Weekly News & Views

Suzano, YPF, Vista, Cemex, Minerva (Feb 14, 2025)

Feb 17, 2025

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Market Snapshot

The LatAm Aggregate Index contracted modestly by 1 bps to 307 bps in the week ending Friday, February 14, 2025. Meanwhile, the broader Emerging Market Index tightened by 3 bps to 178 bps, while the broader U.S. Index narrowed by 4 bps to 108 bps. Notably, the EM B Index tightened by 10 bps to 364 bps, and the EM CCC Index widened significantly by 17 bps to 683 bps, following a 20 bps expansion the previous week.

Equity markets in the region showed mixed performance. Argentina's Merval Index declined 1.2%, Brazil's Ibovespa Index gained 2.9%, and Mexico's Mexbol Index rose 2.4%. In the U.S., the S&P 500 Index advanced 1.5% for the week.

In commodities, WTI crude oil traded at $74.70 per barrel (+0.1% weekly), while Brent crude settled at $70.70 per barrel (-0.4%).

Turning to bond yields, U.S. Treasuries saw modest declines. The 10-year yield fell 2 bps to 4.48%, while the 5-year yield also declined 2 bps to 4.33%. In Latin America, the yield on the 10-year Mexican government bond dropped 6 bps to 6.36%, the 10-year Brazilian government bond fell 3 bps to 6.63%, and the 10-year Argentine government bond rose 20 bps to 10.61% over the week.

Argentina Records Lowest Inflation in 4.5 Years

Argentina's inflation rate slowed to 2.2% in January, the lowest monthly figure in 4.5 years, according to INDEC. This follows four consecutive months of sub-3% inflation and a YoY rate of 84.5%, marking the first time it has fallen below 100% in two years. President Javier Milei's measures, including drastic spending cuts and public sector layoffs, helped the country achieve its first budget surplus in a decade in 2024, contributing to the slowdown in inflation. However, they have also deepened Argentina's recession and increased poverty. Still, unemployment has remained relatively stable, staying below 8%.

The government remains committed to its fiscal strategy, with Economy Minister Luis Caputo hailing the ongoing disinflation process. The government forecasts a 5.0% GDP rebound and a budgetary surplus in 2025. Market expectations also point to significant GDP improvement, with projected growth of 2.2% in 1Q25, 6.7% in 2Q25, and an annual increase of 4.4% in 2025 and 3.4% in 2026. Inflation is also expected to decline sharply, reaching 40.9% in 2025 and 26.6% in 2026.

Weekly News

1. Suzano 4Q24: 2031s & 2032s Offer Value as Fundamentals Strengthen

On February 14, 2025, we published our Suzano 4Q24 results report.

We upgraded Suzano’s 2031s and 2032s to Outperform, while maintaining the rest of the curve at Market Perform. Despite additional industry supply, tight market conditions persist due to low stock levels, maintenance-related production cuts, and operational disruptions. Healthy pulp prices, higher sales volumes, controlled costs, and a focus on deleveraging should support Suzano’s cash generation and credit profile in 2025, with this trend likely continuing as no major new supply is expected. Management downplayed U.S. tariff risks, noting that tariffs have applied only to paper, not pulp, and that U.S. hardwood shortages and a lack of domestic pulp investment reduce the likelihood of future tariffs. Suzano’s export focus also mitigates concerns over Brazil’s economic outlook.

Within Suzano’s capital structure, we prefer the 3.750% 2031 and 3.125% 2032 bonds, which compare favorably to select regional peers, the broader EM BBB Index, and the US BBB Index. Additionally, these notes trade below par at $90.1 and $84.6, respectively, while most of Suzano’s curve remains priced above par.

2. Cemex Announces CEO Transition and Senior Management Reshuffle

On February 10, 2025, Cemex announced that CEO Fernando A. González will retire after over 35 years at the company, with Jaime Muguiro, currently President of Cemex USA, set to take over as CEO effective April 1, 2025. González, who has led Cemex for more than a decade, is credited with steering the company to an industry leadership position in sustainability, innovation, and digitalization while also regaining investment-grade ratings. Chairman Rogelio Zambrano expressed confidence in Muguiro’s ability to drive Cemex’s continued growth, citing his extensive experience across the company’s global operations.

Alongside the CEO transition, Cemex is implementing a broad senior-level reorganization effective April 1, 2025. Key appointments include Jesus Gonzalez as President of Cemex USA, Sergio Menendez as President of Cemex Mexico, and Jose Antonio Cabrera as President of Cemex Europe, Middle East, and Africa. Additionally, Alejandro Ramirez will lead Cemex South, Central America, and the Caribbean, while Ricardo Naya will be Executive Vice President of Sustainability and Operations Development. These changes reflect Cemex’s commitment to leadership development and long-term strategic priorities.

3. YPF & Vista: Argentina to Lift Currency Controls by January 1, 2026

In a recent interview, President Javier Milei announced that Argentina plans to eliminate its complex system of currency controls, known locally as the "cepo," by January 1, 2026. These controls, which have been in place since 2019, have restricted access to U.S. dollars and have impacted economic activities. Milei indicated that securing a new financing agreement with the International Monetary Fund (IMF), currently under negotiation, could expedite this timeline. He emphasized that even without IMF assistance, the government is committed to lifting the cepo by the start of 2026. Economists note that the success of Milei's economic program is closely tied to effectively removing these controls, as they play a significant role in the country's disinflation strategy.

This development is expected to impact Argentina’s oil and gas sector positively. Companies like YPF and Vista stand to benefit from improved stability in dividend payments and a likely increase in rig supply, which could reduce drilling costs. Meanwhile, Raízen may find better conditions to sell its Argentine fuels business, supporting its deleveraging efforts. The certainty of this timeline could be key in shaping investor sentiment and capital flows into Argentina’s energy market.

4. Minerva Revises Structure of Uruguay Transaction Following Antitrust Review

On February 11, 2025, Minerva submitted a revised request to Uruguay’s antitrust authority, the Comisión de Promoción y Defensa de la Competencia (Coprodec), concerning its previously announced acquisition of three industrial plants from Marfrig Global Foods S.A. in Uruguay.

Following Coprodec’s initial decision to reject the transaction in its original form, Minerva has restructured its proposal, now seeking approval for the acquisition of two plants, located in San José and Salto, while committing to the immediate resale of the third facility, located in Colonia, to the Allana Group. This revised transaction structure aims to address regulatory concerns while maintaining Minerva’s strategic objectives in the region. The Company has reiterated its commitment to keeping shareholders and the broader market informed of any material developments related to the transaction, particularly with respect to regulatory review and approval processes.

EM Spreads News & Views - Feb 14 2025

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