Weekly News & Views

EM spreads hold steady, Brazil macro update, YPF advances shale pivot, Minerva finalizes Uruguay asset sale, and CSN Cimentos prices R$550mn issue.

Jun 22, 2025

Market Snapshot

The LatAm Aggregate Index expanded by 5 bps to 308 bps in the week ending Friday, June 20, 2025, and is now trading 25 bps below its 3-month average of 333 bps. The broader Emerging Market Index remained stable at 191 bps, reflecting a 16 bps contraction from its 3-month average of 207 bps. Meanwhile, the U.S. Aggregate Index contracted by 2 bps to 120 bps and is now 16 bps below its 3-month average of 136 bps. Notably, the EM CCC Index expanded 23 bps and is now trading 92 bps below its 3-month average of 800 bps, while the US CCC Index contracted 27 bps and is now at 693 bps, which is 22 bps below its 3-month average of 715 bps.

Equity markets in the region posted negative performances. Argentina’s Merval Index fell 3.0%, Brazil’s Ibovespa Index decreased modestly by 0.1%, while Mexico’s Mexbol Index declined 2.0%. In the U.S., the S&P 500 Index fell 0.2% for the week.

In commodities, WTI crude oil traded at $73.8/b, up 1.2% on the week, while Brent crude settled at $77.0/b, up 3.7% over the same period.

Turning to bond yields, U.S. Treasuries saw declines across the curve. The 10-year yield decreased 2 bps to 4.38%, while the 5-year yield fell 4 bps to 3.96%. In Latin America, the yield on the 10-year Mexican government bond expanded 4 bps to 6.15%, the 10-year Brazilian government bond decreased 4 bps to 6.67%, while the 10-year Argentine government bond contracted 7 bps to 10.87%.

EM Spreads - Weekly News June 22

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Brazil Macro

After four consecutive years of GDP growth at or above 3%, Brazil’s economic expansion is expected to moderate as tight monetary policy and a potential slowdown in public spending take effect. GDP growth is projected at 2.2% in 2025, 1.6% in 2026, and 2.2% in 2027. Inflation closed 2024 at 4.4%, exceeding the 3% target band ceiling, as high interest rates have failed to bring it down. Managing inflation in 2025 will likely require a coordinated policy effort, with the 5.3% inflation forecast reflecting anticipated rate hikes and a smaller budget deficit. Inflation is expected to ease to 4.3% in 2026 and 3.8% in 2027. The Brazilian government has also struggled to reduce spending, which has contributed to higher borrowing costs amid already elevated public debt. In May, consumer prices remained high at 5.32% YoY, offering little relief to central bankers debating whether to pause the tightening cycle or deliver another interest rate hike.

Brazil’s unemployment rate is expected to increase after consistent labor market improvement since 2021, reaching 6.8% in 2024. However, ongoing monetary and fiscal tightening is likely to weigh on employment in the coming quarters, keeping the unemployment rate relatively stable in 2025 before rising to 7.2% in 2026 and 7.4% in 2027.

In 2024, the Brazilian real weakened to its lowest nominal level, while the fiscal deficit remained elevated at 8.5% of GDP. Although the currency is expected to stabilize in 2025, the fiscal deficit is projected to remain high at 8.4% in 2025 and 8.0% in 2026. On trade policy, Brazil maintains a trade deficit with the United States, making it unlikely to become a primary focus of the Trump administration. However, if U.S. tariffs were to exert pressure on Brazil, the country’s export sector, one of its key economic drivers, could be negatively affected. This would risk constraining economic growth.

Weekly News

Minerva Announces Divestment of Uruguayan Asset to Allana

On June 13, 2025, Minerva announced that its subsidiary, Athn Foods Holdings S.A., entered into an agreement to sell Establecimientos Colonia S.A., a Uruguayan company, to Allana Magellan S.L. for US$48 million.

The divestment follows the restructuring of the Uruguay Transaction originally announced in February 2025, in which Minerva agreed to acquire multiple assets from a Marfrig subsidiary. In accordance with antitrust guidance from Uruguay’s COPRODEC, Athn Foods will retain the Salto and San José plants, while the Colonia facility must be resold. The closing of the transaction remains subject to customary conditions, including COPRODEC’s final approval of the broader deal.

EM Spreads’ take: We view the announced divestment as credit neutral. The transaction had been largely anticipated. However, the sale removes uncertainty around COPRODEC’s final decision and mitigates the risk of fines or delays. The retained assets, Salto and San José, represent the strategic core of Minerva’s Uruguay footprint, providing scale, export diversification, and EBITDA contribution to Minerva. With the Uruguay integration already underway and synergy benefits from the Marfrig acquisition beginning to materialize, we continue to see value in Minerva’s credit.

YPF Advances Divestment Strategy to Prioritize Vaca Muerta Development

YPF is accelerating its divestment of conventional assets as it intensifies its strategic focus on shale oil development in the Vaca Muerta formation. As part of its Andes Project, the company approved the transfer of 12 additional blocks, including assets in Chubut and Mendoza, bringing the total number of divested areas to 18. Another 21 are in final stages, and 11 remain in progress. These moves align with YPF’s Mature Fields Exit Program, which targets the transfer of 50 conventional blocks.

This strategic pivot is central to the company’s “4x4 Plan,” which prioritizes capital allocation toward high-IRR unconventional assets and the buildout of midstream infrastructure. In 2025, YPF plans to allocate US$3.3 billion, roughly two-thirds of its US$5 billion capex budget, toward Vaca Muerta. In 1Q25, shale oil output reached 149 kbpd, and total oil production from the formation is on track to hit 200 kbpd by year-end.

EM Spreads’ Take: YPF’s asset sales reaffirm its focus on capital discipline and portfolio optimization. The strategy has begun to show tangible results: 1Q25 adjusted EBITDA rose 48% QoQ to $1.25 billion, driven by margin expansion, higher shale output, and cost savings from mature field divestments. Lifting costs fell 11.8% QoQ to $15.3/boe, while gross margin improved by 6.8pp.

Despite a 10% increase in net debt and continued negative free cash flow, we view the divestment program and investment in core shale infrastructure, including the Oldelval and VMOS pipelines, as credit positive. These steps, combined with LNG monetization plans and favorable tailwinds from Argentina’s macro stabilization and the Milei administration’s pro-business reforms (e.g., RIGI), support our constructive view on YPF’s credit trajectory.

CSN Cimentos Brasil Finalizes Terms of R$550 Million Debenture Offering

CSN Cimentos Brasil S.A., a subsidiary of Companhia Siderúrgica Nacional (CSN), has finalized the terms of its fourth public issuance of simple, non-convertible, unsecured debentures with additional surety guarantee. The offering, distributed under Brazil’s automatic registration process, was originally structured for up to R$600 million but was ultimately set at R$550 million, consisting of 550,000 debentures with a face value of R$1,000 each. The issuance date was June 17, 2025.

The transaction is governed by the private instrument of the 4th Debenture Indenture, signed on June 5, 2025, between CSN Cimentos Brasil, Vórtx Distribuidora de Títulos e Valores Mobiliários Ltda. as the trustee, and Elizabeth Cimentos S.A. as guarantor. Elizabeth Cimentos is currently in the early stages of operations and is not yet registered as a securities issuer with the CVM. The debentures are being offered under CVM’s automatic registration regime and are exclusively directed at professional investors. As such, the offer does not require a prospectus or summary document under CVM Resolution 160.

EM Spreads’ take: We view CSN Cimentos Brasil’s R$550 million debenture issuance as a credit-neutral event that reinforces the company's ability to access domestic capital markets under competitive terms. The use of an additional surety guarantee from Elizabeth Cimentos S.A., despite its early operational stage, likely served to enhance investor comfort and pricing efficiency. We will continue to monitor how proceeds are allocated and whether the company maintains a conservative financial policy amid ongoing market expansion.

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