remains the most challenged.

Angola faces elevated liquidity pressures, with high external debt service and interest-to-revenue ratios, particularly in the short term.

We upgrade Ghana to BUY on improved fundamentals, rating momentum, and attractive yields amid a stabilising global backdrop.

We maintain a HOLD on Nigeria, Angola, and Zambia due to persistent external vulnerabilities despite some supportive developments.

In April, Venezuelan oil production averaged 888 tbd (–2.5% MoM; +7.6% YoY) according to OPEC secondary sources, and 1,051 tbd (+0.3% MoM; +19.7% YoY) based on direct communication.

Exports dropped sharply: Reuters reported a 13.16% MoM decline, while Bloomberg reported a 40.62% MoM fall.

Venezuelan oil buyers have continued to bypass US sanctions through origin rebranding (labeling the crude as Malaysian) and more recently as Brazilian.

Brent fell by 5.01 USD (–7% MoM) to average 66.46 USD/bbl in April, pulling Merey down to 56.72 USD/bbl (–7.2% MoM).

We estimate relative risk measures, or betas, for the countries we cover. High-beta regions include Sub-Saharan Africa and East Asia, while Latin America and the Caribbean show mixed results. 

Argentina (2.14) and Zambia (1.80) display the highest betas, indicating greater sensitivity to global risk factors. In contrast, Trinidad & Tobago (0.41) and Jamaica (0.69) show the lowest betas, suggesting a less market-sensitive risk profile. 

In Nigeria, market risk explains 85% of the variation in weekly returns, highlighting a particularly strong correlation with broader market movements. 

Following Liberation Day, average spread changes were +29 bps for low-beta countries, compared to +212 bps for high-beta ones—underscoring the value of beta as a risk management tool in risk-off episodes. 

Following the May 12 de-escalation agreement between China and the U.S., risk sentiment improved notably. High-beta countries saw yields reductions by an average of 79 bps, while low-beta countries experienced only a 4 bps decline. 

Lebanon’s new government remains committed to achieving the pending conditions the IMF set back in April 2022 before granting a loan.

The Parliament passed a new banking secrecy law that finally complies with IMF standards, allowing access to bank records from the last decade.

Likewise, the Cabinet approved a bank restructuring draft law, intended to start conversations with the banking sector before moving on with the financial gap law that will identify losses and assign responsibilities.

The finance minister, Yasin Jaber, had an introductory meeting with debt holders in Washington on April 25, but there is still a long way to go before having a restructuring debt strategy.

All in all, we are inclined to agree with the authorities on their target to get a staff-level agreement for an IMF package this summer.

BUY: With PDI-adjusted prices as low as 12.8c on average, we still believe that the risk-reward of the investment remains attractive.

On April 22, a terrorist attack in Indian-administered Kashmir killed 26 civilians, reigniting geopolitical tensions and leading India to launch "Operation Sindoor" to target militant infrastructure in Pakistan.

The India-Pakistan conflict over Kashmir dates to 1947, with multiple wars and unresolved disputes. Tensions intensified in 2019 when India revoked the special autonomous status of Jammu and Kashmir.

In response to recent actions, India suspended a key water-sharing treaty, while Pakistan closed bilateral trade with India. These measures are fueling inflation and external liquidity risks in Pakistan.

After deadly cross-border clashes triggered by a terror attack in Kashmir, Trump brokered a surprise ceasefire between India and Pakistan.

After the ceasefire agreement, the likelihood of our no-escalation base case increases, pumping the bonds and balancing the credit risk-reward. We move back from SELL to HOLD.

The Honduran economy grew 3.6% in 2024, but high-frequency data for 2025 points to a slowdown, especially in the manufacturing sector, which is being affected by a decrease in exports to the United States. 

Remittances reached a record high in March, helping to narrow the current account deficit, although these flows are expected to moderate as deportations from the US stabilize. 

The IMF endorsed fiscal and structural progress following the third review of the program and a new disbursement of USD 155 million is expected in June. 

We project economic growth of 3.2% and inflation of 4.4% by 2025, with risks centered on the implementation of reforms during the election year. 

BUY: Attractive yields and robust fundamentals provide an attractive risk/reward proposition. 

The Jamaican economy grew by 1.4% YoY in Q4 2024, a return to growth after a 1.5% YoY contraction in Q3 2024.

The Ministry of Tourism reported that the industry generated approximately USD 4.3 bn in 2024 (+0.82% YoY) and attracted 4.2 million visitors (-0.6% YoY).

The US GDP contracted at an annualized rate of 0.3% in Q1 2025 according to preliminary data, down from the 3.1% and 2.4% growth rates recorded in the third and fourth quarters of 2024.

Since Jamaica’s economy is highly dependent on the US for remittances and tourism inflows, poor GDP performance in the US poses downside risks.

Prices on Eurobonds rebounded after the disturbance of Liberation Day; ZAMBIN 33 is already trading above them, even if its yield is 100 bps higher than at the end of 2024.

ZAMBIN 53 also recovered, but the implied probability of an upgrade in the rating of its debt-carrying capacity has decreased to the 70-75% range.

Recovery has been driven by progress on bilateral deals and the credit rating upgrade by Moody’s, in addition to the suspension of most of Liberation Day tariffs.

Our EMFI Core Index lost 0.2% in April, with 5 names rising, 3 holding steady, and 15 losing ground. 

ECUA (+22.1%), ARGENT (+5.5%), and LEBAN (+4.5%) were April’s top performers, while VENZ (-16.7%), ANGOL(-8.3%), and UKRAIN(-8.2%) showed the worst results.  

In the month, we closely evaluated Argentina’s new EFF agreement and FX policy direction and returned to a BUY recommendation after a few months in HOLD.  

We revised our outlook for Lebanon with fresh macroeconomic data becoming available and assessed Ecuador’s pre- and post-election dynamics, upgrading our recommendation to BUY ahead of the vote. 

We also assessed recent developments in the Ukraine conflict and the evolving situation in Pakistan, where the risks for the credit in the escalation scenario are substantial (we switched our view to SELL). 

In Africa, we found significant exposure to commodity volatility and changed our recommendation on Angola to SELL (but then returned to HOLD as prices stabilized). We also downgraded Ghana and Nigeria to HOLD, from BUY. 

The Venezuelan oil industry is currently in a complicated position, as uncertainty regarding the maintenance of the Chevron license persists.

Oil production averaged 911 tbd (-0.11% MoM, +12.6% YoY) in March according to OPEC Secondary Sources, and 1,048 tbd (+2.2% MoM, +19.9% YoY) according to Direct Communication data.

Reuters reported oil exports at 698 tbd in April (-13.2% MoM, +28.21% YoY), while Bloomberg put them at 470 tbd (-40.6% MoM, -6.8% YoY).

Per Bloomberg data, Venezuela exported 585 tbd in 4Q24, of which 57% (332 tbd) went to the US and EU under OFAC licensing facilities; exports are down considerably in April and only 41% (184 tbd) went to Western markets.

While there is still some time for further surprises, the shifting pattern of trade and headlines concerning Chevron’s activities strongly suggest that the Venezuelan government is positioning itself for the wind-down period not to be further extended after May 27.

Despite FX rate pass-through and global uncertainty coming from the US's new trade policies, inflation decreased from 38.1% in March to 37.8% in April.

Monthly inflation increased to 3%, above the central bank’s target range of 1% to 2%.

There were also electricity and natural gas price adjustments in April, causing a temporary uptick for its expenditure group.

The MPC hiked rates at its last meeting, back in mid-April, which, together with a more stable lira, despite ongoing challenges, our view is that the disinflation process will continue.

The Milei administration continues accumulating monthly fiscal surpluses, although at a slightly slower pace than last year. In March, the administration posted a 0.5% primary surplus, compared to 0.7% one year before.

The frontloaded IMF disbursement has boosted the country’s international reserve position, but the government has significant work to do to meet the program’s targets.

Under the program’s parameters, valuation effects and IFI disbursements do not count towards reserve accumulation, and it will be difficult for the government to comply with the targets through FX purchases under the current setup.

The official leading indicator for GDP grew 5.7% YoY in February, confirming a V-shaped recovery from the April 2024 low; we thus updated our 2025 GDP growth forecast from 4.1% to 5.2%.

BUY: We continue to see room for spread compression given positive macro results and like the short end of the curve for the significant principal amortizations scheduled by Jan 2026.

We revised Ecuador’s 2025 GDP forecast up to 1.4% due to a post-recession rebound, but downside risks from oil prices, drought, employment, and security concerns persist.

Despite a boost from higher VAT revenues in 2024, stagnant oil revenues and production will pressure fiscal accounts. We expect the NFPS deficit to stand at 2.4% of GDP, with a primary surplus of 0.2% of GDP, and gross financing needs of the NFPS to reach USD 8.5 bn in 2025 (6.6% of GDP).

We forecast a USD 5.1 bn (4% of GDP) deficit of the GSB in 2025, with a primary deficit of USD 1.6 bn (1.2% of GDP) and financing needs of USD 11.8 bn (9.2% of GDP).

Elevated external debt repayments in the coming years could likely push Ecuador to seek a short-term arrangement with the IMF to ease 2025 payment pressures.

The IMF might push for further current expenditure cuts such as subsidy cuts to strengthen public finances, but the risk of social unrest, as seen in 2019 and 2022, could complicate the decision process.

Ecuador is seeking an IDB guarantee amounting to USD 250 mn that it will leverage to issue a social bond in the international market.

Given our bearish expectations on the fiscal deficit and the large rally post-election, we downgrade our recommendation from BUY to HOLD.

We adjusted our economic growth forecast downward from 3.6% to 3.1%, based on a baseline scenario of 72 USD/bbl price for Bonny Light and the slowdown in growth in the oil sector.

In our pessimistic scenario, if the oil price averages 60 USD/bl for the rest of the year, we believe economic growth will slow down significantly to 2%.

For an optimistic average oil price of 80 USD/bl for the rest of the year, the economic expansion could reach 4.1%, however, we believe this is the least likely scenario.

Oil prices average 76 USD/bl YTD (vs. 82.4 USD/bl in 2024), and if the current trend persists, it will likely fall below the 75 USD/bl projected in the national budget, leading to revenue shortfalls.

We expect an overall fiscal deficit of 4.4% of GDP with a primary deficit of 1.2% of GDP, more pessimistic than the -3.8% and the -0.8% forecasted by the government.

HOLD: Eurobonds have recovered, but Nigeria´s high oil dependence in terms of exports and revenues makes it highly exposed to the bearish global context.

Global uncertainty remains, affecting oil prices, which in turn affect Angola's finances. Nonetheless, while concerning, current prices don’t represent a fiscal crisis yet.

Angola assumed an oil price of USD/bl 70 in its 2025 budget, nonetheless, there is space to proceed with expense cuts if oil prices remain under that threshold.

We left our fiscal estimations unchanged, with a budget deficit of 2.9% of GDP and a primary surplus of 3.2%, with downside risks related to lower-than-expected non-oil revenues.

The government discarded another IMF loan, but we believe that they opted to leave that door open as they cut fuel subsidies one month ago.

Likewise, another IMF program is very likely if oil prices get close to USD/bl 60, Angola’s fiscal breakeven price.

With a more stable landscape and potential funding, if needed, price could return to pre Liberation Day levels, which is why we change our recommendation from SELL to HOLD.

With growth of 3.4% YoY in the fourth quarter, the economy closed 2024 with an expansion of 2.6%, slightly below our estimate of 2.7%, driven mainly by public consumption and investment. 

Remittances rose by 15% YoY in February, although they could moderate in the coming months due to U.S. immigration policies. 

Fiscal consolidation efforts under the IMF program could limit economic growth in the short term. 

El Salvador deepens its alliance with Washington but remains vulnerable to the 10% tariff and international trade tensions. 

HOLD: The combination of ongoing fiscal consolidation efforts and a light Eurobond amortization schedule over the coming years supports yields below its credit rating peers, even in the absence of further short-term positive catalysts.

The global context looks adverse for oil-dependent countries like Trinidad and Tobago, as oil and gas are major sources of external and fiscal resources for the country.

Fiscal year 2025’s budget suggests a 2.9% fiscal deficit, but with the recent oil price decline, we estimate it could reach 4.3%.

If this wasn’t enough, the US revoked licenses to develop the Dragón field in conjunction with Venezuela.

SELL: The negative news flow added to the weakening of the country's fundamentals, resulting in an unattractive risk/return profile.

Despite US-led efforts, peace talks between Russia and Ukraine remain stalled, with Trump’s administration taking a cautious stance to preserve negotiation space, while Russia leverages a call for Ukrainian elections to delay a ceasefire.

Ukraine’s GDP grew by 2.9% in 2024, a notable slowdown from 2023, driven by war-related disruptions in agriculture, energy, and retail sectors, while mining showed signs of recovery.

Economic growth in 2024 was underpinned by strong household consumption, investment, and exports, with wages surpassing prewar levels due to labor shortages; industrial production remained relatively stable despite year-end softening.

We revised our growth projections down to 2.6% amid continued war, infrastructure damage, external aid uncertainty, and unresolved geopolitical tensions. Although we think that Russia and Ukraine will reach a peace agreement this year, we formulate an alternative scenario of a prolonged war that poses downside risks to our 2026 GDP forecast.

BUY: After a sharp drop in valuations amid ongoing ceasefire uncertainties, we like the risk/reward proposition as bonds should rebound if a new peace plan is implemented. 

The IMF approved a USD 20 bn, 48-month EFF with an upfront USD 12 bn disbursement. The IDB and World Bank also approved funding, which takes the total expected inflows for 2025 to USD 23 bn.

A new FX regime was launched, removing most capital controls and ending with “dollar blend” system. It allows the ARS to float within bands, which were set at ARS 1,000 to ARS 1,400 as a starting point.

BCRA interventions are permitted at the bands and within them to purchase reserves. The bands will widen by 1% monthly, gradually losing relevance as the system shifts towards a free float.

With the implementation of a new exchange rate regime and a robust economic program supported by the IMF and other multilateral institutions—bringing substantial financial firepower—we now view the risk-reward profile as once again compelling. We switch to BUY from HOLD.

Noboa decisively defeated Correísta candidate Luisa González, winning with 55.7% of the vote to her 44.3%, and preventing the widely expected worst-case scenario from materializing.

The victory was shaped by a mix of effective campaigning, improved electoral safeguards, increased turnout, and a series of late-campaign setbacks for González. Noboa also made significant gains in some regions historically associated with the Correísta vote.

Before the election, we switched our recommendation tactically from HOLD to BUY, noting overly pessimistic valuations and an attractive risk/reward setup.

Bonds have rallied almost 30% against Friday and have gained more than 13 pts on average, but the yield curve remains in the 15-20% range.

BUY: Despite the strong gains in the early session, we see room for further upside driven by momentum. However, we will monitor prices for a potential reassessment once the market settles, as we are structurally more pessimistic about the outlook in the longer term.

Costa Rica grew 4.3% in 2024, surpassing both our estimate (4.2%) and that of the Central Bank (4.1%), despite insecurity and social and political tensions. 

Foreign direct investment rose by 14%, reaching USD 4.3 bn (4.5% of GDP), with dynamism in manufacturing, tourism, real estate and services. 

Inflation rose from 0.8% in December 2024 to 1.25% in February 2025, suggesting a gradual reversal of the deflationary trend seen in the last year. We anticipate inflation to remain contained but gradually rise. 

We project growth of 4.1% for 2025, with risks centered on political stability, the international environment, and the fiscal response to growing social demands. 

President Chaves' popularity fell 9 points, complicating his ability to transfer support to a successor ahead of the 2026 elections, especially considering the criminal charges filed against him. 

SELL: The global environment limits even further the upside potential of the already tight Eurobond yields while amplifying their downside risks, offering an unattractive risk/reward proposition. 

Markets reacted sharply to Trump’s reciprocal tariffs announcement but then bounced up partially after the announcement of the 90-day pause.

Among the countries we follow, the hardest hit were Angola and Sri Lanka, while Honduras, Guatemala, Jamaica, Trinidad & Tobago, and Costa Rica were the least affected.

Notably, names such as Ecuador, Venezuela, Ucrania and Lebanon also posted large losses, but there are idiosyncratic factors that muddle the interpretation of the pure shift to a risk-off stance.

We change our recommendation on Angola from HOLD to SELL given the liquidity pressures and its oil dependence.

For Nigeria and Ghana, we change our recommendations from BUY to HOLD as, despite commodity dependence, liquidity pressures remain low.

We recently changed Ecuador to BUY from HOLD due to idiosyncratic reasons, as we see the upcoming run-off as the most important driver for the credit.

Ecuador faces an existential choice between President Daniel Noboa and Correísta candidate Luisa González.

Noboa represents continuity, while González poses significant risks to fiscal consolidation and the IMF program, as well as debt sustainability and the future of dollarization. 

Regardless of the outcome, no party has a clear majority in the National Assembly, which would make governance dependent on alliances and negotiations. 

Our polling average puts Noboa marginally ahead (+0.2 pp) but the eventual outcome remains highly uncertain.

We see roughly even chances for both candidates, with a 55% likelihood of Noboa coming out on top. 

We think the market is overestimating the likelihood of a González victory and thus see the risk-reward profile as skewed to the upside, given prices close to recovery values. We switch our recommendation from HOLD to BUY.

Our EMFI Core Index lost 2.4% in March, with 4 names rising, 6 holding steady, and 13 losing ground. 

BOLIVI (+5.5%), VENZ (+3.0%), and HONDUR (+1.2%) were March’s top performers, while LEBAN (-15.4%), UKRAIN (-12.0%), and ECUA (-8.1%) showed the worst results.  

Over the past month, we closely monitored the ongoing liquidity issues and currency crisis in Bolivia, peace negotiations in Ukraine, and developments in the Ecuadorean presidential elections. 

We also analyzed the political turmoil in Turkey, assessed the escalation of the conflict in Lebanon, and reevaluated both sovereign and sub-sovereign bonds in Argentina. 

We upgraded our recommendation on GUATEM and HONDUR to BUY based on relative value considerations. We also downgraded BOLIVI to SELL, as we reappraised the likelihood of a near-term credit event. 

After two years of contraction, Sri Lanka’s economy expanded by 5% in 2024, driven primarily by industrial growth and fiscal reforms. 

The industrial sector (+2.8%) and services (+1.5%) were the main contributors to economic expansion of 5% in 2024. Tourism showed signs of recovery in volumes but earnings remained below 2018 levels.

Fiscal consolidation efforts boosted tax revenues, but achieving the ambitious 2025 targets remains a challenge. 

Declining production in key crops such as rice, tea, and coconut has led to rising food prices, posing a downside risk to economic stability and our 2.9% 2025 growth forecast.

HOLD: Both Macro and Governance Linked Bonds are suffering from global volatility, but positive macro performance suggests opportunities in the macro-linked instruments.

The FY 2026 budget is more of the same, following Egypt’s slower-than-expected fiscal consolidation, according to the IMF.

The official budget projects an overall deficit of 7.5% of GDP with a primary Surplus of 3.9%.

In our view, the government's assessment is somehow conservative, and we forecast a fiscal deficit of 6.5% of GDP and a primary balance of 4.9%, driven by stronger revenue performance and further control in spending.

The Cabinet-approved draft did not introduce any major changes to revenue policies (e.g., the VAT law amendment), although it aligns with the IMF’s goal of securing a 4% primary surplus.

HOLD: Given the mix of bilateral and multilateral allies' support and the worryingly high interest burden, we see the risk-reward proposition as fairly balanced.

On April 13^th, Ecuador goes to crucial presidential election run-offs, in which incumbent Daniel Noboa faces correísta Luisa González.

While Noboa is the market’s preferred option, bond valuations suggest investors perceive González as having a stronger chance of winning.

Bond prices are likely to react binarily to the runoff; we expect a Noboa victory to result in 50% gains and a González victory to lead to 22% losses.

We assess that the market is overestimating the probability of González winning, even if we do believe this outcome is marginally more likely than continuity.

Given current valuations, we view the risk-reward profile as skewed to the upside on a risk-neutral basis, but given the increasing risks and expected volatility, we maintain the HOLD recommendation for the moment.

President Arévalo’s popularity has declined with slow policy implementation, political tensions, and social protests. 

Despite corruption scandals in his cabinet, Guatemala has recorded a slight improvement in the latest Corruption Perceptions Index due to timely removals. 

The government rolled back some policies such as compulsory car insurance and waste management regulations after protests erupted. 

Macroeconomic fundamentals remain strong, but governability challenges and high-level corruption perception could weigh on the Arevalo administration.

BUY: Guatemala’s stable liquidity and solvency indicators remain attractive, with no immediate credit risk. Given the current uncertainty, we favor bonds on the short end of the curve. 

Angola’s economy relies heavily on its oil sector, which accounts for 95% of its exports and 60% of its fiscal revenue.

The credit will face liquidity pressures in the upcoming years, with annual debt service averaging USD 13 bn until 2029 ,  including USD 9.5 billion in external debt.

The intention of the US to curb inflation by lowering energy prices would probably affect Angolan export prices.

If Brent falls to an average of USD 60 in 2025, GDP growth would be reduced to 1.1% from 2.2%, while exports and fiscal revenue would decline by 15% and 13%, respectively.

This would worsen its liquidity ratios, with the external debt service-to-exports ratio rising to 30% and the debt service-to-revenue ratio to 49%.

The debate between Daniel Noboa and Luisa González was marked by attacks rather than substantive proposals, deepening political polarization.

González accused Noboa of having ties to criminal organizations, while Noboa linked her to a corruption case and criticized her stance on dollarization.

With the runoff election approaching, many voters remain undecided, which in our view would potentially lead to a higher number of null votes.

The debate lacked clear proposals and was criticized for misleading data, leaving voters with little clarity about the candidates' agenda almost three weeks ahead of the runoff.

While we do not identify a clear winner in the debate, Ecuador's sovereign Eurobonds have gained an average of 2% compared to Friday’s close.

The Treasury confirmed that fiscal performance remains strong, accumulating 0.4% and 0.1% of the GDP primary and overall surplus as of February.

After hitting rock bottom in April, economic activity is experiencing a V-shaped recovery, closing 2024 with a 1.7% GDP contraction compared to 2023.

Monthly inflation came at 2.4% in February, with core inflation accelerating to 2.9% from 2.4% in the previous month.

As of March 18^th gross FX reserves closed at USD 27.1 bn, while net reserves are estimated at USD -7.1 bn.

Although this administration's public image remains strong, it registered a 1.8% decline in February, in a poll realized before the $LIBRA scandal.

HOLD: We view current valuations as justified given the risks associated with low and declining net international reserves and the president’s weakening public image ahead of the legislative elections.

BUENOS 37 led 2024 performances with a 109% total return, followed by Chaco (71%) and Río Negro (69%).

La Rioja was the only province with negative returns in 2024, as it defaulted in February, failing to pay a USD 16 mn amortization and remaining in default afterward.

Córdoba, Buenos Aires, Buenos Aires City (CABA), and Neuquén face the highest Eurobond debt service in 2025, but all remain at manageable levels.

CABA, Córdoba, and Neuquén are exploring new issuances in 2025 amid a favorable economic outlook and ongoing national negotiations with the IMF.

BUENOS 6.625% 37 and PDCAR 27 look attractive, and new issuances from key provinces might be interesting opportunities.

Facing liquidity challenges and a high risk of default, Bolivia rely on its gold reserves and public sector debt holdings to stay afloat. However, legal barriers and political instability hinder its repayment capacity. 

Rumors of forced dollar conversions, trade restrictions, and a lack of transparency in official data further increase concerns about Bolivia’s willingness to pay. 

Our base case scenario includes a Eurobond reprofiling and we estimate an average recovery value (RV) of 62c, suggesting a 7% downside from current levels. 

Market pricing currently reflects a 49.1% probability of a credit event, down from a high of 64.4% earlier this year, indicating a partial improvement in sentiment. 

We see more headwinds than positive catalysts on the horizon given the combination of high bond prices and prevailing liquidity issues, which has led us to revise our outlook from HOLD to SELL. 

Tensions have escalated between Guyana and Venezuela after the Guyanese government denounced a Venezuelan navy’s incursion near an ExxonMobil oil facility.

We believe the Maduro regime is unlikely to take military action against Guyana.

We believe the Venezuelan government will continue claiming the disputed area through non-military measures, such as holding elections in the Essequibo region.

We perform a relative value analysis on the key macroeconomic, solvency, liquidity, and financial metrics for Central American countries that we cover using IMF WEO data. 

We see a high probability of a credit upgrade for Guatemala in the near term, as it is the only country in the region that combines strong fundamentals with a clear institutional framework. We upgrade our rating to BUY. 

We upgrade Honduras from HOLD to BUY, supported by solid financial ratios and attractive relative yields. With its high carry and room for spread compression, we turn constructive on the credit. 

Costa Rica appears expensive relative to peers. Given its limited relative value, we reaffirm our SELL recommendation. 

After an exceptional 2024 performance, we maintain a HOLD rating on El Salvador, as the credit is now trading below the median yield of the B-rated tranche.  

Our EMFI Core Index gained 0.2% in February, with 18 names rising, 3 holding steady, and only 2 losing ground. 

LEBAN (+16.1%), VENZ (+10.7%), and UKRAIN (+6.0%) were February’s top performers, while ECUA (-16.5%) and ARGENT (-5.5%) were the only negative performers of the month. 

Over the past month, we closely monitored the much-awaited formation of a new government in Lebanon, peace negotiations in Ukraine and developments on the Ecuadorean presidential elections. 

We also dove into market expectations implied by UKRAIN contingent bonds, concluding that the market is pricing in a significant outperformance vs IMF baseline forecast. 

We upgraded our recommendation on TURKEY to BUY, downgraded ARGENT to HOLD and downgraded ECUA to SELL in the immediate aftermath of the elections (but switched back to HOLD after the selloff materialized). 

Chaves' push for a referendum has failed due to legal obstacles, and there is speculation that he may resign before July to stand as a deputy and promote a constitutional reform. 

He is seeking to change the balance of power in the Legislative Assembly, where his party currently has only 9 out of 57 seats. 

The ruling party is highly popular, with Luis Amador one of the favorite candidates with 7%, and other former ministers close to Chaves also in the running, although without confirming their candidacies. 

The future of the ruling party is uncertain due to legal challenges. Chaves could therefore support a candidate from another party, but his opponents see this as a strategy to obtain immunity. 

SELL: While fundamentals seem strong, the name is yielding at only 195 Z-spread, which seems expensive comparing it to peers.  

A heated meeting between Trump and Zelensky at the White House escalated into a clash, ultimately failing to sign a mineral deal and advance on peace negotiations.

Following the meeting, the Trump administration cut all US military aid to Ukraine, prompting European leaders to reaffirm their commitment to supporting Ukraine.

European nations announced new military assistance packages, and the European Commission introduced the ReArm Plan, potentially mobilizing up to USD 849 bn to strengthen European security and aid Ukraine.

With the US assistance on hold, Ukraine faces two main scenarios: leveraging European support to secure a resumption of US aid or continuing the conflict with limited EU funding, increasing the risks of military setbacks.

Following allegations of fraud in the 2019 presidential elections and delays in the judicial elections, the electoral body is focused on ensuring timely elections and transparent results.

Considering the TSE's recent statements, we believe that Morales won't be able to run for president.

The election outcome remains highly uncertain, given the deep fractures within both the ruling party and the opposition.

Regardless of the winner, we expect the next administration—whether MAS or the opposition—to pursue much-needed economic reforms.

HOLD: We anticipate a moderate risk of an imminent default in 2025 and modest downside potential at present valuations. However, there is also a dearth of catalysts that could drive upward movement in the near term.   

The Constitutional Court ruled four budget articles unconstitutional, reducing the initial deficit from 3.1% to 2.9% of GDP, but Congress responded by approving a GTQ 4.2 bn (USD 535.4 mn) expansion that pushed it to 3.3% of GDP. 

While the government projects a 3.3% deficit, our baseline scenario estimates a lower 2.8%, considering past execution delays.  

Despite ongoing controversy, the 2025 budget could boost infrastructure spending and economic growth. However, the risk of further legal challenges remains, potentially delaying execution. 

The IMF and Fitch Ratings also view the fiscal expansion positively, emphasizing Guatemala’s low debt-to-GDP ratio (27.2%) as a key factor enabling increased public investment. 

HOLD: We believe that the current Z-spreads are justified given the combination of healthy solvency and liquidity ratios, but climate-related and Trump policy risks. 

Milei's endorsement of a crypto scam last Friday, followed by ineffective government responses and new corruption allegations involving his sister, have unsettled the political landscape.

While the legal implications remain uncertain, the potential damage to the president's public image is yet to be fully realized.

Given the heightened political uncertainty in an election year and the possibility of further escalation of these accusations, we are revising our recommendation from BUY to HOLD.

Angola’s average oil output in 2024 increased by 8.9% to1,124 tbd in 2024, up from 1,096 in 2023, right after its withdrawal from OPEC.

Driving this performance is the “Incremental Production Initiative”, which comprises the assessment and reactivation of closed wells and the revision of concessions while awarding new ones.

We believe that keeping oil output over one million barrels per day until 2027 is achievable. Nonetheless, doubling production thereafter still sounds like a distant goal.

There are several oil projects scheduled to come online between 2025 and 2030, but most of them remain in the early stages.

HOLD: Angola continues to secure funding to address liquidity pressures in 2025. The credit offers one of the most attractive current yields within the high-yield universe, presenting a balanced risk-reward profile.

The outcome of the May 25 elections will determine who oversees Suriname’s future oil revenues.

Under Santokhi’s administration, GDP growth stabilized at 2%-3%, inflation declined to 9.6%, and the fiscal deficit was reduced to 1.6% of GDP, alongside a successful debt restructuring.

Santokhi is trying to revamp his popularity with new spending measures and continued electricity subsidies, however, the recent passing of former President Bouterse could strengthen support for the NDP.

A potential NDP comeback raises concerns about fiscal sustainability and oil revenue management, with early polls showing the party in the lead.

BUY: Despite the considerable spread compression, SURINM 33 still offers an attractive current yield. Meanwhile, updates on Block 58 could provide an upside for SURINM 50.

The government achieved a 2.2% monthly inflation in January, the lowest since July 2020.

The Treasury also confirmed that fiscal performance remains on a strong trajectory, reporting a 0.3% primary surplus and a 0.1% overall surplus for January.

While showing great results in terms of inflation and fiscal balance, Milei is currently embroiled in a scandal related to his promotion of a memecoin.

Although we do not believe the impeachment proposed by the Kirchnerist party will advance, the impact on the president's public image remains uncertain.

Bonds with contingent value clauses were issued at a discount to their vanilla equivalents but are now trading with a 10-pt premium due to improved prospects for the credit. 

Bondholders will receive additional UKRAIN 0% 35 and UKRAIN 0% 36 bonds if nominal GDP and real GDP outperform the forecasts set in the IMF’s baseline scenario presented in the fourth EFF review. 

Bonds are pricing in the assumption that the upside clause will be triggered and nominal GDP will outperform by 5.8-6.0%. 

Given our expectation that the current momentum will continue in the short term and the room for spread tightening, we maintain our BUY recommendation on Ukraine. 

Lebanon faces another challenging year, as the ongoing war disrupts production activities and tourism while forcing the displacement of about 1.2 million people.

While there is a surging hope that the decimation of Hezbollah can lead to the election of a new president, so far there is no progress on this front, which points to another year of political vacuum.

We expect a fiscal deficit of 2.5% of the GDP vs 4.1% in the government’s budget proposal.

We anticipate a further GDP contraction of 2.1%, with inflation expected to keep decelerating but with high risks for a new depreciation of the currency amid the central bank’s interventions.

HOLD: Despite trading well above their 2-year average, bonds remain cheap, as they are below their fair value in two different models. But given the significant uncertainty on the timing and conditions of an eventual restructuring, we prefer to wait for a better entry point.

We take a look across EMFI countries in the Sub-Saharan African region through the lens of IMF WEO data.

Angola and Nigeria have negative liquidity indicators, but both are expected to muddle through. We maintain our HOLD rating on both names.

With ZAMBIN 5.75% 33 yielding 9.9% we see little room for further upside. We do expect the upside scenario for ZAMBIN 0.5% 53 to be triggered in the medium term but remain conservative. We maintain our HOLD rating for Zambia.

In Ghana, we expect the 11-year tenor, currently yielding 11.3%, to converge the 9.5% zone. The country shows good macro fundamentals and healthy liquidity/solvency indicators. We maintain our BUY rating on the name.

Zambia is enduring its worst drought in years, which has devastated crops and prompted an energy crisis with most of the country barely getting 3 hours of electricity a day.

GDP growth notably decelerated in the first two quarters of the year, rising 2.2% and 1.7% YoY, respectively, from 4.0% and 5.3% in 2023.

Agriculture and mining are the main contributors to such deceleration.

Private sector activity keeps contracting, as the PMI reached its lowest level since the pandemic.

All in all, we adjusted our GDP’s growth rate estimation from 4.1% to 1.9%.

HOLD: Given a yield of 9.6% for the 9-year tenor we see little room for further upside. On the other hand, we expect that the upside scenario will be triggered on the ZAMBIN 0% 53 in the medium term but remain conservative. 

Unpopular fiscal policies implemented under the IMF’s Extended Fund Facility, including a VAT increase, have improved revenue and reduced the NFPS fiscal deficit.

We expect the NFPS deficit to shrink to 2.6% of GDP in 2024 and 1.9% in 2025, down from 3.7% in 2023. We also forecast primary surpluses of 0.2% in 2024 and 1.3% in 2025, a sharp improvement from the 1.3% deficit of 2023.

Despite the notable improvement in the fiscal balance, Ecuador’s gross financing needs remain substantial. We estimate them at USD 4.6 bn in 2024 and USD 7.2 bn in 2025.

The upcoming 2025 election brings additional risk, with ongoing power shortages potentially impacting President Noboa’s re-election bid. A victory for Correísmo could pose a large downside risk to fiscal stability and Eurobond performance.

BUY: With low cash prices and attractive current yields, we still believe that the risk reward of the credit is tilted to the upside, despite the still mediocre growth and fiscal results.

On October 27, former president Evo Morales claimed to have suffered an assassination attempt after his vehicle was hit by gunfire.

The government, however, denied the allegations and claimed that Evo had orchestrated the assassination attempt.

The most recent poll from Diagnosis dates from September and shows there is no frontrunner, and all candidates are well below the 50% (or the 40% with an advantage of 10 pp) needed to win in the first round.

Although the country is on the verge of collapse, Bolivian Eurobonds rallied in the month, posting a 13.4% total return to accumulate a 35.5% return YTD.

Recent polls reveal a two-horse race in Ghana's upcoming presidential election between the main opposition candidate, John Mahama, and the sitting Vice President, Mahamudu Bawumia.

While the race remains tight, we see Mahama winning as more probable, not only because the most credible survey points that way, but also because of Bawumia’s involvement in the current government, which is implementing highly unpopular economic reforms.

In an interview with Reuters, Mahama said he would renegotiate the IMF deal if elected.

However, we think a potential Mahama victory represents a low risk of a complete withdrawal from the program, and expect him to maintain a friendly relationship with the fund.

BUY: With yields in 11.2% range for the 11-year tenor, we see room for upside to the complex as we think it should compress to the exit yields seen in Zambia.

The Caribbean has grown at an average rate of 2.6% in the last 10 years, but the Bahamas (1.3.%), Barbados (0.9%), and Jamaica (0.9%) underperformed.

Barbados has received the least damage to its economy as a result of hurricanes, whereas Jamaica and the Bahamas have been more affected.

Given the low long-term growth track record for these countries, it is hard to see them growing at fast rates while they consolidate their fiscal accounts.

Ukraine’s 2025 draft budget reflects expectations that the war will continue into 2025 and highlights the need for foreign funding to support military and economic efforts.

We expect recent tax reforms to raise tax collections to 69.5% of total revenues in 2025, from 50.4% in 2024.

We also expect expenditures to fall from 61.6% of GDP in 2024 to 56.2%, owing to cuts in pension funds, subsidies, and social security, as well as a more restrained approach to military spending amid uncertain financing.

With high uncertainty on foreign funding and the development of war, we expect the fiscal deficit to improve from 18.2% in 2024 to 15.2% of GDP in 2025, though financing needs could be left with a USD 8 bn gap.

BUY: Without ignoring the war risks, Ukraine's low short-term Eurobond debt service and attractive yields offer a compelling risk-reward opportunity. 

The IMF raised its global growth forecast to 3.2% in 2024 (+0.1 pp vs. the April edition) and maintained its 2025 projection at 3.2%.

Middle East and Central Asia and the Sub-Saharan Africa were the regions with higher downward revisions (-0.3 and -0.2 pp).

Latam & the Caribbean and Emerging & Developing Europe were both revised up by 0.1 pts for 2024.

With the global battle against the inflation almost over, the IMF highlights downside risks related to “escalation in regional conflicts, monetary policy remaining tight for too long, a possible resurgence of financial markets volatility, a deeper growth slowdown in China, and the continued ratcheting up of protectionist policies”.

After a challenging 2023, Angola is seeing improvement in macroeconomic indicators, boosted by higher oil output and prices.

In 1H24, GDP posted a 4.4% cumulative growth, which led us to adjust our forecast from 1.1% to 3.3% for the full year. However, we see this growth decelerating in 2025, with a stagnant oil production.

Inflation remained high at 29.9% in September but will decelerate due to central bank intervention on the FX rate, which has regained some ground after hitting a 25-year high.

Both fiscal revenues and expenditures show better-than-expected performance, which presents upside risks for our current forecast of 1.1% of the GDP surplus.

The current account posted a notable USD 3.5 bn (3.4% of GDP) surplus vs USD 547 mn (0.6%) seen in 1H23. We upgrade our forecast from 4.7% of the GDP to 5.3%.

HOLD: We believe 715 bps Z-spreads for the 8-year tenor and an attractive 9.8% current yield are justified given oil sector exposure and adverse liquidity ratios.

Ghana has completed the Eurobond debt exchange, issuing 5 new bonds for a total nominal amount of USD 9.4 bn.

The offer was accepted by 98.6% of bondholders, almost all of which opted for the “Disco” option.

Fitch and Moody’s upgraded Ghana’s credit rating to CCC+ and Caa2 respectively.

BUY: With an exit yield of 10.8%, we see upside to the complex and think it should converge to the levels seen in Zambia.

In September, the NNPC increased the petrol price by 24.1% to an average of NGN 1,030 per liter, fully recovering costs, which means a total removal of fuel subsidies.

We believe that the full removal of fuel subsidies will fuel inflation in the short term. We estimate that inflation will reach 34.2% by the end of the year.

Although the FX market is currently under pressure, we believe it will ease in the following months due to lower imports of refined products.

There are downside risks related to growing social unrest, which could lead to a policy reversal. Nonetheless, we are optimistic and expect Tinubu to sustain current reforms.

HOLD: We see credit spreads in the 614-bp area for the 9-year tenor as justified given liquidity ratios while noting that the country could tap international markets to roll over upcoming maturities.

In September, the Treasury reported another overall surplus, accumulating 0.5% of our estimated GDP so far in the year.

Expenditures fell by 25.2% YoY in real terms, slightly outperforming the results of August and July.

Revenues fell only 6.6% in real terms despite the 10-pp reduction in PAIS tax,  boosted by the phenomenal revenue collection of the Wealth tax.

Despite the lack of political support in Congress, the government has managed to convince the market that it will produce an overall balance in 2024 and 2025, which has boosted the Eurobond rally.

We maintain our BUY recommendation even after the 67.2% YTD total return, as we see the risk/reward balance as still attractive.

Egypt’s inflation has increased slightly for the past couple of months, going from 25.2% in June to 26.4% in September.

Such acceleration was expected, as the impact of the recent subsidy cut that the government introduced ahead of the IMF’s EFF program went into effect.

However, we believe it to be a temporary uptick, as core inflation has kept decelerating while the currency remains market-determined.

Likewise, thanks to the increases in the monetary policy rate, the growth rate of the money supply (M1) has been decreasing from a peak of a YoY increase of 49.2% in February to 26.0% in August.

We currently expect inflation to end 2024 at 25.9%, but a base effect in 2025 will help the disinflation process despite the downside risks ahead.

SELL: With Z-spreads at 711 bps for EGYPT 33, we find the credit unattractive given the high debt and interest burden, a considerable Eurobond debt service, and worryingly high twin deficits.

The state budget for Costa Rica in 2025 amounts to CRC 9.46 tn (USD 17.19 bn or 18.0% of GDP), 1.0% higher than the approved budget for 2024. 

Sustainable revenue sources (mainly taxes) as a share of the budget increased from 69.9% to 73.1%, while borrowing decreased from 21.6% to 18.6%. 

Key sectors such as the Judiciary, Public Security, and the Ministry of Justice will receive significant allocations amid the security crisis, but other ministries will face budget cuts. 

One of the biggest challenges this year for the Costa Rican government will be balancing fiscal austerity in sectors with greater demands, such as education, against potential tensions with advocates for social benefits. 

SELL: Bonds are trading with a tight spread over US bonds and don't adequately compensate for the inherent credit risks of the country. 

The IMF approved a new USD 7 bn EFF program for Pakistan, aiming to support the country's economic recovery and stability.

We anticipate that the program will include tough economic measures such as raising tax collection, reducing government spending, and privatizing state-owned enterprises.

The government has already taken the first step by eliminating 150,000 government jobs through a combination of ministry closures and mergers.

In our view, the government's commitment to reform is positive but Pakistan is not out of the woods yet as the program entails the risk of social unrest and policy slippage.

With the IMF program on track, we like the prospects for the credit, especially for PKSTAN 25. We switch our stance from HOLD to BUY.

Turkey’s external accounts have outperformed our expectations, as the current account deficit has shrunk by 61.8% YTD compared to 2023.

Underlying this improvement, imports have decreased by 10.5%, while exports modestly grew by 3.3%, even if they are unlikely to meet the government’s target of USD 267 bn for year-end.

Energy imports continue to fall, driven by international prices, and have posted a YoY decrease of 6.9%, while energy exports rose 26.6%.

Tourism revenues also remain strong, as they have grown 12.5% in YoY terms. So far, the Middle East conflict has not affected tourism activities, and we believe that it will remain that way.

We upgrade our current account deficit estimation from 3.8% to 2.5% of GDP.

Despite the healthy fundamentals, we think that valuations have nearly peaked and therefore modify our rating to HOLD from BUY.

Our EMFI Core Index gained 2.0% in September, with 18 names rising, 3 holding steady, and 1 losing ground. 

LEBAN (+19.5%), ARGENT (+8.7%), and ELSALV (+7.6%) were the month’s top performers, while VENZ (-1.0%) and ANGOL (-0.1%) underperformed. 

Our Research Team analyzed the Oil & Gas industry in our commodity-producer countries, started covering Argentina´s midterm election, and investigated the fiscal situation in the Caribbean. 

We also evaluated Ecuador´s willingness to issue a new green bond and reassessed our stance on Egyptian Eurobonds. 

Ecuador's GDP shrank by 2.2% in Q2-2024 compared to the same period in 2023, displaying a slowdown driven by weaker domestic consumption and power cuts.

The Central Bank reported a 2.2% YoY decline in household consumption, an 8.2% YoY fall in investment, and a 0.6% YoY decrease in government spending.

We downgrade our baseline 2024 GDP forecast to -0.6% GDP growth, from 0.5% previously and a 0.6% YoY GDP growth in 2025. However, an alternative scenario with persistent power cuts could result in a -2.4% GDP contraction in 2025. 

Power cuts could negatively impact Noboa’s chances of reelection, but he remains the frontrunner for the 2025 general elections.

With the likelihood of Correísmo regaining power still low and the attractive current yields, we maintain our BUY rating for the name.

The Paris Club agreed to postpone debt service payments until 2027 when the IMF program is expected to conclude. 

The IMF has emphasized that a restructuring process is needed to ensure debt sustainability in the medium to long term. 

The IMF also published its latest Article IV on Ukraine and approved the second review of the EFF program, unlocking USD 900 mn in disbursements. 

We expect a market-friendly proposal for the restructuring, with negotiations starting in the first quarter of 2024. 

In the 209 sovereign restructurings since 1978, the average haircut stands at 40.5%, but this result may be deceiving.

Market or private restructurings represent 79% of the cases, yet their average haircut stands at 30.3%.

Amongst the market/private restructurings, agricultural countries represent the largest share and exhibit the highest haircuts.

The average haircut in market/private restructurings has been increasing consistently and stands at almost 49% between 2010-2019.