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Latin America Structured Finance Outlook 2021: New Issuance Should Increase Amid The Challenging Environment


U.S. BSL CLO Obligors: Corporate Rating Actions Tracker 2023 (As Of Sept. 22)


CLO Pulse Q2 2023: The 'Snooze Drag' Takes Hold In Europe


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Guidance On Global CMBS Property Evaluation Methodology Updated

Latin America Structured Finance Outlook 2021: New Issuance Should Increase Amid The Challenging Environment

S&P Global Ratings expects new Latin American structured finance issuance to increase to approximately $15 billion in 2021 from $14 billion in 2020, though conditions will likely remain challenging for issuers. Nonbank financials' and infrastructure projects' funding needs remain the key drivers for issuance in the region, particularly in the cross-border and ABS asset classes.

In 2020, overall collateral performance improved as the year progressed. However, the spike in COVID-19 cases in December and the beginning of 2021 led to increased restrictive measures in several countries in the region. And while the year ended with new issuance activity remaining strong in Brazil and the cross-border market--it remained low in Mexico and Argentina. We will continue to monitor the pandemic's impact on structured finance activity in Latin America, particularly on ABS deals that are exposed to consumers and small and medium enterprises (SMEs).



Daniela Fernandez Gil, Buenos Aires +54 (11) 4891-2162; 

Cross-Border: We Expect More Infrastructure-Related Repacks

We expect cross-border issuance to increase moderately this year. In a scenario of global negative real interest rates, we believe that Latin America's high yields continue to attract investors.

We expect new issuances to be mainly focused on infrastructure-related projects and refinancing outstanding transactions. We also expect repackaged securities to be the top asset type for the cross-border market, as this type of structure is designed to protect the investor from all risks other than a default from the underlying obligor or guarantor. Furthermore, we anticipate multilateral agencies will continue to support this type of financing through their participation as guarantors or by providing another type of support.

In 2020, the pandemic-related lockdowns have had a negative impact on private construction and public works. Further, once COVID-19 lockdown ceases in the region, continued social distancing measures and new safety protocols on how construction workers get to work might reduce the workforce and cause additional construction delays. There is still a lot of uncertainty around how a second COVID-19 wave could further affect construction works. Under this scenario, we could expect new issuances to refinance some of the outstanding transactions backed by construction payment obligations that have not finished the construction phase and experienced significant delays last year.

On the other hand, the pandemic has changed consumer market dynamics and originators' underwriting standards. As a result, we expect new issuances to reflect new origination standards and current obligor capacity and willingness to pay down their obligations following the cease of governmental-relief programs.

Finally, the region´s exposure to LIBOR is minimal. As part of our surveillance of rated transactions affected by the phase-out of LIBOR, we expect to receive amendments to transaction documents that reflect replacement benchmarks elected by the transaction parties in a timely manner.


Marcus Fernandes, Sao Paulo (55) 11-3039-9743; 

The New Issuance Pipeline In Brazil Will Remain Strong

Despite the COVID-19 pandemic in 2020, it wasn't necessarily a bad year for the securitization market in Brazil. Total FIDC (Fundo de Investimento em Direitos Creditório; credit rights investment funds) issuances reached 32 billion Brazilian real (R$) for the year (according to Anbima; Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais). This is a 20% decline compared to 2019 but still the second-highest volume in the past six years. Similarly, certificates of real estate receivables (CRI) issuances totaled R$14.5 billion, 15% less than 2019 but still among the highest annual volumes historically. Certificates of Agribusiness Receivables (CRAs) tell a similar story, with issuance having reached an all-time high of R$15 billion in 2020.

We expect the recovery pace to continue in 2021 given the persistently low base interest rates, recurrent annual refinancing needs by large corporates, small businesses looking for sources of working capital financing to fund recovery in 2021, the still-positive fundamentals for the agribusiness industry, and the increasing demand for real estate investment assets led by real estate investment funds.

There was also an increase in market participation of new players, such as fintechs and small originators, and the regulatory framework for securitizations has been evolving. For example, CVM (Comissão de Valores Mobiliários) has requested comments on its proposed changes to the investment funds regulations, including FIDCs. The main changes include:

  • The end of nonstandardized FIDCs;
  • Creating so-called green or sustainable FIDCs;
  • Possibility of distribution of certain FIDCs to the general public;
  • Rating requirements only for FIDCs publicly distributed;
  • Registration of receivables with a registration company authorized by the central bank; and
  • Greater transparency in duties and fees paid to service providers of the FIDCs.

Overall, the changes are aimed at strengthening the FIDCs industry and expanding the potential investor base.

CRIbentures (CRIs) and CRAbentures (CRAs)--corporate repacks

Repackaged securities have continued to be one of the main funding sources for companies in the agribusiness and real estate segments in recent years, including in 2020. These instruments generally allow individual investors to add exposures to certain companies and sectors to their portfolios (as opposed to bonds and debentures, which are usually limited to qualified investors), and real estate funds (FIIs, in the case of CRIs) to expand their portfolios while remaining exposed to corporate risks. The attractiveness of such instruments to issuers is in the low coupon (as these are tax exempt investments to investors), long term, and issuance in local currency.

Given the uncertainty of the pace of economic recovery and ongoing corporate debt refinancing requirements in 2021, we expect repacks to remain the most common structured finance instrument this year (about 30% of total issuance in Brazil). The performance of repacks during the pandemic was largely unchanged, mainly driven by the financial strength of the underlying corporate obligors. We expect the main issuers of these assets to remain mid-sized to large agribusiness-related companies, homebuilders, real estate developers, and other corporate entities than can leverage their own real estate assets.

Consumer loans' pool performance could remain volatile under an uncertain macroeconomic scenario

Transactions backed by consumer loans are typically exposed to economic and employment conditions, which could be an issue as the region emerges from the pandemic. With unemployment rates at historical highs and economic recovery likely coming slowly, individuals` capacity to repay financial obligations will likely diminish. In addition, the government-relief program might end or be rolled back, meaning millions will no longer have its guaranteed monthly income. Therefore, we expect some increase in delinquencies for the majority of pools backed by unsecured consumer loans, with the exception of payroll deductible loans owed by federal employees, military, and armed forces (as they are less sensitive to economic conditions). As for secured consumer loans such as auto financing, we expect deterioration of pool performance to be somewhat linked to the quality and leverage of the collateral.

Regardless of the provided collateral, if any, we believe there will be an increase in obligor renegotiation requests in consumer loans pools. This was the case during the peak of the pandemic in the first half of 2020, when about 20%-30% of the pools requested some level of renegotiation. However, we believe rated transactions have built strong liquidity in anticipation of challenging market conditions, and our analysis already includes a conservative level of future performance that can accommodate further deterioration in the pools. Transactions backed by payroll-deductible loans continue to figure among the frequently issued assets classes and will likely remain so, as the number of originators in the industry continued to increase. Therefore, we see potential for increasing operational risks for new transactions originated by these new participants given their limited operational track records.

Credit cards: Performance was stable during the pandemic, but there are still near-term challenges

Similar to unsecured consumer loans, we expect some volatility in pool performance with the end of the government-relief program and the challenging macroeconomic environment. However, credit cards issuers have been applying more conservative origination standards since the beginning of the pandemic, including greater restrictions on limits and intensified collection efforts. Also, consumers became somewhat more dependent on the availability of the credit card limits, given the need to increase online consumption during the pandemic. With the increasing demand for credit cards and expansion of digital banking, we expect securitization of credit card receivables to increase in the near future.

Payments are a trending asset class, and the legal framework is improving, but there are still operational risks

Securitizations involving credit card payment arrangements (or intermediaries) have become a popular asset class in recent years. In 2020, a new law was released to help strengthen these arrangements and related securitizations. The mandatory participation of credit rights registration companies, which keep proper identification of the owner of such receivables, does address some concerns in a payment arrangement structure. However, we continue to see risks arising from the originator that can lead to increased charge backs, cancellations, and fraud. Nonetheless, we expect this asset class to continue expanding in 2021, especially as several businesses were forced into the digital retail environment during the pandemic and are unlikely to revert. Total transaction volumes processed by credit cards have increased about 9% annually on average for the past five years.

Trade receivables: Performance volatility remains likely, but multiseller servicers already tested strategies early in the pandemic

One of the most traditional securitized asset classes, trade receivables will likely remain a regular contributor in the total SF issuances in 2021. The performance of trade receivables pools during the peak of the pandemic in 2020 was affected significantly, largely as a result of social-distancing measures, which led to a severe drop in consumer spending. Delinquencies in some trade receivables pools jumping to 30% for a few weeks from the typical 5%. Performance eventually recovered to close to pre-pandemic levels by the second half of 2020, but these pools remain exposed to the pace of economic recovery and the prolonged impact of lower consumption.

We believe trade receivables transactions offer a funding source to recovering industries as well as sectors that remained resilient during the pandemic, such as the food industry, and also trending segments such as agribusiness. One of the first rated transactions after the peak of the pandemic in 2020 was an agribusiness trade receivables FIDC.

Collateralized loans obligations (diversified corporate/SMEs credit exposures)--A new trend in the post-pandemic market

Corporate loans securitizations became one of the trending asset types after the peak of pandemic in the first half of 2020, as it offered a viable funding source for the recovery of many SMEs in different sectors of the economy through long-term loans. This has been highlighted by BNDES` public request for proposed securitizations, which would provide funding for the recovery of SMEs in the long term, where CLOs became one of the main options. We expect this trend to carry over into 2021. Macroeconomic conditions will likely remain challenging for SMEs, with uncertainties around the pace of economic recovery and consumer behavior, which is likely to further pressure the individual credit quality of these obligors.

Also, during the pandemic, open-ended funds backed by short-term receivables faced liquidity challenges, as investor drawdowns increased, the liquidity of the asset base declined, and delinquencies rose. This can provide some incentives for the issuance of close-ended transactions backed by CLOs in a scenario of long-term funding requirements for recovery of SMEs.

Commercial mortgage MBS (commercial property-backed CRIs): Market conditions remain challenging, but long-term fundamentals remain solid for quality assets

We maintain a cautious view of transactions backed by commercial properties. The ongoing status of the pandemic and the threat of harsher social-distancing measures will continue to underpin consumer behavior in shopping malls. Transactions backed by rent flows of shopping malls have benefited from some recovery in sales, persistent demand for food services (especially delivery), resilience of the financial strength of tenants (which, in some cases, was supported by payment holidays) and the capacity to quickly replace vacancies. The financial strength of sponsors also played an important role in some cases. Nonetheless, well-located assets with strong demand from a prime client base are more likely to recover faster.

In the case of office buildings, there`s still significant uncertainty as to how fast rent flows and occupancy rates will recover, which could result in growing cash-flow pressures for more concentrated securitizations. Nonetheless, we continue to see long-term fundamentals for the industry as fairly stable, and they still support our analysis of the rated transactions, which carries a significant level of conservatism in high capitalization rates.

Residential mortgages (RMBS)/pulverized CRIs--Conditions vary among segments, but overall fundamentals remain positive

The prospects for the residential market in Brazil remain somewhat positive as a result of the still-low interest rates, as they allow for historically low financing costs and make renting comparatively less attractive. As a result, demand for new homes has remained elevated since the second half of 2020. Homebuilders not only benefitted from the stability in the cash-flow stream during 2020 but prepared for growth in 2021 and on, resulting in four out of nine rated homebuilders having positive rating outlooks.

Also, the number of players in the residential loans market in Brazil continues to increase. New homes continue to be financed primarily by the large banks. However, the surge of credit fintechs and new players targeting loans backed by residential assets (home equity loans) continues to drive the expansion of this product in the market.

With the expansion of financing sources for loans that have residential properties as collateral, we continue to expect a greater use of securitizations of pools of such loans. However, we expect the challenging economic conditions--including high unemployment rates and increasing inflation--to result in increased delinquencies and renegotiation requests for most RMBS pools, especially for those in low-income segments and with contracts that carry interest rates linked to inflation indexes. Also, such a scenario will likely test the quality and resilience of these new originators, as operational risks become heightened.

Given the favorable fundamentals, some homebuilders also are offering financing during the construction phase of the project (prosoluto), and then they fund the project by securitizing those receivables. We continue to view such structures as carrying risks associated with the performance of the homebuilders, as ultimately such loans can be considered as tantamount to an unsecured consumer loan if construction is delayed or stopped.

There's also been an the increase in origination of loans that carry interest rates indexed to inflation rates, both in the cases of traditional financing and collateralized loans. We continue to consider this to be a relevant factor in analyzing risks for pools exposed to this type of loan. The historical volatility of inflation in Brazil, and the associated risk of spike in financing costs to the consumers, can result in higher default rates (see "Brazil's Inflation-Linked Mortgages Are More Securitization Friendly, But What Are The Risks?" Aug. 23, 2019).

LIGs and covered bonds are ready to kick into high gear

We see favorable conditions for the expansion of LIGs in Brazil with the expansion of the real estate and residential markets, increasing number of loans originators seeking for alternative funding sources, and persistently low interest rates. Also, the new regulation allowing the distribution of LIGs to general investors (including individuals) is expected to be in place in early February, which would increase significantly the target investor base for this product. We view the combination of a potentially less-experienced investor base and nontraditional, smaller originators as supporting factors for the need to closely understand the credit quality of the underlying asset pool and not only rely on the creditworthiness of the originator.


Antonio Zellek, CFA, Mexico City +52 (55) 5081-4484; 

In Mexico, We Expect New Issuance Volume To Rebound In 2021

The economic crisis from the COVID-19 pandemic decreased new issuance in Mexico. Last year, there were only nine transactions totaling $23.9 billion Mexican pesos (MXN) compared with 19 deals worth MXN28.9 billion in 2019. The number of deals in 2020 was the lowest over the last decade. However, the issued amount didn't drop significantly due to Fovissste, which issued twice totaling MXN14 billion, FHipo's FHIPOCB 20 RMBS for MXN2.5 billion, and TIP de Mexico's ABS deal for MXN3 billion.

We believe that new issuance volume could rebound in 2021 to MXN30 billion through approximately 20 deals. Equipment ABS, mainly from nonbank financial institutions, should dominate the number of deals placed, attempting to satisfy their financing needs or refinance their existing deals. RMBS will account for the largest part, with Fovissste dominating RMBS new issuance and a few private entities possibly securitizing their mortgage portfolios.

In addition, we believe that some other sectors--such as fintech companies--could gain relevance in the market. To date, some originators have shifted their origination and servicing platforms to digital tools. We believe there's potential for other participants in the market to follow their lead and turn to the capital markets to secure their funding.

We project the economic activity in Mexico to expand 3.9% in 2021 following a 9.3% contraction in 2020. In our view, 2021 will pose several challenges for structured finance transactions, such as already unfavorable investment dynamics; the midterm elections to be held in June, which might add uncertainty to the market; and a heightened number of COVID contagions, which might delay the return to normality. However, these risks could be offset by factors such as:

  • Investors' appetite to invest their increased liquid holdings;
  • Low interest rates, which could attract originators to secure relatively cheap funding;
  • A reduced appetite from private banks to fund nonbank financial institutions (NBFIs) and SMEs), which could find in the capital markets an alternative to satisfy their financing needs; and
  • The relatively stable collateral performance of most of the transactions over the last year.
Credit stability persisted in 2020

Last year, despite the challenging economic environment, credit stability persisted overall. We affirmed 87 ratings, lowered 12, placed 18 on CreditWatch negative, and raised one. Notably, the number of downgrades doubled the 2019 tally. It mainly stemmed from performance deterioration in some ABS equipment transactions with exposure to the transportation industry and future flow deals backed by the revenues from the sales of bus tickets.

In terms of ratings performance, we believe there is a negative bias across our portfolio, especially on ABS deals with significant concentrations in SMEs and on sectors that have been heavily affected by the pandemic (transportation, food, tourism, entertainment, among others). Nonetheless, we do not envision a generalized wave of downgrades in our portfolio because most of the transactions have high overcollateralization levels, which allows them to withstand higher losses.

RMBS: A different story versus 2008

RMBS deals in Mexico have been resilient to the pandemic effects so far, yet we are monitoring the evolution of defaults and delinquencies amid higher unemployment in the country. This year, many transactions from Infonavit will get fully reimbursed mainly due to the seasonality of the portfolios, combined with the excess flows available for the trusts. Nonperfoming loans (NPLs) on Infonavit's deals closed 2020 around 15%. We expect NPLs on Infonavit's transactions to slightly increase during 2021 as the portfolios mature and more borrowers shift their employment status to informal or independent.

Fovissste has a similar credit story, with NPLs of about 7.5% as of year-end 2020. These transactions also tend to naturally increase as portfolios get seasoned and more borrowers lose their payroll deduction benefit. Both Infonavit's and Fovissste's deals' increasing credit enhancement offset this risk.

We do not expect Infonavit to securitize soon, mainly because of the ample liquidity available for the fund from the contributions from private-sector employees, combined with the low origination growth, which reflects a reduced dynamism on the social interest segment. As for Fovissste, we expect that in line with its annual plan, the fund could tap the market twice for an aggregate amount of about MXN14 billion.

Transactions from NBFIs have shown mixed results: On one hand, most of the deals denominated in Mexican pesos have continued presenting solid performance, with stable defaults, collection levels, and overcollateralization metrics at their target levels. On the other hand, most of the transactions denominated in inflation-linked units (UDIs) haven't performed as well. These had already deteriorated after the 20008-2009 crisis, and their credit enhancement continues to decrease as a result of higher-than-average defaults, negative excess spread, and low recoveries. We believe that these trends will persist over the year for both subsectors.

In our view, private banks will not return to the market soon amid the low interest rates, their access to unsecured financing, and slower demand for housing in the high-income sector on which they focus.

ABS equipment: Performance pressures have been mitigated by higher credit enhancement

In general, the COVID-19 outbreak affected performance on equipment ABS transactions, the aggregate NPLs of which increased to 3% at year-end from 1% at the beginning of the year. The macroeconomic scenario in the country drove us to review all our rated portfolio and to increase our base-case loss (BCL) assumptions for all transactions to anticipate the effects of the pandemic on the securitized pools. As a result, our BCL median increased to 4.7% from 5.6%.

We foresee equipment loan and lease defaults will continue increasing. This is because most of the obligors are SMEs, which in our view have been more susceptible to the economic lockdown than other borrowers. While we will continue monitoring performance on the securitized pools and take rating actions when we deem necessary, we anticipate credit stability in 2021 across the sector, mainly because of the gap between observed performance and our BCLs, increasing OC metrics, and the deals' deleveraging from their full-turbo amortization schemes.

In 2021, six out of 20 transactions will finish their revolving period, which could foster the need for originators to refinance those deals. Twelve are currently amortizing, and only two deals are in their revolving period, which reduces the risks in our rated portfolio.

As for operational risk, which continues to be one of the key risk factors on the sector, we are closely following the performance of the servicers on the transactions, their financial positions, staff adequacy, portfolio growth rates, and effectiveness of internal controls. So far, we have not identified any deterioration because of the pandemic. However, we believe this risk factor will continue to impose a rating cap in several deals, mainly those from the smallest originators.

Future flows transactions are on their way to default

Mobility restrictions associated with the pandemic negatively affected the two transactions we actually rate (SIPYTCB 13 and GHOCB 14). Both of these are backed by the future revenues from the sales of bus tickets. Income generation, the number of passengers transported, and operating margins have decreased dramatically as fewer passengers traveled. We expect the two deals will default this year--either on their quarterly interest payments or as a result of a restructure, which we could treat as tantamount to default per our rating definitions.


Facundo Chiarello, Buenos Aires +54 (11) 4891-2134; 

There Are Many Questions Around Recovery Of Structured Finance Issues In Argentina In 2021

Amid the continued uncertainty, we expect that the number of structured finance issues in Argentina during 2021 will be slightly higher than last year. We also expect that the main issuers of financial trusts will be entities related to the digital credit market or that grant credits via payroll to public employees and pensioners. During 2020, the amount issued by financial trusts in Argentina fell 17% in nominal terms, and the amount of issues decreased by approximately 25% compared to 2019. The main reason for this drop is 85% of issues are linked to consumption, the performance of which continued to be affected amid the uncertainty that began in 2018 as a result of economic volatility and the financial crisis in the country, and stepped up with the mandatory lockdown measures to mitigate the spread of the pandemic.

One of the main challenges for credit originators continues to be the reconversion of a business that stopped being face-to-face to become virtual, which entails reviewing the business strategy, investing more in systems, and reducing structures. Given the spread of COVID-19, the time that companies have to adapt is less and less. Furthermore, in view of the current macroeconomic conditions, originators should continue to monitor their origination criteria so that they reflect the current situation and even allow them to forecast the repayment capacity of debtors in order to avoid a rapid deterioration in their portfolios. In this sense, we consider that originators that mainly grant credits to public employees and pensioners with payment through the direct discount of salary or pension, have a relative advantage over originators in the voluntary payment consumer sector. Finally, planning and diversifying funding sources will be of great importance in an environment where financial institutions are increasingly reluctant to expose themselves to the consumer sector.

However, we consider that the demand for credit will remain constant in the coming months compared to last year, for two key reasons. First, it will be used to finance the purchase of essential and basic goods that cannot be done with current income as a result of the erosion in wages derived from inflation and due to salary adjustments. Second, it will be used as a defense against the continuous depreciation of the local currency and expectations of an increase in prices for the coming months, which leads individuals to anticipate consumption--either for the purchase of goods or to make improvements in the households.

Finally, from the point of view of the investor, whom we consider a fundamental piece for the funding of this type of business, the trend in recent months indicates that there is a clear preference for dollar-linked or inflation-linked products. Therefore, the competition to secure financing in the capital market could generate higher funding rates that would be transferred directly to the financial cost of the loans to be originated.

Payroll will remain unchanged in 2021

We believe that financial companies and credit unions that work with payroll could increase origination in 2021 because their debtors have a more stable income. The biggest challenge will be obtaining financing because the product has longer-than-average terms, which in a context of economic and financial uncertainty might be less attractive. However, if the rate level offered were to increase sufficiently, it could become an interesting option for the investor. The performance outlook for this type of loans is stable.

Regional credit cards: Is it time to grow?

Instruments backed by regional credit cards managed to cope relatively well with the effect of the pandemic because of a rapid rearrangement of their structures, opening of alternative payment channels, and a thorough review of their evaluation systems. In 2021, we expect that origination volumes for these types of transactions will continue to grow and to focus on the consumption of essential goods, while credit limits will be adjusted promptly for those clients with a long history and good payment behavior. In line with what happened in 2020, and as long as the economic variables do not deteriorate further, we anticipate a stable performance for the client portfolio in this sector.

Future flows: Tax collection won't be an issue in 2021

Our portfolio includes 11 future cash-flow transactions, the notes of which are supported by the collection of fuel tax. Considering that the national government was making extraordinary contributions to the current infrastructure trusts during 2020, and the tax is adjusted for inflation on a quarterly basis, we do not foresee major changes compared to last year. We also believe the securities will continue to be paid in a timely fashion.

Deferred payment checks and commercial invoices are proceeding at the pace of the agribusiness

We expect that in 2021, the issuance of securities backed by deferred payment checks and commercial invoices--mainly from issuers linked to agribusiness--will consolidate their growth in market share compared to 2020. According to S&P Global Ratings' estimates, the Argentine economy will grow 4% in 2021, and the main driver will be the agricultural sector. Therefore, in the context of an increase in the price of commodities due to the greater demand for food, and the financing needs of producers, it is very likely a higher volume of issues and the emergence of new participants with the intention of meeting the credit demand through notes backed by checks and invoices.

Mortgage loans (UVA; Unidad de Valor Adquisitivo): Origination is decreasing, and defaults are increasing

Our outlook for mortgage loan origination hasn't changed since 2019. We believe that the volume originated will continue to decrease due to inflationary expectations in the short term, the current economic-financial context, and the greater requirements to access a loan denominated in UVA (Spanish acronym for Purchasing Power Unit, which is used to measure the evolution of inflation in Argentina based on the Consumer Price Index). In terms of performance, the default level of the only rated series backed by UVA mortgage loans remained stable during 2020. This is mainly due these loans having benefited from resolutions of the Central Bank of Argentina that froze the UVA adjustment.

As of February 2021, the quotas in pesos should reflect the current UVA value, and the difference between the real value of the UVA and the value frozen since October 2019 should also begin to be repaid in installments. Under this scenario, we consider that the level of default of the trust will grow, although it will be below the default level of the market, due to the borrowers transferred being of medium-high income. There is still uncertainty around the possibility of prolonging the freezing of the UVA for mortgage loans to minimize the impact of inflation on debtors' income or of an eventual change in the calculation method or in the variable adjustment, which would result in a change in terms and conditions and in a default of the notes.

The voluntary repayment of personal loans faces a lot of uncertainty

The demand for credit remains high as a consequence of the current economic situation. However, the high level of indebtedness of individuals--together with the deterioration of credit scores--limits new origination. These types of loans carry a higher credit risk than other products, and if we observe a deterioration of the main economic variables, this could cause a severe increase in the delinquency rates.

This report does not constitute a rating action.

Primary Credit Analysts:Jose Coballasi, Mexico City + 52 55 5081 4414;
Leandro C Albuquerque, Sao Paulo + 1 (212) 438 9729;

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